What changed in this filing

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Item 1. Business

2024-04-08 compared with 2023-04-14 · 99 added, 163 removed, 483 unchanged (35% of the section changed)

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Aero has over 43 years of experience as a contractor.

Our team possesses extensive technical expertise and program management

and integration capabilities.

Our competitive advantage lies in our ability to offer large contractor capabilities with the flexibility

and responsiveness of a small company, while staying competitive in cost and delivering superior quality products.

Our team possesses extensive technical expertise, program and supply chain

management, and integration capabilities.

Our competitive advantage lies in our ability to offer large contractor capabilities

with the flexibility and responsiveness of a small company, while staying competitive in cost and delivering superior quality

maintain a website located at www.cpiaero.com .

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The contents of our website are not incorporated in or otherwise to be regarded as a part of this Annual Report

on Form 10-K.

and started as a technical consulting firm on January 11, 1980, within a few years, Composite Products International Inc.

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the 1990s, CPI became a publicly traded company and changed its name to CPI Aerostructures, Inc.

The company continued to grow,

both in size and in its business.

Government contracts served as the mainstay of CPI Aero’s business, and the Company

continued to grow its presence in the commercial market as well.

Commitment to customer satisfaction and pride in a job well done

propelled CPI Aero to the forefront as a reputable and hardworking supplier to OEMs.

(“CPI Aero”).

Company continued to grow, both in size and in its business.

Government contracts served as the mainstay of CPI Aero’s

business, and the Company continued to grow its presence in the commercial market as well.

Commitment to customer satisfaction

and pride in a job well done propelled CPI Aero to the forefront as a reputable and hardworking supplier to OEMs.

September 5, 2000, CPI Aero shares were listed on the American Stock Exchange (now known as NYSE American).

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employees, and our commitment to providing our customers the full-service solution they require.

offer design, engineering, manufacture, build, maintenance, repair and overhaul (“MRO”) services, and supply chain

and kitting services capabilities to the aerospace and defense industry as follows:

offer design, engineering, manufacture, build, MRO services, and supply chain and kitting services capabilities to the A&D

industry as follows:

● Aerostructures:

Production and Repair/Overhaul of Fielded Wing Structures and other Control Surfaces, Rudder Island, Engine

Inlets/Nacelles, Engine Exhaust Manifolds, Aircraft Doors and Windows, Aircraft Steps and Racks, and other Aircraft Secondary

New Production and Repair/Overhaul of Fielded Wing Structures and other Control

Surfaces, Rudder Island, Engine Inlets/Nacelles, Engine Exhaust Manifolds, Aircraft Doors

and Windows, Aircraft Steps and Racks, and other Aircraft Secondary Structures

● Aerosystems:

Pod Structures and Integration of Internal Systems, Radar Housing Structures, Panel Assemblies, Mechanical Door Locking

Systems, and Canopy Lifting Systems

Airborne Pod Structures and Integration of Internal Systems, Radar Housing Structures,

Panel Assemblies, Mechanical Door Locking Systems, and Canopy Lifting Systems

Diameter Tube Bending:

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a build-to-print structural component manufacturer, CPI Aero’s engineering focus is on executing customer contracts through

product realization, and to support collaborative design development using design for manufacturing and assembly, geometric dimensioning & tolerancing (“GD&T”), and tooling concept support.

Although not vertically integrated, CPI Aero has a deep

well of experience on various types of detail part manufacturing that allows us to provide detailed design for manufacturing input

during the design refinement process.

product realization, and to support collaborative design development using design for manufacturing and assembly (“DFMA”),

geometric dimensioning & tolerancing (“GD&T”), and tooling concept support.

Although not vertically

integrated, CPI Aero has a deep well of experience on various types of detail part manufacturing that allows us to provide detailed

design for manufacturing input during the design refinement process.

have significant experience working in a full model-based definition environment, both CATIA and NX, due to our long sustainment

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per customers’ requests.

Aero is capable and has experience in designing all types of assembly type tools up to and including large floor mounted, articulated

Aero is capable and has experience in designing many types of assembly type tools up to and including large floor mounted, articulated

tooling at high levels of precision.

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Understanding our customers’ product performance needs and combining product GD&T layout and final tooling

definitions and requirements helps us ensure product realization success.

definitions and requirements helps us maximize product realization success.

