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 second quarter ended July 2, 2023.
Q2 2023 Overview (compared with Q2 2022):
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Revenue of $209 million up 9% both reported and organically
- Aerospace & Defense revenue of $74 million, up 9% both reported and organically
- Industrial revenue of $135 million, up 9% both reported and organically
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Orders of $236 million, up 13% reported and 14% organically
- Aerospace & Defense orders of $95 million, up 38% both reported and organically
- Industrial orders of $141 million, up 1% reported and 2% organically
- GAAP operating income of $9.5 million, down 20%
- GAAP operating margin of 4.6%, down 160 bps
- Adjusted operating income excluding impact of deemed contract termination due to Russia sanctions of $29.1 million, up 75%
- Adjusted operating margin excluding impact of deemed contract termination due to Russia sanctions of 13.9%, up 520 bps
President and CEO Tony Najjar said, "Strong orders momentum continued in the second quarter, reflecting our team's focus on customers and the execution of our growth strategy. Our team delivered solid organic orders growth of 14%, primarily driven by our Aerospace and Defense segment. 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 Q2 2023 was up 27% to a record $604 million.”
“Our value pricing initiatives, cost controls, and simplification actions continued to serve as growth and margin expansion levers during the quarter," Mr. Najjar continued. "We delivered a 75% increase in second-quarter adjusted operating income and a 520 basis-point improvement in adjusted operating margin excluding an adjustment to reverse prior periods reported revenue on a contract deemed to be terminated due to Russia sanctions. Our year-over-year results represented another step change in margin performance driven by the significant margin expansion in our Industrial and A&D segments. With the actions taken, and our team’s continued operating discipline and focus on our customers, we believe we are well positioned to deliver sustained growth and margin expansion.”
In light of the pending transaction with CubeBid Co, Inc., which is an affiliate of investment funds managed by KKR, the Company will not conduct an earnings call this quarter or give forward-looking guidance. The Company currently expects to complete the transaction in the fourth quarter of 2023.
The financial statements and the Quarterly Report Form 10-Q are available on the CIRCOR investor relations website, https://investors.circor.com/, and on the U.S. Securities and Exchange Commission website, www.sec.gov.
Selected Consolidated Results (unaudited) | ||||||||||||||||||||||
($ millions except EPS) | Q2 2023 | Q2 2022 | Change | Q2 YTD 2023 | Q2 YTD 2022 | Change | ||||||||||||||||
Revenue1 | $ | 208.8 | $ | 191.4 | 9 | % | $ | 411.9 | $ | 377.0 | 9 | % | ||||||||||
GAAP operating income | 9.5 | 11.9 | (20 | )% | 27.5 | 0.1 | 27400 | % | ||||||||||||||
Adjusted operating income2 | 29.1 | 16.6 | 75 | % | 57.4 | 27.0 | 113 | % | ||||||||||||||
GAAP operating margin | 4.6 | % | 6.2 | % | -160 bps | 6.7 | % | — | % | 670 bps | ||||||||||||
Adjusted operating margin3 | 13.9 | % | 8.7 | % | 520 bps | 13.9 | % | 7.2 | % | 670 bps | ||||||||||||
GAAP (loss) income per share | $ | (0.42 | ) | $ | 0.19 | (321 | )% | $ | (0.44 | ) | $ | (0.86 | ) | 49 | % | |||||||
Adjusted earnings per share (diluted)4 | $ | 0.57 | $ | 0.32 | 78 | % | $ | 1.10 | $ | 0.37 | 197 | % | ||||||||||
Operating cash flow | 2.1 | (3.6 | ) | 159 | % | (11.8 | ) | (19.5 | ) | 39 | % | |||||||||||
Adjusted free cash flow5 | (2.9 | ) | (9.1 | ) | 68 | % | (19.5 | ) | (28.6 | ) | 32 | % | ||||||||||
Orders6 | $ | 236.4 | $ | 208.4 | 13 | % | $ | 478.5 | $ | 430.0 | 11 | % | ||||||||||
Segment Results (unaudited) | ||||||||||||||||||||||
($ in millions) | Q2 2023 | Q2 2022 | Change | Q2 YTD 2023 | Q2 YTD 2022 | Change | ||||||||||||||||
Aerospace & Defense | ||||||||||||||||||||||
