Cpi Aerostructures (NYSE AMEX:CVU)

First Quarter 2012 Results

• evenue increased 23.2% to $19,721,095 from $16,009,608;
• Gross margin was 25.2%, compared to 24.0%;
• Selling, General and Administrative (S, G & A) expenses as a percentage of revenue were 10.7%, compared to 11.2%;
• Pre-tax income increased 34.7% to $2,710,320, compared to $2,012,050; and,
• Net income increased 40.3% to $1,919,320, or $0.27 per diluted share, compared to $1,368,050, or $0.19 per share.

Edward J. Fred, CPI Aero’s President & CEO, stated, “The first quarter 23.2% increase in revenue was accompanied by an improvement in gross margin and lower S, G & A expenses as a percentage of revenue, resulting in a 40.3% increase in net income as compared to the first quarter of 2011.”

Mr. Fred continued, “Contributing to the top line growth was a 190.5% increase in revenue generated from commercial contracts (accounting for approximately 28% of total revenue) and a 41.6% increase in revenue generated from prime government contracts (accounting for approximately 10% of total revenue). There was a slight decrease in revenue generated from government subcontracts (accounting for approximately 62% of total revenue). Work performed on our three major subcontract awards: NGC E-2D program, the Gulfstream G650 program and Boeing A-10 program accounted for 32%, 20% and 15% of 2012 first quarter revenue, respectively.”

Mr. Fred added, “Thus far this year, we continued to receive large contract awards from existing and new customers. As of May 4, 2012, we received a total of $32.2 million of new contract awards, which included approximately $31.4 million of government subcontract awards, approximately $0.6 million of commercial subcontract awards and approximately $0.2 million of government prime contract awards compared to a total of approximately $47 million of new contract awards, of all types, in the same period last year.”

Mr. Fred added, “It is important to note that nearly a third of the value of the year-to-date total awards were from two new customers: Goodrich Corporation and Embraer. We look forward to additional orders as we have approximately $952 million in unawarded solicitations on which we have bid. Unawarded solicitations include two bids totaling approximately $647 million to an international aerospace company for work on the Boeing 787. To be consistent with the way in which we have historically reported unawarded solicitations, we felt that these bids should be in the total; however we also believe that the large increase in bids outstanding needed to be explained.”

Mr. Fred went on to say, “We are reaffirming our 2012 guidance which calls for revenue to be in the range of $95 million to $98 million, primarily due to continued work on our three major long-term programs. With gross margin in the range of 25%-27%, we anticipate net income in the range of $12 million to $13 million. Our first quarter results were in line with our expectations. We are projecting the balance of 2012 to have a similar quarterly performance profile as 2011, with a strong second half and a particularly strong fourth quarter as our newest contracts begin to generate revenue and income. Our 2012 guidance has factored in the current defense budget environment and reflects the cuts mandated by the Budget Control Act of 2011. However, it is still unclear whether or not sequestration will take effect in January 2013 and what the impact of even deeper cuts in defense spending will have on CPI Aero’s existing and projected defense contracts. Therefore, we believe it is imprudent to provide financial projections for 2013 until the second half of 2012 when we anticipate the federal budget situation will be more sufficiently defined. We believe that timing of the guidance to the latter part of the year also more closely aligns ourselves with our industry peers.”

Mr. Fred concluded, “Finally, to support our expected growth in new orders, customers, programs and of course, revenue and profits over the coming years, we have amended and increased our credit lines to a combined borrowing capacity of $22.5 million. Additionally, we have increased our work force to 165 people, and we are conducting our operations at our new, three times larger, 171,000 sq. ft. facility where we relocated in mid-December 2011.”

Fourth Quarter 2011 Results

• Revenue increased to $24,092,200 from $7,464,546;
• Gross margin was 27%, compared to a negative margin of 45%;
• Pre-tax income was $3,901,020, compared to pre-tax loss of $4,758,536; and,
• Net income was $2,673,020, or $0.37 per diluted share, compared to net loss of $2,965,536, or $0.44 per share.