CPI Aero’s engineering team is dedicated to providing our customers an experience where our activities are an extension

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trust over many years and multiple programs.

We also intend to add resources to our business development function to cultivate

We have also added additional resources to our business development function to cultivate

new relationships with new customers.

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and commercial aircraft manufacturers.

Within respect to Aerostructures products, we often compete against much larger Tier 1

suppliers, such as Triumph Group, Spirit Aerosystems, Kaman Aerospace, GKN Aerospace, Ducommun, and LMI Aerospace.

that we can compete effectively with these larger companies by delivering products with the same level of quality and performance

at a better value for our customer.

With respect to Aerosystems products, such as our portfolio of EW and ISR integrated pod structures,

we find more limited competition and are not aware of competition from any of the Aerostructures companies mentioned above.

these cases, we typically compete with the internal manufacturing arm of our customers.

We believe our unique skills related to

integrated pod structures combined with a very efficient and generally much lower cost structure create a competitive advantage

for bidding on Aerosystems contracts.

With respect to Aerostructures products, we often compete against much larger Tier 1 suppliers,

such as Triumph Group, Spirit Aerosystems, Kaman Aerospace, GKN Aerospace, Ducommun, and LMI Aerospace.

We believe that we can

compete effectively with these larger companies by delivering products with the same level of quality and performance at a better

value for our customer.

With respect to Aerosystems products, such as our portfolio of EW and ISR integrated pod structures, we

find more limited competition and are not aware of competition from any of the Aerostructures companies mentioned above.

cases, we typically compete with the internal manufacturing arm of our customers.

We believe our unique skills related to integrated

pod structures combined with a very efficient and generally much lower cost structure create a competitive advantage for bidding

on Aerosystems contracts.

certain unrestricted contracts for the U.S.

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OEM customers in the defense sector include leading prime defense contractors such as:

Lockheed Martin

Corporation - we provide products used in the production of Lockheed Martin Corporation’s (“Lockheed Martin”)

F-35 Joint Strike Fighter and an international variant of the F-16 Falcon.

We also provide structural assemblies to Sikorsky,

a Lockheed Martin company (“Sikorsky”), for many of their military helicopter platforms including the UH-60 BLACK

HAWK©, CH-53E and CH-53K, and a special purpose helicopter;

Raytheon Technologies

Corporation - we provide products to three business divisions of Raytheon Technologies Corporation (“Raytheon”):

Intelligence and Space (Next Generation Jammer – Mid-Band pod), Missiles & Defense (missile wing and Evolved Sea

Sparrow missile launcher controller) and Collins Aerospace (intelligence, surveillance, and airborne reconnaissance pods);

Company - we provide critical wing structure for The Boeing Company’s (“Boeing”) A-10 re-wing program

and welded structures for the CH-47 Chinook helicopter;

Northrop Grumman

Corporation – we provide structural components and kits for the Northrop Grumman Corporation (“NGC”)

E-2D Advanced Hawkeye, various integrated radar and laser pod structures, welded tubes, and welded fluid tanks for a classified

Martin Corporation - we provide products used in the production of Lockheed Martin

Corporation’s (“Lockheed Martin”) F-35 Joint Strike Fighter and an

international variant of the F-16 Fighting Falcon.

We also provide structural assemblies

to Sikorsky, a Lockheed Martin company (“Sikorsky”), for many of their military

helicopter platforms including the UH-60 BLACK HAWK©, CH-53E and CH-53K, and a special

purpose helicopter;

Corporation, formerly Raytheon Technologies – we provide products to two

business divisions of RTX Corporation:

Raytheon (Next Generation Jammer – Mid-Band

pod, Advanced Tactical Pods, Intelligence, Surveillance and Airborne Reconnaissance Pods,

Missile Wings and Components, and Radar Racks) and Collins Aerospace (RF Enclosures);

Boeing Company - we provide critical wing structure for The Boeing Company’s

(“Boeing”) A-10 re-wing program and welded structures for the CH-47 Chinook

Grumman Corporation – we provide structural components and kits for the

Northrop Grumman Corporation (“NGC”) E-2D Advanced Hawkeye, various integrated

radar and laser pod structures, welded tubes, and welded fluid tanks for a classified

and 82% of our revenue in 2023 and 2022, respectively, was generated by subcontracts with defense prime contractors.

