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 (A&D) markets, today announced selected
preliminary financial expectations for the first quarter ended
April 3, 2022.
The selected preliminary financial expectations have not been
reviewed by the Company’s independent registered public accounting
firm. All preliminary, unreviewed financial expectations and
comparisons to prior periods include the Pipeline Engineering
business and account for the preliminary, unaudited changes to the
Company’s 2019 to 2021 financials due to the financial restatement
that is still in progress. The selected preliminary financial
expectations should not be considered final until the Company files
its Annual Report on Form 10-K for the year ended December 31, 2021
(the “Annual Report”) and its first quarter 2022 Quarterly Report
on Form 10-Q.
Selected Preliminary, Unaudited, Unreviewed Financial
Expectations for First-Quarter 2022.
Reported orders are expected to be down low-single digits and
organic orders are expected to be roughly flat year-over-year.
Aerospace and Defense organic orders are expected to be up
high-single digits while Industrial organic orders are expected to
be down low-single digits reflecting the timing of large Downstream
orders, partially offset by orders growth in the remaining
Industrial business.
Reported revenue is expected to be up mid-single digits with
organic revenue up high-single digits in both Aerospace and Defense
and Industrial.
Reported orders and revenue growth are expected to be lower than
organic growth measures due to the unfavorable impact of foreign
exchange in the quarter.
Adjusted operating income and adjusted operating income as a
percentage of sales are expected to improve compared with the prior
year period driven by higher volume, improved pricing that more
than offset inflation, and lower Corporate costs.
Cash flow from operations and free cash flow are expected to be
negative for the first quarter of 2022 and roughly in line with
results from the prior-year period.
CIRCOR remains focused on its strategic priorities of organic
growth, margin expansion, capital allocation, and talent. In the
first quarter of 2022, the Industrial team expanded its pricing
strategy to include incremental surcharges and value-based pricing
initiatives intended to help offset continued inflation and to
support growth through the year. In addition, CIRCOR took
structural cost-out actions in the Industrial segment and Corporate
that are expected to save the Company roughly $4 million on an
annualized basis, and $3 million in 2022. CIRCOR is on track to
complete the previously announced closure of its loss-making
Pipeline Engineering business by the end of the second quarter of
2022. Cash costs associated with this closure are expected to be
roughly $2 million to $4 million. Finally, in the second quarter
CIRCOR generated $26 million of cash proceeds, net of transaction
costs, from the sale of a facility related to a previously divested
business and completion of a sale leaseback agreement.
CIRCOR will make a subsequent announcement to schedule the date
and time of its earnings releases and conference calls for the
fourth-quarter and full-year periods of 2021 and the first quarter
of 2022.
Company Provides Accounting Review Update
On March 14, 2022, the Company announced that it had discovered
accounting irregularities in its Pipeline Engineering business
unit, and that the Audit Committee of the Company’s Board of
Directors had engaged external advisors to conduct an independent
review into the irregularities. Prior to the discovery of these
irregularities, the Pipeline Engineering business unit accounted
for approximately 3% and 2% of the Company’s total reported revenue
in 2020 and 2019, respectively. With the review now largely
complete, the Company is providing the following update, noting
that the amounts presented are unaudited estimates, remain under
review, and should not be considered final until the filing of the
Annual Report:
- To date, the review has identified an individual employee in
the Pipeline Engineering business that intentionally manipulated
Pipeline Engineering’s accounting records beginning in 2017
- The accounting irregularities resulted from intentional acts to
conceal relevant information, falsify accounting records, and
override management controls
- The Company continues to expect that the identified issues will
result in one or more material weaknesses in the Company’s internal
control over financial reporting during the applicable periods
- To date, the review has not identified evidence of accounting
irregularities outside of the Pipeline Engineering business
unit
- The accounting irregularities identified to date account for
balance sheet and income statement entries in the range of $40 to
$45 million of pre-tax income on a cumulative basis over a period
of 5 years through the third quarter of 2021 (compared with a
previously communicated range of $35 million to $45 million)
In addition, as a result of its restatement process to date, the
Company expects to book non-cash impairment charges related to the
Company’s Industrial and Refinery Valves businesses in the amount
of $20 million in Q1 2020 (incremental to the $116 million non-cash
impairment charge originally booked in this period) and $10 million
in Q4 2021, respectively.
