CPI International Announces Second Quarter 2012 Financial Results
PALO ALTO, Calif. - May 9, 2012 - CPI International Holding Corp., the parent company of CPI International, Inc. (CPI), today announced financial results for its second quarter of fiscal year 2012 ended March 30, 2012."In the second quarter, CPI's core programs continued to perform well and present us with opportunities for continued growth," said Joe Caldarelli, chief executive officer of CPI. "Our defense market remains stable and strong, enhanced by momentum in a few of our large radar programs. Our medical market is steady, supported by solid demand for our radiation therapy business and from periodic x-ray imaging programs in Russia. Although there were some timing issues and sales delays in our commercial communications business this quarter, the underlying market conditions and our orders intake remain favorable. In addition, notwithstanding the conclusion of our involvement in the first increment of the WIN-T program, demand for our core military communications products has continued to grow."
CPI generated total sales of $96.5 million in the second quarter of fiscal 2012, representing a two percent increase from the $95.0 million in sales generated in the same quarter of fiscal year 2011.
- In the defense market, the sales level was effectively unchanged.
- In the medical market, sales increased 22 percent, primarily because of higher sales of products used in x-ray imaging applications.
- In the communications market, sales decreased 13 percent due to the expected reduction in sales to support the Warfighter Information Network - Tactical (WIN-T) military communications program. CPI had anticipated lower sales for this program because its involvement in Increment One of the WIN-T program was largely completed in fiscal year 2011.
In the first six months of fiscal 2012, CPI booked total orders of $196 million, producing a book-to-bill ratio of 1.03. During the same six-month period of the previous fiscal year, CPI booked total orders of $208 million, which included $18.1 million in orders to support a one-time counter-improvised explosive device (counter-IED) program that was completed in fiscal 2011. Excluding this non-recurring program, orders for CPI's products increased by three percent in the most recent six-month period. As of March 30, 2012, the company's order backlog totaled $255 million.
- In the defense market, orders decreased 10 percent due to the expected absence of orders for the aforementioned non-recurring counter-IED program. Excluding this program, core defense orders increased 12 percent, primarily as a result of higher orders for products to support the Aegis weapons system and certain other radar systems.
- In the medical market, the orders level was effectively unchanged.
- In the communications market, orders decreased three percent, primarily as a result of lower orders to support certain commercial communications applications. Orders to support military communications applications were higher.
Net loss in the second quarter of fiscal 2012 was $0.3 million, an improvement from the $14.1 million net loss in the same quarter of the previous fiscal year. The second quarter of fiscal 2011 included significant expenses related to the acquisition of CPI by Veritas Capital in February 2011, including $10.8 million in strategic alternative transaction expenses, that did not recur in the most recent quarter. However, in comparison to the same quarter of the prior year, certain other expenses increased in the second quarter of fiscal 2012 as a result of the acquisition, including a $1.0 million increase in amortization of acquisition-related intangibles due to the revaluation of intangible assets in connection with the acquisition and a $0.6 million increase in interest expense due to the refinancing of the company in connection with the acquisition. Net loss in the most recent quarter was also negatively impacted by the effect of high costs for several development programs on the company's gross profit during the quarter.
CPI's adjusted EBITDA for the second quarter of fiscal 2012 equaled $14.2 million, as compared to $15.5 million in the same quarter of fiscal 2011. Adjusted EBITDA in the most recent quarter was negatively impacted by the effect of high costs for several development programs on the company's gross profit.
As of March 30, 2012, CPI had cash and cash equivalents totaling $33.4 million. For the 12-month period ending on that date, cash flow from operating activities totaled $22.3 million and free cash flow totaled $14.0 million. Adjusted free cash flow, which excludes certain non-recurring, unusual or other items, was $13.6 million for the 12 months ending on March 30, 2012.
Fiscal 2012 Outlook
CPI is reconfirming the following previously issued guidance for fiscal 2012:
- Total sales of between $380 million and $395 million;
- Adjusted EBITDA of between $63 million and $65 million; and
- Adjusted free cash flow of more than $17 million.
