<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 28, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission File Number: 33-96858-01
-------------
COMMUNICATIONS &
POWER INDUSTRIES
HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State of Incorporation)
77-0407395
(I.R.S. employer identification number)
607 HANSEN WAY
PALO ALTO, CALIFORNIA 94303-1110
(415) 846-2900
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Commission File Number: 33-96858-02
-------------
COMMUNICATIONS &
POWER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State of Incorporation)
77-0405693
(I.R.S. employer identification number)
607 HANSEN WAY
PALO ALTO, CALIFORNIA 94303-1110
(415) 846-2900
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding for each of the Registrant's classes
of Common Stock, as of the latest practicable date: COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION: 200,000 SHARES OF COMMON STOCK, $.01 PAR VALUE,
AT MAY 1, 1996. COMMUNICATIONS & POWER INDUSTRIES, INC.: 1 SHARE OF COMMON
STOCK, $.01 PAR VALUE, AT MAY 1, 1996.
<PAGE> 2
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
PART 1: FINANCIAL INFORMATION
COMMUNICATIONS AND POWER INDUSTRIES, INC.
<TABLE>
<S> <C>
Consolidated Condensed Balance Sheets, June 28, 1996 (Unaudited) and
September 29, 1995 .................................................... 2
Consolidated Condensed Statements of Operations, 13-week period ended
June 28, 1996 (unaudited) and June 30, 1995 (unaudited) ............... 3
Consolidated Condensed Statements of Operations, 39-week period ended
June 28, 1996 (unaudited) and June 30, 1995 (unaudited) ............... 4
Consolidated Condensed Statements of Cash Flows, 39-week period ended
June 28,1996 (unaudited) and June 30, 1995 (unaudited) ................ 5
Notes to Consolidated Condensed Financial Statements (unaudited) ...... 6
Management's Discussion and Analysis of Financial Condition and Results
of Operations (Unaudited) ............................................. 12
COMMUNICATIONS AND POWER INDUSTRIES HOLDING CORPORATION
Consolidated Condensed Balance Sheets, June 28, 1996 (Unaudited) and
September 29, 1995 .................................................... 7
Consolidated Condensed Statements of Operations, 13-week period ended
June 28, 1996 (unaudited) and June 30, 1995 (unaudited) ............... 8
Consolidated Condensed Statements of Operations, 39-week period ended
June 28, 1996 (unaudited) and June 30, 1995 (unaudited) ............... 9
Consolidated Condensed Statements of Cash Flows, 39-week period ended
June 28,1996 (unaudited) and June 30, 1995 (unaudited) ................ 10
Notes to Consolidated Condensed Financial Statements (unaudited) ...... 11
Management's Discussion and Analysis of Financial Condition and Results
of Operations (Unaudited).............................................. 12
PART II: OTHER INFORMATION
Other Information ..................................................... 15
SIGNATURES ................................................................. 16
</TABLE>
-1-
<PAGE> 3
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands - unaudited)
<TABLE>
<CAPTION>
June 28, September 29,
ASSETS 1996 1995
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,051 8,267
Accounts receivable, net 40,939 44,743
Inventories 51,538 44,765
Other current assets 4,469 2,566
--------- ---------
Total current assets 99,997 100,341
Property, plant, and equipment, net 77,587 74,071
Goodwill, net 25,435 26,098
Other assets 10,287 14,392
--------- ---------
Total assets $ 213,306 214,902
========= =========
LIABILITIES, REDEEMABLE
PREFERRED STOCK AND EQUITY (DEFICIT)
CURRENT LIABILITIES
Revolving credit facility $ 14,400 19,600
Accounts payable - trade 10,873 16,474
Accrued expenses 32,799 25,863
Current portion of term loans 3,200 3,200
--------- ---------
Total current liabilities 61,272 65,137
Senior term loans 37,200 38,800
Senior subordinated notes 100,000 100,000
Deferred taxes 289 43
--------- ---------
Total liabilities 198,761 203,980
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK 14,189 12,460
--------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT):
Junior Preferred Stock 1 1
Common Stock -- --
Additional paid-in capital 30,134 29,088
Accumulated deficit (28,804) (29,627)
Less stockholder loans (975) (1,000)
--------- ---------
Net stockholders' equity (deficit) 356 (1,538)
--------- ---------
Total liabilities, redeemable
preferred stock and equity (deficit) $ 213,306 214,902
========= =========
</TABLE>
See accompanying notes to the unaudited interim condensed consolidated financial
statements.
