PALO ALTO, Calif. - February 9, 2012 - CPI International Holding Corp., the parent company of CPI International, Inc. (CPI), today announced financial results for its first quarter of fiscal year 2012 ended December 30, 2011.
"For the past few years, discussions of our financial results have been dominated by programs that have been atypical for CPI, such as the large, one-time, counter-IED program in which we participated last year, the multi-year WIN-T military communications program and the unpredictable MRI business that has fluctuated significantly for several years," said Joe Caldarelli, chief executive officer. "Fiscal 2012 represents a renewed focus on a number of our long-term, recurring programs. These core programs continue to perform well and offer solid opportunities for CPI, due, in part, to improving economic conditions. In particular, our radar, commercial communications and x-ray imaging businesses have been strong in the first quarter and are expected to provide solid results throughout the year."
In the first quarter of fiscal 2012, CPI generated total sales of $93.0 million, which was a four percent increase from the $89.0 million in sales generated in the same quarter of the previous year.
CPI booked total orders of $97.6 million in the first quarter of fiscal 2012, resulting in a strong book-to-bill ratio of 1.05. In the same quarter of fiscal 2011, the company's $99.1 million in orders included $6.9 million for a one-time program, which was completed in fiscal 2011, for counter-improvised explosive device (counter-IED) products. Excluding this non-recurring program, orders for CPI's products increased six percent. As of December 30, 2011, the company had a robust order backlog of $252 million.
The first quarter of fiscal 2012 included significant increases in expenses resulting from the acquisition of CPI by Veritas Capital in February 2011, including, in comparison to the same quarter of the prior year, a $4.7 million increase in depreciation and amortization expenses and a $3.1 million increase in interest expenses due to the refinancing of the company in connection with the acquisition. In comparison, the first quarter of fiscal 2011 included $2.7 million in strategic alternative transaction expenses that did not recur in the most recent quarter. Primarily as a result of the increase in acquisition-related expenses, the company recorded net loss of $1.6 million as compared to net income of $2.2 million in the same quarter of the prior year.
CPI generated adjusted EBITDA of $12.7 million in the first quarter of fiscal 2012. As compared to the prior year's first quarter, adjusted EBITDA in the most recent quarter was unfavorably impacted by the translation of Canadian costs to the U.S. dollar; this impact was offset, in part, by an increase in gross profit due to higher sales levels. Primarily as a result of the unfavorable Canadian-to-U.S. exchange rate, the first quarter's adjusted EBITDA decreased from $13.2 million in the same quarter of the prior year.
As of December 30, 2011, CPI had cash and cash equivalents totaling $38.9 million. In the 12 months ending on that date, cash flow from operating activities totaled $6.5 million and free cash flow totaled negative $2.2 million. The negative free cash flow result was due to strategic alternative transaction expenses related to the acquisition. Adjusted free cash flow, which excludes certain payments related to the acquisition, among other items, was $11.0 million for the 12 months ending on December 30, 2011.
Fiscal 2012 Outlook
CPI is reconfirming the following previously issued guidance for fiscal 2012:
CPI believes its effective tax rate for fiscal 2012 will be approximately 39 percent.
Financial Community Conference Call
In conjunction with this announcement, CPI will hold a conference call on Friday, February 10, 2012 at 11:00 a.m. (EST) 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 47307215 and ask for the CPI International First 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