As filed with the Securities and Exchange Commission on March 13, 2001
Registration Statement No. 333-54428
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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AMENDMENT NO. 2 TO FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933

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CIRCOR International, Inc.
(Exact Name of Registrant as Specified in its Charter)

Delaware 04-3477276
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

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CIRCOR International, Inc.
c/o Circor, Inc.
35 Corporate Drive, Suite 290
Burlington, Massachusetts 01803
(781) 270-1200
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)

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David A. Bloss, Sr.
Chairman, President and Chief Executive Officer
CIRCOR International, Inc.
c/o Circor, Inc.
35 Corporate Drive, Suite 290
Burlington, Massachusetts 01803
(781) 270-1200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:

David F. Dietz, P.C. James M. Bedore
Goodwin Procter LLP Reinhart, Boerner, Van Deuren, Norris & Rieselbach, s.c.
Exchange Place 1000 North Water Street, Suite 2100
Boston, Massachusetts 02109 Milwaukee, Wisconsin 53202
(617) 570-1000 (414) 298-1000

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [_]

--------------

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment that specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell these securities and it is not +
+soliciting an offer to buy these securities in any jurisdiction where the +
+offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
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Prospectus

SUBJECT TO COMPLETION, DATED MARCH 13, 2001

[Circor logo appears here]

1,350,000 Shares of Common Stock

-----------

We are offering 1,350,000 shares of common stock. Our common stock is listed
on the New York Stock Exchange, or NYSE, under the symbol "CIR." On February
28, 2001, the last reported sale price of our common stock on the NYSE was
$13.05 per share.

This investment involves risks. See "Risk Factors" beginning on page 7.

Per
Share Total
----- -----

Public offering price............................................... $ $
Underwriting discount...............................................
Proceeds to CIRCOR..................................................

We have granted the underwriters a 30-day option to purchase up to 202,500
additional shares of common stock on the same terms as set forth above to cover
over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.

-----------

Robert W. Baird & Co. ING Barings

, 2001

EDGAR GRAPHICS DESCRIPTION

Graphic on one 8 1/2" x 11" page containing nine 3 1/2" long by 2 3/4" wide
photographs in a 3 row/3 column format as follows (beginning with top left to
right):

1. Hoke Space Saver Geared Actuator
2. CIRCOR International, Inc. logo
3. Pibiviesse E3 Welded Body Ball Valve
4. Assorted Spence Engineering and Nicholson Steam Trap products including
Steam Scrubber, Stainless Steel Filter, STV Series Combination Trap Test and
Blocking Steam Valve, and Y-Strainer
5. Hoke Type 8512 S-Valve Manifold
6. Spence Engineering Steam System Noise Suppressors and Muffling Plates
7. Spence Engineering Series ED Pressure Reducing Valve
8. KF Series 35 2" Class 600 Swing Check Valve
9. GO Regulator Pressure Regulator

TABLE OF CONTENTS

Page
----

Summary.................................................................. 1
Risk Factors............................................................. 7
Special Note Regarding Forward-Looking Statements........................ 14
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Price Range of Common Stock.............................................. 16
Capitalization........................................................... 17
Selected Consolidated Financial Data..................................... 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20

Page
----

Business................................................................... 30
Management................................................................. 45
Certain Relationships and Related Transactions............................. 57
Principal Shareholders..................................................... 60
Description of Capital Stock............................................... 63
Shares Eligible for Future Sale............................................ 68
Underwriting............................................................... 69
Legal Matters.............................................................. 71
Experts.................................................................... 71
Where You Can Find Additional Information about CIRCOR..................... 71

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. You should assume that the information in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of common stock. This preliminary
prospectus is subject to completion prior to this offering.

As used in this prospectus, the terms "we," "us," "our" and "CIRCOR" mean
CIRCOR International, Inc. and its subsidiaries (unless the context indicates
another meaning) and include our historical activities as part of the former
industrial, oil and gas product lines of Watts Industries, Inc., or Watts. The
term "common stock" means our common stock, par value $0.01 per share. Unless
otherwise indicated, all information contained in this prospectus assumes no
exercise of the over-allotment option granted to the underwriters.

SUMMARY

You should read the following summary together with the more detailed
information and our consolidated financial statements, the notes to those
statements and the other financial information appearing elsewhere in this
prospectus.

CIRCOR International, Inc.

Our Business

. Oil and gas production - including off-shore platform, sub-sea gathering and
oil refining systems.

. Pipeline construction and maintenance - consisting of natural gas and oil
distribution systems.

. Municipal and institutional power and process steam heating and generating -
involving the use of our valves in many domestic municipal steam systems
for heating, air conditioning and ventilation of facilities.

. Maintenance and maritime manufacturing - involving our steam regulators,
control valves, water heaters, strainers and butterfly valves which are used
in a variety of U.S. Navy and commercial marine applications.

. Aerospace, military and commercial aircraft - involving valves which are
part of aviation systems, such as oxygen, hydraulic, fuel and potable and
nonpotable water systems.

. Processing - including food and chemical processing in addition to air and
water systems utilized in semiconductor fabrication.

. Pharmaceutical, medical and analytical equipment - including our relief,
check, diaphragm and regulating valves in systems that deliver various
ingredients in regulated amounts to make a variety of pills and liquid
medicines. Our instrumentation valves also are used in medical analytical
equipment.

Our products are sold through more than 900 distributors servicing
approximately 24,000 end-users in over 90 countries around the world. For the
year ended December 31, 2000, we derived 56.3% of our net revenues from
instrumentation and fluid regulation products and 43.7% from petrochemical
products.

The domestic and international markets for fluid control products are very
competitive with a highly fragmented group of diverse competitors. We consider
product quality, performance, price, distribution capabilities and breadth of
product offerings to be the primary competitive factors in these markets.

Our Business Objectives and Strategies

We are focused on providing solutions for our customers' fluid-control
requirements through a broad base of products and services. We believe many of
our product lines have leading positions in their niche markets. Our objective
is to enhance shareholder value through profitable growth of our diversified,
multi-national fluid-control company. In order to achieve this objective, our
key strategies are to:

. Continue to build market positions - through internal revenue growth and
acquisitions in selected markets.

. Improve the profitability of our business - by leveraging our existing
manufacturing facilities, improving utilization of working capital and
deriving synergies from acquisitions.

. Expand our geographic coverage - by leveraging distribution channels to
increase sales and cash flow.

Our Competitive Strengths

We believe we will continue to benefit from certain competitive strengths
which assist us in implementing our strategies, including:

. Broad product offerings to diverse end-markets with the ability to serve
multiple markets and industries;

. A long operating history with strong brand name recognition and many
products that are specified in projects by our customers;

. A leading domestic market share position in steam products;

. New, customized product design engineering;

. A successful acquisition record and integration abilities; and

. Strong distribution networks.

Our History

We were established by Watts Industries, Inc., or Watts, to continue to
operate the former industrial, oil and gas products lines of Watts. On October
18, 1999, Watts distributed all of our outstanding common stock to the
shareholders of Watts in a tax-free spin-off. In connection with the spin-off,
our common stock was listed on the NYSE under the symbol "CIR" and we entered
into agreements with Watts regarding licensing and tax sharing arrangements,
benefits and indemnification matters. See "Certain Relationships and Related
Transactions - Our Relationship with Watts" for more information.

Our Executive Offices

Our executive offices are located at 35 Corporate Drive, Suite 290,
Burlington, Massachusetts 01803 and our telephone number is (781) 270-1200. We
are incorporated in the State of Delaware.

The Offering

Common stock offered by CIRCOR...................... 1,350,000 shares

Common stock to be outstanding after this offering.. 14,612,891 shares

Use of proceeds..................................... To acquire complementary
businesses or products,
and until such
acquisitions require our
capital, the reduction of
our outstanding debt, and
for working capital and
general corporate
purposes. See "Use of
Proceeds" for more
information.

NYSE symbol......................................... CIR

The number of shares of our common stock that will be outstanding after this
offering is based on 13,262,891 shares of our common stock outstanding as of
February 28, 2001 and does not include any additional shares which may be
issued in connection with this offering as a result of the over-allotment
option granted to the underwriters.

The total number of shares of our common stock outstanding after this
offering excludes the following additional shares which may be issued:

. 694,700 shares of common stock issuable upon exercise of outstanding stock
options under our 1999 Stock Option and Incentive Plan as of February 28,
2001 at a weighted average exercise price of $9.27 per share;

. 38,007 shares of common stock issuable upon conversion of outstanding
restricted stock units under our Management Stock Purchase Plan which is a
component of our 1999 Stock Option and Incentive Plan;

. 552,376 shares of common stock issuable upon exercise of outstanding stock
options which were issued at the time of the spin-off to replace options
granted by Watts at a weighted average exercise price of $10.63 per share;

. 104,506 shares of common stock issuable upon conversion of outstanding
restricted stock units which were issued at the time of the spin-off to
replace restricted stock units granted by Watts; and

. 1,267,293 shares of common stock currently reserved and available for future
grants under our 1999 Stock Option and Incentive Plan.

See "Capitalization" for more information regarding the outstanding shares
of our common stock.

Summary Consolidated Financial Data

The following table summarizes certain selected historical financial and
operating information that has been derived from our Consolidated Financial
Statements and should be read along with the other sections entitled "Use of
Proceeds," "Selected Consolidated Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
consolidated financial statements and notes and other financial data included
in this prospectus.

The consolidated operating results data for the year ended December 31,
2000, the six months ended December 31, 1999 and the fiscal years ended June
30, 1999 and 1998 and the consolidated balance sheet data as of December 31,
2000 and 1999 and June 30, 1999 are derived from, and are qualified by
reference to, our audited consolidated financial statements included on pages
F-3 to F-28 of this prospectus, and should be read in conjunction with those
financial statements and the related notes to the consolidated financial
statements. The consolidated operating results data for the fiscal year ended
June 30, 1997 and the consolidated balance sheet data as of June 30, 1998 are
derived from our audited consolidated financial statements not included in this
prospectus. The consolidated operating data for the fiscal year ended June 30,
1996 and the consolidated balance sheet data as of June 30, 1997 and 1996 are
derived from our unaudited consolidated financial statements not included in
this prospectus.

The selected unaudited pro forma financial data included in the following
table are derived from the respective audited and unaudited consolidated
financial statements described above and give effect to the transactions
described in Note 15 to the consolidated financial statements included in this
prospectus and also as noted in our prior filings.

Summary Consolidated Financial Data

(In thousands, except per share data)

This summary consolidated historical financial data includes a presentation of
EBITDA. EBITDA represents earnings before interest, income taxes, depreciation,
amortization, restructuring, impairment and special charges. EBITDA is provided
because it is a measure commonly used by investors to analyze and compare
companies on the basis of operating performance. EBITDA is not a measurement
for financial performance under generally accepted accounting principles and
should not be construed as a substitute for operating income, net income or
cash flows. EBITDA, as we have calculated here, is not necessarily comparable
with similarly titled measures for other companies.

Six Months Ended
Years Ended December 31, December 31,
--------------------------------- --------------------
Pro Forma Pro Forma
2000 (1) 1999 (1)(2) 1999 (1) 1999 (1)(2) 1999 (1)
-------- ----------- ----------- ----------- --------
(unaudited) (unaudited) (unaudited)

Summary Income
Statement:
Net revenues..... $316,863 $314,726 $314,726 $157,265 $157,265
Gross profit..... 95,791 100,496 100,496 48,652 48,652
Operating income
(loss)........... 27,636 27,627 27,815 13,785 13,846
Income (loss)
before interest
and taxes........ 26,876 17,059 18,152 13,235 13,386
Net income
(loss)........... 10,560 9,894 10,550 4,650 4,880
Summary Balance
Sheet (4):
Total assets..... $347,062 $367,085 $367,085 $367,085 $367,085
Total debt (5)... 91,533 125,127 125,127 125,127 125,127
Shareholders'
equity........... 191,181 183,409 183,409 183,409 183,409
Total
capitalization... 282,714 308,536 308,536 308,536 308,536
Other Financial
Data:
EBITDA........... $ 41,790 $ 41,790 $ 41,572 $ 21,123 $ 21,184
Cash flow
provided by (used
in):
Operating activities.. 31,700 (519) 137 (15,059) (14,829)
Investing
activities...... 5,827 (21,762) (21,762) (5,171) (5,171)
Financing
activities...... (34,683) 24,245 23,589 18,666 18,436
Net interest
expense.......... 9,276 9,823 8,918 4,864 4,542
Capital
expenditures..... 3,743 11,984 11,984 4,557 4,557
Diluted earnings
per common share
(6).............. $0.78 n/a n/a n/a n/a
Diluted weighted
average common
shares
outstanding (6).. 13,480 n/a n/a n/a n/a
Cash dividends
declared per
common share..... $ 0.1125 n/a n/a $ - $ -

Fiscal Years Ended June 30,
-----------------------------------------------------
Pro Forma
1999 (2) 1999 1998 1997 1996 (3)
----------- --------- --------- --------- -----------
(unaudited) (unaudited)

Summary Income
Statement:
Net revenues..... $324,258 $324,258 $291,580 $275,758 $231,784
Gross profit..... 103,646 103,646 93,428 87,412 67,359
Operating income
(loss)........... 29,297 29,550 38,191 33,906 (23,469)
Income (loss)
before interest
and taxes........ 29,526 29,779 38,497 33,233 (22,976)
Net income
(loss)........... 11,736 12,510 22,425 19,614 (31,609)
Summary Balance
Sheet (4):
Total assets..... $362,370 $359,043 $256,914 $212,727 $202,956
Total debt (5)... 116,248 26,582 15,753 13,252 14,110
Shareholders'
equity........... 169,590 259,256 168,656 137,277 132,993
Total
capitalization... 285,838 285,838 184,409 150,529 147,103
Other Financial
Data:
EBITDA........... $ 42,288 $ 42,541 $ 46,341 $ 40,149 $ 33,219
Cash flow
provided by (used
in):
Operating activities.. 19,754 20,528 21,075 27,842 9,143
Investing
activities...... (82,704) (82,704) (29,197) (6,792) (11,032)
Financing
activities...... 63,719 62,945 11,633 (17,805) 2,557
Net interest
expense.......... 9,845 8,808 3,471 3,274 4,462
Capital
expenditures..... 9,499 9,499 6,115 5,457 12,628
Diluted earnings
per common share
(6).............. n/a n/a n/a n/a n/a
Diluted weighted
average common
shares
outstanding (6).. n/a n/a n/a n/a n/a
Cash dividends
declared per
common share..... n/a n/a n/a n/a n/a

Notes:
- ----
(1) The summary income statement information for the years ended December 31,
2000 and 1999 and for the six months ended December 31, 1999 includes,
respectively, $1.9 million, $0.7 million and $0.7 million of special
charges associated with the closure, consolidation and reorganization of
manufacturing plants.
(2) As adjusted for the spin-off for: the assumption by CIRCOR of selected
indebtedness from Watts; our credit facility and the placement of $75.0
million of senior unsecured notes.
(3) Fiscal 1996 includes an after-tax charge of $48.3 million related to: a
restructuring cost of $3.0 million; an impairment of long lived assets of
$38.5 million; other non-recurring charges of $3.9 million, principally for
product liability costs, additional bad debt reserves and environmental
remediation costs and additional inventory valuation reserves of $2.9
million. This charge represents pretax special charges of $48.1 million and
pretax other charges of $4.9 million.
(4) Summary balance sheet information as of June 30, 1997 is unaudited.

(5) Includes capitalized leases of: $0.2 million; $0.6 million and $4.1 million
as of December 31, 2000, December 31, 1999 and June 30, 1999, respectively.

(6) Diluted earnings per common share and diluted weighted average common
shares outstanding are applicable only for quarterly and annual periods
ended after December 31, 1999, since we were not a publicly-owned,
independent company with a capital structure of our own until after the
October 18, 1999 spin-off. See notes 2 and 15 of the Consolidated Financial
Statements for an explanation of pro forma earnings per share.
n/a not applicable

RISK FACTORS

Before you invest in our common stock, you should consider that making such
an investment involves various risks. You should carefully consider these risk
factors as well as all of the other information contained or incorporated by
reference in the prospectus before you decide to purchase shares of our common
stock. If any of the following risks occur, our business, financial condition,
results of operations, and reputation could be harmed. As a result, the trading
price of our common stock could decline, and you could lose all or part of your
investment. You should also consider these risk factors when you read "forward-
looking statements" elsewhere in this prospectus. You can identify forward-
looking statements by terms such as "may," "hope," "will," "should," "expect,"
"plan," "anticipate," "intend," "believe," "estimate," "predict," "potential,"
or "continue," the negative of those terms or other comparable terminology.
Those forward-looking statements are only predictions. They are subject to a
number of risks and uncertainties, including the risks described in this
section and those described in "Special Note Regarding Forward-Looking
Statements."

Some of our end-markets are cyclical which may cause us to experience
fluctuations in revenues or operating results.

We have experienced and expect to continue to experience fluctuations in
revenues and operating results due to economic and business cycles. We sell our
products principally to oil, gas, petrochemical, process, power, aerospace,
military, heating, ventilation and air conditioning, or HVAC, maritime,
pharmaceutical, medical and instrumentation markets. Although we serve a
variety of markets to avoid a dependency on any one, a significant downturn in
any one of these markets could cause a material reduction in our revenues which
could be difficult to replace.

In particular, our petrochemical business is cyclical in nature as the
worldwide demand for oil and gas fluctuates. When worldwide demand for oil and
gas is depressed, the demand for our products used in maintenance and repair of
existing oil and gas applications, as well as exploration or new oil and gas
project applications, is reduced. As a result, we historically have generated
lower revenues and profits in periods of declining demand for petrochemical
products. Therefore, results of operations for any particular period are not
necessarily indicative of the results of operations for any future period.
Future downturns in demand for petrochemical products could have a material
adverse effect on our business, financial condition or results of operations.
Similarly, although not to the same extent as the oil and gas markets, the
aerospace, military and maritime markets have historically experienced cyclical
fluctuations in demand which also could have a material adverse effect on our
business, financial condition or results of operations.

If we cannot continue operating our manufacturing facilities at current or
higher levels, our results of operations could be adversely affected.

We operate a number of manufacturing facilities for the production of our
products. The equipment and management systems necessary for such operations
may break down, perform poorly or fail resulting in fluctuations in
manufacturing efficiencies. Such fluctuations may affect our ability to deliver
products to our customers on a timely basis which could have a material adverse
effect on our business, financial condition or results of operations.

We face significant competition in our markets and, if we are not able to
respond to competition in our markets, our revenues may decrease.

We face significant competition from a variety of competitors in each of our
markets. Some of our competitors have substantially greater financial,
marketing, personnel and other resources than we do.

New competitors also could enter our markets. We consider product quality,
performance, price, distribution capabilities and breadth of product offerings
to be the primary competitive factors in our markets. Our competitors may be
able to offer more attractive pricing, duplicate our strategies, or develop
enhancements to products that could offer performance features that are
superior to our products. Competitive pressures, including those described
above, and other factors could adversely affect our competitive position,
involving a loss of market share or decreases in prices, either of which could
have a material adverse effect on our business, financial condition or results
of operations. In addition, some of our competitors are based in foreign
countries and have cost structures and prices based on foreign currencies.
Accordingly, currency fluctuations could cause our U.S. dollar-priced products
to be less competitive than our competitors' products which are priced in other
currencies.

If we experience delays in introducing new products or if our existing or new
products do not achieve or maintain market acceptance, our revenues may
decrease.

Our industry is characterized by:

. intense competition;

. changes in end-user requirements;

. technically complex products; and

. evolving product offerings and introductions.

We believe our future success will depend, in part, on our ability to
anticipate or adapt to these factors and to offer, on a timely basis, products
that meet customer demands. Failure to develop new and innovative products or
to custom design existing products could result in the loss of existing
customers to competitors or the inability to attract new business, either of
which may adversely affect our revenues. The development of new or enhanced
products is a complex and uncertain process requiring the anticipation of
technological and market trends. We may experience design, manufacturing,
marketing or other difficulties, such as an inability to attract a sufficient
number of qualified engineers, that could delay or prevent our development,
introduction or marketing of new products or enhancements and result in
unexpected expenses.

Implementation of our acquisition strategy may not be successful which could
affect our ability to increase our revenues or reduce our profitability.

One of our strategies is to increase our revenues and expand our markets
through acquisitions that will provide us with complementary instrumentation
and fluid regulation and petrochemical products. We expect to spend significant
time and effort in expanding our existing businesses and identifying,
completing and integrating acquisitions. We expect to face competition for
acquisition candidates which may limit the number of acquisition opportunities
available to us and may result in higher acquisition prices. We cannot be
certain that we will be able to identify, acquire or profitably manage
additional companies or successfully integrate such additional companies
without substantial costs, delays or other problems. Also, there can be no
assurance that companies acquired in the future will achieve revenues,
profitability or cash flows that justify our investment in them. In addition,
acquisitions may involve a number of special risks, including:

. adverse short-term effects on our reported operating results;

. diversion of management's attention;

. loss of key personnel at acquired companies; or

. unanticipated management or operational problems or legal liabilities.

Some or all of the above special risks could have a material adverse effect
on our business, financial condition or results of operations.

If we fail to manufacture and deliver high quality products, we may lose
customers.

Product quality and performance are a priority for our customers since many
of our product applications involve caustic or volatile chemicals and, in many
cases, involve processes that require precise control of fluids. Our products
also are used in the aerospace, military, commercial aircraft, pharmaceutical,
medical, analytical equipment and maritime industries. These industries require
products that meet stringent performance and safety standards. If we fail to
maintain and enforce quality control and testing procedures, our products will
not meet these stringent performance and safety standards. Substandard products
would seriously harm our reputation resulting in both a loss of current
customers to our competitors and damage to our ability to attract new
customers, which could have a material adverse effect on our business,
financial condition or results of operations.

If we are unable to continue operating successfully overseas or to successfully
expand into new international markets, our revenues may decrease.

We derive a significant portion of our revenue from sales outside the United
States. In addition, one of our key growth strategies is to market our products
in international markets not currently served by us in portions of Europe,
Latin America and Asia. We may not succeed in marketing, selling and
distributing our products in these new markets. Moreover, conducting business
outside the United States is subject to risks, including currency exchange rate
fluctuations, changes in regional, political or economic conditions, trade
protection measures such as tariffs or import or export restrictions, and
unexpected changes in regulatory requirements. One or more of these factors
could prevent us from successfully expanding into new international markets and
could also have a material adverse effect on our current international
operations.

Prices of our raw materials may increase which may adversely affect our
business.

We obtain our raw materials for the manufacture of our products from third-
party suppliers. We do not have contracts with many of these suppliers that
require them to sell us the materials we need to manufacture our products. In
the last few years, stainless steel, cast iron and carbon steel, in particular,
have each increased in price as a result of increases in demand. While
historically we have not experienced difficulties in obtaining the raw
materials we require (including stainless steel, cast iron and carbon steel),
we cannot be certain that our suppliers will continue to provide us with the
raw materials we need in the quantities requested or at a price we are willing
to pay. In the past we have been able to partially offset increases in the cost
of raw materials by increased sales prices, active materials management,
product engineering programs and the diversity of materials used in our
production processes. However, we cannot be certain that we will be able to
accomplish this in the future. Since we do not control the actual production of
these raw materials, we may be subject to delays caused by interruption in
production of materials for reasons we cannot control. These include job
actions or strikes by employees of suppliers, transportation interruptions and
natural disasters or other catastrophic events. Our inability to obtain
adequate supplies of raw materials for our products at favorable prices, or at
all, could have a material adverse effect on our business, financial condition
or results of operations.

The costs of complying with existing or future environmental regulations, and
of curing any violations of these regulations, could increase our expenses or
reduce our profitability.

We are subject to a variety of environmental laws relating to the storage,
discharge, handling, emission, generation, use and disposal of chemicals, solid
and hazardous waste and other toxic and hazardous materials used to
manufacture, or resulting from the process of manufacturing, our products. We
cannot predict the nature, scope or effect of future regulatory requirements to
which our operations might be subject or the manner in which existing or future
laws will be administered or interpreted. Future regulations could be applied
to materials, products or activities that have not been subject to regulation
previously. The costs of complying with new or more stringent regulations, or
with more vigorous enforcement of these or existing regulations, could be
significant.

Environmental laws require us to maintain and comply with a number of
permits, authorizations and approvals and to maintain and update training
programs and safety data regarding materials used in our processes. Violations
of these requirements could result in financial penalties and other enforcement
actions. We also could be required to halt one or more portions of our
operations until a violation is cured. Although we attempt to operate in
compliance with these environmental laws, we may not succeed in this effort at
all times. The costs of curing violations or resolving enforcement actions that
might be initiated by government authorities could be substantial.

The costs of complying with existing or future governmental regulations
applicable to our importing and exporting practices, and of curing any
violations of these regulations, could increase our expenses, reduce our
revenues or reduce our profitability.

We are subject to a variety of laws regarding our international trade
practices including regulations issued by the United States Customs Service and
by the Bureau of Export Administration. We cannot predict the nature, scope or
effect of future regulatory requirements to which our international trading
practices might be subject or the manner in which existing laws might be
administered or interpreted. Future regulations could limit the countries into
which certain of our products may be sold or could restrict our access to and
increase the cost of obtaining products from foreign sources. In addition,
actual or alleged violations of import-export laws could result in enforcement
actions and/or financial penalties that could result in substantial costs.

We face risks from product liability lawsuits which may adversely affect our
business.

We, like other manufacturers and distributors of products designed to
control and regulate fluids and chemicals, face an inherent risk of exposure to
product liability claims in the event that the use of our products results in
personal injury, property damage or business interruption to our customers. We
may be subjected to various product liability claims, including, among others,
that our products include inadequate or improper instructions for use or
installation, or inadequate warnings concerning the effects of the failure of
our products. Although we maintain strict quality controls and procedures,
including the testing of raw materials and safety testing of selected finished
products, we cannot be certain that our products will be completely free from
defect. In addition, in certain cases, we rely on third-party manufacturers for
our products or components of our products. Although we have liability
insurance coverage, we cannot be certain that this insurance coverage will
continue to be available to us at a reasonable cost, or, if available, will be
adequate to cover any such liabilities. We generally seek to obtain contractual
indemnification from our third-party suppliers, and for us to be added as an
additional insured party under such parties' insurance policies. Any such
indemnification or insurance is limited by its terms and, as a practical
matter, is limited to the credit worthiness of the indemnifying or insuring
party. In the event that we do not have adequate insurance or contractual
indemnification, product liabilities could have a material adverse effect on
our business, financial condition or results of operations.

We may be responsible for certain historical liabilities in the event Watts and
its affiliates are ultimately unable to satisfy such liabilities.

Until the spin-off, we were a member of Watts' consolidated group for
federal income tax purposes. Each member of a consolidated group is liable for
the federal income tax liability of the other members of the group, as well as
for pension and benefit funding liabilities of the other group members. Under
federal law we continue to be contingently liable for these Watts consolidated
group liabilities for periods beginning before the spin-off.

We entered into a distribution agreement with Watts which allocates tax,
pension and benefit funding liabilities between Watts and us. Under this
agreement, Watts maintains full control and absolute discretion with regard to
any combined or consolidated United States federal and state tax filings for
periods through the spin-off date. Watts also maintains full control and
absolute discretion regarding common tax audit issues of such entities. These
arrangements may result in conflicts of interest with Watts. In addition, if
Watts is ultimately unable to satisfy its liabilities, we could be responsible
for satisfying them, despite the distribution agreement.

We would be jointly and severally liable for Watts' federal income taxes
resulting from the spin-off if the Internal Revenue Service, or IRS, treats the
spin-off as a taxable distribution.

At the time of the spin-off, Watts received a ruling from the IRS to the
effect that, for United States federal income tax purposes, the spin-off would
be tax-free to Watts and its shareholders. If the undertakings made to the IRS
regarding the spin-off are not complied with or if representations made to the
IRS regarding the spin-off were inaccurate, we could lose the benefit of the
IRS tax ruling and the IRS could assert that the spin-off was a taxable
distribution. In that case, under United States federal income tax law, we
would be jointly and severally liable with Watts for a material amount of
federal income tax. In our distribution agreement with Watts, we agreed that we
will be wholly responsible for that tax if it results from our act or omission,
and Watts will be wholly responsible for that tax if it results from Watts' act
or omission. Under federal income tax law, however, we would be required to pay
that tax if Watts was unable to, regardless of the distribution agreement.

We may have conflicts of interest with Watts that may adversely affect our
business.

Conflicts of interest may arise with Watts in a number of areas relating to
our past and ongoing relationships, including tax and employee benefit matters
and indemnity arrangements. The Chief Executive Officer and Chairman of Watts,
as well as another director of Watts, serve on our board of directors. These
relationships may create conflicts of interest with respect to matters
potentially or actually involving or affecting us and Watts.

We depend on our key personnel and the loss of their services may adversely
affect our business.

We believe that our success will depend on the continued employment of our
senior management team and other key personnel. If one or more members of our
senior management team or other key personnel were unable or unwilling to
continue in their present positions, our business could be seriously harmed. In
addition, if any of our key personnel joins a competitor or forms a competing
company, some of our customers might choose to use the services of that
competitor or those of a new company instead of our own. Other companies
seeking to develop capabilities and products similar to ours may hire away some
of our key personnel. If we are unable to maintain our key personnel and
attract new employees, the execution of our business strategy may be hindered
and our growth limited.

Voting control by our directors and executive officers could delay or prevent a
"change in control."

After giving effect to the offering, our directors and executive officers
and their affiliates will beneficially own in the aggregate 4,409,905 shares of
our outstanding common stock or 29.2% as of February 28, 2001, assuming they do
not participate in the offering. These shareholders, if they were to act
together, could have the ability, as a practical matter, to significantly
influence the outcome of the election of our directors and all other matters
requiring approval by a majority of our shareholders including, in many cases,
significant corporate transactions, such as mergers and sales of all or
substantially all of our assets. Such concentration of ownership, together, in
some cases, with certain provisions of our amended and restated certificate of
incorporation, amended and restated by-laws and shareholder rights plan and
certain sections of the Delaware General Corporation Law, may have the effect
of delaying or preventing a "change in control." Delaying or preventing a
takeover of us could result in our shareholders ultimately receiving less for
their shares by deterring potential bidders for our stock or assets. See
"Principal Shareholders" for more information.

A limited number of our shareholders can exercise substantial influence over
our company.

As of February 28, 2001, our significant shareholders were Timothy P. Horne,
who beneficially owns 29.6% of our outstanding shares of common stock, and
Mario J. Gabelli, Marc J. Gabelli and various entities, which either one
directly or indirectly controls or for which either one acts as chief
investment officer, including but not limited to Gabelli Funds LLC, GAMCO
Investors, Inc. and Gabelli Securities, Inc., which beneficially own 14.3% of
our outstanding shares of common stock. Together these shareholders, as of
February 28, 2001, beneficially own in the aggregate a total of 43.9% of our
outstanding shares of common stock. We expect that, together, they will
continue to beneficially own 39.8% of our outstanding common stock upon
completion of the offering, assuming they do not participate in the offering.
If these shareholders were to vote together as a group, they would have the
ability to exert significant influence over our board of directors and its
policies. For instance, these shareholders would be able to exert a significant
influence over the outcome of all shareholder votes, including votes concerning
director elections, by-law amendments, possible mergers, corporate control
contests and other significant corporate transactions. Also, if either of these
shareholders were to sell a significant amount of their common stock into the
public market, the trading price of our common stock could decline. See
"Principal Shareholders" for more information.

