EDGEWOOD, NY -- (Marketwired) -- 11/08/16 -- CPI Aerostructures, Inc. ("CPI Aero®") (NYSE MKT: CVU) today announced financial results for the three-month and nine-month periods ended September 30, 2016.
Summary Highlights
- Backlog of $441.5 Million at September 30, 2016, up $54.2 Million, or 14%, From 2015 Year-End
- Record Defense backlog of $332.7 Million; up 20% at September 30, 2016 from 2015 year-end; multi-year defense contracts now represent 75% of total backlog
- Raytheon Next Generation Jammer Pod award validates technical capabilities for Electronic Warfare/Intelligence, Surveillance and Reconnaissance pod structures
- Embraer E175-E2 award recognizes world class program management and supply chain management capabilities
- Expect revenue growth in 2017 and a return to profit
Revenue for the 2016 third quarter was $22.1 million compared to $26.8 million for the 2015 third quarter. Gross profit was $5.0 million for the third quarter of 2016, versus $5.6 million for the third quarter of 2015. Pre-tax income for the 2016 third quarter was $2.7 million compared to $3.5 million in the 2015 third quarter. Net profit for the 2016 third quarter was $1.7 million, or $0.19 per diluted share, compared to $2.4 million, or $0.28 per diluted share, in the 2015 third quarter.
Third quarter 2016 results include $2.7 million in zero-margin revenue related to the A-10 Wing Replacement Program (WRP). In reporting first quarter 2016 results, CPI Aero announced that it had incurred a non-cash charge of approximately $13.5 million related to its estimate to perform through the conclusion of the order. Accordingly, the company is recording A-10 WRP revenue for the remainder of the program at zero gross profit. The results summarized below are presented on an adjusted basis that excludes the impact of the A-10 WRP from the applicable periods.
Third Quarter 2016 vs. Third Quarter 2015 (As Adjusted)
- Revenue was $19.4 million compared to $23.9 million
- Gross profit was $5.0 million compared to $5.6 million
- Pre-tax income was $2.7 million compared to $3.5 million
- Net income was $1.7 million compared to $2.4 million
- Earnings per diluted share were $0.19 compared to $0.28
Nine Months 2016 vs. Nine Months 2015 (As Adjusted)
- Revenue was $58.7 million to $55.8 million
- Gross profit was $13.7 million compared to $13.1 million
- Pre-tax income was $6.2 million compared to $6.4 million
- Net income was $3.9 million compared to $4.4 million and
- Earnings per diluted share were $0.45 compared to $0.51
"Our continued focus on operational excellence and program execution resulted in another quarter of solid financial performance," stated Douglas McCrosson, president and chief executive officer of CPI Aero. "The decline in revenue and income for the third quarter of 2016 as compared to the third quarter of 2015 was expected and largely attributed to a reduction in revenue for the E-2D outer wing panel ("OWP") kits. The multi-year E-2D OWP contract awarded in late 2014 front-loaded certain program activities from later years into 2015 that accelerated the timing of revenue recognition. We were pleased to see steady revenue and improving margin from our commercial market and meaningful contributions from our newer multi-year defense programs, such as the E-2D for Japan, T-38 and F-16, in the third quarter of 2016.
"We also continued to build momentum heading into 2017 with significant contract awards from Raytheon and Embraer that increased backlog at September 30 to a record $441.5 million. Subsequent to the close of the third quarter, we announced a $5 million defense contract with Lockheed Martin/Sikorsky, and I'm optimistic that our strategy to focus on the defense market will result in additional defense contracts during the closing months of 2016. The success of this strategy can already be measured by our record backlog. As of September 30, 2016, $247 million of the backlog consists of defense programs announced during the past 24 months, affording us substantial revenue visibility in future years."
"Looking ahead, we believe we have the foundation in place for strong long-term value creation," continued Mr. McCrosson. "As exemplified by our two separate contracts from Raytheon on its Next Generation Jammer Pod in the third quarter, our program management, supply chain management and technical expertise differentiate CPI Aero from our competitors and are highly valued by our customers. Our defense programs strike a good balance between modernization and readiness that we believe place us in the best position to be successful in light of uncertain and evolving U.S. defense budget priorities. Our commercial business remains steady from year-ago levels and we expect that growth in our defense business should more than offset possible headwinds in our business jet product lines.
