UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):November 14, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
| | ||||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
(781 ) 270-1200
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On November 14, 2022, CIRCOR International, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended October 2, 2022. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in this Item 2.02 of Form 8-K and the Exhibits 99.1 and 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by special reference in such filing.
Item 7.01.
Presentation slides discussing the Company's quarterly operating results are attached to this Current Report on Form 8-K, as Exhibit 99.2, and are incorporated herein by reference. The information in this Item 7.01 of Form 8-K and the attached Exhibit 99.2 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by special reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
| CIRCOR Reports Financial Results for Third Quarter Ended October 2, 2022 | |||||
| Third Quarter 2022 Investor Review Presentation | |||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | ||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CIRCOR INTERNATIONAL, INC. | |||||
November 14, 2022 | /s/ Jessica W. Wenzell | ||||
Jessica W. Wenzell | |||||
General Counsel & Chief People Officer | |||||
Exhibit 99.1
CIRCOR Reports Financial Results for Third Quarter Ended October 2, 2022
•GAAP EPS of $1.54, Up 1285% YoY; Adjusted EPS of $0.69, Up 103% YoY
•GAAP Operating Income of $42.6 Million, Up 1133% YoY; Adjusted Operating Income of $27.3 Million, Up 70% YoY
•Orders up 18% Reported and 26% Organically
•Progressing with Review of Strategic Alternatives
Burlington, Mass., November 14, 2022
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 third quarter ended October 2, 2022.
Q3 2022 Overview:
•Revenue of $195 million up 3% reported and 10% organically compared to Q3'2021
▪Aerospace & Defense revenue of $72 million, up 14% reported and 18% organically
▪Industrial revenue of $123 million, down (2%) reported and up 6% organically
•Orders of $228 million, up 18% and 26% organically
▪Aerospace & Defense orders of $90 million, up 67% and 74% organically
▪Industrial orders of $138 million, down (1%) and up 8% organically
•Backlog of $497 million, up 14% driven by strong demand in both Aerospace & Defense and Industrial segments
•GAAP operating income of $42.6 million, up 1133%
•GAAP operating margin of 21.8%, up 2000 bps
•Adjusted operating income $27.3 million, up 70%
•Adjusted operating margin of 14%, up 550 bps
CIRCOR President and CEO, Tony Najjar said, “Our team performed extremely well in the third quarter, exceeding expectations. We delivered a great quarter with strong organic orders, revenue growth and expanded operating margin. Organic orders grew 26%, driven by exceptional performance in A&D, which delivered 74% growth in organic orders. I am particularly pleased with our win rate on key missile programs, our orders growth in medical products, and our sustained momentum in commercial aerospace as that market continues its recovery. In our Industrial segment, we are leveraging our aftermarket position to deliver strong pricing, enabling us to overcome the impact of inflation and generate solid margin expansion.”
Mr. Najjar continued, “Both Industrial and A&D benefited from disciplined execution of our strategic priorities to drive revenues and operating income growth. Our results underscore our emphasis on value pricing, our strong aftermarket position, and operational simplification/cost out actions. We grew adjusted operating income by 70% and drove 550 bps improvement in adjusted operating margin despite inflation pressure, ongoing supply chain and logistics challenges, and rising energy costs. With the actions taken, and continued operating discipline and focus on our customers, we have positioned both segments to deliver sustained growth and shareholder value.”
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Conference Call Information
CIRCOR International will hold a conference call to review its third-quarter 2022 financial results at 9:00 a.m. ET today, November 14, 2022. 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) | Q3 2022 | Q3 2021 | Change | Nine Months Ended October 2, 2022 | Nine Months ended October 3, 2021 | Change | ||||||||||||||||||||||||||||||||
Revenue1 | $ | 195.4 | $ | 189.7 | 3 | % | $ | 572.4 | $ | 553.8 | 3 | % | ||||||||||||||||||||||||||
| GAAP operating (loss) income | 42.6 | 3.5 | 1133 | % | 42.6 | (10.4) | 510 | % | ||||||||||||||||||||||||||||||
Adjusted operating income2 | 27.3 | 16.0 | 70 | % | 54.3 | 33.8 | 61 | % | ||||||||||||||||||||||||||||||
| GAAP operating margin | 21.8 | % | 1.8 | % | 2000 bps | 7.5 | % | (1.9) | % | 940 bps | ||||||||||||||||||||||||||||
Adjusted operating margin3 | 14.0 | % | 8.5 | % | 550 bps | 9.5 | % | 6.1 | % | 340 bps | ||||||||||||||||||||||||||||
| GAAP (loss) per share | $ | 1.54 | $ | (0.13) | 1285 | % | $ | 0.68 | $ | (1.65) | 141 | % | ||||||||||||||||||||||||||
Adjusted earnings per share (diluted)4 | $ | 0.69 | $ | 0.34 | 103 | % | $ | 1.06 | $ | 0.56 | 89 | % | ||||||||||||||||||||||||||
| Operating cash flow | (9.8) | 10.2 | -196 | % | (29.3) | (0.1) | -29200 | % | ||||||||||||||||||||||||||||||
Adjusted free cash flow5 | (14.0) | 5.7 | -347 | % | (42.5) | (10.7) | -297 | % | ||||||||||||||||||||||||||||||
Orders6 | $ | 228.3 | $ | 193.7 | 18 | % | $ | 657.3 | $ | 630.6 | 4 | % | ||||||||||||||||||||||||||
Segment Results
(unaudited)
| ($ in millions) | Q3 2022 | Q3 2021 | Change | Nine Months Ended October 2, 2022 | Nine Months ended October 3, 2021 | Change | ||||||||||||||||||||||||||||||||
| Aerospace & Defense | ||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 72.2 | $ | 63.5 | 14 | % | $ | 202.9 | $ | 182.6 | 11 | % | ||||||||||||||||||||||||||
| Segment operating income | 16.9 | 15.9 | 6 | % | 41.8 | 37.7 | 11 | % | ||||||||||||||||||||||||||||||
| Segment operating margin | 23.4 | % | 25.1 | % | -170 bps | 20.6 | % | 20.6 | % | 0 bps | ||||||||||||||||||||||||||||
Orders6 | $ | 90.5 | $ | 54.0 | 67 | % | $ | 237.4 | $ | 181.3 | 31 | % | ||||||||||||||||||||||||||
| Industrial | ||||||||||||||||||||||||||||||||||||||
Revenue1 | $ | 123.1 | $ | 126.2 | -2 | % | $ | 369.5 | $ | 371.2 | — | % | ||||||||||||||||||||||||||
Segment operating income2 | 15.7 | 7.1 | 121 | % | 31.1 | 20.2 | 54 | % | ||||||||||||||||||||||||||||||
Segment operating margin3 | 12.8 | % | 5.6 | % | 720 bps | 8.4 | % | 5.4 | % | 300 bps | ||||||||||||||||||||||||||||
Orders6 | $ | 137.8 | $ | 139.7 | -1 | % | $ | 420.9 | $ | 449.3 | -6 | % | ||||||||||||||||||||||||||
1. Consolidated and Industrial segment revenues for Q3 2022 and Q3 2021 included $0.0 million and $3.2 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 Q3 2022 and Q3 2021 included $(0.1) million and $(2.5) million, respectively, relating to our Pipeline Engineering business.
