<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 April 4, 1997
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from __________________ to___________________
<TABLE>
<S> <C>
Commission File Number: 33-96858-01 Commission File Number: 33-96858
------------------- ----------------
COMMUNICATIONS & POWER INDUSTRIES HOLDING COMMUNICATIONS & POWER INDUSTRIES, INC.
CORPORATION
(Exact name of registrant as specified in its (Exact name of registrant as specified in its
charter) charter)
DELAWARE DELAWARE
(State of Incorporation) (State of Incorporation)
77-0407395 77-0405693
(I.R.S. employer identification number) (I.R.S. employer identification number)
607 HANSEN WAY 607 HANSEN WAY
PALO ALTO, CALIFORNIA 94303-1110 PALO ALTO, CALIFORNIA 94303-1110
(415) 846-2900 (415) 846-2900
(Address, including zip code, and telephone number, (Address, including zip code, and telephone number,
including area code, of registrant's principal including area code, of registrant's principal
executive offices) executive offices)
Securities registered pursuant to Section 12(b) of Securities registered pursuant to Section 12(b) of
the Act: the Act:
NONE NONE
Securities registered pursuant to Section 12(g) of Securities registered pursuant to Section 12(g) of
the Act: the Act:
NONE NONE
</TABLE>
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, 1997. COMMUNICATIONS & POWER INDUSTRIES, INC.: 1 SHARE OF COMMON
STOCK, $.01 PAR VALUE, AT MAY 1, 1997.
<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)
<TABLE>
<S> <C>
PART 1: FINANCIAL INFORMATION
COMMUNICATIONS AND POWER INDUSTRIES, INC.
Consolidated Condensed Balance Sheets, April 4, 1997 (unaudited) and September 27, 1996 . . . . . . 2
Consolidated Condensed Statements of Operations, 13-week period ended
April 4, 1997 (unaudited) and 13-week period ended March 29, 1996 (unaudited) . . . . . . . . . . . 3
Consolidated Condensed Statements of Operations, 27-week period ended
April 4, 1997 (unaudited) and 26-week period ended March 29, 1996 (unaudited) . . . . . . . . . . . 4
Consolidated Condensed Statements of Cash Flows, 27-week period ended
April 4, 1997 (unaudited) and 26-week period ended March 29, 1996 (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, April 4, 1997 (unaudited) and September 27, 1996 . . . . . . 7
Consolidated Condensed Statements of Operations, 13-week period ended
April 4, 1997 (unaudited) and 13-week period ended March 29, 1996 (unaudited) . . . . . . . . . . . 8
Consolidated Condensed Statements of Operations, 27-week period ended
April 4, 1997 (unaudited) and 26-week period ended March 29, 1996 (unaudited) . . . . . . . . . . . 9
Consolidated Condensed Statements of Cash Flows, 27-week period ended
April 4, 1997 (unaudited) and 26-week period ended March 29, 1996 (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>
April 4, September 27,
ASSETS 1997 1996
--------- -------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,386 1,753
Accounts receivable, net 44,700 50,380
Inventories 51,516 46,471
Deferred taxes 7,109 7,109
Other current assets 2,618 2,133
--------- -------
Total current assets 107,329 107,846
Property, plant, and equipment, net 82,358 79,873
Goodwill, net 24,657 25,203
Debt issue costs, net 8,845 9,651
Deferred taxes 5,565 5,569
Other assets -- --
--------- -------
Total assets $ 228,754 228,142
========= =======
LIABILITIES, REDEEMABLE
PREFERRED STOCK AND EQUITY (DEFICIT)
CURRENT LIABILITIES
Revolving credit facility $ 26,600 17,000
Accounts payable - trade 11,605 10,527
Accrued expenses 15,328 22,371
Product warranty 4,098 4,327
Current portion of term loans 3,950 3,950
Income taxes payable 9,107 10,560
Advance payments from customers 4,404 4,535
--------- -------
Total current liabilities 75,092 73,270
Senior term loans 32,750 35,650
Senior subordinated notes 100,000 100,000
Deferred taxes -- --
--------- -------
Total liabilities 207,842 208,920
--------- -------
SENIOR REDEEMABLE PREFERRED STOCK 16,151 14,822
--------- -------
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT):
Junior Preferred Stock 1 1
Common Stock -- --
Additional paid-in capital 31,335 30,521
Accumulated deficit (25,506) (25,080)
Less stockholder loans (1,069) (1,042)
--------- -------
Net stockholders' equity (deficit) 4,761 4,400
--------- -------
Total liabilities, redeemable
preferred stock and equity (deficit) $ 228,754 228,142
========= =======
</TABLE>
See accompanying notes to the unaudited interim condensed consolidated
financial statements.