-2-
<PAGE> 4
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
--------------- ---------------
13-Week 13-Week
period ended period ended
June 28, June 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Sales $ 62,048 69,565
Cost of sales 46,027 52,108
-------- --------
Gross Profit 16,021 17,457
-------- --------
Operating costs and expenses:
Research and development 2,281 2,367
Marketing 4,519 5,194
General and administrative 3,616 6,256
-------- --------
Total operating costs and expenses 10,416 13,817
-------- --------
Operating income 5,605 3,640
Interest expense 4,552 --
-------- --------
Earnings before taxes 1,053 3,640
Income tax expense 390 1,345
-------- --------
Net earnings (loss) 663 2,295
Preferred dividends:
Senior Redeemable Preferred Stock 561 --
Junior Preferred Stock 374 --
-------- --------
Earnings attributable to common stock $ (272) 2,295
======== ========
</TABLE>
See accompanying notes to the unaudited interim condensed consolidated financial
statements.
-3-
<PAGE> 5
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
--------------- ---------------
39-Week 39-Week
period ended period ended
June 28, June 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Sales $188,148 192,304
Cost of sales 137,866 142,959
-------- --------
Gross Profit 50,282 49,345
-------- --------
Operating costs and expenses:
Research and development 5,981 6,366
Marketing 14,252 14,834
General and administrative 10,163 16,500
-------- --------
Total operating costs and expenses 30,396 37,700
-------- --------
Operating income 19,886 11,645
Interest expense 14,172 --
-------- --------
Earnings before taxes 5,714 11,645
Income tax expense 2,115 4,309
-------- --------
Net earnings (loss) 3,599 7,336
Preferred dividends:
Senior Redeemable Preferred Stock 1,568 --
Junior Preferred Stock 1,046 --
-------- --------
Earnings attributable to common stock $ 985 7,336
======== ========
</TABLE>
See accompanying notes to the unaudited interim condensed consolidated financial
statements.
-4-
<PAGE> 6
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
STATEMENTS OF CASH FLOWS
(in thousands - unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
--------------- ---------------
39-Week 39-Week
period ended period ended
June 28, June 30,
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities $ 10,334 12,044
-------- --------
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (8,422) (4,679)
(Increase) decrease in other non current assets (73) 742
-------- --------
Net cash used in investing activities (8,495) (3,937)
-------- --------
FINANCING ACTIVITIES
Repayment of intercompany funding to Varian -- (4,383)
Debt issue costs (280) --
Proceeds from Stockholder loans 25 --
Borrowings (payments) on revolving credit facility, net (6,800) --
-------- --------
Net cash provided by (used in) financing activities (7,055) (4,383)
-------- --------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (5,216) 3,724
Cash and cash equivalents at beginning of period 8,267 5,713
-------- --------
Cash and cash equivalents at end of period $ 3,051 9,437
======== ========
</TABLE>
See accompanying notes to the unaudited interim condensed consolidated financial
statements.
-5-
<PAGE> 7
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The accompanying unaudited interim condensed consolidated financial statements
of Communications & Power Industries, Inc. ("CPI" or "Successor") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included in annual
financial statements have been condensed or omitted and, accordingly, these
financial statements should be read in conjunction with the financial statements
and the notes thereto contained in CPI's September 29, 1995 Annual Report on
Form 10-K. Management believes that these unaudited interim condensed financial
statements contain all adjustments, all of which are of a normal, recurring
nature, necessary to a fair statement of the results for the interim period
presented.