Edward J. Fred, CPI Aero’s President & CEO, stated, “Our 2011 fourth quarter was the best quarter in CPI Aero’s history in terms of revenue and net income. For the year as a whole, the 68.5% increase in revenue was primarily the result of work performed on our three major subcontract awards won in 2008: the Gulfstream G650 program, Boeing A-10 program and NGC E-2D program which accounted for 11%, 30% and 26% of our 2011 revenue, respectively. In 2011 revenue generated from prime government contracts increased by 51% to approximately $6.7 million; revenue generated from government subcontracts increased by 79% to approximately $57 million primarily the result of the A-10 and E-2D programs; and, revenue generated from commercial contracts increased by 35% to approximately $10.2 million due to higher production rates on the G650 aircraft.”

Mr. Fred added, “Gross margin for 2011 returned to a more normal level, and was within our expected range of 24%-25%. Selling, general and administrative expenses decreased to 10.7% of revenue from 2010’s 12.3% despite one-time expenses related to moving to our new facility, as well as higher overhead costs.”

Mr. Fred added, “As we reported, in 2011, we received $83.6 million of new contract awards including approximately $47.1 million of commercial contract awards, approximately $24.8 million of government subcontract awards and approximately $11.7 million of government prime contract awards. Approximately $24 million of the year-over-year gain in new contracts were attributable to additional government subcontract awards.”

Mr. Fred added, “We started 2012 on a strong note with year-to-date contract awards totaling $28.1 million, as compared to $22.3 million in the same period of last year. Importantly, last month we received a purchase order from a new customer, Goodrich Corporation and for the first time, CPI Aero will have the authority to design modifications to the structure it is manufacturing. We look forward to additional orders as we have approximately $282 million in unawarded solicitations on which we have bid.”

Mr. Fred went on to say, “We are reaffirming our 2012 guidance which calls for revenue to be in the range of $95 million to $98 million, primarily due to continued work on our three major long-term programs. With gross margin in the range of 25%-27%, we anticipate net income in the range of $12 million to $13 million. We intend to provide our 2013 guidance in our first quarter 2012 earnings release in May.”

Mr. Fred concluded, “Finally, to support our expected growth in new orders, customers, programs and of course, revenue and profits over the coming years, in November 2011 we increased our line of credit with Sovereign Bank to $18 million. In addition, in mid-December we completed the relocation to the 171,000 sq. ft. facility, which is nearly three times the size of our former location.

EDGEWOOD, N.Y.--(BUSINESS WIRE)--CPI Aerostructures, Inc. ("CPI Aero®") (NYSE Amex:CVU) today announced that it has received a purchase order from Goodrich Corporation (“Goodrich”) for the supply of aerospace structural assemblies. Work will begin immediately with first delivery scheduled for second quarter of 2013. All deliveries will occur prior to the end of 2013. This is the first contract awarded to CPI Aero by Goodrich. In addition, for the first time, CPI Aero will have design authority for design modifications to the structure it is manufacturing. CPI Aero will utilize GKN Aerospace’s Engineering Development Center in Nashville, TN for the design and structural analysis portion of this program. The structural assemblies will be manufactured entirely by CPI Aero within its new, state-of-the-art production facility.

Including this new award, total new business from all customers in 2012 is $27.4 million, compared to $22.3 million for the first two months of 2011.

EDGEWOOD, N.Y.--(BUSINESS WIRE)--CPI Aerostructures, Inc. ("CPI Aero®") (NYSE Amex:CVU) today announced that it has received its first new business award for 2012, a purchase order valued at $12.7 million from the Boeing Defense, Space & Security unit of The Boeing Company ("Boeing") for assemblies for the A-10 aircraft. This represents a follow-on order for CPI Aero’s previously announced long-term requirements contract to support Boeing's A-10 Wing Replacement Program (WRP). The A-10 WRP contract between Boeing and CPI Aero is worth up to approximately $84 million for the production of a variety of structural assemblies for up to 242 enhanced wings. To date, CPI Aero has received firm requirements for 117 ship sets at a value of approximately $47.3 million for the A-10 WRP program.

In addition, CPI Aero announced that new business awards from all customers for the year ended December 31, 2011 was approximately $83.6 million compared to $61.7 million for all of 2010.

