CPI Aerostructures Announces Record 2012 Results

2012 was the Best Year in CPI Aero’s History; 48.5% Increase in 2012
Net Income on 20.4% Increase in Revenue



March 12, 2013

Positive Operating Cash Flow Projected for 2013

CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE American: CVU) today announced record results for the 2012 fourth quarter and year ended December 31, 2012.

Fourth Quarter 2012 vs. 2011*


  • Revenue increased 13.5% to $27,356,029, compared to $24,092,200;
  • Gross margin was 28.1%, compared to 27.2%;
  • Pre-tax income increased 47.8% to $5,765,354, compared to $3,901,020; and,
  • Net income increased 34.7% to $3,600,354, or $0.43 per diluted share, compared to $2,673,020, or $0.37 per diluted share.


Full Year 2012 vs. 2011*

  • Revenue increased 20.4% to $89,272,582, compared to $74,135,669;
  • Gross margin was 27.1%, compared to 25.4%;
  • Pre-tax income increased 56.8% to $16,525,130, compared to $10,538,928; and,
  • Net income increased 48.5% to $11,011,130 or $1.40 per diluted share, compared to $7,416,928 or $1.04 per diluted share.


* Diluted earnings per share for 2012 fourth quarter and year were calculated on 18% and 10% more shares outstanding than in the prior year periods, respectively, due to the Company’s 1.2 million share public offering completed in July 2012.


Edward J. Fred, CPI Aero’s President & CEO, stated, “2012 was the best year in CPI Aero’s history in terms of revenue and net income. The 20.4% increase in revenue was primarily the result of work performed on our three major subcontract awards won in 2008: the Gulfstream G650, BoeingA-10 and NGC E-2D programs which accounted for 17.6%, 16.7% and 25.5% of our 2012 total revenue, respectively.”


Mr. Fred continued, “In 2012, revenue generated from government subcontracts decreased slightly to $56.7 million or 63% of total revenue. Also, revenue generated from government prime contracts decreased to approximately $6.2 million or 7% of total revenue, which is consistent with our strategy, as we have transitioned away from being a government prime contractor. Revenue generated from commercial subcontracts increased by 162% to $26.7 million or 30% of total revenue. This increase was primarily the result of higher production rates on the Gulfstream G650, as well as revenue from new production programs such as the HondaJet advanced light business jet.”


Mr. Fred continued, “Gross margin in 2012 was substantially ahead of 2011 as two of our long-term contracts, the NGC E-2D and the Gulfstream G650, are in full scale production and unlike in 2011, we no longer incur excess costs related to engineering and design changes for these contracts. Our 2012 selling, general and administrative (S, G & A) expenses as a percent of revenue substantially decreased to 8.2% as compared to 10.7% in 2011. This was mainly due to changes we implemented in early 2012 in our policy of issuing stock options to our board of directors and also lower accounting, legal and other consulting fees. Additionally, in late 2011 we recorded one-time moving expenses for relocating our operations to a larger facility.”


Mr. Fred added, “Higher revenue, lower production costs and lower S,G & A expenses resulted in an approximate 48.5% increase in net income in 2012 as compared to 2011.”


Discussing new contract awards, Mr. Fred noted, “In 2012 we received approximately $81.6 million of new contract awards, which included approximately $74.7 million of government subcontract awards, approximately $6.5 million of commercial subcontract awards, and approximately $0.4 million of government prime contract awards, as compared to approximately $83.6 million of new contract awards of all types, in 2011.”


Mr. Fred continued, “On a going forward basis, we will discontinue reporting ‘total bids outstanding,’ one of our usual disclosures, which we believe has the ability to provide information that could be detrimental to the bid and award process. Bid backlog was initially reported as a way to inform the investing public that CPI Aero was moving up in scale and scope. As a company that historically had approximately $25 million worth of bids in for potential work, it was important to show the world when that number increased ten-fold, to $250 million, and eventually to nearly $1 billion. This disclosure definitely served its purpose for several years, and currently CPI Aero is at a stage where the world knows we are a ‘player’ in the big stadium.”


“However, we believe that we might be giving out information that limits our competitive advantage, and provides our competitors with insight into our strategies and direction. Going forward, we will disclose bid backlog information in our SEC filings, albeit not in a quantifiable dollar amount. Instead, we will show the breakout of the total bid backlog as it relates to commercial and military components, on a percentage basis, which we believe will provide our investors with valuable information about our business development efforts.”


Mr. Fred added, “Although 2012 was the best year in our history, both in terms of revenue and net income, our results were affected by the looming threat of forced, across-the-board government spending cuts, known as sequestration. This threat resulted in delayed contract decisions by many prime contractors in the aerospace and defense sector, including our customers. As a result, releases on previously awarded contracts could be delayed. In addition, a large defense contract for a new program, originally expected in late 2012, is currently projected to be received in 2013.”


