<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 July 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
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 CORPORATION COMMUNICATIONS & POWER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its 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 executive including area code, of registrant's principal
offices) executive offices)
Securities registered pursuant to Section 12(b) of the Act: Securities registered pursuant to Section 12(b) of the Act:
NONE NONE
Securities registered pursuant to Section 12(g) of the Act: Securities registered pursuant to Section 12(g) of 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: 196,420 SHARES OF COMMON STOCK, $.01 PAR VALUE,
AT JULY 2, 1999. COMMUNICATIONS & POWER INDUSTRIES, INC.: 1 SHARE OF COMMON
STOCK, $.01 PAR VALUE, AT JULY 2, 1999.
<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 & POWER INDUSTRIES, INC.
Consolidated Condensed Balance Sheets, July 2, 1999 and October 2, 1998.............................2
Consolidated Condensed Statements of Operations, 13-week period ended July 2, 1999 and 13-week
period ended July 3, 1998...........................................................................3
Consolidated Condensed Statements of Operations, 39-week period ended July 2, 1999 and 39-week
period ended July 3, 1998...........................................................................4
Consolidated Condensed Statements of Cash Flows, 39-week period ended July 2, 1999 and 39-week
period ended July 3, 1998...........................................................................5
Notes to Consolidated Condensed Financial Statements................................................6
Management's Discussion and Analysis of Financial Condition and Results of Operations..............14
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
Consolidated Condensed Balance Sheets, July 2, 1999 and October 2, 1998.............................8
Consolidated Condensed Statements of Operations, 13-week period ended July 2, 1999 and 13-week
period ended July 3, 1998...........................................................................9
Consolidated Condensed Statements of Operations, 39-week period ended July 2, 1999 and 39-week
period ended July 3, 1998..........................................................................10
Consolidated Condensed Statements of Cash Flows, 39-week period ended July 2, 1999 and 39-week
period ended July 3, 1998..........................................................................11
Notes to Consolidated Condensed Financial Statements...............................................12
Management's Discussion and Analysis of Financial Condition and Results of Operations..............14
PART II: OTHER INFORMATION
Other Information .................................................................................18
SIGNATURES..............................................................................................19
</TABLE>
<PAGE> 3
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of
Communications & Power Industries Holding Corporation)
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)
<TABLE>
<CAPTION>
July 2, October 2,
ASSETS 1999 1998
------ --------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 7,041 $ 448
Accounts receivable, net 43,685 49,484
Inventories 55,329 52,923
Deferred taxes 6,981 6,981
Other current assets 1,240 1,440
--------- ---------
Total current assets 114,276 111,276
Property, plant, and equipment, net 77,184 78,099
Goodwill and other intangibles, net 29,351 25,147
Debt issue costs, net 5,886 6,522
Deferred taxes 8,154 8,168
--------- ---------
Total assets $ 234,851 $ 229,212
========= =========
LIABILITIES, REDEEMABLE
PREFERRED STOCK AND EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 32,500 $ 13,300
Current portion of term loans 6,200 6,200
Current portion of capital leases 774 541
Accounts payable 10,444 13,140
Accrued expenses 22,370 15,612
Product warranty 3,692 3,734
Income taxes payable 8,543 10,259
Advance payments from customers 2,786 2,533
--------- ---------
Total current liabilities 87,309 65,319
Senior term loans 18,999 23,750
Senior subordinated notes 100,000 100,000
Obligations under capital leases 2,216 2,548
--------- ---------
Total liabilities 208,524 191,617
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK 23,298 20,683
--------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Junior Preferred Stock 1 1
Common Stock -- --
Additional paid-in capital 35,220 33,582
Accumulated deficit (31,098) (15,614)
Less stockholder loans (1,094) (1,057)
--------- ---------
Net stockholders' equity 3,029 16,912
--------- ---------
Total liabilities, redeemable
preferred stock and equity $ 234,851 $ 229,212
========= =========
</TABLE>
See accompanying notes to the unaudited interim consolidated condensed financial
statements.
-2-
<PAGE> 4
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of
Communications & Power Industries Holding Corporation)
CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)
<TABLE>
<CAPTION>
13-Week 13-Week
period ended period ended
July 2, July 3,
1999 1998
-------- --------
<S> <C> <C>
Sales $ 62,292 $ 64,450
Cost of sales 54,034 48,702
-------- --------
Gross profit 8,258 15,748
-------- --------
Operating costs and expenses:
Research and development 2,332 1,687
Marketing 4,987 5,065
General and administrative 6,012 3,261
-------- --------
Total operating costs and expenses 13,331 10,013
-------- --------
Operating(loss) income (5,073) 5,735
Foreign currency (loss) gain (203) 69
Interest expense (4,386) (4,399)
-------- --------
(Loss) earnings before taxes (9,662) 1,405
Income tax expense 422 527
-------- --------
Net (loss) earnings (10,084) 878
Preferred dividends:
Senior Redeemable Preferred Stock 847 738
Junior Preferred Stock 565 492
-------- --------
Loss earnings attributable to common stock $(11,496) $ (352)
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-3-