Prior to August 11, 1995, CPI's operations were the principal operations of the
Electron Devices Business (the "Predecessor"), a segment of Varian Associates,
Inc. ("Varian"), except they exclude the Tempe, Arizona operations. The
Predecessor consisted of substantially all of the assets of Varian and its
affiliates that were used primarily in developing, manufacturing and
distributing microwave and power grid vacuum electronic devices, microwave
amplifiers, modulators and various other power supply equipment and devices. On
August 11, 1995, CPI acquired these assets from Varian (the "Acquisition") and
was then merged with a wholly owned subsidiary of Communications & Power
Industries Holding Corporation ("Holding", both CPI and Holding together
referred to as "the Company"), a corporation newly formed by a group of
investors, including management of the Company. As a result of the Acquisition,
operations of the Company for the first nine months of 1996 are not necessarily
comparable to the operations of the corresponding period of the prior year.
During the quarter ended June 28, 1996, CPI paid preferred dividends on its
Senior Redeemable Preferred Stock and its Junior Preferred Stock through the
issuance of 5,603 additional shares of its Senior Redeemable Preferred Stock and
3,735 shares of its Junior Preferred Stock, respectively. During the first half
ended June 28, 1996, CPI paid preferred dividends through the issuance of 15,683
shares of its Senior Redeemable Preferred Stock and 10,455 shares of its Junior
Preferred Stock.
Certain reclassifications have been made to the September 29, 1995 consolidated
financial statements to conform with the 1996 presentation.
-6-
<PAGE> 8
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands - unaudited)
<TABLE>
<CAPTION>
June 28, September 29,
ASSETS 1996 1995
------ --------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,051 8,267
Accounts receivable, net 40,939 44,743
Inventories 51,538 44,765
Other current assets 4,469 2,566
--------- ---------
Total current assets 99,997 100,341
Property, plant, and equipment, net 77,587 74,071
Goodwill, net 25,435 26,098
Other assets 10,287 14,392
--------- ---------
Total assets $ 213,306 214,902
========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK,
PREFERRED STOCK OF SUBSIDIARY AND EQUITY (DEFICIT)
- --------------------------------------------------
CURRENT LIABILITIES
Revolving credit facility $ 14,400 19,600
Accounts payable - trade 10,873 16,474
Accrued expenses 32,799 25,863
Current portion of term loans 3,200 3,200
--------- ---------
Total current liabilities 61,272 65,137
Senior term loans 37,200 38,800
Senior subordinated notes 100,000 100,000
Deferred taxes 289 43
--------- ---------
Total liabilities 198,761 203,980
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 14,189 12,460
--------- ---------
JUNIOR PREFERRED STOCK OF SUBSIDIARY 10,392 9,346
--------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT):
Common Stock 2 2
Additional paid-in capital 19,741 19,741
Accumulated deficit (28,804) (29,627)
Less stockholder loans (975) (1,000)
--------- ---------
Net stockholders' equity (deficit) (10,036) (10,884)
--------- ---------
Total liabilities, redeemable preferred stock, preferred
stock of subsidiary and equity (deficit) $ 213,306 214,902
========= =========
</TABLE>
See accompanying notes to the unaudited interim condensed consolidated financial
statements.
-7-
<PAGE> 9
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
--------------- ---------------
13-Week 13-Week
period ended period ended
June 28, June 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Sales $ 62,048 69,565
Cost of sales 46,027 52,108
-------- --------
Gross Profit 16,021 17,457
-------- --------
Operating costs and expenses:
Research and development 2,281 2,367
Marketing 4,519 5,194
General and administrative 3,616 6,256
-------- --------
Total operating costs and expenses 10,416 13,817
-------- --------
Operating income 5,605 3,640
Interest expense 4,552 --
-------- --------
Earnings before taxes 1,053 3,640
Income tax expense 390 1,345
-------- --------
Net earnings (loss) 663 2,295
Preferred dividends:
Senior Redeemable Preferred Stock 561 --
Junior Preferred Stock 374 --
-------- --------
Earnings attributable to common stock $ (272) 2,295
======== ========
</TABLE>
See accompanying notes to the unaudited interim condensed consolidated financial
statements.