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<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>
13-Week 13-Week
period ended period ended
April 4, March 29,
1997 1996
------- ------
<S> <C> <C>
Sales $63,869 63,467
Cost of sales 46,096 45,861
------- ------
Gross Profit 17,773 17,606
------- ------
Operating costs and expenses:
Research and development 1,831 1,919
Marketing 5,250 4,892
General and administrative 2,885 2,801
------- ------
Total operating costs and expenses 9,966 9,612
------- ------
Operating income 7,807 7,994
Interest expense 4,722 4,620
------- ------
Earnings before taxes 3,085 3,374
Income tax expense 195 1,249
------- ------
Net earnings (loss) 2,890 2,125
Preferred dividends:
Senior Redeemable Preferred Stock 621 541
Junior Preferred Stock 414 361
------- ------
Earnings attributable to common stock $ 1,855 1,223
======= ======
</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>
27-Week 26-Week
period ended period ended
April 4, March 29,
1997 1996
--------- -------
<S> <C> <C>
Sales $ 119,191 126,100
Cost of sales 88,562 91,839
--------- -------
Gross Profit 30,629 34,261
--------- -------
Operating costs and expenses:
Research and development 3,724 3,700
Marketing 10,088 9,733
General and administrative 5,555 6,547
--------- -------
Total operating costs and expenses 19,367 19,980
--------- -------
Operating income 11,262 14,281
Interest expense 9,492 9,620
--------- -------
Earnings before taxes 1,770 4,661
Income tax expense 195 1,725
--------- -------
Net earnings (loss) 1,575 2,936
Preferred dividends:
Senior Redeemable Preferred Stock 1,221 1,008
Junior Preferred Stock 814 672
--------- -------
Earnings attributable to common stock $ (460) 1,256
========= =======
</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>
27-Week 26-Week
period period
ended ended
April 4, March 29,
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating
activities $ (347) 4,395
------- -------
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (6,528) (4,396)
(Increase) decrease in other non current assets -- (122)
------- -------
Net cash used in investing activities (6,528) (4,518)
------- -------
FINANCING ACTIVITIES
Net (Repayments)/Proceeds from debt issue costs (192) (250)
Net (Repayments)/Proceeds from stockholder loans -- 10
Net (Repayments)/Proceeds from revolving creditfacility 9,600 (3,100)
Net (Repayments)/Proceeds from senior term loans (2,900) --
------- -------
Net cash provided by (used in) financing activities 6,508 (3,340)
------- -------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (367) (3,463)
Cash and cash equivalents at beginning of period 1,753 8,267
------- -------
Cash and cash equivalents at end of period $ 1,386 4,804
======= =======
</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 27, 1996 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.
During the quarter ended April 4, 1997, CPI paid preferred dividends on its
Senior Redeemable Preferred Stock and its Junior Preferred Stock through the
issuance of 6,212 additional shares of its Senior Redeemable Preferred Stock
and 4,141 shares of its Junior Preferred Stock, respectively. During the first
half ended April 4, 1997, the Company paid preferred dividends through the
issuance of 12,214 shares of its Senior Redeemable Preferred Stock and 8,142
shares of its Junior Preferred Stock.