Various restrictions and agreements could hinder a takeover of us which is not
supported by our board of directors or which is leveraged.

Our amended and restated certificate of incorporation and amended and
restated by-laws, the Delaware General Corporation Law and our shareholder
rights plan contain provisions that could delay or prevent a change in control
in a transaction that is not approved by our board of directors or that is on a
leveraged basis or otherwise. These include provisions creating a staggered
board, limiting the shareholders' powers to remove directors, and prohibiting
shareholders from calling a special meeting or taking action by written consent
in lieu of a shareholders' meeting. In addition, our board of directors has the
authority, without further action by the shareholders, to set the terms of and
to issue preferred stock. Issuing preferred stock could adversely affect the
voting power of the owners of our common stock, including the loss of voting
control to others. Additionally, we have adopted a shareholder rights plan
providing for the issuance of rights that will cause substantial dilution to a
person or group of persons that acquires 15% or more of our shares of common
stock, unless the rights are redeemed. See "Description of Capital Stock" for
more information.

Furthermore, until October 18, 2001, the terms of our distribution agreement
with Watts prohibit us from engaging in any transaction that results in one or
more persons acquiring a 50% or greater interest in us, unless we obtain a
supplemental ruling from the IRS or an opinion of legal counsel that the
transaction will not adversely affect the qualification of our spin-off from
Watts as a tax-free transaction.

Delaying or preventing a takeover could result in our shareholders
ultimately receiving less for their shares by deterring potential bidders for
our stock or assets.

Our ability to issue equity, make acquisitions, incur debt, pay dividends, make
investments, sell assets, merge or raise capital is limited by our obligations
to comply with the covenants under our debt agreements.

Our credit agreement and note purchase agreement both of which are dated
October 19, 1999, govern our indebtedness to our lenders. The debt agreements
include provisions which place limitations on certain activities including our
ability to:

. issue shares of our common stock without, in certain circumstances, making
prepayments under our credit agreement;

. incur additional indebtedness;

. create any liens or encumbrances on our assets or make any guarantees;

. make certain investments;

. pay dividends that exceed 50% of our consolidated income for the most recent
fiscal quarter; or

. dispose of or sell assets or enter into a merger or a similar transaction.

The trading price of our common stock may be volatile and investors in our
common stock may experience substantial losses.

The trading price of our common stock may be volatile. Our common stock
could decline or fluctuate in response to a variety of factors, including, but
not limited to:

. our failure to meet the performance estimates of securities analysts;

. changes in financial estimates of our revenues and operating results or
buy/sell recommendations by securities analysts;

. the timing of announcements by us or our competitors concerning significant
product line developments, contracts or acquisitions or publicity regarding
actual or potential results or performance;

. fluctuation in our quarterly operating results caused by fluctuations in
revenue and expenses;

. substantial sales of our common stock by our existing shareholders;

. general stock market conditions; or

. other economic or external factors.

In addition, the stock market as a whole has recently experienced extreme
price and volume fluctuations. In the past, securities class action litigation
has often been instituted against companies following periods of volatility in
the market price of their securities. This type of litigation could result in
substantial costs and a diversion of management attention and resources.

SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements under the captions
"Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere. These forward-
looking statements include statements about the following:

. implementing our business and acquisition strategies;

. managing our growth;

. our relationship with Watts; and

. other statements that are not historical facts.

You can identify forward-looking statements by words such as "may," "hope,"
"will," "should," "expect," "plan," "anticipate," "intend," "believe,"
"estimate," "predict," " potential," "continue" or the negative of those terms
or other comparable terminology. You should read statements that contain these
words carefully because they discuss our future expectations, contain
projections of our future results of operations or financial condition or state
other "forward-looking" information. We believe that it is important to
communicate our future expectations to our investors. 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. Before you invest in our common stock, you
should be aware that the occurrence of the events described under the caption
"Risk Factors" and elsewhere in this prospectus could have a material adverse
effect on our business, results of operations or financial condition. We
undertake no obligations to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of 1,350,000 shares of
our common stock in this offering will be approximately $15.9 million based on
an assumed public offering price of $13.05 per share which was the last
reported sale price of our common stock on February 28, 2001, after deducting
the underwriting discounts and estimated offering expenses payable by us.

We intend to use substantially all of the net proceeds of this offering to
acquire complementary businesses or products. Immediately after this offering,
and until such acquisitions require our capital, we will use a portion of the
net proceeds to reduce our outstanding indebtedness under our credit facility.
The credit facility matures on October 18, 2003 and, as of February 28, 2001,
$3.0 million was outstanding bearing interest at the prime lending rate of
8.5%. Additionally, we may use some of the net proceeds for general corporate
purposes, including working capital.

We have not determined the amount of net proceeds that we will use for each
of these purposes or the timing of these expenditures. Pending such uses, we
may invest the net proceeds temporarily in short-term, investment-grade,
interest-bearing securities or guaranteed obligations of the United States
government.

We have discussions on an ongoing basis regarding potential acquisitions
that are complementary to our business although currently we have no agreements
or commitments in this regard.

DIVIDEND POLICY

During each of the last three quarters of 2000, we declared and paid
dividends equal to $0.0375 per outstanding common share. During the first
quarter of 2001, we declared a dividend of $0.0375 per outstanding common share
payable on March 16, 2001 to shareholders of record on March 2, 2001. Although
we currently intend to pay cash dividends, the timing and level of such
dividends will necessarily depend on our board of directors' assessment of
earnings, financial condition, capital requirements and other factors,
including restrictions imposed by our lenders.

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the NYSE under the symbol "CIR." The following
table sets forth, for the periods indicated, the high and low sale prices of
our common stock on the NYSE.

High Low
------- -------

Year ended December 31, 1999
4th Quarter.................................................. $ 11.13 $ 8.94

Year ended December 31, 2000
1st Quarter.................................................. $ 15.25 $ 9.94
2nd Quarter.................................................. $ 13.88 $ 7.50
3rd Quarter.................................................. $ 10.50 $ 7.00
4th Quarter.................................................. $ 11.88 $ 9.25

Year ending December 31, 2001
1st Quarter (through February 28, 2001)...................... $ 13.30 $ 10.00

As of February 28, 2001, there were 13,262,891 shares of our common stock
outstanding and we had approximately 147 holders of record of our common stock.
We believe the number of beneficial owners of our common stock on that date was
substantially greater.

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 2000:

. on an actual basis; and

. on an as adjusted basis to reflect the sale of the 1,350,000 shares of
common stock in this offering at an assumed offering price of $13.05 per
share, our receipt of the net proceeds from the sale of these shares after
deducting underwriting discounts and estimated offering expenses payable by
us, and the repayment of certain indebtedness.

You should read this table in conjunction with the consolidated financial
statements and notes included in this prospectus and the information under
"Selected Consolidated Financial Data."

As of December 31, 2000
-------------------------------------
Actual As Adjusted
---------------- -------------------
(unaudited)
(In thousands, except share data)

Balance Sheet Data:
Cash and cash equivalents................. $ 8,192 $ 24,121
================ ================
Current portion of long-term debt......... $ 940 $ 940
Long-term debt, net of current portion.... 90,593 90,593
Shareholders' Equity:
Preferred stock, $0.01 par value per
share; 1,000,000 shares authorized, no
shares issued and outstanding........... - -
Common stock, $0.01 par value per share;
29,000,000 shares authorized, 13,262,891
actual shares issued and outstanding;
and 14,612,891 shares issued and
outstanding on an as adjusted basis..... 133 147
Additional paid-in capital............... 181,184 197,099
Retained earnings........................ 12,451 12,451
Accumulated other comprehensive loss..... (2,587) (2,587)
---------------- ----------------
Total shareholders' equity............... 191,181 207,110
---------------- ----------------
Total capitalization..................... $ 282,714 $ 298,643
================ ================

SELECTED CONSOLIDATED FINANCIAL DATA

The following table presents certain selected historical financial and
operating information that has been derived from our Consolidated Financial
Statements and should be read along with the other sections entitled "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our consolidated financial statements and notes and
other financial data included in this prospectus.

The consolidated operating results data for the year ended December 31,
2000, six months ended December 31, 1999 and the fiscal years ended June 30,
1999 and 1998 and the consolidated balance sheet data as of December 31, 2000
and 1999 and June 30, 1999 are derived from, and are qualified by reference to,
our audited consolidated financial statements included on pages F-3 to F-28 of
this prospectus, and should be read in conjunction with those financial
statements and the related notes to the consolidated financial statements. The
consolidated operating results data for the fiscal year ended June 30, 1997 and
the consolidated balance sheet data as of June 30, 1998 are derived from our
audited consolidated financial statements not included in this prospectus. The
consolidated operating data for the fiscal year ended June 30, 1996 and the
consolidated balance sheet data as of June 30, 1997 and 1996 are derived from
our unaudited consolidated financial statements not included in this
prospectus.

Selected Consolidated Financial Data

(In thousands, except per share data)

This selected consolidated historical financial data includes a presentation
of EBITDA. EBITDA represents earnings before interest, income taxes,
depreciation, amortization, restructuring, impairment and special charges.
EBITDA is provided because it is a measure commonly used by investors to
analyze and compare companies on the basis of operating performance. EBITDA is
not a measurement for financial performance under generally accepted
accounting principles and should not be construed as a substitute for
operating income, net income or cash flows. EBITDA, as we have calculated
here, is not necessarily comparable with similarly titled measures for other
companies.

Six Months Ended
Years Ended December 31, December 31, Fiscal Years Ended June 30,
--------------------------------- -------------------- -----------------------------------------------------
Pro Forma Pro Forma Pro Forma
2000 (1) 1999 (1)(2) 1999 (1) 1999 (1)(2) 1999 (1) 1999 (2) 1999 1998 1997 1996 (3)
-------- ----------- ----------- ----------- -------- ----------- -------- -------- -------- -----------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)

Summary Income
Statement:
Net revenues..... $316,863 $314,726 $314,726 $157,265 $157,265 $324,258 $324,258 $291,580 $275,758 $231,784
Gross profit..... 95,791 100,496 100,496 48,652 48,652 103,646 103,646 93,428 87,412 67,359
Operating income
(loss)........... 27,636 27,627 27,815 13,785 13,846 29,297 29,550 38,191 33,906 (23,469)
Income (loss)
before interest
and taxes........ 26,876 17,059 18,152 13,235 13,386 29,526 29,779 38,497 33,233 (22,976)
Net income
(loss)........... 10,560 9,894 10,550 4,650 4,880 11,736 12,510 22,425 19,614 (31,609)
Summary Balance
Sheet (4):
Total assets..... $347,062 $367,085 $367,085 $367,085 $367,085 $362,370 $359,043 $256,914 $212,727 $202,956
Total debt (5)... 91,533 125,127 125,127 125,127 125,127 116,248 26,582 15,753 13,252 14,110
Shareholders'
equity........... 191,181 183,409 183,409 183,409 183,409 169,590 259,256 168,656 137,277 132,993
Total
capitalization... 282,714 308,536 308,536 308,536 308,536 285,838 285,838 184,409 150,529 147,103
Other Financial
Data:
EBITDA........... $ 41,790 $ 41,790 $ 41,572 $ 21,123 $ 21,184 $ 42,288 $ 42,541 $ 46,341 $ 40,149 $ 33,219
Cash flow
provided by (used
in):
Operating
activities...... 31,700 (519) 137 (15,059) (14,829) 19,754 20,528 21,075 27,842 9,143
Investing
activities...... 5,827 (21,762) (21,762) (5,171) (5,171) (82,704) (82,704) (29,197) (6,792) (11,032)
Financing
activities...... (34,683) 24,245 23,589 18,666 18,436 63,719 62,945 11,633 (17,805) 2,557
Net interest
expense.......... 9,276 9,823 8,918 4,864 4,542 9,845 8,808 3,471 3,274 4,462
Capital
expenditures..... 3,743 11,984 11,984 4,557 4,557 9,499 9,499 6,115 5,457 12,628
Diluted earnings
per common share
(6).............. $0.78 n/a n/a n/a n/a n/a n/a n/a n/a n/a
Diluted weighted
average common
shares
outstanding (6).. 13,480 n/a n/a n/a n/a n/a n/a n/a n/a n/a
Cash dividends
declared per
common share..... $ 0.1125 n/a n/a $ - $ - n/a n/a n/a n/a n/a

Notes:
- ----
(1) The summary income statement information for the years ended December 31,
2000 and 1999 and for the six months ended December 31, 1999 includes,
respectively, $1.9 million, $0.7 million and $0.7 million of special
charges associated with the closure, consolidation and reorganization of
manufacturing plants.
(2) As adjusted for the spin-off for: the assumption by CIRCOR of selected
indebtedness from Watts; our credit facility and the placement of $75.0
million of senior unsecured notes.
(3) Fiscal 1996 includes an after-tax charge of $48.3 million related to: a
restructuring cost of $3.0 million; an impairment of long lived assets of
$38.5 million; other non-recurring charges of $3.9 million, principally
for product liability costs, additional bad debt reserves and
environmental remediation costs and additional inventory valuation
reserves of $2.9 million. This charge represents pretax special charges of
$48.1 million and pretax other charges of $4.9 million.
(4) Summary balance sheet information as of June 30, 1997 is unaudited.

(5) Includes capitalized leases of: $0.2 million; $0.6 million and $4.1
million as of December 31, 2000, December 31, 1999 and June 30, 1999,
respectively.
(6) Diluted earnings per common share and diluted weighted average common
shares outstanding are applicable only for quarterly and annual periods
ended after December 31, 1999, since we were not a publicly-owned,
independent company with a capital structure of our own until after the
October 18, 1999 spin-off. See notes 2 and 15 of the Consolidated
Financial Statements for an explanation of pro forma earnings per share.
n/a not applicable

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following discussion should be read in conjunction with our consolidated
financial statements and other financial information appearing elsewhere in
this prospectus. In addition, the following discussion contains certain
statements that are "forward-looking statements." The words "may," "hope,"
"will," "should," "expect," "plan," "anticipate," "intend," "believe,"
"estimate," "predict," "potential," or "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. Forward-looking
statements 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. We undertake no
obligation to publicly update or revise any forward-looking statement, whether
as a result of new information, future events or otherwise.

Our future operating results and performance trends may be affected by a
number of factors and could differ materially from those projected in the
forward-looking statements as a result of the risk factors discussed under
"Risk Factors" and elsewhere in this prospectus, and as a result of competitive
factors, risks associated with our growth strategies and changes in the
assumptions used in making such forward-looking statements.

Overview

On October 18, 1999, we became a publicly-owned company via a tax-free
distribution of our common stock to the shareholders of our former parent
company, Watts. Additionally, we announced that we would change our fiscal year
end from June 30th to December 31st. The comparisons to prior year periods
pertain to the historical results of these operations under Watts which later
were transferred to us in connection with the spin-off.

Our Business

We design, manufacture and distribute a broad array of valves and related
products and services to a variety of end-markets for use in a wide range of
applications to optimize the efficiency and/or ensure the safety of fluid-
control systems. Within our major product groups, we have used both internal
product development and strategic acquisitions to assemble an array of fluid-
control products and technologies that enable us to address our customers'
unique fluid-control application needs. Our two major product groups are
instrumentation and fluid regulation products and petrochemical products. The
instrumentation and fluid regulation products group designs, manufactures and
distributes valves and controls, such as precision valves, compression tube and
pipe fittings, control valves and regulators for diverse end-uses including
hydraulic, pneumatic, cryogenic and steam applications. The petrochemical
products group designs, manufacturers and distributes flanged and threaded-end
floating and trunnion ball valves, needle valves, check valves, butterfly
valves, gate valves, pipeline closures and strainers and large forged steel
ball valves for use in oil, gas and chemical processing and industrial
applications. The instrumentation and fluid regulation products group includes
the following significant product families: Hoke; GO Regulator; Circle Seal
Controls; Leslie Controls; Spence Engineering; Nicholson Steam Trap; Aerodyne
Controls; Atkomatic Valve; CPC; Cryolab; and Rockwood Swendeman. The
petrochemical products group includes the following significant product
families: KF Industries; Contromatics Specialty Products; Eagle Check Valve;
Telford Valve and Specialities; Pibiviesse; Suzhou KF Valve; and SSI Equipment.

Basis of Presentation

The consolidated financial statements contained elsewhere in this prospectus
present our financial condition, results of operations and cash flows as if we
had been an independent, publicly-owned company for all periods presented. To
facilitate such presentation, we made certain allocations of previously
unallocated Watts interest and general and administrative expenses, as well as
computed separate tax provisions. The consolidated financial statements prior
to October 18, 1999 represent the former combined operations of Watts'
industrial, oil and gas businesses. All significant intercompany balances and
transactions have been eliminated in consolidation. Certain prior period
financial statement amounts have been reclassified to conform to currently
reported presentations.

Effective July 1, 1999, we changed our fiscal year end from June 30th to
December 31st. Accordingly, the audited financial statements include the
results for the year ended December 31, 2000, the six months ended December 31,
1999 and the prior two fiscal years ended June 30, 1999 and June 30, 1998. In
addition to the audited financial statements and related notes, unaudited
financial information for the year ended December 31, 1999 and the six months
ended December 31, 1998 have been presented to enhance comparability.

We monitor our business in two segments: instrumentation and fluid
regulation products and petrochemical products.

Year Ended December 31, 2000 Compared to the Year Ended December 31, 1999

The following table sets forth the results of operations, percentage of net
revenues and the yearly percentage change in certain financial data for the
years ended December 31, 2000 and 1999:

Years Ended December 31,
------------------------------
2000 1999 % Change
-------------- -------------- --------
(Dollars in thousands)

Net revenues......................... $316,863 100.0% $314,726 100.0% 0.7%
Cost of revenues..................... 221,072 69.8 214,230 68.1 3.2
-------- ----- -------- -----
Gross profit........................ 95,791 30.2 100,496 31.9 (4.7)
Selling, general and administrative
expenses............................ 66,246 20.9 71,959 22.9 (7.9)
Special charges...................... 1,909 0.6 722 0.2 164.4
-------- ----- -------- -----
Operating income.................... 27,636 8.7 27,815 8.8 (0.6)
Other expense:
Interest expense, net............... 9,276 2.9 8,918 2.8 4.0
Other expense, net.................. 760 0.2 745 0.2 2.0
-------- ----- -------- -----
Income before income taxes........... 17,600 5.6 18,152 5.8 (3.0)
Provision for income taxes........... 7,040 2.3 7,602 2.4 (7.4)
-------- ----- -------- -----
Net income.......................... $ 10,560 3.3% $ 10,550 3.4% 0.1%
======== ===== ======== =====

Net revenues for the year ended December 31, 2000 increased by $2.1 million,
or 0.7%, to $316.9 million compared to $314.7 million for the year ended
December 31, 1999. The increase in net revenues for the year ended December 31,
2000 was attributable to the following:

Total Foreign
Products Group 2000 1999 Change Acquisitions Operations Exchange
-------------- -------- -------- ------- ------------ ---------- --------
(In thousands)

Instrumentation and Fluid Regulation.. $178,237 $174,563 $ 3,674 $1,634 $4,065 $(2,025)
Petrochemical......................... 138,626 140,163 (1,537) 141 1,216 (2,894)
-------- -------- ------- ------ ------ -------
Total................................. $316,863 $314,726 $ 2,137 $1,775 $5,281 $(4,919)
======== ======== ======= ====== ====== =======

The instrumentation and fluid regulation products segment accounted for
56.3% of net revenues in the year ended December 31, 2000 compared to 55.5% for
the year ended December 31, 1999. The petrochemical products segment accounted
for approximately 43.7% of net revenues for the year ended December 31, 2000
compared to 44.5% for the year ended December 31, 1999.

Instrumentation and fluid regulation product revenues increased $3.7
million, or 2.1%, for the year ended December 31, 2000. The net increase was
primarily due to: incremental revenue of $1.6 million as a result of the
acquisitions of GO Regulator, in April 1999, and of the Rockwood Swendeman
product line, in November 2000; an increase in U.S. instrumentation revenues of
$8.0 million, primarily within aerospace markets; a $1.5 million decrease in
the volume of European instrumentation product revenues; a $2.4 million
decrease in revenues of steam products, resulting from a lower product order
backlog at the beginning of the year than in the prior year; and the effect of
a weaker Euro which reduced instrumentation and fluid regulation revenues by
$2.0 million. The net decrease in petrochemical revenues of $1.5 million, or
1.1%, was principally the result of an $8.2 million decrease in revenues from
our Italian-based operation due to a reduced number of large oil and gas
construction projects and a $2.9 million decrease due to unfavorable exchange
rate changes. Those decreases were partially offest by $8.4 million in higher
North American revenues related to improved customer spending on maintenance
and repair and small capital projects and the 1999 acquisition of SSI Equipment
and a $1.2 million increase in revenue from Suzhou KF Valve, our Chinese joint
venture.

Gross profit decreased $4.7 million, or 4.7%, to $95.8 million for the year
ended December 31, 2000 compared to $100.5 million for the year ended December
31, 1999. Gross margin declined from 31.9% for the year ended December 31, 1999
to 30.2% for the year ended December 31, 2000. Gross profit for the
instrumentation and fluid regulation segment increased $2.3 million as a result
of $0.6 million from acquisitions, $2.2 million from operations, which included
a $1.2 million benefit of lower estimates to settle product liability claims,
and unfavorable net foreign exchange rate changes of $0.5 million. Gross profit
for the petrochemical segment decreased $7.0 million for the year ended
December 31, 2000 compared to the year ended December 31, 1999. The decrease
was the net result of lower revenues in certain higher margin product lines,
resulting from reduced capital project activity for the global oil and gas
markets this year coupled with the related negative effects of increasingly
competitive pricing and by higher manufacturing costs at a key North American
plant which included a $2.0 million charge for physical inventory results and
related adjustments. Net foreign exchange rate changes unfavorably affected
gross profit for this segment by $0.4 million.

Selling, general and administrative expenses decreased $5.7 million, or
7.9%, to $66.2 million for the year ended December 31, 2000 compared with $72.0
million for the year ended December 31, 1999. The instrumentation and fluid
regulation segment reduced operating expenses by $5.4 million including $5.2
million in savings generated from the consolidation of manufacturing and
administrative functions, increased expenses of $0.3 million related to
acquired businesses and decreased expenses of $0.5 million resulting from
favorable foreign exchange rate changes. The petrochemical segment operating
expenses decreased by $1.4 million, resulting from $1.0 million of reduced
expenses at our

Italian-based operation and $0.5 million from the favorable effect of foreign
exchange rate changes. Increased corporate spending of approximately $1.2
million reflected additional costs associated with operating as an independent
public company.

During the year ended December 31, 2000, special charges of $1.9 million were
incurred associated with the closure, consolidation and reorganization of
manufacturing operations in both the instrumentation and fluid regulation and
petrochemical segments. These costs consisted primarily of severance for
terminated employees and exit costs associated with plant closures, including
relocation of manufacturing equipment. During the year ended December 31, 1999,
similar special charges of $0.7 million were incurred in the instrumentation
and fluid regulation products segment.

The change in operating income for the year ended December 31, 2000 compared
to the year ended December 31, 1999 was as follows:

Total Foreign
Products Group 2000 1999 Change Acquisitions Operations Exchange
-------------- ------- ------- ------ ------------ ---------- --------
(In thousands)

Instrumentation and
Fluid Regulation....... $30,480 $23,619 $6,861 $166 $6,675 $ 20
Petrochemical........... 3,868 9,744 (5,876) 12 (6,021) 133
Corporate............... (6,712) (5,548) (1,164) - (1,164) -
------- ------- ------ ---- ------ ----
Total................... $27,636 $27,815 $ (179) $178 $ (510) $153
======= ======= ====== ==== ====== ====

The increase in operating income in the instrumentation and fluid regulation
products segment was primarily attributable to improved manufacturing and
administrative operating efficiencies, a $1.2 million benefit of lower
estimates to settle product liability claims and incremental profit from higher
revenues and acquisitions. These gains were partially offset by lower
manufacturing overhead absorption, resulting from the lower production
requirements and by the effects of the special charges incurred during the year
ended December 31, 2000, compared to the year ended December 31, 1999. The
decrease in operating income in the petrochemical products segment was
primarily due to lower gross profit as a result of competitive pricing
pressures, manufacturing cost inefficiencies, which included a $2.0 million
charge for physical inventory results and related adjustments, and the special
charges related to manufacturing consolidation which were offset, in part, by
reduced operating expenses. Additional corporate expenses of $1.2 million were
incurred while we were operating as an independent public company.

Net interest expense increased $0.4 million to $9.3 million for the year
ended December 31, 2000 compared to the year ended December 31, 1999 due to
higher current year interest rates.

Other non-operating expense was $0.8 million for the year ended December 31,
2000 and $0.7 million for the year ended December 31, 1999.

The effective tax rate decreased to 40.0% for the year ended December 31,
2000 compared to 41.9% for the year ended December 31, 1999, due to the
implementation of various tax strategies in 2000.

Net income was $10.6 million for the years ended December 31, 2000 and 1999.
Improved operating results within the instrumentation and fluid regulation
segment were offset by the decrease in performance within the petrochemical
products segment and higher special charges related to consolidation activities
identified above.

The combined results of operations were impacted by the effect that changes
in foreign exchange rates had on our international subsidiaries' operating
results. Changes in foreign exchange rates had a favorable impact of $0.3
million on net income for the year ended December 31, 2000 compared to the year
ended December 31, 1999.

Six Months Ended December 31, 1999 Compared to the Six Months Ended December
31, 1998

The following table sets forth the results of operations, percentage of net
revenues and the period-to-period percentage change in certain financial data
for the six months ended December 31, 1999 and 1998:

Six Months Ended December 31,
-------------------------------
1999 1998 % Change
-------------- --------------- ---------
(Dollars in thousands)

Net revenues....................... $157,265 100.0% $166,797 100.0% (5.7)%
Cost of revenues................... 108,613 69.1 114,995 68.9 (5.5)
-------- ----- -------- -----
Gross profit...................... 48,652 30.9 51,802 31.1 (6.1)
Selling, general and administrative
expenses.......................... 34,084 21.7 36,221 21.8 (5.9)
Special charges.................... 722 0.5 -- 0.0 n/a
-------- ----- -------- -----
Operating income.................. 13,846 8.8 15,581 9.3 (11.1)
Other (income) expense:
Interest expense, net............. 4,542 2.9 4,432 2.6 2.5
Other (income) expense, net....... 460 0.3 (514) (0.3) (189.5)
-------- ----- -------- -----
Income before income taxes......... 8,844 5.6 11,663 7.0 (24.2)
Provision for income taxes......... 3,964 2.5 4,823 2.9 (17.8)
-------- ----- -------- -----
Net income........................ $ 4,880 3.1% $ 6,840 4.1% (28.7)%
======== ===== ======== =====

Net revenues for the six months ended December 31, 1999 were $157.3 million,
a decrease of $9.5 million, or 5.7%, from $166.8 million in the six months
ended December 31, 1998. The decrease in net revenues was attributable to the
following:

Total Foreign
Products Group 1999 1998 Change Acquisitions Operations Exchange
-------------- -------- -------- ------- ------------ ---------- --------
(In thousands)

Instrumentation and Fluid Regulation.. $ 84,564 $ 85,706 $(1,142) $2,758 $ (3,185) $ (715)
Petrochemical......................... 72,701 81,091 (8,390) 2,238 (9,091) (1,537)
-------- -------- ------- ------ -------- -------
Total................................. $157,265 $166,797 $(9,532) $4,996 $(12,276) $(2,252)
======== ======== ======= ====== ======== =======

The decrease in net revenues from operations was primarily attributable to
reduced unit shipments of valves that serve both domestic and international oil
and gas applications. Revenues of these products were adversely affected by the
reduced demand for products used in the petrochemical industry, caused by
reduced energy prices during calendar year 1998, which continued until the
second-half of 1999 when prices began to increase. Historically, when energy
prices have increased for a sustained period of time, maintenance programs in
the petrochemical industry become more active followed by increased capital
spending on more extensive facility projects. During the latter part of 1999,
we began to experience increasing activity in maintenance programs but
continued to experience lackluster orders in facility project programs. The
decrease in net revenues from operations and foreign exchange was partially
offset by the inclusion of revenues of acquired businesses, including SSI
Equipment, Inc. and GO Regulator, Inc., which were acquired in January 1999 and
April 1999, respectively.

The impact of foreign exchange was due primarily to the strength of the
dollar compared to the Euro.

The instrumentation and fluid regulation products segment accounted for
approximately 53.8% of net revenues for the six months ended December 31, 1999
compared to 51.4% for the six months ended

December 31, 1998. The petrochemical products segment accounted for
approximately 46.2% of net revenues for the six months ended December 31, 1999
compared to 48.6% for the six months ended December 31, 1998.

Net revenues in the instrumentation and fluid regulation segment for the six
months ended December 31, 1999 decreased to $157.3 million, from $166.8 million
for the six months ended December 31, 1998, due to softness in capital spending
for instrumentation products, which was partially offset by the acquisition of
GO Regulator, Inc. The decrease in net revenues in the petrochemical segment
reflected weakness in both domestic and international oil and gas markets,
which was partially offset by the acquisition of SSI Equipment, Inc.

Gross profit for the six months ended December 31, 1999 decreased by $3.1
million, or 6.1%, from $51.8 million to $48.7 million compared to the six
months ended December 31, 1998. Gross margin declined slightly from 31.1% to
30.9%. Gross profit was adversely affected by start-up costs of the new factory
in Spartanburg, South Carolina and relocation costs associated with the closure
of Hoke's Cresskill, New Jersey plant. In addition, gross profit was adversely
affected by competitive pricing pressures, especially in the petrochemical
markets. Lower energy prices experienced prior to the second-half of 1999
reduced demand for petrochemical products, thereby decreasing unit pricing. The
reduced demand also lowered manufacturing levels creating unfavorable overhead
absorption of fixed manufacturing costs, thereby decreasing gross margins for
the six months ended December 31, 1999 compared to the six months ended
December 31, 1998.

Selling, general and administrative expenses decreased $2.1 million to $34.1
million for the six months ended December 31, 1999 compared to the six months
ended December 31, 1998. We reduced selling, general and administrative
expenses as revenues decreased and the savings were partially offset by certain
costs associated with our transition to an independent public company.

During the six months ended December 31, 1999, we incurred $0.7 million of
costs in connection with the closure, consolidation and reorganization of
certain manufacturing operations. These special charges were expensed as
incurred.

The changes in operating income for the six months ended December 31, 1999
and 1998 were as follows:

Total Foreign
Products Group 1999 1998 Change Acquisitions Operations Exchange
-------------- ------- ------- ------- ------------ ---------- --------
(In thousands)

Instrumentation and
Fluid Regulation....... $10,253 $11,478 $(1,225) $357 $(1,584) $ 2
Petrochemical........... 6,332 6,911 (579) 163 (749) 7
Corporate............... (2,739) (2,808) 69 - 69 -
------- ------- ------- ---- ------- ---
Total................... $13,846 $15,581 $(1,735) $520 $(2,264) $ 9
======= ======= ======= ==== ======= ===

The decrease in operating income in the instrumentation and fluid regulation
products segment was primarily attributable to the start-up cost of the
Spartanburg, South Carolina plant and plant relocation costs, partially offset
by benefits derived from improved operating efficiencies and favorable product
mix. The decrease in the operating income in the petrochemical products segment
was primarily attributable to decreased orders for petrochemical facility
projects brought on by lower world market prices for crude oil.

