PALO ALTO, Calif., Aug. 11 /PRNewswire-FirstCall/ -- CPI
International, Inc. (Nasdaq: CPII), the parent company of
Communications & Power Industries, Inc. (CPI), today announced
its financial results for the third quarter of fiscal 2010 ended
July 2, 2010.
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CPI's business continued to gain momentum in the third quarter
of fiscal 2010. In comparison to the same periods of the
prior fiscal year, the company:
- Increased third quarter sales by 14 percent;
- Increased year-to-date orders by four percent and year-to-date
sales by 10 percent, generating a book-to-bill ratio of 1.07;
and
- Increased third quarter net income by nine percent and adjusted
EBITDA by 16 percent.
In addition, during the most recent quarter, CPI:
- Logged record backlog of $245
million as of the end of the quarter; and
- Generated cash flow from operating activities totaling
$32.3 million and free cash flow
totaling $28.4 million for the 12
months ended July 2, 2010.
"In the third quarter, CPI's end markets continued to strengthen
and our top and bottom lines continued to improve as compared to
last year and prior quarters," said Joe
Caldarelli, chief executive officer. "Business in our
defense markets remained stable, and our commercial markets
continued to advance. In particular, our commercial
communications business has recovered nicely from last year's
economic downturn, and demand for our military communications
products has remained strong. In our medical market, our
x-ray imaging business is growing again, our radiation therapy
business continues to be a solid performer and we are enjoying
robust demand for products to support MRI applications."
The company's net income results in the third quarter of fiscal
2010 included $3.6 million in
expenses related to its proposed merger with Comtech
Telecommunications Corp.; there were no such expenses recorded in
the same quarter of fiscal 2009. These merger-related
expenses, which were for non-recurring transaction costs, reduced
CPI's net income in the most recent quarter by approximately
$0.12 per share on a diluted
basis.
Excluding these non-recurring merger-related expenses, CPI's net
income totaled $6.5 million, or
$0.35 per share on a diluted basis,
in the third quarter of fiscal 2010, representing an increase from
the $3.9 million, or $0.22 per share on a diluted basis, generated in
the same quarter of the previous year. This increase was
primarily due to higher sales volume in the most recent quarter.
Including non-recurring merger-related expenses, CPI's net
income totaled $4.2 million, or
$0.23 per share on a diluted basis,
in the third quarter of fiscal 2010.
CPI generated total sales of $93.9
million in the third quarter of fiscal 2010, an increase
from the $82.5 million generated in
the prior year's third quarter. Sales were essentially
unchanged in the company's defense markets and increased in its
communications and medical markets.
During the first nine months of fiscal 2010, CPI booked orders
totaling $283 million, an increase
from the $271 million in orders
booked during the same period of the previous year. Orders
increased in all of the company's commercial markets but decreased
in its defense markets due to the timing of orders to support
certain radar and electronic warfare programs.
Third quarter adjusted EBITDA equaled $16.7 million, or 17.8 percent of sales, in
fiscal 2010. In the prior year's third quarter, adjusted
EBITDA totaled $14.4 million, or 17.5
percent of sales. This increase in adjusted EBITDA was
primarily due to higher sales volume in the most recent
quarter.
As of July 2, 2010, CPI's cash and
cash equivalents equaled $47.2
million. For the 12 month period ended on that day,
cash flow from operating activities totaled $32.3 million, or $1.82 per share on a diluted basis. Free
cash flow for the same period totaled $28.4
million, or $1.60 per share on
a diluted basis.
Fiscal 2010 Outlook
Excluding the impact of merger-related expenses, CPI expects its
fourth quarter results to be comparable to those of its third
quarter and continues to expect its fiscal 2010 financial results
to fall within its previously issued guidance ranges.
About CPI International, Inc.
CPI International, Inc., headquartered in Palo Alto, California, is the parent company
of Communications & Power Industries, Inc., a leading provider
of microwave, radio frequency, power and control solutions for
critical defense, communications, medical, scientific and other
applications. Communications & Power Industries, Inc.
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, free cash flow per share, free cash flow conversion
and adjusted free cash flow presented above and in the financial
information attached hereto are non-generally accepted accounting
principles (GAAP) financial measures. EBITDA represents
earnings before net interest expense, provisions for income taxes
and depreciation and amortization. Adjusted EBITDA represents
EBITDA further adjusted to exclude certain non-recurring or
non-cash 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. Free cash flow per share represents free
cash flow divided by average shares outstanding on a fully diluted
basis. Free cash flow conversion represents free cash flow
divided by net income, expressed as a percentage. Adjusted
free cash flow represents free cash flow further adjusted to
exclude certain non-recurring items. For more information
regarding these non-GAAP financial measures for the periods
presented and a reconciliation of these measures to GAAP financial
information, please see the attached financial information.
