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CPI Aerostructures cites accounting 'error' in revenue, profit report

But after dropping earlier in the day, the Edgewood company's stock rebounded and closed Monday at $6.54 per share.

CPI Aerostructures in Edgewood, seen on Feb. 1,

CPI Aerostructures in Edgewood, seen on Feb. 1, 2016. Photo Credit: Barry Sloan

Shares of CPI Aerostructures Inc. rebounded Monday after the Edgewood-based defense contractor reported that it overstated revenue and profit in the Sept. 30 quarter.

After falling at the open, the stock staged a rally, gaining 3.2 percent to close Monday at $6.54. That followed an 8.5 percent decline on Friday, when the company disclosed in a government filing that an accounting "error" had been identified in the third-quarter results. Twelve months ago the stock was trading at $8.20.

The company's "preliminary conclusion" indicates that error was limited to one instance and will require reductions in revenue of $900,000 to $950,000 and in net income of about $725,000 to $775,000, according to the document.

In its financial report for the quarter ended Sept. 30, CPI reported net income of $1.3 million on revenue of $19.9 million. 

CPI, Long Island's 27th largest public company based on 2017 revenue, joins several other publicly traded Long Island companies, including Lake Success-based Hain Celestial Group Inc. and Lynbrook-based Janel Corp., in disclosing accounting issues in recent months. 

In a telephone interview, CPI's chief financial officer, Vincent Palazzolo, said the error arose from the handling of a single invoice.

"It was the misposting of one invoice" that should have been accounted for based on percentage of completion, he said. Instead, the full revenue was booked at once.

"We're working to tighten up the internal control on that," Palazzolo added. "It just happened to be on one very large contract." 

In 2015, CPI began providing additional details in its quarterly and annual financial reports in response to concerns raised by the Securities and Exchange Commission staff.

In its latest filing, CPI said the audit committee of the board of directors determined on Thursday that the quarterly financial report overstated revenue for the third quarter ended Sept. 30.

The company, which makes structural assemblies for the F-35 jet fighter and other fixed- and rotary-wing aircraft, said it plans to file an amended statement for that period and outline in its upcoming annual report how it plans to address the accounting issue.

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