Company Files Form 12b-25 for First Quarter 2022 Form
10-Q
The Company also announced that on May 16, 2022 it filed a Form
12b-25 with the U.S. Securities and Exchange Commission (SEC) to
disclose that it will be unable to file its Quarterly Report on
Form 10-Q for the quarter ended April 3, 2022 on a timely basis
without unreasonable effort or expense.
As previously disclosed in a Current Report on Form 8-K and Form
12b-25, each dated March 14, 2022, the Company is delayed in filing
its Annual Report because it is reviewing accounting irregularities
in its financial statements for (i) the years ended December 31,
2018, December 31, 2019 and December 31, 2020 included in its
Annual Reports on Form 10-K, (ii) each of the quarterly and
year-to-date periods for 2020 and (iii) the quarterly and
year-to-date periods for the nine months ended October 3, 2021. As
a result of misstatements uncovered during the review, the Company
will restate its audited consolidated financial statements for the
years ended December 31, 2020, and December 31, 2019, and its
interim financial statement periods for the first, second, and
third quarters of 2021 and 2020.
In order to prepare and file its Quarterly Report for the
quarter ended April 3, 2022, the Company must complete the
restatement of its financial statements described above and file
its Annual Report. Although the Company has dedicated significant
resources to completing the restatement and the filing of the
Annual Report, the process is not yet complete.
Use of Non-GAAP Financial Measures
In this press release, the Company uses the non-GAAP financial
measures organic orders, organic revenue, adjusted operating
income, adjusted operating income as a percentage of sales, and
free cash flow. Non-GAAP financial measures are used by management
in our financial and operating decision making because we believe
they reflect our ongoing business and facilitate period-to-period
comparisons. We believe that these non-GAAP financial measures
provide useful information to investors and others in understanding
and evaluating CIRCOR’s current operating performance and future
prospects in the same manner as management does if they so choose.
These non-GAAP financial measures also allow investors and others
to compare CIRCOR’s current financial results with CIRCOR’s past
financial results in a consistent manner.
About CIRCOR International, Inc.
CIRCOR International is one of the world’s leading providers of
mission critical flow control products and services for the
Industrial and Aerospace & Defense markets. The Company has a
product portfolio of market-leading brands serving its customers’
most demanding applications. CIRCOR markets its solutions directly
and through various sales partners to more than 14,000 customers in
approximately 100 countries. The Company has a global presence with
approximately 3,100 employees and is headquartered in Burlington,
Massachusetts. For more information, visit the Company’s investor
relations website at http://investors.circor.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Actual results may differ
materially from the expectations the Company describes in its
forward-looking statements. Substantial reliance should not be
placed on forward-looking statements because they involve unknown
risks, uncertainties and other factors, which are, in some cases,
beyond the control of CIRCOR. Important factors that could cause
actual results to differ materially from expectations include, but
are not limited to findings and conclusions of the Audit
Committee’s review; the Company’s expectations regarding
materiality or significance; the effectiveness of the Company’s
internal control over financial reporting and disclosure controls
and procedures; the potential for a material weakness 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 risk that the completion and
filing of the Annual Report will take longer than expected;
additional information that may arise during the preparation of the
Company’s financial statements; the timing of the Company regaining
compliance with the NYSE’s continued listing standards; the timing
and outcome, if any, of the Company’s strategic alternatives review
and its potential exit from the Pipeline Engineering business unit;
the impact on the Company of the situation in Russia and Ukraine;
and the risks detailed from time to time in the Company’s periodic
reports filed with the SEC. Before making any investment decisions
regarding CIRCOR, the Company strongly advises you to read the
section entitled “Risk Factors” in its most recent annual report on
Form 10-K and subsequent reports on Forms 10-Q, 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20220523005587/en/
Alex Maki Vice President - FP&A and Investor Relations
CIRCOR International (781) 270-1200
CIRCOR (NYSE:CIR)
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