OEM customers in the civil aviation market include:

Executive Jets – we provide engine inlet assemblies for Embraer S.A.’s (“Embraer”) Phenom

300 business jet;

Aircraft Company – until recently, we provided a critical structure used to produce the wing of Gulfstream Aircraft

Company’s large cabin executive business jets, including the flagship G650ER, the G700, and the recently announced G800.

This contract ended in 2022.

Executive Jets – we provide engine inlet assemblies for Embraer S.A.’s

(“Embraer”) Phenom 300 business jet.

and 7% of our revenue in 2023 and 2022, respectively, was generated by commercial contract sales.

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program through December 31, 2023 exceed $209 million.

We anticipate shipping against these orders into 2025.

addition, in 2015 we won an award to supply structural components and kits for the Wet Outer Wing Panel (“WOWP”) on

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to be in excess of $20 million.

CPI completed deliveries in support of this contract in 2023.

February 2020, the Company’s subsidiary WMI received approximately $4 million in purchase orders from NGC to produce numerous

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140 different items in support of the production of at least 25 E-2D aircraft.

The period of performance was through December

31, 2022 with strong potential for follow-on orders.

CPI received follow-on orders for additional quantities

of welded products in 2023 and anticipates additional orders in 2024.

Next Generation Jammer – Mid-Band Pod (“NGJ-MB”):

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LRIP III, for which

the Company was awarded an order of approximately $14.0 million in October 2022, is estimated to be a greater than $25 million

the Company was awarded an order of approximately $14.0 million in October 2022, and later definitized at $32.5 million.

2023, RTX issued a Memorandum for Record for Lot4 with an anticipated Program Value of $32 million and an initial funding limit

of $16 million.

We believe that the total value of the NGJ-MB program through production will be in excess of $210 million through

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purchasing the F-35 via foreign military sales agreements with the DOD.

Company has two significant contracts for products used on the F-35.

In 2015, CPI Aero was awarded a multi-year contract to supply

four different lock assemblies for the arresting gear door on the F-35C Carrier Take Off and Landing variant.

CPI Aero made its

first delivery under that contract in May 2017.

In 2018, the Company received a new long-term agreement valued at approximately

$8 million for lock assemblies to be delivered between 2020 and 2024.

In November 2017, CPI Aero was awarded an additional $15.8

million multi-year contract to manufacture canopy activation drive shaft assemblies for the F-35A, F-35B, and F-35C variants.

2015, CPI Aero was awarded a multi-year contract to supply four different lock assemblies for the arresting gear door on the F-35C

Carrier Take Off and Landing variant.

CPI Aero made its first delivery under that contract in May 2017.

In 2018, the Company received

a new long-term agreement valued at approximately $8 million for lock assemblies to be delivered between 2020 and 2024.

2017, CPI Aero was awarded an additional $15.8 million multi-year contract to manufacture canopy activation drive shaft assemblies

for the F-35A, F-35B, and F-35C variants.

“BLACK HAWK”:

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$9.2 million and in November 2022, the Company announced another follow-on order for these assemblies for $4 million.

value of the RI/DCC program multi-year contract is approximately $25 million.

the strength of Lockheed Martin’s international sales forecast for the F-16, we believe a follow-on to the existing multi-year

contract is possible.

28, 2023 CPI announced the receipt of a 2nd Multiyear long-term agreement with not-to-exceed funding of $34.4M.

The total value

of the RI/DCC program, including both multi-year contracts is approximately $59.3 million.

King Stallion:

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addition, the Company also manufactures welded tubes for the CH-53K as a Tier 1 supplier to Sikorsky.

As of December 31, 2022,

the total value of orders received was $0.8 million.

These tubes will also be required for the multi-year on this program.

of this statement of work also includes CPI Aero intellectual property.

In August 2023, CPI received

a Long-term Agreement with a ceiling price of $17.4 million and a funding limit of $7.3 million.

These tubes will be required

for the multi-year on this program.

A component of this statement of work also includes CPI Aero intellectual property.

Pod Structure:

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The undisclosed pod structure is currently under development.

2021, the Company announced that Raytheon awarded the Company an approximately $6 million contract modification that changes the

scope of work the Company would perform and increases the quantity of pods to be produced.

2021, the Company announced that Raytheon awarded the Company an approximately $6.1 million contract modification that changes

the scope of work the Company would perform and increases the quantity of pods to be produced.

