EDGAR 10-K Filing

Company CIK: 1091883
Filing Year: 2021
Filename: 1091883_10-K_2021_0001091883-21-000005.json

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ITEM 1. BUSINESS
Item 1. Business
This Annual Report on Form 10-K contains certain statements that are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 (the “Act”). The words “may,” “hope,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking statements. We believe that it is important to communicate our future expectations to our stockholders, and we, therefore, make forward-looking statements in reliance upon the safe harbor provisions of the Act. However, there may be events in the future that we are not able to accurately predict or control and our actual results may differ materially from the expectations we describe in our forward-looking statements. Forward-looking statements, including statements about our future performance, including the expected and potential direct and indirect impacts of the COVID-19 pandemic on our business, our ability to maintain our internal controls, the number of new product launches and future cash flows from operating activities, involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the duration and scope of the COVID-19 pandemic; any adverse changes in governmental policies; variability of raw material and component pricing; changes in our suppliers’ performance; fluctuations in foreign currency exchange rates; changes in tariffs or other taxes related to doing business internationally; our ability to hire and retain key personnel; our ability to operate our manufacturing facilities at efficient levels, including our ability to prevent cost overruns and reduce costs; our ability to generate increased cash by reducing our working capital; our prevention of the accumulation of excess inventory; fluctuations in interest rates; our ability to successfully defend product liability actions; as well as the uncertainty associated with the current worldwide economic conditions and the continuing impact on economic and financial conditions in the United States and around the world, including as a result of the COVID-19 pandemic, natural disasters, terrorist attacks and similar matters. For a discussion of these risks, uncertainties and other factors, see Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Overview
As used in this report, the terms “we,” “us,” “our,” the “Company” and “CIRCOR” mean CIRCOR International, Inc. and its subsidiaries (unless the context indicates another meaning). The term “common stock” means our common stock, par value $0.01 per share.
CIRCOR designs, manufactures and markets differentiated technology products and sub-systems for the industrial and aerospace and defense markets. We have a diversified flow and motion control product portfolio with recognized, market-leading brands that fulfill our customers’ mission critical and severe service needs. The Company’s strategy is to grow organically through innovative product development (including growth in the digital space), aftermarket growth, penetrating new regions, margin expansion and through complementary acquisitions; achieve world class operational excellence; and build an inclusive, growth-oriented culture that attracts and retains a diverse group of talent. We have a global presence and operate 21 major manufacturing facilities located in North America, Western Europe, Morocco, China and India. The Company has the following reportable business segments: Industrial segment (“Industrial”) and Aerospace & Defense segment (“Aerospace & Defense”). We sell our products directly to end-user customers and original equipment manufacturers (“OEMs”), as well as through Engineering, Procurement and Construction (“EPC”) companies and our channel partner network.
In 2020, we completed the divestiture of our loss-making Distributed Valves (“DV”) business. This action stemmed from our strategic decision to exit the upstream oil and gas valves market. This business and the associated loss on disposal were reported within discontinued operations in our consolidated financial statements. The following discussion in this Item 1 relates only to our continuing operations unless otherwise noted. Refer to Note 1, Description of Business along with Note 3, Discontinued Operations and Assets Held for Sale, to the consolidated financial statements included in this Annual Report for additional information.
Strategies
Our objective is to enhance stockholder value by focusing on growth, margin expansion, strong free cash flow and disciplined capital deployment. Our strategy to achieve these objectives is to:
1) Build the Best Team. We are committed to creating a strong employee value proposition that attracts talented and diverse people to the CIRCOR team. We are also committed to investing in, engaging, challenging and developing our employees through a variety of development programs. Our goal is to build an inclusive, growth-oriented culture that, when combined with robust process, appropriate metrics and individual accountability, will deliver extraordinary results.
2) Grow Organically and Through Acquisitions. We leverage the power of our global design capabilities to develop innovative products that solve our customers’ most challenging and mission critical problems. New product development is an important part of our growth strategy. We are driving innovation in our traditional flow control product lines, as well as augmenting the existing product offerings with digital solutions that address well-understood customer needs. We are focusing on regional expansion in areas where we see opportunity for our products but have limited presence today. Expansion of our aftermarket is also a key part of our organic growth strategy. We sell products that have strong aftermarket opportunity and endeavor to service our customers throughout the lifetime of the installed equipment.
In addition to organic growth, we expect to acquire businesses over time. We are primarily focused on companies with differentiated technologies in complementary and adjacent markets. In addition to strategic fit and differentiated technology, the main criterion for an acquisition is return on invested capital.
3) Margin Expansion. Given our strategy of providing differentiated solutions to mission critical applications, we are driving value pricing across the Company, with a particular focus on aftermarket. We are also focused on the movement of operations to lower costs jurisdictions as well as simplifying our structure and optimizing centers of excellence to not only drive costs down and improve margins but to help us improve our customer service, operations and controls.
4) Achieve World Class Operational Excellence. Our Global Operations and Supply Chain organization is fully committed to achieving operational excellence in support of our customers’ expectations of high quality, on-time delivery and market competitiveness. We follow the CIRCOR Operating System (“COS”), which creates a disciplined culture of continuous improvement for driving operational excellence including a sales and inventory operations plan that provides for world-class quality and delivery while maintaining an optimal level of working capital. COS is comprised of ten business process attributes designed to engage and empower our employees to recognize and eliminate waste, work real-time problem solving as part of their everyday job experience, and enhance our performance both in operations and business office processes. Under the COS, our employees participate in a regimented training program and receive regular prescriptive assessments and action plans to drive process maturity. Quantitative performance metrics define site certification levels to help attain and sustain a level of quality, productivity, inventory management and market competitiveness that delights our customers, stockholders, and employees.
Business Segments
Industrial
Industrial is a global portfolio of highly engineered and differentiated flow control solutions. Our primary products are positive displacement pumps, specialty centrifugal pumps, metering pumps, automatic recirculating valves, control and actuators valves for mission critical applications.
Our technology is focused on moving the most difficult fluids with extremely high efficiency for critical applications in the general industrial, power, process, energy, and commercial marine end markets.
We plan to grow the Industrial segment by providing innovative new products, including digital products, in multiple product lines that address our customers' severe service and mission critical needs. We are driving growth regionally and developing products in-region, for-region. Growing our share of aftermarket business is a key element of our organic growth. We are using digitization, including a new CIRCOR app, to make it easier for our customers to order parts from us. The Industrial segment is also focused on pricing initiatives to drive value-pricing for our products. We believe margin expansion can be achieved through use of COS at our sites.
Industrial is headquartered in Radolfzell, Germany, with primary manufacturing centers in North America, England, Germany, India and China.
Markets and Applications
Industrial serves the general industrial, power and process, energy and commercial marine markets.
•The general industrial market includes a broad range of manufacturing operations for flow control. Our products are used to handle fluids with a wide range of viscosity, lubricity, temperature, pressure and flow requirements, automate and control plant utilities, increase energy efficiency in buildings and campuses, and safely regulate critical fluids such as steam and industrial gases used in manufacturing processes.
•The power and process market is comprised of electric utilities, industrial power producers and OEM power generating equipment providers. Our products and services are used across this segment in lubrication management for turbines and generators, as well as fuel delivery, heat transfer, and emissions reduction applications. We serve power generation facilities and processes fueled by natural gas, oil, hydro, solar, nuclear, and coal.
•The energy markets we serve are primarily midstream and downstream oil & gas, as well as renewables. In midstream, our products and services are used in the transfer of oils and refined products via pipelines, ship vessels, railcars, and trucks, as well as pipeline pigging and associated pipeline integrity operations. Our products and services are also used to manage and maintain storage terminals. In downstream, our products are used to support critical refining processes, both directly in the process and as part of integrated equipment supplied by OEMs. Our products are also used in the production and management of biofuels and supporting the operation of large-scale wind farms.
•The commercial marine market includes shipbuilders, OEM suppliers of onboard equipment, and shipping fleet operators. Our products and services are designed specifically to support all aspects of fluid systems, including propulsion, ballast handling, cooling water, bilge, fuel, power generation, and mechanical hydraulics.
•In all of the markets we serve, we provide aftermarket components and aftermarket services.
Brands
Industrial manufactures and markets products and services through the following brands:
Allweiler, Houttuin, IMO Pump, IMO AB, Leslie Controls, RG Lawrence, RTK, Schroedahl, Tushaco, and Zenith.
Products
Industrial offers a range of flow control products and services, including:
•3 Screw Pumps
•2 Screw Pumps
•Progressing Cavity Pumps
•Specialty Centrifugal Pumps
•Gear Metering Pumps
•Automatic Recirculation Valves
•Highly engineered valves, actuation and unheading devices for refinery coking and Fluidized Catalytic Cracking Units (FCCU) operations
•Severe Service and General Service Control Valves
•Pipeline pigs and high-pressure pipeline closures
Our products must comply with certification standards applicable to many of our end markets. These standards include but are not limited to ISO 9001:2008, ANSI/ASQC Q 9001, API 676, and Mil-I-45208.
Customers
Industrial's products and services are sold directly to end-users, original equipment manufacturers (“OEMs”) that supply specialized systems in their respective end markets, and EPC companies and through a global network of indirect sales channels.
Revenue
Industrial accounted for $505.5 million, $691.7 million and $776.5 million or 65%, 72% and 77% of our net revenues for the years ended December 31, 2020, 2019 and 2018. For the year ended December 31, 2020 compared to 2019, $90.3 million of decline in net revenues was due to divestitures and for the year ended December 31, 2019 compared to 2018, $81.0 million of decline in net revenues was due to divestitures.
Aerospace & Defense
Aerospace & Defense produces diversified and innovative flow control products. Our primary product focus areas are valves, pumps, actuation, motors, switches and high pressure pneumatic systems. Aerospace & Defense products are mainly used in aerospace, defense and general industrial markets.
We plan to grow Aerospace & Defense by increasing market share in existing and new markets through exceptional sales and customer service and with new products enabled by innovative, reliable and high quality solutions. A key part of our strategy is the development of a strong technology team that can use our core technology to accelerate new product development. We are exploring adjacency applications for our core technology and opportunities to increase our aftermarket sales. Our growth will also be driven by margin expansion, through increased manufacturing capabilities at our lower cost facility in Morocco, adoption of the COS by our sites and value pricing initiatives.
We have Aerospace & Defense facilities in North America, the United Kingdom, France, Morocco, and India. Our Aerospace & Defense headquarters is in Corona, California.
Markets and Applications
Aerospace & Defense serves the aerospace and defense markets.
•The aerospace market that we serve includes commercial aerospace primarily focused on systems and components on airliners and business jets, such as hydraulic, pneumatic, fuel and ground support equipment including maintenance, repair and overhaul (MRO). In addition, we serve the defense aerospace market, including applications where controls or motion switches are mission critical. We support fixed wing aircraft, rotorcraft, missile systems, ground vehicles, submarines, weapon systems and weapon launch systems, ordinance, fire control, fuel systems, pneumatic controls, and hydraulic and dockside support equipment including MRO.
•The non-aerospace defense market that we serve is primarily focused on naval vessels, with our pumps and valves used across most naval platforms in a wide variety of onboard applications. We are a trusted supplier to many countries' navies, leveraging our engineering and manufacturing capabilities to work directly with our customers in developing targeted solutions for mission critical applications including very low acoustic signature pumps for submarines.
•In all of the markets we serve, we provide aftermarket components.
Brands
Aerospace & Defense manufactures and markets control valves, pumps, regulators, fluid controls, actuation systems, pneumatic valves and controls, electro-mechanical controls, motors and other flow control products and systems. Aerospace & Defense provides actuation and fluid control systems and services through the following brands: CIRCOR Aerospace, Aerodyne Controls, CIRCOR Bodet, CIRCOR Industria, CIRCOR Motors, Hale Hamilton, Leslie Controls, Portland Valve, and Warren Pumps.
Products
Aerospace & Defense offers a range of solutions, including:
•Specialty Centrifugal, 2-Screw, and Propeller Pumps
•Specialized control valves
•MIL-Spec butterfly valves and actuators
•Electromechanical, pneumatic and hydraulic, fluid and motion control systems
•Brushless DC Motors
•Switches
•Actuation components and sub-systems
In the manufacture of our products, we must comply with certain certification standards, such as AS9100C, ISO 9001:2008, National Aerospace & Defense Contractors Accreditation Program, Federal Aviation Administration Certification and European Aviation Safety Agency as well as other customer qualification standards. Currently all of our manufacturing facilities comply with applicable standards.
Customers
Aerospace & Defense products and services are sold directly and indirectly to a range of customers, including those in the military and defense, commercial aerospace, business and general aviation and general industrial markets. Our customers include aircraft manufacturers (OEMs) and Tier 1 suppliers to these customers.
Revenue
Aerospace & Defense accounted for $267.8 million, $272.6 million and $237.0 million, or 35%, 28% and 23% of our net revenues for the years ended December 31, 2020, 2019 and 2018, respectively.
CIRCOR Consolidated
Competition
The domestic and international markets for our products are highly competitive. Some of our competitors have substantially greater financial, marketing, personnel and other resources than us. We consider product brand, quality, performance, on-time delivery, customer service, 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 also are important to our success and that our position in the industry is attributable, in significant part, to our ability to develop innovative products and to adapt existing products to specific customer applications. Our ability to leverage our large installed base of equipment to drive repairs and spares growth is a competitive advantage.
The primary competitors of our Industrial segment include: Leistritz AG, Curtiss-Wright Corporation, Netzsch GmbH, ITT Corporation, IMI plc, TD Williamson Inc., Seepex GmbH, and Naniwa Ltd.
