CPI Aerostructures Announces Fourth Quarter and Full Year 2015 Results
Achieves Record Revenue for Both Quarter and Year
March 28, 2016
Edgewood, NY – CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE American: CVU) today reported fourth-quarter and full-year 2015 financial results.
Full Year 2015 versus Full Year 2014
Fourth Quarter 2015 versus Fourth Quarter 2014
Douglas McCrosson, president and chief executive officer, stated, “Revenue growth in the fourth quarter was driven by multi-year defense contracts awarded in 2014 and especially the E-2D/C-2A Outer Wing Panel kits program. Due to customer requirements, certain E-2D/C-2A program activities originally scheduled for 2016 were accomplished in the fourth quarter of 2015, thereby generating revenue above our forecast for the year. In addition, we recognized revenue from Northrop Grumman as part of a supply chain management services contract related to the multi-year contract award to supply wing components for our Japanese E-2D Advanced Hawkeye contract announced subsequent to the close of the fourth quarter.
“The net income for the quarter, however, was adversely impacted by a delay in concluding negotiations for equitable relief we requested in accordance with our A-10 Wing Replacement Program (WRP). Nevertheless, because the proposed 2017 defense budget released in February calls for a delay in the A-10’s retirement, we believe it is very likely that the U.S. Air Force will issue new requirements to re-wing additional aircraft and believe that this will be a net positive for CPI Aero. The remainder of the current A-10 WRP contract is expected to be a net provider of cash and we remain optimistic that we will be able to re-launch the program on favorable terms in 2016.”
Continued Mr. McCrosson, “I am pleased with our execution in 2015 and believe that our performance confirms the strategic and operational choices we made in 2014 to place greater focus on defense opportunities, expand and diversify our revenue base and operate with the strategic and financial discipline to drive growth to our top and bottom lines. We enter fiscal 2016 with greater defense spending certainty following the signing of the 2016 Omnibus Appropriations bill. Based on early indications, the proposed 2017 defense budget provides additional optimism for the sector and indicates support for several defense programs key to CPI Aero. With the U.S. Department of Defense once again in growth mode and geo-political situations serving as drivers of defense spending, we anticipate opportunities to expand our footprint in current programs and are concurrently increasing our business development efforts to new programs. In particular, we are well positioned for growth with our maintenance, repair and overhaul-related programs as airframes log more flight-hours. We are also seeing increased demand from international customers for U.S.-manufactured systems, as evidenced by the recent sale of Northrop Grumman E-2D Advanced Hawkeyes to Japan. Finally, we are seeing significant interest from manufacturers of pod-based intelligence, surveillance and reconnaissance systems for both domestic and foreign applications.
“As we begin to benefit from these tailwinds in the marketplace, we have secured a credit facility that provides us with additional liquidity and flexibility to capture opportunities ahead of us,” concluded Mr. McCrosson. “These opportunities, combined with our strong and diversified backlog, lead us to believe that we are well positioned for continued success in 2016.”
Total backlog as of December 31, 2015 was $387,316,000 compared with $403,648,000 as of December 31, 2014. Government contracts account for $276.9 million, or 71% of 2015 total backlog, up 9% from $254.8 million at end of 2014. Subsequent to the close of 2015, the company announced a three-year, $25.0 million to $30.0 million contract with Northrop Grumman to supply wing components for Japanese E-2D Advanced Hawkeye aircraft that will contribute further to our defense backlog. Funded backlog was $101.1 million, as compared to funded backlog at December 31, 2014 of $120.6 million. The value of the unfunded backlog (long-term contracts that have not been converted to funded orders) at December 31, 2015 was $286.2 million, with $181.8 million of this related to defense.
Fiscal 2016 Guidance
Adjusting for the previously mentioned revenue recognized in the fourth quarter 2015, the company’s fiscal 2016 full year ending December 31, 2016 is expected to be as follows:
Amended and Restated Credit Facility
CPI Aero today announced that it had entered into a $40.0 million secured credit facility, replacing a previous secured $35.0 credit facility, which was scheduled to mature on December 5, 2016. The amended and restated credit facility consists of a $10.0 million term loan and a $30.0 million revolving credit facility, secured by a lien on substantially all assets of the company, and may be used for working capital needs, capital expenditures and general business purposes. The facility has a three-year term and matures in March 2019.
2015 Form 10-K
The company filed its 2015 annual report on Form 10-K with the Securities and Exchange Commission today, March 28, 2016.
Management will host a conference call on Monday, March 28, 2016, at 11:00 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 877-407-8029 or 201-689-8029. Please call in 10 minutes before the conference call is scheduled to begin and ask for the CPI Aero call. 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. Please go to the website 15 minutes early to download and install any necessary audio software. 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 (ISR) 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 original equipment manufacturers 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. Among the key national security programs that CPI Aero supplies are the E-2D Advanced Hawkeye surveillance aircraft, the UH-60 BLACK HAWK® helicopter, the F-16 Falcon fighter, the T-38C Talon trainer, the MH-53/CH-53 variant helicopters, the MH-60S mine countermeasure helicopter, the AH-1Z ZULU attack helicopter, the DB-110 reconnaissance pod, the ALMDS mine detecting pod, and the A-10 Thunderbolt attack jet. In the commercial aviation market CPI Aero manufactures products for the Gulfstream G650 ultra-large cabin business jet, the HondaJet advanced light jet, the Embraer Phenom 300 business jet, the new Cessna Citation X+, and the S-92® helicopter. 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.
CPI Aero® is a registered trademark of CPI Aerostructures, Inc.
CPI Aerostructures, Inc.
STATEMENTS OF OPERATIONS
CPI Aerostructures, Inc.
CONDENSED BALANCE SHEETS
CPI Aerostructures, Inc.
ADJUSTED STATEMENT OF EARNINGS
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.
Chief Financial Officer
Jody Burfening/Sanjay M. Hurry
800 Third Avenue
New York, NY 10022