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CPI International Announces Third Quarter 2012 Financial Results

 

Aug. 8, 2012 

 CPI International Holding Corp., the parent company of CPI International, Inc. (CPI), today announced financial results for its third quarter of fiscal year 2012 ended June 29, 2012.

"CPI's third quarter continued the trends that we enjoyed in the first half of the year, and our traditional core programs continued to drive a successful year," said Joe Caldarelli, chief executive officer of CPI. "Despite the recent expected conclusions of a few atypically large programs, conditions and demand in our three largest markets – the defense, medical and communications markets – remain favorable, particularly for our core programs."

In the third quarter of fiscal 2012, CPI generated total sales of $97.2 million, as compared to total sales of $104.2 million in the same quarter of the previous fiscal year. The decrease in sales was due to CPI's participation in a counter-improvised explosive device (counter-IED) program in fiscal 2011 that has not recurred, and is not expected to recur, during the current fiscal year. In the third quarter of fiscal 2011, CPI recorded $13.9 million in sales for this one-time program, as compared to no sales for this program in the most recent quarter, as expected. Excluding this non-recurring program, CPI's sales increased by eight percent in the third quarter of fiscal 2012.

In comparison to the same quarter of the previous year, CPI's third quarter fiscal 2012 sales in its largest end markets were as follows:

  • In the defense market, sales decreased 23 percent to $36.5 million due to the absence of the aforementioned non-recurring counter-IED program. Excluding this program, CPI's sales in the defense market increased 10 percent as a result of higher sales to support radar applications.
  • In the medical market, sales increased 10 percent to $18.3 million due to increases in sales for radiation therapy and x-ray imaging applications.
  • In the communications market, sales increased two percent to $33.0 million as a result of increased sales to support commercial communications applications.

In the first nine months of fiscal 2012, CPI booked total orders of $282 million, generating a book-to-bill ratio of 0.98. In comparison, during the first nine months of the prior fiscal year, CPI booked total orders of $302 million, which included $18.1 million in orders to support the non-recurring counter-IED program that was completed in fiscal 2011. Excluding this program, the orders level was effectively unchanged. As of June 29, 2012, CPI's order backlog totaled $244 million.

In comparison to the same period of fiscal 2011, CPI's orders in its largest end markets during the first nine months of fiscal 2012 were as follows:

  • In the defense market, orders decreased seven percent to $119.5 million due to the expected absence of the one-time counter-IED program. Excluding this program, defense orders increased nine percent as a result of higher demand for products to support radar applications.
  • In the medical market, the orders level was essentially unchanged at $49.0 million.
  • In the communications market, orders decreased by 10 percent to $87.9 million, primarily as the result of lower orders to support certain military communications applications, in particular telemetry antenna applications and the Warfighter Information Network – Tactical (WIN-T) program. CPI has substantially completed its involvement in Increment One of the WIN-T program.

CPI's net income in the third quarter of fiscal 2012 was $2.9 million, an improvement from the $1.8 million net loss recorded in the third quarter of the prior year. In connection with the February 2011 acquisition of CPI by Veritas Capital, CPI revalued its inventory and intangible assets in fiscal 2011. Significant decreases in amortization related to these revaluations were the primary contributor to the improvement in net income in the third quarter of fiscal 2012.

Adjusted EBITDA for the third quarter of fiscal 2012 totaled $19.0 million, or 20 percent of sales, as compared to $19.5 million, or 19 percent of sales, in the same quarter of the previous fiscal year. In the most recent quarter, adjusted EBITDA was negatively impacted by the lower sales volume and related decrease in operating efficiencies. Partially offsetting this impact, in contrast with the third quarter of fiscal 2011, the most recent quarter did not include costs for a telemetry antenna development program.

As of June 29, 2012, CPI had cash and cash equivalents totaling $41.5 million. On June 30, CPI acquired the Codan Satcom business from Codan Limited for an initial payment of approximately $9 million in cash, funded entirely from CPI's cash on hand. Codan Satcom designs and manufactures solid-state radio frequency subsystems for satellite communications services to commercial and government customers.

For the 12-month period ended June 29, 2012, CPI's cash flow from operating activities totaled $20.7 million and free cash flow totaled $11.8 million. Adjusted free cash flow for the period was $11.1 million.

Fiscal 2012 Outlook
"Fiscal 2012 is proceeding largely according to plan, and we are reconfirming CPI's sales and adjusted EBITDA projections for the year," said Caldarelli. "We expect to generate total sales of $385 million to $395 million and adjusted EBITDA of $63 million to $65 million. We currently expect our adjusted free cash flow to total between $13 million and $17 million." The recent acquisition of the Codan Satcom business is not expected to have a material impact on CPI's financial results in fiscal 2012.