Circor reports financial results for first quarter ended april 2, 2023
Burlington, mass.--(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 first quarter ended april 2, 2023. q1 2023 overview (compared with q1 2022): revenue of $203 million up 9% reported and 13% organically aerospace & defense revenue of $69 million, up 8% reported and 10% organically industrial revenue of $135 million, up 10% reported and up 15% organically aerospace & defense revenue of $69 million, up 8% reported and 10% organically industrial revenue of $135 million, up 10% reported and up 15% organically orders of $242 million, up 9% and 13% organically aerospace & defense orders of $84 million, up 8% and 12% organically industrial orders of $158 million, up 10% and 14% organically aerospace & defense orders of $84 million, up 8% and 12% organically industrial orders of $158 million, up 10% and 14% organically gaap operating income of $17.9 million, up 252% gaap operating margin of 8.8%, up 1510 bps adjusted operating income of $28.4 million, up 173% adjusted operating margin of 14.0%, up 840 bps president and ceo tony najjar said, "strong orders momentum continued in the first quarter, reflecting our focus on customers and the execution of our growth strategy. our team delivered organic orders growth of 13%, which was supported by both segments. we benefited from the continued recovery in the commercial aerospace market, strength in our naval defense programs, industrial aftermarket, and value pricing in both the foremarket and aftermarket. our backlog at the end of q1 2023 was up 22% to a record $584 million.” “our value pricing initiatives, cost controls, and simplification actions continued to serve as growth and margin expansion levers during the quarter," mr. najjar continued. "we delivered a 173% increase in first-quarter adjusted operating income and an 840 basis-point improvement in adjusted operating margin supported by both segments. our year-over-year results represented another step change in margin performance driven by the significant margin expansion in our industrial and a&d segments. with the actions taken, and our team’s continued operating discipline and focus on our customers, we believe we are well positioned to deliver sustained growth and shareholder value.” 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 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 first quarter 2023 financial results at 9:00 a.m. et today, may 11, 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) q1 2023 q1 2022 change revenue1 $ 203.1 $ 185.7 9% gaap operating income (loss) 17.9 (11.8 ) 252% adjusted operating income2 28.4 10.4 173% gaap operating margin 8.8 % (6.3 )% 1510 bps adjusted operating margin3 14.0 % 5.6 % 840 bps gaap (loss) per share $ (0.02 ) $ (1.06 ) 98% adjusted earnings per share (diluted)4 $ 0.53 $ 0.05 960% operating cash flow (13.9 ) (15.9 ) 14% adjusted free cash flow5 (16.6 ) (19.5 ) 15% orders6 $ 242.1 $ 221.6 9% segment results (unaudited) ($ in millions) q1 2023 q1 2022 change aerospace & defense revenue $ 68.6 $ 63.4 8% segment operating income 14.7 11.3 30% segment operating margin 21.5 % 17.9 % 360 bps orders6 $ 84.4 $ 77.9 8% industrial revenue1 $ 134.5 $ 122.3 10% segment operating income2 20.4 6.9 196% segment operating margin3 15.2 % 5.6 % 960 bps orders6 $ 157.7 $ 143.7 10% use of non-gaap financial measures in this press release, the company uses the non-gaap financial measures adjusted net income, adjusted ebitda, adjusted operating income, adjusted operating margin, adjusted earnings per share, adjusted free cash flow, and gross debt, net of cash. 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 april 2, 2023 were completed on january 1, 2022 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 3,060 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 securities exchange commission. before making any investment decisions regarding circor, the company strongly advises you to read the section entitled “risk factors” in its 2022 annual report on form 10-k, which can be accessed under the “investors” link of the company’s website at www.circor.com. 