3. Adjusted operating margin is a non-GAAP financial measure. Adjusted operating margin for Q3 2022 and Q3 2021 included (1875)% and (76)%, respectively, relating to our Pipeline Engineering business.
4. Adjusted earnings per share (diluted) is a non-GAAP financial measure. Adjusted earnings per share and our segment results for Q3 2022 exclude net gain from non-cash acquisition-related intangible amortization and special and restructuring charges of $15.2 million, consisting of (i) $10.4 million for non-cash acquisition-related intangible amortization and depreciation expense; (ii) $0.1 million of costs due to the investigation into the accounting irregularities of the Pipeline Engineering business and incremental professional services incurred due to the restatement; (iii) $0.2 million of special charges related to the evaluation of strategic alternatives for the company; (iv) other special and restructuring charges net of $0.1 million; and (v) a gain of $26.0 million on the sale of real estate located at Corona, California. Adjusted consolidated and segment results for Q3 2021 exclude net income from discontinued operations of $2.5 million and net loss from non-cash acquisition-related intangible amortization, special and restructuring charges totaling $12.6 million. These charges include: (i) $11.8 million for non-cash acquisition-related intangible amortization and depreciation expense; and (ii) $0.8 million of other special and restructuring recoveries.
2
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.
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 Q3 2022 and Q3 2021 included $0.0 million and $6.6 million, respectively, relating to our Pipeline Engineering business. As previously disclosed in our Form 10-K for the year ended December 31, 2021, the Company discovered accounting irregularities in its Pipeline Engineering business unit resulting in a restatement of previously issued financial statements.
Company Files Quarterly Report on Form 10-Q for the Period Ended October 2, 2022
The Company today filed its Quarterly Report on Form 10-Q for the third quarter of 2022.
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 and adjusted 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 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 July 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
3
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 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 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; 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. 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.
Contact:
Scott Solomon
Senior Vice President
Sharon Merrill Associates, Inc.
(857) 383-2409
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CIRCOR INTERNATIONAL, INC
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data) (unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
| October 2, 2022 | As Restated October 3, 2021 | October 2, 2022 | As Restated October 3, 2021 | ||||||||||||||||||||
| Net revenues | $ | 195,362 | $ | 189,709 | $ | 572,392 | $ | 553,750 | |||||||||||||||
| Cost of revenues | 128,116 | 131,898 | 391,660 | 387,943 | |||||||||||||||||||
| Gross profit | 67,246 | 57,811 | 180,732 | 165,807 | |||||||||||||||||||
| Selling, general and administrative expenses | 50,392 | 53,546 | 160,517 | 169,371 | |||||||||||||||||||
| Special and restructuring (recoveries) charges, net | (25,702) | 814 | (22,430) | 6,808 | |||||||||||||||||||
| Operating income (loss) | 42,556 | 3,451 | 42,645 | (10,372) | |||||||||||||||||||
| Other expense (income): | |||||||||||||||||||||||
| Interest expense, net | 11,821 | 7,997 | 31,481 | 24,325 | |||||||||||||||||||
| Other (income), net | (2,396) | (256) | (5,321) | (3,301) | |||||||||||||||||||
| Total other expense, net | 9,425 | 7,741 | 26,160 | 21,024 | |||||||||||||||||||
| Income (loss) from continuing operations before income taxes | 33,131 | (4,290) | 16,485 | (31,396) | |||||||||||||||||||
| Provision for income taxes | 1,661 | 850 | 2,536 | 3,206 | |||||||||||||||||||
| Income (loss) from continuing operations, net of tax | 31,470 | (5,140) | 13,949 | (34,602) | |||||||||||||||||||
| Income from discontinued operations, net of tax | — | 2,510 | — | 1,393 | |||||||||||||||||||
| Net income (loss) | $ | 31,470 | $ | (2,630) | $ | 13,949 | $ | (33,209) | |||||||||||||||
| Basic income (loss) per common share: | |||||||||||||||||||||||
| Basic from continuing operations | $ | 1.55 | $ | (0.25) | $ | 0.69 | $ | (1.72) | |||||||||||||||
| Basic from discontinued operations | $ | — | $ | 0.12 | $ | — | $ | 0.07 | |||||||||||||||
| Net income (loss) | $ | 1.55 | $ | (0.13) | $ | 0.69 | $ | (1.65) | |||||||||||||||
| Diluted income (loss) per common share: | |||||||||||||||||||||||
| Diluted from continuing operations | $ | 1.54 | $ | (0.25) | $ | 0.68 | $ | (1.72) | |||||||||||||||
| Diluted from discontinued operations | $ | — | $ | 0.12 | $ | — | $ | 0.07 | |||||||||||||||
| Net income (loss) | $ | 1.54 | $ | (0.13) | $ | 0.68 | $ | (1.65) | |||||||||||||||
| Weighted average number of common shares outstanding: | |||||||||||||||||||||||
| Basic | 20,364 | 20,257 | 20,345 | 20,181 | |||||||||||||||||||
| Diluted | 20,410 | 20,257 | 20,410 | 20,181 | |||||||||||||||||||
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CIRCOR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
| Nine Months Ended | |||||||||||
| OPERATING ACTIVITIES | October 2, 2022 | As Restated October 3, 2021 | |||||||||
| Net income (loss) | $ | 13,949 | $ | (33,209) | |||||||
| Income from discontinued operations, net of income taxes | — | 1,393 | |||||||||
| Income (loss) from continuing operations, net of tax | 13,949 | (34,602) | |||||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||||||
| Depreciation | 15,012 | 17,505 | |||||||||
| Amortization | 27,704 | 31,929 | |||||||||
| Change in provision for bad debt expense | (263) | (383) | |||||||||
| Write down of inventory | 1,797 | 1,742 | |||||||||
| Compensation expense for share-based plans | 980 | 4,165 | |||||||||
| Loss on debt extinguishment | 4,977 | — | |||||||||
