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CPI Aero stock plunges after firm says financial reports had errors

CPI Aero president and chief executive Douglas McCrosson

CPI Aero president and chief executive Douglas McCrosson said in a release that the company is "assessing the precise impact" of the errors.   Credit: Heather Walsh

Shares of CPI Aerostructures Inc. tumbled Friday after the defense contractor announced that recently appointed chief financial officer Dan Azmon had resigned and financial reports stretching back to March 2018 had errors in revenue recognition.

CPI shares plummeted 27% to close Friday at $4.87 after the Edgewood company's afternoon disclosure.

Azmon, who previously was an executive at defense contractor L3 Technologies Inc., joined CPI Aero in November after the departure of former CFO Vincent Palazzolo.

L3 is now part of L3Harris Technologies Inc.

CPI Aero said that quarterly financial statements for the quarters ended March 31, 2018, June 30, 2018, Sept. 30, 2018, March 31, 2019, June 30, 2019, Sept. 30, 2019 and the year ended Dec. 31, 2018 were inaccurate because of how revenue was recorded.

CPI Aero president and chief executive Douglas McCrosson did not immediately respond to a telephone message.

In a news release, he said that the "quality and integrity of our financial reporting process are of paramount importance" and that the company is "assessing the precise impact" of the errors.

McCrosson said the company does not believe the issues will have an impact on reported operating cash flows of the company during the affected periods, or on projected future cash flows.

CPI Aero, with about 305 employees, makes structural assemblies for helicopters and fixed-wing aircraft, including the giant C-5 Galaxy cargo plane, the A-10 Thunderbolt (also known as the Warthog) and the HondaJet business aircraft.

The company said it would restate its faulty financial reports "as soon as reasonably practical." The latest accounting errors stemmed from issues with revenue recognition under an accounting rule that determines when a sale can be recorded, the company said.

CPI Aero had previously reported issues with its financial statements, including those listed in the latest disclosure.

In February 2019, the company said its financial statement for the quarter ended Sept. 30, 2018 contained an "overstatement of revenue."

In 2015, the company began offering further financial details in its quarterly and annual reports in response to comments in a review by the Securities and Exchange Commission, which regulates U.S. financial markets and public companies that trade on them.

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