Revenue | $ | 73.5 | $ | 67.3 | 9 | % | $ | 142.1 | $ | 130.6 | 9 | % | ||||||||||
Segment operating income | 15.2 | 13.6 | 12 | % | 30.0 | 24.9 | 20 | % | ||||||||||||||
Segment operating margin | 20.7 | % | 20.2 | % | 50 bps | 21.1 | % | 19.0 | % | 210 bps | ||||||||||||
Orders6 | $ | 95.4 | $ | 69.0 | 38 | % | $ | 179.8 | $ | 146.9 | 22 | % | ||||||||||
Industrial | ||||||||||||||||||||||
Revenue1 | $ | 135.3 | $ | 124.1 | 9 | % | $ | 269.8 | $ | 246.4 | 9 | % | ||||||||||
Segment operating income2 | 15.6 | 8.5 | 84 | % | 36.0 | 15.3 | 135 | % | ||||||||||||||
Segment operating margin3 | 11.6 | % | 6.8 | % | 480 bps | 13.4 | % | 6.2 | % | 720 bps | ||||||||||||
Orders6 | $ | 141.0 | $ | 139.4 | 1 | % | $ | 298.7 | $ | 283.1 | 6 | % | ||||||||||
Net Debt and Leverage | |||||||||||||||||
(unaudited) | |||||||||||||||||
2022 | 2023 | ||||||||||||||||
($ in millions) | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | |||||||||||
NET DEBT7 | $ | 486.6 | $ | 487.9 | $ | 475.8 | $ | 452.7 | $ | 467.5 | $ | 470.9 | |||||
Adjusted EBITDA (TTM8) | 77.8 | 83.2 | 96.0 | 108.3 | 124.5 | 138.8 | |||||||||||
Net Leverage9 | 6.3x | 5.9x | 5.0x | 4.2x | 3.8x | 3.4x | |||||||||||
- Consolidated and Industrial segment revenues for Q2 2023 and Q2 2022 included $0.0 million and $0.2 million respectively, relating to our Pipeline Engineering business.
- Adjusted operating income is a non-GAAP financial measure. Refer to “Use of Non-GAAP Financial Measures” for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release. Adjusted operating income and Industrial segment operating income for the Q2 2023 and Q2 2022 included $0.1 million and $(1.1) million, respectively, relating to our Pipeline Engineering business. Adjusted operating income for Q2 2023 excludes the impact of a deemed contract termination due to Russia sanctions of $5.4 million.
- Adjusted operating margin is a non-GAAP financial measure. Refer to “Use of Non-GAAP Financial Measures” for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release. Adjusted operating margin for Q2 2023 and Q2 2022 included 0% and (493)%, respectively, relating to our Pipeline Engineering business. Adjusted operating margin for Q2 2023 excludes the impact of a deemed contract termination due to Russia sanctions.
- Adjusted earnings per share (diluted) is a non-GAAP financial measure. Refer to “Use of Non-GAAP Financial Measures” for an explanation of our non-GAAP financial measures and to the reconciliations included in this press release. Adjusted earnings per share and our segment results for Q2 2023 exclude net loss from non-cash acquisition-related intangible amortization and special and restructuring charges of $19.5 million, consisting of (i) $9.0 million for non-cash acquisition-related intangible amortization and depreciation expense; (ii) $4.2 million of special charges related to the evaluation of strategic alternatives for the Company;(iii) the impact of a deemed contract termination of $5.4 million due to government sanctions placed on Russia in May 2023; (iv) $0.6 million receivable write off due to the deemed contract termination of the Russia order; and (v) other special and restructuring charges net of $0.4 million. Adjusted earnings per share and our segment results for Q2 2022 exclude net loss from non-cash acquisition-related intangible amortization and special and restructuring charges of $4.7 million, consisting of (i) $10.4 million for non-cash acquisition-related intangible amortization and depreciation expense; (ii) $5.0 million of special charges related to the amendment of the credit agreement; (iii) $5.0 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; (iv) $0.9 million of special charges related to the evaluation of strategic alternatives for the company; (v) net restructuring charges of $4.7 million comprised of $5.3 million of CTA loss offset by other adjustments of $0.6 million due to the deconsolidation of the Pipeline Engineering businesses; (vi) other special and restructuring charges net of $0.7 million; and (vii) a gain of $22.0 mil