| Amortization of debt issuance costs | 2,672 | 3,032 | |||||||||
| Deferred tax provision | 45 | 823 | |||||||||
| Loss on sale of businesses | — | 1,308 | |||||||||
| Gain on sale of real estate | (47,977) | — | |||||||||
| Other impairment charges | 8,011 | — | |||||||||
| Loss on deconsolidation charges | 4,675 | — | |||||||||
| Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: | |||||||||||
| Trade accounts receivable | (1,116) | 8,686 | |||||||||
| Inventories | (28,364) | (11,621) | |||||||||
| Prepaid expenses and other assets | (25,387) | (26,686) | |||||||||
| Accounts payable, accrued expenses and other liabilities | (6,047) | 6,439 | |||||||||
| Net cash (used in) provided by continuing operating activities | (29,332) | 2,337 | |||||||||
| Net cash used in discontinued operating activities | — | (2,484) | |||||||||
| Net cash used in operating activities | (29,332) | (147) | |||||||||
| INVESTING ACTIVITIES | |||||||||||
| Additions to property, plant and equipment | (13,291) | (10,579) | |||||||||
| Proceeds from the sale of property, plant and equipment | 82 | 2 | |||||||||
| Proceeds from the sale of real estate | 54,945 | — | |||||||||
| Proceeds from beneficial interest of factored receivables | 3,461 | 1,531 | |||||||||
| Proceeds from the sale of business | — | 9,993 | |||||||||
| Net cash provided by investing activities | 45,197 | 947 | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Proceeds from long-term debt | 180,441 | 145,550 | |||||||||
| Payments of long-term debt | (182,166) | (148,450) | |||||||||
| Net change in short-term borrowings | (1,573) | (225) | |||||||||
| Proceeds from the exercise of stock options | — | 151 | |||||||||
| Withholding tax payments on net share settlements on equity awards | (1,299) | (4,154) | |||||||||
| Payment of debt issuance costs | (16,701) | — | |||||||||
| Net cash used in financing activities | (21,298) | (7,128) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (7,096) | (2,834) | |||||||||
| DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (12,529) | (9,162) | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 61,374 | 68,607 | |||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 48,845 | $ | 59,445 | |||||||
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CIRCOR INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data) (unaudited)
| October 2, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 47,131 | $ | 59,924 | |||||||
| Trade accounts receivable, net | 95,407 | 100,149 | |||||||||
| Inventories | 137,411 | 123,343 | |||||||||
| Prepaid expenses and other current assets | 125,409 | 110,749 | |||||||||
| Total Current Assets | 405,358 | 394,165 | |||||||||
| PROPERTY, PLANT AND EQUIPMENT, NET | 130,442 | 154,461 | |||||||||
| OTHER ASSETS: | |||||||||||
| Goodwill | 117,542 | 122,906 | |||||||||
| Intangibles, net | 257,839 | 303,476 | |||||||||
| Lease right-of-use assets, net | 40,836 | 21,139 | |||||||||
| Deferred income taxes | 637 | 756 | |||||||||
| Other assets | 27,323 | 22,395 | |||||||||
| TOTAL ASSETS | $ | 979,977 | $ | 1,019,298 | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable | $ | 71,601 | $ | 83,382 | |||||||
| Accrued expenses and other current liabilities | 73,505 | 81,998 | |||||||||
| Accrued compensation and benefits | 31,817 | 26,551 | |||||||||
| Short-term borrowings and current portion of long-term debt | — | 1,611 | |||||||||
| Total Current Liabilities | 176,923 | 193,542 | |||||||||
| LONG-TERM DEBT | 501,754 | 511,694 | |||||||||
| DEFERRED INCOME TAXES | 18,101 | 21,721 | |||||||||
| PENSION LIABILITY, NET | 104,438 | 120,881 | |||||||||
| LONG-TERM LEASE LIABILITIES | 37,155 | 17,715 | |||||||||
| OTHER NON-CURRENT LIABILITIES | 19,524 | 20,029 | |||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 9 AND 10) | |||||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||
| Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued and outstanding at October 2, 2022 and December 31, 2021 | — | — | |||||||||
| Common stock, $0.01 par value; 29,000,000 shares authorized; 21,735,838 and 21,633,131 issued at October 2, 2022 and December 31, 2021 respectively | 218 | 217 | |||||||||
| Additional paid-in capital | 455,208 | 454,852 | |||||||||
| Accumulated deficit | (184,132) | (198,081) | |||||||||
| Common treasury stock, at cost (1,372,488 shares at October 2, 2022 and December 31, 2021) | (74,472) | (74,472) | |||||||||
| Accumulated other comprehensive loss, net of tax | (74,740) | (48,800) | |||||||||
| Total Shareholders’ Equity | 122,082 | 133,716 | |||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 979,977 | $ | 1,019,298 | |||||||
7
CIRCOR INTERNATIONAL, INC.
SUMMARY OF ORDERS AND BACKLOG
(in millions) (unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| October 2, 2022 | October 3, 2021 | October 2, 2022 | October 3, 2021 | |||||||||||||||||||||||
| ORDERS (1) | ||||||||||||||||||||||||||
| Aerospace & Defense | $ | 90.5 | $ | 54.0 | $ | 237.40 | $ | 181.3 | ||||||||||||||||||
| Industrial | 137.8 | 139.7 | 420.9 | 449.3 | ||||||||||||||||||||||
| Total orders | $ | 228.3 | $ | 193.7 | $ | 658.3 | $ | 630.6 | ||||||||||||||||||
| October 2, 2022 | October 3, 2021 | |||||||||||||||||||||||||
| BACKLOG (2) | ||||||||||||||||||||||||||
| Aerospace & Defense | $ | 214.0 | $ | 180.9 | ||||||||||||||||||||||
| Industrial | 282.9 | 254.9 | ||||||||||||||||||||||||
| Total backlog | $ | 496.9 | $ | 435.8 | ||||||||||||||||||||||
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 $6.6 million of orders for Pipeline Engineering for the three months ended October 2, 2022 and October 3, 2021 respectively. Industrial includes $2.3 million and $17.3 million of orders for Pipeline Engineering for the nine months ended October 2, 2022 and October 3, 2021 respectively. | ||||||||||||||||||||||||||
| 2. Backlog is calculated as current period orders plus unshipped customer orders from prior periods for which revenue has not been recognized. Industrial includes $0.0 million and $0.8 million for Pipeline Engineering in 2022 and 2021 respectively. | ||||||||||||||||||||||||||
8
CIRCOR INTERNATIONAL, INC.