The program value as of December

31, 2023 was $8.4 million.

In 2018, the Company started production of a welded tank for NGC for an undisclosed application on an undisclosed

The total value of orders received as of December 31, 2022 is approximately $3.2 million.

The total value of orders received as of December 31, 2023 is $3.2 million.

In late 2021, the Company received an initial purchase order from Raytheon to manufacture radar rack structures

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services, development of assembly tooling, and the production of the initial units.

The Radar Rack structure is currently under

development with initial delivery expected in 2023.

We believe the potential total value of the program to be approximately $20.0

The non-recurring and tooling phase of the

program was completed and the initial 11 racks will be delivered in 2024.

Aircraft – Prime Contracts with U.S.

“Fighting Falcon”:

Since 2014, we have been a prime contractor to the DLA to provide structural wing components

and logistical support for global F-16 aircraft MRO operations.

Through December 31, 2022, we had received almost $15 million

in orders on this program.

Pacer Classic III, Phase 2:

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million from the USAF to provide structural modification kits for the PC III aircraft structural modification program.

December 31, 2022, we have received approximately $23 million in orders on this program.

Pacer Classic III, Phase 3 and TRIM:

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and in 2021, the Company announced it had received three separate orders for additional requirements valued at approximately $16.2

In addition, CPI Aero received orders valued at approximately $2.3 million in 2022, bringing total orders under this

long term contract to approximately $34 million.

Through December 2023, CPI has received funded orders under this long term agreement totaling $48.3 million.

Aircraft – Subcontracts with Prime Contractors

The Phenom 300 is a twin-engine, executive jet produced by Brazilian aircraft company Embraer that can carry

between six and 10 passengers and a crew of two.

between six and ten passengers and a crew of two.

We have been producing engine inlet assemblies for Embraer under a long-term

agreement we entered into in 2012.

We have received approximately $49 million in orders on this program through December 31, 2022.

We estimate the potential value of the program to be in excess of $56 million.

G650/G650ER/G700 :

The Gulfstream G650 is a twin-engine business jet airplane produced by Gulfstream

Aerospace that can be configured to carry from 11 to 18 passengers.

Gulfstream began the G650 program in 2005 and revealed it

to the public in 2008.

The G650 is Gulfstream’s largest and fastest business jet.

The G650ER is an extended range version

of the aircraft.

In 2020, Gulfstream announced the launch of a new derivative the G700.

In March 2008, Spirit AeroSystems, Inc.

awarded us a contract to provide fixed leading edges for the Gulfstream G650 business jet, and derivative models, a commercial

program that Spirit was supporting.

In December 2014, Spirit transferred its work-scope on this program to Triumph Group.

to the impact of the COVID-19 pandemic, in May 2020, Triumph Group cancelled nearly all open orders with the Company.

2020, Triumph Group announced it had reached an agreement in principle to sell the G650 wing program to Gulfstream Aerospace,

and on June 12, 2020, we received a joint communication from Gulfstream Aerospace and Triumph Group that stated Gulfstream’s

intention to continue to purchase G650 wing components from the Company.

Since October of 2020, we received purchase orders directly

from Gulfstream for wing components for use on the G650, G650ER and/or G700 aircraft valued at approximately $4 million.

completed deliveries to Gulfstream in 2022.

In January 2024, we celebrated the delivery of the 800th Shipset of Inlets.

In 2023, we received

funded orders totaling $4.4 million.

produce custom assemblies pursuant to long-term contracts and customer purchase orders.

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the full value of our contracts.

total backlog at December 31, 2022 is primarily comprised of long-term programs with Raytheon (NGJ-MB;

Advanced Tactical Pods,

B-52 Radar Rack), USAF (T-38), Boeing (A-10), Sikorsky (UH-60 and CH-53K), NGC (E-2D), Lockheed Martin (F-16;

F-35), Collins Aerospace

(MS-110 and TacSAR pods) and Embraer (Phenom 300).

Funded backlog is primarily from purchase orders under long-term contracts

with the USAF (T-38), Boeing (A-10), Sikorsky (UH-60), Raytheon (NGJ-MB, Advanced Tactical Pods, B-52 Radar Rack), Lockheed Martin

F-35), NGC (E-2D), Collins Aerospace (MS-110 and TacSAR pods) and Embraer (Phenom 300).

total backlog at December 31, 2023 is $513,351,000.

total backlog as of December 31, 2023 and 2022 was as follows:

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Approximately

98% of the total amount of our backlog at both December 31, 2022 and 2021 was attributable to government contracts.

