CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE American: CVU) today
announced financial results for the fourth quarter and year ended
December 31, 2018.
Note: On October 19, 2018, the
Company closed on an underwritten public offering of 3,120,000
shares including over-allotments.
4Q 2018 vs. 4Q 2017
- Revenue was $26.5 million compared to $23.8 million;
- Gross profit was $5.8 million compared to $5.5 million;
- Gross margin was 21.8% compared to 23.1%;
- Pre-tax income was $2.9 million compared to $2.8 million;
- Income tax of $3.7 million, which includes a $3.1 million
reserve for uncertain tax positions (see reconciliation table
below);
- Net (loss) income was $(0.8) million compared to $2.1
million;
- Earnings per diluted share were $(0.07) compared to $0.23 per
diluted share on a higher number of shares outstanding;
- Earnings per diluted share excluding the income tax reserve
were $0.21 (see reconciliation table below); and
- Cash flow from operations was $0.6 million compared to $1.8
million.
Full Year 2018 vs. Full Year 2017
- Revenue was $83.9 million compared to $81.3 million;
- Gross profit was $18.3 million compared to $18.6 million;
- Gross margin was 21.8% compared to 22.9%;
- Pre-tax income was $6.8 million compared to $8.5 million;
- Net income was $2.3 million compared to $5.8 million;
- Earnings per diluted share of $0.24 compared to $0.65 per
diluted share on a higher number of shares outstanding;
- Earnings per diluted share excluding the income tax reserve
were $0.57 (see reconciliation table below);
- Cash flow used in operations was $(2.5) million compared to
cash provided by operations of $ 1.6 million; and
- Both total and defense program backlogs reached record highs at
$457.4 million and $386.4 million, respectively.
“In 2018 we undertook initiatives to expand our core
capabilities and broaden our opportunity-set. We secured new
multi-year program wins, program extensions and program
acquisitions that added more than 17% to an already large backlog
and drove record levels of consolidated and defense backlog by
year-end. We submitted a number of proposals across the entire
spectrum of our capabilities that added both near- and long-term
opportunities to an already robust bid pipeline. Lastly, we closed
the purchase of Welding Metallurgy, Inc. (WMI) that added
capabilities to our Aerostructures and Aerosystems businesses and
broadened the content footprint on shared defense programs,” stated
Douglas McCrosson, president and CEO of CPI Aero. “With WMI we have
established a presence on several prominent and well-funded
long-term defense programs while bolstering our well-earned
standing as a premier supply chain partner for the aerospace and
defense industry. Relocation of WMI’s operations into our facility
is nearing completion, and we expect to meet our original plan to
be operating both companies from a single location by the end of
March.
“2019 is off to a very strong start with new programs recently
announced with long-time customers Sikorsky, Lockheed Martin, and
Northrop Grumman and strong quote activity across the defense and
commercial segments of our business. With initial production
deliveries scheduled for 2019, execution on the Lockheed Martin and
Northrop Grumman programs, in particular, are especially
fundamental to our revenue growth this year,” continued Mr.
McCrosson. “In addition, WMI’s bookings have been better than
anticipated with approximately $3 million in new orders secured to
date this year. As 2019 progresses, we expect that several major
proposals submitted last year and earlier this year by both CPI
Aero and WMI are nearing award decisions by customers. These
proposals comprise new program starts and program extensions,
including large aerostructures programs for military aircraft,
including the A-10, as well as for business jets. We are
negotiating a multi-year extension to a structural overhaul and
repair contract that we have been performing for many years.
Finally, we are seeing momentum in our aerosystems segment where
our superior execution for current customers of our electronic
warfare and surveillance pods is expected to generate additional
opportunities with these customers for similar systems currently in
development.”
Concluded Mr. McCrosson, “Having laid the foundation for our
future growth through organic as well as inorganic initiatives in
2018, we are focused on executing across our entire portfolio in
2019 while also pursuing an active M&A strategy to supplement
our organic growth. With defense spending stable near-term and
macro drivers that favor positive spending trends longer-term,
momentum in new awards and a strengthened balance sheet, we have
the elements in place for both top and bottom line growth
2019.”
Financial Outlook
CPI Aero issued full-year 2019 financial
guidance as follows:
- Revenue in the range of $98.0 million to $102.0 million as
compared to $83.9 million in the fiscal 2018 full year ended
December 31, 2018;
- Pre-tax income in the range of $11.0 to $11.3 million as
compared to $6.8 million in fiscal 2018;
- Cash Flow from Operations in excess of $3.5 million as compared
to a use of cash of $(2.5) million in 2018;
- Effective tax rate of 20% - 22%.