-8-
<PAGE> 10
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
INTERIM CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
--------------- ---------------
39-Week 39-Week
period ended period ended
June 28, June 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Sales $188,148 192,304
Cost of sales 137,866 142,959
-------- --------
Gross Profit 50,282 49,345
-------- --------
Operating costs and expenses:
Research and development 5,981 6,366
Marketing 14,252 14,834
General and administrative 10,163 16,500
-------- --------
Total operating costs and expenses 30,396 37,700
-------- --------
Operating income 19,886 11,645
Interest expense 14,172 --
-------- --------
Earnings before taxes 5,714 11,645
Income tax expense 2,115 4,309
-------- --------
Net earnings (loss) 3,599 7,336
Preferred dividends:
Senior Redeemable Preferred Stock 1,568 --
Junior Preferred Stock 1,046 --
-------- --------
Earnings attributable to common stock $ 985 7,336
======== ========
</TABLE>
See accompanying notes to the unaudited interim condensed consolidated financial
statements.
-9-
<PAGE> 11
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
STATEMENTS OF CASH FLOWS
(in thousands - unaudited)
<TABLE>
<CAPTION>
Successor Predecessor
--------------- ---------------
39-Week 39-Week
period ended period ended
June 28, June 30,
1996 1995
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities $ 10,334 12,044
-------- --------
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (8,422) (4,679)
(Increase) decrease in other non current assets (73) 742
-------- --------
Net cash used in investing activities (8,495) (3,937)
-------- --------
FINANCING ACTIVITIES
Repayment of intercompany funding to Varian -- (4,383)
Debt issue costs (280) --
Proceeds from Stockholder loans 25 --
Borrowings (payments) on revolving credit facility, net (6,800) --
-------- --------
Net cash provided by (used in) financing activities (7,055) (4,383)
-------- --------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (5,216) 3,724
Cash and cash equivalents at beginning of period 8,267 5,713
-------- --------
Cash and cash equivalents at end of period $ 3,051 9,437
======== ========
</TABLE>
See accompanying notes to the unaudited interim condensed consolidated financial
statements.
-10-
<PAGE> 12
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
NOTES TO UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The accompanying unaudited interim condensed consolidated financial statements
of Communications & Power Industries Holding Corporation ("Holding" or
"Successor") have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note disclosures
normally included in annual financial statements have been condensed or omitted
and, accordingly, these financial statements should be read in conjunction with
the financial statements and the notes thereto contained in the Holding's
September 29, 1995 Annual Report on Form 10-K. Management believes that these
unaudited interim condensed financial statements contain all adjustments, all of
which are of a normal, recurring nature, necessary to a fair statement of the
results for the interim period presented.
Prior to August 11, 1995, Communications & Power Industries, Inc.'s ("CPI", both
CPI and Holding together referred to as "the Company") operations were the
principal operations of the Electron Devices Business (the "Predecessor"), a
segment of Varian Associates, Inc. ("Varian"), except they exclude the Tempe,
Arizona operations. The Predecessor consisted of substantially all of the assets
of Varian and its affiliates that were used primarily in developing,
manufacturing and distributing microwave and power grid vacuum electronic
devices, microwave amplifiers, modulators and various other power supply
equipment and devices. On August 11, 1995, Holding's subsidiary, "CPI", acquired
these assets from Varian (the "Acquisition") and was then merged with a wholly
owned subsidiary of Holding, a corporation newly formed by a group of investors,
including management of the Company. As a result of the Acquisition, operations
of the Company for the first nine months of 1996 are not necessarily comparable
to the operations of the corresponding period of the prior year.
During the quarter ended June 28, 1996, CPI paid preferred dividends on its
Senior Redeemable Preferred Stock and its Junior Preferred Stock through the
issuance of 5,603 additional shares of its Senior Redeemable Preferred Stock and
3,735 shares of its Junior Preferred Stock, respectively. During the first half
ended June 28, 1996, CPI paid preferred dividends through the issuance of 15,683
shares of its Senior Redeemable Preferred Stock and 10,455 shares of its Junior
Preferred Stock.
Certain reclassifications have been made to the September 29, 1995 consolidated
financial statements to conform with the 1996 presentation.
-11-
<PAGE> 13
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Sales for the third quarter of Fiscal 1996 were $62.0 million, a decrease of
$7.6 million, or 10.8%, from the third quarter of Fiscal 1995. Sales for the
first nine months of 1996 were $188.1 million, a decrease of $4.2 million, or
2.2% below the comparable period in the prior fiscal year. Sales for the quarter
and the first nine months were affected by short term delays in shipping new
products, consolidation efforts between the Company's facilities in Salt Lake
City, Utah and San Carlos, California as well as several non-production issues
including paperwork delays and customer-requested rescheduling of delivery.