- 6 -
<PAGE> 8
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
INTERIM CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands - unaudited)
<TABLE>
<CAPTION>
April 4, September 27,
ASSETS 1997 1996
--------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,386 1,753
Accounts receivable, net 44,700 50,380
Inventories 51,516 46,471
Deferred taxes 7,109 7,109
Other current assets 2,618 2,133
--------- ---------
Total current assets 107,329 107,846
Property, plant, and equipment, net 82,358 79,873
Goodwill, net 24,657 25,203
Debt issue costs, net 8,845 9,651
Deferred taxes 5,565 5,569
Other assets -- --
--------- ---------
Total assets $ 228,754 228,142
========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK,
PREFERRED STOCK OF SUBSIDIARY AND EQUITY
(DEFICIT)
CURRENT LIABILITIES
Revolving credit facility $ 26,600 17,000
Accounts payable - trade 11,605 10,527
Accrued expenses 15,328 22,371
Product warranty 4,098 4,327
Current portion of term loans 3,950 3,950
Income taxes payable 9,107 10,560
Advance payments from customers 4,404 4,535
--------- ---------
Total current liabilities 75,092 73,270
Senior term loans 32,750 35,650
Senior subordinated notes 100,000 100,000
Deferred taxes -- --
--------- ---------
Total liabilities 207,842 208,920
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 16,151 14,822
--------- ---------
JUNIOR PREFERRED STOCK OF SUBSIDIARY 11,593 10,779
--------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY (DEFICIT):
Common Stock 2 2
Additional paid-in capital 19,741 19,741
Accumulated deficit (25,506) (25,080)
Less stockholder loans (1,069) (1,042)
--------- ---------
Net stockholders' equity (deficit) (6,832) (6,379)
--------- ---------
Total liabilities, redeemable preferred stock,
preferred stock of subsidiary and equity (deficit) $ 228,754 228,142
========= =========
</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>
13-Week 13-Week
period period
ended ended
April 4, March 29,
1997 1996
------- -------
<S> <C> <C>
Sales $63,869 63,467
Cost of sales 46,096 45,861
------- -------
Gross Profit 17,773 17,606
------- -------
Operating costs and expenses:
Research and development 1,831 1,919
Marketing 5,250 4,892
General and administrative 2,885 2,801
------- -------
Total operating costs and expenses 9,966 9,612
------- -------
Operating income 7,807 7,994
Interest expense 4,722 4,620
------- -------
Earnings before taxes 3,085 3,374
Income tax expense 195 1,249
------- -------
Net earnings (loss) 2,890 2,125
Preferred dividends:
Senior Redeemable Preferred Stock 621 541
Junior Preferred Stock 414 361
------- -------
Earnings attributable to common stock $ 1,855 1,223
======= =======
</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>
27-Week 26-Week
period period
ended ended
April 4, March 29,
1997 1996
--------- ---------
<S> <C> <C>
Sales $ 119,191 126,100
Cost of sales 88,562 91,839
--------- ---------
Gross Profit 30,629 34,261
--------- ---------
Operating costs and expenses:
Research and development 3,724 3,700
Marketing 10,088 9,733
General and administrative 5,555 6,547
--------- ---------
Total operating costs and expenses 19,367 19,980
--------- ---------
Operating income 11,262 14,281
Interest expense 9,492 9,620
--------- ---------
Earnings before taxes 1,770 4,661
Income tax expense 195 1,725
--------- ---------
Net earnings (loss) 1,575 2,936
Preferred dividends:
Senior Redeemable Preferred Stock 1,221 1,008
Junior Preferred Stock 814 672
--------- ---------
Earnings attributable to common stock $ (460) 1,256
========= =========
</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>
27-Week 26-Week
period period
ended ended
April 4, March 29,
1997 1996
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating
activities $ (347) 4,395
------- -------
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (6,528) (4,396)
(Increase) decrease in other non current assets -- (122)
------- -------
Net cash used in investing activities (6,528) (4,518)
------- -------
FINANCING ACTIVITIES
Net (Repayments)/Proceeds from debt issue costs (192) (250)
Net (Repayments)/Proceeds from stockholder loans -- 10
Net (Repayments)/Proceeds from revolving credit facility 9,600 (3,100)
Net (Repayments)/Proceeds from senior term loans (2,900) --
------- -------
Net cash provided by (used in) financing activities 6,508 (3,340)
------- -------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (367) (3,463)
Cash and cash equivalents at beginning of period 1,753 8,267
------- -------
Cash and cash equivalents at end of period $ 1,386 4,804
======= =======
</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") 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 27, 1996
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.
