|From: leigh aulper||11/17/2010 1:00:37 PM|
|Q3 2010 Earnings Call|
• Edward Fred, President and Chief Executive Officer
• Vincent Palazzolo, Chief Financial Officer
• Marco Rodriguez
• Richard Hoss
• Michael Callahan
• John Kohler
• Michael Potter
• Russell Silvestri
MANAGEMENT DISCUSSION SECTION
Greetings and welcome to the CPI Aerostructures Incorporated Third Quarter 2010 Conference Call. At this time, all
participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.
[Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce to your host, Edward Fred, President and Chief Executive Officer for CPI
Aerostructures Incorporated. Thank you, Mr. Fred. You may now begin.
Edward Fred, President and Chief Executive Officer
Thank you, Rob [ph]. Good morning and thank you all for joining us for our third quarter 2010 conference call. If you
need a copy of the press release issued this morning, please contact Lena Cati of The Equity Group at 212-836-9611,
and she will fax or e-mail a copy to you.
Also, if you would like to listen to this call again, you can hear a replay on our website's Investor Relations section in
about an hour at www.cpiaero.com.
Before we get started, I want to remind investors that this conference call will contain forward-looking statements,
which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially
different from projected results. Included in these risks are the government's ability to terminate their contracts with us
at any time, the government's ability to reduce or modify its contracts if its requirements or budgetary constraints
change, the government's right to suspend or bar us from doing business with them, as well as competition in the
bidding process for both government and sub-contracting contracts.
Our sub-contracting customers also have the ability to terminate their contracts with us if we fail to meet the
requirements of those contracts or if their customer reduces or modifies its contracts to them due to budgetary
constraints. Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking
statement contained in this conference call. Additional information concerning these and other risks can be found in our
filings with the SEC.
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This morning I will give you a brief overview of our first nine months results. I will then hand the call over to Vince
Palazzolo, our CFO, so he can walk you through the quarter's financial statement details.
As reported earlier this morning, for the first nine months of 2010, revenue was approximately $36,526,000 compared
to approximately $31,045,000 in the first nine months of 2009, an increase of approximately 18%.
Pre-tax income was approximately $5,301,000 compared to pre-tax income of approximately $3,575,000 for the same
period last year.
Net income for the first nine months of 2010 was approximately $3,495,000 or $0.53 per diluted share, compared to net
income of approximately $2,359,000 or $0.38 per diluted share for the same period last year.
Selling, general and administrative expenses for the first nine months of 2010 were approximately $4,052,000 or 11.1%
of revenue compared to approximately $3,689,000 or 11.9% of revenue for the same period of 2009.
So with that prelude, I will now hand the call over to Vince Palazzolo our CFO, so he can walk you through the
quarter's financial statement details. Then I will comment on the current business environment, our guidance for the
remainder of 2010, as well as 2011 and 2012 and then briefly wrap things up and open the call to questions. Vince?
Vincent Palazzolo, Chief Financial Officer
Thanks, Ed. As reported in this morning's press release, comparing the third quarter of 2010 to the third quarter of
2009, revenue increased 31% to $12,976,084 from $9,916,347. Gross margin was 26% both periods. Pre-tax income
increased 60% to $2,131,363 compared to $1,358,662.
Net income increased 51% to $1,429,363 or $0.21 per diluted share compared to $944,662 or $0.15 per diluted share.
Selling, general and administrative expenses were approximately $1,181,000 or 9.1% of revenue compared to
approximately $1,144,000 or 11.5% of revenue in 2009.
At this point, let me hand the call back over to Ed for an overview of the business.
Edward Fred, President and Chief Executive Officer
Thanks, Vince. As Vince just reported, the gross margin for the third quarter of 2010 was the same as that of the prior
year's third quarter. We expect that quarterly ebbs and flows in our gross margin will continue as our new programs
progress, but we arrived at our 2010 guidance based on a 24% to 26% gross margin range and expect to end up in that
range. New orders through November 5th of 2010 were at a record high at $57.7 million, significantly higher than the
$17.5 million reported this time last year.
As I stated during the last quarter's call, this award growth was driven in part by the fact that we received the expected
follow on releases on all three of our major sub-contracting programs, the A-10, the E-2D and the G650. These releases
take us out into the 2012 timeframe and give us a predictable revenue stream, which has allowed me to issue the 2012
guidance recorded this morning. There is also a real business potential from the approximately $384 million worth
amount of unawarded solicitations outstanding once these programs are funded and/or awarded.
In the past several years our reputation has been elevated in our industry, thanks to our impressive list of customers, the
success we've experienced on the important programs that we're working on, and the exposure we've had and the
contacts we've made at various aerospace and defense institutional investment conferences.
We are now in the midst of establishing relationships with additional prime manufacturers, including other helicopter
and business private jet companies who come to recognize CPI Aero as a premier supplier of aircraft structure. Among
the unawarded bids outstanding are contract opportunities with these potential customers. We look forward to reporting
on our progress of turning solicitations with these prospects into awards and contracts in the future.
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As previously announced, based on the visibility we currently have, we project that 2010 revenue will be in the range
of 49 million to $51 million with resulting net income in the range of $4.6 million to $4.8 million.
It is our expectation that our three major long-term production programs, again, the A-10, the E-2D and the G650 will
be in full scale production and generating consistent revenue during 2011, and we therefore project that 2011 revenue
will be in the range of $78 million to $81 million with the resulting net income in the range of $9.2 million to $9.5
Additionally, we currently estimate that the 2012 revenues should be in the range of $88 million to $91 million with
resulting net income in the range of $11 million to $12 million.
