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CIRCOR Reports Financial Results for Fourth Quarter and Year Ended December 31, 2022

  • Q4 GAAP EPS of $0.27, Up 119% YoY; Adjusted EPS of $0.77, Up 67% YoY

  • Q4 GAAP Operating Income of $20.2 Million, Up 206% YoY; Adjusted Operating Income of $33.2 Million, Up 62% YoY

  • Q4 Orders up 13% Reported and 19% Organically YoY

  • President and CEO Tony Najjar Appointed to Board of Directors

  • Progressing with Review of Strategic Alternatives

BURLINGTON, Mass., March 15, 2023--(BUSINESS WIRE)--CIRCOR International, Inc. (NYSE: CIR) ("CIRCOR" or "the Company"), one of the world’s leading providers of mission critical flow control products and services for the Industrial and Aerospace & Defense markets, today announced financial results for the fourth quarter and year ended December 31, 2022.

Q4 2022 Overview (compared with Q4 2021):

  • Revenue of $215 million up 5% reported and 11% organically

    • Aerospace & Defense revenue of $80 million, up 14% reported and 18% organically

    • Industrial revenue of $135 million, flat reported and up 7% organically

  • Orders of $249 million, up 13% and 19% organically

    • Aerospace & Defense orders of $71 million, down 4% and 1% organically

    • Industrial orders of $178 million, up 22% and 29% organically

  • GAAP operating income of $20.2 million, up 206%

  • GAAP operating margin of 9.4%, up 1860 bps

  • Adjusted operating income $33.2 million, up 62%

  • Adjusted operating margin of 15.5%, up 550 bps

FY 2022 Overview (compared with FY 2021):

  • Revenue of $787 million up 4% reported and 9% organically

    • Aerospace & Defense revenue of $283 million, up 12% reported and 15% organically

    • Industrial revenue of $504 million, flat reported and up 7% organically

  • Orders of $907 million, up 7% and 12% organically

    • Aerospace & Defense orders of $308 million, up 21% and 24% organically

    • Industrial orders of $599 million, up 1% and 7% organically

  • Backlog of $543 million at December 31, up 22% driven by strong demand in both Aerospace & Defense and Industrial segments

  • GAAP operating income of $62.8 million, up 314%

  • GAAP operating margin of 8.0%, up 1190 bps

  • Adjusted operating income $87.5 million, up 61%

  • Adjusted operating margin of 11.1%, up 390 bps

President and CEO Tony Najjar said, "Our strong fourth-quarter performance capped a solid year for CIRCOR, reflecting disciplined strategic execution by our entire team. For the fourth quarter, organic orders increased 19% driven by our Industrial segment, which benefited from aftermarket growth in core Industrial and a positive downstream market. For the full year 2022, we delivered 12% organic orders growth driven by aftermarket strength in both segments, commercial aerospace recovery, new products for defense and hydrogen applications, downstream, and value pricing. Our backlog at year end was up 22% to a record $543 million."

Mr. Najjar continued, "Our value pricing initiatives and simplification actions continued to serve as growth and margin expansion levers during the quarter. We delivered a 62% increase in adjusted operating income and a 550 basis-point improvement in adjusted operating margin during Q4, more than offsetting the ongoing effects of inflation and supply chain constraints. The Q4 results represent another step change in margin performance for CIRCOR driven by the significant margin expansion in our Industrial segment and continued strong performance in our A&D segment. With the actions taken, and continued operating discipline and focus on our customers, we believe that we have positioned both segments to deliver sustained growth and shareholder value."

Board Appointment

President and CEO Tony Najjar was appointed to the Company’s Board of Directors effective March 20, 2023. He is the seventh member of the Board, which includes six independent directors.

Strategic Review

Related to the Company’s previously announced review of strategic alternatives, CIRCOR’s Board of Directors, supported by external advisors and the management team, continues to progress with the review. Through its external advisors, the Board is in dialogue with a number of parties that have expressed interest in acquiring all or parts of the Company. The Company has not set a timetable for completion of the review, may suspend or terminate the review at any time and does not intend to make further announcements regarding the process unless and until the Board of Directors approves a course of action for which further disclosure is required or appropriate. The exploration of strategic alternatives may not result in any transaction or strategic change.

