Australia markets open in 5 hours 13 minutes
  • ALL ORDS

    6,788.70
    -132.70 (-1.92%)
     
  • AUD/USD

    0.6530
    -0.0115 (-1.73%)
     
  • ASX 200

    6,574.70
    -125.50 (-1.87%)
     
  • OIL

    79.43
    -4.06 (-4.86%)
     
  • GOLD

    1,651.70
    -29.40 (-1.75%)
     
  • BTC-AUD

    28,921.67
    -426.50 (-1.45%)
     
  • CMC Crypto 200

    434.61
    -9.92 (-2.23%)
     

CIRCOR Reports First-Quarter 2022 Financial Results; Announces the Appointment of Tony Najjar as President and Chief Executive Officer and Arjun Sharma as Chief Financial Officer

·11-min read

BURLINGTON, Mass., August 11, 2022--(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 GAAP and adjusted financial results for the first quarter ended April 3, 2022. Results are in line with previously disclosed selected preliminary financial expectations.

Q1 2022 Overview Results As Reported:

  • Orders of $222 million, down (2%) reported and up 1% organically

    • Aerospace & Defense orders of $78 million, up 7% reported and 8% organically

    • Industrial orders of $144 million, down (7%) reported and (2%) organically

  • Backlog of $477 million, up 12% reported driven by strong demand in Industrial

  • Revenue of $186 million up 5% reported and 8% organically

    • Aerospace & Defense revenue of $63 million, up 8% reported and 10% organically

    • Industrial revenue of $122 million, up 4% reported and 8% organically

  • GAAP operating (loss) of ($11.8) million, down (124%) reported

  • GAAP operating margin of (6.3%)

  • Adjusted operating income $10.4 million, up 53%

  • Adjusted operating margin of 5.6%, up 180 bps

Q1 2022 Overview Results Excluding Pipeline Engineering:

  • Orders of $219 million, down (1%) adjusted and up 2% organically

    • Aerospace & Defense orders of $78 million, up 7% adjusted and 8% organically

    • Industrial orders of $141 million, down (5%) adjusted and flat organically

  • Backlog of $477 million, up 13% adjusted, driven by strong demand in Industrial

  • Revenue of $183 million up 5% adjusted and 9% organically

    • Aerospace & Defense revenue of $63 million, up 8% adjusted and 10% organically

    • Industrial revenue of $119 million, up 4% adjusted and 8% organically

  • Adjusted operating income $13.6 million, up 47% adjusted

  • Adjusted operating margin of 7.4%, up 210 bps

CIRCOR President and CEO, Tony Najjar said, "Our team delivered solid first quarter 2022 results highlighted by continued strong orders performance in A&D and core Industrial businesses partially offset by lumpiness in our downstream business. Revenues for the quarter were up 9% organically excluding Pipeline Engineering, driven by both segments. Excluding Pipeline Engineering, adjusted operating income for the quarter was up 47% and adjusted operating margin up 210 basis points. With a focus on our strategic priorities driving value-based pricing, simplification and cost out actions, we continue to position the Company for growth, expanding margins and improving cash flow."

Selected Consolidated Results

(unaudited)

($ millions except EPS)

April 3, 2022

As Restated
April 4, 2021

Change

Orders

221.6

226.7

-2

%

Orders excluding Pipeline Engineering1

219.4

221.2

-1

%

Revenue

$

185.7

$

176.5

5

%

Revenue excluding Pipeline Engineering1

182.6

173.5

5

%

GAAP operating (loss) income

(11.8

)

(5.3

)

-124

%

Adjusted operating income2

10.4

6.8

53

%

Adjusted operating income excluding Pipeline Engineering1,2

13.6

9.3

47

%

GAAP operating margin

-6.3

%

-3.0

%

-330 bps

Adjusted operating margin2

5.6

%

3.8

%

180 bps

Adjusted operating margin excluding Pipeline Engineering1,2

7.4

%

5.3

%

210 bps

GAAP (loss) per share

$

(1.06

)

$

(0.59

)