The increase in other net non-operating expenses consisted primarily of net
realized and unrealized foreign exchange losses caused primarily by the
strengthening of the U.S. dollar against the Euro.

The effective tax rate for the six months ended December 31, 1999 was 44.8%
compared to 41.4% for the comparable prior year period. The tax rate for the
six months ended December 31, 1998 reflected the benefits primarily derived
from our former parent company's implementation of tax planning strategies.

Net income decreased $2.0 million to nearly $4.9 million for the six months
ended December 31, 1999, compared to $6.8 million for the comparable prior year
period. This decrease was primarily attributable to the factors discussed
above.

Fiscal Year Ended June 30, 1999 Compared to the Fiscal Year Ended June 30, 1998

The following table sets forth the results of operations, percentage of net
revenues and the yearly percentage change in certain financial data for the
fiscal years ended June 30, 1999 and 1998:

Fiscal Years Ended June 30,
-------------------------------- --------
1999 1998 % Change
--------------- --------------- --------
(Dollars in thousands)

Net revenues....................... $324,258 100.0% $291,580 100.0% 11.2%
Cost of revenues................... 220,612 68.0 198,152 68.0 11.3
-------- ----- -------- -----
Gross profit...................... 103,646 32.0 93,428 32.0 10.9
Selling, general and administrative
expenses.......................... 74,096 22.9 55,237 18.9 34.1
-------- ----- -------- -----
Operating income.................. 29,550 9.1 38,191 13.1 (22.6)
Other (income) expense:
Interest expense, net............. 8,808 2.7 3,471 1.2 153.8
Other (income), net............... (229) (0.1) (306) (0.1) (25.2)
-------- ----- -------- -----
Income before income taxes......... 20,971 6.5 35,026 12.0 (40.1)
Provision for income taxes......... 8,461 2.6 12,601 4.3 (32.9)
-------- ----- -------- -----
Net income........................ $ 12,510 3.9% $ 22,425 7.7% (44.2)%
======== ===== ======== =====

Net revenues for the fiscal year ended June 30, 1999 increased by $32.7
million, or 11.2%, to $324.3 million from $291.6 million in the fiscal year
ended June 30, 1998. The increase in net revenues was attributable to the
following:

Total Foreign
Products Group 1999 1998 Change Acquisitions Operations Exchange
-------------- -------- -------- -------- ------------ ---------- --------
(In thousands)

Instrumentation and Fluid Regulation.. $175,697 $110,759 $ 64,938 $66,068 $ (1,130) $ -
Petrochemical......................... 148,561 180,821 (32,260) 13,103 (45,852) 489
-------- -------- -------- ------- -------- ----
Total................................. $324,258 $291,580 $ 32,678 $79,171 $(46,982) $489
======== ======== ======== ======= ======== ====

The growth in revenues was primarily attributable to Hoke, Inc., acquired in
July 1998, which was partially offset by a decrease in revenues in the
petrochemical products group. The decrease in petrochemical net revenues of
$32.3 million, or 17.8%, for the fiscal year ended June 30, 1999 compared to
the fiscal year ended June 30, 1998, was predominantly due to reduced capital
spending by oil producers as a result of lower oil and gas prices. The increase
in instrumentation and fluid regulation net revenues of $64.9 million, or
58.6%, for the fiscal year ended June 30, 1999 compared to the fiscal year
ended June 30, 1998 consisted primarily of volume derived from acquisitions
consisting of Hoke, Inc. and several smaller product lines.

The instrumentation and fluid regulation products group accounted for
approximately 54.2% of net revenues in the fiscal year ended June 30, 1999
compared to 38.0% in the fiscal year ended June 30, 1998. The petrochemical
products group accounted for approximately 45.8% of net revenues in the fiscal
year ended June 30, 1999 compared to 62.0% in the fiscal year ended June 30,
1998.

Gross profit increased $10.2 million, or 10.9%, to $103.7 million for the
fiscal year ended June 30, 1999 compared to the fiscal year ended June 30,
1998. Gross margin remained at 32.0% for the fiscal year ended June 30, 1998
and the fiscal year ended June 30, 1999. Increased gross profits from
acquisitions were offset by decreased gross profits in the domestic and
international oil and gas valve product lines. Lower energy prices resulted in
lower demand and increased competition, and adversely impacted unit pricing.
Additionally, the reduced manufacturing levels, caused by these reduced
revenues, also created unfavorable overhead absorption of fixed manufacturing
expenses in the petrochemical products group thereby decreasing gross margins
for the fiscal year ended June 30, 1999 compared to the fiscal year ended June
30, 1998.

Selling, general and administrative expenses increased $18.9 million to
$74.1 million for the fiscal year ended June 30, 1999 compared to the fiscal
year ended June 30, 1998. This increase was attributable to the inclusion of
the expenses related to acquired companies. This increase was partially offset
by both cost reductions and reduced variable selling expenses within the
petrochemical products group.

The changes in operating income for the fiscal years ended June 30, 1999
and 1998 were as follows:

Total Foreign
Products Group 1999 1998 Change Acquisitions Operations Exchange
-------------- ------- ------- -------- ------------ ---------- --------
(In thousands)

Instrumentation and
Fluid Regulation....... $24,844 $17,883 $ 6,961 $7,181 $ (220) $ -
Petrochemical........... 10,323 25,256 (14,933) 1,256 (16,165) (24)
Corporate............... (5,617) (4,948) (669) - (669) -
------- ------- -------- ------ -------- ----
Total................... $29,550 $38,191 $ (8,641) $8,437 $(17,054) $(24)
======= ======= ======== ====== ======== ====

The increase in operating income in the instrumentation and fluid
regulation products group for the comparable periods was attributable
primarily to acquisitions and to improved operating efficiencies within our
steam related product lines. The decrease in operating income in the
petrochemical products group reflected reduced energy prices and reduced
demand for our products used in petrochemical facility projects and
maintenance programs.

The increase in net interest expense was primarily due to the additional
cost of borrowed funds resulting from the acquisition of Hoke, Inc.

The effective tax rate increased to 40.3% from 36.0%. The increase was a
result of increased earnings in foreign jurisdictions with higher tax rates
than those in the United States.

Net income decreased $9.9 million to $12.5 million for the fiscal year
ended June 30, 1999 compared to the fiscal year ended June 30, 1998. This
decrease was primarily attributable to decreased net revenues and gross
margins in the petrochemical products group.

The combined results of operations were impacted by the effect that changes
in foreign exchange rates had on our international subsidiaries' operating
results. Changes in foreign exchange rates had an immaterial impact on net
income in the fiscal year ended June 30, 1999 compared to the fiscal year
ended June 30, 1998.

Liquidity and Capital Resources

During the year ended December 31, 2000, we generated $31.7 million in cash
flow from operating activities. In addition, we generated $4.2 million
primarily from the closure and sale of two manufacturing facilities, and we
received $9.5 million (net after expenses) in settlement of our arbitration
with the former Hoke shareholders. Our uses of cash included $4.1 million for
the acquisition of the Rockwood Swendeman product line, $3.7 million to
purchase capital equipment and a net $33.4 million to reduce our long-term
debt. Capital expenditures were primarily for manufacturing machinery and
equipment to further improve and consolidate manufacturing operations. Our
capital expenditure budget for the fiscal year ending December 31, 2001 is $7.2
million.

As of December 31, 2000, we had no amounts outstanding under our unsecured
credit facility compared to $32.0 million outstanding as of December 31, 1999.
As of December 31, 2000, we had $75.0 million available under the credit
agreement to support our acquisition program, working capital requirements and
general corporate purposes.

We intend to use substantially all of the net proceeds of this offering to
acquire complementary businesses or products. Immediately after this offering,
and until such acquisitions require our capital, we will use a portion of the
net proceeds to reduce our outstanding indebtedness under our credit agreement.
Additionally, we may use some of the net proceeds for general corporate
purposes, including working capital.

The ratio of current assets to current liabilities as of December 31, 2000
was 3.8:1 compared to 4.5:1 as of December 31, 1999. Cash and cash equivalents
were $8.2 million as of December 31, 2000 compared to $5.2 million as of
December 31, 1999. Debt as a percentage of total capital employed was 32.4% as
of December 31, 2000 compared to 40.6% as of December 31, 1999. On December 31,
2000, we were in compliance with all covenants related to existing debt
obligations.

We anticipate that available funds, including the estimated net proceeds
from this offering, and those funds provided from ongoing operations will be
sufficient to meet current operating requirements and anticipated capital
expenditures for at least the next 24 months.

From time-to-time, we are involved with product liability, environmental and
other litigation proceedings and incur costs on an ongoing basis related to
these matters. We have not incurred material expenditures during the year ended
December 31, 2000 in connection with any of these matters.

Disclosure About Market Risk

Market Risk

The oil and gas markets historically have been subject to cyclicality
depending upon supply and demand for crude oil, its derivatives and natural
gas. When oil or gas prices decrease, expenditures on maintenance and repair
decline rapidly and outlays for exploration and in-field drilling projects
decrease and, accordingly, demand for valve products is reduced. However, when
oil and gas prices rise, maintenance and repair activity and spending for
facilities projects normally increase, and we benefit from increased demand for
valve products. However, oil or gas price increases may be considered temporary
in nature, or not driven by customer demand and, therefore, may result in
longer lead times for increases in petrochemical sales orders. As a result, the
timing and magnitude of changes in market demand for oil and gas valve products
are difficult to predict. Similarly, although not to the same extent as the oil
and gas markets, the aerospace, military and maritime markets have historically
experienced cyclical fluctuations in demand which also could have a material
adverse effect on our business, financial condition or results of operations.

Interest Rate Sensitivity Risk

As of December 31, 2000, our primary interest rate risk related to
borrowings under our revolving credit facility. The interest rate on those
borrowings fluctuates with changes in short-term borrowing rates. There were no
borrowings under our revolving credit facility outstanding as of December 31,
2000. Based upon the expected levels of borrowings under our credit facility in
2001, an increase in interest rates of 100 basis points would not have a
material effect on our results of operations or cash flows.

Currency Exchange Risk

We use forward contracts to manage the currency risk related to business
transactions denominated in foreign currencies. Related gains and losses are
recognized when the contracts expire, which are generally in the same period as
the underlying foreign currency denominated transactions. To the extent these
transactions are completed, the contracts do not subject us to significant risk
from exchange rate movements because they offset gains and losses on the
related foreign currency denominated transactions. As of December 31, 2000, we
had forward contracts to buy foreign currencies with a face value of $10.1
million. These contracts mature on various dates between January 2001 and July
2001 and had a net fair market value of $0.4 million as of December 31, 2000.

The counterparties to these contracts are major financial institutions. Our
risk of loss in the event of non-performance by the counterparties is not
significant. We do not use derivative financial instruments for trading
purposes. Risk management strategies are reviewed and approved by senior
management before implementation.

Commodity Price Risk

The primary raw materials used in our production process are stainless
steel, carbon steel, cast iron and brass. We purchase these materials from
numerous suppliers nationally and internationally, and have not historically
experienced significant difficulties in obtaining these commodities in
quantities sufficient for our operations. However, these commodities are
subject to price fluctuations which may adversely affect our results of
operations. We manage this risk by offsetting increases in commodities with
increased sales prices, active materials management, product engineering
programs and the diversity of materials used in our production processes.

Effects of Recent Accounting Pronouncements

In 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
established accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. We adopted SFAS 133, as amended by SFAS No. 137 and
SFAS No. 138, on January 1, 2001. The adoption of this statement did not have a
significant impact on our financial condition, results of operations or cash
flows.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition." An amendment delayed the
effective date until the fourth quarter of 2000. Our adoption of this bulletin
did not have a material effect on our financial condition, results of
operations or cash flows.

BUSINESS

Overview

We design, manufacture and distribute a broad array of valves and related
products and services to a variety of end-markets for use in a wide range of
applications to optimize the efficiency and/or ensure the safety of fluid-
control systems. We were established as a result of a spin-off from our former
parent, Watts, on October 18, 1999. As a result, discussions relating to
historical activities of our business units also include the time periods when
they constituted the industrial, oil and gas businesses of Watts.

Our two major product groups are instrumentation and fluid regulation
products and petrochemical products. The instrumentation and fluid regulation
products group designs, manufactures and distributes valves and controls, such
as precision valves, compression tube and pipe fittings, control valves and
regulators for diverse end-uses including hydraulic, pneumatic, cryogenic and
steam applications. The petrochemical products group designs, manufactures and
distributes flanged and threaded-end floating and trunnion ball valves, needle
valves, check valves, butterfly valves, gate valves, pipeline closures and
strainers and large forged steel ball valves for use in oil, gas and chemical
processing and industrial applications. Within our major product groups, we
have used both internal product development and strategic acquisitions to
assemble an array of fluid-control products and technologies that enable us to
address our customers' unique fluid-control application needs. As a leading
provider of valves and related fluid-control products, we sell our products to
the following industries:

. Oil and gas production - including off-shore platform, sub-sea gathering and
oil refining systems. Our ball valves are specified in emergency shut-down
systems where the processing unit's fluids are shut off in a matter of
seconds when a fire, explosion or other adverse situations occur. Our valves
also are used throughout oil gathering and processing systems to control the
flow into storage tanks, tank cars or further refining processes.

. Pipeline construction and maintenance - consisting of distribution systems
where our ball valves and check valves direct the flow of natural gas and
oil into various pipelines and processing systems as well as the
distribution pipelines that deliver natural gas across continents from its
source to gas companies and other end-users.

. Municipal and institutional power and process steam heating and generating -
involving the use of our valves in many domestic municipal steam systems,
including New York City, Chicago, Boston and Hartford. Our steam regulators,
control valves and condensation traps are used to reduce and control the
steam pressure from municipal steam lines to commercial buildings where
steam is used in HVAC systems. Similar applications exist at major
universities and hospitals that maintain their own boiler systems for HVAC
use.

. Maintenance and maritime manufacturing - involving our steam regulators,
control valves, water heaters, strainers and butterfly valves which are used
in commercial buildings, universities, hospitals and a variety of U.S. Navy
and commercial marine applications. We provide these products on
applications such as jet aircraft catapult systems on aircraft carriers,
desalinization systems, sanitation systems and steam generation resulting
from the power plants that these vessels employ.

. Aerospace, military and commercial aircraft - involving valves which are
part of aviation systems, such as oxygen, hydraulic, fuel and potable and
nonpotable water systems. We provide numerous hydraulic, pneumatic and water
valves on most commercial, business and military aircraft built today.

. Processing - including food and chemical processing in addition to air and
water systems utilized in semiconductor fabrication. Our steam regulating
valves are used in systems that process food and sterilize equipment used
therein. Our instrumentation valves are used to regulate the various
ingredients in foods. In chemical processing systems, our ball and check
valves control the flow of chemicals through the stages of the distillation
process where various chemicals and other base fluid derivatives are
separated from crude oil.

Our Competitive Strengths

We believe that we will continue to benefit from certain competitive
strengths which will assist us in implementing our strategies, including:

. Broad product offerings to diverse end-markets. Overall, our broad product
portfolio gives us the ability to serve multiple markets and a variety of
industries. For instance, we are positioned favorably both with major oil
companies and with distributors of valve products. In addition, our products
are on many NASA launches and most commercial and military aircraft and on
nearly all U.S. Navy submarines and aircraft carriers.

. A long operating history with strong brand name recognition and many
products that are specified in projects by the customers. Although the
CIRCOR name is relatively new, certain of our businesses have been in
operation for as long as 117 years, such as those that manufacture steam
valves under the brands of Spence Engineering, Nicholson Steam Trap and
Leslie Controls. The steam market is an established industry where our
brands benefit from a high degree of brand loyalty while serving the HVAC,
power and maritime industries.

. A leading domestic market share position in steam products. Steam products
include regulators, steam control valves and condensation traps. Certain of
our key product families such as the Leslie, Spence and Nicholson brands
enjoy strong market share in North America. These brands are among the
leaders in the domestic steam power and generation markets.

. New, customized product design engineering. For many of our key product
families, design engineering capabilities are important to obtaining new
business. Large valves for petrochemical applications, end-user applications
in pharmaceutical and semiconductor manufacturing, food processing, military
and aerospace applications often require customized valve solutions. Our
engineering staffs have been instrumental in helping us win orders for
highly engineered valves in high and low temperature and pressure
environments.

. A successful acquisition record and integration abilities. We have
integrated 25 acquisitions since 1984 including 15 since 1994. Our
integration methods have generated cost savings and economies of scale after
completing acquisitions while offering improved cash flow. For example, we
capitalized on our most recent large acquisition, Hoke, Inc., by
consolidating its manufacturing facilities resulting in a lower cost of
production.

. Strong distribution networks. The vast majority of our sales are through
distributors with a small portion being sold through independent sales
representatives. Many of the top domestic distributors which serve our end-
user markets carry our product offerings. Our long standing relationships
with these distributors allow us to more easily access new end-users and add
complementary products from acquisitions. By more fully utilizing our
existing and acquired distribution channels, we have increased revenues.

Our History

We were established by our former parent, Watts, to continue to operate the
former industrial, oil and gas product lines of Watts. On October 18, 1999,
Watts distributed all of our outstanding common stock to Watts shareholders of
record as of October 6, 1999 in a tax-free spin-off. In connection with the
spin-off, our common stock was listed on the NYSE under the symbol "CIR" and we
entered into agreements with Watts regarding licensing and tax sharing
arrangements, benefits and indemnification matters. See "Certain Relationships
and Related Transactions - Our Relationship with Watts" for more information.

Our Business

We offer a wide array of fluid-control products to address our customers'
unique fluid-control applications which enable them to use fluids safely and
efficiently. We have a global presence and operate 14 manufacturing facilities
which are located in the United States, Canada, Europe and the People's
Republic of China. We have two major product groups, instrumentation and fluid
regulation products, and petrochemical products. Our products are sold through
more than 900 distributors servicing 24,000 end-users in over 90 countries
around the world. For the year ended December 31, 2000, instrumentation and
fluid regulation products accounted for 56.3% of our net revenues and
petrochemical products accounted for the remaining 43.7%.

Instrumentation and Fluid Regulation Products Group. The instrumentation and
fluid regulation products group designs, manufactures and distributes valves,
fittings and controls for diverse end-uses, including hydraulic, pneumatic,
cryogenic and steam applications. Selected products include precision valves,
compression tube and pipe fittings, control valves, fittings and regulators.
The instrumentation and fluid regulation products group consists primarily of
the following product families:

. Aerodyne Controls; . GO Regulator; . CPC;

. Circle Seal Controls; . Hoke; . Cryolab; and

. Leslie Controls; . Spence Engineering; . Rockwood Swendeman.

. Nicholson Steam Trap; . Atkomatic Valve;

The instrumentation and fluid regulation products group had combined
revenues of $178.2 million for the year ended December 31, 2000.

We have had a long-standing presence in the steam application markets,
starting with our 1982 acquisition of Spence Engineering and our 1989
acquisitions of Leslie Controls and Nicholson Steam Trap. We believe that we
have a very strong franchise in steam valve products. Both Leslie Controls and
Spence Engineering have been in the steam pressure reduction and control
business for over 100 years, and due to their reputation for reliability and
quality, customers often specify their products by name. Our steam valve
products are used in:

. municipal and institutional steam heating and air-conditioning applications;

. power plants;

. industrial and food processing; and

. commercial and military maritime applications.

Commencing with the 1990 acquisition of Circle Seal, we have acquired nine
instrumentation and fluid regulation businesses to complement our steam product
business. These acquisitions included

Aerodyne in December 1997, Atkomatic in April 1998, Hoke in July 1998 and GO
Regulator in April 1999. Aerodyne manufactures high-precision valve components
for the medical, analytical, military and aerospace markets. Aerodyne also
provides advanced technologies and control systems capabilities to other
companies in the instrumentation and fluid regulation products group. Atkomatic
makes heavy-duty process solenoid valves which automate the regulation and
sequencing of liquid levels or volume flow. GO Regulator offers a complete line
of specialized cylinder valves, customized valves and pneumatic pressure
regulators for instrumentation, analytical and process applications in addition
to an emerging product line of regulators for the ultra high purity markets.

We significantly expanded the breadth of our instrumentation and fluid
regulation product lines with the acquisition of Hoke in July 1998. Our largest
acquisition to date, Hoke provides us with a leading line of Gyrolok(R)
compression tube fittings, as well as instrumentation ball valves, plug valves,
metering valves and needle valves. Circle Seal and Hoke serve several common
markets and we cross-market their products through their respective
distribution channels. Furthermore, Hoke, with nearly 50% of its revenues
derived outside of the United States, significantly expanded our geographic
marketing and distribution capabilities. We have integrated Circle Seal's and
Hoke's administrative and distribution activities for increased cost
reductions. We believe that our ability to provide various instrumentation
markets with complete fluid-control solutions is enhanced by the combined
product line offerings of Circle Seal, Hoke and GO Regulator.

With the acquisition of Cryolab in 1995 we entered the cryogenic valve
business. Since then we have added the CPC and, most recently, Rockwood
Swendeman product lines which collectively give us an array of valve products
for demanding cryogenic applications and have enabled us to expand our presence
in the industrial gas market.

Petrochemical Products Group. The petrochemical products group designs,
manufactures and distributes flanged-end and threaded-end floating and trunnion
ball valves, needle valves, check valves, butterfly valves, large forged steel
ball valves, gate valves and strainers for use in oil, gas and chemical
processing and industrial applications. We believe that our petrochemical
products group is one of the top three producers of ball valves for the oil and
natural gas markets worldwide. The petrochemical products group consists
primarily of the following product families:

. Telford Valve and Specialties;
. KF Industries;
. Suzhou KF Valve; and
. Contromatics Specialty Products;
. SSI Equipment.
. Eagle Check Valve;

. Pibiviesse;

The petrochemical products group had combined revenues of $138.6 million for
the year ended December 31, 2000.

We entered the petrochemical products market in 1978 with the formation by
Watts of the industrial products division and our development of a floating
ball valve for industrial and chemical processing applications. With the
acquisition of KF Industries in July 1988, we expanded our product offerings to
include floating and trunnion-supported ball valves and needle valves. KF
Industries gave us entry into the oil and gas transmission, distribution and
exploration markets. In 1989, we acquired Eagle Check Valve, which added check
valves to our product line. Pibiviesse S.p.A., based in Nerviano, Italy, was
acquired in November 1994. Pibiviesse manufactures forged steel ball valves for
the petrochemical market, including a complete range of trunnion-mounted ball
valves. Pibiviesse's manufacturing capabilities include valve sizes up through
60 inches in diameter, including very high pressure ratings to meet demanding
international oil and gas pipeline and production requirements. In March 1998,
we

added Telford Valve to KF Industries. Telford Valve had been one of KF
Industries' largest distributors and, with its acquisition, KF Industries
increased its presence in Canada, as well as introduced Telford Valve's
products (check valves, pipeline closures, and specialty gate valves) through
its worldwide representative network. Telford Valve also has assumed the
Canadian sales activities for other of our petrochemical products group
divisions to strengthen our overall presence in Canada. In January 1999, we
acquired SSI Equipment Inc. and added a wide variety of strainers to the KF
Industries product line. During 1999, we consolidated the industrial product
division of Watts into the KF Industries facility in Oklahoma City, Oklahoma.
These industrial products consist of carbon steel and stainless steel ball
valves, butterfly valves and pneumatic actuators that are used in a variety of
industrial, pulp, paper and chemical processing applications.

We also own 60% of Suzhou KF Valve Company, Ltd., a joint venture located in
Suzhou, People's Republic of China. Suzhou KF Valve manufactures two inch
through twelve inch carbon and stainless steel ball valves for us and Suzhou
Valve Factory, our joint venture partner. We sell products manufactured by
Suzhou KF Valve to certain customers worldwide for oil and gas applications and
outside the People's Republic of China for industrial applications. Our joint
venture partner and its related entities have exclusive rights to sell Suzhou
KF Valve products for all industrial (i.e., non-oil and gas) applications
within the People's Republic of China.

Industry

Oil and Gas and Petrochemical Markets. The oil and gas and petrochemical
markets include domestic and international oil and gas exploration and
production, distribution pipeline construction and maintenance, chemical
processing and general industrial applications. The oil and gas market
historically has been subject to cyclicality depending upon supply and demand
of crude oil and its derivatives as well as the supply and demand of natural
gas. When oil and gas prices decrease, expenditures on maintenance and repair
decline, as well as outlays for exploration and in-field drilling projects.
Accordingly, demand for valve products declines. When oil and gas prices rise,
maintenance and repair activities often increase and we expect to benefit from
increased demand for valve products. However price increases which may be
considered temporary in nature, or not driven by customer demand, may result in
longer lead times for petrochemical sales orders.

Process and Power Markets. The process and power markets use steam and other
fluids for a variety of applications, including:

. heating facilities;

. producing hot water;

. freeze protection of external piping;

. cleaning by laundries;

. food processing and cooking; and

. heat transfer applications using steam or hot water in industrial processes.

Process control instruments requiring valves and fittings include process
analytical instruments and differential pressure transmitters. These categories
not only require valves and fittings in or attached to the instrument, but also
often require extensive sampling extraction systems installed by the
manufacturer, system integrators or site contractors. The primary demand driver
of valves and fittings used in process control instruments is spending on plant
and equipment by companies located in various businesses including chemicals,
pulp, paper, electric and gas utilities and petroleum refining.

The power industry uses steam and other fluid-control products in the
production of electric power. While some steam applications have been
eliminated by the introduction of certain alternative methods, such as gas
turbines, the use of steam continues to prevail as the primary source of
electric power. The de-regulation of the power industry in the United States
has created opportunities for plant improvements and overall maintenance and
capital expenditures which historically has driven demand for valves and
fittings.

HVAC and Maritime Markets. The HVAC market utilizes valves and control
systems, primarily in steam-related applications. Although certain new
commercial applications are converting to hot water heating, most metropolitan
areas, universities and commercial institutions are heated by a central steam
loop. Because of the significant investment in capital represented by such
central steam loops, it is unlikely that newer technologies would replace this
installed base in the foreseeable future. Steam control products also are used
in the maritime market, which includes the U.S. Navy and commercial shipping.

Aerospace and Military Markets. The aerospace and military markets we serve
include valve applications used on military combat and transport aircraft,
helicopters, missiles, tracked vehicles and ships. Our products also are used
on commercial, commuter and business aircraft, space launch vehicles, space
shuttles and satellites. Our products also are sold into the support
infrastructure for these markets, with such diverse applications as laboratory
equipment and ground support maintenance equipment. We supply products used in
hydraulic, fuel, water, and air systems. These products typically are highly
engineered and are custom-designed for specific applications to optimize
performance, reliability and quality and to minimize weight and volume. The
industry trend in the aerospace and military markets is for greater reliance by
OEMs on suppliers to produce more fully integrated subsystems. This trend
should afford us the opportunity to supply more highly engineered value-added
products.

Pharmaceutical, Medical and Analytical Instrumentation Markets. The
pharmaceutical industry uses products manufactured by our instrumentation and
fluid regulation products group in research and development, analytical
instrumentation and process measurement applications. We believe that
automation and control of processes and increased efficiency requirements in
the pharmaceutical industry will continue to drive the demand for these
products.

The instrumentation and fluid regulation products group markets its products
to original equipment manufacturers of surgical and medical instruments.
Representative applications include:

. surgical and medical instruments;

. orthopedic devices and surgical supplies;

. diagnostic reagents;

. electromedical equipment;

. x-ray equipment; and

. dental equipment.

The analytical instrumentation market includes laboratory, measurement and
control instruments. The key driver in the laboratory and analytical
instrumentation market is industrial capital investment spending in research
and development and plant equipment. Non-industrial construction spending and
government spending on research and development, as well as levels of defense
spending, are secondary drivers of revenue growth.

Laboratory instruments represent a significant OEM market for our
instrumentation and fluid regulation products. Sample products include valves
and fittings in gas chromatographs, mass spectrometers and liquid
chromatographs.

Our Business Objectives and Strategies

. Continue to build market positions - through internal revenue growth and
acquisitions in selected markets. We plan to build our market share by
continuing to deliver reliable products that meet or exceed customer and
industry specifications. Our broad base of products and services and the
diversity of the markets we serve reduce our susceptibility to market cycles
and enhance our ability to grow even when the markets for some of our
products has been slow. In addition, we have focused significant management
attention on our customers in order to build strong customer relations.

We plan to continue our acquisition strategy, having completed 25
transactions since September 1984. We believe that the global valve industry
remains highly fragmented with numerous potential acquisition candidates. We
plan to expand our current market positions, primarily through acquisitions
in the instrumentation and fluid regulation products group, thereby reducing
our exposure to the cyclicality of the petrochemical industry. Our
acquisition focus will be on value-added components and products that are
more highly engineered and automate valve functionality. We also plan to
expand distribution outside of North America where our current market share
is low and market growth potential is expected to be high.

. Improve the profitability of our business - by leveraging our existing
manufacturing facilities, improving utilization of working capital and
deriving synergies from acquisitions. We have achieved cost reductions from
past acquisitions by eliminating excess capacity and consolidating into
existing facilities. We believe there are future opportunities to reduce our
cost structure and working capital without affecting our liquidity.

. Expand into various fluid control industries and markets and capitalize on
integration opportunities - by further broadening our product line offerings
and creating a "one-stop shop," thereby increasing our ability to service
our customers which may reduce their need to have multiple suppliers. We
expect that this also will strengthen our relationships with our
manufacturers' representatives and distribution networks, as we gain a
higher percentage of their business. Through the acquisition of businesses
and new product development, we intend to diversify our product offerings to
appeal to an increasing variety of industries and markets. Our management
has been successful in realizing meaningful synergies from acquisitions and
from our reorganization as an independent company.

The integration of Hoke and GO Regulator with Circle Seal has resulted in
cost savings and revenue growth. These acquisitions enabled us to expand the
market for Circle Seal's and GO Regulator's products overseas, particularly
in Europe. We also have incorporated the Hoke and GO Regulator product lines
into our strong domestic marketing and distribution channels.

In manufacturing, we completed the consolidation of Hoke's largest
manufacturing plant into existing operations of the instrumentation and
fluid regulation products group. We also completed the consolidation of the
GO Regulator plant into Hoke's existing manufacturing facilities. Within the
petrochemical products group, we have completed a major consolidation of
Watts' industrial products division into KF Industries. This consolidation
reduced operating costs and improved manufacturing efficiencies. In addition
to focusing on acquisitions outside the petrochemical market, we are
implementing strategic actions to broaden our distribution and product
offerings in companies such as KF Industries, which historically has derived
the majority of its revenues in the oil

and gas industry, by expanding its industrial market presence. The
acquisition of Telford Valve's "Top Flow" product line not only expanded KF
Industries' product offering through existing oil field distribution
channels, but also provided an entry into the industrial market segment. In
addition, the SSI acquisition provided a strainer product line that is
being marketed through the KF and Telford distribution networks. In regard
to products, our intent is to target complementary product offerings that
provide higher gross margins such as valves used in high pressure or in
high or low temperature environments and add-on products that are
controlled by and/or provide linkage to intelligent control and analysis
systems.