SEGMENT INFORMATION
(in thousands, except percentages) (unaudited)
| 2021 As Restated | 2022 | |||||||||||||||||||||||||||||||
| As reported | 1ST QTR | 2ND QTR | 3RD QTR | 4TH QTR | TOTAL | 1ST QTR | 2ND QTR | 3RD QTR | TOTAL | |||||||||||||||||||||||
| ORDERS | ||||||||||||||||||||||||||||||||
| Aerospace & Defense | $ | 72,999 | $ | 54,243 | $ | 54,028 | $ | 73,898 | $ | 255,168 | $ | 77,890 | $ | 69,053 | $ | 90,486 | $ | 237,429 | ||||||||||||||
| Industrial | 153,695 | 155,959 | 139,691 | 146,065 | 595,410 | 143,727 | 139,370 | 137,848 | 420,945 | |||||||||||||||||||||||
| Total | $ | 226,693 | $ | 210,203 | $ | 193,719 | $ | 219,964 | $ | 850,578 | $ | 221,617 | $ | 208,423 | $ | 228,334 | $ | 658,374 | ||||||||||||||
| NET REVENUES | ||||||||||||||||||||||||||||||||
| Aerospace & Defense | $ | 58,488 | $ | 60,613 | $ | 63,461 | $ | 69,979 | $ | 252,541 | $ | 63,370 | $ | 67,271 | $ | 72,219 | $ | 202,860 | ||||||||||||||
| Industrial | 117,963 | 126,977 | 126,248 | 134,938 | 506,126 | 122,285 | 124,105 | 123,143 | 369,532 | |||||||||||||||||||||||
| Total | $ | 176,451 | $ | 187,590 | $ | 189,709 | $ | 204,917 | $ | 758,667 | $ | 185,655 | $ | 191,376 | $ | 195,362 | $ | 572,392 | ||||||||||||||
| SEGMENT OPERATING INCOME | ||||||||||||||||||||||||||||||||
| Aerospace & Defense | $ | 9,988 | $ | 11,741 | $ | 15,927 | $ | 18,416 | $ | 56,073 | $ | 11,320 | $ | 13,566 | $ | 16,891 | $ | 41,777 | ||||||||||||||
| Industrial | 5,834 | 7,237 | 7,124 | 8,700 | 28,896 | 6,857 | 8,484 | 15,717 | 31,059 | |||||||||||||||||||||||
| Corporate expenses | (9,035) | (7,950) | (7,017) | (6,636) | (30,638) | (7,770) | (5,485) | (5,301) | (18,557) | |||||||||||||||||||||||
| Total | $ | 6,787 | $ | 11,028 | $ | 16,034 | $ | 20,480 | $ | 54,331 | $ | 10,407 | $ | 16,565 | $ | 27,307 | $ | 54,279 | ||||||||||||||
| SEGMENT OPERATING MARGIN % | ||||||||||||||||||||||||||||||||
| Aerospace & Defense | 17.1 | % | 19.4 | % | 25.1 | % | 26.3 | % | 22.2 | % | 17.9 | % | 20.2 | % | 23.4 | % | 20.6 | % | ||||||||||||||
| Industrial | 4.9 | % | 5.7 | % | 5.6 | % | 6.4 | % | 5.7 | % | 5.6 | % | 6.8 | % | 12.8 | % | 8.4 | % | ||||||||||||||
| Total | 3.8 | % | 5.9 | % | 8.5 | % | 10.0 | % | 7.2 | % | 5.6 | % | 8.7 | % | 14.0 | % | 9.5 | % | ||||||||||||||
| 2021 | 2022 | |||||||||||||||||||||||||||||||
Pipeline Engineering1 | 1ST QTR | 2ND QTR | 3RD QTR | 4TH QTR | TOTAL | 1ST QTR | 2ND QTR | 3RD QTR | TOTAL | |||||||||||||||||||||||
| ORDERS - Industrial | $ | 5,531 | $ | 5,192 | $ | 6,575 | $ | 7,121 | $ | 24,419 | $ | 2,260 | $ | — | $ | — | $ | 2,260 | ||||||||||||||
| NET REVENUES - Industrial | $ | 2,994 | $ | 3,124 | $ | 3,236 | $ | 5,248 | $ | 14,602 | $ | 3,012 | $ | 218 | $ | 8 | $ | 3,238 | ||||||||||||||
| SEGMENT OP. INC. -Industrial | $ | (2,479) | $ | (1,754) | $ | (2,470) | $ | (3,191) | $ | (9,893) | $ | (3,190) | $ | (1,074) | $ | (150) | $ | (4,414) | ||||||||||||||
| Segment Operating Margin % | (82.8) | % | (56.1) | % | (76.3) | % | (60.8) | % | (67.8) | % | (105.9) | % | (492.7) | % | (1875.0) | % | (136.3) | % | ||||||||||||||
1. Quantifies the impact of the Pipeline Engineering business on the Industrial Segment. | ||||||||||||||||||||||||||||||||
9
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE MEASURES
(in thousands, except percentages) (unaudited)
| 2021 As Restated | 2022 | |||||||||||||||||||||||||||||||
| 1ST QTR | 2ND QTR | 3RD QTR | 4TH QTR | TOTAL | 1ST QTR | 2ND QTR | 3RD QTR | TOTAL | ||||||||||||||||||||||||
| Net Cash (Used In) Provided By Operating Activities | $ | (19,210) | $ | 8,866 | $ | 10,197 | $ | 10,595 | $ | 10,448 | $ | (15,924) | $ | (3,593) | $ | (9,815) | $ | (29,332) | ||||||||||||||
| LESS | ||||||||||||||||||||||||||||||||
Capital expenditures, net of sale proceeds1 | 3,392 | 2,644 | 4,541 | 4,168 | 14,745 | 3,592 | 5,461 | 4,156 | 13,209 | |||||||||||||||||||||||
| ADJUSTED FREE CASH FLOW | $ | (22,602) | $ | 6,222 | $ | 5,656 | $ | 6,427 | $ | (4,297) | $ | (19,516) | $ | (9,054) | $ | (13,971) | $ | (42,541) | ||||||||||||||
| Gross Debt | $ | 538,541 | $ | 524,391 | $ | 518,464 | $ | 526,311 | $ | 526,311 | $ | 547,681 | $ | 543,100 | $ | 522,975 | $ | 522,975 | ||||||||||||||
| Less: Cash & Cash equivalents | 64,837 | 58,862 | 58,013 | 59,924 | 59,924 | 61,122 | 55,238 | 47,131 | 47,131 | |||||||||||||||||||||||
| GROSS DEBT, NET OF CASH | $ | 473,704 | $ | 465,529 | $ | 460,451 | $ | 466,387 | $ | 466,387 | $ | 486,559 | $ | 487,862 | $ | 475,844 | $ | 475,844 | ||||||||||||||
| TOTAL SHAREHOLDERS' EQUITY | $ | 138,663 | $ | 122,185 | $ | 121,256 | $ | 133,716 | $ | 133,716 | $ | 110,321 | $ | 103,663 | $ | 122,082 | $ | 122,082 | ||||||||||||||
