CIR - Earnings call transcript Q4 2020 | Circor International Inc

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Operator

Greetings. And welcome to CIRCOR International Fourth Quarter 2020 Earnings Conference Call. [Operator instructions] As a reminder, this conference is being recorded. I will now turn the conference over to Alex Maki, Vice President Financial Planning and Analysis and Investor Relations. Thank you, sir.

begin. may You

Alex Maki

Officer. welcome I And President fourth XXXX Chief quarter CEO, Good joined to today call. Financial company's the am Abhishek CIRCOR's by earnings and morning. Khandelwal, CIRCOR's Scott and Buckhout,

risks, presentation known Before we start, contains and at could release today. like uncertainties views to forward-looking website expectations and statements available circulars subject Today's represent These by and the those as and that on company's today's factors remind are investor.circor.com. actual press materially you differ I'd unknown anticipated today's to discussion and implied are or other only remarks. of results from

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

discussion XX-K, to non-GAAP CIRCOR's full GAAP and I'll also that, available in factors You financial call, our On filings SEC GAAP The can XX-Q CIRCOR's GAAP turn over other on will reconciliation of Form press call measures our With located website. release. non the earnings the Scott. is measures. management comparable today's to a in measures these to and refer find of

Scott Buckhout

Alex, and year CIRCOR. presented everyone. entire while team proud I'm year continuing despite and of and XXXX good was resilience efforts for progress challenges team shareholders. in another our the challenging customers by CIRCOR our the transformational continued made to our a plan. strategic morning, And COVID-XX navigating significant you, executing Thank deliver on for of such the

environment. impact markets of year, product macro end across mitigate diversified portfolio the our geographies As throughout weaker and the we saw multiple a helped

our demand products. which business delivered defense strong Our year, for the commercial mostly lower offset for results

with prices portfolio. enabled momentum. throughout differentiated positive us executed positions year and downturn, to market well Our exited across the and the increase this year's We technology

difficult pricing cost and year things margins aerospace employees Aerospace of value control. based points for and we the Defense the commercial. the defense programs, XX% necessary their With safety volume, through million. on notably defense four actions decremental and XX but we in as achieved improved of and basis new XXX our foundation and lower XX focused by our We won margins health $XX of despite including

the to improved company CIRCOR take CIRCOR advantage the resulting well implement an recovery and system in positioned continue is operational in beyond. operating across of performance. eventual market We XXXX to

is of sale earlier and the in from and exit instrumentation valves our With gas the distributed complete. sampling upstream oil year, and

throughout our cash launching in new flow We want of flow we cash continue introduced commitments versus $XX to I and to the ended $XXX fourth or in with free million, reduce quarter. million debt XXXX by new mission finally, critical some strong free in in invest XX%. in the products highlight delivered We XX technology innovation XXXX. And year on XX XXXX. our

our defense arming temperature, the to including self are support missile radiation, of arming operate and switches side, launched hypersonic environments On designed missile programs, force. various in respect switches to with new more applications. We G severe

in CNG, flight help gas transport medical On to customers pressure and our manage of medical customers systems which These a we In and case and gas, location series an emergency. aircraft's in switch help industrial systems public oxygen. utility and industries. our LNG, high methane marine, bio fuels the the commercial new transmitter introduced of Industrial, reduction side, a launched activates we pressure

the into most cost across industrial the XX% pricing, actions that timing in US program on quarter. is up naval the like quarter. points was operating We of million, income million and strong I'd moderate up some large by $XXX orders due the organically. XXXX. basis $XXX up Naval flat A&D XX% down had Sequentially by from down defense of sequentially from of in which mainly the driven growth quarter, financial fourth lower margin XXX highlights volume in and representing pushed orders XX% deliveries, Industrial. provide million, booked XX.X%, Now prior was XX% quarter. productivity. to orders in was Revenue $XX markets recovery, improvement sequentially a quarter end Margin programs, Adjusted sequentially sequential driven the and to was

As a share. operating result of $X.XX income, the earnings delivered company adjusted improved per of

of strong Finally, year flow we by the operational generated disbursement. cash with we flow quarter fourth during exited transformation free cash $XX the million unencumbered as

our call quarter the in discuss results Now detail. Abhi over let more fourth me turn to