During the quarter ended April 4, 1997, CPI paid preferred dividends on its
Senior Redeemable Preferred Stock and its Junior Preferred Stock through the
issuance of 6,212 additional shares of its Senior Redeemable Preferred Stock
and 4,141 shares of its Junior Preferred Stock, respectively. During the
first half ended April 4, 1997, CPI paid preferred dividends through the
issuance of 12,214 shares of its Senior Redeemable Preferred Stock and 8,142
shares of its Junior Preferred Stock.
- 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
Incoming orders during the second quarter of Fiscal 1997 were $75.5 million as
compared to $66.7 for the second quarter of Fiscal 1996, an increase of 13.2%.
Orders during the first six months of Fiscal 1997 were $141.7 million as
compared to $136.8 million over the comparable period in the prior fiscal year,
a growth rate of 3.6%. However, incoming order levels fluctuate significantly
on a quarterly basis and a particular quarter's 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 accurately predict when these orders will be
recognized as sales.
As of April 4, 1997, the Company had an order backlog of $173.2 million,
representing approximately eight months of sales compared to order backlog of
$155.6 million as of March 29, 1996.
Sales for the second quarter of Fiscal 1997 were $63.9 million, an increase of
$.4 million, or .6%, from the second quarter of Fiscal 1996. Sales for the
first six months of Fiscal 1997 were $119.2 million, a decrease of $6.9
million, or 5.5% below the comparable period in the prior fiscal year. For
Fiscal 1997, sales for the second quarter showed a 15.5% improvement over the
first quarter sales of $55.3 million which were affected by the completion of
the Company's consolidation efforts. In November 1996, the Company relocated
one of its manufacturing plants from a leased facility in Santa Clara to shared
facilities in Palo Alto which resulted in shipping delays and, in December
1996, the Company moved the last of its product lines from Salt Lake City, Utah
to San Carlos, California which impacted production yields.
In terms of markets, the sales decline for the first six months of Fiscal 1997
was reflected in lower sales in the communications, electronic countermeasures
and industrial markets, partially offset by higher sales of product in the
radar and scientific markets. Medical sales remained relatively flat compared
to the same time period in the prior fiscal year. Communications sales totaled
$55.1 million for the first six months of Fiscal 1997 and were down $2.9
million, or 5%, from the six months of Fiscal 1996. However, for Fiscal 1997,
second quarter shipments in this market were up $5.5 million, or 22.3%, from
the first quarter which reflects the anticipated recovery from shipping delays
related to consolidation activities and related to the production ramp-up
necessary to meet the demand for new Satcom products. Electronic
countermeasure sales were $38.1 million for the first six months, which was a
decrease of $4.7 million, or 52.4%, compared to the same time period in Fiscal
1996. This decrease was the result of a gap between the completion of a one
major customer program and the phase in of another customer program.
Industrial sales were $11.2 million, a decrease of $1.9 million, or 14.4%,
compared to prior year which is due to the timing of customer defined delivery
schedules. Radar sales were $38.1 million, an increase of $1.9 million, or
5.3%, from prior year due to strong order receipts as OEM consolidations and
downsizing has promoted outsource requirements for amplifier and transmitter
subsystems which the Company manufactures. Scientific sales increased $.6
million, or 32.9%, due to an anticipated increase in several new development
programs.