| GROSS DEBT AS % OF EQUITY | 388 | % | 429 | % | 428 | % | 394 | % | 394 | % | 496 | % | 524 | % | 428 | % | 428 | % | ||||||||||||||
| GROSS DEBT, NET OF CASH AS % OF EQUITY | 342 | % | 381 | % | 380 | % | 349 | % | 349 | % | 441 | % | 471 | % | 390 | % | 390 | % | ||||||||||||||
1. Includes capital expenditures, net of proceeds of asset sales from GAAP operating cash flow. | ||||||||||||||||||||||||||||||||
10
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE MEASURES
(in thousands, except percentages) (unaudited)
| 2021 As Restated | 2022 | |||||||||||||||||||||||||||||||
| 1ST QTR | 2ND QTR | 3RD QTR | 4TH QTR | TOTAL | 1ST QTR | 2ND QTR | 3RD QTR | TOTAL | ||||||||||||||||||||||||
| NET (LOSS) INCOME | $ | (11,796) | $ | (18,784) | $ | (2,630) | $ | (28,427) | $ | (61,638) | $ | (21,481) | $ | 3,960 | $ | 31,470 | $ | 13,949 | ||||||||||||||
| LESS: | ||||||||||||||||||||||||||||||||
| Restructuring related inventory charges (recoveries), net | — | 958 | (60) | (299) | 599 | 2,757 | — | — | 2,757 | |||||||||||||||||||||||
| Restructuring charges (recoveries), net | 2,060 | 2,281 | (312) | 205 | 4,234 | 6,447 | 4,695 | (173) | 10,969 | |||||||||||||||||||||||
| Acquisition amortization | 10,487 | 10,498 | 10,417 | 10,369 | 41,772 | 9,391 | 9,178 | 9,118 | 27,687 | |||||||||||||||||||||||
| Acquisition depreciation | 2,375 | 1,327 | 1,412 | 1,397 | 6,511 | 1,045 | 1,239 | 1,335 | 3,620 | |||||||||||||||||||||||
| Special (recoveries) charges, net | (2,870) | 4,523 | 1,126 | 17,259 | 20,038 | 2,556 | (10,425) | (25,529) | (33,399) | |||||||||||||||||||||||
| Goodwill Impairment charge | — | — | — | 10,500 | 10,500 | — | — | — | — | |||||||||||||||||||||||
| Income tax impact | (44) | 2,425 | (596) | (1,622) | 163 | 384 | (2,207) | (2,066) | (3,889) | |||||||||||||||||||||||
| Net loss (income) from discontinued operations | 239 | 878 | (2,510) | (13) | (1,406) | — | — | — | — | |||||||||||||||||||||||
| ADJUSTED NET INCOME | $ | 451 | $ | 4,106 | $ | 6,847 | $ | 9,369 | $ | 20,773 | $ | 1,099 | $ | 6,440 | $ | 14,155 | $ | 21,694 | ||||||||||||||
| (LOSS) EARNINGS PER COMMON SHARE (Diluted) | $ | (0.59) | $ | (0.93) | $ | (0.13) | $ | (1.40) | $ | (3.05) | $ | (1.06) | $ | 0.19 | $ | 1.54 | $ | 0.68 | ||||||||||||||
| LESS: | ||||||||||||||||||||||||||||||||
| Restructuring related inventory charges | — | 0.05 | — | (0.01) | 0.03 | 0.14 | — | — | 0.14 | |||||||||||||||||||||||
| Restructuring charges (recoveries), net | 0.10 | 0.11 | (0.02) | 0.01 | 0.21 | 0.32 | 0.23 | (0.01) | 0.54 | |||||||||||||||||||||||
| Acquisition amortization | 0.52 | 0.52 | 0.51 | 0.51 | 2.07 | 0.46 | 0.45 | 0.45 | 1.36 | |||||||||||||||||||||||
| Acquisition depreciation | 0.12 | 0.07 | 0.07 | 0.07 | 0.32 | 0.05 | 0.06 | 0.07 | 0.18 | |||||||||||||||||||||||
| Special (recoveries) charges, net | (0.14) | 0.22 | 0.06 | 0.85 | 0.99 | 0.13 | (0.51) | (1.25) | (1.64) | |||||||||||||||||||||||
| Impairment charge | — | — | — | 0.52 | 0.52 | — | — | — | — | |||||||||||||||||||||||
| Income tax impact | — | 0.12 | (0.03) | (0.08) | 0.01 | 0.02 | (0.11) | (0.10) | (0.19) | |||||||||||||||||||||||
| (Loss) earnings) per share from discontinued operations | 0.01 | 0.04 | (0.12) | — | (0.07) | — | — | — | — | |||||||||||||||||||||||
| ADJUSTED EARNINGS PER SHARE (Diluted) | $ | 0.02 | $ | 0.20 | $ | 0.34 | $ | 0.46 | $ | 1.03 | $ | 0.05 | $ | 0.32 | $ | 0.69 | $ | 1.06 | ||||||||||||||
11
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE MEASURES
(in thousands, except percentages) (unaudited)
| 2021 As Restated | 2022 | |||||||||||||||||||||||||||||||
| 1ST QTR | 2ND QTR | 3RD QTR | 4TH QTR | TOTAL | 1ST QTR | 2ND QTR | 3RD QTR | TOTAL | ||||||||||||||||||||||||
| NET (LOSS) INCOME | $ | (11,796) | $ | (18,784) | $ | (2,629) | $ | (28,426) | $ | (61,635) | $ | (21,481) | $ | 3,960 | $ | 31,470 | $ | 13,949 | ||||||||||||||
| LESS: | ||||||||||||||||||||||||||||||||
| Interest expense, net | 8,369 | 7,958 | 7,997 | 8,040 | 32,365 | 9,456 | 10,203 | 11,821 | 31,480 | |||||||||||||||||||||||
| Depreciation | 6,509 | 5,460 | 5,536 | 5,348 | 22,854 | 5,000 | 5,056 | 4,956 | 15,012 | |||||||||||||||||||||||
| Amortization | 10,696 | 10,657 | 10,576 | 10,375 | 42,304 | 9,397 | 9,183 | 9,124 | 27,704 | |||||||||||||||||||||||
| Provision for income taxes | (297) | 2,659 | 850 | 1,970 | 5,182 | 1,523 | (647) | 1,661 | 2,536 | |||||||||||||||||||||||
| Loss (income) from discontinued operations | 239 | 878 | (2,510) | (13) | (1,406) | — | — | — | — | |||||||||||||||||||||||