. Increase product offerings - through internal product development and
customized, highly engineered product extensions which help drive revenue
growth and strengthen our relationships with end-users. We have been able
to capitalize on our ability to engineer specific valve products and
systems to help solve our customers' fluid processing problems. This
engineer-to-engineer relationship helps differentiate us from our
competition who may be unable or unwilling to provide the necessary
resources to assist end-users. New products are being developed through
engineering efforts within our existing businesses. Our instrumentation and
fluid regulation products group focuses on providing our customers with
customized products designed to meet their specifications. Circle Seal's
product development efforts are currently directed to provide new products
under the Circle Seal, Hoke and GO Regulator franchises which can be mass-
marketed through our global distributor network. Recent product offerings
include an excess flow check valve line, three new distinct check valve
lines, a new diaphragm shut-off valve line and a miniature solenoid valve
line. Leslie Controls is developing control valves up to the high pressure
class, sixteen inch diameter range. Leslie Controls has also developed
Hastelloy-C construction valves for chemical weapons disarmament programs.
KF Industries and Pibiviesse are developing products to take our
international gas transmission expertise and compete more effectively in
the North American market. KF Industries is also developing products such
as three-way diverter valves, check valves, and floating ball valves with a
spring energized lip seal designed for chemical plants and refineries. We
plan to continue to invest in our internal research and development
programs and to integrate product development across our businesses.

. Expand our geographic coverage - by leveraging distribution channels to
increase sales and cash flow. For the year ended December 31, 2000, more
than 75% of our sales were to customers located in North America. We
believe that we can also be successful with our products and business
management skills in many other countries around the world, especially
areas where industrial development is growing rapidly or consolidation
opportunities exist in the area of fluid-control products. KF Industries is
broadening its presence in Latin America, Western Africa and the Middle
East to meet the growing international businesses of our current customers.
Pibiviesse is joint marketing with KF Industries to increase its presence
in North America as well as increasing its penetration of other markets
such as the People's Republic of China, South Korea, Russia, Latin America,
and the Middle East. Hoke's strong international distribution network is
benefiting other product lines within the instrumentation and fluid
regulation products group.

Overall, our growth strategies are expected to continue increasing our
market positions, building our product offerings, enhancing marketing and
distribution channels and providing additional opportunities to realize
integration cost savings.

Products

The following table lists the principal products and markets served by each
of the businesses within our two product groups. Within the majority of our
product lines, we believe that we have the broadest product offerings in terms
of distinct designs, sizes and configurations of our valves.

Product Families Principal Products Primary Markets Served
- ---------------- ------------------ ----------------------

Instrumentation and Fluid Regulation Products Group

Hoke Compression tube fittings; pipe fittings; General industrial; analytical
instrument ball and needle valves; instrumentation; compressed
cylinders; cylinder valves; actuators natural gas; natural gas vehicles;
chemical processing

Circle Seal Controls Motor operated valves; check valves; General industrial; semiconductors; medical;
relief valves; pneumatic valves; solenoid pharmaceutical; aerospace; military
valves; regulators

Leslie Controls Steam and water regulators; steam control General industrial and power; maritime;
valves; electric actuated shut-off valves chemical processing

Spence Engineering Pilot operated and direct steam regulators; HVAC; general industrial
steam control valves

Nicholson Steam Trap Safety and relief valves; steam traps HVAC; general industrial

GO Regulator Pressure reducing regulators; specialized Analytical instrumentation; chemical
cylinder manifolds; high pressure processing
regulators; pneumatic pressure regulators;
diaphragm valves

Aerodyne Controls Pneumatic manifold switches; mercury- Aerospace; medical instrumentation; military;
free motion switches; pneumatic valves; automotive
control assemblies

CPC, Cryolab and Cryogenic control and safety relief valves; Liquified industrial gases; other high purity
Rockwood Swendeman valve assemblies processing

Petrochemical Products Group

KF Industries Threaded and flanged-end floating ball Oil and gas exploration, production,
actuators; pipeline closures; trunnion refining and transmission; maritime;
supported ball valves; needle valves; chemical processing
check valves; strainers

Pibiviesse Forged steel ball valves Oil and gas exploration, production, refining
and transmission

Contromatics Threaded and flanged-end floating ball Oil and gas exploration, production, refining
Speciality Products valves; butterfly valves; pneumatic and and transmission; general industrial; chemical
electric activators processing

SSI Equipment Specialty strainers; check valves; butterfly General industrial; chemical processing;
valves; connectors refining

Sales and Distribution

We sell our products to distributors and end-users primarily through
commissioned representatives and secondarily through our direct sales force.
Our representative networks offer technically trained sales forces with strong
relationships to key markets without fixed costs to us.

We believe that our multifaceted and well established sales and distribution
channels constitute a competitive strength, providing access to all of our
markets. We believe that we have good relationships with our representatives
and distributors and we continue to implement marketing programs to enhance
these relationships. Ongoing distribution-enhancement programs include
shortening shelf stock delivery, reducing assemble-to-order lead times,
introducing new products, offering competitive pricing and increasing inventory
turns.

Manufacturing

We have fully-integrated and highly automated manufacturing capabilities
including machining operations and assembly. Our machining operations feature
computer-controlled machine tools, high-speed chucking machines and automatic
screw machines for machining brass, iron and steel components. We believe that
our fully-integrated manufacturing capabilities are essential in the valve
industry in order to control product quality, to be responsive to customers'
custom design requirements and to ensure timely delivery. Product quality and
performance are a priority for our customers, especially since many of our
product applications involve caustic or volatile chemicals and, in many cases,
involve processes that are used in the precise control of fluids. We have
implemented integrated enterprise-wide software systems at all of our major
locations to make operations more efficient and to improve communications with
our suppliers and customers.

We are committed to maintaining our manufacturing equipment at a level
consistent with current technology in order to maintain high levels of quality
and manufacturing efficiencies. As part of this commitment, we have spent a
total of $3.7 million, $4.6 million, $9.5 million and $6.1 million on capital
expenditures for the year ended December 31, 2000, the six months ended
December 31, 1999 and for the fiscal years ended June 30, 1999 and 1998,
respectively. Depreciation and amortization for such periods were $13.0
million, $7.1 million, $12.8 million and $7.8 million, respectively.

We believe that our current facilities will meet our near-term production
requirements without the need for additional facilities.

Quality Control

Products representing a majority of our sales have been approved by
applicable industry standards agencies in the United States and European
markets. We have consistently advocated the development and enforcement of
performance and safety standards, and are currently planning new investments
and implementing additional procedures as part of our commitment to meet these
standards. We maintain quality control and testing procedures at each of our
manufacturing facilities in order to produce products in compliance with these
standards. Additionally, all of our major manufacturing subsidiaries have
acquired ISO 9000, 9001 or 9002 certification from the International
Organization for Standardization and, for those in the petrochemical products
group, American Petroleum Institute certification.

Our products are designed, manufactured and tested to meet the requirements
of various government or industry regulatory bodies. The primary industry
standards that our instrumentation and fluid

regulation products group meet are Underwriters' Laboratory, American National
Standards Institute, American Society of Mechanical Engineers, U.S. Military
Standards, the American Gas Association and the Department of Transportation.
The primary industry standards that our petrochemical products group meet are
American National Standards Institute, American Society of Mechanical
Engineers, the American Petroleum Institute and Factory Mutual.

Product Development

We continue to develop new and innovative products to enhance our market
positions. Our product development capabilities include the ability to design
and manufacture custom applications to meet high tolerance or close precision
requirements. For example, KF Industries has fire-safe testing capabilities,
Circle Seal has the ability to meet the testing specifications of the aerospace
industry and Pibiviesse can meet the tolerance requirements of sub-sea and
cryogenic environments. These testing and manufacturing capabilities have
enabled us to develop customer-specified applications, unique characteristics
of which have been subsequently utilized in broader product offerings. Our
research and development expenditures for the year ended December 31, 2000, the
six months ended December 31, 1999 and the fiscal years ended June 30, 1999 and
June 30, 1998 were $6.2 million, $3.2 million, $6.1 million and $5.5 million,
respectively.

Raw Materials

The raw materials used most often in our production processes are stainless
steel, carbon steel, cast iron, and brass. We purchase these materials from
numerous suppliers and have not historically experienced significant
difficulties in obtaining these commodities in quantities sufficient for our
operations. However, these materials are subject to price fluctuations which
may adversely affect our results of operations. Historically, increases in the
prices of raw materials have been partially offset by increased sales prices,
active materials management, project engineering programs and the diversity of
materials used in our production processes.

Properties

We maintain 15 major facilities worldwide, including 14 manufacturing
facilities, located in the United States, Canada, Europe and the People's
Republic of China. Many of these facilities contain sales offices or warehouses
from which we ship finished goods to customers, distributors and commissioned
representative organizations.

In general, we believe that our properties, including machinery, tools and
equipment, are adequate and suitable for their intended uses. Our manufacturing
facilities generally operate five days per week on one or two shifts. We
believe our manufacturing capacity could be increased by working additional
shifts and weekends. This utilization is subject to change as a result of
increases or decreases in orders.

Our corporate headquarters are located in Burlington, Massachusetts. The
following is a list of our major properties.

Approx. Owned or
Business Location Sq. Ft. Leased Principal Use
- -------- -------- ------- -------- -------------

Instrumentation and Fluid Regulation Products
Group

Leslie Controls Tampa, FL 150,000 Owned Manufacturing,
Administrative

Hoke Spartanburg, SC 116,000 Leased Manufacturing
Spartanburg, SC 49,000 Owned Manufacturing
Berlin, CT 25,000 Leased Manufacturing

Circle Seal Controls Corona, CA 105,000 Owned Manufacturing,
Administrative

Spence Engineering Walden, NY 80,000 Owned Manufacturing

Aerodyne Controls Ronkonkoma, NY 26,000 Leased Manufacturing

Petrochemical Products
Group

Pibiviesse Nerviano, Italy 170,000 Leased Manufacturing,
Administrative

KF Industries Oklahoma City, OK 162,000 Owned Manufacturing,
Administrative
Houston, TX 58,000 Owned Warehouse

Suzhou KF Valve Suzhou, People's 70,000 Owned Manufacturing
Republic of China (30 yr
land lease)

SSI Equipment Burlington, Ontario, Canada 30,000 Owned Manufacturing,
Administrative

Contromatics Specialty Pembroke, NH 25,000 Leased Manufacturing,
Products Administrative

Telford Valve and Edmonton, Alberta, Canada 25,000 Leased Manufacturing,
Specialties Administrative

DeMartin Naviglio, Italy 22,000 Leased Manufacturing

Competition

The domestic and international markets for fluid-control products are highly
competitive. Some of our competitors have substantially greater financial,
marketing, personnel and other resources than us. We consider product quality,
performance, price, distribution capabilities and breadth of product offerings
to be the primary competitive factors in these markets. We believe that new
product development and product engineering are also important to our success
and that our position in the industry is attributable, in significant part, to
our ability to develop innovative products quickly and to adapt and enhance
existing products.

The primary competitors of our instrumentation and fluid regulation products
group include:

. Swagelok Company; . Flowseal (a division of Crane
Co.);
. Flowserve Corporation; and
. Parker Hannifin Corporation;
. Keystone (a division of Tyco
. Spirax-Sarco Engineering plc; International Ltd.).

The primary competitors of our petrochemical products group include:

. Grove Valve and Regulator Co. . Jamesbury, Inc. (a division of
(a unit of First Reserve Neles Control Group which is part
Corporation and Odyssey of the Rauma Corporation); and
Investment Partners, LLC);
. Cooper Cameron Corporation; . Worcester Controls Corp. (a
subsidiary of Invensys plc).
. Apollo (a division of Conbraco
Industries, Inc.);

Trademarks and Patents

We own patents that are scheduled to expire between 2004 and 2016 and
trademarks that can be renewed as long as we continue to use them. We do not
believe the vitality and competitiveness of our business as a whole depends on
any one or more patents or trademarks. We own certain licenses such as software
licenses, but we also do not believe that our business as a whole depends on
any one or more licenses.

Customers, Cyclicality and Seasonality

For the year ended December 31, 2000 no single customer accounted for more
than 10% of revenues for either the instrumentation and fluid regulation
products group or the petrochemical products group.

We have experienced and expect to continue to experience fluctuations in
revenues and operating results due to economic and business cycles. Our
businesses, particularly the petrochemical products group, is cyclical in
nature as the worldwide demand for oil and gas fluctuates. When the worldwide
demand for oil and gas is depressed, the demand for our products used in those
markets declines. Future changes in demand for petrochemical products could
have a material adverse effect on our business, financial condition or results
of operations. Similarly, although not to the same extent as the oil and gas
markets, the aerospace, military and maritime markets have historically
experienced cyclical fluctuations in demand which could also have a material
adverse effect on our business, financial condition or results of operations.

Backlog

Our backlog was $66.4 million as of February 24, 2001, compared to $58.9
million as of February 27, 2000. The change in our backlog was primarily due to
increased orders for major oil and gas projects and fluid regulation products.
These increases were partially offset by reductions to order backlog in our
Oklahoma manufacturing facility as a result of improved on-time delivery of
products.

Employees

As of December 31, 2000, our worldwide operations directly employed
approximately 1,700 people, in addition to 90 employees in the Suzhou joint
venture. We have 79 employees in the United States who are covered by
collective bargaining agreements. We also have 126 employees in Italy covered
by union regulations. We believe that our employee relations are good.

Government Regulation

As a result of our manufacturing and assembly operations, our businesses are
subject to federal, state, local and foreign laws, as well as other legal
requirements relating to the generation, storage, transport and disposal of
materials. These laws include, without limitation, the Resource Conservation
and Recovery Act, the Clean Air Act, the Clean Water Act and the Comprehensive
Environmental Response, Compensation and Liability Act.

We currently do not anticipate any materially adverse impact on our
business, financial condition or results of operations as a result of
compliance with federal, state, local and foreign environmental laws or other
legal requirements. However, risk of environmental liability and charges
associated with maintaining compliance with environmental laws is inherent in
the nature of our manufacturing operations and there is no assurance that
material liabilities or charges could not arise. During the year ended December
31, 2000, we capitalized $0.1 million related to environmental and safety
control facilities. We expect to capitalize $0.6 million during the fiscal year
ending December 31, 2001. We also incurred and expensed $0.5 million of other
related charges during the year ended December 31, 2000. We expect to incur and
expense $0.4 million in the fiscal year ending December 31, 2001.

On July 12, 2000, we were notified that the United States Customs Service,
or Customs, had begun an investigation to determine whether our subsidiary, KF
Industries was, and continues to be, in compliance with country of origin
marking requirements on those valves that KF Industries imports from sources in
the People's Republic of China, including our Chinese joint venture. While we
believe that the Customs investigation will not result in any material
liability to KF Industries, there can be no assurances as to the outcome of
this matter. If the Customs investigation were to reveal that violations of the
customs laws had occurred, KF Industries could be subjected to civil fines and
forfeitures and, if such violations were determined to be intentional, criminal
penalties, which could be material. We believe that KF Industries' marking
practices have been in substantial compliance with Customs' regulations and we
are cooperating with Customs in its investigation.

Legal Proceedings

We, like other worldwide manufacturing companies, are subject to a variety
of potential liabilities connected with our business operations, including
potential liabilities and expenses associated with possible product defects or
failures and compliance with environmental laws. We maintain $5.0 million in
aggregate product liability insurance and $75.0 million coverage available
under an excess umbrella liability insurance policy. We also maintain a
products liability policy with aggregate limits of $200.0 million for the
aviation products produced by our Circle Seal Controls operation. We believe
this coverage to be generally in accordance with industry practices.
Nonetheless, such insurance coverage may not be adequate to protect us fully
against substantial damage claims which may arise from product defects and
failures or from environmental liability.

Two of our subsidiaries, Leslie Controls and Spence, are third-party
defendants in over 300 civil product liability actions filed against ship owner
defendants in the U.S. District Court, Northern District of Ohio (Cleveland)
between the 1980s and 1996. These cases are part of tens of thousands of
maritime asbestos cases filed in this court against multiple defendants. The
ship owner defendants' third-party claims in the Leslie Controls and Spence
cases typically involve 20-30 third-party defendants. The claims against Leslie
Controls and Spence assert that the packing in metal pumps and the gaskets in
metal valves

supplied by Leslie Controls and Spence contained asbestos which contributed to
the asbestos exposure of plaintiffs who worked on the defendants' ships. To
date, only two cases involving Leslie Controls have settled in a way that
required a payment from Leslie Controls. One case settled in 1995 with a $2,000
payment from Leslie Controls; another settled in 1989 with a $500 payment from
Leslie Controls. These thousands of cases are subject to court ordered
moratoriums on answers and motion practice, and the very small percentage of
these cases that have come to trial since 1996 have not involved Leslie
Controls or Spence.

We are currently a party to or otherwise involved in various administrative
or legal proceedings under federal, state or local environmental laws or
regulations involving a number of sites, in some cases as a participant in a
group of potentially responsible parties, referred to as PRPs. Two of these
sites, the Sharkey and Combe Landfills in New Jersey, are listed on the
National Priorities List. With respect to the Sharkey Landfill, we have been
allocated 0.75% of the remediation costs, an amount which is not material to
us. With respect to the Combe Landfill, we have settled both the Federal
Government's claim and the State of New Jersey's claim for amounts that are
immaterial to us. Moreover, our insurers have covered defense and settlement
costs to date with respect to the Sharkey and Combe Landfills. In addition we
are involved as a PRP with respect to the Solvent Recovery Service of New
England site and the Old Southington landfill site, both in Connecticut. These
sites are on the National Priorities List but, with respect to both sites, we
have the right to indemnification from the prior owners of the affected
subsidiaries. Based on currently available information, we believe that our
share of clean-up costs at these sites will not be material.

At the time of the spin-off, we were assigned all of the rights of Watts
Investment Company under the stock purchase agreement governing the Hoke
acquisition. Our recent success in two separate arbitration proceedings against
the former Hoke shareholders involved purchase price adjustments and
indemnification claims which resulted in net cash proceeds to us of $11.3
million. The amount of the cash proceeds less the associated costs of pursuing
these claims has been accounted for as a $9.5 million reduction in the purchase
price for Hoke.

We have established reserves for all of the claims discussed above and do
not currently believe it is reasonably likely that losses could occur in excess
of the amounts accrued. We have not recorded any probable third-party
recoveries of our own on these claims.

MANAGEMENT

Executive Officers, Directors and Key Employees

Our executive officers, directors and key employees, and their respective
ages and positions as of February 28, 2001, are as follows:

Name Age Position
- ---- --- --------

David A. Bloss, Sr. .... 50 Chairman, President and Chief Executive Officer
Kenneth W. Smith........ 50 Vice President, Chief Financial Officer and Treasurer
Alan R. Carlsen......... 53 Executive Vice President, Operations
Carmine F. Bosco........ 54 Group Vice President, Petrochemical Products
Carl J. Nasca........... 49 Vice President and General Manager, Circle Seal Controls
Stephen J. Carriere..... 45 Vice President, Corporate Controller and Assistant Treasurer
Alan J. Glass........... 37 Corporate Counsel and Assistant Secretary
Barry L. Taylor, Sr..... 45 Vice President and General Manager, Hoke Operations
Douglas E. Frank........ 52 Vice President and General Manager, Fluid Regulation
Dewain K. Cross (1)(2).. 63 Director
David F. Dietz (2)...... 51 Director
Timothy P. Horne........ 62 Director
Daniel J. Murphy, III
(1)(2)................. 59 Director
Thomas N. Tullo (1)..... 43 Director

- --------
(1) Member of audit committee.
(2) Member of the compensation committee.

David A. Bloss, Sr. Mr. Bloss has been employed by us since June 1993 and
assumed his present position as our Chairman, President and Chief Executive
Officer in August 1999. He joined Watts as Executive Vice President in June
1993 and served as President and Chief Operating Officer from April 1997 until
we were spun off from Watts in October 1999. Prior to joining Watts, Mr. Bloss
was associated for five years with the Norton Company, a manufacturer of
abrasives and cutting tools, serving as President of the Superabrasives
Division.

Kenneth W. Smith. Mr. Smith has served as our Vice President, Chief
Financial Officer and Treasurer since April 2000. Mr. Smith served as the Vice
President of Finance at North Safety Products, a division of Invensys plc, from
January 1997 to April 2000. From 1986 through December 1996, he served in a
variety of senior financial positions for Digital Equipment Corporation. Prior
to 1986, Mr. Smith was a certified public accountant for Ernst & Young.

Alan R. Carlsen. Mr. Carlsen has been employed by us since June 1995 and
assumed his present position as Executive Vice President, Operations in
November 2000. Mr. Carlsen had previously served as our Group Vice President,
Instrumentation and Fluid Regulation Products from August 1999 until October
2000. Mr. Carlsen served as Group Vice President of Steam Products for Watts
from September 1998 until August 1999. Prior to that time, Mr. Carlsen was the
Vice President and General Manager of Leslie Controls, Inc. from July 1997 to
September 1998, was the corporate Vice President of Manufacturing of Watts from
June 1995 to July 1997 and prior to that was Director of Manufacturing for
Senior Flexonics, Inc., a manufacturer of tubular goods.

Carmine F. Bosco. Mr. Bosco has served as Group Vice President,
Petrochemical Products since February 2000. From June 1995 to January 2000, he
served as Group Vice President and General Manager of the instrumentation and
measurement products group of Giddings & Lewis. Prior to this

time, Mr. Bosco was employed by Ingersoll-Rand from September 1978 to May 1995
in various marketing, sales and management roles, last serving as Vice
President and General Manager of its Aro Fluid Products Division.

Carl J. Nasca. Mr. Nasca joined us in December 1999 as Vice President of
Industrial Sales and Marketing, Circle Seal Controls. He has served as Vice
President and General Manager, Circle Seal Controls since November 2000. From
April 1999 to November 1999, he was the Vice President and Regional Manager for
Ingersoll-Rand. Prior to that time, Mr. Nasca served as the General Manager of
the Portable Air Compressor Division of Ingersoll-Rand from January 1997 to
April 1999 and Business Unit Manager for the Rock Drill Division of Ingersoll-
Rand from March 1995 to December 1996.

Stephen J. Carriere. Mr. Carriere has served as Vice President, Corporate
Controller and Assistant Treasurer since March 2000 and as Corporate Controller
since shortly after we were created in July 1999. He joined Watts as Assistant
Corporate Controller in January 1997 and served in that position until we were
spun off in October 1999. From September 1982 to January 1997, he served at
Wang Laboratories, Inc. where he held a variety of U.S. and international
controllership and senior corporate finance positions. Prior to 1982, Mr.
Carriere was associated with Child World, Inc. and served as a certified public
accountant for KPMG LLP.

Alan J. Glass. Mr. Glass has served as Corporate Counsel and Assistant
Secretary since February 2000. Mr. Glass served as Corporate Counsel and
Assistant Secretary of Wyman-Gordon Company, an aerospace manufacturer, from
June 1996 to February 2000. Prior to that time, he spent seven years in private
practice as a general corporate attorney.

Barry L. Taylor, Sr. Mr. Taylor has served as Vice President and General
Manager, Hoke Operations since November 2000. Previously he served as Vice
President, Operations, Hoke, Inc. from April 1997 to October 2000. From June
1993 to March 1997, Mr. Taylor served as Vice President of Worldwide
Manufacturing for Hoke, Inc. Prior to that time, he served as Vice President of
U.S. Manufacturing, Plant Manager and Materials Manager at Hoke, Inc.

Douglas E. Frank. Mr. Frank has served as Vice President and General
Manager, Fluid Regulation since September 1999. From August 1997 through August
1999, he held executive marketing and sales roles with Spence Engineering and
Leslie Controls. From June 1995 through July 1997, Mr. Frank served as Vice
President and a member of the board of directors of Mikron Instrument Company,
a manufacturer of infrared instrumentation equipment, and from December 1983
through May 1995 he served as Vice President, Sales and Marketing and then,
General Manager and Chief Operating Officer of Thermo Electric, a manufacturer
of temperature instrumentation.

Dewain K. Cross. Mr. Cross has served as a member of our board of directors
since our inception in July 1999. Mr. Cross joined Cooper Industries, Inc. in
1966 as Director, Accounting and Taxation, Assistant Controller, and Treasurer.
Mr. Cross was appointed Vice President, Finance of Cooper Industries in 1972
and was named Senior Vice President, Finance of Cooper Industries in 1980. He
was the Senior Vice President, Finance for Cooper Industries from 1980 until he
retired in April 1995. Mr. Cross is also a director of Magnetek, Inc.

David F. Dietz. Mr. Dietz has served as a member of our board of directors
since our inception in July 1999. Mr. Dietz or his professional corporation has
been a partner of the law firm of Goodwin Procter LLP since 1984. Mr. Dietz is
also a director of the Andover Companies, a property and casualty insurance
company, and High Liner Foods (USA), Inc., a frozen food company.

Timothy P. Horne. Mr. Horne has served as a member of our board of directors
since our inception in July 1999. He has been the Chief Executive Officer of
Watts since 1978 and Chairman of the Board

of Watts since 1986. Prior to that, Mr. Horne served as the President of Watts
from 1976 to 1978 and again from 1994 to April 1997. Mr. Horne joined Watts in
September 1959 and has been a director of Watts since 1962.

Daniel J. Murphy, III. Mr. Murphy has served as a member of our board of
directors since our inception in July 1999. He has been the Chairman of
Northmark Bank since August 1987. Prior to forming Northmark Bank in 1987, Mr.
Murphy was a Managing Director of Knightsbridge Partners, Inc., a venture
capital firm, from January to August 1987, and President and Director of Arltru
Bancorporation, a bank holding company, and its wholly owned subsidiary,
Arlington Trust Company, from 1980 to 1986. Mr. Murphy is also a director of
Bay State Gas Company and has been a director of Watts since 1986.

Thomas N. Tullo. Mr. Tullo began serving as a member of our board of
directors in February 2001. He is currently a private investor and from 2000
through January 2001, he served as Senior Managing Director of Equity Capital
Network, a venture capital and private equity firm. From 1998 to 2000,
Mr. Tullo was a Managing Director of ING Barings, and from 1997 to 1998, he was
a Managing Director of Furman Selz. From 1995 to 1997, Mr. Tullo served as a
Managing Director of Schroeder & Co. From 1986 to 1995, Mr. Tullo served in
various senior roles at Goldman Sachs & Co. and S.G. Warburg & Co. From 1982
through 1986, Mr. Tullo served as a management consultant at
McKinsey & Company.

Board Composition

The number of our directors is currently fixed at six. Our board of
directors is divided into three classes, each of whose members serve for a
staggered three-year term. Our board of directors consists of two directors in
Class I, whose terms of office will continue until the 2003 annual meeting of
shareholders, two Class II directors, whose terms of office will continue until
the 2001 annual meeting of shareholders, and two Class III directors, whose
terms of office will continue until the 2002 annual meeting of shareholders.
The Class I directors are David F. Dietz and Thomas N. Tullo, the Class II
directors are Dewain K. Cross and Daniel J. Murphy, III, and the Class III
directors are David A. Bloss, Sr. and Timothy P. Horne. At each annual meeting
of shareholders, a class of directors will be elected for a three-year term to
succeed the directors of the same class whose terms are then expiring.

There are no family relationships among any of our directors or executive
officers.

Board Committees

Audit Committee. The members of the audit committee, all of whom are
independent directors, are responsible for recommending to our board of
directors the engagement of our outside auditors and reviewing our accounting
controls and the results and scope of audits and other services provided by our
auditors. The audit committee consists of Messrs. Cross, Murphy and Tullo.

Compensation Committee. The members of the compensation committee, a
majority of whom are independent directors, are responsible for reviewing and
recommending to our board of directors the amount and type of consideration to
be paid to senior management, administering our stock plans and establishing
and reviewing general policies relating to compensation and benefits of
employees. The compensation committee consists of Messrs. Cross, Dietz and
Murphy.

Director Compensation

Directors receive such compensation for their services as our board of
directors may from time to time determine. Further, each director is reimbursed
for reasonable travel and other expenses incurred in attending meetings.
Currently, each non-employee director receives annual remuneration of $27,500
and an annual grant of a non-qualified option to acquire 2,000 shares of common
stock. At his election, each director may elect to defer all or part of such
director's cash remuneration for the purchase of restricted stock units at a
33% discount from the closing price of our common stock on the date of the fee
payments. Additionally, each non-employee director has received a non-qualified
option to acquire 10,000 shares of common stock in connection with his initial
appointment to serve on the board of directors. Each non-employee director is
eligible to receive grants of stock options under the 1999 Stock Option and
Incentive Plan and to defer compensation under our Management Stock Purchase
Plan. Our directors who are our employees will not receive compensation for
their services as directors.

Executive Compensation

The following table sets forth the compensation paid in the year ended
December 31, 2000 and for the six months ended December 31, 1999 to our Chief
Executive Officer, our four most highly compensated executive officers who were
serving as executive officers at the end of 2000 and an additional individual
who held an executive officer position during 2000 but who was not serving as
an executive officer as of December 31, 2000, each of whose total salary and
bonus exceeded $100,000 during 2000. We refer to each of these people in this
prospectus as our "named executive officers." From July 1, 1999 (the date on
which we were incorporated in the State of Delaware) through October 18, 1999,
the date of the spin-off, Watts made all payments of compensation to the named
executive officers on our behalf. The following table, therefore, reflects
compensation paid to each named executive officer, regardless of whether such
compensation was actually paid by us or by Watts.