<PAGE> 5
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of
Communications & Power Industries Holding Corporation)
CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)
<TABLE>
<CAPTION>
39-Week 39-Week
period ended period ended
July 2, July 3,
1999 1998
--------- ---------
<S> <C> <C>
Sales $ 187,192 $ 190,625
Cost of sales 148,647 142,181
--------- ---------
Gross profit 38,545 48,444
--------- ---------
Operating costs and expenses:
Research and development 7,092 5,406
Marketing 14,573 14,397
General and administrative 14,231 10,545
--------- ---------
Total operating costs and expenses 35,896 30,348
--------- ---------
Operating income 2,649 18,096
Foreign currency (loss) gain (644) 24
Interest expense (13,237) (13,520)
--------- ---------
(Loss) earnings before taxes (11,232) 4,600
Income tax expense -- 1,725
--------- ---------
Net (loss) earnings (11,232) 2,875
Preferred dividends:
Senior Redeemable Preferred Stock 2,455 2,140
Junior Preferred Stock 1,637 1,426
--------- ---------
Loss attributable to common stock $ (15,324) $ (691)
========= =========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-4-
<PAGE> 6
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of
Communications & Power Industries Holding Corporation)
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(in thousands - unaudited)
<TABLE>
<CAPTION>
39-Week 39-Week
period ended period ended
July 2, July 3,
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $ 7,801 $ 18,592
-------- --------
INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 13 29
Purchase of property, plant and equipment, net (6,681) (4,388)
Product lines acquisitions (8,910) (2,730)
-------- --------
Net cash used in investing activities (15,578) (7,089)
-------- --------
FINANCING ACTIVITIES
Net Proceeds/(Repayments) from revolving credit facility 19,200 (7,100)
Net Repayments on senior term loans (4,830) (4,150)
Net Proceeds from stockholder loans -- 30
Purchase of treasury stock -- (723)
Issuance of treasury stock -- 696
-------- --------
Net cash provided by (used in) financing activities 14,370 (11,247)
-------- --------
NET INCREASE IN
CASH AND CASH EQUIVALENTS 6,593 256
Cash and cash equivalents at beginning of period 448 2,027
-------- --------
Cash and cash equivalents at end of period $ 7,041 $ 2,283
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-5-
<PAGE> 7
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of
Communications & Power Industries Holding Corporation)
NOTES TO UNAUDITED CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(unaudited)
The accompanying unaudited consolidated condensed financial statements of
Communications & Power Industries, Inc. ("CPI") have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote 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 October 2, 1998 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 (except
as described below), necessary to present fairly the financial position of CPI,
and its results of operations and cash flows, for the interim period presented.
The results for the interim periods reported are not necessarily indicative of
the results for the full fiscal year 1999.
Results for the quarter and the nine months ending July 2, 1999 reflect an
aggregate $7.6 million in non-recurring charges, of which $6.0 million was
charged to cost of goods sold and $1.6 million was charged to general and
administrative expenses. These non-recurring charges were principally related to
the Company's Traveling Wave Technology (TWT) Division and changes in estimated
costs to complete certain customer contracts and the write-off of certain
inventory which the Company believes is not realizable. In addition, certain
charges for the discontinuation of a Satcom Division product line are reflected.
The TWT business, historically conducted as a separate Palo Alto division, is in
the process of being integrated into the Company's Microwave Power Products
(MPP) Division, also headquartered in Palo Alto. The non-recurring charges also
include a provision for severance expenses in connection with the integration of
the TWT Division and estimated settlement costs with a customer.
The Company is currently involved in a dispute with a customer involving
performance and functionality of a particular type of product that is sold to
this customer. The parties are presently negotiating a settlement to resolve
this matter. The Company has recorded a reserve for the minimum level of its
estimate of the range of exposure.
The Company's third quarter performance resulted in its failure to meet certain
financial covenants contained in the Company's senior bank credit facility. CPI
has obtained a limited waiver of the defaults from 100% of its lenders. This
waiver is effective until the earlier of October 1, 1999, or the completion of a
more comprehensive restructuring amendment to the credit facility. CPI expects
to shortly begin working on the terms of such a restructuring amendment with the
lenders' representatives.
During the quarter ended July 2, 1999, CPI paid preferred stock dividends on its
Senior Redeemable Preferred Stock and its Junior Preferred Stock through the
issuance of 8,466 additional shares of its Senior Redeemable Preferred Stock and
5,644 shares of its Junior Preferred Stock, respectively. During the nine months
ended July 2, 1999, the Company paid preferred dividends through the issuance of
24,549 shares of its Senior Redeemable Preferred Stock and 16,366 shares of its
Junior Preferred Stock.
At the beginning of fiscal year 1999, CPI completed the acquisition of the
Microwave Components Division ("MCD") of Aydin Corporation for approximately
$8.9 million with net assets of approximately $2.4 million. The $6.5 million
difference between the purchase price and the fair value of the net assets
acquired was allocated to goodwill and other intangibles and will be amortized
over estimated useful lives ranging from 1 to 15 years. This acquisition was
accounted for as a purchase.