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 april 2, 2023 april 3, 2022 net revenues $ 203,097 $ 185,655 cost of revenues 129,031 130,372 gross profit 74,066 55,283 selling, general and administrative expenses 54,666 58,069 special and restructuring charges, net 1,484 9,003 operating income (loss) 17,916 (11,789 ) other expense (income): interest expense, net 14,528 9,456 other expense (income), net 214 (1,287 ) total other expense, net 14,742 8,169 income (loss) before income taxes 3,174 (19,958 ) provision for income taxes 3,581 1,523 net loss $ (407 ) $ (21,481 ) net loss per share (basic and diluted) $ (0.02 ) $ (1.06 ) weighted-average common shares (basic and diluted) 20,368 20,310 circor international, inc. consolidated statements of cash flows (in thousands) (unaudited) three months ended april 2, 2023 april 3, 2022 operating activities net loss $ (407 ) $ (21,481 ) adjustments to reconcile net loss to net cash used in operating activities: depreciation 4,712 5,000 amortization 7,925 9,397 change in provision for bad debt expense (350 ) (89 ) write down of inventory 1,497 439 compensation expense for share-based plans 1033 (84 ) amortization of debt issuance costs 975 514 other impairment charges — 8,011 changes in operating assets and liabilities: trade accounts receivable 237 4,242 inventories (17,971 ) (15,465 ) prepaid expenses and other assets (4,811 ) (5,671 ) accounts payable, accrued expenses and other liabilities (6,766 ) (737 ) net cash used in operating activities (13,926 ) (15,924 ) investing activities additions to property, plant and equipment (5,045 ) (3,607 ) proceeds from the sale of property, plant and equipment 38 15 supplier funding 2,370 — proceeds from beneficial interest of factored receivables 1,097 927 net cash used in investing activities (1,540 ) (2,665 ) financing activities proceeds from long-term debt 53,475 51,325 payments of long-term debt (50,800 ) (30,875 ) net change in short-term borrowings — 925 withholding tax payments on net share settlements on equity awards (450 ) (821 ) net cash used in continuing financing activities 2,225 — net cash provided by financing activities 2,225 20,554 effect of exchange rate changes on cash, cash equivalents and restricted cash 537 (712 ) (decrease) increase in cash, cash equivalents, and restricted cash (12,704 ) 1,253 cash, cash equivalents, and restricted cash at beginning of period 66,724 61,374 cash, cash equivalents, and restricted cash at end of period 54,020 62,627 circor international, inc. condensed consolidated balance sheets (in thousands, except share and per share data) (unaudited) april 2, 2023 december 31, 2022 assets current assets: cash and cash equivalents $ 52,080 $ 64,275 trade accounts receivable, net 111,557 109,754 inventories 156,967 139,786 prepaid expenses and other current assets 120,124 117,766 total current assets 440,728 431,581 property, plant and equipment, net 142,147 141,141 other assets: goodwill 120,114 119,847 intangibles, net 249,379 256,338 lease right-of-use assets, net 41,389 42,491 deferred income taxes 507 512 other assets 21,465 20,777 total assets $ 1,015,729 $ 1,012,687 liabilities and shareholders’ equity current liabilities: accounts payable 80,224 78,778 accrued expenses and other current liabilities 83,695 84,510 accrued compensation and benefits 28,100 30,817 total current liabilities 192,019 194,105 long-term debt 500,042 496,534 deferred income taxes 18,422 18,238 pension liability, net 87,090 85,968 long-term lease liabilities 37,618 38,480 other non-current liabilities 19,300 20,316 commitments and contingencies shareholders’ equity: preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding at april 2, 2023 and december 31, 2022 — — common stock, $0.01 par value; 29,000,000 shares authorized; 21,762,933 and 21,736,911 issued at april 2, 2023 and december 31, 2022, respectively 218 218 additional paid-in capital 456,685 456,102 accumulated deficit (179,100 ) (178,693 ) common treasury stock, at cost (1,372,488 shares