-81

%

Adjusted earnings per share (diluted)2

$

0.05

$

0.02

150

%

Operating cash flow

(15.9

)

(19.2

)

17

%

Free cash flow3

(19.5

)

(22.6

)

14

%

Segment Results

(unaudited)

($ in millions)

April 3, 2022

As Restated
April 4, 2021

Change

Aerospace & Defense

Orders

$

77.9

$

73.0

7

%

Revenue

63.4

58.5

8

%

Segment operating income

11.3

10.0

13

%

Segment operating margin

17.9

%

17.1

%

80 bps

Industrial

Orders

$

143.7

$

153.7

-7

%

Orders - excluding Pipeline Engineering1

141.5

148.2

-5

%

Revenue

122.3

118.0

4

%

Revenue - excluding Pipeline Engineering1

$

119.3

$

115.0

4

%

Segment operating income

6.9

5.8

18

%

Segment operating income excluding Pipeline Engineering

10.0

8.3

20

%

Segment operating margin

5.6

%

4.9

%

70 bps

Segment operating margin (adjusted)

8.4

%

7.2

%

120 bps

  1. Orders, revenue, adjusted operating income and adjusted operating margin excluding Pipeline Engineering businesses are non-GAAP measures. Pipeline Engineering accounting irregularities were initially noted on March 14,2022 8-K Filing and further described in the Company's Annual report Form 10-K filed with SEC on July 26, 2022 as related to the Industrial Segment.

  2. Adjusted consolidated and segment results for Q1 2022 exclude net loss from non-cash acquisition-related intangible amortization and special and restructuring charges of $22.2 million. These charges include: (i) $10.4 million for non-cash acquisition-related intangible amortization and depreciation expense; (ii) $8.7 million of restructuring costs associated with the exit of the Pipeline Engineering business; (iii) $1.3 million costs due to the investigation into the accounting irregularities of the Pipeline Engineering business; (iv) $0.9 million charge for severance related to the former CEO; and (v) $0.9 million of other special and restructuring costs. Adjusted consolidated and segment results for Q1 2021 exclude net loss from discontinued operations of $0.2 million and net loss from non-cash acquisition-related intangible amortization, special and restructuring charges totaling $12.1 million. These charges include: (i) $12.9 million for non-cash acquisition-related intangible amortization and depreciation expense; and (ii) $0.8 million of other special and restructuring expense.

  3. Free cash flow is a non-GAAP financial measure and is calculated by subtracting GAAP capital expenditures, net of proceeds from asset sales, from GAAP operating cash flow.

Company Announces Executive Appointments

CIRCOR also announced that Tony Najjar has been appointed President & Chief Executive Officer, and Arjun "AJ" Sharma has been appointed Chief Financial Officer. Mr. Najjar, who joined the Company in 2015, has most recently served as the Chief Operating Officer and Interim President & Chief Executive Officer. Mr. Sharma, who joined the Company in 2009, has most recently served as Senior Vice President, Business Development and Interim Chief Financial Officer. Mr. Sharma will retain his leadership of business development in his new role.

"Since being appointed to their interim roles, Tony and AJ have demonstrated their ability to lead the Company through challenging times," said Helmuth Ludwig, Chair of CIRCOR’s Board of Directors. "As the Board continues to evaluate strategic alternatives for the Company, we believe Tony and AJ are the right leaders for CIRCOR. While completing the accounting review that occurred earlier this year, they have also stabilized business operations, focused on employee engagement, strengthened customer relationships and are driving growth and margin expansion initiatives. We look forward to partnering with Tony and AJ to create value for our stakeholders."

Use of Non-GAAP Financial Measures

In this press release, the Company uses the non-GAAP financial measures backlog, backlog excluding Pipeline Engineering, orders, orders excluding Pipeline Engineering, revenue excluding Pipeline Engineering, adjusted operating income, adjusted operating income excluding Pipeline Engineering, adjusted operating margin, adjusted operating margin excluding Pipeline Engineering, adjusted earnings per share and free cash flow. 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 also allow investors and others to compare CIRCOR’s current financial results with CIRCOR’s past financial results in a consistent manner.