-6-
<PAGE> 8
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of
Communications & Power Industries Holding Corporation)
Inventories are stated at the lower of average cost or market (net realizable
value). The main components of inventories are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) July 2, October 2,
1999 1998
------- -------
<S> <C> <C>
Raw materials and parts $41,868 $38,327
Work in process 10,796 13,572
Finished goods 2,665 1,024
------- -------
Total inventories $55,329 $52,923
======= =======
</TABLE>
-7-
<PAGE> 9
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)
<TABLE>
<CAPTION>
July 2, October 2,
ASSETS 1999 1998
------ --------- ---------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 7,041 $ 448
Accounts receivable, net 43,685 49,484
Inventories 55,329 52,923
Deferred taxes 6,981 6,981
Other current assets 1,240 1,440
--------- ---------
Total current assets 114,276 111,276
Property, plant, and equipment, net 77,184 78,099
Goodwill and other intangibles, net 29,351 25,147
Debt issue costs, net 5,886 6,522
Deferred taxes 8,154 8,168
--------- ---------
Total assets $ 234,851 $ 229,212
========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK,
PREFERRED STOCK OF SUBSIDIARY AND EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 32,500 $ 13,300
Current Portion of term loans 6,200 6,200
Current Portion of capital leases 774 541
Accounts payable 10,444 13,140
Accrued expenses 22,370 15,612
Product warranty 3,692 3,734
Income taxes payable 8,543 10,259
Advance payments from customers 2,786 2,533
--------- ---------
Total current liabilities 87,309 65,319
Senior term loans 18,999 23,750
Senior subordinated notes 100,000 100,000
Obligations under capital leases 2,216 2,548
--------- ---------
Total liabilities 208,524 191,617
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 23,298 20,683
--------- ---------
JUNIOR PREFERRED STOCK OF SUBSIDIARY 16,038 14,400
--------- ---------
STOCKHOLDERS' (DEFICIT) EQUITY:
Common Stock 2 2
Additional paid-in capital 19,181 19,181
Accumulated deficit (31,098) (15,614)
Less stockholder loans (1,094) (1,057)
--------- ---------
Net stockholders' (deficit) equity (13,009) 2,512
--------- ---------
Total liabilities, redeemable preferred stock, preferred
stock of subsidiary and equity $ 234,851 $ 229,212
========= =========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-8-
<PAGE> 10
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)
<TABLE>
<CAPTION>
13-Week 13-Week
period ended period ended
July 2, July 3,
1999 1998
-------- --------
<S> <C> <C>
Sales $ 62,292 $ 64,450
Cost of sales 54,034 48,702
-------- --------
Gross profit 8,258 15,748
-------- --------
Operating costs and expenses:
Research and development 2,332 1,687
Marketing 4,987 5,065
General and administrative 6,012 3,261
-------- --------
Total operating costs and expenses 13,331 10,013
-------- --------
Operating (loss) income (5,073) 5,735
Foreign currency (loss) gain (203) 69
Interest expense (4,386) (4,399)
-------- --------
(Loss) earnings before taxes (9,662) 1,405
Income tax expense 422 527
-------- --------
Net (loss) earnings (10,084) 878
Preferred dividends:
Senior Redeemable Preferred Stock 847 738
Junior Preferred Stock 565 492
-------- --------
Loss earnings attributable to common stock $(11,496) $ (352)
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-9-
<PAGE> 11
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands - unaudited)
<TABLE>
<CAPTION>
39-Week 39-Week
period ended period ended
July 2, July 3,
1999 1998
--------- ---------
<S> <C> <C>
Sales $ 187,192 $ 190,625
Cost of sales 148,647 142,181
--------- ---------
Gross profit 38,545 48,444
--------- ---------
Operating costs and expenses:
Research and development 7,092 5,406
Marketing 14,573 14,397
General and administrative 14,231 10,545
--------- ---------
Total operating costs and expenses 35,896 30,348
--------- ---------
Operating income 2,649 18,096
Foreign currency (loss) gain (644) 24
Interest expense (13,237) (13,520)
--------- ---------
(Loss) earnings before taxes (11,232) 4,600
Income tax expense -- 1,725
--------- ---------
Net (loss) earnings (11,232) 2,875
Preferred dividends:
Senior Redeemable Preferred Stock 2,455 2,140
Junior Preferred Stock 1,637 1,426
--------- ---------
Loss attributable to common stock $ (15,324) $ (691)
========= =========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-10-
<PAGE> 12
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(in thousands - unaudited)
<TABLE>
<CAPTION>
39-Week 39-Week
period ended period ended
July 2, July 3,
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $ 7,801 $ 18,592
-------- --------
INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 13 29
Purchase of property, plant and equipment, net (6,681) (4,388)
Product line acquisitions (8,910) (2,730)
-------- --------
Net cash used in investing activities (15,578) (7,089)
-------- --------
FINANCING ACTIVITIES
Net Proceeds from stockholder loans -- 30
Net Proceeds/(Repayments) from revolving credit facility 19,200 (7,100)
Net Repayments on senior term loans (4,830) (4,150)
Purchase of treasury stock -- (723)
Issuance of treasury stock -- 696
-------- --------
Net cash provided by (used in) financing activities 14,370 (11,247)
-------- --------
NET INCREASE IN
CASH AND CASH EQUIVALENTS 6,593 256
Cash and cash equivalents at beginning of period 448 2,027
-------- --------
Cash and cash equivalents at end of period $ 7,041 $ 2,283
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-11-
<PAGE> 13
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
NOTES TO UNAUDITED CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(unaudited)
The accompanying unaudited 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 footnote 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 Holding's October 2, 1998 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 (except as described below), necessary to present fairly the
financial position of Holding, and its results of operations and cash flows, for
the interim period presented. The results for the interim periods reported are
not necessarily indicative of the results for the full fiscal year 1999.
Results for the quarter and the nine months ending July 2, 1999 reflect an
aggregate $7.6 million in non-recurring charges, of which $6.0 million was
charged to cost of goods sold and $1.6 million was charged to general and
administrative expenses. These non-recurring charges were principally related to
the Company's Traveling Wave Technology (TWT) Division and changes in estimated
costs to complete certain customer contracts and the write-off of certain
inventory which the Company believes is not realizable. In addition, certain
charges for the discontinuation of a Satcom Division product line are reflected.
The TWT business, historically conducted as a separate Palo Alto division, is in
the process of being integrated into the Company's Microwave Power Products
(MPP) Division, also headquartered in Palo Alto. The non-recurring charges also
include a provision for severance expenses in connection with the integration of
the TWT Division and estimated settlement costs with a customer.
The Company is currently involved in a dispute with a customer involving
performance and functionality of a particular type of product that is sold to
this customer. The parties are presently negotiating a settlement to resolve
this matter. The Company has recorded a reserve for the minimum level of its
estimate of the range of exposure.