The primary competitors of our Aerospace & Defense segment include: Transdigm, Crane Co., Curtiss-Wright Corporation, Moog, Inc., Parker Hannifin Corp., and Woodward Inc.
New Product Development
Our engineering differentiation comes from our ability to offer products, solutions and services that address high pressure, high temperature, and caustic flow. Our solutions offer high standards of reliability, safety and durability in applications requiring precision movement and zero leakage.
We continue to develop new and innovative products to enhance our market positions and drive growth. Our product development capabilities include designing and manufacturing custom solutions to meet high tolerance or close precision requirements. Our Aerospace & Defense segment continues to expand its integrated systems design and testing capability to support bundled sub-systems for aeronautics applications, as well as acoustically superior pumps for marine applications. These testing and manufacturing capabilities enable us to develop customer-specified applications. In many cases, the unique characteristics of our customer-specified technologies have been subsequently used in broader product offerings. The Industrial segment provides unique flow control products for viscous and critical fluids with specific design and engineering capabilities.
We maintain a Global Engineering Center of Excellence in India with a capable technology and engineering team that complements the engineering resources in a business unit.
Customers
For the years ended December 31, 2020 and 2019, no customers accounted for more than 10% of the Company’s consolidated revenues. Our businesses sell into both long-term capital projects as well as short-cycle demand. As a result, we tend to experience fluctuations in orders, revenues and operating results at various points across economic and business cycles.
Selling and Distribution
Across our businesses we utilize a variety of channels to market our products and solutions. Those channels include direct sales, distributors and commissioned representatives. Our channel partner network typically offers technically trained sales forces with strong relationships in key markets. We believe that our established, global direct and indirect sales channels constitute a competitive strength. We believe that we have good relationships with our channel partners.
Intellectual Property
The Company relies upon a combination of trade secrets and patent and trademark registrations to protect its intellectual property. Our patents are scheduled to expire between 2021 and 2030, and our trademarks can be renewed as long as we continue to use them. We do not believe the vitality and competitiveness of any of our business segments as a whole depends on any one or more patents or trademarks. We own certain licenses such as software licenses, but we do not believe that our business as a whole depends on any one or more licenses.
Raw Materials
The raw materials used most often in our production processes are castings, forgings and bar stock of various materials, including stainless steel, carbon steel, bronze, copper, brass, titanium and aluminum. These materials are subject to price fluctuations that may adversely affect our results of operations. We purchase these materials from numerous suppliers and at times experience constraints on the supply of certain raw material as well as the inability of certain suppliers to respond to our needs. Historically, increases in the prices of raw materials have been partially offset by higher sales prices, active materials management, project engineering programs and the diversity of materials used in our production processes.
Regulatory and Environmental Matters
Our business and operations are subject to numerous federal, state and local laws and regulations, both within and outside the United States, in areas such as: competition, government contracts, international trade, labor and employment, tax, environmental protection, workplace health and safety, and others. These and other laws and regulations impact the manner in which we conduct our business, and changes in legislation or government policies can affect our operations, both favorably and unfavorably. Below is a summary of the some of the significant regulations that impact our business (see also Part I, Item IA, Risk Factors).
Government Procurement. The services we provide to the U.S. federal government are subject to Federal Acquisition Regulation, the Truth in Negotiations Act, export controls rules and Department of Defense (DOD) security regulations, as well as many other laws and regulations. These laws and regulations affect how we transact business with our customers and, in some instances, impose additional costs on our business operations. A violation of specific laws and regulations could lead to fines, contract termination or suspension of future contracts. Our government clients can also terminate, renegotiate, or modify any of their contracts with us at their convenience.
Trade Controls. The export of our products is subject to applicable trade controls laws, including those in the U.S., the European Union, the United Kingdom and China, and include, but are not limited to, the International Traffic in Arms Regulations, the Export Administration Regulations, and trade sanctions against embargoed countries. A violation of specific laws and regulations could lead to civil or criminal enforcement action and varying degrees of liability.
Anti-Bribery. We are subject to the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. The U.K. Bribery Act of 2010 prohibits both domestic and international bribery, as well as bribery across both private and public sectors. In addition, an organization that “fails to prevent bribery” committed by anyone associated with the organization can be charged under the U.K. Bribery Act unless the organization can establish the defense of having implemented “adequate procedures” to prevent bribery.
Human Capital
CIRCOR’s success depends on our ability to attract, develop, engage and retain key talent. Management oversees and drives a number of vital employee programs in support of these goals.
Employee Profile
As of December 31, 2020, CIRCOR had 3,138, employees, of which approximately 80% are full-time. 48% of this workforce was in Europe, 41% in the United States, 9% in India and the rest spread across the rest of Asia, the Middle East and Latin America.
39% of our workforce is composed of skilled direct labor working in our factories across the globe. 28% is indirect labor in support of this direct labor. 33% are SG&A staff (including engineering, sales, finance, human resources and legal personnel). 6% of the Company’s U.S. employees are unionized. Outside the United States, we have employees in Europe that are represented by an employee representative organization, such as a union, works council or employee association.
Approximately 19% of the Company's global workforce is female, and 14% of the Company's employees in leadership roles are female. Approximately 31% of the Company's U.S. workforce and 25% of our U.S. employees in leadership roles are racially or ethnically diverse.
Talent Attraction
We employ a rigorous recruitment process to attract and hire the talent needed for our continued success and growth. This includes candidates from diverse backgrounds and with differing experiences. Candidates are carefully vetted and assessed in multiple stages and interviews. Our recruitment processes are designed to comply with local labor laws and regulations.
We actively partner with universities across the globe to recruit promising graduate talent into various functions in the Company. We partner with Kellogg School (Northwestern University) to hire graduating MBAs each year into the Company’s general management rotation program.
Talent Development
We are committed to developing its talent. Some of our employees participate in an annual Talent Review Process and Performance Management Process, which helps assess the performance as well as the potential of employees. We focus on investment in three main methods of developing talent: (1) on-the-job training, (2) mentorship and (3) training.
We offer an annual Senior Leadership Program for top leaders and a Management Development Program for mid-level managers. In addition, we actively train our employees on diversity and inclusion, interpersonal skills, process improvement skills, compliance topics as well as technical skills at the site level. We work with high potential employees to create Individual Development Plans for them and provide opportunities for assessments and coaching as needed. In 2020, 50% of leadership positions were filled internally as CIRCOR lays heavy emphasis on promoting from within.
Talent Retention
We are committed to creating a strong employee value proposition, and our retention strategy centers on building an inclusive, growth-oriented culture that is attractive to our employees. We have regular communications from our senior leaders to employees throughout the organization and provide channels for feedback.
We periodically conduct employee engagement surveys and other similar surveys to measure employee engagement and satisfaction. In addition, our sites host town halls throughout the year to engage employees at a local level. In 2020 while many of our employees worked from home, sites have hosted online events to continue to facilitate employee engagement.
In addition, we offer competitive compensation and benefits packages that are designed to retain, motivate and reward our employees. CIRCOR has a Pay for Performance philosophy, and we align our compensation practices with reference to external benchmarks, internal comparisons and the relationship between management and non-management remuneration. Some of our employees participate in our short-term and/or long-term incentive program connecting payouts to achievement of key financial and other metrics and the employee’s contribution to those results.
We also provide competitive benefits programs in line with local market practice. We regularly review our benefits packages globally, especially in light of changing employees’ expectations as a result of the COVID-19 pandemic. During 2020 we supported more work from home opportunities, and we are rolling out a Flex Work Policy to accommodate employees after pandemic measures are lifted.
We carefully monitor the voluntary attrition of our employees. In 2020, the annualized voluntary attrition rate was 7%. This is lower than our historical rate, in part due to the COVID-19 pandemic, which we believe led to fewer employees leaving their jobs during 2020.
Employee Health & Safety
We are committed to protecting the health and safety of our employees, and safety is one of our Absolutes. Our Absolutes, which are Safety, Controls and Ethics, are the three imperatives underlying everything we do at CIRCOR. Our culture of safety includes an ongoing training program, stand downs when injury events occur and encouraging our employees to speak up if they see a safety hazard.
We also utilize metrics to track employee safety. In addition to common lagging indicators, such as injuries, we look to leading indicators, such as safety observations and near-hits, integrated with established problem-solving methodologies to resolve any issue that endangers worker safety. Our total recordable incident rate for 2020 was 0.76.
The ongoing COVID-19 pandemic has created unique challenges for our employees, and we are striving to ensure the health, safety and general well-being of our teams. Actions we have taken in response to the pandemic challenges include the following:
•Adjusting attendance policies to encourage those who are sick to stay home;
•Increasing cleaning protocols across all locations;
•Initiating regular communication regarding impacts of the COVID-19 pandemic;
•Implementing temperature screening of employees at the majority of our facilities;
•Establishing physical distancing procedures for employees who need to be onsite;
•Providing additional personal protective equipment and cleaning supplies;
•Implementing protocols to address actual and suspected COVID-19 cases and potential exposure;
•Prohibiting all domestic and international non-essential travel for all employees;
•Requiring masks to be worn in all locations where allowed by local law; and
•Providing wellness seminars to employees addressing mental health needs exacerbated by the pandemic.
Diversity & Inclusion ("D&I")
CIRCOR is committed to cultivating a workplace that makes diversity, equity, inclusion and transparency priorities in everything we do. In furtherance of that commitment, we have established active D&I initiatives in the areas of talent acquisition, talent development, total rewards, employee engagement and communications, which impact employees at all levels of the organization. In addition, we appointed our first D&I Leader, who is driving our D&I initiatives and goals. Our goal is to increase gender and racial/ethnic representation throughout the organization, including senior management, and our initiatives are focused on that goal.
D&I achievements in 2020 included the following:
•Developed strategy, priorities, goals and scorecard;
•Added D&I review in periodic Talent Reviews with sites, including section for Emerging Female Talent;
•Launched our first Employee Resource Group in late 2020, Women @ CIRCOR;
•Approval of Flex Work Policy in the United States and Germany (other jurisdictions will follow in 2021);
•Published D&I metrics; and
•Multiple employee communications on D&I topics and initiatives.
Available Information
We file reports on Form 10-Q with the Securities and Exchange Commission (“SEC”) on a quarterly basis, additional reports on Form 8-K from time to time, and an annual report on Form 10-K on an annual basis. These and other reports filed by us, or furnished by us, to the SEC in accordance with section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge from the SEC on its website at http://www.sec.gov. Additionally, our Form 10-Q, Form 8-K, Form 10-K and amendments to those reports are available without charge, as soon as reasonably practicable after they have been filed with, or furnished to, the SEC, on our Investor Relations website at http://investors.CIRCOR.com. The information on our website is not part of, or incorporated by reference in, this Annual Report.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Set forth below are certain risk factors that we believe are material to our stockholders. The risks described in these risk factors could harm our business, financial condition, cash flows, results of operations and reputation. You should also consider these risk factors when you read “forward-looking statements” elsewhere in this report. You can identify forward-looking statements by terms such as “may,” “hope,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of those terms or other comparable terminology. Forward-looking statements are only predictions and can be adversely affected by any of the following risks:
Risks Related to our Markets and Industry
We face significant competition and, if we are not able to respond, our revenues may decrease.
We operate in a highly competitive environment in each of the markets we serve, and we face competition in each of our segments from numerous competitors. We consider product innovation, product quality, performance, customer service, on-time delivery, 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, resulting in a loss of market share or decreases in prices, either of which could have a material adverse effect on our business, financial condition, cash flows 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. The majority of our transactions are denominated in either U.S. dollar or Euro currency. Accordingly, currency fluctuations could cause our U.S. dollar and/or Euro priced products to be less competitive than our competitors’ products that are priced in other currencies.
We, along with our customers and vendors, face the uncertainty in the public and private credit markets and in general economic conditions in the United States and around the world.
In recent years there has been at times disruption and general slowdown of the public and private capital and credit markets in the United States and around the world. Such conditions can adversely affect our revenue, results of operations and overall financial growth. Our business can be affected by a number of factors that are beyond our control such as general geopolitical, economic and business conditions and conditions in the financial services market, which each could materially impact our business, financial condition, cash flows and results of operations. Additionally, many lenders and institutional investors, at times, have reduced funding to borrowers, including other financial institutions. A constriction on future lending by banks or investors could result in higher interest rates on future debt obligations, restrict our ability to obtain sufficient financing to meet our long-term operational and capital needs or limit our ability in the future to consummate strategic acquisitions. Any uncertainty in the credit markets could also negatively impact the ability of our customers and vendors to finance their operations which, in turn, could result in a decline in our sales and in our ability to obtain necessary raw materials and components, thus potentially having an adverse effect on our business, financial condition, cash flows or results of operations.
Implementation of our acquisition strategy may not be successful, which could affect our ability to increase our revenues, reduce our profitability or lead to significant impairment charges.
One of our strategies has been and is to increase our revenues and expand our markets through acquisitions that will provide us with complementary products. We expect to face competition for acquisition candidates that 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 acquired companies or successfully integrate such additional acquired companies without substantial costs, delays or other problems. Acquisitions may also involve a number of special risks, including: adverse effects on our reported operating results; use of cash; diversion of management’s attention; loss of key personnel at acquired companies; or unanticipated management or operational problems or legal liabilities.
