CIRCOR International, Inc.

Greetings, and welcome to CIRCOR International's fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the conference over to Alex Mackey, Vice President, Financial Planning and Analysis and Investor Relations. Thank you, sir. You may begin.

Good morning, and welcome to SIRCOR's fourth quarter 2020 earnings call. I'm joined today by Scott Buckout, SIRCOR's president and CEO, and Abid Kondawal, the company's chief financial officer. Before we start, I'd like to remind you that today's presentation and press release are available on SIRCOR's website at investors.sircor.com. Today's discussion contains forward-looking statements and only represent the company's views as of today. These expectations are subject to known and unknown risks, uncertainties, and other factors, and actual results could differ materially from those anticipated or implied by today's remarks. While SERCOR may choose to update these forward-looking statements at a later date, the company specifically disclaims any duty to do so. You can find a full discussion of these factors in CIRCOR's Form 10-K, 10-Qs, and other SEC filings, also located on our website. On today's call, management will refer to GAAP and non-GAAP financial measures. The reconciliation of CIRCOR's non-GAAP measures to the comparable GAAP measures are available in our earnings press release. With that, I'll turn the call over to Scott.

Thank you, Alex, and good morning, everyone. 2020 was another transformational year for CIRCOR, and despite the continued challenges presented by COVID-19, our team made significant progress on executing our strategic plan. I'm proud of the resilience and efforts of the entire CIRCOR team in navigating such a challenging year while continuing to deliver for our customers and shareholders. As we saw throughout the year, our diversified product portfolio across multiple end markets and geographies helped mitigate the impact of a weaker macro environment. Our defense business delivered strong results for the year, which mostly offset lower demand for our commercial products. Our differentiated technology and market positions enabled us to increase prices across the portfolio. We executed well throughout this year's downturn and exited the year with positive momentum. With the health and safety of our employees as our foundation, we focused on the things we control. We achieved decremental margins of 25% for the year through value-based pricing and difficult but necessary cost actions of $45 million. Aerospace and Defense improved their margins by 290 basis points despite lower volume. Notably, Aerospace and Defense won 20 new programs, including 16 in defense and four in commercial. We continue to implement the CIRCWAR operating system across the company, resulting in improved operational performance. SERCOR is well positioned to take advantage of an eventual market recovery in 2021 and beyond. With the sale of instrumentation and sampling and distributed valves earlier in the year, our exit from upstream oil and gas is complete. We continue to invest in innovation, launching 49 new products in 2020 versus 33 in 2019. We delivered on our free cash flow commitments throughout the year and ended with strong free cash flow of $20 million in the fourth quarter. And finally, reduced our debt by $126 million, or 22%. I want to highlight some new mission-critical technology we introduced in 2020. On the defense side, our new missile arming switches are designed to operate in more severe environments with respect to temperature, radiation, and G-force. We launched self-arming switches in support of various missile programs, including hypersonic applications. On the commercial side, we introduced a switch which activates the aircraft's location transmitter in case of an in-flight emergency. In industrial, we launched a series of new gas pressure reduction systems to help our customers in marine, medical, and public utility industries. These systems help our customers transport and manage high-pressure industrial gas, LNG, CNG, biomethane fuels, and medical oxygen. Now I'd like to provide some financial highlights from the fourth quarter. We booked orders of $168 million in the quarter, which was flat sequentially and down 25% organically. Sequentially, industrial was up 12% in the quarter. A&D had lower orders sequentially, down 21%, due to the timing of large naval program orders that pushed into 2021. Revenue in the quarter was $208 million, up 10% sequentially, driven by strong defense deliveries, mainly on U.S. naval programs, and moderate growth across most end markets and industrial. Adjusted operating income was $23 million, representing a margin of 11.2%, up 200 basis points from the prior quarter. Margin improvement was driven by sequential volume recovery, pricing, cost actions, and productivity. As a result of improved operating income, the company delivered 66 cents of adjusted earnings per share. Finally, we generated strong free cash flow of $20 million during the fourth quarter as we exited the year with operational cash flow unencumbered by transformation disbursements. Now, let me turn the call over to Abhi to discuss our fourth quarter results in more detail.