In addition, this press release and the attached financial
information are available in the investor relations section of the
company's Web site at http://investor.cpii.com.
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, free cash flow per share, free cash flow conversion
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, free cash flow per share, free cash flow conversion
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, free cash flow per share, free cash flow conversion and
adjusted free cash flow of other companies. Because EBITDA,
adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, free cash
flow, free cash flow per share, free cash flow conversion 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; the impact of a general slowdown in the global
economy; our significant amount of debt; changes or
reductions in the U.S. defense budget; currency fluctuations;
goodwill impairment considerations; U.S. government contracts laws
and regulations; changes in technology; the impact of unexpected
costs; 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.
|
CPI International,
Inc.
|
|
|
and Subsidiaries
|
|
|
|
|
CONDENSED
CONSOLIDATED
|
|
|
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
|
|
|
(in thousands, except per share
data - unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Nine Months Ended
|
|
|
|
July 2,
2010
|
July 3,
2009
|
July 2,
2010
|
July 3,
2009
|
|
|
Sales
|
$ 93,876
|
$ 82,520
|
$ 264,995
|
$ 241,569
|
|
|
Cost of sales
|
64,953
|
58,236
|
185,910
|
175,603
|
|
|
Gross profit
|
28,923
|
24,284
|
79,085
|
65,966
|
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
Research and
development
|
3,542
|
2,731
|
9,287
|
8,071
|
|
|
Selling and marketing
|
5,178
|
4,762
|
15,392
|
14,552
|
|
|
General and
administrative
|
6,373
|
5,073
|
18,560
|
15,537
|
|
|
Amortization of
acquisition-related intangible assets
|
688
|
691
|
2,062
|
2,076
|
|
|
Merger expenses
|
3,589
|
-
|
3,800
|
-
|
|
|
Total operating costs and
expenses
|
19,370
|
13,257
|
49,101
|
40,236
|
|
|
Operating income
|
9,553
|
11,027
|
29,984
|
25,730
|
|
|
Interest expense, net
|
3,780
|
4,204
|
11,516
|
12,965
|
|
|
Gain on debt
extinguishment
|
-
|
(51)
|
-
|
(248)
|
|
|
Income before income
taxes
|
5,773
|
6,874
|
18,468
|
13,013
|
|
|
Income tax expense
(benefit)
|
1,562
|
3,004
|
5,924
|
(2,201)
|
|
|
Net income
|
$
4,211
|
$
3,870
|
$
12,544
|
$
15,214
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net
of tax
|
|
|
|
|
|
|
Net unrealized (loss) gain on
cash flow hedges and
|
|
|
|
|
|
|
minimum pension liability
adjustment
|
(1,096)
|
3,346
|
(92)
|
84
|
|
|
Comprehensive income
|
$
3,115
|
$
7,216
|
$
12,452
|
$
15,298
|
|
|
|
|
|
|
|
|
|
Earnings per common share -
Basic
|
$
0.25
|
$
0.23
|
$
0.75
|
$
0.92
|
|
|
Earnings per common share -
Diluted
|
$
0.23
|
$
0.22
|
$
0.69
|
$
0.86
|
|
|
|
|
|
|
|
|
|
Shares used to compute earnings
per common share - Basic
|
16,631
|
16,362
|
16,534
|
16,316
|
|
|
Shares used to compute earnings
per common share - Diluted
|
17,961
|
17,535
|
17,787
|
17,402
|
|
|
|
|
|
|
|
|
CPI International,
Inc.