Discussing the outlook for 2013, Mr. Fred added, “As previously announced, regardless of its actual long-term effect, sequestration which became effective March 1, 2013, has already impacted our business. For 2013, we expect:


  • Revenue and earnings to be lower than 2012 and more similar to those of 2011, which was the second best year in the history of our Company.
  • Product shipments to be greater than in 2012, or any other year, as many of our programs have transitioned from development to production.
  • Commercial programs to generate a larger percentage of our overall revenue as compared to 2012, due to higher production rates.
  • Increased shipments, combined with less spending for startup costs associated with new contracts and a decline in non-recurring expenses on our maturing programs, to result in positive cash flow from operations of approximately $3 million.


“During the last several years, we diversified our customer base by acting as a subcontractor to defense prime contractors for large defense programs, but most importantly we are a subcontractor to commercial prime contractors for the production of commercial aircraft/helicopter parts, which has reduced our exposure to government spending decisions. Our new business opportunities remain strong, as we are bidding on larger and more complex contracts, including contracts for large commercial aircraft parts. We believe we are well positioned to resume growth in 2014 and beyond.”


Mr. Fred concluded, “To support our continued growth going forward, in 2012 we raised approximately $13.5 million through a public offering and we increased our credit lines to a combined borrowing capacity of $39 million.”


Conference Call

CPI Aero’s President and CEO, Edward J. Fred, and CFO, Vincent Palazzolo, will host a conference call today, Tuesday, March 12, 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 Forms 10-Q for the quarters ended March 31, 2013, June 30, 2013, and September 30, 2013.


CPI Aero® is a registered trademark of CPI Aerostructures, Inc.


(See Accompanying Tables)

CPI Aerostructures, Inc.


For the Three Months Ended
December 31,

For the Twelve Months Ended
December 31,







Revenue $24,092,200 $89,272,582 74,135,669 27,356,029
Cost of Sales 19,660,870 17,544,770 65,039,969 55,325,729
Gross profit 7,695,159 6,547,430 24,232,623 18,809,940
Selling, general and administrative expenses 2,031,631 2,523,313 7,322,630 7,931,586
Income from operations 5,663,528 4,024,117 16,909,983 10,878,354
Other income (expense), net 101,826 (123,097) (384,853) (339,426)
Income before provision for income taxes 5,765,354 3,901,020 16,525,130 10,538,928
Provision for income taxes 2,165,000 1,228,000 5,514,000 3,122,000
Net income $3,600,354 $2,673,020 $11,011,130 $7,416,928
Basic net income per common share $0.43 $0.39 $1.43 $1.08
Diluted net income per common share $0.43 $0.37 $1.40 $1.04
Shares used in computing earnings per common share:
Basic 8,355,762 6,918,739 7,721,304 6,869,624
Diluted 8,446,215 7,156,720 7,865,090 7,133,604

CPI Aerostructures, Inc.


December 31,

December 31,




Current Assets:
Cash $2,709,803 $878,200
Accounts receivable, net 6,774,346 4,285,570
Costs and estimated earnings in excess of billings on uncompleted contractss 108,909,844 79,126,828
Deferred income taxes 534,000 257,000
Prepaid expenses and other current assets 426,063 662,326
Total current assets $119,354,056 $85,209,924
Plant and equipment, net 2,907,476 2,629,569
Deferred income taxes 1,001,000 1,105,000
Other assets 1,620,984 112,080
Total Assets $124,883,516 $89,056,573
Current Liabilities:
Accounts payable $13,286,558 $11,998,244
Accrued expenses 943,356 994,398
Billings in excess of costs and estimated earnings on uncompleted contractss 656,853 116,466
Current portion of long-term debt 1,100,564 887,380
Line of Credit 23,450,000 16,100,000
Deferred income taxes 102,000 125,000
Income taxes payable 106,000 2,802,000
Total current liabilities $39,645,331 $33,023,488
Long-term debt, net of current portion 3,209,873 889,239
Deferred income taxes 867,000 660,000
Other liabilities 567,113 457,639
Total Liabilities $44,289,317 $35,030,366
Shareholders’ Equity:
Common stock – $.001 par value; authorized 50,000,000 shares, issued 8,371 7,080
  8,371,439 and 7,079,638 shares, respectively, and outstanding 8,371,439
  and 6,946,381 shares, respectively
Additional paid-in capital 49,780,673 35,346,273
Retained earnings 30,845,982 19,834,852
Accumulated other comprehensive loss (40,827) (21,772)
Treasury stock, 0 and 133,257 shares, respectively of common stock (at cost) (1,140,226)
Total Shareholders’ Equity $80,594,199 $54,026,207
Total Liabilities and Shareholders’ Equity $124,883,516 $89,056,573


Vincent Palazzolo

Chief Financial Officer

CPI Aero

(631) 586-5200




Jody Burfening/Sanjay M. Hurry


800 Third Avenue

New York, NY 10022

(212) 838-3777


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