CPI International Announces Second Quarter 2016 Financial Results

PALO ALTO, Calif., May 10, 2016 /PRNewswire/ -- CPI International Holding Corp., the parent company of CPI International, Inc. (CPI), today announced financial results for its fiscal year 2016 second quarter ended April 1, 2016.

"CPI delivered improved financial results in the second quarter that included increases in sales, orders, backlog and profitability in comparison to both the previous quarter and last year's second quarter, and we continue to manage our business prudently to ensure the continued long-term health and stability of our business," said Joe Caldarelli, chief executive officer of CPI.  "Although global economic conditions remain challenging, conditions are stabilizing in several of our end markets and certain previously delayed orders are starting to flow in to CPI.  As a result, we expect the second half of fiscal 2016 to be stronger than the first half of the year."

Orders and Sales

In the first six months of fiscal 2016, CPI booked orders totaling $249 million, a nine percent increase from the $227 million booked in the same period of the previous year.  Orders increased in the communications market and decreased in the defense and medical markets.

In the second quarter of fiscal 2016, CPI generated sales totaling $120 million, an 11 percent increase from the $108 million generated in the same quarter of the previous year.  Sales increased in the defense and communications markets and decreased in the medical market.

In September 2015, CPI acquired ASC Signal Corporation, expanding its advanced antenna offerings for communications and radar customers.  In the first six months of fiscal 2016, the ASC Signal operations contributed orders of approximately $28 million and sales of approximately $18 million to CPI.  Orders and sales from CPI ASC Signal Division in this period were primarily in the communications market.

Net Income and Adjusted EBITDA

CPI generated net income of $0.5 million in the second quarter of fiscal 2016, an increase from the $0.9 million net loss recorded in the same quarter of the previous year.

Adjusted EBITDA in the second quarter of fiscal 2016 totaled $18.4 million, increasing from $16.6 million in the same quarter of the previous year.

The increases in CPI's net income and adjusted EBITDA results in the most recent quarter were primarily due to higher sales volume and beneficial changes in the exchange rate between the U.S. dollar and the Canadian dollar.

CPI's net income and adjusted EBITDA results also increased in comparison to the previous quarter of fiscal 2016, in which the company recorded a net loss of $1.2 million and adjusted EBITDA of $16.3 million.

Defense Market

In the defense market, orders decreased 18 percent to $75.9 million in the first six months of fiscal 2016.  This decrease was primarily due to the timing of orders for certain naval radar programs, including a large recurring program for which orders have been delayed into the second half of fiscal 2016, and an airborne radome program.

CPI's sales in the defense market increased 11 percent to $47.8 million in the second quarter of fiscal 2016.  This increase was primarily the result of higher sales for a variety of radar programs.

Orders and sales for Aegis radar systems increased during the most recent periods.  Aegis radar systems represent CPI's largest recurring defense program.

The ASC Signal Division contributed less than $2 million to CPI's defense orders in the first six months of fiscal 2016 and less than $1 million to CPI's defense sales in the second quarter of 2016.

Communications Market

In the communications market, orders increased 53 percent to $117 million in the first six months of fiscal 2016.  The inclusion of orders from CPI ASC Signal Division for commercial and military communications programs contributed approximately 60 percent of the increase in communications orders in the most recent period.  Approximately 40 percent of the increase was due to higher orders to support various long-term military communications programs, including higher orders of advanced tactical common data link (TCDL) antenna products for unmanned aerial vehicle (UAV) programs, and commercial communications applications, particularly high-throughput satellite applications.

Sales in the communications market increased 27 percent to $48.6 million in the second quarter of fiscal 2016.  This increase was due to the inclusion of sales from CPI ASC Signal Division in the most recent period and higher sales to support CPI's other military communications applications.

Medical Market

In the medical market, orders decreased four percent to $43.8 million in the first six months of fiscal 2016.  This decrease was primarily the result of lower orders of x-ray imaging products for foreign customers, largely due to challenging global economic conditions, and lower orders of MRI products.  Orders for radiation therapy applications increased.

Sales in the medical market decreased 21 percent to $13.7 million.  This decrease was due to lower sales of x-ray imaging products, primarily for foreign customers, and was largely the result of challenging global economic conditions.  Sales of radiation therapy and MRI products increased slightly.

Cash Flow

As of April 1, 2016, CPI's cash and cash equivalents totaled $34.1 million.  For the 12-month period ending on that date, cash flow from operating activities totaled $24.3 million, free cash flow totaled $17.7 million and adjusted free cash flow totaled $26.2 million.

Financial Community Conference Call

In conjunction with this announcement, CPI will hold a conference call on Wednesday, May 11, 2016 at 11:00 a.m. (EDT) that will be broadcast simultaneously on the company's Web site.  To participate in this conference call, please dial (800) 649-5127, or (253) 237-1144 for international callers, enter conference ID 1393376 and ask for the CPI International Second Quarter 2016 Financial Results Conference Call.  To access the Web cast, 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 and Communications & Power Industries Canada Inc.  Together, Communications & Power Industries LLC and Communications & Power Industries Canada Inc. develop, manufacture and globally distribute components and subsystems used in the generation, amplification, transmission and reception of microwave signals for a wide variety of systems including radar, electronic warfare and communications (satellite and point-to-point) systems for military and commercial applications, specialty products for medical diagnostic imaging and the treatment of cancer, as well as microwave and RF energy generating products for various industrial and scientific pursuits.

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 or zoning 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.

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SOURCE CPI International Holding Corp.; CPI International, Inc.

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