Conference Call Information

CIRCOR International will hold a conference call to review its fourth-quarter and full-year 2022 financial results at 9:00 a.m. ET today, March 15, 2023. The call may also include discussion of Company developments, and forward-looking and other material information about business and financial matters. To listen to the live conference call and view the accompanying presentation slides, please visit "Webcasts & Presentations" in the "Investors" portion of CIRCOR’s website. https://investors.circor.com/. The live call also can be accessed by dialing (877) 407-5790 or (201) 689-8328. Participants are encouraged to dial in to the call at least 15 minutes prior to the start time. The webcast will be archived on the Company’s website for one year.

Selected Consolidated Results

(unaudited)

($ millions except EPS)

Q4 2022

Q4 2021

Change

FY 2022

FY 2021

Change

Revenue1

$

214.5

$

204.9

5

%

$

786.9

$

758.7

4

%

GAAP operating income (loss)

20.2

(19.0

)

206

%

62.8

(29.3

)

314

%

Adjusted operating income2

33.2

20.5

62

%

87.5

54.3

61

%

GAAP operating margin

9.4

%

(9.2

)%

1860 bps

8.0

%

(3.9

)%

1190 bps

Adjusted operating margin3

15.5

%

10.0

%

550 bps

11.1

%

7.2

%

390 bps

GAAP income (loss) per share

$

0.27

$

(1.40

)

119

%

$

0.95

$

(3.05

)

131

%

Adjusted earnings per share (diluted)4

$

0.77

$

0.46

67

%

$

1.83

$

1.03

78

%

Operating cash flow

28.5

10.6

169

%

(0.8

)

10.4

-108

%

Adjusted free cash flow5

19.8

6.4

209

%

(22.7

)

(4.3

)

-428

%

Orders6

$

248.9

$

220.0

13

%

$

907.2

$

850.6

7

%

Segment Results

(unaudited)

($ in millions)

Q4 2022

Q4 2021

Change

FY 2022

FY 2021

Change

Aerospace & Defense

Revenue

$

79.9

$

70.0

14

%

$

282.7

$

252.5

12

%

Segment operating income

21.8

18.4

18

%

63.6

56.1

13

%

Segment operating margin

27.3

%

26.3

%

100 bps

22.5

%

22.2

%

30 bps

Orders6

$

70.8

$

73.9

(4

)%

$

308.2

$

255.2

21

%

Industrial

Revenue1

$

134.7

$

134.9

%

$

504.2

$

506.1

%

Segment operating income2

18.2

8.7

109

%

49.3

28.9

71

%

Segment operating margin3

13.5

%

6.4

%

710 bps

9.8

%

5.7

%

410 bps

Orders6

$

178.1

$

146.1

22

%

$

599.0

$

595.4

1

%

  1. Consolidated and Industrial segment revenues for Q4 2022 and Q4 2021 included $0.0 million and $5.2 million, respectively, relating to our Pipeline Engineering business.

  2. Adjusted operating income is a non-GAAP financial measure. Refer to "Use of Non-GAAP Financial Measures" for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release. Adjusted operating income and Industrial segment operating income for the Q4, 2022 and Q4 2021 included $0.0 million and $(3.2) million, respectively, relating to our Pipeline Engineering business.

  3. Adjusted operating margin is a non-GAAP financial measure. Refer to "Use of Non-GAAP Financial Measures" for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release. Refer to "Use of Non-GAAP Financial Measures" for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release. Adjusted operating margin for Q4 2022 and Q4 2021 included (61)% and 236%, respectively, relating to our Pipeline Engineering business.

  4. Adjusted earnings per share (diluted) is a non-GAAP financial measure. Refer to "Use of Non-GAAP Financial Measures" for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release. Refer to "Use of Non-GAAP Financial Measures" for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release. Adjusted earnings per share and our segment results for Q4 2022 exclude net loss from non-cash acquisition-related intangible amortization and special and restructuring charges of $13.1 million, consisting of (i) $9.6 million for non-cash acquisition-related intangible amortization and depreciation expense; (ii) $0.5 million of costs due to the investigation into the accounting irregularities of our Pipeline Engineering business and incremental professional services incurred due to the restatement; (iii) $1.8 million of special charges related to the evaluation of strategic alternatives for the Company; (iv) incremental loss allowance related to a contract assumed as part of the Fluid Handling acquisition of $0.5 million ; and (v) other special and restructuring charges net of $0.7 million. Adjusted consolidated and segment results for Q4 2021 exclude net income from discontinued operations and net loss from non-cash acquisition-related intangible amortization, special and restructuring charges, and goodwill impairment charge totaling $39.4 million. These charges include: (i) $11.8 million for non-cash acquisition-related intangible amortization and depreciation expense; (ii) $8.7 million of costs related to debt refinancing; (iii) $7.9 million related to incremental loss allowance for a receivable, contract asset and sub-contractor claims for a contract assumed as part of the Fluid Handling acquisition; (iv) $0.5 million other special and restructuring recoveries; and (v) $10.5 million goodwill impairment charge related to our Industrial segment.