- 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)
Gross profit increased to $17.8 million, or 27.8% of sales, in the second
quarter of Fiscal 1997 from $17.6 million, or 27.7% of sales, in the second
quarter of Fiscal 1996 based on the slight increase in sales volume and despite
an increase in depreciation expense of approximately $.5 million. However,
comparing the first six months of Fiscal 1997 to Fiscal 1996, gross profit
decreased to $30.6 million, or 25.7% of sales, from $34.3 million, or 27.2% of
sales, due to the impact of planned consolidation efforts including lower sales
volume in the first quarter of Fiscal 1997, higher integration costs related to
the last product line moved from Utah, and higher depreciation expense of
approximately $.8 million related mainly to facilities upgrades required to
complete the moves.
Operating costs and expenses increased to $10.0 million, or 15.6% of sales, in
the second quarter of Fiscal 1997 from $9.6 million, or 14.4% of sales, in the
second quarter of Fiscal 1996 primarily due to an increase in marketing efforts
which correspond to the increase in order receipts. Operating costs and
expenses for the first six months of Fiscal 1997 were $19.4 million, or 16.8%
of sales, which is a decrease from $20.0 million, or 15.8% of sales, for the
first six months of Fiscal 1996 due to lower general and administrative costs
primarily related to reduced management incentive accruals tied to first half
performance.
Operating income was $7.8 million, or 12.2% of sales, for the second quarter of
Fiscal 1997, as compared to $8.0 million, or 12.6% of sales for the second
quarter of Fiscal 1996. Operating income was $11.3 million, or 9.4% of sales
for the first six months of Fiscal 1997, as compared to $14.3 million, or 11.3%
of sales for the first six months of Fiscal 1996. The $3.0 million decrease in
operating income in the first half of Fiscal 1997 was primarily related to the
first quarter impact of consolidation efforts described above.
Earnings before interest, income taxes, depreciation and amortization
("EBITDA") for the second quarter of Fiscal 1997 was $10.1 million, or 15.9% of
sales, which was consistent with the Company's performance of $10.1 million
(excluding the effect of a $.3 million charge during the quarter relating to
the write-up of inventory recorded in connection with the Acquisition), or
16.0% of sales, for the second quarter of Fiscal 1996. This represents a
significant improvement over the Company's first quarter EBITDA of only $5.7
million, or 10.3% of sales, which was impacted by lower volume and higher
move-related production costs. EBITDA for the first six months of Fiscal 1997
was $15.8 million, or 13.3% of sales, compared to $19.7 million (excluding a
$1.7 million charge for the write-up of inventory), or 15.6% of sales, for the
first six months of Fiscal 1996. Costs associated with the Salt Lake City to
San Carlos consolidation, including travel and training expenses, temporary
duplication of labor and facility resources and poor manufacturing yields on
the moved product lines, negatively impacted EBITDA by approximately $1.9
million in the first half of Fiscal 1997 (the final stages of the move)
compared to $.8 million during the first half of Fiscal 1996 (the initial
planning stages of the move).
Earnings before taxes amounted to $3.1 million and $1.7 million for the 13-week
and 27-week periods ended April 4, 1997, respectively, as compared to $3.4
million and $4.7 million for the 13-week and 26-week periods ended March 29,
1996. The decrease of $2.9 million, or 62.0%, for the first six months of
Fiscal 1997 was due to the impact of the Company's consolidation efforts
described above, including additional depreciation expense of $.9 million,
offset partially by lower incentive accruals and lower interest. Interest was
$9.5 million in the first half of Fiscal 1997 ($8.5 million of cash interest
expense) compared to $9.6 million in the first half of Fiscal 1996 ($8.6
million of cash interest expense).