|
|
|
and Subsidiaries
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
|
(in thousands, except per share
data - unaudited)
|
|
|
|
|
|
|
|
|
|
|
July 2,
|
October 2,
|
|
|
|
|
2010
|
2009
|
|
|
Assets
|
|
|
|
|
Current Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$ 47,183
|
$ 26,152
|
|
|
Restricted cash
|
1,040
|
1,561
|
|
|
Accounts receivable,
net
|
43,433
|
45,145
|
|
|
Inventories
|
78,407
|
66,996
|
|
|
Deferred tax assets
|
10,485
|
8,652
|
|
|
Prepaid and other current
assets
|
4,321
|
6,700
|
|
|
|
Total current assets
|
184,869
|
155,206
|
|
|
Property, plant, and equipment,
net
|
54,650
|
57,912
|
|
|
Deferred debt issue costs,
net
|
2,607
|
3,609
|
|
|
Intangible assets,
net
|
73,218
|
75,430
|
|
|
Goodwill
|
162,225
|
162,225
|
|
|
Other long-term
assets
|
3,786
|
3,872
|
|
|
|
Total assets
|
$
481,355
|
$
458,254
|
|
|
|
|
Liabilities and stockholders’
equity
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
Accounts payable
|
$ 21,164
|
$ 22,665
|
|
|
Accrued expenses
|
27,955
|
19,015
|
|
|
Product warranty
|
4,830
|
3,845
|
|
|
Income taxes payable
|
3,608
|
4,305
|
|
|
Deferred income taxes
|
328
|
-
|
|
|
Advance payments from
customers
|
12,899
|
12,996
|
|
|
|
Total current
liabilities
|
70,784
|
62,826
|
|
|
Deferred income taxes,
non-current
|
23,997
|
24,726
|
|
|
Long-term debt
|
194,931
|
194,922
|
|
|
Other long-term
liabilities
|
2,009
|
2,227
|
|
|
|
Total liabilities
|
291,721
|
284,701
|
|
|
Commitments and
contingencies
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
Common stock ($0.01 par value,
90,000 shares
|
|
|
|
|
|
authorized; 17,016 and 16,807
shares issued;
|
|
|
|
|
|
16,810 and 16,601 shares
outstanding)
|
170
|
168
|
|
|
Additional paid-in
capital
|
79,257
|
75,630
|
|
|
Accumulated other comprehensive
income
|
506
|
598
|
|
|
Retained earnings
|
112,501
|
99,957
|
|
|
Treasury stock, at cost (206
shares)
|
(2,800)
|
(2,800)
|
|
|
|
Total stockholders’
equity
|
189,634
|
173,553
|
|
|
|
Total liabilities and
stockholders' equity
|
$
481,355
|
$
458,254
|
|
|
|
|
|
|
|
CPI International,
Inc.
|
|
|
and Subsidiaries
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
(in thousands -
unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
July 2,
|
July 3,
|
|
|
2010
|
2009
|
|
|
|
|
|
|
Cash flows from operating
activities
|
|
|
|
|
Net cash provided by operating
activities
|
$ 22,516
|
$ 20,308
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
Capital expenditures
|
(2,824)
|
(2,349)
|
|
|
Payment of patent application
fees
|
(36)
|
-
|
|
|
Net cash used in investing
activities
|
(2,860)
|
(2,349)
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
Repayments of debt
|
-
|
(12,358)
|
|
|
Proceeds from issuance of common
stock to employees
|
579
|
781
|
|
|
Proceeds from exercise of stock
options
|
214
|
82
|
|
|
Excess tax benefit on stock
option exercises
|
582
|
51
|
|
|
Net cash provided by (used in)
financing activities
|
1,375
|
(11,444)
|
|
|
|
|
|
|
Net increase in cash and cash
equivalents
|
21,031
|
6,515
|
|
|
Cash and cash equivalents at
beginning of period
|
26,152
|
28,670
|
|
|
Cash and cash equivalents at end
of period
|
$ 47,183
|
$ 35,185
|
|
|
|
|
|
|
Supplemental cash flow
disclosures
|
|
|
|
|
Cash paid for
interest
|
$
8,008
|
$
9,742
|
|
|
Cash paid for income taxes, net
of refunds
|
$
8,069
|
$
2,417
|
|
|
|
|
|
CPI International,
Inc.
|
|
|
and Subsidiaries
|
|
|
|
|
NON-GAAP SUPPLEMENTAL
INFORMATION
|
|
|
EBITDA and Adjusted
EBITDA
|
|
|
(in thousands -
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months Ended
|
|
|
|
|
|
July 2,
|
|
July 3,
|
|
July 2,
|
|
July 3,
|
|
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
Net income
|
|
|
$ 4,211
|
|
$ 3,870
|
|
$ 12,544
|
|
$ 15,214
|
|
|
Depreciation and
amortization
|
|
|
2,768
|
|
2,703
|
|
8,253
|
|
8,080
|
|
|
Interest expense, net
|
|
|
3,780
|
|
4,204
|
|
11,516
|
|
12,965
|
|
|
Income tax expense
(benefit)
|
|
|
1,562
|
|
3,004
|
|
5,924
|
|
(2,201)
|
|
|
EBITDA
|
|
|
12,321
|
|
13,781
|
|
38,237
|
|
34,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to exclude certain
non-recurring or non-cash items:
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
expense
|
(1)
|
|
782
|
|
702
|
|
2,300
|
|
2,024
|
|
|
Gain on debt
extinguishment
|
(2)
|
|
-
|
|
(51)
|
|
-
|
|
(248)
|
|
|
Merger expenses
|
(3)
|
|
3,589
|
|
-
|
|
3,800
|
|
-
|
|
|
Total adjustments
|
|
|
4,371
|
|
651
|
|
6,100
|
|
1,776
|
|
|
Adjusted EBITDA
|
|
|
$ 16,692
|
|
$ 14,432
|
|
$ 44,337
|
|
$ 35,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin
|
(4)
|
|
13.1%
|
|
16.7%
|
|
14.4%
|
|
14.1%
|
|
|
Adjusted EBITDA
margin
|
(5)
|
|
17.8%
|
|
17.5%
|
|
16.7%
|
|
14.8%
|
|
|
Net income margin
|
(6)
|
|
4.5%
|
|
4.7%
|
|
4.7%
|
|
6.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents a non-cash charge
for stock options, restricted stock awards, restricted stock unit
awards and the employee discount related to CPI’s Employee Stock
Purchase Plan.