The Company's third quarter performance resulted in its failure to meet certain
financial covenants contained in the Company's senior bank credit facility. CPI
has obtained a limited waiver of the defaults from 100% of its lenders. This
waiver is effective until the earlier of October 1, 1999, or the completion of a
more comprehensive restructuring amendment to the credit facility. CPI expects
to shortly begin working on the terms of such a restructuring amendment with the
lenders' representatives.
During the quarter ended July 2, 1999, CPI paid preferred stock dividends on its
Senior Redeemable Preferred Stock and its Junior Preferred Stock through the
issuance of 8,466 additional shares of its Senior Redeemable Preferred Stock and
5,644 shares of its Junior Preferred Stock, respectively. During the nine months
ended July 2, 1999, the Company paid preferred dividends through the issuance of
24,549 shares of its Senior Redeemable Preferred Stock and 16,366 shares of its
Junior Preferred Stock.
At the beginning of fiscal year 1999, CPI completed the acquisition of the
Microwave Components Division ("MCD") of Aydin Corporation for approximately
$8.9 million with net assets of approximately $2.4 million. The $6.5 million
difference between the purchase price and the fair value of the net assets
acquired was allocated to goodwill and other intangibles and will be amortized
over estimated useful lives ranging from 1 to 15 years. This acquisition was
accounted for as a purchase.
-12-
<PAGE> 14
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
Inventories are stated at the lower of average cost or market (net realizable
value). The main components of inventories are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands) July 2, October 2,
1999 1998
------- -------
<S> <C> <C>
Raw materials and parts $41,868 $38,327
Work in process 10,796 13,572
Finished goods 2,665 1,024
------- -------
Total inventories $55,329 $52,923
======= =======
</TABLE>
-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)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Orders during the third quarter of Fiscal 1999 were $65.6 million as compared to
$53.4 million for the third quarter of Fiscal 1998, bringing orders for the
first nine months of Fiscal 1999 to a level of $180.7 million as compared to
$197.2 million during the same time period in Fiscal 1998. This year-to-date
decline of $16.5 million, or 8.3%, was primarily due to continued softness from
the Company's satellite communications ("satcom") market where orders were down
$10.9 million and to order receipt delays from the Company's medical market
where orders were down $6.8 million. Order receipts for sole-source medical
products have been delayed due to a customer's change from an annual procurement
process to a quarterly procurement process but this is not expected to impact
shipments. Overall, 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 July 2, 1999, the Company had order backlog of $156.5 million,
representing approximately seven months of sales, compared to order backlog of
$168.5 million, or approximately eight months of sales as of July 3, 1998.
Sales for the third quarter of Fiscal 1999 were $62.3 million compared to $64.5
million for the same period in Fiscal 1998 and were $187.2 million for the first
nine months of Fiscal 1999 compared to $190.6 million during the same time
period in Fiscal 1998. The nine month decline of $3.4 million, or 1.8%, is a
relatively small decline attributable to the challenging global economic
conditions impacting order receipts, but there has been a significant change in
product mix. Sales of products to the communications, radar and industrial
markets for the first nine months of Fiscal 1999 were down by $7.7 million, $2.5
million and $1.9 million, respectively, compared to the first nine months of
Fiscal 1998. The communications market has been unfavorable impacted by softness
in demands for satcom products in spite of the Company's recent acquisition
(completed in October 1998) of solid state products that added $4.7 million of
new sales during the first nine months of Fiscal 1999. The radar market has been
impacted slightly by U.S. sanctions against India and the industrial market has
been impacted by softness in demands from the semiconductor products. Partially
offsetting these declines are increased sales to the electronic countermeasures,
scientific and medical markets of $4.4 million, $2.2 million and $2.1 million,
respectively. Both electronic countermeasures and scientific sales have been
favorably impacted by new product development efforts.
Gross profit for the third quarter of Fiscal 1999 was $8.3 million, or 13.3% of
sales, compared to $15.7 million, or 24.4% of sales, in the third quarter of
Fiscal 1998. Gross profit for the first nine months of Fiscal 1999 was $38.5
million, or 20.6% of sales, compared to $48.4 million, or 25.4% of sales, during
the comparable period in Fiscal 1998. This decline of $7.5 million for the third
quarter and $9.9 million
-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)
for the nine months ending July 2, 1999 was primarily due to non-recurring
charges of $6.0 million (described below). Absent this charge, gross margins
were down in Fiscal 1999 compared to Fiscal 1998 due to slightly lower sales
volume and shifts in product mix to more technically challenging products in new
applications as well as new product introductions that have higher costs.
Operating costs and expenses were $13.3 million, or 21.4% of sales, for the
third quarter of Fiscal 1999, as compared to $10.0 million, or 15.5%, for the
third quarter of Fiscal 1998. Operating costs and expenses for the first nine
months of Fiscal 1999 were $35.9 million, or 19.2% of sales, compared to $30.3
million, or 15.9% of sales, for the first nine months of Fiscal 1998. This
increase of $3.3 million for the third quarter and $5.5 million for the nine
months ending July 2, 1999 was due to non-recurring charges of $1.6 million
(described below), higher research and development spending primarily in the
satcom product area as well as higher marketing, administrative and amortization
costs related to the Company's recent acquisition.
Results for the quarter and the nine months ending July 2, 1999 reflect an
aggregate $7.6 million in non-recurring charges principally related to the
Company's Traveling Wave Technology (TWT) Division and changes in estimated
costs to complete certain customer contracts and the write-off of certain
inventory which the Company believes is not realizable. In addition, certain
charges for the discontinuation of a Satcom Division product line are reflected.
The TWT business, historically conducted as a separate Palo Alto division, is in
the process of being integrated into the Company's Microwave Power Products
(MPP) Division, also headquartered in Palo Alto. The non-recurring charges also
include a provision for severance expenses in connection with the integration of
the TWT Division and estimated settlement costs with a customer in connection
with a product performance dispute.