Mr. McCrosson concluded, "In the near-term, we see a clear path to greater revenue and profits driven by programs transitioning from ramp-up to full-production volumes in fiscal 2017 and margin expansion opportunities from cost reduction and efficiency initiatives undertaken over the past two years. Our bid pipeline further supports our optimism as we are also well positioned on future defense initiatives planned by the U.S. Department of Defense, such as the F-16 Service Life Extension Program (SLEP), the T-X trainer, and the F-15 Wing Replacement Program, either as a prime contractor or partnered with one of our current defense customers."
Financial Outlook
Mr. McCrosson stated, "We are maintaining our 2016 adjusted revenue outlook for a range of $82.5 million to $88.5 million and narrowing our outlook for 2016 adjusted pre-tax income to the lower end of our previously stated range of $9.8 million to $10.5 million. Our updated adjusted pre-tax income outlook for fiscal 2016 reflects the adoption of a new executive compensation policy that better aligns the interests of shareholders and management and additional legal and accounting fees associated with preparing our full year 2015 audited financial statements. We expect to provide 2017 guidance when we announce fourth quarter and full year 2016 results, however, given the recent wins coupled with our bid pipeline, we have enough visibility today to project revenue growth in fiscal 2017 over fiscal 2016 of 5 to 10 percent and a return to positive earnings per share for the year."
Conference Call
Management will host a conference call today at 8:30 a.m. ET to discuss these results as well as recent corporate developments. After opening remarks, there will be a question and answer period. Interested parties may participate in the call by dialing 844-378-6486 or 412-542-4181. Please call in 10 minutes before the conference call is scheduled to begin. The conference call will also be broadcast live over the Internet. Additionally, a slide presentation will accompany the conference call. To listen to the live call, please go to www.cpiaero.com, click on the Investor Relations section, then to the Event Calendar. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days.
About CPI Aero
CPI Aero is a U.S. manufacturer of structural assemblies for fixed wing aircraft, helicopters and airborne Intelligence Surveillance and Reconnaissance pod systems in both the commercial aerospace and national security markets. Within the global aerostructure supply chain, CPI Aero is either a Tier 1 supplier to aircraft OEMs or a Tier 2 subcontractor to major Tier 1 manufacturers. CPI also is a prime contractor to the U.S. Department of Defense, primarily the Air Force. In conjunction with its assembly operations, CPI Aero provides engineering, program management, supply chain management, and MRO services. CPI Aero is included in the Russell Microcap® Index.
The above statements include forward-looking statements that involve risks and uncertainties, which are described from time to time in CPI Aero's SEC reports, including CPI Aero's Form 10-K for the year ended December 31, 2015, and Form 10-Q for the three-month periods ended March 31, 2016 and June 30, 2016.
CPI Aero® is a registered trademark of CPI Aerostructures, Inc. For more information, visit www.cpiaero.com, and follow us on Twitter @CPIAERO.