Summary Compensation Table

Annual Long-Term
Compensation Compensation
------------------ ------------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Salary Bonus Unit(s) Options Compensation
Position Year (1) (2) (2)(3)(4) Granted (5)
- ------------------ ---- -------- --------- ---------- ---------- ------------

David A. Bloss, Sr.
Chairman, President and
Chief Executive
Officer................ 2000 $400,000 $ 146,621 - 105,000 $15,600
1999 182,500 0 $34,629(6) 131,500 5,569
Kenneth W. Smith
Vice President, Chief
Financial Officer and
Treasurer.............. 2000 134,436 32,965 80,000 8,000
1999 - - - - -
Alan R. Carlsen
Executive Vice
President, Operations.. 2000 206,667 120,000 - 30,000 178,224
1999 93,333 0 39,071(7) 39,500 4,410
Carmine F. Bosco
Group Vice President,
Petrochemical
Products............... 2000 155,682 40,000(8) - 45,000 23,683
1999 - - - - -
Stephen J. Carriere
Vice President,
Corporate Controller
and Assistant
Treasurer.............. 2000 131,875 23,093 - 10,000 8,400
1999 54,042 0 4,147(9) 8,000 3,325
George M. Orza
Vice President, Sales
and Marketing,
KF Industries (10)..... 2000 137,994 13,525 - - 9,000
1999 93,925 5,575(11) 8,322(11) 36,000 4,410

(1) As a result of changing our fiscal year end from June 30th to December 31st
of each year, the salary and bonus amounts for the six months ended
December 31, 1999 represent the actual amounts earned for that period.
(2) Bonuses are awarded under our Executive Incentive Bonus Plan (the "Bonus
Plan"). The bonus amounts with respect to the year ended December 31, 2000
were recently approved by the Compensation Committee and are expected to be
paid in March 2001. Under the Bonus Plan, executives are eligible to
receive a bonus up to a specified maximum percentage of base salary based
on performance goals assigned by the Compensation Committee. Our named
executive officers also are eligible to participate in our Management Stock
Purchase Plan (the "Management Plan"). Under the Management Plan,
executives may make an advance election to receive restricted stock units,
or RSUs, in lieu of a specified percentage or dollar amount of the
executive's annual incentive cash bonus under the Bonus Plan. RSUs are
issued in whole units only (fractional RSUs are returned to the participant
in the form of cash) on the basis of a 33% discount to the fair market
value of our common stock on the date the underlying bonus is paid or
otherwise would be paid is awarded and generally vest three years after the
date of grant, at which time they are converted into shares of our common
stock unless the executive has previously elected a longer deferral period.
Because the number and value of the RSUs granted to each participant under
the Management Plan are determined by reference to the closing price of the
Company's common stock on the date the bonus is paid, this information is
not yet available. For convenience, the table lists the entire value of the
bonus granted to each named executive officer. The following percentage of
their bonus for the fiscal year ended December 31, 2000 was deferred into
the acquisition of RSUs: Mr. Bloss - 100%; Mr. Smith - 30%; Mr. Carlsen -
100%; Mr. Bosco - 20%; and Mr. Carriere - 100%.
(3) Represents the dollar value (net of any consideration paid by the named
executive officer) of RSUs received under the Management Plan determined by
multiplying the number of RSUs received by the closing market price of our
common stock of $13.69 on the RSU grant date of April 6, 2000.
(4) For the six months ended December 31, 1999, RSUs were awarded as of April
6, 2000, (the date actual annual incentive bonuses were determined) by
dividing the named executive officer's election amount by $9.17, which was
67% of $13.69, the closing market price of our common stock on April 6,
2000 ("1999 RSU Cost"). Each RSU is 100% vested three years after the date
of grant, and at the end of a deferral period, if one had been specified by
the named executive officer or upon the named executive officer's
termination of employment under the Management Plan, we will issue one
share of common stock for each vested RSU. Cash dividends, equivalent to
those paid on the our common stock, will be credited to the named executive
officer's account for each nonvested RSU and will be paid in cash to such
person when the RSUs become vested. Such dividends will also be paid in
cash to individuals for each vested RSU held during any deferral period.
(5) Consists of car allowance, except that Mr. Carlsen's amount for 2000 also
includes $58,451 of housing allowance and $108,038 in moving expenses and
allowances and Mr. Bosco's amount for 2000 also includes $13,591 in moving
expense allowance.
(6) For the six months ended December 31, 1999, Mr. Bloss received 2,530 RSUs
in lieu of receiving all of his incentive bonus of $23,203. This number of
RSUs was determined by dividing $23,203 by the 1999 RSU Cost. Mr. Bloss
held 54,402 RSUs at December 31, 2000 with a value of $544,020 based on a
closing price of our common stock of $10.00 on December 29, 2000.
(7) For the six months ended December 31, 1999, Mr. Carlsen received 2,854 RSUs
in lieu of receiving all of his incentive bonus of $26,180. The number of
RSUs was determined by dividing $26,180 by the 1999 RSU Cost. In addition,
Mr. Carlsen was required to purchase 2,598 restricted stock units due to
his prior election to defer a fixed amount ($50,000) of bonus (which
exceeded his actual earned bonus by $23,820) into the receipt of RSUs. Mr.
Carlsen held 46,550 RSUs at December 31, 2000 with a value of $465,500
based on a closing price of our common stock of $10.00 on December 29,
2000.
(8) In connection with his February 2000 hiring, Mr. Bosco was guaranteed a
minimum bonus of $40,000 for the year ended December 31, 2000.
(9) For the six months ended December 31, 1999, Mr. Carriere received 303 RSUs
in lieu of receiving all of his incentive bonus of $2,785. This number of
RSUs was determined by dividing $2,785 by the 1999 RSU Cost. Mr. Carriere
held 2,192 RSUs at December 31, 2000 with a value of $21,920 based on a
closing price of our common stock of $10.00 on December 29, 2000.
(10) Effective October 2, 2000, Mr. Orza ended his employment with us.
(11) For the six months ended December 31, 1999, Mr. Orza received 608 RSUs in
lieu of receiving 50% of his annual incentive bonus of $11,156. This
number of RSUs was determined by dividing $5,576 by the 1999 RSU Cost.
Upon Mr. Orza's termination of employment, effective October 2, 2000, we
issued 5,564 shares of common stock for vested RSUs. Mr. Orza received a
payment of $11,482 equal to the value of his unvested RSUs, which were
cancelled.

Option Grants in Fiscal Year 2000

In fiscal year 2000, 406,000 options were granted to our employees. The
following table sets forth certain information concerning the individual grant
of options to purchase our common stock to our named executive officers who
received such grants during the fiscal year ended December 31, 2000.

Option Grants in Fiscal Year 2000

Potential
Realizable Value at
Number of Assumed Annual
Shares of Percent of Rates of Stock
Common Stock Total Options Price Appreciation
Underlying Granted to Exercise for Option Term (3)
Options Employees in Price Per Expiration -------------------
Name Granted (1) Fiscal Year Share (2) Date 5% 10%
- ---- ------------ ------------- --------- ---------- -------- ----------

David A. Bloss, Sr. .... 105,000 26.4% $ 7.50 8/02/10 $495,254 $1,255,072

Kenneth W. Smith........ 40,000 10.1 13.50 4/17/10 339,603 860,621
40,000 10.1 7.50 8/02/10 188,668 478,123

Alan R. Carlsen......... 30,000 7.5 7.50 8/02/10 141,501 358,592

Carmine F. Bosco........ 20,000 5.0 13.31 2/28/10 167,412 424,254
25,000 6.3 7.50 8/02/10 117,918 298,827

Stephen J. Carriere..... 10,000 2.5 7.50 8/02/07 47,167 119,531

George M. Orza (4)...... - - - - - -

- --------
(1) The options terminate ten years after the grant date, subject to earlier
termination in accordance with the 1999 Stock Option and Incentive Plan and
the applicable option agreement. Options vest over 5 years at the rate of
20% per year on successive anniversaries of the date on which the options
were granted.
(2) The exercise price equals the fair market value of the stock as of the
grant date.
(3) This column shows the hypothetical gain or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full 10-year term of the options.

The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent our estimate or
projection of future common stock prices. The gains shown are net of the
option exercise price, but do not include deductions for taxes or other
expenses associated with the exercise of the option or the sale of the
underlying shares, or reflect nontransferability, vesting or termination
provisions. The actual gains, if any, on the exercises of stock options will
depend on the future performance of our common stock.
(4) Effective October 2, 2000, Mr. Orza ended his employment with us, and as of
December 31, 2000, all of his remaining unexercised options were cancelled.

Option Exercises and Option Values

The following table sets forth information concerning the aggregate number
of options exercised in 2000 and the number and value of unexercised options to
purchase our common stock held by our named executive officers who held such
options at December 31, 2000.

Aggregated Option Exercises in Fiscal Year 2000 and Fiscal Year-End Option
Values

Number of Shares of
Common Stock Underlying Value of Unexercised
Unexercised Options at In-The-Money Options at
Shares Fiscal Year-End Fiscal Year-End (1)
Acquired on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------

David A. Bloss, Sr. .... - $ - 360,658 315,787 $211,060 $321,226
Kenneth W. Smith........ - - - 80,000 - 100,000
Alan R. Carlsen......... - - 91,978 70,399 42,602 91,228
Carmine F. Bosco........ - - - 45,000 - 62,500
Stephen J. Carriere..... - - 1,600 16,400 - 25,000
George M. Orza (2)...... 20,334 23,140 - - - -

- --------
(1) Based on the last reported sale price of our common stock on the NYSE on
December 29, 2000 less the option exercise price.
(2) On December 29, 2000, George M. Orza exercised 20,334 options. Of this
number, 12,513 options were exercised at a price of $8.37 per share and
7,821 options were exercised at a price of $9.43 per share. Mr. Orza sold
these shares on December 29, 2000 at an average fair market value of $9.92
per share.

1999 Stock Option and Incentive Plan

The compensation paid pursuant to the 1999 Stock Option and Incentive Plan
("1999 Stock Plan") qualifies as "performance-based compensation" not subject
to the federal tax limitations on deductibility of certain executive
compensation in excess of $1.0 million. Generally, the 1999 Stock Plan permits
the grant of the following types of awards:

. unrestricted stock awards;
. incentive stock options;
. performance share awards; and
. non-qualified stock options;
. dividend equivalent rights.
. deferred stock awards;

. restricted stock awards;

Grants of awards may be made under the 1999 Stock Plan to our officers,
other employees and directors. The 1999 Stock Plan currently provides for the
issuance of up to 2,000,000 shares of common stock (subject to adjustment for
stock splits and similar events). An additional 632,738 shares are reserved for
issuance upon exercise of options granted to replace Watts options (which we
refer to as "replacement options"). Options with respect to no more than
500,000 shares of common stock (subject to adjustment for stock splits and
similar events) may be granted to any one individual in any calendar year. The
maximum award of restricted stock, deferred stock or performance shares (or
combination thereof) for any one individual that is intended to qualify as
"performance-based compensation" under Section 162(m) of the Internal Revenue
Code may not exceed 200,000 shares of common stock (subject to adjustment for
stock splits and similar events) for any performance cycle.

The following is a summary of material terms of the 1999 Stock Plan:

. the 1999 Stock Plan provides for administration by either our board of
directors or a committee of not fewer than two non-employee directors,
referred to as the "administrator," as appointed by our board of directors
from time to time;

. all of our officers, employees and directors are eligible to participate in
the 1999 Stock Plan, subject to the discretion of the administrator;

. options granted under the 1999 Stock Plan may be either incentive options
(within the definition of Section 422 of the Internal Revenue Code) or non-
qualified options;

. the administrator has authority to determine the terms of options granted
under the 1999 Stock Plan but no option can be exercisable more than 10
years after the option is granted;

. participants under the 1999 Stock Plan are responsible for the payment of
any federal, state or local taxes which we are required by law to withhold
upon any option exercise or vesting of other awards;

. the administrator may grant shares (at par value or for a higher purchase
price determined by the administrator) of common stock to any participant
subject to such conditions and restrictions as the administrator may
determine;

. the administrator may grant options that include a "reload" feature; and

. the administrator may also award phantom stock units as deferred stock
awards to participants.

Management Stock Purchase Plan

Our Management Stock Purchase Plan is a component of the 1999 Stock Plan.
Certain key employees and directors are eligible to participate in the plan,
which provides that eligible employees may

elect to receive restricted stock units in lieu of all or a portion of their
pre-tax annual incentive bonus and, in some circumstances, make after-tax
contributions in exchange for restricted stock units. In addition, non-employee
directors may elect to receive restricted stock units in lieu of all or a
portion of their annual directors' fees. Participants are required to make an
election no later than December 31 of the calendar year prior to calendar year
for which the annual incentive bonus will be determined or the compensation or
directors' fees will be paid. Each restricted stock unit represents the right
to receive one share of our common stock after a three-year vesting period, and
a participant may elect to defer receipt of shares of common stock for an
additional period of time after the vesting period. Furthermore, income and the
associated income taxes will be deferred until the time that the restricted
stock units are converted to shares of common stock. Restricted stock units are
granted at a discount of 33% from the fair market value of the shares of common
stock on the date of grant. The date of grant is the date that the annual
incentive bonuses, compensation or directors' fees are paid or would otherwise
be paid.

Executive Incentive Bonus Plan

Our executives are eligible to receive a bonus up to a specified maximum
percentage of base salary based on four performance-based goals assigned by the
compensation committee for the particular year under the Executive Incentive
Bonus Plan. Each goal carries equal weight. In addition, if 100% of each of the
four goals is achieved, the executive may achieve a bonus up to twice the
maximum percentage based on the extent to which each objective is exceeded.

Employment Agreements

We have entered into an employment agreement with Mr. Bloss, pursuant to
which Mr. Bloss serves as our Chairman, President and Chief Executive Officer
for a term of three years beginning on October 18, 1999. The agreement will be
automatically extended for additional one-year terms unless either we or Mr.
Bloss elects to terminate it by notice in writing at least 90 days prior to the
third anniversary of the agreement or each anniversary thereafter. Mr. Bloss'
base salary is currently $400,000. Mr. Bloss is also eligible to receive
incentive compensation in an amount to be determined by our board of directors.

Upon termination of employment due to the death or disability of Mr. Bloss,
all unexercisable stock options will immediately vest and will be exercisable
for one year and we will pay health insurance premiums for Mr. Bloss and his
family for one year.

If employment is terminated by Mr. Bloss for "good reason," or if we
terminate his employment without "cause," Mr. Bloss will receive a severance
payment equal to two times the sum of his average base salary and average
incentive compensation (as determined in accordance with the agreement),
payable over 24 months. In addition, certain stock options and restricted stock
units held by Mr. Bloss will become exercisable or nonforfeitable, and Mr.
Bloss will receive additional vesting credit under the supplemental plan.

If a "change in control" (as defined in the agreement) occurs and Mr. Bloss'
employment is terminated by us without cause or by Mr. Bloss with good reason
within 18 months of such change in control, Mr. Bloss will receive a lump sum
amount in cash equal to three times the sum of his then current base salary and
most recent bonus, all of his stock options and stock-based awards will become
immediately exercisable, he will be fully vested in his accrued benefit under
the supplemental plan, and we will pay health insurance premiums for Mr. Bloss
and his family for one year. In addition, Mr. Bloss will receive a tax gross-up
payment to cover any excise tax due.

We also have entered into change of control agreements with Messrs. Bosco,
Carlsen, Carriere, Glass and Smith. These agreements generally provide the same
change of control provisions as in Mr. Bloss' employment agreement, except that
(i) each of these agreements applies to terminations within 12 months of the
change of control event, (ii) the agreements with Messrs. Bosco, Carlsen and
Smith provide for a lump sum payment equal to two times the sum of the
executive's annual salary and most recent bonus and (iii) the agreements with
Messrs. Carriere and Glass provide for a lump sum payment equal to one times
the sum of the executive's annual salary and most recent bonus.

Compensation Committee Interlocks and Insider Participation

Messrs. Cross, Dietz and Murphy are members of our compensation committee.
Mr. Horne is also a director of Watts and, based on his most recent public
filings, beneficially owns 35.5% of the outstanding Watts common stock and
29.6% of our outstanding common stock prior to this offering. Mr. Murphy is
also a director of Watts and serves on the compensation committee of both
entities. In the event that Mr. Horne ceases to serve as trustee of the 1997
Voting Trust (as described in footnote 5 in the section entitled "Principal
Shareholders"), then Walter J. Flowers and Daniel J. Murphy, III will become
co-trustees of the 1997 Voting Trust.

Our policy is that any future transactions with our directors, officers,
employees or affiliates be approved in advance by a majority of our board of
directors, including a majority of the disinterested members of our board of
directors, and be on terms no less favorable to us than we could obtain from
non-affiliated parties.

Pension Plan and Supplemental Plan

We sponsor a qualified noncontributory defined benefit pension plan for
eligible salaried employees, including the named executive officers specified
in the Summary Compensation Table above, and we maintain a nonqualified
noncontributory defined benefit supplemental plan for certain highly
compensated employees, which also covers the named executive officers specified
in the Summary Compensation Table. The eligibility requirements of the pension
plan are generally the attainment of age 21 and the completion of at least
1,000 hours of service in a specified 12-month period. The assets of the
pension plan are maintained in a trust fund at State Street Bank and Trust
Company. The pension plan is administered by a retirement plan committee
appointed by our board of directors. Annual contributions to the pension plan
are computed by an actuarial firm based on normal pension costs and a portion
of past service costs. The pension plan provides for monthly benefits to, or on
behalf of, each participant at age 65 and has provisions for early retirement
after attainment of age 55 and five or ten years of service and surviving
spouse benefits after five years of service. Participants in the pension plan
who terminate employment prior to retirement with at least five years of
service are vested in their accrued retirement benefit. The pension plan is
subject to the Employee Retirement Income Security Act of 1974, as amended.

The normal retirement benefit for participants in the pension plan is an
annuity payable monthly over the participant's life. If the participant is
married, he or she will receive a spousal joint and 50% survivor annuity,
unless an election out is made. Generally, the annual normal retirement benefit
is an amount equal to 1.67% of the participant's final average compensation (as
defined in the pension plan), reduced by the maximum offset allowance (as
defined in the pension plan) multiplied by years of service (maximum 25 years).
For the 2000 and 2001 plan years, annual compensation in excess of $170,000 per
year is disregarded for all purposes under the pension plan ($160,000 for the
1997 through 1999 plan

years and $150,000 for plan years prior to 1997). However, benefits accrued
prior to the 1994 plan year may be based on compensation in excess of $150,000.
Compensation recognized under the pension plan generally includes base salary
and annual bonus.

The supplemental plan provides additional monthly benefits to (i) a select
group of key executives, (ii) individuals who were projected to receive reduced
benefits as a result of changes made to the Retirement Plan to comply with the
Tax Reform Act of 1986, (iii) executives who will be affected by IRS limits on
compensation under the Retirement Plan, and (iv) individuals who deferred
compensation under the CIRCOR International, Inc. Management Stock Purchase
Plan since these deferred amounts are excludible as earnings under the
qualified Retirement Plan. The supplemental plan is not a tax qualified plan,
and is subject to certain provisions of the Employee Retirement Security Act of
1974, as amended. The supplemental plan is not funded.

Tier one benefits are provided under the supplemental plan to a select group
of key executives. The annual benefit under tier one payable at normal
retirement is equal to the difference between (x) 2% of the highest three year
average pay multiplied by years of service up to ten years, plus 3% of average
pay times years of service in excess of ten years, to a maximum of 50% of
average pay, less (y) the annual benefit payable under the pension plan formula
described above. Normal retirement age under tier one is age 62.

The following table illustrates total annual normal retirement benefits
(payable from both the pension plan and from the supplemental plan and assuming
attainment of age 62 during 2000) for various levels of final average
compensation and years of benefit service under tier one of the supplemental
plan.

Estimated Total Annual Retirement
(Pension Plan plus Supplemental
Plan, Tier One)
Final Average Compensation Based on Years of Service (1)
Benefit for Three Highest ----------------------------------
Consecutive Years in Last 10 Years 5 Years 10 Years 15 Years 20 Years
---------------------------------- ------- -------- -------- --------

$100,000 $10,000 $ 20,000 $ 35,000 $ 50,000
150,000 15,000 30,000 52,500 75,000
200,000 20,000 40,000 70,000 100,000
250,000 25,000 50,000 87,500 125,000
300,000 30,000 60,000 105,000 150,000
350,000 35,000 70,000 122,500 175,000
400,000 40,000 80,000 140,000 200,000
450,000 45,000 90,000 157,500 225,000
500,000 50,000 100,000 175,000 250,000
550,000 55,000 110,000 192,500 275,000
600,000 60,000 120,000 210,000 300,000

- --------
(1) The annual pension plan and supplemental plan benefits are computed on the
basis of a straight life annuity.

Messrs. Bloss, Carlsen, and Carriere have eight, six and four years,
respectively, of benefit service under the pension plan (which includes years
of benefit service credited under the Watts pension plan) and Messrs. Bloss and
Carlsen are eligible for tier one benefits. Mr. Bosco has one year of benefit
service and is eligible for tier one benefits. Mr. Smith does not currently
have any years of benefit service and accordingly is not currently eligible for
benefits. Mr. Orza had three years of benefit service with us when his
employment terminated. Eligible employees are currently limited to a maximum
annual benefit under the pension plan of $140,000 (subject to cost of living
adjustments) under Internal Revenue Code requirements regardless of their years
of service or final average compensation. Accordingly, under current salary
levels and law, annual benefits are limited to such amount under the pension
plan.

401(k) Plan

We sponsor a defined contribution 401(k) plan for eligible employees,
including the named executive officers specified in the Summary Compensation
Table above. The eligibility requirements of the 401(k) plan are generally the
attainment of age 21 and the completion of at least 1,000 or more hours of
service in a specified 12-month period. The assets of the 401(k) plan are
maintained in a trust fund at Fidelity Institutional Retirement Services
Company. The 401(k) plan is administered by the compensation committee, which
is appointed by our board of directors.

The 401(k) plan permits eligible employees to make pre-tax 401(k)
contributions of 1% to 18% of compensation, which is defined in the 401(k) plan
generally as W-2 pay, plus amounts deferred pursuant to the 401(k) plan and
section 125 of the Internal Revenue Code, but excluding income realized upon
the exercise of stock options and subject to certain other limitations.
Compensation in excess of $170,000 per year ($160,000 for the years 1997
through 1999 and $150,000 for the years prior to 1997) is disregarded under the
401(k) plan.

In addition, the 401(k) plan provides for employer matching contributions of
30% of the first 4% of compensation (up to $40,000) contributed by a
participant to the 401(k) plan. However, certain participants with compensation
in excess of $80,000 and certain other participants are not eligible for
employer matching contributions.

Participants' accounts are always fully vested with respect to their 401(k)
contributions and are fully vested with respect to employer matching
contributions after five years of vesting service or upon the participant's
retirement date (as defined in the 401(k) plan). Participants may direct the
investment of their accounts among the available investment funds. Participants
may request hardship withdrawals and loans from the 401(k) plan while still
employed. Participants may request a withdrawal of all or part of their vested
account at or after age 59, whether or not still employed. Distributions at
retirement, disability, death or termination of employment for any other reason
are made in a single lump sum cash payment.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We have continuing obligations to Watts under the distribution agreement and
certain other agreements described in the section entitled "Our Relationship
with Watts."

Mr. Timothy P. Horne, a member of our board of directors, is also a director
of Watts and, based on his most recent public filings, beneficially owns 35.5%
of the outstanding Watts common stock and 29.6% of our outstanding common stock
as of February 28, 2001 and before this offering.

Mr. David F. Dietz, a member of our board of directors, is the sole owner of
a professional corporation which is a partner of Goodwin Procter LLP, a law
firm which provides legal services to us and to Watts.

Mr. Daniel J. Murphy, III, a member of our board of directors, is also a
director of Watts. Under the terms of the 1997 Voting Trust, in the event Mr.
Horne ceases to serve as trustee of the 1997 Voting Trust (as described in
footnote 5 in the section entitled "Principal Shareholders"), then Walter J.
Flowers and Daniel J. Murphy, III will become co-trustees of the 1997 Voting
Trust.

Our Relationship with Watts

This section describes our primary agreements with Watts that define our
ongoing relationship with Watts, its subsidiaries and affiliates. They also
provided for our orderly separation from Watts. The following description
summarizes the material terms of the agreements.

Distribution Agreement

We are party to a distribution agreement with Watts providing for, among
other things:

. the principal corporate transactions which were required to effect the spin-
off;

. the conditions precedent to the spin-off;

. the allocation between Watts and us of certain assets and liabilities;

. the settlement of intercompany accounts between Watts and us;

. indemnification obligations of Watts and us; and

. certain other transition arrangements.

The distribution agreement provided generally that all assets and
liabilities associated exclusively with our business be transferred to or
retained by us, including certain capitalized lease obligations and obligations
under industrial revenue bonds totaling approximately $12.5 million. Under the
distribution agreement, Watts retained sole responsibility for all other
external debt for borrowed money and other financings (including Watts'
publicly held bonds) with the exception of approximately $96.0 million
outstanding under Watts' credit facility, which we assumed and repaid at the
time of the spin-off. The distribution agreement provided that all assets and
liabilities of Watts that were not identified or described as being our
property or responsibility remained the property or responsibility of Watts.

We each have agreed to indemnify, defend and hold harmless the other party
and its subsidiaries and their respective directors, officers, employees and
agents from and against any and all damage, loss, liability and expense arising
out of or due to the failure of the indemnitor or its subsidiaries to pay,

perform or otherwise discharge any of the liabilities or obligations for which
it is responsible under the terms of the distribution agreement, which include,
subject to certain exceptions, all liabilities and obligations arising out of
the conduct or operation of their respective businesses before, on or after the
spin-off date. The distribution agreement included procedures for notice and
payment of indemnification claims and provided that the indemnifying party may
assume the defense of the claim or suit brought by a third party.

The distribution agreement provided generally that a portion of the assets
of the tax-qualified retirement plans maintained by Watts be transferred to
similar qualified retirement plans established by us. In the case of the Watts
401(k) plan, the amount transferred was the value of the accounts of employees
of our companies now in the instrumentation and fluid regulation products group
and the petrochemical products group. In the case of the other Watts pension
plans, the portion of plan assets transferred was based generally on the
percentage of plan liabilities attributable to plan participants who are now
our employees as a result of the spin-off.

We and our subsidiaries were historically included with Watts and its
subsidiaries in a single consolidated group for United States federal income
tax purposes. Under United States federal income tax law, each member of a
consolidated group is jointly and severally liable for the United States
federal income tax liability of each other member of the consolidated group.
Accordingly, members of our group could be held liable by the IRS for federal
income tax liabilities arising from periods beginning before the spin-off date.

The tax sharing provisions of the distribution agreement provided that Watts
be responsible for all domestic income taxes attributable to taxable periods
beginning before the spin-off date. For domestic income taxes attributable to
taxable periods beginning on or after the spin-off date, the tax sharing
provisions of the distribution agreement provided that Watts is responsible for
domestic income taxes of the Watts group, and that we are responsible for
domestic income taxes of our group. The tax sharing provisions also provide
that taxes, other than domestic income taxes, are the responsibility of Watts
or us according to whether the tax is attributable to the assets or business
operations of the Watts group or our group.

In addition, the tax sharing provisions of the distribution agreement
provided that we indemnify Watts for taxes arising from any act or omission by
us which causes the spin-off to be taxable. The tax sharing provisions of the
distribution agreement also provide that Watts indemnify us for taxes arising
from any act or omission by Watts which causes the spin-off to be taxable.

We agreed in the tax sharing provisions of the distribution agreement to
engage in a public offering of a significant amount of our common stock within
one year of the spin-off in accordance with statements and representations made
by Watts in its request for the ruling from the IRS regarding the spin-off. We
subsequently obtained another ruling from the IRS extending, to April 18, 2001,
the deadline for engaging in a public offering. We also agreed in the tax
sharing provisions of the distribution agreement not to engage within two years
of the spin-off in any merger, reorganization, acquisition, equity
restructuring or other transaction that results in one or more individuals or
entities acquiring a 50% or greater interest in us. We also agreed in the tax
sharing provisions of the distribution agreement that we will not take any
action that is inconsistent with the statements and representations made by
Watts in its request for the ruling from the IRS regarding the spin-off. Watts
agreed in the tax sharing provisions of the distribution agreement not to
engage within two years of the spin-off in any merger, reorganization,
acquisition, equity restructuring or other transaction that results in one or
more individuals or entities acquiring a 50% or greater interest in Watts.
Watts also agreed in the tax sharing

provisions of the distribution agreement that it will not take any action that
is inconsistent with the statements and representations made by Watts in its
request for the ruling from the IRS regarding the spin-off. The tax sharing
provisions of the distribution agreement provided, however, that Watts or us
may act or fail to act in a way contrary to the commitments referred to in this
paragraph after first obtaining an opinion from Goodwin Procter llp (or other
mutually acceptable law firm) or a ruling from the IRS to the effect that such
action (or inaction) will not cause the spin-off to be taxable to either Watts
or the Watts shareholders.

Supply Agreement

We entered into a supply agreement with Watts under which Watts provides
certain products to us. Watts is selling these products to us under market or
formula-based pricing mechanisms. The supply agreement, by its terms, ended on
October 18, 2000, the first anniversary of the spin-off. To date, however, we
continue to purchase such products from Watts.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of common stock as of February 28, 2001 and as adjusted to reflect
the sale of the common stock offered hereby, by:

. all persons known by us to own beneficially 5% or more of our common stock;

. each of our directors;

. our Chief Executive Officer and the other named executive officers; and

. all directors and executive officers as a group.

The number of shares beneficially owned by each shareholder is determined
under rules issued by the Securities and Exchange Commission and includes
voting or investment power with respect to securities. Under these rules,
beneficial ownership includes any shares as to which the individual or entity
has sole or shared voting power or investment power and includes any shares as
to which the individual or entity has the right to acquire beneficial ownership
within 60 days after February 28, 2001 through the exercise of any warrant,
stock option or other right. The inclusion in this prospectus of such shares,
however, does not constitute an admission that the named shareholder is a
direct or indirect beneficial owner of such shares. As of February 28, 2001 a
total of 13,262,891 shares were outstanding. The applicable percentage of
"beneficial ownership" after the offering is based upon 14,612,891 shares of
common stock outstanding and assumes that none of the named shareholders
participate in the offering.

Unless otherwise indicated below, to our knowledge, all persons listed below
have sole voting and investment power with respect to their shares of common
stock, except to the extent authority is shared by spouses under applicable
law.

Shares Beneficially Owned
------------------------------------------------
Percent after
Name of Beneficial Owner (1) Number (2) Percent (2) the Offering (2)
- ---------------------------- ---------- ----------- ----------------

Timothy P. Horne (3)........... 3,924,291(4)(5)(6) 29.6% 26.8%
Gabelli Entities (7)........... 1,898,800 14.3 13.0
Perkins, Wolf, McDonnell &
Company(8).................... 1,236,200 9.3 8.5
Wellington Management Company,
LLP (9)....................... 853,200 6.4 5.8
George B. Horne (3)(10)........ 712,300 5.4 4.9
Daniel W. Horne (3)(6)......... 667,920 5.0 4.6
Deborah Horne (3)(6)........... 667,920 5.0 4.6
David A. Bloss, Sr. (11)....... 365,258 2.7 2.4
Alan R. Carlsen (12)........... 92,508 * *
Daniel J. Murphy, III (13)..... 6,248 * *
David F. Dietz (14)............ 6,000 * *
Kenneth W. Smith............... 4,000 * *
Dewain K. Cross (15)........... 4,000 * *
Carmine F. Bosco (16).......... 4,000 * *
Stephen J. Carriere (17)....... 2,100 * *
George M. Orza................. 0 * *
Thomas N. Tullo................ 0 * *
All executive officers and
directors as a group
(12 persons)(18).............. 4,409,905 32.1% 29.2%

- --------
* Less than 1%.
(1) The address of each shareholder in the table is c/o Circor, Inc., 35
Corporate Drive, Burlington, Massachusetts 01803, except that Wellington
Management Company, LLP's address is 75 State Street, Boston, MA 02109;
Perkins, Wolf, McDonnell & Company's address is 53 W. Jackson Blvd, Suite
722, Chicago, Illinois 60604; and the Gabelli Entities' address is
One Corporate Center, Rye, NY 10580.