In early April we completed a registered direct offering and raised $3.5 million of net proceeds through the sale of
500,000 shares of our common stock. Through this offering, we've strengthened our financial position in preparation
for continued growth and enhance the potential liquidity of our stock. CPI's future has never been brighter and we will
continue to get that message out to the investment community as often as possible.
CPI participated in the DA Davidson Aerospace and Industrials Conference on Tuesday and as most of you know, a
full sell-side firm, Sidoti, initiated research coverage on us in their initial micro cap research product. We are proud to
report that Sidoti gave us the highest ranking of the nine companies that appeared in their first report. Sidoti joins Roth
Capital, Stonegate Securities and Capstone Investments as firms that currently cover CPI Aero. So our efforts to get the
message out and increase investment community awareness of CPI are obviously having a significant impact.
Lastly, we just announced the Sikorsky Aircraft Crop., a subsidiary of United Technologies Corp. has awarded us its
Supplier Gold status. UTC's Supplier Gold program recognizes superior performance in quality, delivery,
remanufacturing, and customer satisfaction. I think it's important to point out here that this award is a highly exclusive
recognition as CPI is now one of only nine suppliers in the entire Sikorsky worldwide vendor base that has received it's
designation. We are only one -we are one of only two structural suppliers to achieve this level and the only one in
North America. So this puts us in some very select company.
Before closing, I would like to thank all of our shareholders for your continued support of CPI Aero and I assure you
that the management team and your Board of Directors are working diligently to continue this profitable growth and
reach our full potential as the world's premier small business supplier of aircraft structure.
And I would be remiss if I didn't once again thank the CPI management team for sharing my vision of where we can
take this company, but more importantly for making it happen. I would also like to thank all the employees of CPI Aero
for executing on that vision and being an integral part in us obtaining Supplier Gold as it requires a complete team
effort, which you put for. You should be very, very proud of yourself.
I look forward to the future of this company with great eagerness and anticipation of now executing on these contracts
and then obtaining new ones due to the quality of our work. Finally, since this is our last conference call of the year, we
want to be among the first to wish to all the very best for the holiday season and for the coming year.
Now, before I open the floor to questions, we did receive a question through our IR firm, and I'll answer that one first.
It comes from Mr. Kevin Stone [ph], and the question is, Mr. Fred, please provide some color on the possibility of
another money raise, the likelihood, the timeframe, the reason. Mr. Stone, at this time, we don't see any need to do a
money raise. There is not one anticipated.
The raise we did with Roth Capital back in April, we feel gave us the necessary working capital to go ahead and reach
the numbers that we've projected for 2011 and 2012 that's not to say we would never do another one. If we won an
often new contracts that are required us to capitalize even further, I guess that's the possibility, but as of now, we don't
see that at all. There is no anticipated money raise at the moment. So I hope that answers your question. Right now,
there is nothing on horizon for us to be doing anything like that.
Okay. And with that, I'd like to open the floor to questions. Rob, can you allow callers to place questions now, please?
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Yes, sir. [Operator instructions] Thank you. Our first question is coming from the line Marco Rodriguez of Stonegate
Securities. Please state your question, sir.
<Q - Marco Rodriguez>: Good morning, guys. Thanks for taking my questions here.
<A - Edward Fred, President and Chief Executive Officer>: No problem, Marco. How are you?
<Q - Marco Rodriguez>: I'm doing very well, and yourself?
<A - Edward Fred, President and Chief Executive Officer>: Good. Thanks.
<Q - Marco Rodriguez>: All right. I was wondering if you could provide an update on the potential bids outstanding
with Sikorsky. I believe on the last call you mentioned that roughly 50% of those bids outstanding what was then. So if
you can provide an update there and also any kind of color you might be able to provide in regards to high need of any
of those potential bids?
<A - Edward Fred, President and Chief Executive Officer>: Okay. Their absolute number, which I've reported is
about $125 million or so is still approximately the same. Obviously, we've had some of those solicitations in the system
for quite a while yet under a year they wouldn't appear in that number. And with the awarding of Supplier Gold, we
hope and anticipate that perhaps some of those rewards will be forthcoming in the not too distant future based on this
new level of customer satisfaction we've attained if you will.
So that number is pretty much the same. Obviously, it's a smaller percentage of the overall, so the overall has gone up
almost $100 million, but Sikorsky is a great customer we would not have received this designation from them if they
didn't see us as a great supplier, so I think there's a lot of good things that will come down the road.
As far as the other things we have in the hopper, I really can't talk about them too much, because they are not public
information. I'm sure my customers don't want me speaking about the programs that they are bidding out at this
moment until they are obviously awarded. But, as I said in my script, there's a lot of new potential here with company's
that we've never done business before which opens the door to a variety of other things. So we are very, very pleased
with what that number is right now, what it's made up of, and the potential new customer that could come with that.
<Q - Marco Rodriguez>: Okay. And then kind of a follow-up in regard to that the new potential customers, can you
maybe classify from a high level where you kind of stand in the process of whether it's building the relationship or
actually waiting for them to hear back from some bids you've done? Can you kind of help me?
<A - Edward Fred, President and Chief Executive Officer>: In some cases, you know it is we're still building
relationships with companies, but I'll be honest with you. Our outstanding bids didn't go up from 288 million last
quarter, well, last time I reported them to 384 million this year without us having submitted bids and some of them are
to those new potential customers.
So in that case we are sitting, waiting to hear whether or not we will be in the down select or whether or not there will
be a best in final or whether or not we will be simply be selected as the supplier of choice by any of these. None of
these apply in the skies. These are real programs. I think that they are in our sweet spot and fits in our core
competencies. So we believe we will be very competitive of on all the new stuff that we put in.
<Q - Marco Rodriguez>: Okay. Perfect. And then in regard to your 2012 guidance, can you discuss what might be
your kind of main assumptions there, the potential drivers behind them, and kind of how you might see the revenues
building over that year? Was it kind of an even spread or a little bit lumpy?
