PALO ALTO, Calif. - August 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 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:
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.
Financial Community Conference Call
In conjunction with this announcement, CPI will hold a conference call on Thursday, August 9, 2012 at 11:00 a.m. (EDT) that simultaneously will be broadcast live 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 15698586 and ask for the CPI International Third 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, 650.846.3998, firstname.lastname@example.org