In terms of markets, the sales decline for the first nine months was primarily
due to lower sales in electronic countermeasures, radar, and scientific markets
partially offset by higher industrial and medical sales. Communications sales
remained relatively flat compared to the same time period in the prior fiscal
year due to the delays in shipping new products as well as delays due to San
Carlos consolidation efforts. Electronic countermeasure sales, also impacted by
several short term delays, decreased $2.5 million, or 16.7%. Radar sales
decreased $2.3 million, or 4.0% primarily due to U.S. Government budgetary
constraints. Scientific sales decreased $1.5 million or 34.1% due to a slow down
in development programs from the U.S. Department of Energy. Industrial sales
increased approximately $1.5 million, or 8.8% as a result of the new
applications for microwave amplifiers and increased marketing efforts for power
grid vacuum electronic devices. Medical sales increased slightly by $.3 million
or 2.5%.
Incoming orders during the third quarter of Fiscal 1996 were $61.5 million as
compared to $63.3 for the third quarter of Fiscal 1995, a decrease of 2.9%.
Orders during the first nine months of Fiscal 1996 were $198.3 million as
compared to $190.4 million over the comparable period in the prior fiscal year,
a growth rate of 4.1%. However, as shown by the third quarter of Fiscal 1996,
incoming order levels fluctuate significantly on a quarterly basis and a
particular quarters order rate may not be indicative of future order levels. In
addition, the Company's sales are highly dependent upon manufacturing
scheduling, performance and shipments and, accordingly, it is not possible to
predict when these orders will be recognized as sales.
Gross profit decreased from $17.5 million in the third quarter of Fiscal 1995 to
$16.0 million in the third quarter of Fiscal 1996, principally related to lower
sales volume. Lower depreciation expense of approximately $1.8 million in Fiscal
1996, recorded in connection with the Acquisition, was partially offset by
increased cost of sales related to the Company's consolidation efforts. Gross
profit increased from $49.3 million, or 25.7% of sales, in the first nine months
of Fiscal 1995 to $50.3 million, or 26.7% of sales, in the first nine months of
Fiscal 1996 as a result of a $4.1 million reduction in depreciation expense
partially offset by a $1.7 million charge to cost of sales related to the
write-up of inventory (both recorded in connection with the Acquisition) and
lower sales volume.
-12-
<PAGE> 14
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
Research and development expenses decreased by $.1 million and $.4 million for
the 13-week period and 39-week period ended June 28, 1996, respectively, as
compared to the same time periods ended June 30, 1995. As a percent of sales,
these expenses have remained relatively stable from 3.3% in the first nine
months of Fiscal 1995 to 3.2% in the first nine months of Fiscal 1996. Overall
the Company continues its emphasis on new products and is currently working on
several customer-funded projects.
Marketing, General and Administrative expenses as a percent of sales were 13.1%
and 13.0% for the 13-week and 39-week periods ended June 28, 1996, respectively,
as compared to 16.5% and 16.3% for the 13-week and 39-week periods ended June
30, 1995, respectively. The reduced level of these costs as a percentage of
sales reflects the Company's new cost structure as an independent company in
Fiscal 1996, as opposed to being an operating division of Varian during the
first nine months of Fiscal 1995.
Operating income was $5.6 million (9.0% of sales) for the third quarter of
Fiscal 1996, as compared to $3.6 million (5.2% of sales) for the third quarter
of Fiscal 1995, a 54% improvement. Operating income was $19.9 million (10.6% of
sales) for the first nine months of Fiscal 1996, as compared to $11.6 million
(6.1% of sales) for the first nine months of Fiscal 1995, a 71% improvement. In
addition to the various items mentioned, operating income was positively
affected by a reduction in depreciation expense due to the revaluation of the
Company's assets in connection with the Acquisition, which went from $9.6
million in the first nine months of Fiscal 1995 to $5.7 million in the first
nine months of Fiscal 1996.