97% and 98% of the total amount of our backlog at December 31, 2023 and 2022 was attributable to government contracts.

attributable to government contracts at December 31, 2023 and 2022 was as follows:

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we believe that the loss of any single supplier would not have a material adverse effect on our business.

Coronavirus Pandemic Impact on Our Business

outbreak of the COVID-19 coronavirus was declared a pandemic by the World Health Organization during our first quarter of 2020.

During the latter part of that quarter and subsequent to that quarter end, the COVID-19 pandemic grew, causing non-essential businesses

to shut down and many people to observe the shelter-in-place directive from our state government.

Our business and operations

and the industries in which we operate have been impacted by public and private sector policies and initiatives in the U.S.

address the transmission of COVID-19, such as the imposition of travel restrictions and the adoption of remote work.

pandemic has contributed to a general slowdown in the global economy, continued supply chain challenges and an adverse impacts

to the businesses of certain of our customers and suppliers.

During 2020 in response to the COVID-19 impact on our business, we

took actions to preserve capital and protect the long-term needs of our businesses, including negotiating progress payments with

our customers and reducing discretionary spending.

2021 and 2022, we continued to follow and adapt measures implemented in 2020 in an attempt to reduce the adverse effects of COVID-19

on our business, workplace and workforce.

For example, we have curtailed discretionary spending and business travel, and taken

other steps to preserve cash.

We have also taken action to more closely manage the flow of materials to be more responsive to

unanticipated changes in customer delivery schedules.

Since May 2021, we have experienced a decrease in the impact of COVID-19.

However, we do continue to experience employees and business partners with new COVID-19 diagnoses on an intermittent basis and

we take needed steps to mitigate these impacts on the Company’s operation as they occur.

more information on the current and potential impact of the COVID-19 pandemic on our business, see Risk Factors included in Part

I, Item 1A of this Annual Report on Form 10-K

Environmental

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of innovation and continuous improvement throughout our organization.

We continue to pursue opportunities that enable us to build

our talent pipeline, particularly for skilled labor, including running an apprentice training program several times over the course

of the year and forging relationships with local high school and trade schools.

attract and compensate our employees by offering a competitive total rewards package which includes benefits, resources, and programs

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to cultivate the pipeline of talent needed to operate our business.

response to the COVID-19 pandemic, we began allowing employees to work from home and made changes to shift work to promote social

distancing among our manufacturing personnel.

We are implementing a continuing work from home program to provide our employees

with flexibility and a competitive work benefit.

We are prepared to implement shift changes should an uptick in COVID-19 require

such a response.

the first quarter of 2022, the Company implemented a cost reduction initiative designed to improve operational efficiency and

reduce costs during fiscal year 2022.

Management has reallocated resources and reduced operating and general administrative expenses

to more properly align the Company’s costs to revenue given the timing differences between the conclusion of certain mature

programs and the commencement of new programs in 2022.

In connection with the cost reduction initiative, the Company executed

a headcount reduction and furlough action in March 2022 and implemented cost controls and cuts during the balance of fiscal year

The Company recorded severance costs related to the headcount reduction in its first fiscal quarter of 2022 and the cost

reductions of these actions positively impacted the financial results of the Company beginning in the second fiscal quarter of

and Inclusion

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onboarding processes.

Over the last two years, we have increased diversity on our board of directors by 16% and executive management

Over the last year, we have increased diversity on our board of directors to 29% up from 17% in 2022.

executive management team is comprised of 40% diverse employees.

our total employee population and based on employees who self-identify, as of December 31, 2023, approximately 21% of our workforce

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This includes, hosting educational experiences and shop

tours with high school and trade school classes, participating in career development fairs and other industry events, and offering

internship and apprenticeship opportunities for students from local trade schools.

In addition to educational involvement, members

of our leadership team participate on the boards of the local aviation college and trade associations that support and advance

the interests of the local community.

tours with high school and trade school classes.

Members of our leadership team participate on the boards of the local aviation

college and trade associations that support and advance the interests of the local community.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business