<A - Edward Fred, President and Chief Executive Officer>: We don't give quarterly guidance; I'm not going to get
too specific there other than say to you if you look back at us historically, you will see that we have a tendency just to
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grow quarter by quarter. This company does – our first quarter is usually not as good as our second. Our second isn't as
good as our third. Yet, if you go back, our quarters tend to be better than previous years year-over-year. So in that
regard, I think that trend will continue.
The drivers behind the growth at this very moment are simply the additional business on the kinds of programs we
already have. I go back to anybody who is listening, my background is accounting, I'm not a marketer, I'm not an
engineer, I don't get really carried away with making projections unless somebody can convince me that we are very,
very safe in making them. So I mean, you have to assume from that that there's a pretty solid piece of existing business
in there already, of course, as a new business piece, but it's not something I'm uncomfortable with. It's something that
historically we've always been able to achieve, so that's why I'm comfortable with my projection.
So I mean the growth drivers in it, I think, would be the same three major new programs, I guess, I can't hold them new
anymore, the three major programs, G650, E-2D, and A-10, all of them still upscheduling as we go forward. '10 was an
okay year for them, '11 is where they both, or I should say, really start to kick into their production phase, '12 will be an
even bigger production phase, '13 will be equal to or better and then the programs will either start to phase out in a slow
basis or there will be additional business from all of them and then on half of that, growth can always come even in
those numbers from the bids and quotes we have outstanding right now.
Again, as I've stated at many investor conferences, my numbers don't include massive amounts of awards from
Sikorsky or massive amounts of awards from that $384 million number. So if we were to win a significant percentage
of that outstanding number, that's upside to us. That's stuff that we have not baked into the system if you will. So,
plenty upside potential going forward. And from my own personal feeling, a limited amount of risk that I'm going to
make my numbers. If there was any doubt in my mind, I wouldn't go out with them.
Keep in mind this is a company that we're now with a projection in 2008 for 2009, '10, and '11, '09 we hit on the
money, '10 we're right on target, I reaffirm the '11, probably a half dozen times already and now I've been comfortable
enough to come out with 2012, which again how many companies are coming out with a projection for two years from
now. So given all that, I think, that's what you should see as the flavor in our going forward numbers.
<Q - Marco Rodriguez>: That's perfect. And lastly just a couple of housekeeping items. What was the cash flow from
operations, depreciation, amortization and CapEx for the quarter?
<A - Edward Fred, President and Chief Executive Officer>: We don't have it sitting in front of us.
<Q - Marco Rodriguez>: Okay
<A - Edward Fred, President and Chief Executive Officer>: The Q will be filed tomorrow?
<A - Vincent Palazzolo, Chief Financial Officer>: Tomorrow.
<A - Edward Fred, President and Chief Executive Officer>: Tomorrow, and that will all be in those numbers.
<Q - Marco Rodriguez>: Okay. Perfect. Thanks a lot, guys.
<A - Edward Fred, President and Chief Executive Officer>: Okay. Thank you.
Thank you. Our next question is coming from the line of Rick Hoss of Roth Capital Partners. Please state your
<Q - Richard Hoss>: Hi. Good morning.
<A - Edward Fred, President and Chief Executive Officer>: Hey, Rick. How are you?
<Q - Richard Hoss>: Pretty good. Thanks.
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<A - Edward Fred, President and Chief Executive Officer>: Good.
<Q - Richard Hoss>: Ed, the 100 or so sequential improvement in bookings, that – of the delta, can you give us the
depreciation or the percentage that has come from potential new customers?
<A - Edward Fred, President and Chief Executive Officer>: I would say to you it's probably about 85% in that $100
<Q - Richard Hoss>: Okay. And were these bids placed prior to your awarding of Supplier Gold or with this a catalyst
that we've been looking at enabled you to open up additional doors with new – potential new customers?
<A - Edward Fred, President and Chief Executive Officer>: Well, I think, actually I think, they all were submitted
prior to Supplier Gold; we just got that last week. I think what it does though, Rick, is Supplier Gold now gives us even
more credibility and when people are evaluating our bids and et cetera, we have something to point to that says we are
about as good as it gets. We're delivering on time, giving you 100% quality, giving you the customer satisfaction you
require from us.
So while I don't think it had any influence on how we prepared those bids, it will certainly have an influence on how
those bids are reviewed by the potential customer and of course going forward it will get named in every proposal we
ever put out.
<Q - Richard Hoss>: Okay. And then as far as government prime work goes, do you have any increased visibility or
additional thoughts from resumption of historic spending habits, any change there?
<A - Edward Fred, President and Chief Executive Officer>: Yeah. At this point, Rick, we are still seating in the
boat. We haven't seen an increase in the activity. As I tell people all the time, I mean, our competitors are friendly.
We've known them for years and years and years. They have not seen an increase in activity. So – as of this time, I
wouldn't dream of putting new business from or return business from that marketplace into my projections in any way,
shape, or form, which again, as I just told Mark a while, when you see my presentation where people see my
presentation that's the second line item that's in there that talks about where there's potential growth that I have not even
included in my projections.
If we ever go back to eventually you have to. This play, it has to come home at some point. And when they do, the
inspections that they've done on them are going to turn up obviously a variety of requirements, certainly structurally
between damage and sand blasting et cetera, et cetera and when that market opens back up again, we see no reason that
CPI won't be considered certainly the lead or one of the two leads in replacing these damaged structural parts. Keep in
mind before the Iraq war, we were the second largest supplier of structure to the U.S. government trailing only
Lockheed Martin who was the OEM on most to them, okay.