Earnings before interest, income taxes, depreciation and amortization
("EBITDA")(1) for the third quarter of Fiscal 1999 were a negative $1.8 million,
or (2.9%) of sales, compared to $8.8 million, or 13.6% of sales, for the third
quarter of Fiscal 1998. EBITDA for the first nine months of Fiscal 1999 was
$12.2 million, or 6.5% of sales, compared to $26.6 million, or 13.9% of sales,
for the same time period in Fiscal 1998. Excluding the non-recurring charges of
$7.6 million, EBITDA for the third quarter was $5.8 million, or 9.3% of sales,
and $19.8 million, or 10.6% of sales, for the nine months ending July 2, 1999.
This decrease in EBITDA of $3.0 million for the third quarter and $6.8 million
for the first nine months of Fiscal 1999 was due primarily to shifts in product
mix that, because of a number of new product development contracts, have lower
margins, higher research and development spending and higher general and
administrative costs associated with unfavorable currency fluctuations,
information system replacement efforts and adding a new operating division.
- --------
(1) EBITDA is presented because some investors may use it as a financial
indicator of the ability to service or incur indebtedness. EBITDA should
not be considered as an alternative to net earnings (loss), as a measure of
operating results, cash flows or liquidity.
-15-
<PAGE> 17
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of
Communications & Power Industries Holding Corporation)
FINANCIAL CONDITION
Cash flows provided by operating activities for the first nine months of Fiscal
1999 were $7.8 million, a decrease of $10.8 million from the $18.6 million
provided by operating activities during the first nine months of Fiscal 1998.
Cash flow decreased due primarily to lower earnings and higher levels of
accounts payable payments partially offset by a decrease in operating assets, an
increase in accrued liabilities and an increase in advanced payments from
customers.
Investing activities increased to $15.6 million in the first nine months of
Fiscal 1999 compared to $7.1 million in the first nine months of Fiscal 1998.
This increase of $8.5 million was due to the acquisition of the Microwave
Components Division of Aydin Corporation, which was completed in October 1998,
and to slightly higher spending on production equipment.
The Company's current primary source of liquidity, other than funds generated
from operations, is the $45.0 million revolving credit facility provided under
its senior credit agreement (of which $10.3 million was available as of July 30,
1999). In the first nine months of Fiscal 1999, the Company borrowed $19.2
million under this facility to repay $4.8 million of term loans and to complete
the acquisition mentioned above. The Company's third quarter performance
resulted in its failure to meet certain financial covenants contained in the
Company's senior bank credit facility. CPI has obtained a limited waiver of the
defaults from 100% of its lenders. This waiver is effective until the earlier of
October 1, 1999, or the completion of a more comprehensive restructuring
amendment to the credit facility. CPI expects to shortly begin working on the
terms of such a restructuring amendment with the lenders' representatives. Among
other things, CPI expects that the restructuring amendment will reflect the
Company's reduced expectations for financial results in upcoming quarters.
Market Risk
The Company's market risk disclosures set forth in its Annual Report on Form
10-K for the fiscal year ended October 2, 1998 have not changed significantly.
Year 2000
The Company has conducted a comprehensive review of its computer systems and
applications to identify systems that could be affected by the "Year 2000" issue
and has developed a remediation plan. All systems that are considered to be
mission critical have been identified and addressed in this plan. The Company
has also reviewed its products, process equipment and facilities systems as part
of its overall Year 2000 readiness.
The Company's focus is first on products and business critical systems and
equipment. Evaluation of products is substantially complete as only a few CPI
products contain microprocessors or microcode. To date, no significant problems
have been found in existing CPI products. Also, CPI is contacting its suppliers
to ensure that they have appropriate plans in place to adequately address the
century change issue. CPI's goals for the Year 2000 project are to have all
business critical process Year 2000
-16-
<PAGE> 18
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of
Communications & Power Industries Holding Corporation)
conversions, corrective actions, work arounds and tests completed by October 31,
1999. To date, four of the Company's six Divisions have successfully modified or
replaced Enterprise Resource Planning ("ERP") systems. The other two are
scheduled to "go-live" on a new ERP system during the next three months.
Timely completion of its Year 2000 project is a priority of the Company and the
remediation plan, along with the timetable for its completion and budgeted
remediation costs, have been approved by the Company's Year 2000 project team,
management, and the Board of Directors. Management currently estimates that it
will spend approximately $5.6 million primarily through a capital lease program
to replace outdated Varian legacy systems. To date, approximately $5.2 million
has been incurred. Other remediation efforts include a mix of capital
expenditures and operating expense and an estimated $1.5 million is planned for
Fiscal 1999. The Company's estimated timetable and budgeted remediation costs
are based on assumptions which management believes are reasonable and
appropriate. Management is committing and will continue to commit necessary
human and financial resources to complete its remediation plans on a timely
basis.
To date, based on both written and verbal discussions, management has no
information that indicates a significant vendor or service provider may be
unable to sell goods or provide services to the Company or that any significant
customer may be unable to purchase from the Company because of Year 2000 issues.
Further, the Company has not received any notifications from regulatory agencies
to which it is subject indicating that the Company must achieve compliance by a
specific date or significant regulatory action will be taken.
The Company presently believes that, with modifications to existing software and
conversion to new software, the Year 2000 problem will not pose significant
operational problems for the Company's systems as modified and converted.
However, if such modifications and conversions are not completed timely, the
Year 2000 problem could have a material impact on the operations of the Company.
Management is still in the process of developing contingency plans but expects
that manual processing procedures to maintain accurate processing of information
and data are available. Contingency plans are in process but completion of these
plans has been delayed until October 31, 1999 to coincide with converting the
last Division to Y2K compliant information systems.