CPI AEROSTRUCTURES, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
(Unaudited) (Unaudited)
--------------------------- --------------------------
Revenue $ 22,110,829 $ 26,790,881 $57,061,826 $ 68,611,766
Cost of sales 17,086,461 21,194,449 58,642,561 55,564,894
------------- ------------- ------------ -------------
Gross profit (loss) 5,024,368 5,596,432 (1,580,735) 13,046,872
Selling, general and
administrative
expenses 2,014,147 1,898,965 6,603,321 5,968,123
------------- ------------- ------------ -------------
Income (loss) from
operations 3,010,221 3,697,467 (8,184,056) 7,078,749
Interest expense 338,156 218,382 937,523 703,436
------------- ------------- ------------ -------------
Income (loss) before
provision for
(benefit from) income
taxes 2,672,065 3,479,085 (9,121,579) 6,375,313
Provision for
(benefit from)
income taxes 986,000 1,033,000 (3,378,000) 2,011,000
------------- ------------- ------------ -------------
Net income (loss) 1,686,065 2,446,085 (5,743,579) 4,364,313
Other comprehensive
income (loss)
net of tax -
Change in unrealized
loss on
interest rate swap 25,936 1,382 (44,547) 3,906
------------- ------------- ------------ -------------
Comprehensive income
(loss) $ 1,712,001 $ 2,447,467 $(5,788,126) $ 4,368,219
============= ============= ============ =============
Income (loss) per
common share - basic $ 0.19 $ 0.29 $ (0.67) $ 0.51
============= ============= ============ =============
Income (loss) per
common share -
diluted $ 0.19 $ 0.28 $ (0.67) $ 0.51
============= ============= ============ =============
Shares used in
computing income
(loss) per common
share:
Basic 8,678,608 8,564,417 8,628,716 8,544,475
============= ============= ============ =============
Diluted 8,692,420 8,625,308 8,628,716 8,613,316
============= ============= ============ =============
CPI AEROSTRUCTURES, INC.
BALANCE SHEETS
September 30, December 31,
2016 2015
(Unaudited) (Note 1)
ASSETS
Current Assets:
Cash $ 665,317 $ 1,002,023
Accounts receivable, net of allowance for
doubtful accounts of $470,748 as of September
30, 2016 and $75,000 as of December 31, 2015 9,004,826 7,665,837
Costs and estimated earnings in excess of
billings on uncompleted contracts 95,743,826 102,622,387
Prepaid expenses and other current assets 2,655,376 1,065,473
------------- -------------
Total current assets 108, 112,
069,345 355,720
Plant and equipment, net 2,362,655 2,358,736
Deferred income taxes 5,351,000 1,890,000
Other assets 204,240 108,080
------------- -------------
Total Assets $115,987,240 $116,712,536
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 13,704,363 $ 18,379,469
Accrued expenses 1,056,659 1,057,682
Billings in excess of costs and estimated
earnings on uncompleted contracts 830,746 175,438
Current portion of long-term debt 1,092,237 1,011,491
Contract loss 2,032,494 549,723
Line of credit 21,938,685 23,700,000
Income tax payable 24,876 189,000
------------- -------------
Total current liabilities 40,680,060 45,062,803
Long-term debt, net of current portion 9,296,095 483,961
Other liabilities 702,509 633,663
------------- -------------
Total Liabilities 50,678,664 46,180,427
------------- -------------
Shareholders' Equity:
Common stock - $.001 par value; authorized
50,000,000 shares, 8,722,569 and 8,583,511
shares, respectively, issued and outstanding 8,722 8,584
Additional paid-in capital 52,701,839 52,137,384
Retained earnings 12,646,015 18,389,594
Accumulated other comprehensive loss (48,000) (3,453)
------------- -------------
Total Shareholders' Equity 65,308,576 70,532,109
------------- -------------
Total Liabilities and Shareholders' Equity $115,987,240 $116,712,536
============= =============
CPI AEROSTRUCTURES, INC.
ADJUSTED STATEMENT OF EARNINGS
30-SEP-16
Adjusted Earnings (arrived at by eliminating the Company's A-10 Program with Boeing from reported results) is not derived in accordance with generally accepted accounting principles ("GAAP"). Adjusted Earnings is a key metric CPI Aero has used in evaluating its financial performance. Adjusted Earnings is considered a non-GAAP financial measure as defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. CPI Aero considers Adjusted Earnings important in evaluating its financial performance on a consistent basis across various periods. Due to the significance of the non-cash and non-recurring change in estimate recognized in the three months ended March 31, 2016, Adjusted Earnings enables the Company's Board of Directors and management to monitor and evaluate the business on a consistent basis. CPI Aero uses Adjusted Earnings as a measure, among others, to analyze and evaluate financial and strategic planning decisions regarding future operating decisions and investments. The presentation of Adjusted Earnings should not be construed as an inference that CPI Aero's future results will be unaffected by unusual or non-recurring items or by non-cash items, such as changes in estimates. Adjusted Earnings should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities.