Well, if we gain that position again and only go back to what we were doing prior to the war, that's $20 million or $30
million worth of revenue a year that I don't have baked into any of my projections. If it increases the way I think it
would given this repair work really hasn't been done for five or six years, and a lot of our competitors have dropped by
the wayside because they weren't diversified like us, they couldn't get into sub-contracting like we did, certainly not
fast enough, and are no longer in that mix. I think it's a very real possibility that when this business returns, we're going
to be a major player in it and it can have significant increases, upside increases to the numbers we've got out there
<Q - Richard Hoss>: Okay. And then last question from me, gross margin I know that you've given the range of 24 to
26 pretty consistently and last couple of quarters have been at the high end of that. Based on the maintenance of the net
income numbers, does that imply a gross margin that would sequentially be lower and if so is there a particular reason
for that or is this just you being conservative?
<A - Edward Fred, President and Chief Executive Officer>: Honestly, we're being conservative. We always watch
product mix to see if you might have somewhat less profitable job contributing for revenue et cetera. It's very possible
that it's going to hit the higher end of that range, just like it's very possible that it's going to hit the high end of revenue
and net income range, but I think given the projections we give as a company, which most companies don't do, ranges
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at least give me a little bit of room. But, do I think we're going to end the year at 24% gross margin? No, I don't.
<Q - Richard Hoss>: Okay. Thank you, Ed.
<A - Edward Fred, President and Chief Executive Officer>: Okay. Take care, Rick.
Thank you. Our next question is from Michael Callahan of CapStone Investments. Please state your question.
<Q - Michael Callahan>: Hi. Good morning, guys, and nice quarter.
<A - Edward Fred, President and Chief Executive Officer>: Thanks, Mike.
<Q - Michael Callahan>: I guess, my first question is it's really about the new bids that you guys have [indiscernible] I
know you can't go too much deep [indiscernible] in aggregate a little bit about the kind of a whole bucket that we're
looking at. Is it trending maybe a little bit more towards the commercial side or are you still seeing lot of opportunity
on the defense side or and also maybe with these new customers that are going to be signed with the traditional
business or are again are you looking maybe at some commercial programs as that looks like more favorable spot in the
market with medium term?
<A - Edward Fred, President and Chief Executive Officer>: The stuff we just did on the mix of both commercialish
I call it and military. Going out in the future, we see the same things you had mentioned that there's going to be an
opportunity to participate a little more in the commercial arena, which we welcome the opportunity to do that. I like to
keep commercial as a nice element of CPI, but I don't want to get too heavy commercial just because it can change on a
dime based on world economies, based on aircraft accidents, et cetera, et cetera. So we never want to get overly heavy
in the commercial arena.
That said, we have very little commercial right now and when I say commercial, I'm evenly bringing in G650 in
classifying in this commercial, which it really is and it's business executive jet. The only commercial aspect we have is
the S-92 helicopter out of Sikorsky, which is used for search and rescue; I'll call it high level governmental
transportation, transportation to and from oil rigs, things like that. So we do not have much of a concentration, if you
will, of commercial at all.
So while the new stuff is not highly commercial, we are looking at opportunities to get into the commercial
marketplace through sub-contracting arrangements. There's an awful lot of work out there once the primes get
themselves streamed out on their aircraft and we will want to participate in somewhat, no doubt about it.
<Q - Michael Callahan>: Okay. Thanks. I think just kind of a follow-up then on 2012 guidance. The revenue growth
assumption into 2012 decelerates substantially from 2011 and I get it pretty far out into the future, but I guess that's the
same point, it almost seems like really the only thing baked into there is G650 coming up to full production. And I
guess correct me if I'm wrong there, but also are you anticipating maybe picking up some orders and that maybe some
of the prime contracting business falling off a little bit or are you really just not counting on many orders at this point
<A - Edward Fred, President and Chief Executive Officer>: Well, right now, Mike, I'm not going to go out on a
limit and predict that the items we've been bidding on et cetera; we are going to win two or three huge ones. I mean that
would be kind of silly on my part that to me [ph] people to believe it's going to be a huge number and have to back off
it. The 2012 number is based on increased production as you said.
G650 will be huge that year, A10 will be higher, E-2 will be higher, some of our other programs that we're anticipating
will be higher, but it doesn't bake in any of the large new stuff that we have the potential of winning. So, could that
number go up? Absolutely. But, I guess what I'm trying to say in my projection is, if I lost pretty much everything, of
the large stuff I've got in court [ph] right now. If I lost it all, I'm still going to do 2012's number.
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I win my smaller contracts, I'll win the stuff that I usually win, and I will get to the 2012 number. If I win one or two
major programs again between now and then that number will go up. But, I don't want to give people the impression it's
a 110 million today, and then have to come back and say oh, you know I told you guys 110 and you priced us
accordingly, and now it turns out, I didn't win what I thought I'd win, so I'm only at $91 million. That doesn't make
sense to me, it's just not my style.
The 88 to 91 is the number, I am highly confident in, based on the business we have in hand and the historic wins we
get on a year-to-year basis. Anything big and new could make that number go up substantially.
<Q>: Okay, thanks. That's very helpful. I guess I asked only 2010 question, are you going to [indiscernible] answer fit
for me. Thank you.
<Q - Michael Callahan>: Okay. Take care.
Thank you. Our next question is coming from the line John Kohler of Oppenheimer. Please state your question, sir.
<Q - John Kohler>: Hi, Oppenheimer & Close, jut to clarify, how are you gentlemen?
<A>: Good John, how are you? I would have said it for you.
<Q - John Kohler>: Thanks. I was wondering, one of my questions have been answered already, but I was wondering
if you can talk about discussions that you've had with clients on the big – your big three programs, about getting
<A>: We do that constantly. You know obviously, if you think about who we're doing it with, is also prominent, an
entity all through itself. Spirit in essence is a lot like us, a major – they are major subcontractors – where we're just a
subcontractor. So, they relay a network from Primes as well for the most part, be it Gulfstream, be it Boeing et cetera.