Third Quarter 2011 Results

• Revenue increased 28% to $16,607,638 from $12,976,084;
• Gross margin was 25.1% as compared to 26.1%;
• Pre-tax income increased 17% to $2,531,042, compared to $2,171,363; and,
• Net income increased 26% to $1,805,042, or $0.25 per diluted share, compared to $1,429,363, or $0.21 per diluted share.

 As expected, 2011 third quarter revenue increased by only 28% with the big surge in revenue to come in the fourth quarter. As we are now well into the fourth quarter, we can say with added confidence that the fourth quarter of 2011 will be the highest revenue quarter in CPI Aero’s history by a significant margin.

EDGEWOOD, N.Y.--(BUSINESS WIRE)--CPI Aerostructures, Inc. ("CPI Aero®") (NYSE Amex:CVU) today announced that it has received authorization from Spirit AeroSystems, Inc. (“Spirit”) (NYSE SPR) for work on wing leading edge assemblies for business jet aircraft that extend CPI Aero’s backlog through September 2013. In March 2008, Spirit and CPI Aero entered into a long term agreement to provide Spirit with leading edges for the wing of the business jet. Spirit designs and manufactures the entire wing for this business jet customer.

The total 2011 year-to-date awards for CPI Aero from all customers is $81.5 million, compared to $57.7 million for the same period of 2010 and $61.7 million for all of 2010.

Second Quarter 2011 vs. 2010 

• Revenue increased 38.9% to $17,426,223 from $12,544,625;
• Gross margin was 24.4% compared to 26.7%;
• Pre-tax income increased 14.7% to $2,094,816 compared to $1,826,254; and,
• Net income increased 30.3% to $1,570,816 or $0.22 per diluted share, compared to $1,205,254, or $0.18 per diluted share.

Edward J. Fred, CPI Aero’s President & CEO, stated, “The current second quarter and six month periods were our best ever reporting periods in terms of revenue and net income. The increase in revenue is primarily the result of work performed for the Boeing Company on the A-10 attack jet and Northrop Grumman Corporation on the E-2D surveillance airplane. Revenue for these two programs accounted for approximately 74% of government subcontracting revenue and approximately 58% of total revenue for first half of 2011.”

He continued, “As was the case in the first quarter of 2011, our gross margin in the second quarter was slightly below our targeted gross margin range of 25%-27%. This was primarily due to the lower gross margin for the C-5 TOP order received in the first quarter of 2011, as well as travel and labor required for supplier surveillance on the early stage of production for our three major programs: the A-10 attack jet, the E-2D surveillance airplane and the Gulfstream G650 aircraft. Additionally, because of the continued development of new suppliers, and the new contracts won in the first half of 2011, these costs should remain in effect through year-end, resulting in a gross margin range of 24%-25% for second half of 2011.”

Mr. Fred added, “As of June 30, 2011, new contract awards totaled $58.6 million, which included approximately $8.8 million of government prime contract awards, approximately $19.9 million of government subcontract awards and approximately $29.9 million of commercial subcontract awards, compared to a total of $31.1 million of new contract awards, of all types, in the same period last year, and $61.7 million for all of 2010.”

Mr. Fred went on to say, “Lastly, because some anticipated contract awards have been delayed by a customer, we are providing revised guidance for both revenue and net income. The net income reduction will also take into account the additional cost to relocate the Company to the larger facility, which was obviously not anticipated when we issued the original guidance. Therefore, we now project that 2011 revenue will be approximately $74 million, with a resulting net income in the range of $7.4 million to $7.5 million.

“However, because of this award delay that pushes revenue into 2012, and the strong year we have had to date in receiving new orders, we are pleased to be able to raise 2012 guidance to the following: we expect that revenue should be in the range of $95 million to $98 million, with a resulting net income in the range of $12 million to $13 million.”

He concluded, “As a final piece of the guidance discussion, we expect third quarter revenue for 2011 to be the lowest revenue quarter of the year, while the fourth quarter will be the highest revenue quarter in CPI Aero’s history, and by a significant margin. While we don’t typically issue quarterly guidance, we feel it is important to point out the revenue level expectations for these quarters, as the revenue timing is somewhat different than it has been historically. This is simply due to the timing of deliveries, and the requirement to purchase materials to coincide with these delivery schedules.”