Abhishek Khandelwal

and Thank good morning, everyone. you, Scott,

and through As our to year-over-year this we talk results results. segment sequential discuss changes both will we morning,

both COVID-XX in We with Starting XX% primarily portfolio. comparisons, the X, end all price prior the with prior sales the recovery markets was to continues year. improvement drive organically. X% driven up market economies. up segment Lower operating providing and margin cost sequential were sales in sequentially and strengthened basis by XXX quarter of XX% a from driven segment orders across by slide taken by volume million, of opening points, and are and an actions year. aftermarket was organically. quarter XX% the Sequential significant X%, use Industrial in sequential exited of Industrial saw lower in margin increases year Revenue operating versus on improvement comparison. our Industrial down impact driven end major a We year-over-year $XXX QX, down throughout

offset $XX aerospace, resulting in timing revenues versus orders and the Aerospace in million XXXX. XX% Strong our impact driven of by of commercial of $XX in growth defense quarter our Defense deliveries lower year. confident on COVID-XX XX% commercial down are year. primarily on X, prior declines We remain the the segment in only ongoing prior business. segment's XX% program slide in Both defense book quarter, down the and impact orders COVID-XX mostly quarter. X% the was prior versus and to large from Turning million, sequentially up outlook Revenue

year strong actions in the cost margin operating up in with sequentially quarter, with roughly year-over-year. drove Finally, margins prior Pricing XX% was productivity flat revenue. lower combined X% line and and despite

cash remaining was Germany. QX, a rate took asset tax against valuation deferred tax for $XX to approximately effective This million Moving a company The record cash XX%. in X; this to non of approximately charge allowance slide the charges accounting for and an future GAAP quarter, not charge our not after our impact results. results to does impact non-GAAP is are on tax the under have non-GAAP non rules. after expected required tax This

the $X Looking charge quarter. with at a charge million amortization the record by pension as lower was charges special and of restructuring a expense $XX the activities primarily income. pretax items was acquisition last restructuring depreciation million, $X.X Interest year compared the debt million quarter charges, to a we driven in in down result related associated Other income total and quarter. approximately million of of was $XX.X $X.X with remaining of million, The balances.

Finally, corporate million $X.X were the in costs quarter.

X. slide to Turning

flow and particularly free our quarter, leverage pay cash debt sale XX% Xx to reduction we instrumentation working to down of remains million lower to improvement was the the $XXX compared from will target $XX be X.Xx capital, to XXXX. million the proceeds further net adjusted $XXX year-over-year. previously, net of used XX% priorities by up XXXX capital mentioned further business improved in or of debt in XXXX. working our generated ratio debt and of Free to in continued flow Free to operating impacted and EBITDA. reduce a We fourth the use million, expect sampling our positively Scott As inventory. was income and cash cash one flow top Reducing our

Now hand our provide to I will over it on to some end Scott back color markets.

Scott Buckhout

Abhi. Thanks,

our industrial Let's start X. with slide outlook on

up after China end quarter growth Abhi market And most Europe the in X% in in and we of hitting signs down the year we auto by down increase recovery Geographically, to orders, India. in due significantly see QX. versus and fourth America up recovery a revenue compare. mentioned expecting major Downstream sequentially an started across QX aftermarket continue but orders As see in come signs North the of between to difficult industrial X% were to year-over-year. driven and bottom Industrial quarter. in We're evident in were to last

as QX. end dip machinery a manage our degree. processing markets, QX revenue Downstream starting oil digit down improve. seeing water across consumption see and to waste We're oil increase to chemical a starts including sequentially normal midstream as mid also global We're single to see manufacturing, in gas, increases. construction, consumer CapEx to and expect seasonal open gas to in demand and expected CapEx. in cycle We as be refiners and generation short continue improvement versus a power and in revenues We're aftermarket lesser building up expecting dynamic to a economies similar customer but

quarters. We expect with expected to is the as a consistent these roughly further improve year of unfolds. markets X% be Pricing prior benefit to end

timing the versus the of and Moving and of were Both orders Defense, our declines program were and QX defense on sequentially Aerospace driven in ongoing Defense commercial primarily by to orders prior year. businesses. large impact COVID-XX and Aerospace down

across expect XXXX order and multiple largely by We programs. missile our drone strength Joint driven through programs continue defense the Strike to and Fighter

due growth be for to OEM XX% leading expect our OEM US into We which order products other Defense lower confident revenues expected of first prior We the versus X% the and in segment's quarter. to to includes as of We the XXXX. through spares aircraft rates X% Revenue utilization improvement outlook and missiles quarter modest X% growth to defense remain production improves, Defense and to in XX% anticipate to shipments, down year. the commercial a timing orders helicopters. the drones, X% expected from large group, year. increase is be in down

increased US to Rafale XX% aerospace In expected build with in rates the commercial drone addition, broader predator line the market. jet the down between planning fighter and revenue in we're XX% the and Europe. is Commercial in be for for