We exclude costs and tax effects associated with restructuring activities, such as reducing overhead and consolidating facilities. We believe that the costs related to these 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 also 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 backlog, orders and revenue, we also discuss these changes on an "organic" basis. Organic is calculated assuming the divestitures and/or exited business are completed prior to April 3, 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.

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 3,100 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. 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 findings and conclusions of the Audit Committee’s review; 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 of the Company regaining compliance with the NYSE’s continued listing standards; the timing and outcome, if any, of the Company’s strategic alternatives review and its exit from the Pipeline Engineering business unit; the impact on the Company of the situation in Russia and Ukraine; and the risks detailed from time to time in the Company’s periodic reports filed with the SEC. Before making any investment decisions regarding CIRCOR, the Company strongly advises you to read the section entitled "Risk Factors" in its 2021 Annual Report on Form 10-K, which can be accessed under the "Investors" link of the Company’s website at www.circor.com. 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.

CIRCOR INTERNATIONAL, INC

CONSOLIDATED STATEMENT OF OPERATIONS

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

Three Months Ended

April 3, 2022

As Restated
April 4, 2021

Net revenues

$

185,655

$

176,451

Cost of revenues

130,372

124,889

Gross profit

55,283

51,562

Selling, general and administrative expenses

58,069

57,637

Special and restructuring charges (recoveries), net

9,003

(809

)

Operating (loss)

(11,789

)

(5,266

)

Other expense (income):

Interest expense, net

9,456

8,369

Other (income) expense

(1,287

)

(1,781

)

Total other expense, net

8,169

6,588

(Loss) from continuing operations before income taxes

(19,958

)

(11,854

)

Provision for (benefit from) income taxes

1,523

(297

)

(Loss) from continuing operations, net of tax

$

(21,481

)

$

(11,557

)

(Loss) from discontinued operations, net of tax

$

$

(239

)

Net (loss)

$

(21,481

)

$

(11,796

)

Basic (loss) per common share:

Basic from continuing operations

$

(1.06

)

$

(0.58

)

Basic from discontinued operations

$

$

(0.01

)

Net (loss)

$

(1.06

)

$

(0.59

)

Diluted (loss) per common share:

Diluted from continuing operations

$

(1.06

)

$

(0.58

)

Diluted from discontinued operations

$

$

(0.01

)

Net (loss)

$

(1.06

)

$

(0.59

)

Weighted average common shares outstanding:

Basic

20,310

20,054

Diluted

20,310

20,054

CIRCOR INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) (unaudited)

Three Months Ended

April 3, 2022

As Restated
April 4, 2021

OPERATING ACTIVITIES

Net (loss)

$

(21,481

)

$

(11,796

)

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

(239

)

(Loss) from continuing operations, net of tax

(21,481

)

(11,557

)

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

Depreciation

5,000

6,509

Amortization

9,397

10,696

Change in provision for bad debt expense

(89

)

(465

)

Write down of inventory

439

188

Compensation expense of share-based plans

(84

)

1,402

Amortization of debt issuance costs

514

995

Deferred tax provision

(1,011

)

(Gain) on sale of businesses

(1,947

)

Other impairment charges

8,011

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

Trade accounts receivable

4,242

(3,707

)

Inventories

(15,465

)

(8,255

)

Prepaid expenses and other assets

(5,671

)

(8,875

)

Accounts payable, accrued expenses and other liabilities

(737

)

(2,547

)

Net cash used in continuing operations activities

(15,924

)

(18,574

)

Net cash used in discontinued operations activities

(636

)

Net cash (used in) operating activities

(15,924

)

(19,210

)

INVESTING ACTIVITIES

Additions of property, plant and equipment

(3,607

)

(3,394

)

Proceeds from the sale of property, plant and equipment

15

2

Proceeds from beneficial interest of factored receivables

927

812

Proceeds from sale of business

7,193

Net cash (used in) provided by investing activities

(2,665