Greetings, and welcome to the CPI Aerostructures Fourth Quarter and Full Year 2015 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sanjay Hurry, Investor Relations. Thank you, Mr. Hurry. You may begin.

Thank you, Michelle. Good morning, everyone, and welcome to CPI Aerostructures' Fourth Quarter and Full Year 2015 Results Conference Call. With us on the call today are Doug McCrosson, President and Chief Executive Officer; and Vincent Palazzolo, CFO. After management's prepared remarks, there will be a Q&A session. As a reminder, this conference call will contain forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. Included in these risks are the government's ability to terminate their contracts with the company at any time; the government's ability to reduce or modify its contracts if its requirements or budgetary constraints change; the government's right to suspend or bar the company from doing business with them; as well as competition in the bidding process for both government and subcontracting contracts. Subcontracting customers also have the ability to terminate their contracts with the company if it fails to meet the requirements of those contracts or if their customer reduces or modifies its contracts due to budgetary constraints. Given these uncertainties, listeners are cautioned not to place undue reliance on any forward-looking statements contained in this conference call. Additional information concerning these and other risks can be found in filings with the SEC. With that, I'd like to hand the call over to Douglas McCrosson, CPI Aero's President and Chief Executive Officer. Good morning, Doug.

Good morning, and thank you, Sanjay, and thank you for joining us for our fourth quarter and fiscal full year 2015 results conference call. Our results for the fourth quarter and full year were issued earlier this morning prior to the opening of the market. A copy of our earnings press release and PowerPoint presentation that accompanies this call are available for download at the Investor Relations section of the CPI Aero website. To start, let me provide some context on the past year. Entering 2015, we were coming out of a very challenging 2014 when we were buffeted by the twin headwinds of the Budget Control Act and the Department of Defense's decision to retire the Air Force's fleet of A-10. At the time, the A-10 Wing Replacement Program contract with Boeing was one of our largest revenue-generating defense programs. Based on the facts at that time, we took a substantial noncash charge in 2014 that resulted in a revenue decline of 52% and a loss of $2.98 per share. As we began 2015, we focused management attention on cost cutting, both indirect costs and production costs as we simultaneously sought to diversify our customer base, grow our defense prime contractor business and recast CPI Aero as a value-added manufacturing enterprise capable of managing complex aerospace production and supply chain management programs. We decided to place greater sales emphasis on the defense market while narrowing the aperture of our commercial aviation business to regional and business jet opportunities that we believe are better aligned with our corporate capabilities, capital structure and return on investment goals. Finally, we enhanced our MRO or maintenance repair and overhaul services. Fast-forward to today, and I believe that we have improved our business during 2015 by every measure: strategically, operationally and financially. We enter…

Thank you, Doug. As Doug previously noted, we are reporting record revenue for both the fourth quarter and full year 2015. As detailed on Slide 8, revenue for the fourth quarter of 2015 was $31.6 million compared to $21.5 million in the fourth quarter of 2014. Gross profit for the fourth quarter of 2015 was $3.6 million on gross margins of 11.3% compared to $4.5 million on gross margin of 21.4% in the fourth quarter of 2014. Income from operations for the fourth quarter of 2015 was $1.9 million compared to $2.7 million in the fourth quarter of 2014. Net income for the fourth quarter of 2015 was $0.7 million or $0.08 per diluted share compared to $1 million or $0.20 per diluted share in the fourth quarter of 2014. For the full year, revenue for 2015 was $100.2 million compared to $39.7 million in 2014. Gross profit for fiscal 2015 was $16.6 million on gross margin of 16.6% compared to a loss of $29.7 million on negative gross margin of 74.8% in fiscal 2014. Income from operations for fiscal 2015 was $9 million compared to a loss of $37 million for fiscal 2014. Income -- net income for fiscal 2015 was $5 million or $0.58 per diluted share compared to a net loss of $25.2 million or $2.98 per diluted share in fiscal 2014. Our fourth quarter and fiscal 2015 financial results reflect both a higher-than-anticipated effective tax rate and was adversely impacted by a delay in concluding negotiations for equitable relief related to our A-10 program. To provide you some color on the higher-than-anticipated effective tax rate, as those of you who have followed CPI for some time, our historic effective tax rate has been in the range between 30% and 32% of taxable income. Our rate has…

