CPI Aerostructures Announces 2013 Second Quarter Results
$68 Million in New Contract Awards as of July 31st, 50% Higher than Same Period of 2012; Expects a Solid Year for New Business
August 8, 2013
CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE American: CVU) today announced financial results for the 2013 second quarter and six months ended June 30, 2013.
Second Quarter 2013 vs. 2012
First Half 2013 vs. 2012
* Diluted earnings per share for 2013 second quarter and six month periods were calculated on 16% and 18% more shares outstanding, respectively, than in the prior year periods due to the Company’s 1.2 million share public offering completed in July 2012.
Edward J. Fred, CPI Aero’s President & CEO, stated, “2013 second quarter and first half results were in line with our expectations. Our revenue for both reporting periods slightly increased, as compared to the same periods of 2012; however, as we previously reported, we expect our revenue for the full year to decline from 2012’s full year revenue.”
Mr. Fred continued, “For the 2013 first half, the slight increase in our total revenue was due to higher revenue from government and commercial subcontracts, offset by a decrease in revenue from prime government contracts. Specifically:
Mr. Fred added, “Our 2013 first half gross margin was affected by adjustments to our long-term programs with Spirit, Northrop Grumman and Boeing, as well as our C-5 TOP program as follows:
“Due to these reductions and adjustments, we currently expect our gross margin for the 2013 full year to be within the range of 23% to 24%, lower than our projected range of 25% to 27%. We intend to compensate for this shortfall by continued reductions in selling, general and administrative expenses (SG&A) which should allow us to achieve the net income target we projected for 2013.”
Mr. Fred noted, “Our 2013 second quarter and first half SG&A expenses as a percent of revenue decreased to 7.1% and 8.2%, respectively, as compared to 7.5% and 9.0% in the same periods of 2012, respectively. The decrease for both periods was mainly due to lower accrued officers’ bonus, accounting, legal and other consulting fees, slightly offset by increased salaries due to higher headcount.”
Mr. Fred added, “Lower gross margins, although slightly offset by lower SG&A expenses, resulted in a decrease in net income for the 2013 second quarter and first half, as compared to the same periods of 2012. Our 2013 first half operating cash flow, although negative, improved significantly in the second quarter as compared to the first quarter of 2013 and was in line with expectations. We had negative cash flow from operations of approximately $7.35 million in the first quarter of the year and negative cash flow from operations of only approximately $285,000 in the second quarter. We expect continued improvement in cash flow in the third and fourth quarters of the year which should result in positive cash flow from operations of approximately $3 million for 2013 full year, as we had projected at the end of 2012. Our cash flow is expected to improve due to the completion of our contract negotiations with Boeing.”
Mr. Fred added, “Our total backlog at June 30, 2013 increased by $20.0 million to $411.9 million as compared to $391.9 million at December 31, 2012. This increase was attributable to a $35.7 million increase in backlog on commercial programs, offset by a $15.7 million decrease in backlog for military programs. Funded backlog increased to $74.8 million, at June 30, 2013 from $52.3 million at December 31, 2012, which was the result of a $26.0 million increase in funded backlog on commercial programs, offset by a $3.5 million decrease in funded backlog for military programs.”
Discussing new contract awards, Mr. Fred noted, “Even with the federal budget sequester, we have recently seen acceleration in new order releases for military aircraft, as our customers have received more definite information regarding certain key defense programs. In that regard, in July, we received a $47 million long-term agreement from Sikorsky for the production of the BLACK HAWK fuel panels, a program for which CPI Aero has provided assembly labor since 2010. We expect this program to transition into full production during the third quarter of 2013. Including this new order, new contract awards as of July 31st, from all customers were approximately $68 million, as compared to approximately $45 million in new contract awards for the same period in 2012. We expect additional contracts to be released before 2013 year-end and to have a solid year for new business from both the military and commercial segments.”
Mr. Fred added, “As previously announced, for 2013 we continue to expect:
Mr. Fred concluded, “Over the last several years, we have taken steps to further diversify our business and we have focused our new business efforts on larger and more complex contract awards, especially for commercial programs, including contracts for large commercial aircraft parts. We expect several of these contracts to be awarded to us in the coming months and we believe that we are well positioned to resume our growth in 2014.”
CPI Aero’s President and CEO, Edward J. Fred, and CFO, Vincent Palazzolo, will host a conference call today, Thursday, August 8, 2013 at 10:00 am ET to discuss third quarter 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 (201) 493-6739. Please call in 10 minutes before the scheduled time and ask for the CPI Aero call. The conference call will also be broadcast live over the Internet. To listen to the live call, please go to www.cpiaero.com and click on the “Investor Relations” section, then click on “Event Calendar”. Please access the website 15 minutes prior to the call to download and install any necessary audio software. The conference call will be archived and can be accessed for approximately 90 days. We suggest listeners use Microsoft Explorer as their browser.
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, 2012 and Form 10-Q for the quarter ended March 31, 2013.
CPI Aero® is a registered trademark of CPI Aerostructures, Inc.
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