  5. Adjusted free cash flow, a non-GAAP financial measure, is calculated by subtracting GAAP capital expenditures, net of proceeds from asset sales, from GAAP operating cash flow. Refer to "Use of Non-GAAP Financial Measures" for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release. Refer to "Use of Non-GAAP Financial Measures" for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release.

  6. Orders, an operating measure, is defined as a legally binding agreement from an authorized individual at a customer requesting CIRCOR to provide goods and/or services at a fixed or determinable price and CIRCOR is capable of providing such goods and services, when the terms and conditions are firm enough to assure subsequent payment by the customer. Consolidated and Industrial segment orders for Q4 2022 and Q4 2021 included $0.0 million and $7.1 million, respectively, relating to our Pipeline Engineering business.

Use of Non-GAAP Financial Measures

In this press release, the Company uses the non-GAAP financial measures organic revenue, adjusted net income, adjusted EBITDA, adjusted operating income, adjusted operating margin, adjusted earnings per share, adjusted free cash flow, gross debt, net of cash and net debt1. Non-GAAP financial measures are used by management in our financial and operating decision making because we believe they reflect our ongoing business and facilitate period-to-period comparisons. We believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating CIRCOR’s current operating performance and future prospects in the same manner as management does if they so choose. These non-GAAP financial measures can also assist investors and others in comparing CIRCOR’s current financial results with CIRCOR’s past financial results in a consistent manner.

We exclude costs and tax effects associated with special and restructuring activities, such as reducing overhead and consolidating facilities. We believe that the costs related to special and restructuring activities are not indicative of our normal operating costs. We exclude certain acquisition-related costs, including significant transaction costs and amortization of inventory and fixed-asset step-ups and the related tax effects. We exclude these costs because we do not believe they are indicative of our normal operating costs.

We exclude the expense and tax effects associated with the non-cash amortization of acquisition-related intangible assets because a significant portion of the purchase price for acquisitions may be allocated to intangible assets that have lives up to 25 years. Exclusion of the non-cash amortization expense allows comparisons of operating results that are consistent over time for both our newly acquired and long-held businesses and with both acquisitive and non-acquisitive peer companies.

We exclude certain gains/losses and related tax effects, which are either isolated or cannot be expected to occur again with any predictability, and that we believe are not indicative of our normal operating gains and losses. For example, we exclude gains/losses from items such as the sale of a business, significant litigation-related matters and lump-sum pension plan settlements. We exclude the results of discontinued operations. We exclude goodwill impairment charges. We exclude these costs because we do not believe they are indicative of our normal operating costs.

Due to the significance of recently sold or exited businesses and to provide a comparison of changes in our revenue and orders (an operating measure), we also discuss these changes on an "organic" basis. Organic is calculated assuming the divestitures and/or exited businesses completed prior to December 31, 2022 were completed on January 1, 2021 and excluding the impact of changes in foreign currency exchange rates.

CIRCOR’s management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring the Company’s operating performance and comparing such performance to that of prior periods and to the performance of our peers. We use such measures when publicly providing our business outlook, assessing future earnings potential, evaluating potential acquisitions and dispositions and in our financial and operating decision-making process, including for compensation purposes.

Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition and not as a substitute for or superior to, any measure of performance, cash flow or liquidity prepared in accordance with accounting principles generally accepted in the United States. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is included in this news release.

1 See comment to investor presentation regarding consistency in use of terms "net debt" vs. "gross debt, net of cash"

About CIRCOR International, Inc.