And Boeing obviously 737, 787, they are having their issues at the moment.
So, while we talk to them constantly about trying to get some of that work, and I will tell everybody, I would love to
get some 737 or some 787 working here. I think they would be the right commercial programs to be on. It's very hard to
go out and get any from them, when they are still having their own issues with them. So, we are in their phase, we are
there, they know who we are. They have seen the quality of the work we are doing. I have no doubt – I have no doubt
that we'll certainly be considered when they get themselves back to where they want to be and look to offload work.
Right now, I'm also being logical about this. CPI is not the biggest thing on there mind right now. They are trying to
get, for example, 787, they are just trying to get at the flight without having a landed in the emergency case, so.
<Q - John Kohler>: Right. Okay, so the additional work on the 650 or on A-10 are probably [inaudible] more on,
extraneous factors in you capability?
<A>: Exactly, right.
<Q - John Kohler>: Okay. And then I know you made some big leaps in the production floor. And you mentioned in
your earlier comments about the potential returns for parts and refurbishment of existing aircraft. How do you look at
your ability to handle an influx of orders along those lines, if it is sizable, it'll be smaller parts given [indiscernible]?
<A>: If we have that kind of influx, if we go back to our [indiscernible] days with the U.S. Government, we were doing
30 million a year in revenue on replacement parts, on variety of aircrafts, on 100 extra contracts, the reality is we would
need more space, it's just no way around it. What's great about our complex and our landlord is there is space available
all over here, including next floor to us, where we could take the space necessary and move things in. Now whether that
means I'd move that military business in there, it remains to be seen. It's also possible that given the amount of work we
would have from one of our other prime contractors and pick – take your pick. I think A-10 program could fit, we
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might or Sikorsky, we might actually move all of one of those companies work to a facility next to us and designate it
as their facility.
<Q - John Kohler>: All right.
<A>: You know if it – if it makes them more willing to give us more business, so we've a facility totally dedicated to
them than that's what we would do, and I wouldn't hesitate to do. It's not expensive, it would just be basically leasing
space, because all of the corporate overhead et cetera, will remain right here in this building. So it would simply be an
assembly facility, which is not expensive real estate. You don't have to do a lot to make it workable. And again, the $30
million of revenue or $20 million extra dollars of revenue, the cost of leasing space is quite insignificant.
<Q - John Kohler>: Right, okay great, thanks so much.
<A>: You're welcome John, take care.
Thank you. [Operator instructions]. Thank you, gentlemen we've next question coming from the line of Michael Potter
of Monarch Capital Group. Please state your question sir.
<A>: Mike you almost disappointed me. I was wondering where you were.
<Q - Michael Potter>: Congratulation guys on a Great quarter.
<A>: Thank you, thank you
<Q - Michael Potter>: Just a quick question Ed. I know we have discussed it in the past. Has the contract mature?
Should we assume that we should be able to get further efficiencies and scale where historically we were in the low 30
on a gross margin side? Is there a room for our margins to improve from the current range?
<A>: Absolutely, they can improve. Will they ever get to the range they were, what we directed US government 32 to
35, I am not sure that's possible given the high competition in the non-US government direct arena. That's said, can it
get better than 26 or 27? Yes. I think it can absolutely approach to 30s without gap.
<Q - Michael Potter>: Okay.
<A>: More importantly though, I think what's great about these programs is that because their production programs,
because they are maturing et cetera, I think where you see the growth in CPI, where you should be looking for in
honestly, is not in gross margins necessarily, but take a look at the growth in operating margins. Take a look at the fact
that we -- when we put out the projection in 2008, we projected 30 to 35% growth in revenue, but 50 to 60 in net
income. And you're seeing that develop as we produce our quarterly results.
That's where you're going to see it, because we can produce all of that new revenue without having to add any type of
SG&A or certainly any significant SG&A. And you're seeing that in the percentages of SG&A versus total revenue. So
yes, I absolutely believe we will improve gross margins, as we go forward, but where I really look forward is
improving our operating margin, which we have been doing now very successfully for the last two years.
<Q - Michael Potter>: Okay, all right, great. One other question, on the B-52 program, and I know we're not on this,
that I guess is a very, very large program to upgrade the B-52 in the country, the Boeing one. It's primarily avionics and
engines, I am assuming, correct?
<Q - Michael Potter>: Is there opportunity for us on the structure for that program as well?
<A>: Specifically no at this moment. In general, yeah, I think absolutely, because again you go back to the ideas that
okay, you can improve the avionics and this is the same discussion Mr. Steve [ph] got. You can improve the avionics,
Page 10 of 11
you can improve the engining. Eventually, the structure has to be modified, replaced, repaired, done whatever to, and
that's where CPI is going to be available to do those things. I think the more we build our reputation with Boeing, the
better opportunity we'll have to get some of the business when it comes, and it must, because let's face it, if you the
greatest engines in the world, the most terrific avionics, if the structure is widening out, you don't have an airplane that
can fly. So while it's not part of this immediate upgrade or modification that is being done on B-52 or on the C-5
RERP, or – avionics, I think both of those things are to come down the line.
<Q - Michael Potter>: So the $10.5 billion contract of Boeing, one, including B-52, none of that is structure.
<A>: Very, very little. Very little.
<Q - Michael Potter>: Okay, great guys. Thank s a lot.
<A>: Thanks Mike. Take care.
Thank you. Our next question is coming from the line of Russ Silvestri of SKIRITAI Capital. Please proceed with your
<Q - Russell Silvestri>: Hi, good morning Ed.