Forward-Looking Information
Except for historical information, this Management's Discussion and Analysis
contains forward-looking statements that involve risks and uncertainties that
could cause actual results to differ materially from those projected. Such risks
and uncertainties include: product demand and market acceptance risks; the
effect of general economic conditions; the impact of competitive products and
pricing; new product development and commercialization; technological
difficulties and the ability to increase margins; the timing of renewed growth
in the Far East; U.S. Government export policies; and other risks detailed from
time to time in the Company's filings with the Securities and Exchange
Commission.
-17-
<PAGE> 19
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.
See the discussion above under "Management's Discussion and Analysis of
Financial Condition and Results of Operation Financial Condition" for a
discussion of the Company's senior bank credit facility.
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.
(a) The following exhibits are being filed as part of this report:
10.1.6 Sixth Amendment to Credit Agreement among CPI, Holding, the
other obligors named therein, the lenders named therein and
Bankers Trust Company, as Agent, dated as of July 26, 1999.
27.1 Financial Data Schedule (Communications & Power Industries,
Inc.)
27.2 Financial Data Schedule (Communications & Power Industries
Holding Corporation)
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended July 2, 1999.
-18-
<PAGE> 20
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/ William P. Rutledge
------------------------------------------------
William P. Rutledge
Chief Executive Officer and President
Date: August 12, 1999
By: /s/ Lynn E. Harvey
------------------------------------------------
Lynn E. Harvey
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
Date: August 12, 1999
-19-
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ------------
<S> <C>
10.1.6 Sixth Amendment to Credit Agreement among CPI, Holding, the other
obligors named therein, the lenders named therein and Bankers Trust
Company, as Agent, dated as of July 26, 1999.
27.1 Financial Data Schedule (Communications & Power Industries, Inc.)
27.2 Financial Data Schedule (Communications & Power Industries Holding
Corporation)
</TABLE>
<PAGE> 1
[Exhibit 10.1.6]
AMENDMENT NO. 6 TO CREDIT AGREEMENT AND LIMITED WAIVER
This AMENDMENT NO. 6 TO CREDIT AGREEMENT AND LIMITED WAIVER (this
"Limited Waiver") is made and entered into as of July 26, 1999 among
COMMUNICATIONS & POWER INDUSTRIES, INC. (the "Borrower"), COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION, CPI SUBSIDIARY HOLDINGS INC., COMMUNICATIONS &
POWER INDUSTRIES INTERNATIONAL INC., COMMUNICATIONS & POWER INDUSTRIES ASIA
INC., COMMUNICATIONS & POWER INDUSTRIES ITALIA S.R.L., COMMUNICATIONS & POWER
INDUSTRIES EUROPE LIMITED, COMMUNICATIONS & POWER INDUSTRIES CANADA INC.,
COMMUNICATIONS & POWER INDUSTRIES AUSTRALIA PTY LIMITED, CPI SALES CORP.
(collectively, the "Obligors"), BANKERS TRUST COMPANY, as agent (the "Agent"),
and the various lenders (the "Lenders") from time to time party to the Credit
Agreement, dated as of August 11, 1995 (as amended by Amendment No. 1, dated as
of December 31, 1996, Amendment No. 2, dated as of April 1, 1997, Amendment No.
3, dated as of June 27, 1997, Amendment No. 4, dated as of October 6, 1998, and
Amendment No. 5, dated as of February 12, 1999, the "Agreement"), among the
Obligors, the Agent and the Lenders.
RECITALS
A. The Borrower has (1) failed to deliver the amended financial
statements and Borrowing Base Certificate for the April, 1999 Fiscal Month and
the financial statements and Borrowing Base Certificate for the May, 1999 Fiscal
Month, in each case required to be delivered under paragraph 2 of Annex D to the
Agreement at the times required therein (the "Reporting Default") and (2)
informed the Agent and the Lenders that it expects to fail to meet the financial
covenants contained in paragraphs 1, 2 and 3 of Annex F of the Agreement for the
Fiscal Quarter ending June 30, 1999 (the "Financial Covenant Default").
B. The Borrower has requested that the Lenders waive the Reporting
Default and the Financial Covenant Default (collectively, the "Defaults").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings given thereto in the Agreement.
2. Effectiveness of this Limited Waiver. This Limited Waiver shall
become effective as of the date hereof ("Effectiveness") upon satisfaction of
each of the following conditions:
(a) Lenders comprising Requisite Lenders shall have executed a
counterpart to this Limited Waiver and shall have delivered the same to the
Agent; and
<PAGE> 2
(b) each Lender shall have received a fee in immediately available
funds equal to the product of (i) 0.125% and (ii) the aggregate amount of such
Lender's Commitments, which fee shall be credited against any upfront fee
payable to such Lender upon the effectiveness of any amendment to the Agreement
in form and substance satisfactory to the Obligors, the Agent and the Lenders
pursuant to which the Defaults shall be permanently waived and the Loans, or any
terms thereof or covenants relating thereto, will be restructured (the
"Restructuring Amendment").
3. Limited Waiver. Subject to Effectiveness, the Lenders hereby waive
each of the Defaults for a period (the "Waiver Period") beginning on the first
date of Effectiveness and ending on the earliest of (i) July 26, 1999, unless
the Borrower shall have delivered to each Lender on or prior to such date the
financial statements and Borrowing Base Certificate required to be delivered
under paragraph 2 of Annex D to the Agreement for the May, 1999 Fiscal Month,
(ii) the Non-Compliance Date (as defined below), (iii) the date of effectiveness
of the Restructuring Amendment and (iv) October 1, 1999. For purposes hereof,
"Non-Compliance Date" shall mean the earlier of (x) the date on which the
Borrower delivers to the Agent and each Lender the certification of its Chief
Financial Officer for the Borrower's Fiscal Quarter ended June 30, 1999 required
by paragraph 3 of Annex D to the Agreement if such certification shows that for
the Test Period covered thereby the Interest Coverage Ratio is less than
1.25:1.00 or the Leverage Ratio is more than 7.25:1.00 and (y) the date on which
the Borrower defaults in its obligation to deliver to the Agent and each Lender
the certification referred to in clause (x) at the time set forth in paragraph 3
of Annex D to the Agreement.