Moreover, there can be no assurance that companies we have previously acquired or that we may acquire in the future ultimately will achieve the revenues, profitability or cash flows, or generate the synergies upon which we justify our investment in them; as a result, any such under-performing acquisitions could result in impairment charges which would adversely affect our results of operations. The acquired assets of businesses include goodwill and indefinite-lived intangible assets that are required to be tested for impairment at least annually or more frequently if impairment indicators are present. Events or changes that could indicate that the carrying value of our goodwill or indefinite-lived intangible assets may not be recoverable include reduced future cash flow estimates, slower growth rates in industry segments in which we participate and a decline in our stock price and market capitalization. In addition, any prolonged material disruption of our employees, distributors,
suppliers or customers, whether due to COVID-19 or otherwise, would negatively impact our global sales and operating results and could lead to impairments and other valuation allowances.
Risks Related to our 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, cash flows or results of operations. We are working to continuously enhance and improve Lean manufacturing techniques as part of the CIRCOR Operating System. We believe that this process produces meaningful reductions in manufacturing costs. However, continuous improvement of these techniques may cause short-term inefficiencies in production. If we are not successful in continuously improving our processes, our results of operations may suffer.
Further, a catastrophic event could result in the loss of the use of all or a portion of one of our manufacturing facilities. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur. Any of these events individually or in the aggregate could have a material adverse effect on our business, financial condition and operating results.
If we cannot pass on higher raw material or manufacturing costs to our customers, we may become less profitable.
One of the ways we attempt to manage the risk of higher raw material and manufacturing costs is to increase selling prices to our customers. The markets we serve are extremely competitive and customers may not accept price increases or may look to alternative suppliers, which may negatively impact our profitability and revenues.
If our suppliers cannot provide us with adequate quantities of materials to meet our customers’ demands on a timely basis or if the quality of the materials provided does not meet our standards, we may lose customers or experience lower profitability.
Some of our customer contracts require us to compensate those customers if we do not meet specified delivery obligations. We rely on numerous suppliers to provide us with our required materials and in many instances these materials must meet certain specifications. In addition, we continue to increase our dependence on lower cost foreign sources of raw materials, components, and, in some cases, completed products. While we actively manage our supply chain, having a geographically diverse supply base inherently poses significant logistical challenges, and we could experience diminished supplier performance resulting in longer than expected lead times and/or product quality issues. In addition, the potential physical effects of climate change, such as increased frequency and severity of storms, floods and other climatic events, could disrupt our supply chain, and cause our suppliers to incur significant costs in preparing for or responding to these effects. These or other meteorological changes could lead to increased costs. The occurrence of such factors could have a negative impact on our ability to deliver products to customers within our committed time frames and could adversely impact our results of operations, financial conditions and cash flows.
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 industries are characterized by: intense competition; changes in end-user requirements; technically complex products; and evolving product offerings and introductions.
We believe our future success depends, in part, on our ability to anticipate or adapt to these factors and to offer, on a timely basis, mission-critical 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, which could delay or prevent our development, introduction or marketing of new products or enhancements and result in unexpected expenses.
If we fail to manufacture and deliver high quality products in accordance with industry standards, we will 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 are used in the aerospace, military, commercial aircraft, analytical equipment, oil & gas refining, power generation, chemical processing and maritime industries. These industries require products that meet stringent performance and safety standards, such as the standards of the International Organization for Standardization, Underwriters’ Laboratory, American National Standards Institute, American Society of Mechanical Engineers and the European Pressure Equipment Directive. If we fail to maintain and enforce quality control and testing procedures, our products will not meet these stringent performance and safety standards that are required by many of our customers. Non-compliance with the standards could result in a loss of current customers and damage our ability to attract new customers, which could have a material adverse effect on our business, financial condition, cash flows or results of operations.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that technology could harm our business, financial condition, cash flows and results of operations.
We rely on information technology networks and systems, including systems of third parties and the Internet, to process, transmit and store electronic information, and manage or support a variety of business processes, including operational and financial transactions and records, personal identifying information, payroll data and workforce scheduling information. We purchase some of our information technology from vendors, on whom our systems depend. We rely on commercially available systems, software, tools and monitoring to provide security for the processing, transmission and storage of Company and customer information. Although we have taken steps to protect the security of our information systems and the data maintained in those systems, no such measures can eliminate the possibility of the systems' improper functioning or the improper access or disclosure of confidential or personally identifiable information such as in the event of cyber-attacks. Security breaches, whether through physical or electronic break-ins, computer viruses, ransomware, impersonation of authorized users, attacks by hackers or other means, can create system disruptions or shutdowns or the unauthorized disclosure of confidential information. Additionally, outside parties frequently attempt to fraudulently induce employees, suppliers or customers to disclose sensitive information or take other actions, including making fraudulent payments or downloading malware, by using “spoofing” and “phishing” emails or other types of attacks. Our employees have been and likely will continue to be targeted by such fraudulent activities. Outside parties may also subject us to distributed denial of services attacks or introduce viruses or other malware through “trojan horse” programs to our users’ computers in order to gain access to our systems and the data stored therein. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and continuously become more sophisticated, often are not recognized until launched against a target and may be difficult to detect for a long time, we may be unable to anticipate these techniques or to implement adequate preventive or detective measures.
If Company, personal or otherwise protected information is improperly accessed, tampered with or distributed, we may face significant financial exposure, including incurring significant costs to remediate possible injury to the affected parties. We may also be subject to sanctions and civil or criminal penalties if we are found to be in violation of the privacy or security rules under federal, state, or international laws protecting confidential information. Any failure to maintain proper functionality and security of our information systems could results in the loss of trade secrets or other proprietary or competitively sensitive information, compromise personally identifiable information regarding customers or employees, interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties. The costs associated with maintaining robust information security mechanisms and controls are also increasing and are likely to increase further in the future. We continuously seek to maintain a robust program of information security and controls, but the impact of a material information technology event could have a material adverse effect on our competitive position, reputation, results of operations, financial condition and cash flows.
Terrorist activity and/or political instability around the world could cause economic conditions to deteriorate and adversely impact our businesses.
In the past, terrorist attacks have negatively impacted general economic, market and political conditions. Terrorist acts, acts of war or political instability (wherever located around the world) could cause damage or disruption to our business, our facilities or our employees which could significantly impact our business, financial condition or results of operations. The potential for future terrorist attacks, the national and international responses to terrorist attacks, political instability, and other acts of war or hostility , have created many economic and political uncertainties, which could adversely affect our business and results of operations in ways that cannot presently be predicted. In addition, with manufacturing facilities located worldwide, including facilities located in North America, Western Europe, Morocco, and India, we may be impacted by terrorist actions not only
against the United States but in other parts of the world as well. In some cases, we are not insured for losses and interruptions caused by terrorist acts and acts of war.
The impact of the COVID-19 pandemic has adversely impacted, and continues to pose risks to, our business, results of operations and financial condition.
The situation relating to the COVID-19 pandemic and its potential effects on our business and financial results remains dynamic. The broader implications for our business and results of operations remain uncertain and will depend on many factors outside our control, including, without limitation, the timing, extent, trajectory and duration of the pandemic, the development, availability and effectiveness of treatments and vaccines, the imposition of protective public safety measures, and the impact of the pandemic on the global economy and enterprise and consumer behaviors. If these and other effects of the COVID-19 pandemic, including its effect on broader economies, financial markets and overall demand environment for our products, continues or worsens, it could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
The COVID-19 pandemic may also increase the likelihood and severity of other risks discussed in this “Risk Factors” section, including but not limited to risks related to competition, development of the market for and demand for our products, delays in the development and production of our products, reliance on third parties, our international scale, our exposure to currency exchange rate fluctuations and the credit risks of our customers and resellers, and volatility in the capital markets.
Risks Related to our International 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 sell our products in international markets not significantly served by us in portions of Europe, Latin America and Asia. We market our products and services outside of the United States through direct sales, distributors, and technically trained commissioned representatives. We may not succeed in our efforts to further penetrate these 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 complex, varying and changing government regulations and legal standards and requirements, particularly with respect to price protection, competition practices, export control regulations and restrictions, customs and tax requirements, immigration, anti-boycott regulations, data privacy, intellectual property, anti-corruption and environmental compliance, including U.S. customs and export regulations and restrictions and the Foreign Corrupt Practices Act, and the occurrence of any of these factors could materially and adversely affect our operations.
Our international activities expose us to fluctuations in currency exchange rates that could adversely affect our results of operations and cash flows.
Our international manufacturing and sales activities expose us to changes in foreign currency exchange rates. Our major foreign currency exposures involve the markets in Western Europe and Asia. Fluctuations in foreign currency exchange rates could result in our (i) paying higher prices for certain imported goods and services, (ii) realizing lower prices for any sales denominated in currencies other than U.S. dollars, (iii) realizing lower net income, on a U.S. dollar basis, from our international operations due to the effects of translation from weakened functional currencies, and (iv) realizing higher costs to settle transactions denominated in other currencies. Any of these risks could adversely affect our results of operations and cash flows.
We use derivatives to help manage the currency risk related to certain business transactions denominated in foreign currencies. To the extent these transactions are completed, the contracts minimize our risk from exchange rate fluctuations because they offset gains and losses on the related derivatives. However, there can be no assurances that we will be able to effectively utilize these forward exchange contracts in the future to offset significant risk related to fluctuations in currency exchange rates. In addition, there can be no assurances that counterparties to such contracts will perform their contractual obligations to us in order for us to realize the anticipated benefits of the contracts.
A change in international governmental policies or restrictions could result in decreased availability and increased costs for certain components and finished products that we purchase from sources in foreign countries, which could adversely affect our profitability.
Like most manufacturers of flow control products, we attempt, where appropriate, to reduce costs by seeking lower cost sources of certain components and finished products. Many such sources are located in developing countries such as India and China, where a change in governmental approach toward U.S. trade could restrict the availability to us of such sources. In addition, periods of war or other international tension and global health pandemics could interfere with international freight operations and hinder our ability to purchase such components and products. A decrease in the availability of these items could hinder our ability to timely meet our customers’ orders. We attempt, when possible, to maintain alternate sources for these components and products and the capability to produce such items in our own manufacturing facilities. However, the cost of obtaining such items from alternate sources or producing them ourselves is often considerably greater, and a shift toward such higher cost production could therefore adversely affect our profitability.
Risks Related to our Business Strategy
Our ability to execute our strategy is dependent upon our ability to attract, train and retain qualified personnel.
Our continued success depends, in part, on our ability to identify, attract, motivate, train and retain qualified personnel in key functions and geographic areas, including the members of our senior management team. In particular, we are dependent on our ability to recruit and retain qualified engineers with the requisite education, background and industry experience to assist in the development, enhancement, introduction and manufacture of our products.
Failure to attract, train and retain qualified personnel, whether as a result of an insufficient number of qualified candidates or the allocation of inadequate resources to training, integration and retention, could impair our ability to execute our business strategy and could have an adverse effect on our business prospects. Our success also depends to a large extent upon our ability to attract and retain key executives. The loss of the services of one or more of these key employees could have an adverse effect, at least in the short to medium term, on significant aspects of our business, including the ability to manage our business effectively and the successful execution of our strategies. If certain of these employees decide to leave us, we could incur disruptions to the completion of certain initiatives and we could incur significant costs in hiring, training, developing and retaining their replacements.
Risks Related to Legal, Regulatory and Compliance Matters
We face risks from product liability lawsuits that may adversely affect our business.
We, like other manufacturers, 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, asbestos-related claims, claims 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 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 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. For example, liability insurance typically does not afford coverage for a design or manufacturing defect unless such defect results in injury to person or property. We generally attempt to contractually limit liability to our customers to risks that are insurable but are not always successful in doing so. Similarly, 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, cash flows or results of operations.
The costs of complying with existing or future governmental regulations on 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 and international trade practices, including regulations issued by certain United States governmental agencies and authorities in the European Union. 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 such regulations could result in enforcement actions and/or financial penalties that could result in substantial costs.
If we incur higher costs as a result of trade policies, treaties, government regulations or tariffs, we may become less profitable.
There is currently significant uncertainty about the future relationship between the United States and China, including with respect to trade policies, treaties, government regulations and tariffs. The past U.S. presidential administration had called for substantial changes to U.S. foreign trade policy and had implemented greater restrictions on international trade and significant changes in tariffs on goods imported into the U.S. Under the current administration, we expect that tariff increases will primarily impact our Industrial segment. We are unable to predict whether or when additional tariffs will be imposed or the impact of any such future tariff changes.
The costs of complying with existing or future environmental regulations and 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.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
In 2020 we remediated material weaknesses in our internal control over financial reporting identified as of December 31, 2019. If our remediation or other controls do not continue to operate effectively, we may not be able to rely on the integrity of our financial results, which could result in inaccurate or late reporting of our financial results, as well as delays or the inability to meet our reporting obligations or to comply with SEC rules and regulations. If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare consolidated financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our consolidated financial statements and adversely impact our stock price.
Regulations related to “conflict minerals” may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.
Under the conflict minerals rule, public companies must disclose whether specified minerals, known as conflict minerals, are necessary to the functionality or production of products manufactured or contracted to be manufactured. The rule requires a disclosure report to be filed by May 31st of each year. The conflicts mineral rule could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products, including tantalum, tin, gold and tungsten. The number of suppliers who provide conflict-free minerals is limited. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. As our supply chain is complex, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may harm our reputation. In addition, we may encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so.
Risks Related to our Common Stock
The trading price of our common stock continues to be volatile, and investors in our common stock may experience substantial losses.