EDGEWOOD, N.Y.--(BUSINESS WIRE)--CPI Aerostructures, Inc. (“CPI Aero”) (NYSE Amex: CVU) announced today that on June 30, 2011 it entered into a lease agreement, with Heartland Boys II L.P. for the premises located at 91 Heartland Boulevard, Edgewood, New York, directly across the street from CPI Aero’s current location. The approximate 171,000 square foot building will be used as the Company’s assembly facility, principal offices and corporate headquarters. CPI Aero intends to move all of its operations presently at 60 Heartland Boulevard, Edgewood, New York to the new facility by December 31, 2011. The term of the new lease commences on July 1, 2011 and expires on April 30, 2022.

Commenting Edward J. Fred, CPI Aero’s President & CEO, stated, “Our planned move into premises that are nearly three times the size of our current location is indicative of our expectations for continued growth in orders, customers, programs and of course revenue and profits over the coming years. Since the landlord of both properties is the same, our old lease has been amended and we no longer pay rent at the 60 Heartland Boulevard location, although we have use of it through year end as well as of the the new location immediately. We were able to negotiate attractive rental terms for the new location and we are pleased that it will cause no dislocation to our employees.”

First Quarter Results:

• Revenue increased 45% to $16,009,608 from $11,005,529;
• Gross margin was 24%, compared to 25%;
• Pretax income increased 54% to $2,012,050, compared to $1,303,815;
• Net income increased 59% to $1,368,050, or $0.19 per diluted share, compared to $860,815, or $0.14 per diluted share

Edward J. Fred, CPI Aero’s President & CEO, stated, "We started 2011 on a strong note with revenue and net income increasing by 45% and 59%, respectively, compared to the first quarter of 2010. In addition, revenue for the three months ended March 31, 2011 made the current quarter our best ever quarter in terms of revenue. The increase in revenue is primarily due to work performed for the Boeing Company on the A-10 attack jet and for Northrop Grumman Corporation on the E-2D surveillance airplane."

Mr. Fred concluded, "We are once again confirming our 2011 guidance which calls for revenue to be in the range of $78 million to $81 million, a 77% to 84% increase over 2010, primarily due to increased work on our three major long-term programs: A-10, E-2D and G650. Net income for 2011 is expected to be in the range of $9.2 million to $9.5 million. Our gross margin for the year should be in the range of 25% to 27%. In addition, we continue to expect that for 2012, revenue should be in the range of $88 million to $91 million, with resulting net income of between $11 million and $12 million."

• Revenue was $7,464,546 from $12,729,858 
• Gross margin was (45%), compared to 30% in last year’s fourth quarter;
• Pre-tax loss was $4,758,535, compared to pre-tax income of $2,240,661; and,
• Net loss was $2,965,535, or $0.44 per diluted share, compared to net income of $1,559,661, or $0.25 per diluted share.

Edward J. Fred, CPI Aero’s CEO & President, stated, "As previously announced, the termination of the T-38 program one release year earlier than expected, resulted in a revenue adjustment based on a change in estimate for the fourth quarter and the year. This non-cash adjustment is a GAAP change in estimate, and conforms to the procedures used for the percentage of completion method ("POC") of accounting.

"The adjustments that we made for the T-38 program and two other contracts subject to early termination/completion that are accounted for in a similar manner, eliminate the possibility of similar revenue adjustments on these ongoing contracts in future years.

"Without the impact of the above adjustment, we would have slightly exceeded our 2010 guidance of revenue in the range of $49 million to $51 million and net income in the range of $4.6 million to $4.8 million."

Mr. Fred concluded, "Our 3-year, compounded annual growth rate guidance for revenue in the range of 30% to 35%, and for net income in the range of 50% to 60% - provided by CPI Aero in 2008, remains intact. We remain confident that we will achieve our 2011 guidance which calls for revenue to be in the range of $78 million to $81 million, a 77% to 84% increase over 2010, primarily due to increased work on our three major long-term programs: A-10, E-2D and G650. Net income for 2011 is expected to be in the range of $9.2 million to $9.5 million. Our gross margin for the year should be in the range of 25% to 27%. In addition, we estimate that for 2012, revenue should be in the range of $88 million to $91 million, with resulting net income of between $11 million and $12 million."