at april 2, 2023 and december 31, 2022) (74,472 ) (74,472 ) accumulated other comprehensive loss, net of tax (42,093 ) (44,109 ) total shareholders’ equity 161,238 159,046 total liabilities and shareholders’ equity $ 1,015,729 $ 1,012,687 circor international, inc. summary of orders and backlog (in millions) (unaudited) three months ended april 2, 2023 april 3, 2022 orders (1) aerospace & defense $ 84.4 $ 77.9 industrial 157.7 143.7 total orders $ 242.1 $ 221.6 april 2, 2023 april 3, 2022 backlog (2) aerospace & defense $ 224.8 $ 199.7 industrial 358.8 276.8 total backlog $ 583.6 $ 476.5 1. orders do not include the foreign exchange impact due to the re-measurement of customer backlog amounts denominated in foreign currencies. industrial includes $0.0 million and $2.3 million orders in pipeline engineering for the three months ended april 2, 2023 and april 3, 2022 respectively. 2. backlog includes unshipped customer orders for which revenue has not been recognized. circor international, inc. segment information (in thousands, except percentages) (unaudited) 2022 2023 1st qtr 2nd qtr 3rd qtr 4th qtr total 1st qtr total orders aerospace & defense $ 77,890 $ 69,053 $ 90,486 $ 70,778 $ 308,207 $ 84,400 $ 84,400 industrial 143,727 139,370 137,848 178,069 599,014 157,705 157,705 total $ 221,617 $ 208,423 $ 228,334 $ 248,847 $ 907,221 $ 242,105 $ 242,105 net revenues aerospace & defense $ 63,370 $ 67,271 $ 72,219 $ 79,855 $ 282,715 $ 68,551 $ 68,551 industrial 122,285 124,105 123,143 134,672 504,204 134,546 134,546 total $ 185,655 $ 191,376 $ 195,362 $ 214,527 $ 786,919 $ 203,097 $ 203,097 segment operating income aerospace & defense $ 11,320 $ 13,566 $ 16,891 $ 21,807 $ 63,584 $ 14,714 $ 14,714 industrial 6,857 8,484 15,717 18,244 49,302 20,402 20,402 corporate expenses (7,770 ) (5,485 ) (5,301 ) (6,828 ) (25,384 ) (6,743 ) (6,743 ) total $ 10,407 $ 16,565 $ 27,307 $ 33,223 $ 87,502 $ 28,373 $ 28,373 segment operating margin % aerospace & defense 17.9 % 20.2 % 23.4 % 27.3 % 22.5 % 21.5 % 21.5 % industrial 5.6 % 6.8 % 12.8 % 13.5 % 9.8 % 15.2 % 15.2 % total 5.6 % 8.7 % 14.0 % 15.5 % 11.1 % 14.0 % 14.0 % 2022 2023 pipeline engineering1 1st qtr 2nd qtr 3rd qtr 4th qtr total 1st qtr total orders - industrial $ 2,260 $ — $ — $ — $ 2,260 $ — $ — net revenues - industrial $ 3,012 $ 218 $ 8 $ 11 $ 3,249 $ — $ — segment op. inc. -industrial $ (3,190 ) $ (1,074 ) $ (150 ) $ 26 $ (4,388 ) $ 125 $ 125 segment operating margin % (105.9 )% (492.7 )% (1875.0 )% 236.4 % (135.1 )% circor international, inc. reconciliation of non-gaap financial measures and key performance measures (in thousands, except percentages) (unaudited) 2022 2023 1st qtr 2nd qtr 3rd qtr 4th qtr total 1st qtr total net cash (used in) provided by operating activities $ (15,924 ) $ (3,593 ) $ (9,815 ) $ 28,511 $ (821 ) $ (13,926 ) $ (13,926 ) less capital expenditures, net of sale proceeds1 3,592 5,461 4,156 8,675 21,884 2,637 2,637 adjusted free cash flow $ (19,516 ) $ (9,054 ) $ (13,971 ) $ 19,836 $ (22,705 ) $ (16,563 ) $ (16,563 ) gross debt $ 547,681 $ 543,100 $ 522,975 $ 516,925 $ 516,925 $ 519,600 $ 519,600 less: cash & cash equivalents 61,122 55,238 47,131 64,275 64,275 52,080 52,080 gross debt, net of cash $ 486,559 $ 487,862 $ 475,844 $ 452,650 $ 452,650 $ 467,520 $ 467,520 total shareholders' equity $ 110,321 $ 103,663 $ 122,082 $ 159,046 $ 159,046 $ 161,238 $ 161,238 gross debt as % of equity 496 % 524 % 428 % 325 % 325 % 322 % 322 % gross debt, net of cash as % of equity 441 % 471 % 390 % 285 % 285 % 290 % 290 % circor international, inc. reconciliation of non-gaap financial measures and key performance measures (in thousands, except percentages) (unaudited) 2022 2023 1st qtr 2nd qtr 3rd qtr 4th qtr total 1st qtr total net (loss) income $ (21,481 ) $ 3,960 $ 31,470 $ 5,439 $ 19,388 $ (407 ) $ (407 ) less: restructuring related inventory charges (recoveries), net 2,757 — — — 2,757 — — restructuring charges (recoveries), net 6,447 4,695 (173 ) 97 11,066 (216 ) (216 ) acquisition amortization 9,391 9,178 9,118 8,651 36,338 7,920 7,920 acquisition depreciation 