Benzinga | Nov 17, 2021 04:38PM EST

CPI Aerostructures Offers Update On Restatement of Results

- Plans to File Comprehensive Form 10-K/A That Includes Restated Results for 2020 and 2019 -

- 2020 Restated Net Income Expected to Be In Line With Previously Disclosed Estimates -

- 2020 Net Income Lower Than Previously Reported on Form 10-K by $2.3 million -

- 2019 Net Income Expected to Be Lower Than Previously Reported on Form 10-K by $2.3 million -

- No Expected Impact on Reported Revenue and Cash Flows for 2020 or 2019 -

EDGEWOOD, N.Y., Nov. 17, 2021 (GLOBE NEWSWIRE) -- CPI Aerostructures, Inc. ("CPI Aero(r)" or "Company") (NYSE:CVU) today provided an update on the restatement of its financial results.

On June 7, 2021, the Company announced it needed to restate its full year and quarterly 2020 financial statements due to errors in such financial statements relating to the recording and reporting of inventory costing and related internal controls (the "Inventory Costing Errors"). At the time of the June 2021 disclosure, the Company estimated and disclosed that the Inventory Costing Errors were expected to lower 2020 net income reported in the Annual Report on Form 10-K for the year ended December 31, 2020 by $1.9 million to $2.3 million. The Company now estimates that the Inventory Costing Errors are expected to reduce 2020 net income by approximately $2.0 million.

The correction of the Inventory Costing Errors resulted in the determination that certain contracts were in a loss position and certain inventory items required additional reserves. The Company reevaluated the sufficiency of its provisions for loss contracts and inventory reserves that it had previously recorded and concluded that increases to these reserves were required. The insufficient reserves resulting from such reserve increases are referred to as "Insufficient Reserves." It was further determined by management that the appropriate starting point for increasing the Insufficient Reserves was at the end of the fourth quarter of 2019. Therefore, the Company has determined that its 2019 financial results as previously reported in its Annual Report on Form 10-K for the year ended December 31, 2019 will also be restated.

Considering both the Inventory Costing Errors and the Insufficient Reserves, the Company currently estimates that the net income for the years ended December 31, 2020 and December 31, 2019 will be approximately $2.3 million and $2.3 million, respectively, less than the net income reported in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The Inventory Costing Errors and the Insufficient Reserves affect the income reported with respect to the Company's product lines for which revenue is recognized when a product ships to customers, which accounted for approximately 15% of total 2020 revenue (the "Non-POC Contracts"). The Inventory Costing Errors and Insufficient Reserves did not affect income reported with respect to the Company's products for which revenue is recognized over time using percentage of completion accounting (the "POC Contracts"). The Inventory Costing Errors and the Insufficient Reserves did not affect either prior reported revenue or cash flow for fiscal years 2020 and 2019.

At this time, the Company has not fully completed its review and the expected financial impact of the Inventory Costing Errors and the Insufficient Reserves described above is preliminary and subject to change. The Company expects to restate its annual financial statements as of and for the years ended December 31, 2020 and December 31, 2019, and correct its unaudited restated quarterly financial statements as of and for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 by amending its Annual Report on Form 10-K for the year ended December 31, 2020, by filing a comprehensive Annual Report on Form 10-K/A as soon as practicable.

For further details, please read the Current Report filed by the Company on November 17, 2021 on Form 8-K.