<A>: Hi Russ, how are you?
<Q - Russell Silvestri>: Good. Could you give me a little idea on the, I think you mentioned a $100 million of growth
with new customer or 85% of it with new customers in that realized value. Is that a much of a use it or lose it type of
budget that you would might expecting to year end here?
<A>: No, not for those programs that we're talking about. Not for what we bid on. It is not – I have a big one [ph]. It is
not direct to the U.S. government, which means it isn't based on, we got to get this on budget early before – at this point
we have a ton of time anyway, but before September 30th. It's not like that at all.
<Q - Russell Silvestri>: Okay. That's all I have. Thanks.
<A>: Okay. Take care.
Thank you. Our next question is coming from Marco Rodriguez from Stonegate Securities. Please state your question.
<Q - Marco Rodriguez>: Hi, guys. A quick follow-up – in regard to the bids outstanding that you have, is there any
way you kind of quantify what might be kind of like the biggest one versus other opportunities?
<A>: I can't do that because again these are not public bids. They have not been posted on a website, where anybody
could go and bid on them. As I just said, they're not directed U.S. government. If they were, I can tell you that. I can
tell you what it was for and everything else, but these are – the best I can do for you is these are prime manufactures of
aircraft, who are looking to sub out structural assemblies that hit our niche, right were we wanted to and that we are –
we know no matter what, we are incredibly competitive on these now. I'd like to believe we're going to win a nice talk
[ph] of business from those, but I don't control that completely, but we absolutely know from feedback that we're in a competitive range on all of these programs, so that is certainly a good news for us.
Thank you. Gentleman, there are no further questions at this time. I'd like turn the floor back to management for closing
Edward Fred, President and Chief Executive Officer
Okay. I just like to thank everybody for joining us with the call and we'll -- I guess it will be a while before we talk to
you again. But again, thank you well for participating.
This concludes today's teleconference. You may now disconnect your lines at this time
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|From: leigh aulper||2/2/2011 8:58:19 AM|
|CPI Aerostructures Announces $17.7 Million Contract Award from Sikorsky Aircraft|
EDGEWOOD, N.Y.--(BUSINESS WIRE)-- CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE Amex: CVU) announced today that it has entered into a long term contract for a period of five years covering $17.7 million in structural assemblies and kits to be supplied to Sikorsky Aircraft Corp. for its S-92® civil helicopter program. Sikorsky is a subsidiary of United Technologies Corp. (NYSE:UTX - News).
The contract includes seventeen different deliverable items including door assemblies, cover assemblies, and various installation kits that contain detail parts and installation hardware used by Sikorsky to complete the final assembly of the S-92 helicopter. Each of the deliverable items are currently produced by CPI Aero for Sikorsky under separate purchase orders and were incorporated into this new five year contract to cover Sikorksy’s anticipated requirements for these items through 2016.
The S-92 helicopter is a technologically advanced aircraft in Sikorsky's civil product line. The S-92 fleet spans several countries, and performs a number of missions, including Offshore Oil, Corporate VIP, Head of State and Search and Rescue.
“We are very proud that Sikorsky, one of the world’s leading helicopter manufacturers, has once again selected us to provide important assemblies for its production requirements,” stated Edward J. Fred, CPI Aero’s CEO & President. “This $17.7 million award is the largest contract CPI Aero has ever received from Sikorsky and validates the importance of our recent recognition as a UTC/Sikorsky Gold Supplier.”
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|From: leigh aulper||3/9/2011 8:56:47 AM|
|CPI Aerostructures Announces 2010 Year-End Results|
2010 Orders Set a Record of $61.7 Million
$22.1 Million in New Orders in First Two Months of 2011
Press Release Source: CPI Aerostructures, Inc. On Wednesday March 9, 2011, 8:45 am
EDGEWOOD, N.Y.--(BUSINESS WIRE)-- CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE Amex: CVU) today announced audited results for the 2010 fourth quarter and year ended December 31, 2010.
Fourth Quarter 2010 vs. 2009
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.
Full Year 2010 vs. 2009
Revenue was $43,990,784 from $43,906,825;
Gross margin was 14% as compared to 26%;
Pre-tax income was $542,896 as compared to $5,861,007;
Net income was $529,896 or $0.08 per diluted share, compared to $3,946,007 or $0.64 per diluted share;
New orders were a record $61.7 million, compared to $23.4 million; and,
Solicitations not yet awarded totaled a maximum realizable value of approximately $486 million.
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.”
The change in estimate adjustment, and the related impact, is described more fully in our press release of January 20, 2011.
He added, “2010 was a record year in terms of new contract awards which approximated $61.7 million of which approximately $8.5 million were government prime contract awards, $48.6 million were government subcontract awards and $4.6 million were commercial subcontract awards.
“We started 2011 on a very strong note. Since the beginning of the year we have received several contracts including: a $17.7 million contract from Sikorsky Aircraft Corp. for structural assemblies and kits for the S-92® civil helicopter program; and a $4 million purchase order to manufacture seats for the E-2D Advanced Hawkeye aircraft from Northrop Grumman Corporation. We look forward to additional new orders from existing contracts as well as from the $486 million of solicitations that we have bid on but remain unawarded as of December 31, 2010.”
Mr. Fred noted, “One of the major achievements of 2010 was being named by Sikorsky to its Supplier Gold status which was followed earlier this year with the $17.7 million S-92® civil helicopter order, the largest contract we have ever received from Sikorsky. The work we have performed for major prime contractors has enhanced our reputation and stature which we are using to establish relationships with additional prime manufacturers, including other helicopter and business/private jet companies, who have come to recognize CPI Aero as a premier supplier of aircraft structure.”
Affirms Long-Term Guidance
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.”
