CPI International Announces Third Quarter 2011 Financial Results
PALO ALTO, Calif., Aug. 15, 2011 /PRNewswire/ -- CPI International Holding Corp., the parent company of CPI International, Inc., today announced financial results for the third quarter of fiscal 2011 ended July 1, 2011. CPI International, Inc. is the parent company of Communications & Power Industries LLC (CPI). These financial results have also been posted to the SEC Filings & Periodic Reports page in the News & Events section of CPI's Web site at www.cpii.com.
In comparison to the same periods of fiscal 2010, CPI:
- Increased third quarter sales by 11 percent;
- Increased year-to-date orders by seven percent and sales by nine percent, generating a book-to-bill ratio of 1.05; and
- Increased third quarter EBITDA by 17 percent, or $2.1 million. Net income decreased by $6.0 million due to the impact of expenses related to the acquisition of CPI by The Veritas Capital Fund IV, L.P. in February 2011.
"It has been a momentous year for CPI," said Joe Caldarelli, chief executive officer. "We refinanced and sold the company to Veritas Capital, aligning ourselves with an excellent private equity partner that has a deep expertise in our markets and a thorough understanding of our business. At the same time, we won significant new business in our defense markets, maintained strong business in our commercial and military communications markets and enjoyed an uptick in our industrial market. Our medical market was adversely affected by the irregularity of our MRI orders and sales, but our underlying medical business remains stable and in good condition. As a result, our third quarter sales were the highest in CPI's history and our backlog is near record levels."
In the third quarter of fiscal 2011, CPI generated total sales of $104.2 million, an increase from the $93.9 million in sales generated in the same quarter of the previous year and the first time in the company's history that CPI has achieved a quarterly sales level in excess of $100 million. Sales increased 33 percent in CPI's defense markets, were essentially unchanged in the communications market and decreased six percent in the medical market. The substantial increase in defense market sales was due to increased sales to support a new counter-improvised explosive device (counter-IED) program for which CPI began production shipments in the most recent quarter. Third quarter sales for this program, which is expected to be completed in fiscal 2011, were $13.9 million.
During the first nine months of fiscal 2011, CPI's orders totaled $302 million, an increase from the $283 million in orders booked during the prior year's period. Orders increased 25% in CPI's defense markets, were essentially unchanged in its communications market and decreased six percent in its medical market. The significant increase in defense orders resulted from increased orders to support the new counter-IED program as well as the Aegis weapons system.
Net loss in the third quarter of fiscal 2011 equaled $1.8 million, a decrease from the $4.2 million in net income recorded in the third quarter of the prior year. This decrease in net income was primarily due to an increase in expenses related to the February 2011 acquisition of CPI by Veritas Capital, including higher amortization, depreciation and other expenses resulting from the application of purchase accounting and the non-deductibility of certain acquisition-related expenses for income tax purposes, as well as higher interest expenses due to the refinancing of the company in connection with the acquisition.
CPI generated $14.4 million in EBITDA in the third quarter of fiscal 2011, an increase from the $12.3 million in EBITDA generated in the prior year's third quarter. CPI generated adjusted EBITDA of $19.5 million, or 18.7 percent of sales, in the most recent quarter, an increase as compared to the $16.7 million, or 17.8 percent of sales, in adjusted EBITDA recorded in the prior year's third quarter. These increases in EBITDA and adjusted EBITDA mainly resulted from higher sales volumes and the related improvements in gross profit and operating efficiencies.
As of July 1, 2011, CPI's cash and cash equivalents totaled $31.9 million. For the 12 month period ended July 1, 2011, cash flow from operating activities and free cash flow equaled $8.9 million and $2.3 million, respectively. Adjusted free cash flow for the same period was $27.8 million.
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, provisions for income taxes and depreciation and amortization. Adjusted EBITDA represents EBITDA further adjusted to exclude certain non-recurring, non-cash or other unusual 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 or other unusual 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.
SOURCE CPI International, Inc.; CPI International Holding Corp.