| EBITDA | $ | 13,720 | $ | 8,828 | $ | 19,820 | $ | (2,706) | $ | 39,664 | $ | 3,895 | $ | 27,755 | $ | 59,032 | $ | 90,681 | ||||||||||||||
| LESS: | ||||||||||||||||||||||||||||||||
| Restructuring related inventory charges (recoveries) | — | 958 | (60) | (299) | 599 | 2,757 | — | — | 2,757 | |||||||||||||||||||||||
| Restructuring charges (recoveries), net | 2,060 | 2,281 | (312) | 205 | 4,234 | 6,447 | 4,695 | (173) | 10,969 | |||||||||||||||||||||||
| Special (recoveries) charges, net | (2,870) | 4,523 | 1,126 | 17,259 | 20,038 | 2,556 | (10,425) | (25,529) | (33,399) | |||||||||||||||||||||||
| Goodwill impairment charge | — | — | — | 10,500 | 10,500 | — | — | — | — | |||||||||||||||||||||||
| ADJUSTED EBITDA | $ | 12,910 | $ | 16,590 | $ | 20,574 | $ | 24,959 | $ | 75,035 | $ | 15,655 | $ | 22,025 | $ | 33,330 | $ | 71,008 | ||||||||||||||
12
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE MEASURES
(in thousands, except percentages) (unaudited)
| 2021 As Restated | 2022 | |||||||||||||||||||||||||||||||
| 1ST QTR | 2ND QTR | 3RD QTR | 4TH QTR | TOTAL | 1ST QTR | 2ND QTR | 3RD QTR | TOTAL | ||||||||||||||||||||||||
| OPERATING (LOSS) INCOME | $ | (5,266) | $ | (8,557) | $ | 3,451 | $ | (18,952) | $ | (29,323) | $ | (11,789) | $ | 11,878 | $ | 42,556 | $ | 42,645 | ||||||||||||||
| LESS: | ||||||||||||||||||||||||||||||||
| Restructuring related inventory charges (recoveries) | — | 958 | (60) | (299) | 599 | 2,757 | — | — | 2,757 | |||||||||||||||||||||||
| Restructuring charges (recoveries), net | 2,060 | 2,281 | (312) | 205 | 4,234 | 6,447 | 4,695 | (173) | 10,969 | |||||||||||||||||||||||
| Acquisition amortization | 10,487 | 10,498 | 10,417 | 10,369 | 41,772 | 9,391 | 9,178 | 9,118 | 27,687 | |||||||||||||||||||||||
| Acquisition depreciation | 2,375 | 1,327 | 1,412 | 1,397 | 6,511 | 1,045 | 1,239 | 1,335 | 3,620 | |||||||||||||||||||||||
| Special (recoveries) charges, net | (2,870) | 4,523 | 1,126 | 17,259 | 20,038 | 2,556 | (10,425) | (25,529) | (33,399) | |||||||||||||||||||||||
| Goodwill impairment charge | — | — | — | 10,500 | 10,500 | — | — | — | — | |||||||||||||||||||||||
| ADJUSTED OPERATING INCOME | $ | 6,787 | $ | 11,029 | $ | 16,034 | $ | 20,479 | $ | 54,331 | $ | 10,407 | $ | 16,565 | $ | 27,307 | $ | 54,279 | ||||||||||||||
| OPERATING MARGIN | (3.0) | % | (4.6) | % | 1.8 | % | (9.2) | % | (3.9) | % | (6.3) | % | 6.2 | % | 21.8 | % | 7.5 | % | ||||||||||||||
| LESS: | ||||||||||||||||||||||||||||||||
| Restructuring related inventory charges (recoveries) | 0.0 | % | 0.5 | % | 0.0 | % | (0.1) | % | 0.1 | % | 1.5 | % | 0.0 | % | 0.0 | % | 0.5 | % | ||||||||||||||
| Restructuring charges (recoveries), net | 1.2 | % | 1.2 | % | (0.2) | % | 0.1 | % | 0.6 | % | 3.5 | % | 2.5 | % | (0.1) | % | 1.9 | % | ||||||||||||||
| Acquisition amortization | 5.9 | % | 5.6 | % | 5.5 | % | 5.1 | % | 5.5 | % | 5.1 | % | 4.8 | % | 4.7 | % | 4.8 | % | ||||||||||||||
| Acquisition depreciation | 1.3 | % | 0.7 | % | 0.7 | % | 0.7 | % | 0.9 | % | 0.6 | % | 0.6 | % | 0.7 | % | 0.6 | % | ||||||||||||||
| Special (recoveries) charges, net | (1.6) | % | 2.4 | % | 0.6 | % | 8.4 | % | 2.6 | % | 1.4 | % | (5.4) | % | (13.1) | % | (5.8) | % | ||||||||||||||
| Goodwill impairment charge | 0.0 | % | 0.0 | % | 0.0 | % | 5.1 | % | 1.4 | % | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||||
| ADJUSTED OPERATING MARGIN | 3.8 | % | 5.9 | % | 8.5 | % | 10.0 | % | 7.2 | % | 5.6 | % | 8.7 | % | 14.0 | % | 9.5 | % | ||||||||||||||
13
CIRCOR INTERNATIONAL, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND KEY PERFORMANCE MEASURES
(in thousands, except percentages) (unaudited)
| CIRCOR | Aerospace & Defense | Industrial | |||||||||||||||||||||||||||
| 3Q 22 | 3Q 21 | Change | 3Q 22 | 3Q 21 | Change | 3Q 22 | 3Q 21 | Change | |||||||||||||||||||||
| Reported Orders | 228,334 | 193,719 | 18 | % | 90,486 | 54,028 | 67 | % | 137,848 | 139,691 | (1) | % | |||||||||||||||||
| FX | 16,620 | 3,756 | 12,864 | ||||||||||||||||||||||||||
| Organic | 244,954 | 193,719 | 26 | % | 94,242 | 54,028 | 74 | % | 150,712 | 139,691 | 8 | % | |||||||||||||||||
| CIRCOR | Aerospace & Defense | Industrial | |||||||||||||||||||||||||||
| 3Q 22 | 3Q 21 | Change | 3Q 22 | 3Q 21 | Change | 3Q 22 | 3Q 21 | Change | |||||||||||||||||||||
| Reported Revenue | 195,362 | 189,709 | 3 | % | 72,219 | 63,461 | 14 | % | 123,143 | 126,248 | (2) | % | |||||||||||||||||
| FX | 13,680 | 2,665 | 11,015 | ||||||||||||||||||||||||||
| Organic | 209,042 | 189,709 | 10 | % | 74,884 | 63,461 | 18 | % | 134,158 | 126,248 | 6 | % | |||||||||||||||||
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.