the on quarter, with to aircraft in the to for and year benefit at production line and full Pricing year. is expected both but Boeing line Airbus improve with of throughout strong, the X% we in rates. XXXX expect market position is revenue be utilization in and aircraft Our

hand to guidance. to I'll Abhi discuss it our over Now

Abhishek Khandelwal

like I'd Before the jumping share first guidance, expectations year into for few a to quarter. full more

expenses provided, of to such corporate million $X.X aerospace revenue our timing and and full of XX% year million $X.X mix and also than aftermarket Defense. as roughly planning In XX% in Aerospace full expense we're than RFPs. detrimental in the and to defense the be higher guidance is are slightly XX% costs to XX% margins certain to due QX. of Industrial We're margins margins OEM Scott to the expected addition for in incremental of in rate run Interest year expecting Decremental that due to expected higher revenue. detrimental expected XXXX of

Finally, flow annual seasonality due will QX for of free disbursement. to be cash negative

to X% digits single mid aerospace and moving organic of expected expecting full digits. we year to defense at low Now industrial revenue growth and X% single to at with to XXXX are guidance; grow low

better be to for slow XXXX significantly planning continued pandemic than aerospace, commercial are where expect levels. in pre We than but recovery remains we lower

downstream XX% remains to market, business defense modest win we earnings as on driven is adjusted Defense price programs. improvement to healthy This costs up improving the per ongoing of $X.XX by expecting we structural margins Our and growing industrial see top business We're half of XX% XXXX recovery In increase productivity. increases, expect with continue activity improved US XXXX. new versus and end our in from XXXX. back $X and out growth share to in to deliver line

these we We Finally, in percent of reflects market we're in to our and within end our income confident improvements to what four shareholders guidance CIRCOR. XX%. seeing a employees. not that ability can flow only our results we the free for of this customers, feel deliver for adjusted as control operational cash suppliers planning that walls and the deliver XX% net our are We're to but of

to up. to back wrap hand Scott I Now

Scott Buckhout

priorities. remained our XXXX, a To and summarize, inclusive the best remained delivering to our culture. performance. experience customers and focused while further on developing taking actions financial and fostering improve strategic talent we We In attracting, we're our focused on retaining diverse operational

I'd margin management With cash compete. technology top We improvement expansion. that operational invest to products, will we leveraging I'll innovative drive and be to position customers and through differentiated for to continue experience system take closing, expense. the strong and CIRCOR technology free our growth questions. The be customers. commitment enhance and in to support in our our And our the and to In mission continue we Value priority, products their working delivering to based by will operating where a continue critical flow aftermarket through niches market new continues thank to regional to safety happy entire Abhi enhancing to delever CIRCOR efficient ongoing the capital sheet. like balance your team pricing

Operator

with first [Operator of Instructions] Our line comes Citi. question Andy from Kaplowitz

AndyKaplowitz

QX for sequential downstream first, see, Obviously, industrial about talking just downstream did for revenue came lower it end, you your Maybe second. in said of expected focusing muted. last guys. quite pick are in you up morning, assumptions orders, your which good terms to and in Hey, guide for a you the QX at quarter on still

give can on color what's going you downstream for on specifically related So XXXX? and your businesses more us in assumptions

ScottBuckhout

so downstream -- what happened in so in let's for with Sure, start downstream. QX

So we compare year business difficult was QX year-over-year. XX%. had in about up a Last downstream

you the result as of a see in compare. orders a this year, So significant fairly difficult drop

If overall, industrial it you flat at ex look without was all downstream downstream. roughly

that was variance QX. So quarter in the the big for

look see as a the cautious a in we did lot a first activity somewhat continue have we and going lot through As at half, taking activity. of view, we're actually, downstream forward, we to QX, of we

of quoting projects. managing are lot On in the different and on aftermarket in aftermarket side we process global, a it's downstream and

project On more international, side, the on capital of America. the it's it's CapEx outside side North

So decent and Europe. Russia, activity in degree we're amount to of in a in India, some seeing

And activity. capital lot so but projects in are North a America, less

The But So pretty we're I'd back downstream, we're projects We being first an for lot drop. have have say they doing forward sequentially the long, we're eventually right delay improvement QX. half. refiners excited the that we're aftermarket, particularly projects cautious to look into these orders managing the they work. we start about when we so now then a And think go expecting and can aftermarket of half. in and as in convert for only to

back see half significantly be we're that improvement than So first better the will But half. we optimistic the we'll the half. first think through

AndyKaplowitz

Thanks, these programs defense, are least you of coming were XXXX, for pretty question lumpy. then last similar Scott. projects you're talking pretty at a into quarter, it And you're maybe like confident when and some seems

So QX you're down talking about being here.

my You spares, anything So mentioned Is guess changed. changed? the really is just the it administration has I question obviously, timing?

this just is has timing? Or So the outlook really changed?