Second Quarter 2010 vs. 2009

• Revenue increased 10% to $12,544,625 from $11,437,691;
• Gross margin was 26.7% compared to 24.8%;
• Pre-tax income increased 31% to $1,826,254, compared to $1,389,489; and,
• Net income increased 33% to $1,205,254 or $0.18 per diluted share, compared to $903,489, or $0.14 per diluted share. Diluted earnings per share were calculated on 8.7% more shares in 2010 second quarter vs. 2009 second quarter.

Reaffirms Long-Term Guidance

Mr. Fred added, “We are again reaffirming our long-term guidance which is based on our expectation that our three major long-term production programs (A-10, E-2D and G650) will be in full scale production and producing consistent significant revenue during 2011. For 2011 we expect that revenue will be in the range of $78 million to $81 million, with resulting net income in the range of $8.9 million to $9.5 million. Using 2008 as the baseline, we expect a three-year compound annual growth rate for revenue in the range of 30% to 35%, with a resulting compound annual growth rate for net income in the range of 50% to 60%.”

“Based on results for the first half of the year and expectations for a strong second half, we are confident that we will reach our 2010 guidance which calls for revenue to be in the range of $48 million to $51 million, with resulting net income in the range of $4.3 million to $4.8 million.”

Raises $3.5 Million through Registered Direct Offering

Mr. Fred concluded, “As previously announced, in the second quarter of 2010 we completed a registered direct offering raising $3.5 million in net proceeds through the sale of 500,000 shares of our common stock. As a result, we strengthened our financial position in preparation for continued growth and enhanced the potential liquidity of our stock.”

2008 Year end comments:

“As previously reported, our 2009 new contract awards approximated $23.4 million. Of this amount, approximately $10.6 million, $6.9 million and $5.8 million were government prime contract awards, government subcontract awards and commercial subcontract awards, respectively. Although this total was well below contract awards for 2008, orders in the fourth quarter of 2009 were significantly higher compared to the previous quarters of the year. From the start of the year through March 15, 2010 we have received a total of $3.6 million in new contracts, compared to $2.5 million in the same period last year. We look forward to additional new orders from existing contracts as well as from the unawarded solicitations of approximately $270 million that we have bid on as of March 15, 2010.”

Mr. Fred concluded, “As previously announced, based on the visibility we currently have, we project that 2010:

• Revenue will be in the range of $48 million to $51 million,
• Net income in the range of $4.3 million to $4.8 million.

It is our expectation that our three major long-term production programs (A-10, E-2D and G650) will be in full scale production and producing consistent significant revenue during 2011, and we therefore project that 2011:

• Revenue will be in the range of $78 million to $81 million,
• Net income in the range of $8.9 million to $9.5 million.

 Additionally, using 2008 as the baseline, our 2011 guidance affirms our expectations for a three-year compound annual growth rate for revenue in the range of 30% to 35%, with a resulting compound annual growth rate for net income in the range of 50% to 60%.”

Source: Business Wire (March 23, 2010)

Based upon the year-to-date results and our expectations for the fourth quarter, we confirm that we will achieve our 2009 guidance, which calls for revenue in the range of $42 million to $45 million, and net income of between $3.9 million to $4.3 million. We are fully cognizant of the fourth quarter results that are required to meet these targets, and with approximately seven weeks left in our fiscal year, we are confident of our ability to achieve these results.”

Source: Business Wire (November 10, 2009)

^aThe above forecasts reflect the Company's current and preliminary views and are therefore subject to change. Please refer to the Company's Safe Harbor Statement (usually in press releases) for the factors that could cause actual results to differ materially from those contained in any forward-looking statement.

^b CPI Aerostructures did not provide EPS guidance. The GeoTeam® calculated an implied EPS figure using the current outstanding share count of 6,250,021.

Guidance Update: 

Mr. Fred continued, "We are able to reaffirm our 2009 guidance which calls for revenue to be in the range of $42 million to $45 million, with resulting net income in the range of $3.9 million to $4.3 million. Additionally, using 2008 as the baseline, for the three-year period ending in 2011, we expect to achieve a compounded annual growth rate for revenue in the range of 30% to 35%, with a resulting compounded annual growth rate for net income in the range of 50% to 60%."

Source: Business Wire (November 4, 2008)