14
INDUSTRIAL AEROSPACE & DEFENSE Third-Quarter 2022 Earnings Call November 14, 2022 EXHIBIT 99.2
Forward-Looking Statements This presentation 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 our expectations for our performance in fiscal year 2022 or business outlook for fiscal year 2023 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 Company’s ability 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 control 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 impact on the Company of the situation in Russia and Ukraine; 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, 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. 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. 2
Use of Non-GAAP Financial Measures Within this presentation, 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, net debt and adjusted 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. Specifically: • We exclude the FX impact on revenue as FX can materially change. We believe the FX impact are not indicative to our normal operating revenue. • 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 are completed prior to July 3, 2022, were completed on January 1, 2021, and excluding the impact of changes in foreign currency exchange rates. 3
Agenda and Speakers • Executive Overview • 3Q’22 Financial Performance • FY’22 Guidance • Market Outlook • Q&A Tony Najjar President & Chief Executive Officer AJ Sharma Chief Financial Officer & SVP, Business Development 4
CEO Commentary 5 • People. Our teams demonstrated strong focus on execution and on our customers, and resilience delivering a great quarter, exceeding expectations. • Performance. We delivered 26% organic orders growth and 550 bps of margin expansion in the quarter, navigating ongoing supply chain and macroeconomic challenges. • Progress. We continued to make measurable progress on our strategic priorities: margin expansion, growth, and de-levering our balance sheet.
3Q’22 Highlights 6 • A&D organic orders +74% y/y • Industrial organic orders +8% y/y • Value pricing and cost-out delivering margin expansion • Backlog, orders and margin growth position us well for year end and into 2023 YOY 3Q ’22 Compare Organic orders +26% Backlog +14% Revenue +3% Organic revenue +10% AOI (%) +550 bps AOI ($) +70% Adjusted EPS +103% Commentary Organic revenue, Adjusted Operating Income (AOI), AOI%, and Adjusted EPS are non-GAAP measures.
Aftermarket Pumps EMEA & APAC 7 Missile & Bomb Fuzing Switches and Brushless DC Motors Quick-response, severe environment, impact and acceleration switches for hypersonic missiles, bombs, and warhead arming Electric motors for missiles Control Actuation Systems Five new missile applications in various stages of development FY 2021 Orders: $12M YTD 2022 Orders: $17M Estimated Annual Revenue at Full Production Rate: ~$50M FY 2021 Orders: $112M FY 2022 Orders Outlook: $137M YoY Organic Growth: 22.3% Dedicated aftermarket leader focused on leveraging our large installed base Value Pricing strategy and leverage of 80/20 principles to maximize value from the products and services we provide Targeted Growth Initiatives
3Q’22 Financial Results Summary CIRCOR 3Q’22 3Q’21 Change Backlog $497 $436 14% Orders 228 194 18% Organic % 26% Revenue 195 190 3% Organic % 10% GAAP operating income 42.6 3.5 1133% GAAP operating margin 21.8% 1.8% 2000 bps Adjusted operating income (AOI) 27.3 16.0 70% AOI% 14.0% 8.5% 550 bps GAAP Income (Loss) per Share $1.54 $(0.13) 1285% Adjusted EPS $0.69 $0.34 103% Adjusted EBITDA 33.3 20.6 62% Adjusted FCF $(14.0) $5.7 (347)% 8 Comments on 3Q’22 Results • Robust organic orders growth…exceptional growth in A&D supported by broad-base growth in Industrial and downstream markets • Organic revenue growth across our end markets despite supply chain disruptions and labor constraints • +550 bps of AOI margin expansion driven by pricing, cost take-out, exit of Pipeline Engineering • Adjusted EPS growth of +103%...higher AOI partly offset by higher interest cost • Adjusted FCF impacted by FX headwinds, special charges and select working capital investments Organic revenue, Adjusted Operating Income (AOI), AOI%, Adjusted EPS, Adjusted EBITDA and Adjusted Free Cash Flow (FCF) are non-GAAP measures. ($ in millions, except EPS) * Financial results include results from the Pipeline Engineering business, including $0.0 million of revenue and $(0.1) million of AOI in Q3’22 and $6.6 million of orders, $3.2 million of revenue, and $(2.5) million of AOI in Q3’21.