CPI Aero’s President and CEO, Edward J. Fred, and CFO, Vincent Palazzolo, will host a conference call today, Wednesday, March 9, 2011 at 11:00 am ET to discuss fourth quarter results, recent corporate developments and the Company’s future outlook. After opening remarks, there will be a question and answer period. Interested parties may participate in the call by dialing (201) 689-8337. 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
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|From: leigh aulper||3/14/2011 8:52:30 AM|
|CPI Aero Announces Release of C-5 Top Order Valued at $7.9 Million|
EDGEWOOD, N.Y.--(BUSINESS WIRE)-- CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE AMEX: CVU) today announced that the U.S. Air Force has released a new order under CPI Aero’s C-5 TOP contract for a variety of spoilers and wing tips valued at approximately $7.9 million. Orders under this program, including this $7.9 million order, have totaled $44.9 million since the inception of the contract.
This award brings the total new year-to-date awards for CPI Aero from all customers to $30.0 million, compared to $4.5 million for the same period of 2010
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|From: JakeStraw||3/14/2011 9:10:57 AM|
|CPI Aero Announces Release of C-5 Top Order Valued at $7.9 Million|
This award brings the total new year-to-date awards for CPI Aero from all customers to $30.0 million, compared to $4.5 million for the same period of 2010.
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|From: leigh aulper||5/24/2011 9:11:24 AM|
|CPI Aerostructures Selected to Manufacture HondaJet Inlet and Flap and Vane Assemblies|
EDGEWOOD, N.Y.--(BUSINESS WIRE)-- CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE Amex: CVU) announced today that it has been selected by Honda Aircraft Company, Inc., a wholly owned subsidiary of Honda Motor Company, Ltd., to manufacture engine inlet and flap and vane assemblies for the HondaJet© advanced light business jet. The inlet and flap and vane assemblies will be manufactured by CPI Aero under a long term agreement with Honda Aircraft Company. The first assemblies manufactured by CPI Aero will be delivered to Honda’s state-of-the-art aircraft assembly operation in Greensboro, North Carolina in January 2012.
Scheduled for first delivery in the third quarter of 2012, the $4.5 million HondaJet is Honda's first-ever commercial aircraft and lives up to the company's reputation for dynamic performance together with superior efficiency. Honda Aircraft Company has amassed orders for well over 100 HondaJets. The HondaJet incorporates many innovative technological advances in aviation design, including a unique over-the-wing engine-mount configuration that dramatically improves aircraft performance and fuel efficiency by significantly reducing aerodynamic drag in flight.
Edward J. Fred, CPI Aero’s President & CEO stated, “We are extremely proud to have been selected to manufacture two critical assemblies of the first aircraft offering from one of the world’s great corporations. Honda is new customer for CPI Aero, and this is an extremely dynamic program for which we are excited to play a significant role with the supply of such important components. We are confident that our past performance on similarly complex and critical flight structures will provide a high-value, low risk solution for the HondaJet.”
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|From: leigh aulper||3/27/2013 11:19:54 AM|
| Stocks to Buy: Huge Growth for a Bargain Price |
Tim Melvin, Contributing Writer - March 26, 2013
Some of the most exciting stocks to buy are those with impressive growth potential.
Companies that are able to grow earnings for a long period of time can often see their stock prices soar for years, creating tremendous wealth for shareholders. Stocks to Buy: Huge Growth for a Bargain Price
Unfortunately, much of what passes for growth stock investing today is really momentum investing in disguise. Today's growth stock investors all tend to own and trade the same really popular companies that have already experienced significant price appreciation.
While it may be exciting to share cocktail party chatter with friends about the shares of Apple Inc. (Nasdaq: AAPL) or Green Mountain Coffee Roasters Inc. (Nasdaq: GMCR), odds are that the real growth and profit opportunity has passed.
It makes more sense for growth investors to look for stocks of companies that have been growing sales and earnings at a consistently high rate, but are off Wall Street's radar. Companies that have very high rates of institutional ownership and lots of analyst coverage from the major firms are more than likely fully priced. All the growth potential is well defined and everyone already owns the stock.
The big rally moves in growth stocks come when the institutional money discovers the company and intense buying pressure develops as they all pile into the stock, pushing prices dramatically higher.
One such company that fits the bill now is CPI Aerostructures Inc. (NYSEAMEX: CVU).
Stocks to Buy: CPI Aerostructures (NYSEAMEX: CVU) CPI Aerostructures builds structural components for military and commercial aircraft as a subcontractor.
CPI has been off Wall Street's radar screen; in fact, some investors have been selling, afraid the sequester would hurt the share price.
What many are overlooking is that this company has been growing at an impressive pace. Sales and earnings have both averaged increases of over 30% for the past five years. In the most recent quarter, the company reported record sales and profits for the quarter and the full year.
CPI Aerostructures has acknowledged that the sequester may cause growth to slow in 2013, but beyond that the company is well positioned to regain a strong growth track.
The company has a $392 million backlog and a strong bid pipeline. Many of its military programs such as the Hawkeye Surveillance aircraft and UH 60M Blackhawk are not expected to be effected by the projected cutbacks in military spending. Commercial markets are recovering quickly and new demand is starting to emerge for next generation business jets such as the Gulfstream G60 and Cessna Citation X where the company already has subcontractor status.
While 2014 may show some weakness the expectations are that this company will recover its plus-30% earnings growth rate after that.
But, here is what Wall Street is really missing about CPI Aerostructures...
As institutional investors have abandoned the stock over sequester and defense budget concerns, they have pushed it down to such a bargain price that the company could be liquidated at a small profit. The company balance sheet shows $119 million of short-term assets including $2.7 million of cash and a little over $116 million in receivables. When you consider that the receivables are large established commercial aviation firms and government contractors, they are as good as cash.