4. Additional Agreements. The following provisions shall apply at all
times prior to the effectiveness of the Restructuring Amendment:
(a) Interest Rates.
(i) The "Applicable Base Rate Margin" shall mean a rate per
annum determined as follows: (A) in the case of the Revolving Credit
Loan and Term Loan A, 1.25% per annum, (B) in the case of Term Loan B,
1.75% per annum and (C) in the case of Swingline Loans, 0.75% per
annum.
(ii) The "Applicable Eurodollar Rate Margin" shall mean a
rate per annum determined as follows: (A) in the case of the Revolving
Credit Loan and Term Loan A, 2.75% per annum and (B) in the case of
Term Loan B, 3.25% per annum.
(b) Eurodollar Loan Interest Periods. The Borrower may not elect any
new Interest Period pursuant to Section 1.8(e)(ii) of the Agreement in respect
of any borrowing of a Eurodollar Loan longer than a three month period.
(c) Further Restrictions. Without limiting any of the restrictions
otherwise contained in the Agreement, no Obligor shall:
(i) directly or indirectly, by operation of law or
otherwise, enter into a merger, acquisition or joint venture for the
purposes described in clause (c) of Section 6.1 of the Agreement;
<PAGE> 3
(ii) make any investment in, or make or accrue loans or
advances of money or extend credit to, any Person, through the direct
or indirect holding of securities or otherwise, or purchase or acquire
any stock, obligations or securities of, or make any capital
contribution to, any Person for the purposes described in clauses (e)
or (g) of the defined term "Permitted Investments" set forth in Annex A
to the Agreement;
(iii) create, incur, assume or permit to exist any
Indebtedness described in clauses (i) or (o) of the defined term
"Permitted Indebtedness" set forth in Annex A to the Agreement other
than any such Indebtedness existing on or before June 30, 1999;
(iv) enter into any transactions described in clauses (c),
(f) or (j) of the defined term "Permitted Affiliate Transactions" set
forth in Annex A to the Agreement; or
(v) make any investments, incur any Indebtedness or
otherwise make any payments for the purposes described in clause (b) of
Section 6.14 of the Agreement (other than the payments described in
sub-clauses (iii)(B) and (iii)(D) of such clause (b)).
(d) EBITDA. The Borrower will not permit Consolidated EBITDA for the
immediately preceding twelve Fiscal Months, determined as of the last day of
each month, to be less than $21,000,000.
(e) Financial Reports. At the time of and together with the delivery
of the internally prepared Consolidated income statement, statement of cash
flows and balance sheet required to be provided by the Borrower under paragraph
2 of Annex D to the Agreement (the "Monthly Financials"), the Borrower will
provide to each Lender (i) copies of its internally prepared financial
statements of each division of the Borrower in a format consistent with the
Monthly Financials, (ii) in lieu of comparisons to the budget for that monthly
period and the year to date period, comparisons for such periods of the Monthly
Financials to the forecasts and projections delivered to the Agent and the
Lenders by the Borrower on July 12, 1999 and (iii) a certification of the Chief
Financial Officer of Borrower that Borrower is or is not, as the case may be, in
compliance with the terms of Section 4(d) of this Limited Waiver and showing in
reasonable detail the calculations used in determining such compliance or
non-compliance.
(f) Mandatory Prepayment. Notwithstanding anything to the contrary
contained in Section 1.8(e)(i) of the Agreement, if at any time the Borrower's
aggregate cash balances exceed $1,099,999 (excluding non-US cash balances
required in connection with contract advances), the Borrower shall promptly pay,
without premium or penalty, cash in excess of $1,000,000 in minimum amounts of
$100,000 and integral multiples thereof to the Agent for application (i) first,
to outstanding amounts under the Swingline Loan and (ii) second, to outstanding
amounts under the Revolving Credit Loan in accordance with Section 1.4(e) of the
Agreement. For purposes of this clause (f), prepayments hereunder shall be
applied first to outstanding Base Rate Loans and then to outstanding Eurodollar
Loans, provided that Borrower shall at all times remain obligated to pay
breakage costs pursuant to Section 1.9(e)(ii) of the Agreement. So long as
Borrower's aggregate cash balances do not exceed $1,099,999 (excluding non-US
cash balances required in connection with contract advances), payments hereunder
may be reborrowed from time to time subject to the terms and conditions of the
Agreement.
-3-
<PAGE> 4
5. Miscellaneous.
(a) The waiver given hereby is made once only with respect to the
specific provisions of the Agreement set forth above and is made only to the
extent and for the limited purpose and period described herein. Such waiver is
not to be construed as a waiver for any purpose other than as specifically set
forth in this Limited Waiver and shall not constitute an agreement or obligation
of the Agent or any Lender to grant any other or any future waiver.
(b) Upon expiration of the Waiver Period (other than upon the
effectiveness of the Restructuring Amendment), each of the Defaults waived
hereunder shall, unless cured prior to such time, be reinstated in full as of
the date of such expiration. No failure or delay in accordance with this Limited
Waiver on the part of the Agent or any Lender in exercising any right, power or
privilege under the Agreement in respect of the Defaults shall operate as a
waiver of any such right, power or privilege in the event that the Defaults (or
any of them) are reinstated. No waiver of the Defaults hereunder shall suspend,
waive or effect any other Default or Event of Default under the Agreement.