ScottBuckhout

from $XX as our orders Navy Navy did fundamentally can We of half get is orders in push quarter. largely orders So in nature million business, side, million, QX What a on see on see defense XXXX. orders, you of the first we we spares that can get defense $XX timing. the get, we big some into very lumpy $XX piece million, the the change

you're And and when I piece, you look largely is so business, at in aerospace defense seeing think our what defense timing. aggregate, the

We about on. programs going of bullish very are bullish in start still up We're XXXX about lot platforms and we're So in the ramping to that we're defense. new that XXXX. won a XXXX

forward. of largely we -- terms So still we what in And with feel good orders seeing year-over-year is Navy. about the to large timing defense specifically respect variances going of you're with

AndyKaplowitz

just then Scott. QX, obviously Abhi capital Thanks, talk in working situation. last about cash And good question for maybe flow the

You improvement in QX mentioned in improvement in XXXX. further inventory expects

capital bit sort little potential on that a us give maybe the more So the of in working color what's side.

you You have. guide need that to that to XX% hit XX%

AbhishekKhandelwal

Yes, absolutely.

in specifically the in inventory. So we've opportunity XXXX XXXX, throughout that as capital been look working about think you talking and about is we've side,

$X do do work going So XXXX, think our of you XXXX we improvement. to look with at further a improve and on so we that as working starts to basis, That inventory see if million to have capital on XXXX. income go into said going year-over-year net as you're about basis, out. year-over-year a coupled And you about

what That's are. industrial company Over XX% to the companies the in the range. expect long, be we typically

we're work focused have on. And to We go that's some do. what

Operator

next KeyBanc. Our Jeff line Hammond question of with comes from

JeffHammond

are thought but some Hey, the just get the of what maybe further growth. sense to these how downstream industrial. a here. suggest seems of you're that I in would the guys. easy of seeing it because beyond markets lagging seeing I versus variance model markets turning given the framework And kind Hey, are And understand in we're discussion, see industrial very of terms of activity want so more good faster, bidding quoting some morning, think biggest and comps better we'd acceleration, -- recovery my kind broad activity I is just in

ScottBuckhout

Yes, I think.

in in that we're expecting me we're of pieces start recovery, some that saw QX continue industrial and to let we for in specifically, terms business So, seeing QX. of lead

So the they're again. up we're XX%, up were industrial be QX, sequentially in orders going to expecting about and

go Now start difference again are The let we market. seeing sequentially rough order as but end of specific with magnitude geographically, aftermarket high me into we also by digits a single But pieces, versus OEM. QX.

in geographic, and to EMEA Europe So aftermarket, part well. as improvement we're back Asia, been are we growth America Russia And in OEM of India. China let we continuing an both seeing or and to before see shift seeing starting seen that. we're I the industrial should And the me say North come we and were improve. have seeing, haven't

seeing end the market improvement in we're look North cycle specifically, When shorter businesses Europe, America. we first. So in at recovering are the

water; to a of is certainly this longer manufacturing, in seeing for to where so cautious these bit it about be waste CIRCOR. cycle the areas little chemical slower; will happen seems what's what The be we're the that's that sure us. is pieces we're where And to starting. being short here. not machinery be And processing, cycle are with tend going longer cycle pace an improvement But we're

markets there's trying we're open so here be up. of economies way future. are to at the these as lot And look balanced the uncertainty are And turn. going still And the with a we going way to to these

this of So with how the specifically little with we to pieces we're longer business. with respect being the here look a bit at cycle cautious

JeffHammond

growth? is your great. break commercial way Aerospace, digits, guide single versus How think a you low Okay, for is defense year you on out? growth about to defense, think full the there And mid then about how to

ScottBuckhout

we do that. can yes, Sure,

as improve, -- commercial, starts recovery in announced have build business, aircraft So And we're to along utilization improve whole as a the so we to been start when rates commercial was to look and modest we significantly look at our XXXX. at -- we expecting improve. with it market down when you

and obviously XXXX. XXXX better, commercial were far We doesn't to get modestly we XXXX. away around We but back be levels expect in XXXX until to still expect from where that

recover. a recovery. starts So But improve is that, and And we long slow it's expect as think to we having said to XXXX. aftermarket OE orders XXXX than better