The trading price of our common stock may be, and, in the past, has been volatile. Our common stock could decline or fluctuate in response to a variety of factors, including, but not limited to: our failure to meet our performance estimates or 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 stockholders; general stock market conditions; and fluctuations in oil and gas prices or other economic or external factors. While we attempt in our public disclosures to provide forward-looking information in order to enable investors to anticipate our future performance, such information by its nature represents our good-faith forecasting efforts. As a result, our actual results have differed materially, and going forward could differ materially, from our forecasts, which could cause further volatility in the value of our common stock.
In recent years the stock market as a whole has experienced dramatic 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.
Risks Related to our Indebtedness
If we are unable to generate sufficient cash flow, we may not be able to service our debt obligations, including making payments on our outstanding term loan.
Our ability to make payments of principal and interest on our indebtedness when due, including the significant indebtedness that we incurred in connection with our acquisition of Colfax Corporation's Fluid Handling business ("FH"), depends upon our future performance, which will be subject to general economic conditions (including recovery from the COVID-19 pandemic), industry cycles and financial, business and other factors affecting our consolidated operations, many of which are beyond our control. If we are unable to generate sufficient cash flow from operations in the future to service our outstanding debt, we may be required to, among other things:
•seek additional financing in the debt or equity markets;
•refinance or restructure all or a portion of our indebtedness;
•divert funds that would otherwise be invested in our operations;
•sell selected assets; or
•reduce or delay planned capital expenditures or operating expenditures.
Such measures might not be sufficient to enable us to service our debt, which could negatively impact our financial results. In addition, we may not be able to obtain any such financing, refinancing or complete a sale of assets on economically favorable terms. In the case of financing or refinancing, favorable interest rates will be dependent on the health of the debt capital markets and our credit rating.
Our existing indebtedness could also have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions, reducing funds available for working capital, capital expenditures, acquisitions and other general corporate purposes or creating competitive disadvantages relative to other companies with lower debt levels.
Our credit agreement requires that we maintain certain ratios and limits our ability to make acquisitions, incur debt, pay dividends, make investments, sell assets or merge.
Our credit agreement, dated December 11, 2017, as amended, governs our indebtedness. This agreement includes provisions which place limitations on certain activities, including our ability to: issue; incur additional indebtedness; create any liens or encumbrances on our assets or make any guarantees; make certain investments; pay cash dividends above certain limits; or dispose of or sell assets or enter into a merger or a similar transaction. These restrictions may limit our ability to operate our business and may prohibit or limit our ability to execute our business strategy, compete, enhance our operations, take advantage of potential business opportunities as they arise or meet our capital needs. Furthermore, future debt instruments or other contracts could contain more restrictive financial or other covenants. The breach of any of these covenants by us or the failure by us to meet any of these conditions or requirements could result in a default under any or all of our indebtedness. If we are unable to service our indebtedness, our business, financial condition, cash flows and results of operations would be materially adversely affected.
Discontinuation, replacement or reform of LIBOR could affect interest rates under our credit agreement and financing costs
Our credit arrangements include borrowings at variable rates, primarily based on London Interbank Offered Rate ("LIBOR"). In 2017 the UK Financial Conduct Authority announced that it will no longer be necessary to persuade or compel banks to submit to LIBOR after 2021. It is possible that, after 2021, the LIBOR may be discontinued as a reference rate. In the United States the Alternative Reference Rate Committee convened by the US Federal Reserve identified the Secured Overnight Financing Rate (SOFR) as its preferred alternative reference rate to the US Dollar LIBOR. The shift away from one of the most widely used interest rate benchmarks to an alternative reference rate is a significant change for the global financial markets. At this time the future consequences of developments with respect to replacement of LIBOR remain unclear. However, these changes could have a material adverse affect on our credit facilities, and could adversely effect our business, results of operations, financial condition and cash flows.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
We maintain 21 major manufacturing facilities worldwide, including operations located in North America, Western Europe, Morocco, China and India. We also maintain sales offices or warehouses from which we ship finished goods to customers, distributors and commissioned representative organizations. Our executive office is located in Burlington, Massachusetts and is leased.
Our Aerospace & Defense segment has major manufacturing facilities located in North America, United Kingdom, France and Morocco. Properties in New York and California are leased. Our Industrial segment has major facilities located in North America, Germany, India and China. Properties in Germany, India and China are leased.
Segment Leased Owned Total
Industrial 5 10 15
Aerospace & Defense 1 5 6
Total 6 15 21
In general, we believe that our properties, including machinery, tools and equipment, are in good condition, are well maintained, and 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 and by successful implementation of our CIRCOR Operating System. We also have low-cost sources for manufacturing in India and Morocco which have capacity to fulfill our manufacturing needs. We believe that our current facilities will meet our near-term production requirements without the need for additional facilities.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
For information regarding our legal proceedings refer to the first two paragraphs of Note 16, Contingencies, Commitments and Guarantees, to the consolidated financial statements included in this Annual Report, which disclosure is incorporated herein by reference.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
Part II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “CIR.”
Our Board of Directors is responsible for determining our dividend policy. The timing and level of any dividends will necessarily depend on our Board of Directors’ assessments of earnings, financial condition, capital requirements and other factors, including restrictions, if any, imposed by our lenders. On February 28, 2018, we announced the suspension of our nominal dividend, as part of our capital deployment strategy.
As of March 10, 2021, there were 20,155,251 shares of our common stock outstanding and we had 50 holders of record of our common stock. We believe the number of beneficial owners of our common stock was substantially greater on that date.
The graph below compares the cumulative 5-Year total return provided stockholders on CIRCOR International, Inc.'s common stock relative to the cumulative total returns of the S&P 500 index, the Russell 2000 index, our previous peer group (“2018 Peer Group”) and our updated peer group (“2019 Peer Group”). The companies included in the 2018 Peer Group and the 2019 Peer Group are listed in footnotes 1 and 2 below, respectively. We revised our peer group to incorporate peers relevant to the businesses we acquired in the Fluid Handling acquisition along with divestitures of non-core businesses. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock, in each index and in each of the peer groups on December 31, 2015 and its relative performance is tracked through December 31, 2020.
12/15 12/16 12/17 12/18 12/19 12/20
CIRCOR International, Inc. $ 100.00 $ 154.37 $ 116.15 $ 50.82 $ 110.33 $ 91.72
S&P 500 100.00 111.96 136.40 130.42 171.49 203.04
Russell 2000 100.00 121.31 139.08 123.76 155.35 186.36
2018 Peer Group 100.00 123.46 117.88 77.90 101.45 87.70
2019 Peer Group 100.00 109.69 138.98 130.84 172.68 178.42
•2018 Peer Group: There are three companies included in the Company's 2018 Peer Group which are: Dover Corp, IDEX Corp and Schlumberger NV.
•2019 Peer Group: The eight companies included in the Company's 2019 Peer Group are: Alfa Laval Ab, Flowserve Corp, Gardner Denver Holdings Inc, Imi Plc, Metso Oyj, Spx Flow Inc, Sulzer Ag and Weir Group Plc.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data
Not Applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
See Part 1, Item 1, "Business", for additional detail on forward looking statements.
Company Overview
CIRCOR International is one of the world’s leading providers of mission critical flow control products and services for the Industrial and Aerospace & Defense markets. The Company has a product portfolio of market-leading brands serving its customers’ most demanding applications. CIRCOR markets its solutions directly and through various sales partners to more than 14,000 customers in approximately 100 countries. The Company has a global presence with approximately 3,100 employees and is headquartered in Burlington, Massachusetts. See Part 1, Item 1, Business, for additional information regarding the description of our business.
COVID-19
The COVID-19 pandemic adversely impacted our end markets, operations, and financial condition in 2020. Throughout this continued time of unprecedented uncertainty, the Company's top priority remains the health and safety of our employees, customers, and suppliers. Because of the end markets we serve, the majority of our facilities are deemed 'essential operations' in the countries in which we operate. Throughout 2020 and continuing in 2021, we implemented significant measures in an effort to ensure our employees around the world have the necessary protection and our business continues to operate with as little disruption as possible. These measures include but are not limited to:
•Additional cleaning and disinfecting procedures at all facilities;
•Daily temperature checks and masks for employees;
•Adherence to strict social distancing guidelines;
•Employees are strongly encouraged to work from home where possible; and
•Cancellation of all non-essential travel
Throughout 2020 and into 2021, the Company also took prudent action to ensure it maintained its financial flexibility including the cessation of all non-critical business expenses, permanent employee reductions, employee furloughs, and pay cuts for senior management and board of directors. We believe that these actions along with the Company's continued focus on new product innovation, cost productivity, and the CIRCOR Operating System ("COS") serve to best position the Company for potential end market recovery across our Industrial and Aerospace & Defense business segments. The situation relating to the COVID-19 pandemic and its potential effects on our business and financial results remains dynamic, and the broader implications for our business and results of operations remain uncertain and will depend on many factors outside our control. Please see Part 1, Item 1A - "Risk Factors" for more detail.
Segment Commentary
The Company's Aerospace & Defense segment has been and continues to be significantly impacted by the COVID-19 pandemic, primarily in our Commercial Aerospace business. We expect that the commercial aerospace end markets will improve in 2021 compared to 2020, but that a recovery to pre-pandemic levels of demand will depend on air framer production rates and could take several years. Our Defense business has been less impacted by the pandemic, and we expect continued growth in this end market driven by our positions on key U.S. defense programs, including the Joint Strike Fighter and Columbia class submarines, and new product introductions. We continue to focus on increasing growth in our global aftermarket.
The Company's Industrial reporting segment has been and continues to be significantly impacted by the COVID-19 pandemic. In 2021, we expect modest growth in the General Industrial sector led by chemical and machinery applications with a weaker recovery in construction and mining. While our commercial marine sector continues to be constrained, we do expect to experience growth as the regulatory environment could cause demand for our products. We expect that our mid-stream and downstream oil and gas customers will continue to prioritize spending on critical safety and maintenance, but we expect that larger capital expenditures will continue to be delayed. We expect to experience higher demand for our products that serve the power generation markets with particular strength in Asia and in our global aftermarket.
We continue to implement actions to mitigate the impact on our earnings from lower demand and an increasingly competitive environment. In addition, we are investing in products and technologies designed to help solve our customers’ most difficult problems. We expect to further simplify CIRCOR by standardizing technology, rationalizing facilities, consolidating suppliers and achieving world class operational excellence, including working capital management. We believe our cash flow from
operations and financing capacity is adequate to support these activities. Finally, continuing to attract and retain talented personnel, including the enhancement of our global sales, operations, product management and engineering organizations, remains an important part of our strategy during 2021.
Basis of Presentation
All significant intercompany balances and transactions have been eliminated in consolidation. We operate and report financial information using a 52-week fiscal year ending December 31. The data periods contained within our Quarterly Reports on Form 10-Q reflect the results of operations for the 13-week, 26-week and 39-week periods which generally end on the Sunday nearest the calendar quarter-end date. Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation, including the results of discontinued operations and reportable segment information.
Critical Accounting Policies and Use of Estimates
The Company’s discussion and analysis of its financial condition and results of operations is based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent liabilities. On an on-going basis, management evaluates its significant estimates, including those related to contracts accounted for under the percentage of completion method, bad debts, inventories, intangible assets and goodwill, purchase accounting, delivery penalties, income taxes, and contingencies including litigation. Management believes the most complex and sensitive judgments, because of their significance to the consolidated financial statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management bases its estimates on historical experience, current market and economic conditions and other assumptions that management believes are reasonable. The results of these estimates form the basis for judgments about the carrying value of assets and liabilities where the values are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes from the methodology applied by management for critical accounting estimates previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
For goodwill, we perform an impairment assessment at the reporting unit level on an annual basis as of our October month end or more frequently if circumstances warrant. On March 29, 2020, the Company reorganized its reporting units and had its stock price drop below book value, which the Company determined were triggering events requiring an assessment of its goodwill and indefinite-lived trade names. Based on our impairment assessment as of March 29, 2020, we concluded that our goodwill in the Industrial reporting unit was impaired and, accordingly, recorded a goodwill impairment charge of $116.2 million in the quarterly period ended March 29, 2020.
In October 2020 when we performed our annual goodwill impairment assessment, the fair value of each of our reporting units exceeded the respective carrying amount, and no goodwill impairments were recorded. The fair values utilized for our 2020 goodwill assessment exceeded the carrying amounts by more than 20% and 10% for our Aerospace & Defense and Industrial reporting units, respectively. The growth rate assumptions utilized were consistent with growth rates within the markets that we serve and considered the near to mid-term negative impact of the COVID-19 pandemic on our end markets, operations, and cash flows. If our results significantly vary from our estimates, related projections, or business assumptions in the future due to change in industry or market conditions, we may be required to record impairment charges.
For information regarding our significant accounting policies, refer to Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in this Annual Report, which disclosure is incorporated by reference herein.
Revenue Recognition
The Company recognizes revenue to depict the transfer of control to the Company's customers in an amount reflecting the consideration the Company expects to be entitled to in exchange for performance obligations. Revenue on point in time contracts are recognized when customer obtains control of the product, which is generally at the time of shipping. Revenues and costs on certain long-term contracts are recognized on the percentage-of-completion method measured on the basis of costs incurred to estimated total costs of each contract. This method is used because management considers it to be the best available measure of progress towards completion on these contracts. Revenues and costs on contracts are subject to changes in estimates throughout the duration of the contracts, and any required adjustments are made in the period in which a change in estimate becomes known.