(2) The number of shares of common stock outstanding used in calculating the
percentage for each listed person and the directors and executive officers
as a group includes the number of shares of common stock underlying
options, warrants and convertible securities held by such person or group
that are exercisable or convertible within 60 days from February 28, 2001,
the date of the above table, but excludes shares of common stock
underlying options, warrants or convertible securities held by any other
person.
(3) Timothy P. Horne, George B. Horne, Daniel W. Horne and Deborah Horne,
together with Walter J. Flowers (as trustee for Tiffany R. Horne), as
depositors under the 1997 Voting Trust (see footnote 5), may be deemed a
"group" as that term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934.
(4) Includes (i) 1,756,981 shares of common stock held by Timothy P. Horne
(for purposes of this footnote, "Mr. Horne"), (ii) 667,920 shares held for
the benefit of Daniel W. Horne, Mr. Horne's brother, under a revocable
trust for which Mr. Horne serves as sole trustee, (iii) 667,920 shares
held for the benefit of Deborah Horne, Mr. Horne's sister, under a trust
for which Mr. Horne serves as sole trustee, which trust is revocable with
the consent of the trustee, (iv) 712,300 shares held for the benefit of
George B. Horne, Mr. Horne's father, under a revocable trust for which Mr.
Horne serves as co-trustee, (v) 11,300 shares held for the benefit of
Tiffany R. Horne, under an irrevocable trust for which Mr. Horne serves as
trustee, (vi) 22,110 shares held for the benefit of Tiffany R. Horne by
Mr. Horne as custodian, and (vii) 81,760 shares held for the benefit of
Tiffany R. Horne, under a revocable trust for which Walter J. Flowers
serves as Trustee. See footnote 5. A total of 1,725,610 of the shares
noted in clause (i) and all of the shares noted in clauses (ii) through
(v) of this footnote (3,785,050 shares in the aggregate) are held in a
voting trust for which Mr. Horne serves as trustee. See footnote 5. Also
includes 4,000 shares of common stock issuable upon the exercise of
currently exercisable options.
(5) 1,725,610 shares of common stock held by Timothy P. Horne individually,
and all shares of common stock held by trusts for the benefit of Daniel W.
Horne, Deborah Horne, George B. Horne and Tiffany R. Horne (3,785,050
shares in the aggregate) are subject to the terms of The Amended and
Restated George B. Horne Voting Trust Agreement - 1997 (the "1997 Voting
Trust"). Under the terms of the 1997 Voting Trust, the trustee (currently
Timothy P. Horne) has sole power to vote all shares subject to the 1997
Voting Trust. Timothy P. Horne, for so long as he is serving as trustee of
the 1997 Voting Trust, has the power to determine in his sole discretion
whether or not proposed actions to be taken by the trustee of the 1997
Voting Trust shall be taken, including the trustee's right to authorize
the withdrawal of shares from the 1997 Voting Trust (for purposes of this
footnote, the "Determination Power"). In the event that Timothy P. Horne
ceases to serve as trustee of the 1997 Voting Trust, no trustee thereunder
shall have the Determination Power except in accordance with a duly
adopted amendment to the 1997 Voting Trust. Under the terms of the 1997
Voting Trust, in the event Timothy P. Horne ceases to serve as trustee of
the 1997 Voting Trust, then Walter J. Flowers and Daniel J. Murphy, III
(the "Successor Trustees") will become co-trustees of the 1997 Voting
Trust. At any time, Timothy P. Horne, if then living and not subject to
incapacity, may designate up to two additional persons, one to be
designated as the primary designee (the "Primary Designee") and the other
as the secondary designee (the "Secondary Designee") to serve in the stead
of any Successor Trustee who shall be unable or unwilling to serve as a
trustee of the 1997 Voting Trust. Such designations are revocable by
Timothy P. Horne at any time prior to the time at which such designees
become trustees. If any of the Successor Trustees is unable or unwilling
or shall otherwise fail to serve as a trustee of the 1997 Voting Trust, or
after becoming a co-trustee shall cease to serve as such for any reason,
then there shall continue to be two trustees and a third trustee shall be
selected in accordance with the following line of succession: first, any
individual designated as the Primary Designee, next, any individual
designated as the Secondary Designee, and then, any individual appointed
by the holders of a majority in interest of the voting trust certificates
then outstanding. In the event that the Successor Trustees shall not
concur on matters not specifically contemplated by the terms of the 1997
Voting Trust, the vote of a majority of the Successor Trustees shall be
determinative. No trustee or Successor Trustee shall possess the
Determination Power unless it is specifically conferred upon such trustee
by way of an amendment to the 1997 Voting Trust.

The 1997 Voting Trust expires on August 26, 2021, subject to extension on
or after August 26, 2019 by shareholders (including the trustee of any
trust shareholder, whether or not such trust is then in existence) who
deposited shares of common stock in the 1997 Voting Trust and are then
living or, in the case of shares in the 1997 Voting Trust the original
depositor of which (or the trustee of the original deposit of which) is
not then living, the holders of voting trust certificates representing
such shares. The 1997 Voting Trust may be amended by vote of the holders
of a majority of the voting trust certificates then outstanding and by the
number of trustees authorized to take action at the relevant time or, if
the trustees (if more than one) do not concur with respect to any proposed
amendment at any time when any trustee holds the Determination Power, then
by the trustee having the Determination Power. In certain cases (i.e.,
changes to the extension, termination and amendment provisions), each
individual depositor must also approve amendments. Shares may not be
removed from the 1997 Voting Trust during its term without the consent of
the requisite number of trustees required to take action under the 1997
Voting Trust. Voting trust certificates are subject to any restrictions on
transfer applicable to the stock that they represent.

Timothy P. Horne holds 45.6% of the total beneficial interest in the 1997
Voting Trust (the "Beneficial Interest") individually, 17.2% of the
Beneficial Interest as trustee of a revocable trust, 17.6% of the
Beneficial Interest as trustee of a trust revocable with the consent of
the trustee, 18.8% of the Beneficial Interest as co-trustee of a revocable
trust and 0.4% of the Beneficial Interest as trustee of two irrevocable
trusts (representing an aggregate of 100% of the Beneficial Interest).
George B. Horne holds 18.8% of the Beneficial Interest as co-trustee of a
revocable trust.
(6) Shares held in a revocable trust for which Timothy P. Horne serves as sole
trustee, and are subject to the 1997 Voting Trust. See footnote 5.
(7) This information is based on an amended Schedule 13D dated November 15,
2000 and filed with the Securities and Exchange Commission on November 17,
2000 on behalf of Mario J. Gabelli and Marc J. Gabelli and various
entities which either one directly or indirectly controls or for which
either one acts as chief investment officer including, but not limited to,
Gabelli Funds LLC, GAMCO Investors, Inc. and Gabelli Securities, Inc. (the
"Gabelli Entities"). According to the Schedule 13D, the Gabelli Entities
engage in various aspects of the securities business, primarily as
investment adviser

to various institutional and individual clients, including registered
investment companies and pension plans, as broker/dealer and as general
partner of various private investment partnerships. Certain Gabelli
Entities may also make investments for their own accounts. As of November
15, 2000, Gabelli Funds LLC, GAMCO Investors, Inc., and Gabelli
Securities, Inc. held 320,000, 1,576,800 and 2,000 shares, respectively.
Subject to certain limitations, each of the foregoing has all investment
and/or voting power in the shares except that GAMCO Investors does not
have the authority to vote 5,000 of the shares. According to the Schedule
13D, on November 15, 2000 the board of directors of The Gabelli Value
Fund, Inc. (one of the funds managed by the Gabelli Entities) voted to
transfer to its proxy voting committee all dispositive and voting power
with respect to 200,000 shares of our common stock held by The Gabelli
Value Fund, Inc. As a result, the Gabelli Entities disclaim beneficial
ownership of these shares and, therefore, those shares are not included in
this table.
(8) The information is based on a Schedule 13G filed with the Securities and
Exchange Commission by Perkins, Wolf, McDonnell & Company on February 11,
2000. Perkins, Wolf, McDonnell & Company has stated in the Schedule 13G
that it is an investment adviser registered under the Investment Advisers
Act of 1940 and that it has shared power to vote and/or dispose of all
such shares.
(9) The information relating to the number and nature of Wellington Management
Company's beneficial ownership is based on a Schedule 13G filed with the
Securities and Exchange Commission on February 13, 2001 by Wellington
Management Company reporting Wellington Management Company's beneficial
ownership as of December 31, 2000. According to the Schedule 13G,
Wellington Management Company serves as an investment adviser with shared
power to vote or direct the vote of 495,200 shares and shared power to
dispose or direct the disposition of 853,200 shares.
(10) Consists of 712,300 shares held in a revocable trust for which Timothy P.
Horne and George B. Horne serve as co-trustees. All of such shares are
subject to the 1997 Voting Trust. See footnote 5.
(11) Includes 360,658 shares of common stock issuable upon the exercise of
currently exercisable options.
(12) Includes 88,067 shares of common stock issuable upon the exercise of
currently exercisable options.
(13) Includes 200 shares of common stock held under a trust for the benefit of
Mr. Murphy's son. Mr. Murphy serves as the sole trustee. Also includes
4,000 shares of common stock issuable upon the exercise of currently
exercisable options.
(14) Includes 4,000 shares of common stock issuable upon the exercise of
currently exercisable options.
(15) Includes 4,000 shares of common stock issuable upon the exercise of
currently exercisable options.
(16) Includes 4,000 shares of common stock issuable upon the exercise of
currently exercisable options.
(17) Includes 1,600 shares of common stock issuable upon the exercise of
currently exercisable options.
(18) Includes 470,325 shares of common stock issuable upon the exercise of
currently exercisable options. Also includes Mr. Timothy P. Horne's
beneficial ownership as reflected in footnotes (3), (4), (5) and (6).

DESCRIPTION OF CAPITAL STOCK

Authorized and Outstanding Capital Stock

Upon completion of this offering, our authorized capital stock will consist
of 29,000,000 shares of common stock, of which 14,612,891 shares will be issued
and outstanding, and 1,000,000 shares of preferred stock issuable in one or
more series by our board of directors, of which 1,000 shares are designated as
series A junior participating cumulative preferred stock.

Common Stock. The holders of common stock are entitled to one vote per share
on all matters to be voted on by shareholders and are entitled to receive such
dividends, if any, as may be declared from time to time by our board of
directors from funds legally available therefor. Any issuance of preferred
stock with a dividend preference over common stock could adversely affect the
dividend rights of holders of common stock. Holders of common stock are not
entitled to cumulative voting rights. Therefore, the holders of a majority of
the shares voted in the election of directors can elect all of the directors
then standing for election, subject to any voting rights of the holders of any
then outstanding preferred stock. The holders of common stock have no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to the common stock. All
outstanding shares of common stock, including the shares offered hereby, are,
or will be upon completion of the offering, fully paid and non-assessable.

Our amended and restated certificate of incorporation and amended and
restated by-laws provide that the number of directors shall be fixed by our
board of directors, subject to the rights of the holders of any preferred stock
then outstanding. The directors, other than those who may be elected by the
holders of any preferred stock, are divided into three classes, as nearly equal
in number as possible, with each class serving for a three-year term. Subject
to any rights of the holders of any preferred stock to elect directors, and to
remove any director whom the holders of any preferred stock had the right to
elect, any of our directors may be removed from office only with cause and by
the affirmative vote of at least two-thirds of the total votes which would be
eligible to be cast by shareholders in the election of such director.

Undesignated Preferred Stock. Our board of directors is authorized, without
further action of the shareholders, to issue up to 1,000,000 shares of
preferred stock in one or more series and to fix the designations, powers,
preferences and the relative, participating, optional or other special rights
of the shares of each series and any qualifications, limitations and
restrictions thereon as set forth in the our amended and restated certificate
of incorporation. Any such preferred stock issued by us may rank prior to the
common stock as to dividend rights, liquidation preference or both, may have
full or limited voting rights and may be convertible into shares of common
stock.

The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring or seeking to acquire, a significant portion of the outstanding
common stock.

Certain Provisions of Our Amended and Restated Certificate of Incorporation and
By-laws

A number of provisions of our amended and restated certificate of
incorporation and amended and restated by-laws concern matters of corporate
governance and the rights of shareholders. Certain of these provisions, as well
as the ability of our board of directors to issue shares of preferred stock and
to set the voting rights, preferences and other terms thereof, may be deemed to
have an anti-takeover effect and may discourage takeover attempts not first
approved by our board of directors, including takeovers which

shareholders may deem to be in their best interests. To the extent takeover
attempts are discouraged, temporary fluctuations in the market price of the
common stock, which may result from actual or rumored takeover attempts, may
be inhibited. These provisions, together with the classified board of
directors and the ability of our board of directors to issue preferred stock
without further shareholder action, also could delay or frustrate the removal
of incumbent directors or the assumption of control by shareholders, even if
such removal or assumption would be beneficial to our shareholders. These
provisions also could discourage or make more difficult a merger, tender offer
or proxy contest, even if favorable to the interests of shareholders, and
could depress the market price of the common stock. Our board of directors
believes that these provisions are appropriate to protect our interests and
all of our shareholders.

Meetings of Shareholders. Our amended and restated by-laws provide that a
special meeting of shareholders may be called only by a majority of our board
of directors unless otherwise required by law. Our amended and restated by-
laws provide that only those matters set forth in the notice of the special
meeting may be considered or acted upon at that special meeting unless
otherwise provided by law. In addition, our amended and restated by-laws set
forth certain advance notice and informational requirements and time
limitations on any director nomination or any new proposal which a shareholder
wishes to make at an annual meeting of shareholders.

No Shareholder Action by Written Consent. Our amended and restated
certificate of incorporation provides that any action required or permitted to
be taken by our shareholders at an annual or special meeting of shareholders
must be effected at a duly called meeting and may not be taken or effected by
a written consent of shareholders in lieu thereof.

Indemnification and Limitation of Liability. Our amended and restated by-
laws provide that our directors and officers shall be, and in the discretion
of our board of directors non-officer employees may be, indemnified by us to
the fullest extent authorized by Delaware law, as it now exists or may in the
future be amended, against all expenses and liabilities reasonably incurred in
connection with service for or on behalf of us. Our amended and restated by-
laws also provide that the right of directors and officers to indemnification
shall be a contract right and shall not be exclusive of any other right now
possessed or hereafter acquired under any by-law, agreement, vote of
shareholders or otherwise. Our amended and restated certificate of
incorporation contains a provision permitted by Delaware law that generally
eliminates the personal liability of directors for monetary damages for
breaches of their fiduciary duty, including breaches involving negligence or
gross negligence in business combinations, unless the director has breached
his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock repurchase in violation of the Delaware General Corporation
Law or obtained an improper personal benefit. This provision does not alter a
director's liability under the federal securities laws and does not affect the
availability of equitable remedies, such as an injunction or rescission, for
breach of fiduciary duty. We also have entered into indemnification agreements
with each of our directors and executive officers reflecting the foregoing and
requiring the advancement of expenses in proceedings involving the directors
and executive officers in most circumstances.

Amendment of our Certificate of Incorporation. Our amended and restated
certificate of incorporation provides that an amendment thereof must first be
approved by a majority of our board of directors and (with certain exceptions)
thereafter approved by a majority (or two-thirds in the case of any proposed
amendment to the provisions of our amended and restated certificate of
incorporation relating to shareholder action, the composition of our board of
directors, limitation of liability or amendments of our amended and restated
certificate of incorporation) of the total votes eligible to be cast by
holders of voting stock with respect to such amendment.

Amendment of By-laws. Our amended and restated certificate of incorporation
provides that our amended and restated by-laws may be amended or repealed by
our board of directors or by our shareholders. Such action by our board of
directors requires the affirmative vote of a majority of our directors then in
office. Such action by our shareholders requires the affirmative vote of at
least two thirds of the total votes eligible to be cast by holders of voting
stock with respect to such amendment or repeal at an annual meeting of our
shareholders or a special meeting called for such purpose unless our board of
directors recommends that our shareholders approve such amendment or repeal at
such meeting, in which case such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast by
holders of voting stock with respect to such amendment or repeal.

Statutory Business Combination Provision

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations
with a person or affiliate, or associate of such person, who is an "interested
shareholder" for a period of three years from the date that such person became
an interested shareholder unless:

(i) the transaction resulting in a person becoming an interested shareholder,
or the business combination, is approved by the board of directors of the
corporation before the person becomes an interested shareholder;

(ii) the interested shareholder acquired 85% or more of the outstanding voting
stock of the corporation in the same transaction that makes it an
interested shareholder (excluding shares owned by persons who are both
officers and directors of the corporation, and shares held by certain
employee stock ownership plans); or

(iii) on or after the date the person becomes an interested shareholder, the
business combination is approved by the corporation's board of directors
and by the holders of at least two-thirds of the corporation's
outstanding voting stock at an annual or special meeting, excluding
shares owned by the interested shareholder.

Under Section 203, an "interested shareholder" is defined (with certain
limited exceptions) as any person that is (i) the owner of 15% or more of the
outstanding voting stock of the corporation or (ii) an affiliate or associate
of the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the three-year period immediately
prior to the date on which it is sought to be determined whether such person is
an interested shareholder.

A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action
of its shareholders to exempt itself from coverage, provided that such by-law
or charter amendment shall not become effective until 12 months after the date
it is adopted. Neither our amended and restated certificate of incorporation
nor our amended and restated by-laws contains any such exclusion; however, our
board of directors voted to exempt from the coverage of Section 203 persons who
owned 15% or more of our outstanding common stock immediately after the spin-
off. These "exempted persons" are those persons identified as "grandfathered
persons" under our shareholder rights plan described below.

Shareholder Rights Plan

We have adopted a shareholder rights plan to help ensure that our
shareholders receive fair and equal treatment in the event of any proposed
acquisition of us. The shareholder rights plan may delay, defer or

prevent a change of control and, therefore, could adversely affect our
shareholders' ability to realize a premium over the then-prevailing market
price for our common stock in connection with such a transaction.

In connection with the adoption of the shareholder rights plan, our board of
directors declared a dividend distribution of one preferred stock purchase
right for each outstanding share of common stock to shareholders of record (the
"shareholder rights plan record date") as of October 19, 1999. Each right
entitles its registered holder to purchase from us a unit consisting of one ten
thousandth of a share of our series A junior participating cumulative preferred
stock, par value $0.01 per share, at a cash exercise price per unit of $48.00,
subject to adjustment.

The rights initially are not exercisable and are attached to and trade with
all shares of common stock outstanding as of, and issued subsequent to, the
shareholder rights plan record date. The rights will separate from the common
stock and will become exercisable upon the earlier of the following (a
"distribution event"):

. the close of business on the tenth calendar day following the first public
announcement that a person or group of affiliated or associated persons,
referred to as an "acquiring person," has acquired beneficial ownership of
15% or more of the outstanding shares of common stock; or

. the close of business on the tenth business day following the commencement
of a tender offer or exchange offer that could result upon its completion in
a person or group becoming the beneficial owner of 15% or more of the
outstanding shares of common stock; or

. the declaration by our board of directors that a person or group that has
become the beneficial owner of 10% or more of the outstanding shares of
common stock is an "adverse person."

Some of our shareholders are "grandfathered persons" under the shareholder
rights plan. They are Timothy P. Horne, George B. Horne, Daniel W. Horne,
Deborah Horne, Tara Horne, the George B. Horne Trust, the Daniel W. Horne
Trust, the Deborah Horne Trust, the Tara Horne 1995 Trust, the Tiffany Horne
1984 Trust, the Tiffany Horne 1995 Trust, the George B. Horne Voting Trust, any
trustees of that trust, and any other trust or entity of which Timothy P. Horne
has the exclusive right to vote the shares held in such trust or by such
entity. These individuals, trusts and entities are referred to in the
shareholder rights plan as "family shareholders" and the family shareholders
are permitted to own, collectively, 35% of the common stock. The rights plan
also grandfathers any other person who or which, together with all their
respective affiliates and associates, beneficially owned 15% or more of the
outstanding shares of common stock as of the date on which we announced the
adoption of the shareholder rights plan. In the case of a grandfathered person,
the rights will separate from the common stock and will become exercisable upon
the earlier of the first two events described above, provided that for such
purposes the applicable percentage for such grandfathered person is not 15% but
is instead 35% in the case of the family shareholders and in the case of any
other grandfathered person is the percentage ownership of the outstanding
common stock owned by such person as of the date on which we announced the
adoption of the shareholder rights plan, plus 1%. In addition, a grandfathered
person would not be an acquiring person unless it acquired additional shares of
our common stock after the date on which we announced the adoption of our
shareholder rights plan in excess of the applicable grandfathered percentage.

If a person becomes an acquiring person, the shareholder rights plan
provides that as of the close of business ten calendar days after the first
public announcement of that event, each holder of a right will be entitled to
receive, upon payment of the exercise price, shares of preferred stock of our
company

having a market value of twice the exercise price of the right. If we are
acquired in a merger or similar transaction, the shareholder rights plan
provides that as of the close of business ten calendar days following the first
public announcement of that event, each holder of a right will be entitled to
receive, upon payment of the exercise price, shares of common stock of the
acquiring company having a market value of twice the exercise price of the
right.

In the event that our board of directors approves a transaction that it has
determined is in the best interest of our shareholders but that otherwise would
cause a distribution event under the shareholder rights plan, the board may, in
connection with such approval, redeem the rights for a nominal price. Once the
rights are redeemed, the transaction can proceed without causing a distribution
event. The shareholder rights plan could make it more difficult for a third
party to acquire, and could discourage a third party from acquiring or seeking
to acquire, us or a large block of our common stock.

No Preemptive Rights

No holder of any class of our stock has any preemptive right to subscribe
for or purchase any kind or class of our securities.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Equiserve, L.P.

SHARES ELIGIBLE FOR FUTURE SALE

Following this offering, there will be 14,612,891 shares of our common stock
outstanding. All of the shares, including the 1,350,000 shares which are being
sold in this offering, generally will be freely transferable without
restriction or further registration under the Securities Act, except that any
shares held by our "affiliates" as is defined in Rule 144 under the Securities
Act may be sold only in compliance with the limitations described below.

Sales of Restricted Securities

Our directors and executive officers, who beneficially own 4,409,905 shares
of common stock as of February 28, 2001, have agreed that, for a period of 90
days after the date of this prospectus, they will not, directly or indirectly,
offer for sale, sell, contract to sell, transfer or otherwise dispose of any
shares of our common stock, or any securities convertible, exchangeable or
exercisable into shares of our common stock, owned directly by such persons or
with respect to which they have the power of disposition, without the prior
written consent of Robert W. Baird & Co. Incorporated, acting on behalf of the
underwriters.

In general, under Rule 144, a shareholder who has beneficially owned his or
her restricted securities for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1%
of the then outstanding shares of our common stock (approximately
146,129 shares immediately after this offering) or the average weekly trading
volume in our common stock during the four calendar weeks preceding the date on
which notice of such sale was filed under Rule 144, provided certain
requirements concerning availability of public information, manner of sale and
notice of sale are satisfied. In addition, a shareholder that is not one of our
affiliates at any time during the three months preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years is
entitled to sell the shares immediately under Rule 144(k) without compliance
with the above described requirements under Rule 144.

Stock Options

On November 18, 1999, we filed a registration statement on Form S-8 with
respect to the aggregate of 2,000,000 shares of common stock issuable under our
1999 Stock Plan and an additional 632,738 shares of common stock issuable
pursuant to the replacement options. Shares issued upon the exercise of stock
options after the effective date of the Form S-8 registration statement will be
eligible for resale in the public market without restriction, except that
affiliates must comply with Rule 144.

UNDERWRITING

Subject to the terms and conditions set forth in the underwriting agreement,
we have agreed to sell to the underwriters named below, the indicated number of
shares of our common stock:

Number
Underwriters of Shares
------------ -----------

Robert W. Baird & Co. Incorporated..................................
ING Barings LLC.....................................................
-----------
Total............................................................. 1,350,000
===========

We have the following relationships with ING Barings LLC (or its affiliate):

. ING Barings LLC served as an advisor for the spin-off;

. ING Barings LLC was the book and lead manager for our $110.0 million credit
facility;

. ING (U.S.) Capital LLC is the administrative agent for our $110.0 million
credit facility; and

. ING Barings LLC was the private placement agent in connection with our $75.0
million 8.23% notes due 2006.

The underwriting agreement provides that the underwriters are obligated to
purchase all of the shares of our common stock offered in this offering if any
are purchased, other than those shares covered by the over-allotment option we
describe below. The underwriting agreement also provides that if an underwriter
defaults, the purchase commitments of non-defaulting underwriters may be
increased or this offering of our common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase up to
202,500 shares at the public offering price less the underwriting discounts and
commissions. This option may be exercised only to cover over-allotments of our
common stock.

The underwriters propose to offer our common stock initially at the public
offering price on the cover page of this prospectus at that price less a
selling concession of $ per share. The underwriters may allow a discount of
not more than $ per share on sales to other broker/dealers. After the
offering, the public offering price and selling concession and discount to
dealers may be changed by the representatives. As used in this section:

. Underwriters are securities broker/dealers that are parties to the
underwriting agreement and will have a contractual commitment to purchase
shares of our common stock from us, and the representatives are the two
firms acting on behalf of the underwriters.

. Selling group members are securities broker/dealers to whom the underwriters
may sell shares of common stock at the public offering price less the
selling concession above, but who do not have a contractual commitment to
purchase shares from us.

. Broker/dealers are firms registered under applicable securities laws to sell
securities to the public.

. The syndicate consists of the underwriters and the selling group members.

The following table summarizes the compensation and estimated expenses that
we will pay. The compensation we will pay to the underwriters will consist
solely of the underwriting discount, which is equal to the public offering
price per share of common stock less the amount the underwriters pay to us

per share of common stock. The underwriters have not received and will not
receive from us any other item of compensation or expense in connection with
this offering considered by the National Association of Securities Dealers,
Inc. to be underwriting compensation under its rule of fair practice.

Per Share Total
----------------------------- -----------------------------
Without With Without With
over-allotment over-allotment over-allotment over-allotment
-------------- -------------- -------------- --------------

Underwriting discounts
and commissions
paid by us in cash..... $ $ $ $
Estimated expenses
payable by us.......... $ $ $ $

We have agreed to pay all of the expenses in connection with this offering.
The principal components of the offering expenses payable by us will include
the fees and expenses of our accountants and attorneys, the fees of our
registrar and transfer agent, the cost of printing this prospectus, NYSE
listing fees and filing fees paid to the Securities and Exchange Commission and
the National Association of Securities Dealers, Inc.

Our directors and executive officers have agreed that, for 90 days after the
date of this prospectus, they will not, directly or indirectly, offer for sale,
sell, contract to sell, transfer or otherwise dispose of any shares of our
common stock, or any securities convertible, exchangeable or exercisable into
any shares of our common stock, without the prior written consent of Robert W.
Baird & Co. Incorporated on behalf of the underwriters. We have agreed that,
for 180 days following the date of this prospectus, we will not, without the
prior written consent of Robert W. Baird & Co. Incorporated on behalf of the
underwriters, directly or indirectly, offer for sale, sell, contract to sell,
transfer or otherwise dispose of any shares of our common stock, or any
securities convertible, exchangeable or exercisable into any shares of our
common stock, except: (i) for grants of employee stock options or other rights
to purchase shares of common stock under our stock incentive plans in effect on
the date hereof, (ii) issuances of common stock as a result of any options or
other rights to purchase shares of common stock outstanding on the date hereof,
and (iii) issuances of shares of our common stock (or options or other rights
to purchase shares of common stock) in connection with any acquisitions we may
complete during such 180 day period.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or to contribute to payments which the underwriters may be
required to make in that respect.

The shares of our common stock are traded on the NYSE under the symbol
"CIR."

The underwriters may engage in over-allotment, stabilizing and syndicate
covering transactions. Over-allotment transactions involve syndicate sales in
excess of the size of this offering, which creates a syndicate short position.
Stabilizing transactions involve bids to purchase shares of our common stock
for the purpose of pegging, fixing, or maintaining the price of the common
stock. Syndicate covering transactions involve purchases of our common stock in
the open market in order to cover syndicate short positions. The
representatives may, at their discretion, reclaim a selling concession from any
syndicate member that appears to have permitted its customers to purchase
shares in the public offering and then promptly resell all or a portion of such
shares to such syndicate member. However, the underwriters do not have any
agreements with any potential purchasers of shares of common stock in this
offering that would restrict their transfer of such shares following this
offering.

Such stabilizing transactions and syndicate covering transactions may cause
the price of our common stock to be higher than it would otherwise be in the
absence of such transactions. These transactions may be effected on the NYSE or
otherwise and, if commenced, may be discontinued at any time.

LEGAL MATTERS

The validity of the shares of common stock we are offering will be passed
upon for us by Goodwin Procter LLP, Boston, Massachusetts. David F. Dietz, a
director of our company, is the sole owner of David F. Dietz, P.C., a partner
of Goodwin Procter LLP. The underwriters have been represented by Reinhart,
Boerner, Van Deuren, Norris & Rieselbach, s.c.

EXPERTS

The financial statements of CIRCOR International, Inc. as of December 31,
2000 and 1999, and June 30, 1999, for the year ended December 31, 2000, for the
six months ended December 31, 1999 and for the fiscal years ended June 30, 1999
and 1998 have been included herein and in the registration statement we have
filed with the Securities and Exchange Commission in reliance upon the report
of KPMG LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT CIRCOR

We have filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act with respect to the common stock
we propose to sell in this offering. This prospectus, which constitutes part of
the registration statement, does not contain all of the information set forth
in the registration statement. For further information about us and the common
stock we propose to sell in this offering, we refer you to the registration
statement and the exhibits and schedules filed as a part of the registration
statement. Statements contained in this prospectus as to the contents of any
contract or other document filed as an exhibit to the registration statement
are not necessarily complete. If a contract or document has been filed as an
exhibit to the registration statement, we refer you to the copy of the contract
or document that we have filed. You may inspect the registration statement,
including exhibits, without charge at the principal office of the Securities
and Exchange Commission in Washington, D.C. You may inspect and copy the same
at the public reference facilities maintained by the Securities and Exchange
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington,
D.C. 20549, and at the Commission's regional office located at 7 World Trade
Center, Suite 1300, New York, New York 10048. You can also obtain copies of
this material at prescribed rates by mail from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. You may call
the Securities and Exchange Commission at 1800-SEC-0330 for further information
about the public reference rooms. In addition, the Securities and Exchange
Commission maintains a website at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Securities and Exchange Commission.

We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and we are required to file reports, proxy statements
and other information with the Securities and Exchange Commission. Such
reports, proxy statements and other information can be inspected and copied at
the locations described above. Our Central Index Key number, or CIK number,
assigned to us by the Securities and Exchange Commission is 000-1091883. Copies
of these materials can be obtained by mail from the Public Reference Section of
the Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. Our common stock
is listed on the NYSE under the symbol "CIR."

The Securities and Exchange Commission allows us to incorporate by reference
the information that we file with them. Incorporation by reference means that
we can disclose important information to you by referring you to other
documents that are legally considered to be part of this prospectus, and later
information that we file with the Securities and Exchange Commission will
automatically update and supersede the information in this prospectus and the
documents listed below. We incorporate by reference the specific documents
listed below and any future filings we make with the Securities and Exchange
Commission under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 until all of the shares of common stock offered under this
prospectus are sold:

. our Annual Report on Form 10-K for the fiscal year ended December 31, 2000;
and

. the description of our common stock contained in our Registration Statement
on Form 8-A filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, and all amendments and reports updating
the description.

You may request a copy of these filings, and any exhibits we have
specifically incorporated by reference as an exhibit in this prospectus, at no
cost, by writing or telephoning us at the following address: CIRCOR
International, Inc., c/o Circor, Inc., 35 Corporate Drive, Suite 290,
Burlington, Massachusetts 01803, Attention: Corporate Secretary. Telephone
requests may be directed to the Corporate Secretary at (781) 270-1200.

CIRCOR INTERNATIONAL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

Independent Auditors' Report.............................................. F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999 and June 30,
1999...................................................................... F-3

Consolidated Statements of Operations for the year ended December 31,
2000, for the six months ended December 31, 1999 and 1998 (Unaudited) and
for the fiscal years ended June 30, 1999 and 1998......................... F-4

Consolidated Statements of Cash Flows for the year ended December 31,
2000, for the six months ended December 31, 1999 and 1998 (Unaudited) and
for the fiscal years ended June 30, 1999 and 1998......................... F-5

Consolidated Statements of Shareholders' Equity for year ended December
31, 2000, for the six months ended December 31, 1999 and for the fiscal
years ended June 30, 1998 and 1999........................................ F-6

Notes to the Consolidated Financial Statements............................ F-7

F-1

Independent Auditors' Report

To the Board of Directors and Shareholders
CIRCOR International, Inc.