3Q’22 A&D Segment Highlights 9 Aerospace & Defense 3Q’22 3Q’21 Change Backlog $214 $181 18% Orders 90 54 67% Organic % 74% Revenue 72 64 14% Organic % 18% AOI $16.9 $15.9 6% AOI% 23.4% 25.1% (170) bps Comments on 3Q’22 Results • Exceptional orders growth driven by defense aftermarket, missile programs, medical products and continued commercial aerospace recovery • Broad-based revenue growth…all businesses delivered organic growth • AOI margins down 170bps…difficult prior-year compare Organic Revenue, Adjusted Operating Income (AOI), and AOI% are non-GAAP measures. ($ in millions)
3Q’22 Industrial Segment Highlights Industrial 3Q’22 3Q’21 Change Backlog $283 $255 11% Orders 138 140 (1)% Organic % 8% Revenue 123 126 (2)% Organic % 6% AOI $15.7 $7.1 121% AOI% 12.8% 5.6% 720 bps 10 Comments on 3Q’22 Results • Organic orders growth across end markets and regions • Continued growth in Core Industrial aftermarket orders • Organic revenue…all businesses delivered organic growth • +720 bps AOI margin expansion…pricing, OPEX optimization, and Pipeline Engineering exit * Financial results include results from the Pipeline Engineering business including $0.0 million of revenue and $(0.1) million of AOI in Q3’22 and $6.6 million of orders, $3.2 million of revenue and $(2.5) million of AOI in Q3’21. ($ in millions) Organic Revenue, Adjusted Operating Income (AOI), and AOI% are non-GAAP measures.
Net Debt and Leverage 11 Net Debt, Adjusted EBITDA and Compliance Adjusted EBITDA are non-GAAP measures. 1 – Net Debt defined as total debt (Term Loan B and revolvers) less cash or cash equivalents 2 – TTM defined as trailing twelve months 3 – Net Leverage is defined as calculated measure of net debt divided by adjusted earnings before taxes, depreciation and amortization TTM 4 – Compliance Leverage is defined as adjusted EBITDA as per the definition in CIRCOR’s credit agreement entered into on December 20, 2021, available at: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001091883/000109188321000033/cir-20211220.htm. 2Q’22 3Q’22 Net Debt1 $488 $476 Adjusted Earnings Before Interest Taxes, Depreciation and Amortization (TTM2) $83 $96 Net Leverage3 5.9x 5.0x Compliance Adjusted Earnings Before Interest Taxes, Depreciation and Amortization (TTM) $100 $108 Compliance Leverage4 4.9x 4.4x Comments on 3Q’22 Results • Executed ~$28M of sale and sale-leaseback (SLB) transaction in 3Q • De-levering throughout the year…cash from sale leasebacks, and expanding EBITDA • Expect year-end net leverage in the high 4s ($ in millions)
FY’22 Guide 12 CIRCOR FY’22 Prior Guidance Range FY’22 Current Guidance Range Change vs. FY’21 (Midpoint) Revenue $757 to $777 $772 to $780 Reported 2% Organic 9% AOI $70 to 78 $75 to 80 42% Adjusted EBITDA $89 to $98 $96 to $101 31% Interest Cost ~$(45) ~$(45) 39% Adjusted EPS $1.07 to $1.34 $1.37 to $1.52 40% Commentary: • Expect 4Q AOI segment performance in line with strong 3Q • Higher corporate costs in 4Q…timing of audit/consulting fees and benefits • $13M annualized cost-outs…expect $6M carryover benefit in 2023 • FX headwinds ~$7M earnings impact Adjusted Operating Income (AOI), Adjusted EBITDA and Adjusted EPS are non-GAAP measures. Please see “Reconciliation of Forward-Looking Non-GAAP Measures” in the Appendix for a discussion of the reconciliation of our full year 2022 non-GAAP guidance. *Financial results include results from the Pipeline Engineering business – 3Q’22 YTD $2.3 million of orders, $3.2M of revenue and $(4.4M) in AOI. ($ in millions, except EPS)
FY’22 Market Outlook – Orders 13 Industrial Vs. PY Approximate Sales Mix (%) Growth Drivers General Industrial Power generation, midstream O&G, new business activities for lithium batteries manufacturing, aftermarket, and pricing Commercial Marine Strong aftermarket growth supported by pricing and increased utilization Downstream O&G Flat compared to prior year with strong orders in NA offsetting decline in India Other Decline driven by non-repeat of multi-year large defense order for US Navy Aftermarket Solid growth supported by pricing and increased utilization 56 15 20 9 40-45 Aerospace & Defense Vs. PY Approximate Sales Mix (%) Growth Drivers Defense Growth driven by the aftermarket, new products for missiles fusing devices and space application, and pricing Commercial Growth driven by the recovery in the single isle platforms at Airbus and Boeing and the aftermarket supported by pricing and the rebound in air travel Other Growth driven by new products in the Hydrogen market and increased activities in medical Aftermarket Strength in commercial aero and defense 61 17 22 25-30
2023 Outlook • Ending 2022 with strong momentum - solid backlog • Industrial segment: • Leveraging strong aftermarket position and deploying value-based pricing • Focused on margin expansion and staying ahead of inflation in current macro-economic climate • A&D segment: • Benefitting from ongoing rebound of commercial aerospace market, sustained momentum in defense business, and new products • Striving for value creation for shareholders through organic revenue and margin growth • New product development, value-based pricing, simplification initiatives, cost-out actions • Simultaneously pursuing parallel path of potential strategic transaction 14
INDUSTRIAL AEROSPACE & DEFENSE Appendix
3Q’22 Organic Orders and Revenue vs. PY 16 Organic Revenue is a non-GAAP measure.
3Q’22 GAAP Operating (Loss) Income to Adjusted Operating Income 17
3Q’22 GAAP Net (Loss) Income to Adjusted EBITDA 18
3Q’22 GAAP Net (Loss) Income to Adjusted Net Income 19
3Q’22 Net Cash (Used In) Provided by Operating Activities to Adjusted Free Cash Flow 20
Reconciliation of Forward-Looking Non-GAAP Measures 21 This presentation contains forward-looking estimates of organic revenue growth, AOI, adjusted EBITDA and adjusted EPS for full year 2022. We provide these non-GAAP measures to investors on a prospective basis for the same reasons (set forth on slide 3 (“Use of Non-GAAP Financial Measures”)) that we provide to investors on a historical basis. We are unable to provide a reconciliation of our forward-looking estimate of full year 2022 organic revenue growth, AOI, adjusted EBITDA and adjusted EPS to a forward-looking estimate of full year 2022 GAAP revenue growth, GAAP operating income (loss), GAAP net income (loss) and GAAP EPS because certain information needed to make a reasonable forward-looking estimate of such non-GAAP measures for full year 2022 is difficult to predict and estimate and is often dependent on future events that may be uncertain or outside of our control. Such events may include unanticipated changes in currency exchange rates, our GAAP effective tax rate, unanticipated gains or losses, and other unanticipated non-recurring items not reflective of ongoing operations. Our forward-looking estimates of both GAAP and non-GAAP measures of our financial performance may differ materially from our actual results and should not be relied upon as statements of fact.