For revenue that is recognized from products and services transferred to customers over-time, the Company uses an input measure (e.g., costs incurred to date relative to total estimated costs at completion, known as the “cost-to-cost” method) to measure progress. The Company uses the cost-to-cost measure of progress because it best depicts the transfer of control to the customer which occurs as it incurs costs on its contracts. Under the cost-to-cost measure of progress, revenue is recognized proportionally as costs are incurred. Contract costs include labor, materials and subcontractors’ costs, other direct costs and an allocation of overhead, as appropriate. Accounting for over-time contracts requires reliable estimates in order to estimate total contract revenue and costs. For these contracts, management reviews the progress and execution of the Company's performance obligations at least quarterly. Management estimates the profit on a contract as the difference between the total estimated revenue and estimate at completion ("EAC") costs and recognizes the resultant profit over the life of the contract, using the cost-to-cost EAC input method to measure progress toward complete satisfaction of a performance obligation. A change in one or more of these estimates could affect the profitability of the related contracts. Management recognizes adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. The impact of adjustments in contract estimates on our operating earnings can be reflected in either operating expenses or revenue.
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 carry-forwards. 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.
In accordance with the provisions of ASC Topic 740, Income Taxes, the Company initially recognizes the financial statement effect of a tax position when, based solely on its technical merits, it is more likely than not (a likelihood of greater than fifty percent) that the position will be sustained upon examination by the relevant taxing authority. Those tax positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more likely than not standard, are resolved through negotiation or litigation with the taxing authority, or upon expiration of the statute of limitations. De-recognition of a tax position that was previously recognized occurs when an entity subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.
ASC 740, Income Taxes, requires a valuation allowance to reduce deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, (a) the more positive evidence is necessary and (b) the more difficult it is to support a conclusion that a valuation allowance is not needed for some portion, or all, of the deferred tax asset. Should there be
a cumulative loss in recent years it is considered a significant piece of negative evidence that is difficult to overcome in assessing the need for a valuation allowance.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On July 9, 2020, the US Department of the Treasury (Treasury) and Internal Revenue Service (IRS) released Final Regulations (Final Regulations) that provide guidance on the section 250 deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). In addition, on July 20, 2020, Treasury released Proposed Regulations concerning GILTI. Based on the impact of these regulations, we believe less reliance should be placed on the US taxation of foreign earnings, which would adversely impact our ability to realize our US deferred tax assets. With the release of these Final Regulations during the third quarter, coupled with the negative evidence of cumulative losses in the US, the negative evidence outweighed the positive evidence as of the third quarter of 2020. As such, the Company has not relied on projections of future taxable income in our assessment of the realization of deferred tax assets at September 27, 2020, and recognized a valuation allowance of $42.2 million in income tax expense in the third quarter of 2020.. In addition, the Company recorded a valuation allowance related to German deferred tax assets of $14.8 million in income tax expense in the fourth quarter of 2020. The Company relied solely on the expected reversal of taxable temporary differences to support the realizability of the German deferred tax assets and no reliance was placed on projections of future taxable income.
Results of Operations
The Chief Operating Decision Maker ("CODM") is the function that allocates the resources of the enterprise and assesses the performance of the Company's reportable operating segments. CIRCOR has determined that the CODM is solely comprised of its Chief Executive Officer ("CEO"), as the CEO has the ultimate responsibility for CIRCOR strategic decision-making and resource allocation.
Our CODM evaluates segment operating performance using segment operating income. We define segment operating income as GAAP operating income excluding intangible amortization and amortization of fair value step-ups of inventory and fixed assets from acquisitions completed subsequent to December 31, 2011, the impact of restructuring-related inventory write-offs, impairment charges and special charges or gains. The Company also refers to this measure as adjusted operating income. The Company uses this measure because it helps management understand and evaluate the segments’ core operating results and facilitates a comparison of performance for determining incentive compensation achievement.
For information regarding our segment determination refer to Note 18, Business Segment and Geographical Information, of the consolidated financial statements included in this Annual Report.
The following tables present information on net revenues and operating income of our business segments, along with a reconciliation of total segment operating income to the Company's consolidated operating income.
2020 Compared With 2019
Consolidated Operations
(in thousands) 2020 2019 Total
Change Divestiture Operations Foreign
Exchange
Net Revenues
Industrial $ 505,449 691,688 $ (186,239) (90,287) (98,435) 2,483
Aerospace & Defense 267,822 272,625 (4,803) - (5,553) 750
Consolidated Net Revenues $ 773,271 $ 964,313 $ (191,042) $ (90,287) $ (103,988) $ 3,233
Net revenues in 2020 were $773.3 million, a decrease of $191 million from 2019 primarily driven by lower revenue as a result of divestitures of $90.3 million and lower operational results of $104.0 million, partially offset by favorable foreign exchange of $3.2 million.
Segment Results
(in thousands) 2020 2019 Change
Net Revenues
Industrial $ 505,449 $ 691,688 $ (186,239)
Aerospace & Defense 267,822 272,625 (4,803)
Consolidated Net Revenues $ 773,271 $ 964,313 $ (191,042)
Operating Income
Industrial - Segment Operating Income 39,823 $ 90,789 $ (50,966)
Aerospace & Defense - Segment Operating Income 59,093 52,480 6,613
Corporate expenses (31,285) (33,469) 2,184
Subtotal 67,631 109,800 (42,169)
Special restructuring (recoveries) charges, net 4,945 5,186 (241)
Special other (recoveries) charges, net (39,248) 17,686 (56,934)
Special and restructuring (recoveries) charges, net (1) (34,303) 22,872 (57,175)
Restructuring related inventory (recoveries) charges, net (1) (250) (820) 570
Amortization of inventory step-up - - -
Impairment charges 116,182 - 116,182
Acquisition amortization 42,463 45,715 (3,252)
Acquisition depreciation 3,985 4,352 (367)
Restructuring, impairment and other cost, net 162,380 49,247 113,133
Consolidated Operating (Loss) Income $ (60,446) $ 37,681 $ (98,127)
Consolidated Operating Margin (7.8) % 3.9 %
(1) See Note 5, Special and Restructuring (Recoveries) Charges, net in the consolidated financial statements included in this Annual Report, for additional details.
Industrial Segment
(in thousands, except percentages) 2020 2019 Change
Net Revenues as reported $ 505,449 $ 691,688 $ (186,239)
Net Revenues excluding divestiture (1) 500,549 596,501 (95,952)
Segment Operating Income as reported 39,823 90,789 (50,966)
Segment Operating Income excluding divestiture (2) 39,823 73,500 (33,677)
Segment Operating Margin excluding divestiture (2) 8.0 % 12.3 %
Orders $ 481,609 $ 663,553 $ (181,944)
(1) Adjusted for the January 2020 divestiture of our Instrumentation & Sampling business and the August 2019 divestiture of certain assets and liabilities related to our Spence and Nicholson product lines. The Instrumentation and Sampling business generated revenues of $4.9 million and $78.6 million for the years ended December 31, 2020 and December 31, 2019, respectively. The Spence and Nicholson product lines generated revenues of $0.0 million and $13.5 million for the year ended December 31, 2020 and December 31, 2019, respectively.
(2) Adjusted for the January 2020 divestiture of our Instrumentation & Sampling business, which contributed $0.0 million and $13.8 million to segment operating income for the years ended December 31, 2020 and December 31, 2019, respectively, and the August 2019 divestiture of certain assets and liabilities related to our Spence and Nicholson product lines, which contributed $0.0 million and $3.5 million to segment operating income for the years ended December 31, 2020 and December 31, 2019, respectively.
Industrial segment revenues decreased $186.2 million, or 27%, in 2020 compared to 2019. Segment net revenues excluding divestitures decreased $96.0 million due to the timing of projects in the Europe and North American Pumps businesses ("Pumps businesses") driving a decrease of 7% and reduction in the Valves businesses of 10%.
Industrial segment operating income decreased $51.0 million, or 56%, in 2020 compared to 2019. Segment operating income excluding divestitures decreased $33.7 million, or 46%, to $39.8 million for 2020 compared to $73.5 million for 2019, driven by decreases in the Pumps businesses of 31% and the Valves businesses of 49% partially offset by operational efficiencies in headquarters.
Industrial segment orders decreased $181.9 million, or 27%, in 2020 compared to 2019. The decrease was primarily driven by the impact from divestitures of $90.3 million and reductions in the Valves businesses of 17% and the Pumps businesses of 11%.
QUARTERLY INDUSTRIAL SEGMENT INFORMATION
(in thousands, except percentages)
(unaudited)
2019 2020
1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL
Orders $171,834 $164,642 $158,986 $168,091 $663,553 $136,443 $116,023 $107,453 $121,690 $481,609
Net Revenues 177,615 181,074 169,431 163,568 691,688 126,720 123,825 124,391 130,513 505,449
Operating Income 22,581 26,173 21,278 20,757 90,789 5,169 12,406 9,807 12,441 39,823
Operating Margin 12.7% 14.5% 12.6% 12.7% 13.1% 4.1% 10.0% 7.9% 9.5% 7.9%
Backlog (1) $254,942 $238,081 $218,365 $226,208 $226,208 $222,190 $217,774 $203,993 $197,198 $197,198
(1) At end of period.
Aerospace & Defense Segment
(in thousands, except percentages) 2020 2019 Change
Net Revenues $ 267,822 $ 272,625 $ (4,803)
Segment Operating Income 59,093 52,480 6,613
Segment Operating Margin 22.1 % 19.2 %
Orders $ 254,548 $ 313,939 $ (59,391)
Aerospace & Defense segment net revenues decreased by $4.8 million, or 2% in 2020 as compared to 2019. The decrease was driven by our Aerospace businesses 28%, partially offset by increases in the Defense businesses 21%.
Segment operating income increased $6.6 million, or 13%, to $59.1 million for 2020 compared to $52.5 million for 2019. The increase in operating income was driven by improved value pricing and cost actions taken to mitigate the impact of the COVID-19 pandemic.
Aerospace & Defense segment orders decreased $59.4 million, or 18.9%, to $254.5 million in 2020 compared to $313.9 million in 2019, driven by decreases in our Defense businesses of 5% and our Aerospace businesses of 36%.
QUARTERLY A&D SEGMENT INFORMATION
(in thousands, except percentages)
(unaudited)
2019 2020
1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL
Orders $88,107 $93,405 $63,968 $68,459 $313,939 $72,031 $76,616 $59,105 $46,796 $254,548
Net Revenues 61,240 64,694 67,621 79,070 272,625 65,493 62,241 62,249 77,839 267,822
Operating Income 9,374 10,443 13,564 19,099 52,480 12,494 13,142 14,782 18,675 59,093
Operating Margin 15.3% 16.1% 20.1% 24.2% 19.2% 19.1% 21.1% 23.7% 24.0% 22.1%
Backlog (1) $206,457 $234,964 $206,917 $194,459 $194,459 $199,013 $214,192 $211,367 $182,111 $182,111
(1) At end of period.
Corporate Expenses
Corporate expenses decreased $2.2 million to $31.3 million for 2020. This decrease was primarily driven by ongoing cost savings initiatives and lower travel expenses due to global travel restrictions related to COVID-19.
Special and Restructuring (Recoveries) Charges, net
During 2020, the Company recorded a total of $34.3 million in recovery of special and restructuring charges. In our consolidated statements of (loss) income, these recoveries are recorded in special and restructuring (recoveries) charges, net. The recovery is a result of the net gain on sale of our Instrumentation & Sampling business, offset by professional fees related to an unsolicited tender offer to acquire the Company and other restructuring costs associated with our simplification efforts, primarily in our Industrial Segment. These recoveries, restructuring charges and other special charges are described in further detail in Note 5, Special and Restructuring (Recoveries) Charges, net, in the consolidated financial statements included in this Annual Report.
Restructuring, impairment and other costs, net
During 2020, the Company recorded a total of $162.4 million of Restructuring, impairment and other costs, net, including Q1 2020 industrial reporting unit goodwill impairment in the amount of $116.2 million. These charges represent plant, property, and equipment depreciation related to the step-up in fair value as part of our acquisition of Colfax Corporation's Fluid Handling ("FH") business, intangible amortization in connection with acquisitions subsequent to December 31, 2011, and step-up in fair value of inventory acquired as part of our FH acquisition. These charges are recorded in either selling, general and administrative expenses or cost of revenues based upon the nature of the underlying asset.
Interest Expense, Net
Interest expense decreased $14.4 million to $34.2 million for 2020. The change in interest expense was primarily due to lower debt balances.
Other Income, Net
Other income, net, was $0.5 million for 2020 compared to $0.8 million in 2019. The difference of $0.3 million primarily relates to net pension income for the retirement plans we acquired as part of the FH acquisition. Effective January 1, 2018 all pension gains and losses are recorded in the Other (Income) Expense, net caption on our consolidated statement of (loss) income. Pension Income was partially offset by unfavorable foreign currency translation.
Comprehensive (Loss) Income
Comprehensive loss increased $46.7 million, from a comprehensive loss position of $144.5 million for the year-ended December 31, 2019 to a comprehensive loss position of $191.2 million for the year-ended December 31, 2020. This change was primarily driven by an increase in net loss of $125.6 million in our continuing operations caused by impairment of goodwill of $116.2 million and increased income taxes of $41.5 million, partially offset by net gain on the sale of the
Instrumentation & Sampling business of $53.2 million and reduced losses in our discontinued operations of $74.0 million as the Distributed Valve business was divested during the year.