- 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)
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities for the first six months of Fiscal 1997 was
$.3 million, a decrease of $4.7 million from the $4.4 million provided by
operating activities during the first six months of Fiscal 1996. Cash used in
operations was primarily the result of increases in inventory of $5.0 million,
cash tax payments of $1.6 million and lower levels of deferred liabilities due
to the timing of cash payments required for payroll, supplemental property
taxes and interest. These cash needs were partially offset by lower levels of
accounts receivable and higher levels of outstanding accounts payable.
Cash flow from investing activities was comprised principally of capital
expenditures for property and equipment, which amounted to $6.5 million for the
first six months of Fiscal 1997 as compared to $4.4 million for the first half
of Fiscal 1996. The $2.1 million increase was primarily attributable to the
Company's consolidation efforts. These investing activities, combined with the
cash needs of operations, required $6.7 million of net proceeds during the
first six months from the Company's senior credit agreement.
As of April 4, 1997, the Company had working capital of approximately $32.2
million, a decrease of $2.3 million, or 6.8%, from September 27, 1996. The
decrease in working capital was substantially attributable to a higher balance
on the Company's revolving credit facility offset partially by lower accrued
expenses.
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 $5.4 million was available as of May 2,
1997). 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 April 4, 1997.
- 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: May 16, 1997
By: /s/ LYNN E. HARVEY
--------------------------------------------
Lynn E. Harvey
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
Date: May 16, 1997
- 16 -
<PAGE> 18
EXHIBIT INDEX
EXHIBIT
NO. Description.
- ------- ------------
27.1 Financial Data Schedule
27.2 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION FOR THE QUARTER ENDED APRIL 4, 1997.
</LEGEND>
<CIK> 0001000654
<NAME> COMMUNICATIONS & POWER INDUSTRIES HOLDING CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-03-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> APR-04-1997
<CASH> 1,386
<SECURITIES> 0
<RECEIVABLES> 44,700
<ALLOWANCES> 0
<INVENTORY> 51,516
<CURRENT-ASSETS> 107,329
<PP&E> 82,358
<DEPRECIATION> 0
<TOTAL-ASSETS> 228,754
<CURRENT-LIABILITIES> 75,092
<BONDS> 132,750
16,151
0
<COMMON> 2
<OTHER-SE> (6,830)
<TOTAL-LIABILITY-AND-EQUITY> 228,754
<SALES> 119,191
<TOTAL-REVENUES> 119,191
<CGS> 88,562
<TOTAL-COSTS> 88,562
<OTHER-EXPENSES> 3,724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,492
<INCOME-PRETAX> 1,770
<INCOME-TAX> 195
<INCOME-CONTINUING> 1,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,575
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
CONDENSED CONSOLIATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER
INDUSTRIES, INC. FOR THE QUARTER ENDED APRIL 4, 1997.
</LEGEND>
<CIK> 0001000564
<NAME> COMMUNICATIONS & POWER INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-03-1997
<PERIOD-START> SEP-28-1996
<PERIOD-END> APR-04-1997
<CASH> 1,386
<SECURITIES> 0
<RECEIVABLES> 44,700
<ALLOWANCES> 0
<INVENTORY> 51,516
<CURRENT-ASSETS> 107,329
<PP&E> 82,358
<DEPRECIATION> 0
<TOTAL-ASSETS> 228,754
<CURRENT-LIABILITIES> 75,092
<BONDS> 132,750
16,151
1
<COMMON> 0
<OTHER-SE> 4,760
<TOTAL-LIABILITY-AND-EQUITY> 228,754
<SALES> 119,191
<TOTAL-REVENUES> 119,191
<CGS> 88,562
<TOTAL-COSTS> 88,562
<OTHER-EXPENSES> 3,724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,492
<INCOME-PRETAX> 1,770
<INCOME-TAX> 195
<INCOME-CONTINUING> 1,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,575
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