Thank you, Vince. 2015 was a year of strong execution and a return to growth for CPI Aero. In 2016, we intend [ph] to continue on the same path. And as our financial guidance suggests, we have the opportunity to drive growth to the top and bottom lines over the year. Our expectations for 2016 are grounded in large measure in our strong backlog. As you can see from Slide 18, the vast majority of our backlog, which as of December 31, 2015, stood at $387.3 million, consists currently of 12 programs. What you'll also see from the time line at the top is that we have excellent visibility into the business as far out as 2022. I would highlight that very few of these programs end before 2017, so that gives us a measure of revenue certainty in 2016 and 2017. As we deliver against backlog, headwinds are turning into tailwinds, and we see opportunity for additional multiyear defense opportunities on the horizon. Domestically, the passing of the 2016 Omnibus Appropriations bill and the recent fiscal 2017 President's budget request signals a return to growth in defense spending while also giving the marketplace greater spending clarity in the near term. Greater spending certainty, in turn, should create opportunities in several defense programs that are key to CPI Aero. An example, and as you can see on Slide 19, the proposed 2017 budget pushes out the retirement of the A-10 through 2022 in order to preserve the aircraft's capabilities during the Air Force's transition to the F-35. We expect that this major change of strategy is behind the Air Force's recent announcement that it is considering to procure up to an additional 120 wings on top of their current order with Boeing, which would result in more than 290 A-10…

[Operator Instructions] Our first question comes from the line of Mark Jordan with Noble Financial.

Doug, in your guidance or revenue range for 2016, what is reflected in there in terms of revenues on the A-10 program?

We're not going to individually say what the revenue is for each program, but on a macro level, it is the same as it was in -- roughly the same as it was in 2015. So we are expecting a not insignificant amount of revenue for A-10.

Okay. In terms of...

There's no margin contribution to that revenue, however.

All right. In terms of positioning the company with regards to guidance and with the A-10 program, is it fair to say that you are taking a fairly conservative position here, assuming no positive contribution when you still have the potential for equitable relief from the prior relationship and that if you were to sign on for something that you wouldn't do at a loss. So again, so we should say that it's -- and kind of this is not necessarily worst case, but pretty doggone close to it?

Yes. I mean, the whole A-10 issue, as you know, has been very fluid, especially now in this time of the year when the President's zero [ph] budget request just came out, and now they're going to be debating it in Congress. So I think it's very fair to say that we've taken a conservative approach here. As we mentioned in the prepared remarks, should either the equitable relief happen, should a new long-term contract be negotiated or -- either with Boeing or with a winner of the new competition, those, all over the long run, are very favorable to CPI. We're probably way too early. Maybe over the next 6 months, we'll know whether or not some of the good things that we anticipate happening this year will, in fact, lead to higher guidance for the year. But I would say that we're being pretty conservative in our estimate.

The revenue guidance for 2016 kind of virtually straddles the revenues reported for this year. On your Slide 13, you have percent of revenues commercial going from 42% in 2015 to 36% in 2016 with HondaJet increasing in volume. Given the mix shift towards defense, what is declining on your commercial side?

Right now, it's the S-92 from Sikorsky, which has seen a rather large decrease in historical annual revenue as a result of the softness in that market for our customer as well as some softness currently in the Cessna Citation X program. Both of those programs are year-over-year decliners in 2016.

Okay. Final question from me. Relative to expected cash flow from operations and including CapEx, do you see yourself as a consumer of cash? Do you expect bank lines to be up this year or neutral with regards to cash generation?

Mark, we are kind of projecting that we're going to be a consumer of cash this year, but that's predominantly the result of us building up inventory on the new F-16 program. That's the biggest generator of -- or burner of cash because of the inventory that we have to build up on that program. We just don't think that we can burn down the inventory of the other programs fast enough to offset that.

Can you quantify what the incremental cash needs would be for the year?