As of December 31, 2020, we had a cumulative currency translation adjustment of $18.2 million in Accumulated Other Comprehensive Loss for our Brazil entity. If we were to cease to have a controlling financial interest in the Brazil entity or otherwise satisfy criteria for reclassification of the amount from Accumulated Other Comprehensive Loss to earnings, we would recognize a non-cash charge of $18.2 million based on December 31, 2020 balances, which would be included as a special charge within the consolidated statements of (loss) income.
(Benefit from) Provision for Income Taxes
The table below outlines the change in effective tax rate for 2020 and 2019 (in thousands, except percentages).
2020 2019 Change
Income (Loss) Before Tax $(94,136) $(10,092) $(84,044)
Expected federal income tax rate 21.0% 21.0% -%
State income taxes, net of federal tax benefit (3.8) 15.5 (19.3)
Impairment (7.1) - (7.1)
US permanent differences - (1.6) 1.6
Foreign tax rate differential 4.6 4.5 0.1
Tax reserve (0.8) (0.3) (0.5)
Rate Change (0.1) 5.9 (6.0)
GILTI (4.0) (3.9) (0.1)
Foreign tax credit writeoff - - -
Foreign-derived intangible income ("FDII") - 10.7 (10.7)
Prior period adjustment 0.4 44.1 (43.7)
Dispositions (1.0) (227.0) 226.0
Valuation Allowance (68.8) (0.5) (68.3)
Other, net 0.4 (16.1) 16.5
Equity compensation (0.5) (10.8) 10.3
Research and development - 13.1 (13.1)
Effective tax rate (59.7)% (145.4)% 85.7%
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On July 9, 2020, the US Department of the Treasury ("Treasury") and Internal Revenue Service released "Final Regulations" that provide guidance on the section 250 deduction for foreign-derived intangible income ("FDII") and global intangible low-taxed income ("GILTI"). In addition, on July 20, 2020, Treasury released proposed regulations ("Proposed Regulations") concerning GILTI. Based on the expected impact of these regulations, we believe less reliance should be placed on the US taxation of foreign earnings, which would adversely impact our ability to realize our US deferred tax assets. With the release of the Final Regulations during the third quarter of 2020, coupled with the negative evidence of cumulative losses in the US, the negative evidence outweighed the positive evidence as of the third quarter of 2020. As such, the Company has not relied on projections of future taxable income in our assessment of the realization of deferred tax assets at September 27, 2020, and recognized a valuation allowance of $42.2 million in income tax expense in the third quarter of 2020. In addition, the Company recorded a valuation allowance related to German deferred tax assets of $14.8 million in income tax expense in the fourth quarter of 2020. The Company relied solely on the expected reversal of taxable temporary differences to support the realizability of the German deferred tax assets and no reliance was placed on projections of future taxable income.
As of December 31, 2020 and 2019, the Company maintained a total valuation allowance of $125.3 million and $44.3 million, respectively, which relates to foreign, federal, and state deferred tax assets as of December 31, 2020 and 2019. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.
Results of Operations
2019 Compared With 2018
Consolidated Operations
(in thousands) 2019 2018 Total
Change Divestiture Operations Foreign
Exchange
Net Revenues
Industrial $ 691,688 $ 776,453 $ (84,765) $ (81,044) $ 15,280 $ (19,001)
Aerospace & Defense 272,625 237,017 35,608 - 39,133 (3,525)
Consolidated Net Revenues $ 964,313 $ 1,013,470 $ (49,157) $ (81,044) $ 54,413 $ (22,526)
Net revenues in 2019 were $964.3 million, a decrease of $49.2 million from 2018 primarily driven by lower revenue as a result of divestitures of $81.0 million and unfavorable foreign exchange of $22.5 million, partially offset by operational growth in all segments of $54.4 million.
The following table present information on net revenues and operating income of our business segments, along with a reconciliation of total segment operating income to the Company's consolidated operating income.
(in thousands) 2019 2018 Change
Net Revenues
Industrial $ 691,688 $ 776,453 $ (84,765)
Aerospace & Defense 272,625 237,017 35,608
Consolidated Net Revenues $ 964,313 $ 1,013,470 $ (49,157)
Operating Income
Industrial - Segment Operating Income $ 90,789 $ 104,831 $ (14,042)
A&D - Segment Operating Income 52,480 36,047 16,433
Corporate expenses (33,469) (39,011) 5,542
Subtotal 109,800 101,867 7,933
Restructuring charges, net 5,186 5,848 (662)
Special charges, net 17,686 13,061 4,625
Special and restructuring charges, net (1) 22,872 18,909 3,963
Restructuring related inventory (recoveries) charges, net (1) (820) 346 (1,166)
Amortization of inventory step-up - 6,600 (6,600)
Impairment charges - - -
Acquisition amortization 45,715 47,310 (1,595)
Acquisition depreciation 4,352 7,049 (2,697)
Restructuring and other cost, net 49,247 61,305 (12,058)
Consolidated Operating Income $ 37,681 $ 21,653 $ 16,028
Consolidated Operating Margin 3.9 % 2.1 %
(1) See Note 5, Special and Restructuring (Recoveries) Charges, net of the consolidated financial statements, for additional details.
Industrial Segment
(in thousands, except percentages) 2019 2018 Change
Net Revenues as reported $ 691,688 $ 776,453 $ (84,765)
Net Revenues excluding divestiture (1) 596,501 596,463 38
Segment Operating Income as reported 90,789 104,831 (14,042)
Segment Operating Income excluding divestiture (2) 73,500 77,447 (3,947)
Segment Operating Margin excluding divestiture (2) 12.3 % 11.3 %
Orders $ 663,553 $ 821,740 $ (158,187)
(1) Adjusted for the August 2019 divestiture of certain assets and liabilities related to our Spence and Nicholson product lines, the October 2018 divestiture of our Rosscor B.V. and SES International B.V. subsidiaries (the "Delden Business"), and the January 2019 divestiture of our Reliability Services business. The Spence and Nicholson product lines generated revenues of $13.5 million and $20.7 million for the years ended December 31, 2019 and December 31, 2018, respectively. The Delden business generated revenues of $0.0 million and $11.3 million for the years ended December 31, 2019, and December 31, 2018, respectively. The Reliability Services business generated $3.1 million and $65.6 million for the years December 31, 2019 and December 31, 2018, respectively.
(2) Adjusted for the August 2019 divestiture of certain assets and liabilities related to our Spence and Nicholson product lines, which contributed $3.5 million and $6.4 million to segment operating income for the year ended December 31, 2019 and December 31, 2018, respectively, and for the divestiture of the Delden business, which contributed $0.0 million and ($0.7) million to segment operating income for the years ended December 31, 2019, and December 31, 2018, respectively. Also adjusted for the Reliability Services business which contributed $0.0 million and $6.6 million to segment operating income for the years ended December 31 2019 and December 31, 2018 respectively.
Industrial segment net revenues, excluding divestitures, remained relatively flat with a less than $0.1 million increase, in 2019 compared to 2018.
Segment operating income, excluding divestitures, decreased $4.0 million, or 5%, to $73.5 million for 2019 compared to $77.5 million for 2018, primarily driven by a decrease in the Pumps businesses of 14%, partially offset by an increase in the Valves businesses of 6% along with operational efficiencies in headquarters.
Industrial segment orders decreased $158.2 million, or 19%, to $663.5 million for 2019 as compared to $821.7 million in 2018, driven by declines within our Pumps businesses of 9%, Refinery Valves of 9% and other Valves businesses of 3%.
QUARTERLY INDUSTRIAL SEGMENT INFORMATION
(in thousands, except percentages)
(unaudited)
2018 2019
1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL
Orders $221,943 $203,571 $202,022 $194,205 $821,741 $171,834 $164,642 $158,986 $168,091 $663,553
Net Revenues $181,410 $202,158 $189,452 $203,433 $776,453 $177,615 $181,074 $169,431 $163,568 $691,688
Operating Income $21,188 $26,279 $26,573 $30,791 $104,831 $22,581 $26,173 $21,278 $20,757 $90,789
Operating Margin 11.7% 13.0% 14.0% 15.1% 13.5% 12.7% 14.5% 12.6% 12.7% 13.1%
Backlog (1) $282,904 $273,515 $299,644 $274,299 $274,299 $254,942 $238,081 $218,365 $226,208 $226,208
(1) At end of period.
Aerospace & Defense Segment
(in thousands, except percentages) 2019 2018 Change
Net Revenues $ 272,625 $ 237,017 $ 35,608
Segment Operating Income 52,480 36,047 16,433
Segment Operating Margin 19.2 % 15.2 %
Orders $ 313,939 $ 277,469 $ 36,470
Aerospace & Defense segment net revenues increased by $35.6 million, or 15%, in 2019 as compared to 2018. The increase was driven by growth in our Defense businesses of 10% and our Aerospace businesses of 5%.
Segment operating income increased $16.4 million, or 46%, to $52.5 million for 2019 compared to $36.0 million for 2018. The change was driven by increases in our Defense businesses of 25% and our Aerospace businesses of 21%.
Aerospace & Defense segment orders increased $36.5 million, or 13%, to $313.9 million for 2019 compared to $277.5 million in 2018, driven by increases in our Defense businesses of 10% and our Aerospace businesses of 3%.
QUARTERLY A&D SEGMENT INFORMATION
(in thousands, except percentages)
(unaudited)
2018 2019
1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL 1ST QTR 2ND QTR 3RD QTR 4TH QTR TOTAL
Orders $59,793 $59,441 $81,533 $76,702 $277,469 $88,107 $93,405 $63,968 $68,459 $313,939
Net Revenues $58,477 $57,500 $57,757 $63,283 $237,017 $61,240 $64,694 $67,621 $79,070 $272,625
Operating Income $8,931 $6,992 $8,709 $11,415 $36,047 $9,374 $10,443 $13,564 $19,099 $52,480
Operating Margin 15.3% 12.2% 15.1% 18.0% 15.2% 15.3% 16.1% 20.1% 24.2% 19.2%
Backlog (1) $165,841 $152,081 $150,571 $156,256 $156,256 $206,457 $234,964 $206,917 $194,459 $194,459
(1) At end of period.
Corporate Expenses
Corporate expenses decreased $5.5 million to $33.5 million for 2019. This decrease was primarily driven by ongoing cost savings initiatives resulting in lower professional fees, variable compensation and integration costs
Special and Restructuring charges, net
During 2019, the Company recorded a total of $22.9 million of Special and restructuring charges. In our consolidated statements of (loss) income, these charges are recorded in Special and restructuring charges, net. These costs are primarily related to our simplification and restructuring efforts, as well as professional fees relating to an unsolicited tender offer to acquire the Company. These restructuring charges and other special charges are described in further detail in Note 5, Special and Restructuring (recoveries) charges, net, of the consolidated financial statements included in this Annual Report.
Restructuring and other cost, net
During 2019, the Company recorded a total of $49.2 million of Restructuring and other costs. These charges represent plant, property, and equipment depreciation related to the step-up in fair value as part of our acquisition of Colfax Corporation's Fluid Handling ("FH") business, intangible amortization in connection with acquisitions subsequent to December 31, 2011, and step-up in fair value of inventory acquired as part of our FH acquisition. These charges are recorded in either selling, general and administrative expenses or cost of revenues based upon the nature of the underlying asset.
Interest Expense, Net
Interest expense decreased $4.4 million to $48.6 million for 2019. The change in interest expense was primarily due to lower debt balances, and our net investment hedge, partially offset by an increase in interest rates.
Other (Income) Expense, Net
Other income, net, was $0.8 million for 2019 compared to $7.4 million in 2018. The difference of $6.6 million primarily relates to net pension income for the retirement plans we acquired as part of the FH acquisition. Effective January 1, 2018 all pension gains and losses are recorded in the Other (Income) Expense, net caption on our consolidated statement of (loss) income. In addition we experienced lower gains from foreign exchange in 2019 compared to 2018.
Comprehensive (Loss) Income
Comprehensive loss increased $72.1 million, from a comprehensive loss position of $72.4 million for the year-ended December 31, 2018 to a comprehensive loss position of $144.5 million for the year-ended December 31, 2019. This change was primarily driven by an increase in net loss of $103.1 million in our discontinued operations, partially offset by $15.8 million of lower negative effects of foreign currency translation, and reduced losses in our continuing operations of $8.6 million, as compared to the prior year.
(Benefit from) Provision for Income Taxes
The table below outlines the change in effective tax rate for 2019 and 2018 (in thousands, except percentages).
2019 2018 Change
Income (Loss) Before Tax $(10,092) $(23,896) $13,804
Expected federal income tax rate 21.0% 21.0% -%
State income taxes, net of federal tax benefit 15.5 3.8 11.7
Impairment - - -
US permanent differences (1.6) (1.0) (0.6)
Foreign tax rate differential 4.5 5.1 (0.6)
Tax reserve (0.3) 1.3 (1.6)
Rate Change 5.9 - 5.9
GILTI (3.9) (20.7) 16.8
Foreign tax credit writeoff - (45.6) 45.6
Foreign-derived intangible income ("FDII") 10.7 0.1 10.6
Prior period adjustment 44.1 4.3 39.8
Dispositions (227.0) - (227.0)
Valuation Allowance (0.5) (5.5) 5.0
Other, net (16.1) (0.8) (15.3)
Equity compensation (10.8) (4.2) (6.6)
Research and development 13.1 2.7 10.4
Effective tax rate (145.4)% (39.5)% (105.9)%
Liquidity and Capital Resources
Our liquidity needs arise primarily from capital investment in machinery, equipment and the improvement of facilities, funding working capital requirements to support business growth initiatives, acquisitions, and debt service costs. We have historically generated cash from operations and remain in a strong financial position, with resources available for reinvestment in existing businesses, strategic acquisitions and managing our capital structure on a short and long-term basis.