Financial Community Conference Call
In conjunction with this announcement, CPI will hold a conference call on Thursday, May 10, 2012 at 11:00 a.m. (EDT) that will be broadcast live simultaneously over the Internet on the company's Web site. To participate in the conference call, please dial (800) 649-5127, or (253) 237-1144 for international callers, enter conference ID 77582090 and ask for the CPI International Second Quarter Fiscal 2012 Financial Results Conference Call. To access the call via the Internet, please visit http://investor.cpii.com and click "Events."
About CPI International Holding Corp.
CPI International Holding Corp., headquartered in Palo Alto, California, is the parent company of CPI International, Inc., which is the parent company of Communications & Power Industries LLC, a leading provider of microwave, radio frequency, power and control solutions for critical defense, communications, medical, scientific and other applications. Communications & Power Industries LLC develops, manufactures and distributes products used to generate, amplify, transmit and receive high-power/high-frequency microwave and radio frequency signals and/or provide power and control for various applications. End-use applications of these systems include the transmission of radar signals for navigation and location; transmission of deception signals for electronic countermeasures; transmission and amplification of voice, data and video signals for broadcasting, Internet and other types of commercial and military communications; providing power and control for medical diagnostic imaging; and generating microwave energy for radiation therapy in the treatment of cancer and for various industrial and scientific applications.
Non-GAAP Supplemental Information
EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, free cash flow and adjusted free cash flow presented here are non-generally accepted accounting principles (GAAP) financial measures. EBITDA represents earnings before net interest expense, provision for income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to exclude certain non-recurring, non-cash, unusual or other items. EBITDA margin represents EBITDA divided by sales. Adjusted EBITDA margin represents adjusted EBITDA divided by sales. Free cash flow represents net cash provided by operating activities minus capital expenditures and patent application fees. Adjusted free cash flow represents free cash flow further adjusted to exclude certain non-recurring, unusual or other items.
CPI believes that GAAP-based financial information for leveraged businesses, such as the company's business, should be supplemented by EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, free cash flow and adjusted free cash flow so that investors better understand the company's operating performance in connection with their analysis of the company's business. In addition, CPI's management team uses EBITDA and adjusted EBITDA to evaluate the company's operating performance, to monitor compliance with its senior credit facility, to make day-to-day operating decisions and as a component in the calculation of management bonuses. Other companies may define EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, free cash flow and adjusted free cash flow differently and, as a result, the company's measures may not be directly comparable to EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, free cash flow and adjusted free cash flow of other companies. Because EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, free cash flow and adjusted free cash flow do not include certain material costs, such as interest and taxes in the case of EBITDA-based measures, necessary to operate the company's business, when analyzing the company's business, these non-GAAP measures should be considered in addition to, and not as a substitute for, net income (loss), net cash provided by (used in) operating activities, net income margin or other statements of income or statements of cash flows data prepared in accordance with GAAP.
Certain statements included above constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements provide our current expectations, beliefs or forecasts of future events. Forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual events or results to differ materially from the results projected, expected or implied by these forward-looking statements. These factors include, but are not limited to, competition in our end markets; our significant amount of debt; changes or reductions in the U.S. defense budget; currency fluctuations; goodwill impairment considerations; customer cancellations of sales contracts; U.S. Government contracts; export restrictions and other laws and regulations; international laws; changes in technology; the impact of unexpected costs; the impact of a general slowdown in the global economy; the impact of environmental laws and regulations; and inability to obtain raw materials and components. These and other risks are described in more detail in our periodic filings with the Securities and Exchange Commission. As a result of these uncertainties, you should not place undue reliance on these forward-looking statements. All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We undertake no duty or obligation to publicly revise any forward-looking statement to reflect circumstances or events occurring after the date hereof or to reflect the occurrence of unanticipated events or changes in our expectations.
Amanda Mogin, Communications & Power Industries, investor relations,