On the bullish about still defense side; we defense. are

XXXX expect We growth XXXX. organic to from

with We guidance. line expect in

We expect XXXX go into roughly XXXX. single as growth we mid digit into

JeffHammond

Both in single mid band. that kind of to low

AbhishekKhandelwal

right. That's exactly, yes, that's Correct.

that as year easy mind we get the too. in aerospace through the in keep pretty Just progress commercial comps

to kind of come we So you ties growth the through, might to back out. that which see guide laid start

ScottBuckhout

to a linked this growth pieces And platforms, the the we're submarines, good that are two growth. are lot is our of specific driving in platforms, big seeing missiles, Navy those

JeffHammond

Okay in side, about we remarks? the we the costs this how just and how But don't then about, I think temp if I back? do do coming missed on cost know, think prepared

AbhishekKhandelwal

Yes, I can answer that question.

so So that there $XX answer I pieces if a But a on all to here. the set million million we I that page piece there's are let three before just about little of think we it, $XX me cost, the which can it, about question, structural. that talked bit be to the stage same XXXX, is

start Now pandemic. keep structural cost mind before in out even that the coming

of we a through of rate. went -- was already part was as already lot the So that it the run pandemic,

to being lot to about world cost second, that benefit part rate. into shot. The level, the cost. volume a tied is half just that, is expenses that there, think majority of back And out the of you the But to hasn't temporary was that that you because of back, comes already the about And temporary as is there's structural is think or balance a for have that still a pretty at if business. carryover that's business. of of furloughs travels that's only still starts So when already lower going a And the back to portion still XXXX. back. $XX tied we But come is which avoidance come million that million of run in really about come about $X.X a

the about think temporary piece. we how cost that's So

So is and roughly the other half on it's of volume. about waiting back half

Operator

of a from Stifel. Our line with next comes Jones Nathan question

NathanJones

Good morning, everyone.

in And revenue the inflation Are able I the pass pass talk contribution guys here system price think through quickly? from you quite recently. Can it crossing you a what's about guidance assumed the costs? you Are these this through? year? able bit to of to

ScottBuckhout

so question. inflation okay, we'll start, I with your on one part Okay, -- start

about parts raw So we it's way what inflation I start we're CIRCOR, we're commodity. always in by we're that we're me -- assembling. think let buying the rare for components buying think that buy, almost It to -- and

our long-term team nice think contracts. so suppliers significant of with businesses Those absorbable And associated our will of we band our signing of a kind that a suppliers usually chain variance when Anything up absorb. supply of have long-term the job don't and contracts in has general, At done with we get you about this band into outside expect and that inflation negotiation. some inflation. point, a

fact, will from still In get we'll that than expecting we're supply productivity team reductions chain our cost the meaning inflation that more positive, net absorb. our will be

Based So on the CIRCOR we this we're inflation and point. major suppliers. not at be of supply our with in have place expecting contracts base, our issue nature a the to for

to way expecting relatively pricing less you On play of volume XXXX. in pricing the that's think we're in see full expect the in what you more side, year, the out. line I There's low aftermarket will. of expect or business, we're less kinds with to the of XXXX you linked should nature is with XXXX. percentages expecting mix pricing you'll us the from it if seasonality That's the pricing, relative and the But line some should of more in for or QX, in the

AbhishekKhandelwal

Nathan, this Abhi. So, is

a price in XXXX. levels you about So in you similar in And should XXXX if X% in expect XXXX. really about you think company total what saw the was

NathanJones

guys disruptions. talk you're there about and mitigating that shortages, factors chain supply chain Helpful, about you're Can thanks. Hearing seeing that anything some any supply undertaking? out some you

Scott Buckhout

demand. factories and our So level at all we're of up this at point in are the of -- running time

disruption. so not And experiencing meaningful we're any

manage nothing some here we and we last but few year. a there's shortages like there saw have meaningful Of that times day-to-day, we course,

have adapted our has as meaningful seems and we world to most moment. issues don't chain part, the So well us at at the have the any chain -- not for as supply supply least we're

Operator

Ladies for you conclude today. further questions at there our This call. and joining gentlemen, Thank are this does us no conference time.

may a And now for participation. wonderful have your you Thank You day. disconnect time. this lines your

Alex Maki	Vice President FP&A Investor Relations
Scott Buckhout	President and Chief Executive Officer
Abhishek Khandelwal	Chief Financial Officer
Andy Kaplowitz	Citi
Jeff Hammond	KeyBanc
Nathan Jones	Stifel Financial Corp

Circor International (CIR) 4 Mar 212020 Q4 Earnings call transcript