The following table summarizes our cash flow activities for the year-ended indicated (in thousands):
2020 2019 2018
Cash flow provided by (used in):
Operating activities $ (22,723) $ 15,913 $ 53,994
Investing activities 144,295 153,036 (16,877)
Financing activities (133,798) (152,944) (74,073)
Effect of exchange rate changes on cash and cash equivalents 4,195 197 (5,812)
Increase (decrease) in cash and cash equivalents $ (8,031) $ 16,202 $ (42,768)
Cash Flow Activities for the Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019
During the year ended December 31, 2020, we used $22.7 million in cash flow from operating activities compared to generating $15.9 million during the year ended December 31, 2019. The $38.6 million decrease in operating cash was primarily driven by lower income from continuing operations, payment of one-time professional fees, and transition costs related to exiting the upstream oil & gas business, partially offset by higher cash flows from inventory and accounts payable.
During the year ended December 31, 2020, we generated $144.3 million from investing activities compared to generating $153.0 million during the year ended December 31, 2019. The $8.7 million year over year decrease in cash provided was primarily driven by cash used in discontinued investing activities.
During the year ended December 31, 2020, we used $133.8 million in cash from financing activities compared to cash used of $152.9 million during the year ended December 31, 2019. The $19.1 million year over year decrease in cash used by financing activities resulted from lower repayment of long term debt.
As of December 31, 2020, total debt (including current portion) was $507.9 million compared to $636.3 million at December 31, 2019. Total debt is net of unamortized term loan debt issuance costs of $12.0 million and $17.6 million at December 31, 2020 and 2019, respectively. Total debt as a percentage of total shareholders’ equity was 246% as of December 31, 2020 compared to 163% as of December 31, 2019. As of December 31, 2020, we had available capacity to borrow an additional $91.7 million under our revolving credit facility.
As of December 31, 2020, we had borrowings of $507.9 million outstanding under our credit facility and $39.3 million outstanding under letters of credit.
We were in compliance with all financial covenants related to our existing debt obligations at December 31, 2020 and we believe it is likely that we will continue to meet such covenants for at least the next twelve months from date of issuance of the financial statements.
The ratio of current assets to current liabilities was 2.4:1 at December 31, 2020 compared to 2.4:1 at December 31, 2019. As of December 31, 2020, cash and cash equivalents totaled $76.5 million and was substantially all held in foreign bank accounts. This compares to $84.5 million of cash and cash equivalents as of December 31, 2019, with balances all substantially held in foreign bank accounts. These funds are considered indefinitely reinvested to be used to expand operations either organically or through acquisitions outside of the United States.
In 2021, we expect to generate positive cash flow from operating activities sufficient to support our capital expenditures and service our debt. Based on our expected cash flows from operations and contractually available borrowings under our credit facility, we expect to have sufficient liquidity to fund working capital needs and future growth over at least the next twelve months from date of filing the 2020 financial statements.
On February 26, 2020, the Company amended its term loan to lower the interest rate associated with the applicable margin calculation. The new terms lower the interest rate on the Company's term loan from LIBOR plus an applicable margin of 3.5% to LIBOR plus an applicable margin of 3.25%, based on its existing corporate family rating from Moody's. The applicable margin reduces to LIBOR plus an applicable margin of 3.00%, with a corporate family rating from Moody's of B1 or better.
During the fourth quarter of 2019, the Company entered into a definitive agreement to sell its non-core Instrumentation and Sampling ("I&S") business to Crane Co. for $172 million, in cash, subject to working capital adjustments. The transaction
closed on January 31, 2020. The I&S business manufactures valves, fittings, regulators and sampling systems primarily serving energy end markets. The Company received net cash proceeds from sale of $169.8 million and recognized a pre-tax gain on sale of $54.6 million.
Cash Flow Activities for the Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
During the year ended December 31, 2019, we generated $15.9 million in cash flow from operating activities compared to $54.0 million during the year ended December 31, 2018. The $38.1 million decrease in operating cash was primarily driven by higher cash taxes, higher working capital and cash used by discontinued operations.
During the year ended December 31, 2019, we generated $153.0 million for investing activities compared to cash used of $16.9 million during the year ended December 31, 2018. The $169.9 million year over year increase in cash provided was primarily driven by cash proceeds from the sale of certain assets and liabilities related to Spence and Nicholson products lines for $84.5 million and the sale of the Reliability Services business for approximately $85 million.
During the year ended December 31, 2019, we used $152.9 million in cash from financing activities as compared to cash used of $74.1 million during the year ended December 31, 2018. The $78.9 million year over year increase in cash used by financing activities resulted from payments to reduce long-term debt.
As of December 31, 2019, total debt (including current portion) was $636.3 million compared to $786.0 million at December 31, 2018. Total debt is net of unamortized term loan debt issuance costs of $17.6 million and $21.0 million at December 31, 2019 and 2018, respectively. Total debt as a percentage of total shareholders’ equity was 163% as of December 31, 2019 compared to 149% as of December 31, 2018. As of December 31, 2019, we had available capacity to borrow an additional $115.7 million under our revolving credit facility.
As of December 31, 2019, we had borrowings of $636.3 million outstanding under our credit facility and $42.0 million outstanding under letters of credit.
We were in compliance with all financial covenants related to our existing debt obligations at December 31, 2019 and we believe it is likely that we will continue to meet such covenants for at least the next twelve months from date of issuance of the financial statements.
Significant Contractual Obligations and Commercial Commitments
The following table summarizes our significant contractual obligations and commercial commitments at December 31, 2020 that affect our liquidity (in thousands):
Payments due by Period
Total (1) Less Than
1 Year 1 - 3
Years 3 - 5
Years More than
5 years
Contractual Cash Obligations:
Long-term debt, less current portion $ 519,938 $ - $ 27,900 $ 492,038 $ -
Interest payments on debt 122,945 33,217 61,519 28,209 -
Operating leases 20,585 5,153 6,312 3,471 5,649
Total contractual cash obligations $ 663,468 $ 38,370 $ 95,731 $ 523,718 $ 5,649
Commercial Commitments:
U.S. standby letters of credit $ 29,683 $ 19,891 $ 9,792 $ - $ -
International standby letters of credit 9,619 6,164 2,137 614 704
Commercial contract commitments 100,965 83,686 12,168 5,083 28
Total commercial commitments $ 140,267 $ 109,741 $ 24,097 $ 5,697 $ 732
Our commercial contract commitments primarily relate to open purchase orders of $94.0 million, $11.7 million of which extend to 2022 and beyond.
In accordance with the authoritative guidance for accounting for uncertainty in income taxes, as of December 31, 2020, we had unrecognized tax benefits of $1.1 million and $0.1 million of accrued interest. The Company does not expect the unrecognized tax benefits to change over the next 12 months.
During the fiscal year ended December 31, 2020, we made cash contributions of approximately $0.8 million to our U.S. plans and $4.1 million to our foreign plans. During the fiscal year ended December 31, 2019, we made cash contributions of approximately $0.8 million to our U.S. plans and $4.3 million for our foreign plans. During the fiscal year ended December 31, 2018, we did not make any cash contributions to our defined benefit plan, but made $0.4 million in payments for our non-qualified plans. In addition, we made $0.5 million, $3.4 million, $1.8 million in payments to our 401(k) savings plan for 2020, 2019 and 2018, respectively.
In 2021, we expect to make defined benefit plan contributions based on the minimum required funding in accordance with statutory requirements (approximately $1.1 million in the U.S. and approximately $3.9 million for our foreign plans). The estimates for plan funding for future periods may change as a result of the uncertainties concerning the return on plan assets, the number of plan participants, and other changes in actuarial assumptions. We anticipate fulfilling these commitments through the generation of cash flow from operations.
Off-Balance Sheet Arrangements
Through December 31, 2020, we have not entered into any off-balance sheet arrangements or material transactions with unconsolidated entities or other persons that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk
Business performance in the oil & gas refining sector is largely tied to refining margins, which are also driven by the market price of crude oil and gasoline demand. Seasonal factors such as hurricanes and peak gasoline demand in the summer months may also drive high crack spread margins. During periods when high crack spread margins exist, refineries prefer to operate continuously at full capacity. Refiners may decide to delay planned maintenance (commonly called “unit turnarounds”) during these periods to maximize their returns. Refining crack spread margins moderated in 2018, which resulted in unit turnarounds. As a result, the timing of major capital projects in our severe service refinery valves business were impacted. While planned maintenance and unit turnarounds are necessary for safe and efficient operation of the refineries, project timing driven by these factors may continue to create fluctuations in our performance.
Foreign Currency Exchange Risk
The Company is exposed to certain risks relating to its ongoing business operations including foreign currency exchange rate risk and interest rate risk. During 2019, the Company entered into a cross-currency swap ("cross-currency swap") agreement to hedge against future volatility in exchange rates between the U.S. dollar and the Euro. We believe our exposure to changes in foreign currency is not material given our hedging policy. For additional information regarding our foreign currency exchange risk refer to Note 12, Financing Arrangements, of the consolidated financial statements included in this Annual Report.
Interest Rate Risk
Loans under our credit facility bear interest at variable rates which reset every 30 to 180 days depending on the rate and period selected by the Company. These loans are subject to interest rate risk as interest rates will be adjusted at each rollover date to the extent such amounts are not repaid. As of December 31, 2020, the annual rates on the revolving loans were 5.8975%. The Company entered into a hedging agreement to mitigate the inherent rate risk associated with our outstanding variable rate debt. We believe our exposure to changes in interest rates is not material given our hedging policy. Refer to Note 12, Financing Arrangements, of the consolidated financial statements included in this Annual Report.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements and the related notes thereto are listed in Item 15(a)(1) on the Index to Consolidated Financial Statements.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") (our principal executive officer and principal financial officer, respectively), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this Annual Report on Form 10-K. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information we disclose in reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure and that such information is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our CEO and CFO concluded that, as of December 31, 2020, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined by Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2020, based upon the framework presented in “Internal Control-Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included herein.
Remediation of Previously Reported Material Weaknesses in Internal Control over Financial Reporting
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely manner.
As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2019, we did not maintain a sufficient complement of corporate personnel with appropriate levels of accounting and controls knowledge and experience commensurate with our financial reporting requirements to appropriately analyze, record and disclose accounting matters completely and accurately. This material weakness contributed to the following additional material weaknesses detailed below.
•We did not design and maintain effective controls to analyze, account for and review non-routine transactions at the corporate level, including accounting for the financial statement effects of business dispositions, adverse purchase commitment liabilities, restricted cash balance sheet classification and other non-recurring transactions.
•We did not design and maintain effective controls over the preparation, review and approval of certain account reconciliations. Specifically, we did not maintain effective controls over the completeness and review of supporting schedules and accuracy of underlying data supporting account reconciliations prepared at the corporate level and certain of our shared service locations.
These material weaknesses had resulted in audit adjustments to the Company's consolidated financial statements in the areas of income taxes, cash and cash equivalents (including restricted cash), adverse purchase commitment liabilities and other liabilities, and special charges related to non-recurring transactions as of and for the year ended December 31, 2019.
During the year ended December 31, 2020, we implemented remedial actions to implement new controls, enhance existing controls and change processes. The remedial actions included the following:
•Hired additional full-time corporate accounting resources with appropriate levels of experience
•Allocated additional resources to the Corporate accounting function, including the use of independent consultants with sufficient expertise to assist in the preparation and review of certain non-recurring transactions and timely review of the account reconciliations
•Enhanced training on a regular basis related to internal control over financial reporting for our finance and accounting personnel
•Added additional controls for review of transactions with higher level of subjectivity and non-routine transactions
•Improved processes and enhanced controls over the preparation and review of account reconciliations including specific controls on completeness and accuracy of underlying data.
During the quarter ended December 31, 2020, we completed the implementation and testing of the operating effectiveness of the remediated controls and concluded that the previously identified material weaknesses have been remediated as of December 31, 2020.
Changes in Internal Control over Financial Reporting
Except for the remediation of the 2019 material weaknesses described above there were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.
Part III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information required under this item is incorporated by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission no later than 120 days after the close of the Company’s fiscal year ended December 31, 2020.
Code of Ethics
The Company has implemented and regularly monitors compliance with a comprehensive Code of Conduct & Business Ethics (the "Code of Conduct"), which applies uniformly to all directors, executive officers, and employees. Among other things, the Code of Conduct addresses conflicts of interest, confidentiality, fair dealing, protection and proper use of Company assets, compliance with applicable law (including insider trading and anti-bribery laws), and reporting of illegal or unethical behavior. The Code of Conduct is available on the Company's website at www.CIRCOR.com under the "Investors" tab and a hard copy will be provided by the Company to any stockholder who requests it by writing to the Company's Secretary at the Company's executive offices. In addition, we will post on our website all disclosures that are required by SEC regulations or NYSE listing standards with respect to amendments to, or waivers from, any provision of the Code of Conduct.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required under this item is incorporated by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission no later than 120 days after the close of the Company’s fiscal year ended December 31, 2020.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Except for the information required by Section 201(d) of Regulation S-K which is set forth below, the information required under this item is incorporated by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission no later than 120 days after the close of the Company’s fiscal year ended December 31, 2020.