We have audited the accompanying consolidated balance sheets of CIRCOR
International, Inc. as of December 31, 2000 and 1999, and June 30, 1999 and the
related consolidated statements of operations, cash flows and shareholders'
equity for the year ended December 31, 2000, the six months ended December 31,
1999, and the fiscal years ended June 30, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CIRCOR
International, Inc. as of December 31, 2000 and 1999 and June 30, 1999, and the
results of its operations and its cash flows for the year ended December 31,
2000, the six months ended December 31, 1999, and the fiscal years ended June
30, 1999 and 1998 in conformity with accounting principles generally accepted
in the United States of America.

KPMG LLP

Boston, Massachusetts
February 12, 2001

F-2

CIRCOR INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

December 31,
------------------ June 30,
2000 1999 1999
-------- -------- --------

ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................... $ 8,192 $ 5,153 $ 6,714
Trade accounts receivable, less allowance for
doubtful accounts of $2,831, $2,683 and $2,949,
respectively................................... 58,457 60,916 49,857
Inventories..................................... 111,258 107,332 108,910
Prepaid expenses and other current assets....... 6,192 7,006 6,817
Deferred income taxes........................... 6,141 9,794 8,592
-------- -------- --------
Total Current Assets........................... 190,240 190,201 180,890

PROPERTY, PLANT AND EQUIPMENT, NET............... 64,794 75,154 76,682
OTHER ASSETS:
Goodwill, net of accumulated amortization of
$14,303, $11,775 and $10,353, respectively..... 87,741 96,488 96,900
Other assets.................................... 4,287 5,242 4,571
-------- -------- --------
TOTAL ASSETS..................................... $347,062 $367,085 $359,043
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................................ $ 30,767 $ 21,172 $ 25,543
Accrued expenses and other current liabilities.. 14,096 15,167 16,598
Accrued compensation and benefits............... 4,757 3,902 5,705
Income taxes payable............................ - - 3,275
Current portion of long-term debt............... 940 2,260 4,178
-------- -------- --------
Total Current Liabilities...................... 50,560 42,501 55,299

LONG-TERM DEBT, NET OF CURRENT PORTION........... 90,593 122,867 22,404
DEFERRED INCOME TAXES............................ 2,873 5,162 7,439
OTHER NONCURRENT LIABILITIES..................... 7,490 9,022 10,525
MINORITY INTEREST................................ 4,365 4,124 4,120
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; 13,262,891 and 13,236,877 issued
and outstanding at December 31, 2000
and 1999, respectively......................... 133 132 -
Additional paid-in capital...................... 181,184 180,887 -
Retained earnings............................... 12,451 3,393 -
Accumulated other comprehensive loss............ (2,587) (1,003) (691)
Investments by and advances from Watts
Industries, Inc. .............................. - - 259,947
-------- -------- --------
Total Shareholders' Equity..................... 191,181 183,409 259,256
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....... $347,062 $367,085 $359,043
======== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-3

CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Six Months Ended Fiscal Years
Year Ended December 31, Ended June 30,
December 31, --------------------- ------------------
2000 1999 1998 1999 1998
------------ -------- ----------- -------- --------
(unaudited)

Net revenues............ $316,863 $157,265 $166,797 $324,258 $291,580
Cost of revenues........ 221,072 108,613 114,995 220,612 198,152
-------- -------- -------- -------- --------
GROSS PROFIT.......... 95,791 48,652 51,802 103,646 93,428

Selling, general and
administrative
expenses............... 66,246 34,084 36,221 74,096 55,237
Special charges......... 1,909 722 - - -
-------- -------- -------- -------- --------
OPERATING INCOME...... 27,636 13,846 15,581 29,550 38,191
-------- -------- -------- -------- --------
Other (income) expense:
Interest income........ (451) (90) (192) (333) (427)
Interest expense....... 9,727 4,632 4,624 9,141 3,898
Other, net............. 760 460 (514) (229) (306)
-------- -------- -------- -------- --------
10,036 5,002 3,918 8,579 3,165
-------- -------- -------- -------- --------
INCOME BEFORE INCOME
TAXES.................. 17,600 8,844 11,663 20,971 35,026
Provision for income
taxes.................. 7,040 3,964 4,823 8,461 12,601
-------- -------- -------- -------- --------
NET INCOME............ $ 10,560 $ 4,880 $ 6,840 $ 12,510 $ 22,425
======== ======== ======== ======== ========
Earnings per common
share:
Basic.................. $0.80 * * * *
Diluted................ $0.78 * * * *
Weighted average common
shares outstanding:
Basic.................. 13,238 * * * *
Diluted................ 13,480 * * * *

* See notes 2 and 15 of the consolidated financial statements for an
explanation of pro forma earnings per share.

The accompanying notes are an integral part of these consolidated financial
statements

F-4

CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Six Months Fiscal Years
Ended Ended
Year Ended December 31, June 30,
December 31, --------------------- ------------------
2000 1999 1998 1999 1998
------------ -------- ----------- -------- --------
(unaudited)

OPERATING ACTIVITIES
Net income............................................. $ 10,560 $ 4,880 $ 6,840 $ 12,510 $ 22,425
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.......................................... 10,141 5,468 4,517 9,440 6,312
Amortization.......................................... 2,864 1,608 1,418 3,322 1,532
Deferred income taxes (benefit)....................... 1,326 (3,503) 642 4,193 173
(Gain) loss on disposal of property, plant
and equipment........................................ (312) (285) (78) (54) 19
Changes in operating assets and liabilities, net of
effects from business acquisitions:
Trade accounts receivable............................ 1,681 (11,274) 7,681 13,665 (6,254)
Inventories.......................................... (4,147) 1,340 2,277 209 (9,783)
Prepaid expenses and other assets.................... 1,357 (570) (1,483) (3,102) 1,491
Accounts payable, accrued expenses and other
liabilities......................................... 8,230 (12,493) (16,252) (19,655) 5,160
-------- -------- ------- -------- --------
Net cash provided by (used in) operating activities.... 31,700 (14,829) 5,562 20,528 21,075
-------- -------- ------- -------- --------
INVESTING ACTIVITIES
Additions to property, plant and equipment............. (3,743) (4,557) (2,072) (9,499) (6,115)
Disposal of property, plant and equipment.............. 4,179 298 169 1,208 146
Increase in other assets............................... (79) (912) (335) (237) (725)
Business acquisitions, net of cash acquired............ (4,030) - (63,875) (74,176) (22,503)
Purchase price adjustment on previous acquisition...... 9,500 - - - -
-------- -------- ------- -------- --------
Net cash provided by (used in) investing activities.... 5,827 (5,171) (66,113) (82,704) (29,197)
-------- -------- ------- -------- --------
FINANCING ACTIVITIES
Proceeds from long-term borrowings..................... 36,172 188,643 1,738 4,331 2,957
Payments of long-term debt............................. (69,590) (90,157) (6,962) (20,646) (428)
Dividends paid......................................... (1,502) - - - -
Proceeds from the exercise of stock options............ 179 - - - -
Conversion of restricted stock units................... 58 - - - -
Net intercompany activity with Watts Industries, Inc... - 15,950 63,016 79,260 9,104
Partial payment of investments by and from Watts
Industries, Inc....................................... - (96,000) - - -
-------- -------- ------- -------- --------
Net cash provided by (used in) financing activities.... (34,683) 18,436 57,792 62,945 11,633
-------- -------- ------- -------- --------
Effect of exchange rate changes on cash and cash
equivalents........................................... 195 3 608 (296) 143
-------- -------- ------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....... 3,039 (1,561) (2,151) 473 3,654
Cash and cash equivalents at beginning of year......... 5,153 6,714 6,241 6,241 2,587
-------- -------- ------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR............... $ 8,192 $ 5,153 $ 4,090 $ 6,714 $ 6,241
======== ======== ======= ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)

Investments
Common Stock Additional by and Other Total
------------- Paid-in Retained Advances Comprehensive Shareholders'
Shares Amount Capital Earnings from Watts Income (Loss) Equity
------ ------ ---------- -------- ----------- ------------- -------------

BALANCE AT JUNE 30,
1997................... - $ - $ - $ - $136,648 $ 629 $137,277
------ ---- -------- ------- -------- ------- --------

Net income.............. 22,425 22,425
Cumulative translation
adjustment............. (150) (150)
--------
Comprehensive income... 22,275
Net intercompany
activity............... 9,104 9,104
------ ---- -------- ------- -------- ------- --------
BALANCE AT JUNE 30,
1998................... - - - - 168,177 479 168,656
------ ---- -------- ------- -------- ------- --------

Net income.............. 12,510 12,510
Cumulative translation
adjustment............. (1,170) (1,170)
--------
Comprehensive income... 11,340
Net intercompany
activity............... 79,260 79,260
------ ---- -------- ------- -------- ------- --------
BALANCE AT JUNE 30,
1999................... - - - - 259,947 (691) 259,256
------ ---- -------- ------- -------- ------- --------
Net income prior to
spin-off............... 1,487 1,487
Net income after spin-
off.................... 3,393 3,393
Cumulative translation
adjustment............. (312) (312)
--------
Comprehensive income... 4,568
Partial repayment of
advances............... (96,000) (96,000)
Issuance of shares of
common stock in
connection with the
spin-off............... 13,237 132 (132) -
Net intercompany
activity............... 15,551 15,551
Contribution to capital
of remaining unpaid
advances............... 180,853 (180,853) -
Net change in restricted
stock units............ 34 34
------ ---- -------- ------- -------- ------- --------
BALANCE AT DECEMBER 31,
1999................... 13,237 132 180,887 3,393 - (1,003) 183,409
------ ---- -------- ------- -------- ------- --------

Net income.............. 10,560 10,560
Cumulative translation
adjustment............. (1,584) (1,584)
--------
Comprehensive income... 8,976
Common stock dividends
declared............... (1,502) (1,502)
Stock options
exercised.............. 20 1 178 179
Conversion of restricted
stock units............ 6 - 58 58
Net change in restricted
stock units............ 61 61
------ ---- -------- ------- -------- ------- --------
BALANCE AT DECEMBER 31,
2000................... 13,263 $133 $181,184 $12,451 $ - $(2,587) $191,181
====== ==== ======== ======= ======== ======= ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-6

CIRCOR INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Description of Business

CIRCOR International, Inc. ("CIRCOR" or the "Company") designs, manufactures
and distributes valves and related products and services for use in a wide
range of applications to optimize the efficiency or ensure the safety of fluid-
control systems. The valves and related fluid-control products we manufacture
are used in processing industries; oil and gas production, pipeline
construction and maintenance; aerospace, military and commercial aircraft; and
maritime manufacturing and maintenance. We have used both internal product
development and strategic acquisitions to assemble a complete array of fluid-
control products and technologies that enables us to address our customers'
unique fluid-control application needs. We have two major product groups:
instrumentation and fluid regulation products and petrochemical products.

The instrumentation and fluid regulation products group designs,
manufactures and supplies valves and controls for diverse end-uses including
hydraulic, pneumatic, cryogenic and steam applications. Selected products
include precision valves, compression tube and pipe fittings, control valves
and regulators. The instrumentation and fluid regulation products group
includes the following subsidiaries and major divisions: Hoke; GO Regulator;
Circle Seal Controls; Leslie Controls; Spence Engineering; Nicholson Steam
Trap; Aerodyne Controls; Atkomatic Valve; CPC; Cryolab; and Rockwood Swendeman.

The petrochemical products group designs, manufactures and supplies flanged-
end and threaded floating and trunnion ball valves, needle valves, check
valves, butterfly valves and large forged steel ball valves, gate valves and
strainers for use in oil, gas and chemical processing and industrial
applications. The petrochemical products group includes the following
subsidiaries and major divisions: KF Industries; Contromatics Specialty
Products; Eagle Check Valve; Telford Valve and Specialities; Pibiviesse; Suzhou
KF Valve; and SSI Equipment.

On October 18, 1999 (the "spin-off date"), we became a publicly-owned
company as a result of a tax-free distribution of our common stock (the
"distribution" or "spin-off") to the shareholders of our former parent, Watts
Industries, Inc. ("Watts"). A description of the spin-off and certain
transactions with Watts is included in Note 3.

(2) Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements present our financial
condition, results of operations and cash flows as if we had been an
independent, publicly-owned company for all periods presented. Certain
allocations of previously unallocated Watts interest and general and
administrative expenses, as well as computations of separate tax provisions,
have been made to facilitate such presentation (see Note 3). The consolidated
financial statements prior to October 18, 1999 represent the former combined
operations of Watts' industrial, oil and gas businesses. All significant
intercompany balances and transactions have been eliminated in consolidation.

Change in Fiscal Year

Effective July 1, 1999, we changed our fiscal year-end from June 30th to
December 31st. Accordingly, the audited financial statements include the
results for the year ended December 31, 2000, the six months ended December 31,
1999 ("Transition Period"), and the prior two fiscal years ended June 30, 1999
("fiscal 1999"), and June 30, 1998 ("fiscal 1998").

F-7

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenue Recognition

Revenue is recognized upon shipment, net of a provision for estimated
returns and allowances based on historical experience.

Shipping and Handling Costs

We have adopted the Financial Accounting Standards Board Emerging Issues
Task Force Abstract No. 00-10 Accounting for Shipping and Handling Fees and
Costs, effective October 2000. We record amounts invoiced to customers for
shipping and handling charges as components of revenues and the associated
costs are recorded as cost of sales. Accordingly, financial information for all
periods presented has been restated to conform with this pronouncement.

Research and Development

Research and development expenditures are expensed when incurred and are
included in operating income in the Consolidated Statements of Operations.

Cash Equivalents

Cash equivalents consist of investments with maturities of three months or
less at the date of original issuance.

Inventories

Inventories are stated at the lower of cost (principally first-in, first-out
method) or market.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Plant and equipment
under capital leases are stated at the present value of minimum lease payments.

Depreciation is provided on a straight-line basis over the estimated useful
lives of the assets, which range from 10 to 40 years for buildings and
improvements and 3 to 15 years for machinery and equipment. Plant and equipment
held under capital leases and leasehold improvements are amortized on a
straight-line basis over the shorter of the lease term or estimated useful life
of the asset.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets of
businesses acquired. This balance is amortized over 40 years using the
straight-line method. We assess the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of goodwill impairment, if any, is measured
based on projected discounted future operating cash flows using a discount rate
reflecting the average cost of funds.

Long-Lived Assets

Impairment losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. In
such instances, the carrying values of long-lived assets are reduced to their
estimated fair value, as determined using an appraisal or a discounted cash
flow approach, as appropriate.

F-8

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Foreign Currency Translation

Balance sheet accounts of foreign subsidiaries are translated into United
States dollars at fiscal year-end exchange rates. Operating accounts are
translated at weighted average exchange rates for each year. Net translation
gains or losses are adjusted directly to a separate component of shareholders'
equity. The Company does not provide for U.S. income taxes on foreign currency
translation adjustments since it does not provide for such taxes on
undistributed earnings of foreign subsidiaries.

Earnings Per Common Share

Basic earnings per common share is calculated by dividing net income by the
number of weighted average common shares outstanding. Diluted earnings per
common share assumes the conversion of all dilutive securities (see note 10).

Earnings per common share and number of shares used to compute net earnings
per common share, basic and assuming full dilution, are reconciled below (in
thousands, except per share data):

Year Ended December
31, 2000
---------------------
Per
Net Share
Income Shares Amount
------- ------ ------

Basic EPS................................................ $10,560 13,238 $0.80
Dilutive securities, principally common stock options.... - 242 -
------- ------ -----
Diluted EPS.............................................. $10,560 13,480 $0.78
======= ====== =====

Historical earnings per share has been omitted for certain fiscal periods
presented in the accompanying consolidated statement of operations since we
were not an independent publicly-owned company until October 18, 1999. The
computation of pro forma net earnings per share is included in Note 15.

Stock-Based Compensation

As allowed under Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, we account for our stock-based
employee compensation plans in accordance with the provisions of APB Opinion
No. 25, Accounting for Stock Issued to Employees.

Derivative Financial Instruments

We use foreign currency forward exchange contracts to manage currency
exchange exposures in certain foreign currency denominated transactions. Gains
and losses on contracts designated as hedges are

F-9

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

recognized when the contracts expire, which is generally in the same time
period as the underlying foreign currency denominated transactions.

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Reclassification of Prior Years

Certain prior-year financial statement amounts have been reclassified to
conform to the December 31, 2000 presentation.

New Accounting Standards

In 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities." We will adopt
SFAS 133, as amended by SFAS No. 137 and SFAS No. 138, on January 1, 2001. The
adoption of this statement will not have a significant impact on our financial
condition, results of operations or cash flows.

(3) Spin-off from and Transactions with Former Affiliates

Spin-off and Relationships after the Spin-off

At the spin-off date of October 18, 1999, all of our common shares were
distributed on a pro-rata basis to the record date holders of Watts common
shares at a ratio of one share for each two outstanding Watts shares. After the
spin-off, Watts had no ownership in us. Immediately after the spin-off,
however, certain of our shares were held by the Watts pension trust on behalf
of Watts' employees. We have entered into separation and other related
agreements (the "Distribution Agreement"), outlined below, governing the spin-
off transaction and our subsequent relationship with Watts. Such agreements
provide certain indemnities to the parties, and provide for the allocation of
tax and other assets, liabilities and obligations arising from periods prior to
the spin-off.

The Distribution Agreement provided for, among other things, our assumption
of all liabilities relating to industrial, oil and gas businesses of Watts, and
the indemnification of Watts with respect to such liabilities. The net
investment by and advances from Watts were determined to be approximately
$277.0 million at the spin-off date. The Distribution Agreement provided that
we pay, prior to the spin-off, $96.0 million to Watts as repayment of certain
amounts due to Watts. Watts contributed to our capital its remaining unpaid
advances of approximately $181.0 million, as provided by the Distribution
Agreement.

This determination has been completed. The accompanying consolidated
financial statements reflect our estimates, based on available information, of
the net assets that were transferred.

F-10

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In connection with the spin-off, Watts received a ruling from the Internal
Revenue Service (the "IRS") to the effect, among other things, that the spin-
off would qualify as a tax-free distribution under Section 355 of the Internal
Revenue Code of 1986, as amended. Such a ruling, while generally binding upon
the IRS, is subject to certain factual representations and assumptions provided
by Watts. We have agreed to certain restrictions on our future actions to
provide further assurances that the spin-off will qualify as a tax-free
distribution. Restrictions include, among other things: limitations on the
liquidation, merger or consolidation with another company. Additionally, we
committed to engage in a public offering of a significant amount of our common
stock within one year of the distribution date. In November 2000 we received a
supplemental ruling by the IRS providing us with an extension until April 18,
2001 to complete a follow-on equity offering. If the distribution was to be
considered taxable for United States federal income tax purposes, Watts and
CIRCOR would be joint and severally liable for the resulting Watts' Federal
taxes, which could be substantial.

Under the Distribution Agreement, Watts maintains full control and absolute
discretion with regard to any combined or consolidated United States federal
and state tax filings for periods through the spin-off date. Watts also
maintains full control and absolute discretion regarding common tax audit
issues of such entities. Although Watts has contractually agreed, in good
faith, to use its best efforts to settle all joint interests in any common
audit issue on a consistent basis with prior practice, there can be no
assurance that determinations so made by Watts would be the same as we would
reach, acting on our own behalf.

The Distribution Agreement specifies methods for allocation of assets,
liabilities and responsibilities with respect to certain existing employee
compensation and benefit plans and programs. Such allocations have been
completed for employees of Watts who became CIRCOR employees at the spin-off
date. In addition, all vested and unvested Watts options held by our employees
were terminated and replaced with CIRCOR options of equivalent value. We have
agreed to indemnify Watts as to any employer payroll tax it incurs related to
the exercise of such options after the spin-off. Certain provisions of the
Distribution Agreement also governed the transfer of employees between the
parties during the transition period ended in 1999. We have also agreed on
arrangements between the parties with respect to certain internal software,
third-party agreements, telecommunications services and computing services.

Allocations and Determination of Common Costs in Historical Financial
Statements

Prior to the spin-off, our operations were financed through our operating
cash flows, and investments by and advances from Watts. For this reason, our
historical financial statements include interest expense on our external debt
plus an allocation of interest expense which had not previously been separately
allocated by Watts. These interest allocations were based on Watts' weighted
average interest rate applied to the average annual balance of investments by
and advances from Watts.

Additionally, our historical financial statements include an allocation of
Watts' previously unallocated general and administrative expenses. These
allocations were based on our revenue as a percent of Watts' total revenue. The
amounts, by year, of the historical allocations described above are as follows:

Fiscal Years
Ended June
July 1, 1999 30,
Through -------------
Spin-Off Date 1999 1998
------------- ------ ------
(In thousands)

General and administrative expenses allocated...... $1,678 $5,600 $4,900
Interest expense allocated......................... 1,899 6,455 3,101

F-11

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

We believe that the original bases of allocation of interest and general and
administrative expenses were reasonable based on the facts available at the
date of their allocation. However, based on current information, such amounts
are not indicative of amounts which we would have incurred if we had been an
independent, publicly-owned entity for all periods presented. As noted in the
accompanying consolidated balance sheet, our capital structure changed as a
result of the distribution from Watts and bears little relationship to the
average net outstanding investments by and advances from Watts. We chose to add
personnel and incur other costs to perform services previously provided by
Watts. The full cost reflective of our capital structure and our personnel
complement have been included in our Consolidated Statement of Operations as
incurred.

For periods prior to the spin-off, income tax expense was calculated, to the
extent possible, as if we had filed separate income tax returns and benefited
from the Watts strategies associated with our operations. We did not employ
similar tax planning strategies immediately following the spin-off until we
were sure that these tax strategies would not jeopardize the tax-free nature of
the spin-off. We requested and chose to wait for a favorable supplemental
ruling from the IRS, which we received in April 2000. As Watts managed its tax
position on a consolidated basis, which takes into account the results of all
of its businesses, our effective tax rate in the future could vary
significantly from our historical effective tax rates. Our future effective tax
rate will be partially dependent on our structure and tax strategies as a
separate entity.

Other Transactions with Former Affiliates

Prior and subsequent to the spin-off transaction we conducted business with
various other subsidiaries of Watts, under various contracts and agreements.
The following table summarizes transactions with these related parties:

Fiscal Years Ended
June 30,
Year Ended Six Months Ended -------------------
December 31, 2000 December 31, 1999 1999 1998
----------------- ----------------- --------- ---------
(In thousands)

Purchases of inventory.. $4,277 $3,621 $ 7,484 $ 7,672
Sale of goods........... 835 2,042 1,366 1,081

(4) Business Acquisitions

On July 22, 1998, Watts Investment Company, a subsidiary of our former
parent, Watts Industries, Inc., acquired Hoke, Inc. ("Hoke"), a multinational
manufacturer of industrial valves and fittings, for approximately $85.0 million
including assumption of debt. The following table reflects unaudited pro forma
consolidated results on the basis that the Hoke acquisition had taken place and
was recorded at the beginning of the fiscal year for each of the periods
presented:

Fiscal Years
Ended June 30,
-----------------
1999 1998
-------- --------
(In thousands)

Net revenues.................................................. $327,888 $358,191
Net income.................................................... 12,436 19,365

F-12

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In our opinion the unaudited pro forma consolidated results of operations
may not be indicative of the actual results that would have occurred had the
acquisition been consummated at the beginning of fiscal 1998, or at the
beginning of fiscal 1999, or of future operations of the consolidated companies
under our ownership and management.

On October 18, 1999, the spin-off date, the ownership of Hoke was
transferred to CIRCOR. Additionally, Watts Investment Company assigned to us
all of its rights under the Stock Purchase Agreement governing the Hoke
acquisition (the "Stock Purchase Agreement"). As a result, we became the
claimant in two separate arbitration proceedings against the former Hoke
shareholders.

Under the terms of the Stock Purchase Agreement, Watts Investment Company
was obligated to prepare a closing date balance sheet and closing net worth
statement, which when compared to the closing net worth as detailed in the
Stock Purchase Agreement, would result in either an upward or downward purchase
price adjustment. Watts Investment Company prepared the closing date balance
sheet that showed that the closing net worth was approximately $9.9 million
lower than the target amount in the Stock Purchase Agreement, and sought a
purchase price adjustment for that amount. The former Hoke shareholders
objected to the closing date balance sheet and closing net worth statement. In
early 1999, pursuant to the terms of the Stock Purchase Agreement, arbitration
proceedings began between the former Hoke shareholders and us to determine the
closing net worth of Hoke. In May 2000, the arbitrator awarded us a purchase
price adjustment in the amount of $6.2 million. Because the Stock Purchase
Agreement provided for a deferred purchase price payment by us of $3.5 million,
the net effect of the arbitrator's award resulted in a payment to us of $2.7
million.

We also were the claimant in an indemnification claim against the former
Hoke shareholders pursuant to the Stock Purchase Agreement. This second claim,
made on December 11, 1998, asserted that the former Hoke shareholders, either
intentionally or unintentionally, made misrepresentations in the Stock Purchase
Agreement regarding Hoke's financial statements and that those
misrepresentations caused Hoke's earnings for 1997 to be inflated, thereby
causing us harm. This claim was the subject of a separate proceeding. During
November 2000, the claim was settled for $8.5 million. The amount of the cash
received for these two claims, less the associated costs of pursuing these
claims, has been accounted for as a $9.5 million reduction in the purchase
price for Hoke.

Additionally, in connection with the Hoke acquisition, we implemented a plan
to integrate certain of Hoke's operations and activities into our existing
operations. This plan included the closure of Hoke's headquarters facility and
relocation of certain manufacturing operations to other CIRCOR facilities. As a
result of this plan, 170 former Hoke employees were involuntarily terminated.
Details of costs recorded as part of the acquisition for the integration
activities are as follows:

Balance at
Original Activity December 31, Activity Balance at
Accrual in 1999 1999 in 2000 December 31, 2000
-------- -------- ------------ -------- ------------------
(In thousands)

Employee severance and
related benefits....... $3,167 $(2,839) $328 $(328) $ -
Relocation of
employees.............. 45 (6) 39 (39) -
Other exit costs........ 1,365 (1,365) - - -
------ ------- ---- ----- ---
$4,577 $(4,210) $367 $(367) $ -
====== ======= ==== ===== ===

F-13

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Additionally, during the year ended December 31, 2000 and the six months
ended December 31, 1999, costs of $0.5 million and $0.7 million, respectively,
were incurred to relocate certain Hoke manufacturing equipment to our other
manufacturing facilities. These costs were expensed as incurred, were included
in operating expenses and were identified as special charges.

In fiscal 1998, we acquired Telford Valve and Specialties, Inc. of Edmonton,
Alberta, Canada, Atkomatic Valve Company, located in Indianapolis, Indiana and
Aerodyne Controls Corp. of Ronkonkoma, New York. During fiscal 1999, we also
acquired SSI Equipment Inc. of Burlington, Ontario, Canada, and GO Regulator,
Inc. of San Dimas, California. On November 29, 2000, we acquired the Rockwood
Swendeman line of cryogenic safety relief valves, located in Scarborough,
Maine. All of these acquired companies are valve manufacturers and the
aggregate purchase price of these acquisitions was approximately $37.5 million.
The goodwill which resulted from these acquisitions is being amortized on a
straight-line basis over a 40-year period.

All acquisitions have been accounted for under the purchase method and the
results of operations of the acquired businesses have been included in the
consolidated financial statements from the date of acquisition. Had these
acquisitions, other than Hoke, occurred at the beginning of each respective
fiscal year of acquisition, the effect on operating results would not have been
material.

(5) Inventories

Inventories consist of the following:

December 31,
----------------- June 30,
2000 1999 1999
-------- -------- --------
(In thousands)

Raw materials........................................ $ 41,233 $ 42,701 $ 45,098
Work in process...................................... 31,804 27,466 23,087
Finished goods....................................... 38,221 37,165 40,725
-------- -------- --------
$111,258 $107,332 $108,910
======== ======== ========

(6) Property, Plant and Equipment

Property, plant and equipment consist of the following:

December 31,
------------------ June 30,
2000 1999 1999
-------- -------- --------
(In thousands)

Land.............................................. $ 4,672 $ 6,225 $ 6,222
Buildings and improvements........................ 24,983 27,665 26,022
Machinery and equipment........................... 108,254 111,470 105,085
Construction in progress.......................... 949 1,724 6,548
-------- -------- --------
138,858 147,084 143,877
Accumulated depreciation.......................... (74,064) (71,930) (67,195)
-------- -------- --------
$ 64,794 $ 75,154 $ 76,682
======== ======== ========

F-14

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(7) Income Taxes

The significant components of our deferred income tax liabilities and assets
are as follows:

December 31,
----------------
June 30,
2000 1999 1999
------- ------- --------
(In thousands)

Deferred income tax liabilities:
Excess tax over book depreciation................. $ 6,919 $ 6,965 $ 6,819
Inventory......................................... 3,314 3,577 3,327
Other............................................. 532 914 620
------- ------- -------
Total deferred income tax liabilities............ 10,765 11,456 10,766
------- ------- -------
Deferred income tax assets:
Accrued expenses.................................. 5,413 5,727 5,554
Net operating loss and credit carryforward........ 803 529 716
Cost basis differences in intangible assets....... 2,013 2,499 -
Other............................................. 5,804 7,333 5,649
------- ------- -------
Total deferred income tax assets................. 14,033 16,088 11,919
Valuation allowance............................... - - -
------- ------- -------
Net deferred income tax asset..................... 14,033 16,088 11,919
------- ------- -------
Deferred income tax asset, net ................... $ 3,268 $ 4,632 $ 1,153
======= ======= =======

The above components of deferred income taxes are
classified in the respective consolidated balance
sheet as follows:
Net current deferred income tax asset............. $ 6,141 $ 9,794 $ 8,592
Net noncurrent deferred income tax liability...... (2,873) (5,162) (7,439)
------- ------- -------
Deferred income tax asset, net ................... $ 3,268 $ 4,632 $ 1,153
======= ======= =======

F-15

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The provision for income taxes is based on the following pre-tax income:

Fiscal Years
Ended June 30,
Year Ended Six Months Ended ----------------
December 31, 2000 December 31, 1999 1999 1998
----------------- ----------------- ------- -------
(In thousands)

Domestic................ $13,790 $ 6,587 $14,011 $22,864
Foreign................. 3,810 2,257 6,960 12,162
------- ------- ------- -------
$17,600 $ 8,844 $20,971 $35,026
======= ======= ======= =======

The provision for income taxes consists of the following:

Fiscal Years
Ended June 30,
Year Ended Six Months Ended ----------------
December 31, 2000 December 31, 1999 1999 1998
----------------- ----------------- ------- -------
(In thousands)

Current tax expense
(benefit):
Federal................ $ 3,759 $(1,360) $ 173 $ 7,156
Foreign................ 1,354 1,272 2,408 3,085
State.................. 612 244 26 1,678
------- ------- ------- -------
5,725 156 2,607 11,919
------- ------- ------- -------
Deferred tax expense
(benefit):
Federal................ 73 3,798 4,684 599
Foreign................ 954 (366) 613 (22)
State.................. 288 376 557 105
------- ------- ------- -------
1,315 3,808 5,854 682
------- ------- ------- -------
$ 7,040 $ 3,964 $ 8,461 $12,601
======= ======= ======= =======

Actual income taxes reported from operations are different than those which
would have been computed by applying the federal statutory tax rate to income
before income taxes. The reasons for these differences are as follows:

Fiscal Years
Ended June 30,
Year Ended Six Months Ended ----------------
December 31, 2000 December 31, 1999 1999 1998
----------------- ----------------- ------- -------

Computed expected
federal income tax
expense................ 35.0% 35.0% 35.0% 35.0%
State income taxes, net
of federal tax
benefit................ 3.3 4.6 2.0 2.0
Goodwill amortization... 4.4 4.2 3.8 0.8
Foreign tax rate
differential........... 1.5 1.3 1.8 (3.1)
Foreign Sales
Corporation benefit.... (5.0) (3.1) (2.2) (1.5)
Other, net.............. 0.8 2.8 (0.1) 2.8
------- ------- ------- -------
40.0% 44.8% 40.3% 36.0%
======= ======= ======= =======

F-16

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Undistributed earnings of our foreign subsidiaries amounted to $1.7 million
at December 31, 2000, $4.7 million at December 31, 1999, and $3.2 million and
$0.8 million at June 30, 1999 and 1998, respectively. Those earnings are
considered to be indefinitely reinvested and, accordingly, no provision for
U.S. federal and state income taxes has been recorded thereon. Upon
distribution of those earnings, in the form of dividends or otherwise, we will
be subject to both U.S. income taxes (subject to an adjustment for foreign tax
credits) and withholding taxes payable to the various foreign countries.
Determination of the amount of U.S. income tax liability that would be incurred
is not practicable because of the complexities associated with its hypothetical
calculation; however, unrecognized foreign tax credits would be available to
reduce some portion of any U.S. income tax liability. Withholding taxes of $0.2
million would be payable upon remittance of all previously unremitted earnings
at December 31, 2000. We made income tax payments of $5.6 million in the year
ended December 31, 2000, $2.7 million during the six months ended December 31,
1999, and $4.7 million and $4.3 million in fiscal years 1999 and 1998,
respectively.