For the Nine months ended September 30,
2016
----------------------------------------
GAAP Adjusted
------------ ------------
as Reported Adjustments Earnings
------------ -------------- ------------
Revenues $57,061,826 $ 1,665,466 $58,727,292
Cost of sales 58,642,561 (13,618,684) 45,023,877
------------ -------------- ------------
Gross profit (loss) (1,580,735) 15,284,150 13,703,415
------------ -------------- ------------
Selling, general and administrative
exp 6,603,321 6,603,321
------------ -------------- ------------
Income (loss) from operations (8,184,056) 15,284,150 7,100,094
------------ -------------- ------------
Interest expense (937,523) (937,523)
============ -------------- ============
Income before provision for
(benefit from) income taxes (9,121,579) 15,284,150 6,162,571
------------ -------------- ------------
Provision for (benefit from) income
taxes (3,378,000) 5,658,000 2,280,000
------------ -------------- ------------
Net income (loss) $(5,743,579) $ 9,626,150 $ 3,882,571
============ ============== ============
Diluted earnings (loss) per share $ (0.67) $ 0.45
============ ============== ============
For the Three months ended September 30,
2016
--------------------------------------------
GAAP Adjusted
-------------- --------------
as Reported Adjustments Earnings
--------------------------------------------
Revenues $ 22,110,829 $ (2,678,199) $ 19,432,630
Cost of sales 17,086,461 (2,678,199) 14,408,261
-------------- -------------- --------------
Gross profit 5,024,368 5,026,368
Selling, general and
administrative exp 2,014,147 2,014,147
-------------- -------------- --------------
Income from operations 3,010,221 3,010,221
Interest expense (338,156) (338,156)
-------------- -------------- --------------
Income before provision for
(benefit from) income taxes 2,672,065 2,672,065
Provision for income taxes 986,000 986,000
-------------- -------------- --------------
Net income $ 1,686,065 $ 1,686,065
============== ============== ==============
Diluted earnings per share $ 0.19 $ 0.19
============== ============== ==============
For the Nine Months Ended September 30, 2015
GAAP Adjusted
as Reported Adjustments Earnings
Revenues $ 68,611,766 $ (12,803,792) $ 55,807,974
Cost of sales 55,564,894 (12,811,561) 42,753,333
-------------- --------------- -------------
Gross profit 13,046,872 7,769 13,054,641
Selling, general and
administrative exp 5,968,123 5,968,123
-------------- --------------- -------------
Income from operations 7,078,749 7,769 7,086,518
Interest expense 703,436 703,436
-------------- --------------- -------------
Income before provision for
income taxes 6,375,313 7,769 6,383,082
Provision for income taxes 2,011,000 2,011,000
-------------- --------------- -------------
Net income $ 4,364,313 $ 7,769 $ 4,372,082
============== =============== =============
Diluted earnings per share $ 0.51 $ 0.51
============== =============== =============
For the Three Months Ended September 30, 2015
GAAP Adjusted
as Reported Adjustments Earnings
Revenues $ 26,790,881 $ (2,894,487) $ 23,896,394
Cost of sales 21,194,449 (2,889,279) 18,305,170
--------------- --------------- ---------------
Gross profit 5,596,432 (5,208) 5,591,224
Selling, general and
administrative exp 1,898,965 1,898,965
--------------- --------------- ---------------
Income from operations 3,697,467 (5,208) 3,692,259
Interest expense 218,382 218,382
--------------- --------------- ---------------
Income before provision for
income taxes 3,479,085 (5,208) 3,473,877
Provision for income taxes 1,033,000 1,033,000
--------------- --------------- ---------------
Net income $ 2,446,085 (5,208) $ 2,440,877
=============== =============== ===============
Diluted earnings per share $ 0.28 $ 0.28
=============== =============== ===============
Contact:
Vincent Palazzolo
Chief Financial Officer
CPI Aero
(631) 586-5200
www.cpiaero.com
Investor Relations Counsel:
LHA
Jody Burfening/Sanjay M. Hurry
(212) 838-3777
Email Contact
www.lhai.com