CPI has a total of $44.2 million of liabilities and debts. That leaves a net current liquidation value of about $75 million and the market cap of the stock is just over $71 million. This calculation does not include about $4 million of computers, trucks, cars and other machinery owned by the company.
Wall Street's narrow focus has created an incredible bargain in a growth stock that is experiencing a very short-term pause in its high rate of sales and profit expansion. CPI has been profitable nine of the last 10 years, and every year since 2006. Earnings may slip back to $1 a share in 2013, but that should begin growing rapidly again in 2014 to over $1.20.
The stock is trading at less than nine times earnings in spite of excellent corporate performance and profitability.
When Wall Street discovers the mistake it has made, institutional investors will flock back to these shares and the buying pressure should push prices markedly higher. Shares traded hands at twice the current price a year ago, and CPI Aerostructures could recover much of that ground late in 2013.
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|From: Paul Lee||11/16/2015 11:06:33 AM|
Will Northrop Grumman Corporation E-2D Advanced Hawkeye Nullify $80 Billion Bomber Halt News?
Published by Sam Hason on November 14, 2015 at 7:33 am EST
Northrop stock has been under pressure since its $80 billion order was halted due to Boeing and Lockheed protest
According to a Reuters report, Northrop Grumman Corporation's ( NYSE:NOC) forecasted E-2D Advanced Hawkeye airborne early warning aircraft will receive orders from North Africa, the Gulf and Asia in the near term. The company recently lost a UAE order, to SAAB AB, worth $1.27 billion, for surveillance systems up-gradation on bombardier planes. Northrop claims to have an order for four E-2D aircraft already placed by Japan.
$80 billion order under scrutiny On November 12, the company's $80 billion order of long-range strike bombers awarded on October 27 by the US Air Force was halted. The contract was protested by Lockheed Martin Corporation (NYSE:LMT) and Boeing Co (NYSE:BA) saying the selection process was fundamentally flawed.
100 aircraft were to be developed and manufactured under the deal. The government was expecting the first fleet to be incorporated in 2025. The need for radar evading aircraft arose due to the Pentagon’s effort to ready US military systems against potential aggression from China and Russia.
On November 6, Boeing and Lockheed filed an official protest against the deal, saying there were flaws in the Pentagon’s evaluation process, those that could derail the Defense Department’s extensive efforts to making weapons less expensive.
The US Government Accountability Office stated that the ruling on the protest will take place on February 16, 2016.
JP2068 Computer Network Defense contract received There was also positive news for the company, coming from its subsidiary, the “Northrop Grumman M5 Network Security,” which received a contract for the JP2068 Phase 2B.2 from the Australian Department of Defense.
This subsidiary is involved in providing cyber-security services to government organizations, military, and large-scale corporations. M5 also maintains a flourishing product development practice, which focuses on the Secure Communications System, and an array of cyber-secure products and capabilities.
The award for the JP2068 will enable effective management at the defense department’s, with monitoring, as well as the security of communication networks and information systems through its multi-phased project.
Northrop Grumman Australia chief executive Ian Irving said, "This contract marks the formalization of a partnership between Defense and Northrop Grumman Australia as a trusted cyber systems integrator with the ability to deliver enhanced cyber security to Defense."
Business Finance News believes despite Northrop's past, the company developed better aircraft. Naturally, before having allocated the second largest weapons program, the Department of Defense must carefully considered multiple factors due to sensitivity. The award also opened the Pentagon’s doors for Northrop, which should be seen as a positive sign in an environment where military spending has slowed. It is yet to be seen whether the company will adhere to the development agenda.
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|From: Paul Lee||11/6/2017 8:39:34 AM|
|CPI Aero Awarded $15.8 Million Multi-Year Contract by Lockheed Martin for F-35 Canopy Drive Shaft Assemblies|
GlobeNewswire•November 6, 2017
EDGEWOOD, N.Y., Nov. 06, 2017 (GLOBE NEWSWIRE) -- CPI Aerostructures, Inc. (“CPI Aero®”) (NYSE American:CVU) today announced that it has been awarded a $15.8 million multi-year contract by Lockheed Martin Company ( LMT) to manufacture canopy actuation drive shaft assemblies for the F-35 Lightning II, the world’s most advanced multirole fighter.
Under this new contract with Lockheed Martin’s Aeronautics division based in Fort Worth, TX, CPI Aero will provide four different drive shaft assemblies used within the actuation system that opens and closes the cockpit canopy of all three variants of the aircraft: the F-35A conventional takeoff and landing (CTOL) variant, the F-35B short takeoff/vertical landing (STOVL) variant, and the F-35C carrier variant (CV). Deliveries are expected to begin during the third quarter of 2018 and continue through December 31, 2022.
This is CPI Aero’s second contract with Lockheed Martin for structural assemblies on the F-35. In May 2017, CPI Aero made its first delivery of lock assemblies for the arresting gear door of the F-35A CTOL variant under a multi-year contract awarded in 2015 estimated at up to $10.6 million.
The F-35 Lightning II is a family of single-seat, single-engine, all-weather stealth multirole fighters designed to perform ground attack, aerial reconnaissance, and air defense missions. The US Department of Defense plans to acquire over 2,400 F-35’s by 2034 and eleven other countries also have plans to acquire the aircraft.
Douglas McCrosson, President and CEO of CPI Aero, stated, “This is an important win for CPI Aero as it increases CPI Aero content on the F-35, our nation’s largest military aircraft program, and further strengthens our ties to Lockheed, the largest defense prime contractor in the world. Coming on the heels of our first F-35 assembly delivery, I am confident that Lockheed Martin views us as having attributes that define successful defense contracting: quality, performance and affordability.”
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