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 3,060 employees and is headquartered in Burlington, Massachusetts. For more information, visit the Company’s investor relations website at http://investors.circor.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements that address expectations or projections about the future, including with respect to the Company’s expectations for its performance in 2023 or relating to the Company’s strategic review are forward-looking statements. Actual results may differ materially from the expectations the Company describes in its forward-looking statements. Substantial reliance should not be placed on forward-looking statements because they involve unknown risks, uncertainties and other factors, which are, in some cases, beyond the control of CIRCOR. Important factors that could cause actual results to differ materially from expectations include, but are not limited to the inability to achieve expected results in pricing and cost out actions and the related impact on margins and cash flow; the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures; the remediation of the material weaknesses in the Company’s internal controls over financial reporting or other potential weaknesses of which the Company is not currently aware or which have not been detected; the timing and outcome, if any, of the Company’s strategic alternatives review; 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 COVID-19, rising inflation, increasing interest rates, natural disasters, military conflicts, including the conflict between Russia and Ukraine, terrorist attacks and other similar matters, and the risks detailed from time to time in the Company’s periodic reports filed with the SEC. The Company has provided additional information about the risks facing the business in its annual report on Form 10-K and subsequent periodic and current reports most recently filed with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this press release, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.

CIRCOR INTERNATIONAL, INC

CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands, except per share data) (unaudited)

Three Months Ended

Twelve Months Ended

December 31, 2022

December 31, 2021

December 31, 2022

December 31, 2021

Net revenues

$

214,527

$

204,917

$

786,919

$

758,667

Cost of revenues

138,172

140,348

529,832

528,291

Gross profit

76,355

64,569

257,087

230,376

Selling, general and administrative expenses

52,777

55,556

213,294

224,927

Goodwill Impairment charges

10,500

10,500

Special and restructuring charges (recoveries), net

3,417

17,464

(19,013

)

24,272

Operating income (loss)

20,161

(18,951

)

62,806

(29,323

)

Other expense (income):

Interest expense, net

13,405

8,040

44,886

32,365

Other income, net

(426

)

(525

)

(5,747

)

(3,826

)

Total other expense, net

12,979

7,515

39,139

28,539

Income (loss) from continuing operations before income taxes

7,182

(26,466

)

23,667

(57,862

)

Provision for income taxes

1,743

1,976

4,279

5,182

Income (loss) from continuing operations, net of tax

5,439

(28,442

)

19,388

(63,044

)

Income from discontinued operations, net of tax

1,406

Net income (loss)

$

5,439

$

(28,442

)

$

19,388

$

(61,638

)

Basic income (loss) per common share:

Basic from continuing operations

$

0.27

$

(1.40

)

$

0.95

$

(3.12

)

Basic from discontinued operations

$

$

$

$

0.07

Net income (loss)

$

0.27

$

(1.40

)

$

0.95

$

(3.05

)

Diluted income (loss) per common share:

Diluted from continuing operations

$

0.27

$

(1.40

)

$

0.95

$

(3.12

)

Diluted from discontinued operations

$

$

$

$

0.07

Net income (loss)

$

0.27

$

(1.40

)

$

0.95

$

(3.05

)

Weighted average number of common shares outstanding:

Basic

20,366

20,261

20,350

20,201

Diluted

20,480

20,261

20,427

20,201

CIRCOR INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

Twelve Months Ended

December 31, 2022

December 31, 2021

OPERATING ACTIVITIES

Net Income (loss)

$

19,388

$

(61,638

)

Income (loss) from discontinued operations, net of income taxes

1,406

Income (Loss) from continuing operations, net of tax

19,388

(63,044

)

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:

Depreciation

19,691

22,854

Amortization

36,360

42,304

Change in provision for bad debt expense

(813

)

1,213

Write down of inventory

2,606

3,364

Compensation expense of share-based plans

1,880

5,252

Loss on debt extinguishment

4,977

8,693

Amortization of debt issuance costs

3,645

3,996

Deferred income tax (benefit) provision

(3,709

)

(2,992

)

Goodwill impairment charges

10,500

Other impairment charges

8,011

Loss (gain) on sale of businesses

1,919

Gain on sale of real estate

(47,977

)

Loss on deconsolidation charges

4,675

Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:

Trade accounts receivable

(9,649

)

(6,308

)

Inventories

(26,299

)

(6,974

)

Prepaid expenses and other assets

(22,218

)

(23,665

)

Accounts payable, accrued expenses and other liabilities

8,611

15,820

Net cash (used in) provided by continuing operations

(821

)

12,932

Net cash used in discontinued operations

(2,484

)

Net cash (used in) provided by operating activities

(821

)

10,448

INVESTING ACTIVITIES

Additions of property, plant and equipment

(21,988

)

(14,747

)

Proceeds from the sale of property, plant and equipment

104

2

Proceeds from beneficial interest of factored receivables

4,484

2,047

Proceeds from sale of real estate

54,945

...