|
|
|
(2) For the three month and nine
month periods ended July 3, 2009, respectively, represents the
following related to repurchase of $5.0 million and $8.0 million of
8% Senior Subordinated Notes at a discount of 2.75% and 4.9%:
$0.137 million and $0.392 million discount, partially offset by
$0.086 million $0.144 million write-off of unamortized deferred
debt issue costs.
|
|
|
(3) Represents transaction costs
in connection with the proposed merger with Comtech, including fees
for investment bankers, attorneys and other professional
services.
|
|
|
(4) Represents EBITDA divided by
sales.
|
|
|
(5) Represents adjusted EBITDA
divided by sales.
|
|
|
(6) Represents net income
divided by sales.
|
|
|
|
CPI International,
Inc.
|
|
|
and Subsidiaries
|
|
|
|
|
NON-GAAP SUPPLEMENTAL
INFORMATION
|
|
|
Free Cash Flow, Adjusted Free
Cash Flow, Free Cash Flow Conversion
|
|
|
and Free Cash Flow per
Share
|
|
|
(in thousands, except per share
and percent data - unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
|
|
|
|
|
|
July 2,
|
|
|
|
|
|
2010
|
|
|
Net cash provided by operating
activities
|
|
|
$
32,322
|
|
|
Capital expenditures
|
|
|
$
(3,840)
|
|
|
Payment of patent application
fees
|
|
|
(36)
|
|
|
Free cash flow
|
|
|
28,446
|
|
|
|
|
|
|
|
|
Adjustments to exclude certain
non-recurring items:
|
|
|
|
|
|
Cash paid for prior year
transfer pricing audit
|
(1)
|
|
1,598
|
|
|
Cash paid for merger expenses,
net of taxes
|
(2)
|
|
352
|
|
|
Total adjustments
|
|
|
1,950
|
|
|
Adjusted free cash
flow
|
|
|
$
30,396
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
|
$
28,446
|
|
|
Net income
|
|
|
$
20,796
|
|
|
Free cash flow
conversion
|
(3)
|
|
137%
|
|
|
|
|
|
|
|
|
Free cash flow per
share
|
(4)
|
|
$
1.60
|
|
|
|
|
|
|
|
(1) Represents a payment made to
the Canada Revenue Agency (“CRA”) related to an audit of
Communications & Power Industries Canada Inc.’s (“CPI Canada”)
income tax returns for fiscal years 2001 and 2002. CPI Canada has
received a tax assessment, including interest expense, from the CRA
for fiscal years 2001 and 2002, based on tax deductions related to
the valuation of the Satcom business, which was purchased by CPI
Canada from Communications & Power Industries, Inc. in fiscal
years 2001 and 2002. While the Company believes it has meritorious
defenses and is in the process of pursuing these defenses, certain
payments are required to be made in the meantime. The Company
considers this a non-recurring use of cash as it pertains to
previous years.
|
|
|
(2) Represents cash paid for
transaction costs in connection with the proposed merger with
Comtech, including fees for investment bankers, attorneys and other
professional services, net of income taxes.
|
|
|
(3) Represents free cash flow
divided by net income, expressed as a percentage.
|
|
|
(4) Represents free cash flow
divided by the simple average of the last four fiscal quarters’
“Shares used to compute earnings per share: Diluted.” The simple
average of the last four fiscal quarters’ “Shares used to compute
earnings per share: Diluted” is 17,732,000 shares.
|
|
|
SOURCE CPI International, Inc.
Copyright . 11 PR Newswire