Reconciliation of Non-GAAP Financial
Measures:
Note Regarding Use of Non-GAAP Financial Measures
The company’s financial statements are prepared in accordance
with generally accepted accounting principles in the United States
(“GAAP”). The company uses a non-GAAP financial measure as a
supplemental indicator of operating performance. The non-GAAP
financial measure that is used is Net income adjusted for uncertain
tax positions. Net income adjusted for uncertain tax positions (as
defined below) is considered a non-GAAP financial measure as
defined by Regulation G promulgated by the SEC under the Securities
Act of 1933, as amended. Management believes this non-GAAP
financial measure enhances the understanding of the company’s
historical and current financial results and enables the board of
directors and management to analyze and evaluate financial and
strategic planning decisions that will directly affect operating
decisions and investments. The presentation of Net income adjusted
for uncertain tax positions should not be construed as an inference
that future results will be unaffected by unusual or non-recurring
items. This non-GAAP financial measure should be considered in
addition to, rather than as a substitute for, the company’s actual
operating results included in its financial statements.
The provision for income taxes for the year ended December 31,
2018 was approximately $4.5 million, an effective tax rate of
approximately 66%. In February 2019, the Company received
information that the net operating loss carryback that was utilized
in 2014 was under examination and could possibly be disallowed by
the IRS. The Company has not received a written notice or tax
assessment related to the possible disallowance of our net
operating loss carryback. If we receive written notice we
have the ability to appeal the disallowance, as well as go to tax
court to challenge the notice. Although the company has not
received any formal documentation or notice of such disallowance,
in accordance with ASC 740-10 (“Accounting for Uncertainty in Tax
Positions”) the Company has recorded a liability of approximately
$3.1 million in the year ended December 31, 2018 for this
uncertainty. The liability represents the maximum net tax
adjustment for the disallowance of the net operating loss carry
forward, computed at the pre-2018 tax rates, and tax savings of
recording a net operating loss carryforward, calculated at the
current tax rates. Because of the impact of recognizing the
liability for this uncertainty, the Company is presenting Net
income adjusted for uncertain tax positons, which we believe allows
us to compare net income on a more consistent basis.
Had the Company not recognized the liability for the uncertain
tax position, net income would have been as follows:
|
Reconciliation of Non-GAAP Financial
Measures |
(amounts in millions, except for per
share amounts) |
|
Quarter endedDecember 31,2018 |
|
Addback of taxliability foruncertain
taxposition |
|
Quarter endedDecember 31,2018 |
|
GAAP |
|
|
|
as adjusted foruncertain
taxposition |
|
|
|
|
|
|
Net income (loss) |
$ |
(0.8 |
) |
|
$ |
3.1 |
|
$ |
2.3 |
|
|
|
|
|
|
|
|
|
Diluted earnings (loss)
per share |
|
$(0.07 |
) |
|
|
$0.28 |
|
|
$0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year endedDecember 31,2018 |
|
Addback of taxliability foruncertain
taxposition |
|
Year endedDecember 31,2018 |
|
GAAP |
|
|
|
as adjusted foruncertain
taxposition |
|
|
|
|
|
|
Net income |
$ |
2.3 |
|
$ |
3.1 |
|
$ |
5.4 |
|
|
|
|
|
|
|
|
|
Diluted earnings per
share |
|
$0.24 |
|
|
$0.33 |
|
|
$0.57 |
|
|
|
|
|
|
|
|
|
Conference Call Management will host a
conference call on Wednesday, March 13, 2019, 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 and ask for the CPI Aero
call. The conference call will also be broadcast live via webcast.
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 webcast will be archived and can be accessed for a period
of approximately one year.
About CPI AeroCPI 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, 2017, and Form 10-Q for the three-month
period ended March 31, 2018, June 30, 2018, and Form 10-Q/A for the
three-month period ended September 30, 2018.
CPI Aero® is a registered trademark of CPI Aerostructures, Inc.
For more information, visit www.cpiaero.com, and follow us on
Twitter @CPIAERO.
|
|
|
Contact: |
|
Vincent Palazzolo |
|
Investor Relations
Counsel: |
Chief Financial
Officer |
|
LHA Investor
Relations |
CPI Aero |
|
Sanjay M. Hurry |
(631) 586-5200 |
|
(212) 838-3777 |
www.cpiaero.com |
|
cpiaero@lhai.com |
|
|
www.lhai.com |
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