EQUITY COMPENSATION PLAN INFORMATION
Plan category Number of securities
to be issued upon
exercise of
outstanding
options,
warrants and rights Weighted-average
exercise price of
outstanding options,
warrants and rights Number of securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a))
(a) (b) (c)
Equity compensation plans approved by security holders 1,217,199 (1) $31.92 (3) 457,953
Equity compensation plans not approved by security holders 194,511 (2) $10.89 (3) N/A
Total 1,411,710 $23.61 457,953
(1)Reflects 15,460 stock options granted under the Company’s Amended and Restated 1999 Stock Option and Incentive Plan, 501,325 stock options and 167,047 restricted stock units granted under the Company's 2014 Stock Option and Incentive Plan, and 533,367 restricted stock units granted under the Company's 2019 Stock Option and Incentive Plan.
(2)Reflects 150,000 stock options issued as an inducement equity award to our President and CEO on April 9, 2013 as well as 44,511 restricted stock units issued as an inducement equity award to our SVP and CFO on April 2, 2020. These awards were granted pursuant to the inducement award exemption under Section 303A.08 of the NYSE Listed Company Manual. Details of this grant, including vesting terms, are set forth in Note 13, Share-Based Compensation, of the consolidated financial statements included in this Annual Report.
(3)The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding restricted stock units, which have no exercise price.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required under this item is incorporated by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission no later than 120 days after the close of the Company’s fiscal year ended December 31, 2020.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
The information required under this item is incorporated by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission no later than 120 days after the close of the Company’s fiscal year ended December 31, 2020.
Part IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
(a)(1) Financial Statements
Topic Page
Number
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of (Loss) Income
Consolidated Statements of Comprehensive (Loss) Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP dated March 15, 2021 on the Company's financial statements filed as a part hereof for the fiscal year ended December 31, 2020 and on the Company's internal control over financial reporting as of December 31, 2020 is included in this Annual Report on Form 10-K. The independent registered public accounting firm's consent with respect to this report appears in Exhibit 23.1 of this Annual Report on Form 10-K. Report of PricewaterhouseCoopers LLP dated March 30, 2020, except for the change in reportable segments discussed in Note 18 to the consolidated financial statements, as to which the date is March 15, 2021 on the Company’s financial statements filed as a part hereof as of December 31, 2019 and for the fiscal years ended December 31, 2019 and 2018 is included in this Annual Report on Form 10-K. The independent registered public accounting firm’s consent with respect to this report appears in Exhibit 23.2 of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules
Page
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2020, 2019 and 2018
Other than our Allowance for Doubtful Accounts Rollforward included in Schedule II Valuation and Qualifying Accounts, all other schedules are omitted because they are not applicable or not required, or because the required information is included either in the consolidated financial statements or in the notes thereto.
(a)(3) Exhibits
Unless otherwise indicated, references to exhibits in the table below being incorporated by reference are made in each case with respect to filings of the Company, SEC File No. 001-14962.
Exhibit
No. Description and Location
2.1
Share Purchase Agreement, dated April 15, 2015, between the Company and affiliates and Schroedahl-ARAPP Spezialarmaturen GmbH & Co. KG and affiliates, incorporated herein by reference to Exhibit 2.1 to the Company’s Form 8-K filed with the SEC on April 15, 2015
2.2
Agreement and Plan of Merger dated October 12, 2016 by and among the Company, Downstream Holding, LLC, Downstream Acquisition LLC, and Sun Downstream, LP., incorporated herein by reference to Exhibit 2.1 to the Company’s Form 8-K filed with the SEC on October 14, 2016
2.3
Purchase Agreement, dated as of September 24, 2017, by and between Colfax Corporation and the Company, incorporated herein by reference to Exhibit 2.1 to the Company's Form 8-K filed with the SEC on September 25, 2017
2.4
Quota Purchase Agreement, dated as of July 13, 2019, as amended by Amendment No. 1 to the Quota Purchase Agreement, dated as of July 26, 2019, between CEP Holdings Sarl and P&P Flow Control AG, incorporated herein by reference to Exhibit 2.1 of the Company’s Form 8-K, filed with the SEC on August 1, 2019
2.5
Asset Purchase Agreement, dated as of August 30, 2019, by and among Spence Engineering Company, Inc., Leslie Controls, Inc., Emerson Process Management Regulator Technologies, Inc. and the Company (for certain enumerated provisions), incorporated herein by reference to Exhibit 2.1 of the Company’s Form 8-K, filed with the SEC on September 6, 2019
2.6
Amended and Restated Securities Purchase Agreement, dated as of January 31, 2020, by and among CIRCOR Dovianus Holdings B.V., CIRCOR Aerospace, Inc., the Company and Crane Co., incorporated herein by reference to Exhibit 2.1 of the Company’s Form 8-K, filed with the SEC on February 5, 2020
2.7
Securities Purchase Agreement, dated as of June 5, 2020, by and between CIRCOR Energy Products, LLC and Rheinsee 765. V V GmbH (Renamed into “MS Valves GmbH”), incorporated herein by reference to Exhibit 2.1 to the Company’s Form 8-K, filed with the SEC on June 23, 2020
3.1
Amended and Restated Certificate of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2020
3.2
Second Amended and Restated By-Laws of the Company, incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the SEC on June 17, 2020
4.1**
Description of Securities Registered under Section 12 of the Exchange Act
10.1
Credit Agreement, dated as of December 11, 2017, by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto, Deutsche Bank AG New York Branch, as term loan administrative agent and collateral agent, SunTrust Bank, as revolver administrative agent, swing line lender and a letter of credit issuer, Deutsche Bank Securities Inc. and SunTrust Robinson Humphrey, Inc., as joint-lead arrangers and joint-bookrunners, and Citizens Bank, N.A. and HSBC Securities (USA) Inc. as co-managers incorporated herein by reference to Exhibit 10.2 to the Company's Form 8-K, filed with the SEC on December 12, 2017
10.2
Amendment No 2. to the Credit Agreement, dated as of February 19, 2020, by and among the Company, certain domestic subsidiaries of the Company, as guarantors, the lenders party thereto, Deutsche Bank AG New York Branch, as term loan administrative agent and as collateral agent and Trust Bank (formerly known as SunTrust Bank), as revolver administrative agent, incorporated herein by reference to Exhibit 10.56 to the Company’s Form 10-K, filed with the SEC on March 31, 2020
10.33
Amendment No. 3 to the Credit Agreement, dated as of February 26, 2020, by and among the Company, certain domestic subsidiaries of the Company, as guarantors, the lenders party thereto, Deutsche Bank AG New York Branch, as term loan administrative agent and as collateral agent and Trust Bank (formerly known as SunTrust Bank), as revolver administrative agent, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K, filed with the SEC on February 28, 2020
10.4
Amendment No. 4 to the Credit Agreement, dated as of May 18, 2020, by and among the Company, Inc., certain domestic subsidiaries of the Company, as guarantors, the lenders party thereto, Deutsche Bank AG New York Branch, as term loan administrative agent and as collateral agent and Truist Bank (formerly known as SunTrust Bank), as revolver administrative agent, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K, filed with the SEC on May 22, 2020
10.5§
CIRCOR International, Inc. Amended and Restated 1999 Stock Option and Incentive Plan (as amended, the “1999 Stock Option and Incentive Plan”), incorporated herein by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-8, File No. 333-125237, filed with the SEC on May 25, 2005
10.6§
First Amendment to the 1999 Stock Option and Incentive Plan, dated as of December 1, 2005, incorporated herein by reference to Exhibit 10.1 to the Company’s Form 8-K, filed with the SEC on December 7, 2005
10.7§
Second Amendment to the 1999 Stock Option and Incentive Plan, dated as of February 12, 2014, incorporated herein by reference to Exhibit 10.6 to the Company's Form 10-K, filed with the SEC on March, 1 2018
10.8§
Form of Non-Qualified Stock Option Agreement for Employees (Three Year Cliff Vesting) under the 1999 Stock Option and Incentive Plan , incorporated herein by reference to Exhibit 10.1 to the Company’s Form 10-Q, filed with the SEC on May 10, 2010
10.9§
CIRCOR International, Inc. Amended and Restated Management Stock Purchase Plan dated as of January 1, 2017, incorporated herein by reference to Exhibit 10.8 to the Company's Form 10-K, filed with the SEC on March1, 2018
10.10§
Form of Indemnification Agreement entered into by the Company and its directors and certain of its officers incorporated herein by reference to Exhibit 10.12 to the Company’s Form 10-K, filed with the SEC on March 12, 2003
10.11§
Stock Option Inducement Award Agreement, dated as of April 9, 2013, between the Company and Scott A Buckhout, incorporated herein by reference to Exhibit 10.3 to the Company’s Form 8-K, filed with the SEC on April 15, 2013
10.12§
Severance Agreement, dated as of April 9, 2013, between the Company and Scott A Buckhout, incorporated herein by reference to Exhibit 10.4 to the Company’s Form 8-K, filed with the SEC on April 15, 2013
10.13§
CIRCOR International, Inc. 2014 Stock Option and Incentive Plan (the "2014 Stock Option and Incentive Plan") incorporated herein by reference to Exhibit A to the Company’s Definitive Proxy Statement, filed with the SEC on March 21, 2014
10.14§
First Amendment to 2014 Stock Option and Incentive Plan, dated February 12, 2014, incorporated herein by reference to Exhibit 10.36 to the Company’s Form 10-K, filed with the SEC on February 18, 2015
10.15§
Form of Non-Qualified Stock Option Agreement for Employees under the 2014 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.34 of the Company's Form 10-K, filed with the SEC on February 21, 2017
10.16§
Form of Restricted Stock Unit Agreement for Employees under the 2014 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.35 of the Company's Form 10-K, filed with the SEC on February 21, 2017
10.17§
Form of Performance-Based Restricted Stock Unit Agreement for Employees under the 2014 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.1 of the Company’s Form 10-Q, filed with the SEC on May 14, 2019
10.18§
Form of Management Stock Purchase Plan Restricted Stock Unit Agreement for Employees and Directors under the 2014 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.2 of the Company’s Form 10-Q, filed with the SEC on May 14, 2019
10.19§
Form of Non-Qualified Stock Option Agreement for Employees under the 2014 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.3 of the Company’s Form 10-Q, filed with the SEC on May 14, 2019
10.20§
Form of Restricted Stock Unit Agreement for Employees under the 2014 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.4 of the Company’s Form 10-Q, filed with the SEC on May 14, 2019
10.21§
Form of Restricted Stock Unit Agreement for Directors under the 2014 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.5 of the Company’s Form 10-Q, filed with the SEC on May 14, 2019
10.22§
CIRCOR International, Inc. 2019 Stock Option and Incentive Plan (the “2019 Stock Option and Incentive Plan”), incorporated herein by reference to Exhibit 99.1 to the Company’s Form 8-K, filed with the SEC on May 14, 2019
10.23§
Form of Performance-Based Restricted Stock Unit Agreement for Employees under the 2019 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.1 of the Company’s Form 10-Q, filed with the SEC on August 1, 2019
10.24§
Form of Updated Performance-Based Restricted Stock Unit Agreement under the 2019 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.8 to the Company’s Form 10-Q, filed with the SEC on June 1, 2020
10.25§
Form of 2020 Special One Year Restricted Stock Unit Agreement under the 2019 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.9 to the Company’s Form 10-Q, filed with the SEC on June 1, 2020
10.26§
Form of Restricted Stock Unit Agreement for Employees under the 2019 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.10 to the Company’s Form 10-Q, filed with the SEC on June 1, 2020
10.27§
Form of Restricted Stock Unit Agreement for Directors under the 2019 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.11 to the Company’s Form 10-Q, filed with the SEC on June 1, 2020
10.28§
First Amendment to the Amended and Restated Management Stock Purchase Plan, incorporated herein by reference to Exhibit 10.2 of the Company’s Form 10-Q, filed with the SEC on November 13, 2019
10.29§
Offer Letter, dated March 28, 2020, between the Company and Abhishek Khandelwal, incorporated herein by reference to Exhibit 10.4 to the Company’s Form 10-Q, filed with the SEC on June 1, 2020
10.30§
Form of Inducement Restricted Stock Unit Agreement between the Company and Abhishek Khandelwal, incorporated herein by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8, File No. 333-237554, filed with the SEC on April 2, 2020
10.31§
Form of Amended and Restated Executive Change in Control Agreement, incorporated herein by reference to Exhibit 10.5 to the Company’s Form 10-Q, filed with the SEC on August 7, 2020
10.32§**
Form of Severance Agreement between the Company and each of its executive officers other than Scott A. Buckhout
10.33§**
Form of Restrictive Covenants Agreement between the Company and each of its executive officers
10.34
Letter from PricewaterhouseCoopers LLP to the SEC, dated June 5, 2020, incorporated herein by reference to Exhibit 16.1 to the Company’s Form 8-K, filed with the SEC on June 5, 2020
21**
Schedule of Subsidiaries of CIRCOR International, Inc.
23.1**
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
23.2**
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
31.1**
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2**
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 The following financial statements from CIRCOR International, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 15, 2020, formatted in XBRL (eXtensible Business Reporting Language), as follows:
(i) Consolidated Balance Sheets as of December 31, 2020 and 2019
(ii) Consolidated Statements of (Loss) Income for the years ended December 31, 2020, 2019 and 2018
(iii) Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2020, 2019 and 2018
(iv) Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
(v) Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2020, 2019 and 2018
(vi) Notes to the Consolidated Financial Statements
* The Company hereby agrees to provide the Commission, upon request, copies of any omitted exhibits or schedules to this exhibit required by Item 601(b)(2) of Regulation S-K.
** Filed with this report.
*** Furnished with this report.
§ Indicates management contract or compensatory plan or arrangement.