CPI Aerostructures Announces Third Quarter 2015 Results
November 4, 2015
CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE American: CVU) today announced financial results for the three-month and nine-month periods ended September 30, 2015.
Third Quarter 2015 vs. Third Quarter 2014
Nine Months 2015 vs. Nine Months 2014
Douglas J. McCrosson, CPI Aero’s President & CEO, stated, “Third quarter revenue and net income increased as we began to recognize revenue from the multi-year defense contracts we were awarded in late 2014 and earlier this year. Revenues for the 2015 third quarter and nine-month periods were also improved over the 2014 comparable periods due to the increased build rates of our business jet production contracts, particularly our programs with Honda and Embraer. We recorded a 24.7% increase in revenue and a 44% increase in net income for the three-month period ended September 30, 2015 as compared to the same period in 2014. We are anticipating the fourth quarter to be the highest revenue quarter in our history. Based on our nine-month performance and our expectation for the fourth quarter we are updating our guidance to a more narrow range. For 2015:
Mr. McCrosson continued, “Our gross margin for the third quarter and nine months of 2015 was 20.9% and 19.0%, respectively and continued to be affected by the profit adjustment we made last year related to revised estimates for the A-10 WRP, as we continue to record revenue on this program with zero gross margin. Excluding the effect of the A-10 WRP, gross margin for the third quarter and nine months of 2015, on all remaining programs, was 23.4% for both periods, as compared to 23.6% and 21.5% in the same periods of 2014. This improvement in the nine-month period is primarily the result of higher gross margin on our commercial product lines as production rates and customer demand has increased. We anticipate that once the A-10 WRP program is concluded, our gross margin will remain in the range of 23% to 24%, given our current and projected product mix.”
Mr. McCrosson added, “Although total selling, general and administrative (SG&A) expenses for the third quarter of 2015 increased to $1.9 million as compared to $1.8 million in the same period of 2014, as a percentage of revenue the SG&A rate decreased to 7.1% as compared to 8.4%.”
Discussing new contact awards and backlog, Mr. McCrosson added, “From the beginning of the current fiscal year through September 30, 2015, we received approximately $48.0 million of new contract awards, which included approximately $12.7 million of government prime contract awards, $12.3 million of government subcontract awards and approximately $23.0 million of commercial subcontract awards, compared to a total of $87.8 million of new contract awards, of all types, in the same period last year. In September of last year we received a $65 million multi-year contract modification adding four additional year’s worth of E-2/C-2 wing kits. This amount was entirely included in new contract awards for the 2014 period. This means we will no longer receive annual purchase orders for our largest program as has been the case historically, making the comparison to last year less informative.
“We continue to pursue new opportunities from military prime contractors and believe we will be successful on at least one sizable new contract within the coming months. We see growth potential in repairing and manufacturing spares for the current fleet of aging military aircraft and we have recently submitted several proposals to the U.S. Government for the production of new structural assemblies and the repair of existing structures. The Government expects to make awards on these solicitations in 2015."
“We are pursuing commercial market opportunities, principally within the business jet and regional jet markets that align with our size, expertise and capability as a Tier 1 supplier. While we see the large commercial airliner segment as a potential growth opportunity, we are being selective with our entry into this market to make sure that there will be an acceptable balance between risk and sustainable profitability."
“Total backlog at September 30, 2015 increased to $421.7 million, as compared to $403.7 million at December 31, 2014. At September 30, 2015, funded backlog was to $125.7 million, up $5.1 million as compared to funded backlog of $120.6 million at December 31, 2014. The value of the unfunded backlog (long-term contracts that have not been converted to funded orders) at September 30, 2015 increased to $295.9 million from $283.1 million at December 31, 2014, with 38% related to our long-term commercial aerospace programs.”
Mr. McCrosson concluded, “During the nine month period ended September 30, 2015 we generated $1.6 million in cash from operations and ended the period with approximately $1.9 million in cash. For the same period in 2014, operating activities used more than $7.6 million in cash. The improvement in operating cash flow in 2015 is largely the result of an income tax refund we received resulting from the change of estimate we made to the A-10 WRP combined with higher product sales and increased operating margins on product sales. Additionally, as of September 30, 2015, we had approximately $407,000 both federal net operating loss carryforwards available which should offset future federal income taxes.”
CPI Aero’s President and CEO, Douglas J. McCrosson, and CFO, Vincent Palazzolo, will host a conference call tomorrow, Thursday, November 5, 2015 at 8:30 am 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 (201) 493-6739. 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, 2014 and Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015.
CPI Aero® is a registered trademark of CPI Aerostructures, Inc.
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