(c) Except as expressly modified by this Limited Waiver, the
Agreement shall continue to be and remain in full force and effect in accordance
with its terms.
(d) This Limited Waiver may be executed in any number of
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
(e) THIS LIMITED WAIVER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(f) This Limited Waiver may be executed by facsimile signature and
each such signature shall be treated in all respects as having the same effect
as an original signature.
(g) Each Obligor hereby ratifies, affirms, acknowledges and agrees
that the Agreement (as modified herein) and each of the other Loan Documents to
which it is a party constitute its valid, binding and enforceable obligations,
and each such Obligor further acknowledges that there are no existing claims,
counterclaims, defenses or rights of setoff whatsoever with respect to the
Agreement (as modified herein) or any of the other Loan Documents.
(h) Each Obligor fully, finally, and absolutely and forever releases
and discharges the Agent and each Lender and their present and former directors,
shareholders, officers, employees, agents, representatives, successors and
assigns, and their separate and respective heirs, personal representatives,
successors and assigns, from any and all actions, causes of action, claims,
debts, damages, demands, liabilities, obligations, and suits, of whatever kind
or nature, in law or equity of such Obligor, whether now known or unknown to
such Obligor, and whether contingent or matured, (i) in respect of the Loans,
the Loan Documents, or the actions or omissions of the Agent and the Lenders in
respect of the Loans or the Loan Documents and (ii) arising from events
occurring prior to the date of this Limited Waiver.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Limited
Waiver to be duly executed as of the date first above written.
COMMUNICATIONS & POWER
INDUSTRIES, INC.
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: Chief Financial Officer, Treasurer
and Secretary
COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: Chief Financial Officer, Treasurer
and Secretary
CPI SUBSIDIARY HOLDINGS INC.
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: Secretary
-5-
<PAGE> 6
COMMUNICATIONS & POWER
INDUSTRIES INTERNATIONAL INC.
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: Secretary
COMMUNICATIONS & POWER
INDUSTRIES ASIA INC.
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: Treasurer
COMMUNICATIONS & POWER
INDUSTRIES ITALIA S.R.L.
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: (Per Power of Attorney)
COMMUNICATIONS & POWER
INDUSTRIES EUROPE LIMITED
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: Secretary
-6-
<PAGE> 7
COMMUNICATIONS & POWER
INDUSTRIES CANADA INC.
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: Vice President
COMMUNICATIONS & POWER
INDUSTRIES AUSTRALIA
PTY LIMITED
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: (Per Power of Attorney)
CPI SALES CORP.
By /s/LYNN E. HARVEY
-------------------------------------------
Name: Lynn E. Harvey
Title: Secretary and Treasurer
BANKERS TRUST COMPANY,
as Lender and as Agent
By /s/MARY JO JOLLY
-------------------------------------------
Name: Mary Jo Jolly
Title: Assistant Vice President
-7-
<PAGE> 8
DRESDNER BANK AG,
New York and Grand Cayman Branches
By /s/BEVERLY G. CASON
-------------------------------------------
Name: Beverly G. Cason
Title: Vice President
By /s/JOHN R. MORRISON
-------------------------------------------
Name: John R. Morrison
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION
(f/k/a FIRST BANK NATIONAL ASSOCIATION)
By /s/KURT D. EGERTSON
-------------------------------------------
Name: Kurt D. Egertson
Title: Vice President
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By /s/JOSEPH MORONEY
-------------------------------------------
Name: Joseph Moroney
Title: Authorized Signatory
ROYALTON COMPANY
By PACIFIC INVESTMENT MANAGEMENT
COMPANY, as Investment Adviser
By PIMCO Management Inc., a general partner
By /s/MOHAN V. PHASALKAR
-------------------------------------------
Name: Mohan V. Phansalkar
Title: Senior Vice President
-8-
<PAGE> 9
SENIOR DEBT PORTFOLIO
By BOSTON MANAGEMENT AND RESEARCH,
as Investment Adviser
By /s/SCOTT H. PAGE
-------------------------------------------
Name: Scott H. Page
Title: Vice President
EATON VANCE SENIOR INCOME TRUST
By EATON VANCE MANAGEMENT
as Investment Adviser
By /s/SCOTT H. PAGE
-------------------------------------------
Name: Scott H. Page
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By /s/RICHARD FAULKNER
-------------------------------------------
Name: Richard Faulkner
Title: Vice President
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER
INDUSTRIES, INC. FOR THE QUARTER ENDED JULY 2, 1999.
</LEGEND>
<CIK> 0001000564
<NAME> COMMUNICATIONS & POWER INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-01-1999
<PERIOD-START> OCT-03-1998
<PERIOD-END> JUL-02-1999
<CASH> 7,041
<SECURITIES> 0
<RECEIVABLES> 43,685
<ALLOWANCES> 0
<INVENTORY> 55,329
<CURRENT-ASSETS> 114,276
<PP&E> 77,184
<DEPRECIATION> 0
<TOTAL-ASSETS> 234,851
<CURRENT-LIABILITIES> 208,524
<BONDS> 121,215
23,298
1
<COMMON> 0
<OTHER-SE> 3,028
<TOTAL-LIABILITY-AND-EQUITY> 234,851
<SALES> 187,192
<TOTAL-REVENUES> 187,192
<CGS> 148,647
<TOTAL-COSTS> 148,647
<OTHER-EXPENSES> 7,092
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,237
<INCOME-PRETAX> (11,232)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,232)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,232)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION FOR THE QUARTER ENDED JULY 2, 1999.
</LEGEND>
<CIK> 0001000654
<NAME> COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
<MULTIPLIER> 1,000
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23,298
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