We've decided not to give cash flow guidance. So I don't think it would be appropriate if I were to say that.

Okay. But in terms of the facilities you have in place, you're very comfortable with availability of cash and needs?

Yes.

Our next question comes from the line of Ken Herbert with Canaccord Genuity.

Just first off, can you quantify what the fourth quarter pull forward was associated with the E-2D and the supply chain work you did for Northrop -- the revenue impact?

The supply chain work wasn't necessarily a pull-in. The E-2D/C-2A Outer Wing Panel kits were. These were new kit deliveries that were scheduled in '16 that were moved by our customer into '15. I don't have the exact number. If I was to guess, I'm going to say around $2 million of additional revenue that otherwise would have been in 2016.

Okay. Okay. That's helpful. And then second, the -- just big picture, how much of the 2016 guide is currently in the backlog? And how much is still yet to win?

It's probably -- well, it's 2 -- there's 2 phases to that have to win. One is anticipated follow-ons to current contracts, and then there's brand-new wins. I would say the brand-new wins are under -- maybe between 3% and 6% of the guidance.

Okay. And the follow-ons...

I don't have the precise number of follow-on, but there is still -- we're constantly getting orders for our commercial accounts and also from our military customers. For example, F-16 and T-38 are on recurring delivery orders. So there is a certain amount of that factored in as well. But in terms of brand-new, not yet won or announced programs. It's a very small number.

Okay. And the -- the follow-on programs, whether it be T-38, F-16 or others on the commercial side, are there any of those you'd classify as higher risk? Or do you -- are you pretty confident about those follow-on orders coming in this year?

Very confident.

Okay. And then just finally, again, back on the A-10, my understanding was at some point in the first half of this year, you would have shipped through the units that you wrote off when you took the charge back in 2014. Assuming the revenue contribution is relatively flat from '15 into '16 and what's implied in the guidance, is there a risk that there's another charge or earnings impact coming perhaps from this program as you shipped past what was originally accounted for in the initial charge? Or is the risk now of a charge on the A-10 essentially off the table? How should we think about that heading into midpoint of this year?

Yes. As I mentioned to Mark, it's really kind of hard to say right now. And the -- what happened in the fourth quarter was we were accounting for some top line growth that didn't materialize in the time that we wanted it. So that's a major driver towards what might happen in 2016. So there's 3 or 4 different types of scenarios, as I mentioned, all of which would or could impact how we estimate that job with each coming quarter. So I know it's kind of an evasive answer, but it's -- with so many facts changing, including the negotiation with Boeing, there's some external conversations between Boeing and its customer, and then they have the brand-new start, which may or may not involve Boeing. So there's a lot going into it. I will tell you that we treat the A-10 program like we treat every program. And every 3 months when we do the quarter, we will assess all of the facts and information that are available to us at the time, and we make a decision on how to make that estimate. And we'll continue to do that on the A-10. From a big-picture standpoint though, I don't think there's a question in my mind that the deferment or the delay in the eventual retirement of the A-10 is a net positive for us and will keep us making these structures probably through the next 5 or 6 years. So while there might be some short-term noise based on certain facts and how we interpret those facts to make our estimates, I think over the longer term, it's a positive for us.

Okay. All right. It sounds like there's obviously still a lot of uncertainty around this program. I guess, just one final question. As you look here into 2016, there's clearly -- I know you're confident in what's on the books now. There's been certainly some increase in just some concern around some business jet programs and that market and sort of the growth or lack of growth into 2016. Aside from the Citation program, are you seeing any changes? Are you concerned about any potential changes in any of your other business jet programs just based upon some of the macro weakness?

No. I have been reading like you have probably with regard to the Gulfstream product in particular. It's getting a lot of talk these days. But we are not seeing any of that in our delivery forecast and in our customer orders. So if there is any weakness, it's not in '16. And we have actually firm delivery backlog for some of those programs into '17. So we're not seeing that, no.

[Operator Instructions] There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Thank you all for participating on this call. We look forward to speaking to you again in May when we announce our 2016 first quarter results. Thank you, and talk to you soon.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.