PALO ALTO, Calif. - December 6, 2012 - CPI International Holding Corp., the parent company of CPI International, Inc. (CPI), today announced financial results for its fourth quarter and fiscal year 2012 ended September 28, 2012. In fiscal 2012, CPI maintained the strong orders, sales and adjusted EBITDA results of the previous year and significantly improved its net income results. The company also achieved a healthy backlog as of the end of the most recent fiscal year.
"CPI's business was stable and strong in fiscal 2012, and our sound financial performance met our expectations," said Joe Caldarelli, chief executive of CPI. "Within our defense markets, demand was strong for radar applications, particularly for large, long-lived programs for which we have provided products for many years. In fact, approximately 56 percent of our defense market sales were for spare and repair products for existing 'sockets.' In the medical market, the pace of economic recovery has picked up, and we enjoyed an appreciable increase in activity for x-ray imaging applications in the U.S. and abroad. In the communications market, conditions have remained healthy within both military and commercial communications, and once again our milcom business contributed more than 10 percent of our total sales for the year. Our recent acquisition of the Codan Satcom business has been well received by our customers, and we are looking forward to it being fully integrated into CPI's solid-state communications business in fiscal 2013."
In fiscal 2012, CPI generated total sales of $391 million, a slight increase from the $389 million generated in the prior year notwithstanding the absence in fiscal 2012 of the non-recurring counter-improvised explosive device (counter-IED) program that had contributed $18.0 million in sales in fiscal 2011. Excluding that one-time program, CPI's sales increased by five percent in fiscal 2012.
In comparison to the previous year, CPI's fiscal 2012 sales in its largest end markets were as follows:
During the most recent fiscal year, CPI booked total orders of $383 million, resulting in a book-to-bill ratio of 0.98. Orders decreased two percent from fiscal 2011 as a result of the absence of the aforementioned non-recurring counter-IED program that had provided $18.0 million in orders in fiscal 2011. Excluding that one-time program, orders rose two percent in fiscal 2012. As of September 28, 2012, CPI's order backlog was $242 million.
In comparison to fiscal 2011, CPI's fiscal 2012 orders in its largest end markets were as follows:
CPI's fiscal 2012 net income totaled $3.7 million, a significant improvement from the $11.2 million net loss recorded in the previous year. CPI was acquired by The Veritas Capital Fund IV, L.P. in February 2011, and the company's fiscal 2011 financial results included substantial expenses related to that acquisition, including non-recurring transaction costs, non-cash expenses related to the revaluation of CPI's inventory and intangible assets, and stock compensation expenses. The absence of the non-recurring transaction costs and notable decreases in amortization related to the revaluations and in stock compensation expenses were the primary reasons for the improvement in net income in fiscal 2012.
Adjusted EBITDA in fiscal 2012 totaled $64.4 million, or 16.5 percent of sales, as compared to the $62.4 million, or 16.0 percent of sales, generated in the prior year. The improvement in adjusted EBITDA was due in part to higher sales volume and the related improvements in operating efficiencies, as well as higher profit margins from CPI's advanced antenna products, as more of these products moved from development into production in fiscal year 2012.
As of September 28, 2012, CPI's cash and cash equivalents totaled $43.0 million. In fiscal 2012, cash flow from operating activities equaled $25.1 million, free cash flow totaled $17.5 million and adjusted free cash flow was $17.3 million.
Fiscal 2013 Outlook
"While CPI's performance in our major markets continued to be quite strong and resilient in fiscal 2012, particularly in light of the difficult global environment in the past year, we remain cognizant of the challenges facing global economies and government funding in the U.S. and around the world in the coming year. We will continue to monitor the situation diligently in order to maintain our customary agility necessary to respond rapidly to changes in global market conditions," said Caldarelli. "Nevertheless, our business remains healthy, and we expect CPI to continue to perform quite well in fiscal year 2013."
For fiscal 2013, CPI expects:
CPI expects that its effective tax rate for fiscal 2013 will be approximately 42 percent.
Financial Community Conference Call
In conjunction with this announcement, CPI will hold a conference call on Friday, December 7, 2012 at 11:00 a.m. (EST) 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 73407109 and ask for the CPI International 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, +1.650.846.3998, firstname.lastname@example.org