1,045 1,239 1,335 995 4,614 1,053 1,053 special (recoveries) charges, net 2,556 (10,425 ) (25,529 ) 3,319 (30,079 ) 1,700 1,700 income tax impact 384 (2,207 ) (2,066 ) (2,739 ) (6,628 ) 843 843 adjusted net income $ 1,099 $ 6,440 $ 14,155 $ 15,762 $ 37,456 $ 10,893 $ 10,893 (loss) earnings per common share (diluted) $ (1.06 ) $ 0.19 $ 1.54 $ 0.27 $ 0.95 $ (0.02 ) $ (0.02 ) less: restructuring related inventory charges 0.14 — — — 0.14 — — restructuring charges (recoveries), net 0.32 0.23 (0.01 ) — 0.54 (0.01 ) (0.01 ) acquisition amortization 0.46 0.45 0.45 0.42 1.78 0.39 0.39 acquisition depreciation 0.05 0.06 0.07 0.05 0.23 0.05 0.05 special (recoveries) charges, net 0.13 (0.51 ) (1.25 ) 0.16 (1.47 ) 0.08 0.08 income tax impact 0.02 (0.11 ) (0.10 ) (0.13 ) (0.32 ) 0.04 0.04 adjusted earnings per share (diluted) $ 0.05 $ 0.32 $ 0.69 $ 0.77 $ 1.83 $ 0.53 $ 0.53 circor international, inc. reconciliation of non-gaap financial measures and key performance measures (in thousands, except percentages) (unaudited) 2022 2023 1st qtr 2nd qtr 3rd qtr 4th qtr total 1st qtr total net income (loss) $ (21,481 ) $ 3,960 $ 31,470 $ 5,439 $ 19,388 $ (407 ) $ (407 ) less: interest expense, net 9,456 10,203 11,821 13,405 44,886 14,528 14,528 depreciation 5,000 5,056 4,956 4,679 19,691 4,712 4,712 amortization 9,397 9,183 9,124 8,656 36,360 7,925 7,925 provision for income taxes 1,523 (647 ) 1,661 1,742 4,279 3,581 3,581 ebitda $ 3,895 $ 27,755 $ 59,032 $ 33,921 $ 124,604 $ 30,339 $ 30,339 less: restructuring related inventory charges (recoveries) 2,757 — — — 2,757 — — restructuring charges (recoveries), net 6,447 4,695 (173 ) 97 11,066 (216 ) (216 ) special (recoveries) charges, net 2,556 (10,425 ) (25,529 ) 3,319 (30,079 ) 1,700 1,700 adjusted ebitda $ 15,655 $ 22,025 $ 33,330 $ 37,337 $ 108,348 $ 31,823 $ 31,823 circor international, inc. reconciliation of non-gaap financial measures and key performance measures (in thousands, except percentages) (unaudited) 2022 2023 1st qtr 2nd qtr 3rd qtr 4th qtr total 1st qtr total operating (loss) income $ (11,789 ) $ 11,878 $ 42,556 $ 20,161 $ 62,806 $ 17,916 $ 17,916 less: restructuring related inventory charges (recoveries) 2,757 — — — 2,757 — — restructuring charges (recoveries), net 6,447 4,695 (173 ) 97 11,066 (216 ) (216 ) acquisition amortization 9,391 9,178 9,118 8,651 36,338 7,920 7,920 acquisition depreciation 1,045 1,239 1,335 995 4,614 1,053 1,053 special (recoveries) charges, net 2,556 (10,425 ) (25,529 ) 3,319 (30,079 ) 1,700 1,700 adjusted operating income $ 10,407 $ 16,565 $ 27,307 $ 33,223 $ 87,502 $ 28,373 $ 28,373 operating margin (6.3 ) % 6.2 % 21.8 % 9.4 % 8.0 % 8.8 % 8.8 % less: restructuring related inventory charges (recoveries) 1.5 % 0.0 % 0.0 % 0.0 % 0.4 % 0.0 % 0.0 % restructuring charges (recoveries), net 3.5 % 2.5 % (0.1 )% 0.0 % 1.4 % (0.1 ) % (0.1 )% acquisition amortization 5.1 % 4.8 % 4.7 % 4.0 % 4.6 % 3.9 % 3.9 % acquisition depreciation 0.6 % 0.6 % 0.7 % 0.5 % 0.6 % 0.5 % 0.5 % special (recoveries) charges, net 1.4 % (5.4 ) % (13.1 )% 1.5 % (3.8 )% 0.8 % 0.8 % adjusted operating margin 5.6 % 8.7 % 14.0 % 15.5 % 11.1 % 14.0 % 14.0 % circor international, inc. reconciliation of non-gaap financial measures and key performance measures (in thousands, except percentages) (unaudited) q1'23 organic orders and revenue circor aerospace & defense industrial 1q 23 1q 22 variance 1q 23 1q 22 variance 1q 23 1q 22 variance orders 242,105 221,617 9% 84,400 77,890 8% 157,705 143,727 10% divestitures — — — — — — fx 8,291 2,499 5,792 organic 250,395 221,617 13% 86,899 77,890 12% 163,497 143,727 14% circor aerospace & defense industrial 1q 23 1q 22 variance 1q 23 1q 22 variance 1q 23 1q 22 variance revenue 203,097 185,655 9% 68,551 63,370 8% 134,546 122,285 10% divestitures — — — — — — fx 6,709 1,191 5,518 organic 209,806 185,655 13% 69,742 63,370 10% 140,064 122,285 15% note regarding financial statements: financial amounts are computed independently each quarter; therefore, the sum of the quarterly amounts may not equal the total amount for the respective year due to rounding.