Earnings before interest, income taxes, depreciation and amortization ("EBITDA")
for the third quarter of Fiscal 1996 was $7.6 million, compared to $6.9 million
for the third quarter of 1995. EBITDA for the first nine months of Fiscal 1996
was $27.3 million (excluding the $1.7 million charge for the write-up of
inventory), compared to $21.3 million for the first nine months of 1995.
Earnings before taxes amounted to $1.0 million and $5.7 million for the 13-week
and 39-week periods ended June 28, 1996, respectively, as compared to $3.6
million and $11.6 million for the same time periods ended June 30, 1995. The
decrease of $2.6 million, or 71.1%, for the third quarter and the decrease of
$5.9 million, or 50.9%, for the first nine months was due to the incurrence of
$4.6 million and $14.2 million, respectively, of interest expense ($4.1 million
and $12.7 million, respectively, of cash interest expense) associated with the
debt incurred in connection with the Acquisition.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operating activities for the first nine months of Fiscal
1996 were $10.3 million, a decrease of $1.7 million from the $12.0 million
provided by operating activities during the first nine months of Fiscal 1995.
The primary reason for the decrease in cash provided was lower net earnings
driven by higher interest expense along with higher inventories which were
partially offset by accounts receivable collections and advance payments from
customers. Operating activities funded $6.8 million of paydowns during the first
nine months against CPI's revolving credit facility.
-13-
<PAGE> 15
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
Cash flow from investing activities was comprised principally of capital
expenditures for property and equipment, which amounted to $8.4 million for the
first nine months of Fiscal 1996 as compared to $4.7 million for the first half
of Fiscal 1995. The $3.7 million increase was substantially attributable to the
Company's consolidation efforts.
As of June 28, 1996, the Company had working capital of approximately $38.7
million, an increase of $3.5 million, or 10%, from September 29, 1995. The
increase of working capital was substantially attributable to a lower balance on
the CPI's revolving credit facility.
Prior to the Acquisition, the Predecessor's short-term cash requirements were
provided by Varian through an intercompany credit facility arrangement. The
Company's current primary source of liquidity, other than funds generated from
operations, is the $35.0 million revolving credit facility provided under its
senior credit agreement (of which $16.9 million was available as of July 26,
1996). Management believes that the Company will have adequate capital resources
and liquidity (including cash flow from operations and borrowing under its
revolving credit facility) to meet its obligations, fund all required capital
expenditures and pursue its business strategy for the foreseeable future and, in
any event, for the next 12 months.
-14-
<PAGE> 16
COMMUNICATIONS & POWER INDUSTRIES
HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2: CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
No reports were filed on Form 8-K during the quarter ended June 28, 1996.
-15-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMMUNICATIONS & POWER INDUSTRIES, INC.
By: /s/ Al D. Wilunowski
---------------------------------------------------
Al D. Wilunowski
Chief Executive Officer and President
Date: August 6, 1996
By: /s/ Lynn E. Harvey
---------------------------------------------------
Lynn E. Harvey
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
Date: August 6, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) INTERIM
CONDENSED CONSOLIDATED BALANCE SHEET & STATEMENT OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10Q - COMMUNICATIONS & POWER
INDUSTRIES, INC. FOR QUARTER ENDED JUNE 28, 1996.
</LEGEND>
<CIK> 0001000564
<NAME> COMMUNICATIONS & POWER INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1996
<PERIOD-START> SEP-30-1995
<PERIOD-END> JUN-28-1996
<CASH> 3,051
<SECURITIES> 0
<RECEIVABLES> 40,939
<ALLOWANCES> 0
<INVENTORY> 51,538
<CURRENT-ASSETS> 99,997
<PP&E> 77,587
<DEPRECIATION> 0
<TOTAL-ASSETS> 213,306
<CURRENT-LIABILITIES> 61,272
<BONDS> 137,200
14,189
1
<COMMON> 0
<OTHER-SE> 355
<TOTAL-LIABILITY-AND-EQUITY> 213,306
<SALES> 188,148
<TOTAL-REVENUES> 188,148
<CGS> 137,866
<TOTAL-COSTS> 137,866
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,172
<INCOME-PRETAX> 5,714
<INCOME-TAX> 2,115
<INCOME-CONTINUING> 3,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,599
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