(8) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

December 31,
--------------- June 30,
2000 1999 1999
------- ------- -------- ---
(In thousands)

Commissions and sales incentive payable............ $ 3,782 $ 3,895 $ 4,272
Acquisition related costs.......................... 207 1,068 4,708
Insurance.......................................... 2,397 2,875 2,414
Other.............................................. 7,710 7,329 5,204
------- ------- -------
Total............................................ $14,096 $15,167 $16,598
======= ======= =======

F-17

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(9) Financing Arrangements

Long-term debt consists of the following:

December 31,
---------------- June 30,
2000 1999 1999
------- -------- --------
(In thousands)

Senior unsecured notes, maturing in 2006, at a fixed
interest rate of 8.23%.............................. $75,000 $ 75,000 $ -
Revolving line of credit, maturing in 2003, at a
variable interest rate, 7.57% at December 31, 1999.. - 32,000 -
Industrial revenue bonds, maturing in varying amounts
through 2020, at a variable interest rate, 4.66% at
December 31, 2000, 5.45% at December 31, 1999, and
3.88% at June 30, 1999.............................. 12,265 12,265 12,540
Term loan, at a variable interest rate, 8.50% at June
30, 1999............................................ - - 4,658
Capital lease obligations, at varying interest rates
ranging from 9.87% to 18.50%........................ 232 596 4,081
Other borrowings, at varying interest rates ranging
from 6.25% to 9.00%................................. 4,036 5,266 5,303
------- -------- -------
Total long-term debt............................... 91,533 125,127 26,582
Less: current portion................................ 940 2,260 4,178
------- -------- -------
Total long-term debt, less current portion......... $90,593 $122,867 $22,404
======= ======== =======

On October 18, 1999, we entered into a $75.0 million unsecured revolving
credit facility maturing in 2003. Under the credit facility agreement we are
required to pay a facility fee of 0.35% per annum, and are able to borrow at
various interest rates based on either the Euro dollar rate plus 1.25% or prime
lending rate, as specified by the lender. On October 19, 1999, we also issued
$75.0 million of unsecured notes maturing in 2006. Proceeds from the notes and
borrowings under the credit facility were used to repay $96.0 million of
investments by and advances from Watts and the outstanding balance under the
term loan agreement.

At December 31, 2000, we had $75.0 million available from the unsecured
credit facility to support our acquisition program, working capital
requirements and for general corporate purposes.

Certain of our loan agreements contain covenants that require, among other
items, maintenance of certain financial ratios and also limit our ability to
enter into secured borrowing arrangements.

At December 31, 2000, principal payments during each of the next five fiscal
years and thereafter are due as follows: 2001-$0.9 million; 2002-$15.1 million;
2003-$15.9 million; 2004-$15.5 million; and 2005-$15.9 million and $28.2
million thereafter. Interest paid for all periods presented in the accompanying
consolidated financial statements approximates interest expense.

F-18

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(10) Stock-Based Compensation

During the Transition Period, the 1999 Stock Option and Incentive Plan (the
"1999 Stock Plan") was adopted by our Board of Directors. Generally, the 1999
Stock Plan permits the grant of the following types of awards to our officers,
other employees and non-employee directors: incentive stock options, non-
qualified stock options, deferred stock awards, restricted stock awards,
unrestricted stock awards, performance share awards, stock appreciation rights
and dividend equivalent rights. The 1999 Stock Plan provides for the issuance
of up to 2,000,000 shares of common stock (subject to adjustment for stock
splits and similar events). New options granted under the 1999 Stock Plan could
have varying vesting provisions and exercise periods. Options granted
subsequent to the spin-off vest in periods ranging from 1 to 7 years and expire
10 years after grant.

The CIRCOR Management Stock Purchase Plan, which is a component of the 1999
Stock Plan, provides that eligible employees may elect to receive restricted
stock units in lieu of all or a portion of their pre-tax annual incentive bonus
and, in some cases, make after-tax contributions in exchange for restricted
stock units. In addition, non-employee directors may elect to receive
restricted stock units in lieu of all or a portion of their annual directors'
fees. Each restricted stock unit represents a right to receive one share of our
common stock after a three-year vesting period. Restricted stock units are
granted at a discount of 33% from the fair market value of the shares of common
stock on the date of grant. This discount is amortized to compensation expense
ratably over the vesting period.

At the spin-off date, vested and non-vested Watts options held by our
employees terminated in accordance with their terms and new options of
equivalent value were issued under the 1999 Stock Plan to replace the Watts
options ("replacement options"). The vesting dates and exercise periods of the
options were not affected by the replacement. Based on their original Watts
grant date, CIRCOR replacement options vest during the 1999 to 2003 time period
and expire 10 years after grant of the original Watts options. Additionally, at
the spin-off date vested and non-vested Watts restricted stock units held by
our employees were converted into comparable restricted stock units based on
our common stock and will be payable in shares of our common stock. At
December 31, 2000, 142,513 restricted stock units were outstanding.

Had compensation cost for all our option grants subsequent to the spin-off
to employees and non-employee directors been determined consistent with SFAS
123, our net income for the year ended December 31, 2000 would have decreased
by $0.6 million to $10.0 million. Similarly, our net income for the six months
ended December 31, 1999 would have decreased by $0.1 million to $4.8 million.
The pro forma net income may not be representative of future disclosures of pro
forma net income since the estimated fair value of stock options is amortized
to expense over the vesting period, which was only a partial year in the
transition period, and additional options may be granted in varying quantities
in future years. SFAS 123 pro forma income per share data is not meaningful as
we were not an independent, publicly owned company prior to the spin-off.

The fair value of each option grant made subsequent to the spin-off was
estimated as of the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions:

December 31,
--------------
2000 1999
------ ------

Risk-free interest rate......................................... 5.8% 6.1%
Expected life (years)........................................... 5 5
Expected stock volatility....................................... 46.3% 15.0%
Expected dividend yield......................................... 1.8% 1.5%

F-19

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

A summary of the status of all options granted to employees and non-
employee directors as of December 31, 2000 and 1999, and changes during the
year and six months then ended is presented in the table below:

Year Ended Six Months Ended
December 31, 2000 December 31, 1999
---------------------------- ----------------------------
Options Weighted Average Options Weighted Average
(thousands) Exercise Price (thousands) Exercise Price
----------- ---------------- ----------- ----------------

Options outstanding at
beginning of period.... 1,025 $10.43 - $ -
Replacement of Watts
options................ - - 627 10.60
Granted................. 406 8.60 398 10.13
Exercised............... (20) 8.78 - -
Forfeited............... (179) 10.48 - -
----- -----
Options outstanding at
end of period.......... 1,232 $ 9.85 1,025 $10.43
===== =====

Options exercisable..... 464 $10.62 359 $10.67

Weighted average fair
value of options
granted................ $ 3.61 $ 2.37

The following table summarizes information about stock options outstanding
as of December 31, 2000:

Options Outstanding Options Exercisable
--------------------------------- ----------------------------
Weighted Average
Range of Exercise Options Remaining Weighted Average Options Weighted Average
Prices (thousands) Contractual Life Exercise Price (thousands) Exercise Price
- ----------------- ----------- ---------------- ---------------- ----------- ----------------

$ 7.50 - $ 8.37 481 8.4 $ 7.76 133 $ 8.28
9.20 - 10.38 391 8.5 9.89 100 9.78
11.00 - 11.96 101 5.2 11.85 89 11.94
12.15 - 13.94 259 6.6 12.89 142 12.58
----- ---
$ 7.50 - $13.94 1,232 7.7 $ 9.85 464 $10.62
===== ===

(11) Employee Benefit Plans

We sponsor a defined benefit pension plan covering substantially all of our
domestic non-union employees. Benefits are based primarily on years of service
and employees' compensation. Our funding policy for these plans is to
contribute annually the maximum amount that can be deducted for federal income
tax purposes. Prior to the spin-off, the participants in the plan were covered
by plans with similar benefits, sponsored by Watts. Under an agreement with
Watts, we have assumed or retained pension liabilities related to
substantially all of our participants. Assets of the Watts plans have been
allocated, in accordance with regulatory rules, between the Watts plans and
our plan.

Additionally, substantially all of our domestic non-union employees are
eligible to participate in a 401(k) savings plan. Under this plan, we match a
specified percentage of employee contributions, subject to certain
limitations.

F-20

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The components of net benefit expense are as follows:

Fiscal Years
Ended June
30,
Year Ended Six Months Ended ------------
December 31, 2000 December 31, 1999 1999 1998
----------------- ----------------- ------ ------
(In thousands)

Components of net benefit
expense
Service cost-benefits
earned................... $1,071 $ 526 $1,085 $ 786
Interest cost on benefits
obligation............... 643 298 531 459
Estimated return on
assets................... (793) (330) (654) (443)
------ ----- ------ ------
921 494 962 802
Defined contribution
plans.................... 345 203 216 210
------ ----- ------ ------
Total net benefits
expense................ $1,266 $ 697 $1,178 $1,012
====== ===== ====== ======

The funded status of the defined benefit plan and amounts recognized in the
balance sheet follow:

December 31, June 30,
---------------- --------
2000 1999 1999
------- ------- --------
(In thousands)

Change in projected benefit obligation
Balance at beginning of period..................... $ 9,105 $ 8,014 $ 7,021
Service cost....................................... 1,071 526 1,085
Interest cost...................................... 643 298 531
Actuarial gain (loss).............................. (1,399) 267 (623)
Benefits paid...................................... (49) - -
Administrative expenses............................ (94) - -
Amendments......................................... (90) - -
------- ------- -------
Balance at end of period.......................... $ 9,187 $ 9,105 $ 8,014
======= ======= =======
Change in fair value of plan assets
Balance at beginning of period..................... $ 7,823 $ 7,173 $ 6,459
Actual return on assets............................ 25 650 595
Benefits paid...................................... (49) - -
Administrative expenses............................ (94) - -
Employer contributions............................. 918 - 119
------- ------- -------
Fair value of plan assets at end of period........ $ 8,623 $ 7,823 $ 7,173
======= ======= =======
Funded status
Plan assets less than benefit obligation........... $ (563) $(1,282) $ (841)
Unrecognized transition obligation................. (200) (264) (257)
Unrecognized prior service cost.................... 233 353 207
Unrecognized actuarial gain (loss)................. (964) (298) (1,047)
------- ------- -------
Net accrued benefit cost.......................... $(1,494) $(1,491) $(1,938)
======= ======= =======

F-21

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The weighted average assumptions used in determining the obligations of
pension benefit plans are shown below:

December 31, June 30,
------------- -----------
2000 1999 1999 1998
------ ------ ----- -----

Discount rate......................................... 8.00% 7.75% 7.00% 7.00%
Expected return on plan assets........................ 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase......................... 5.00% 5.00% 5.00% 5.00%

(12) Contingencies and Environmental Remediation

Contingencies

We are subject to pending or threatened lawsuits and proceedings or claims
arising from the ordinary course of operations. Reserves have been established
which management presently believes are adequate in light of probable and
estimable exposure to the pending or threatened litigation of which it has
knowledge. Such contingencies are not expected to have a material effect on our
financial condition, results of operations, or liquidity.

On July 12, 2000, we were notified that the United States Customs Service,
or Customs, had begun an investigation to determine whether our subsidiary, KF
Industries was, and continues to be, in compliance with country of origin
marking requirements on those valves that KF Industries imports from sources in
the People's Republic of China, including our Chinese joint venture. While we
believe that the Customs investigation will not result in any material
liability to KF Industries, there can be no assurances as to the outcome of the
matter. If the Customs investigation were to reveal that violations of the
customs laws had occurred, KF Industries could be subjected to civil fines and
forfeitures and, if such violations were determined to be intentional, criminal
penalties, which could be material. We believe that KF Industries' marking
practices have been in substantial compliance with Customs' regulations and we
are cooperating with Customs in its investigation.

Environmental Remediation

We have been named a potentially responsible party with respect to
identified contaminated sites. The level of contamination varies significantly
from site to site as do the related levels of remediation efforts.
Environmental liabilities are recorded based on the most probable cost, if
known, or on the estimated minimum cost of remediation. Our accrued estimated
environmental liabilities are based on assumptions which are subject to a
number of factors and uncertainties. Circumstances which can affect the
reliability and precision of these estimates include identification of
additional sites, environmental regulations, level of cleanup required,
technologies available, number and financial condition of other contributors to
remediation and the time period over which remediation may occur. We recognize
changes in estimates as new remediation requirements are defined or as new
information becomes available. We estimate that accrued environmental
remediation liabilities will likely be paid over the next five to ten years.
Such environmental remediation contingencies are not expected to have a
material effect on our financial condition, results of operation, or liquidity.

F-22

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Operating Lease Commitments

At December 31, 2000, minimum rental commitments under noncancellable
operating leases, primarily for office and warehouse facilities were: $2.6
million in 2001, $2.5 million in 2002, $2.3 million in 2003, $2.1 million in
2004, $1.8 million in 2005 and $6.0 million for years thereafter. Rental
expense amounted to: $3.2 million during the year ended December 31, 2000, $1.5
million during the six months ended December 31, 1999, and $3.4 million and
$1.4 million during the years ended June 30, 1999 and 1998, respectively.

(13) Financial Instruments

Fair Value

The carrying amounts of cash and cash equivalents, short-term investments,
trade receivables and trade payables approximate fair value because of the
short maturity of these financial instruments. The fair value of the senior
unsecured notes, based on the value of comparable instruments brought to
market, is $74.1 million as of December 31, 2000. The fair value of the
Company's variable rate debt approximates its carrying value.

Use of Derivatives

We use foreign currency forward exchange contracts to manage the currency
risk related to business transactions denominated in foreign currencies.
Related gains and losses are recognized when the contracts expire, which are
generally in the same period as the underlying foreign currency denominated
transaction. To the extent these transactions are completed, these contracts do
not subject us to significant market risk from exchange movement because they
offset gains and losses on the related foreign currency denominated
transactions. At December 31, 2000 and 1999 and June 30, 1999, we had forward
contracts to buy foreign currencies with a face value of $10.1 million, $9.0
million and $4.8 million, respectively. These contracts had various settlement
dates between January-July 2001, July 1999-January 2000 and January-June 2000
and had fair market values of $0.4 million, $(0.6) million and $(0.2) million,
respectively.

The counterparties to the above contracts are major financial institutions.
Our risk of loss, in the event of non-performance by a counterparty, is not
significant.

F-23

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(14) Segment Information

The following table presents certain operating segment information:

Instrumentation &
Fluid Regulation Petrochemical Corporate Consolidated
Products Products Adjustments Total
----------------- ------------- ----------- ------------
(In thousands)

Year Ended December 31,
2000
Net revenues............ $178,237 $138,626 $ - $316,863
Operating income
(loss)................. 30,480 3,868 (6,712) 27,636
Identifiable assets..... 238,901 150,604 (42,443) 347,062
Capital expenditures.... 1,947 1,615 181 3,743
Depreciation and
amortization........... 7,873 4,872 260 13,005
Six Months Ended
December 31, 1999
Net revenues............ $ 84,564 $ 72,701 $ - $157,265
Operating income
(loss)................. 10,254 6,331 (2,739) 13,846
Identifiable assets..... 212,328 141,773 12,984 367,085
Capital expenditures.... 1,822 2,258 477 4,557
Depreciation and
amortization........... 4,412 2,566 98 7,076
Fiscal Year Ended June
30, 1999
Net revenues............ $175,697 $148,561 $ - $324,258
Operating income
(loss)................. 24,843 10,324 (5,617) 29,550
Identifiable assets..... 218,732 136,328 3,983 359,043
Capital expenditures.... 6,592 2,907 - 9,499
Depreciation and
amortization........... 7,939 4,823 - 12,762
Fiscal Year Ended June
30, 1998
Net revenues............ $110,759 $180,821 $ - $291,580
Operating income
(loss)................. 17,883 25,256 (4,948) 38,191
Identifiable assets..... 97,245 153,186 3,046 253,477
Capital expenditures.... 1,586 4,529 - 6,115
Depreciation and
amortization........... 3,611 4,233 - 7,844

Each operating segment is individually managed and has separate financial
results that are reviewed by the Company's chief operating decision-maker. Each
segment contains closely related products that are unique to the particular
segment. Refer to Note 1 for further discussion of the products included in
each segment.

F-24

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In calculating profit from operations for individual operating segments,
substantial administrative expenses incurred at the operating level that are
common to more than one segment are allocated on a net revenues basis. Certain
headquarters expenses of an operational nature also are allocated to segments
and geographic areas. All intercompany transactions have been eliminated, and
inter-segment revenues are not significant.

Fiscal Years
Ended
Year Ended Six Months Ended June 30,
(a) Net revenues by geographic December 31, December 31, -----------------
area 2000 1999 1999 1998
------------------------------ ------------ ---------------- -------- --------
(In thousands)

United States................. $220,568 $ 95,943 $189,909 $198,512
Italy......................... 3,579 2,386 42,956 50,734
Canada........................ 18,020 16,094 27,830 23,783
Other......................... 74,696 42,842 63,563 18,551
-------- -------- -------- --------
Total revenues............... $316,863 $157,265 $324,258 $291,580
======== ======== ======== ========

December 31,
(b) Long-lived assets by ----------------------------- June 30,
geographic area 1999 1999
------------------------ 2000 ---------------- --------
(In thousands)

United States................. $55,040 $64,193 $64,773
Italy......................... 3,107 3,770 4,254
Canada........................ 2,262 2,439 2,671
Other......................... 4,385 4,752 4,984
-------- -------- --------
Total long-lived assets...... $64,794 $75,154 $76,682
======== ======== ========

F-25

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(15) Pro Forma Financial Information (unaudited)

As discussed in Note 3, we became an independent publicly-owned company on
October 18, 1999 as a result of a spin-off from Watts. The following unaudited
pro forma financial information presents a summary of the consolidated results
of operations as if the spin-off and related transactions had occurred at the
beginning of the periods presented:

Fiscal Years
Six Months Ended Ended June 30,
December 31, ------------------
1999 1999 1998
---------------- -------- --------
(In thousands, except per share
data)

Net income as reported................... $ 4,880 $ 12,510 $ 22,425
Pro forma adjustments:
Incremental administrative expenses
(a).................................... (61) (253) (246)
Incremental interest expenses (b)....... (322) (1,037) (429)
Income tax effect of pro forma
adjustments (c)........................ 153 516 270
------- -------- --------
Net pro forma adjustments............... (230) (774) (405)
------- -------- --------
Pro forma net income..................... $ 4,650 $ 11,736 $ 22,020
======= ======== ========

Basic earnings per share: (d)
Before pro forma adjustments............ $ 0.37 $ 0.95 $ 1.65
Impact of pro forma adjustments......... (0.02) (0.07) (0.03)
------- -------- --------
Pro forma basic earnings per share...... $ 0.35 $ 0.88 $ 1.62
======= ======== ========

Diluted earnings per share: (d)
Before pro forma adjustments............ $ 0.37 $ 0.95 $ 1.65
Impact of pro forma adjustments......... (0.02) (0.07) (0.03)
------- -------- --------
Pro forma diluted earnings per share.... $ 0.35 $ 0.88 $ 1.62
======= ======== ========

- --------
(a) To record estimated additional administrative expenses that would have been
incurred by CIRCOR as a publicly-owned, independent company. Such amounts
include additional compensation and related costs for employees to perform
functions that have been performed by Watts' corporate headquarters
(treasury, investor relations, regulatory compliance, risk management,
etc.). These additional costs also include amounts for corporate governance
costs, stock transfer agent costs, incremental professional fees and other
administrative activities.
(b) To record estimated incremental interest expense for estimated outstanding
borrowings under the CIRCOR credit facility and from the issuance of senior
unsecured notes. The borrowings under the credit facility and senior
unsecured notes are assumed to bear an annualized interest rate, including
amortization of related fees, of 7.3% for the six months ended December 31,
1999 and 8.5% for the fiscal years ended June 30, 1999 and 1998. These
interest rates represent management's best estimate of the available rates
for borrowings under similar facilities. Net income as reported includes an
allocation of Watts' interest expense based on Watts' weighted average
interest rate applied to the average balance of investments by and advances
to CIRCOR.
(c) To record the income tax benefit attributable to adjustments (a) and (b) at
a combined Federal and state tax rate of 40.0%.
(d) The number of shares used to calculate pro forma earnings per share for the
six months ended December 31, 1999 assumes the spin-off transaction
occurred at July 1, 1999. The number of shares used to calculate pro forma
earnings per share for the fiscal years ended June 30, 1999 and 1998 is
based on the weighted average common stock and common stock equivalents
outstanding used by Watts to determine earnings per share for that period,
adjusted in accordance with the distribution ratio (see Note 3).

Basic net income per common share is calculated by dividing net income by
the weighted average number of common shares outstanding. The calculation of
diluted earnings per share assumes the conversion of all dilutive securities
(see Note 10).

F-26

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Pro forma net income and number of shares used to compute pro forma net
earnings per share, basic and assuming full dilution, are reconciled below (in
thousands, except per share data):

Six Months Ended Fiscal Years Ended June 30,
December 31, -------------------------------------------------------
1999 1999 1998
--------------------------- --------------------------- ---------------------------
Pro Forma Per Share Pro Forma Per Share Pro Forma Per Share
Net Income Shares Amount Net Income Shares Amount Net Income Shares Amount
---------- ------ --------- ---------- ------ --------- ---------- ------ ---------

Basic EPS............... $ 4,650 13,229 $0.35 $11,736 13,368 $0.88 $22,020 13,554 $1.62
Dilutive securities,
principally common
stock options.......... - 86 - - 7 - - 40 -
------- ------ ----- ------- ------ ----- ------- ------ -----
Diluted EPS............. $ 4,650 13,315 $0.35 $11,736 13,375 $0.88 $22,020 13,594 $1.62
======= ====== ===== ======= ====== ===== ======= ====== =====

(16) Quarterly Financial Information (unaudited)

First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(In thousands, except per share
data)

Year ended December 31, 2000
Net revenues.................................. $82,305 $80,269 $75,988 $78,301
Gross profit.................................. 26,219 23,640 23,008 22,924
Net income.................................... 3,186 2,426 2,287 2,661
Earnings per common share:
Basic......................................... $ 0.24 $ 0.18 $ 0.17 $ 0.20
Diluted....................................... 0.24 0.18 0.17 0.20
Dividends per common share.................... - 0.0375 0.0375 0.0375
Six months ended December 31, 1999
Net revenues.................................. $78,063 $79,202 n/a n/a
Gross profit.................................. 23,602 25,050 n/a n/a
Net income.................................... 1,688 3,192 n/a n/a
Pro forma earnings per common share:
Basic......................................... $ 0.11 $ 0.24 n/a n/a
Diluted....................................... 0.11 0.24 n/a n/a
Dividends per common share.................... n/a - n/a n/a
Fiscal year ended June 30, 1999
Net revenues.................................. $81,411 $85,386 $79,492 $77,969
Gross profit.................................. 25,557 26,245 25,644 26,200
Net income.................................... 3,706 3,134 2,493 3,177

F-27

CIRCOR INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

(17) Special Charges

During the year ended December 31, 2000, we incurred $1.9 million of costs
in connection with the consolidation and reorganization of manufacturing
operations. The severance costs recognized for 88 terminated employees were
$1.3 million. Other costs of $0.6 million were incurred and were primarily
associated with the closure, consolidation and reorganization of manufacturing
plants in both the instrumentation and fluid regulation and petrochemical
segments. The portion of the accrued severance cost to be paid subsequent to
December 31, 2000 totals $0.1 million. Special charges of $0.7 million were
incurred in the last six months of 1999, all associated with the closure,
consolidation and reorganization of manufacturing plants in the instrumentation
and fluid regulation segment. Special charges have been recognized as incurred.

(18) Subsequent Event

On January 26, 2001 we filed a registration statement on Form S-3 with the
Securities and Exchange Commission to register our offering of 1,552,500 shares
of our Common Stock.

F-28

EDGAR GRAPHICS DESCRIPTION

Graphic on one 8 1/2" x 11" page containing nine 3 1/2" long by 2 3/4" wide
photographs in a 3 row/3 column format as follows (beginning with top left to
right):

- -------------------------------------------------------------------------------

[Circor logo appears here]

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the estimated expenses payable by us in
connection with the offering and distribution (excluding underwriting
discounts and commissions):

Nature of Expense Amount
- ----------------- --------

SEC Registration Fee.................................................. $ 4,475
NASD Filing Fee....................................................... 2,290
NYSE Listing Fee...................................................... 14,750
Accounting Fees and Expenses.......................................... 150,000
Legal Fees and Expenses............................................... 280,000
Printing Expenses..................................................... 75,000
Blue Sky Qualification Fees and Expenses.............................. 2,500
Transfer Agent's Fee.................................................. 2,500
Miscellaneous......................................................... 100,000
--------
TOTAL............................................................... $631,515
========

The amounts set forth above, except for the SEC, NASD and NYSE fees, are in
each case estimated.

Item 15. Indemnification of Directors and Officers

In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our amended and restated certificate of incorporation provides
that no director be personally liable to us or our shareholders for monetary
damages for breach of fiduciary duty as a director, except for liability:

. for any breach of the director's duty of loyalty to us or our shareholders;

. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. in respect of unlawful dividend payments or stock redemptions or
repurchases; or

. for any transaction from which the director derived an improper personal
benefit.

In addition, our amended and restated certificate of incorporation provides
that if the Delaware General Corporation Law is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended.

Article V of our by-laws provides for indemnification by us of our officers
and certain non-officer employees under certain circumstances against
expenses, including attorneys fees, judgments, fines and amounts paid in
settlement, reasonably incurred in connection with the defense or settlement
of any threatened, pending or completed legal proceeding in which any such
person is involved by reason of the fact that such person is or was an officer
or employee of the registrant if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to our best
interests, and, with respect to criminal actions or proceedings, if such
person had no reasonable cause to believe his or her conduct was unlawful.

We also have entered into indemnification agreements with each of our
directors and executive officers reflecting the foregoing and requiring the
advancement of expenses in proceedings involving the directors and executive
officers in most circumstances.

II-1

Item 16. Exhibits

Exhibit
No. Description
------- -----------

*1.1 Form of Underwriting Agreement

2.1 Distribution Agreement between Watts Industries, Inc. and CIRCOR
International, Inc. dated as of October 1, 1999, (incorporated by
reference to Exhibit 2.1 to Amendment No. 2 to CIRCOR "s Registration
Statement on Form 10, File No. 000-26961)

4.1 Shareholder Rights Agreement, dated as of September 16, 1999, between
CIRCOR International, Inc. and BankBoston, N.A., as Rights Agent
(incorporated by reference to Exhibit 4.1 to CIRCOR 's Registration
Statement on Form 8-A, File No. 001-14962)

5.1 Opinion of Goodwin Procter LLP regarding the legality of shares

23.1 Consent of KPMG LLP

23.2 Consent of Goodwin Procter LLP (included in Exhibit 5.1 hereto).

*24 Power of Attorney (included on signature page)

- --------

* Previously filed.

Item 17. Undertakings

(a) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer, or controlling person of ours in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

(c) (1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
the Registration Statement (File No. 333-54428) to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth
of Massachusetts on March 13, 2001.

CIRCOR International, Inc.

By: /s/ KENNETH W. SMITH
Kenneth W. Smith
Vice President, Chief Financial
Officer and Treasurer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

* Chairman, President and March 13, 2001
____________________________________ Chief Executive Officer
David A. Bloss, Sr. (Principal Executive Officer)

/s/ KENNETH W. SMITH Vice President, Chief March 13, 2001
____________________________________ Financial Officer and
Kenneth W. Smith Treasurer (Principal
Financial Officer)

* Vice President, Corporate March 13, 2001
____________________________________ Controller and Assistant
Stephen J. Carriere Treasurer (Principal
Accounting Officer)
* Director March 13, 2001
____________________________________
Dewain K. Cross

* Director March 13, 2001
____________________________________
David F. Dietz

* Director March 13, 2001
____________________________________
Timothy P. Horne

* Director March 13, 2001
____________________________________
Daniel J. Murphy, III

* Director March 13, 2001
____________________________________
Thomas N. Tullo

*By: /s/ KENNETH W. SMITH
Attorney-in-fact
Kenneth W. Smith

II-3

EXHIBIT
NO. DESCRIPTION
------- -----------

*1.1 Form of Underwriting Agreement

2.1 Distribution Agreement between Watts Industries, Inc. and CIRCOR
International, Inc. dated as of October 1, 1999, (incorporated by
reference to Exhibit 2.1 to Amendment No. 2 to CIRCOR's Registration
Statement on Form 10, File No. 000-26961)

4.1 Shareholder Rights Agreement, dated as of September 16, 1999, between
CIRCOR International, Inc. and BankBoston, N.A., as Rights Agent
(incorporated by reference to Exhibit 4.1 to CIRCOR's Registration
Statement on Form 8-A, File No. 001-14962)

5.1 Opinion of Goodwin Procter LLP regarding the legality of shares

23.1 Consent of KPMG LLP

23.2 Consent of Goodwin Procter LLP (included in Exhibit 5.1 hereto).

*24 Power of Attorney (included on signature page)

- --------

* Previously filed.