<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 January 1, 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 COMMUNICATIONS & POWER
INDUSTRIES HOLDING 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 (Address, including zip code, and telephone number,
number, including including area code, of registrant's principal executive
area code, of registrant's principal executive offices) offices)
Securities registered pursuant to Section 12(b) Securities registered pursuant to Section 12(b)
of the Act: of the Act:
NONE NONE
Securities registered pursuant to Section 12(g) Securities registered pursuant to Section 12(g)
of the Act: 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 JANUARY 1, 1999. COMMUNICATIONS & POWER INDUSTRIES, INC.: 1 SHARE OF COMMON
STOCK, $.01 PAR VALUE, AT JANUARY 1, 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 I: FINANCIAL INFORMATION
COMMUNICATIONS & POWER INDUSTRIES, INC.
Consolidated Condensed Balance Sheets, January 1, 1999 and October 2, 1998..................................2
Consolidated Condensed Statements of Operations, 13-week period ended
January 1, 1999 and 13-week period ended January 2, 1998....................................................3
Consolidated Condensed Statements of Cash Flows, 13-week period ended
January 1, 1999 and 13-week period ended January 2, 1998....................................................4
Notes to Consolidated Condensed Financial Statements........................................................5
Management's Discussion and Analysis of Financial Condition and Results of Operations......................10
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
Consolidated Condensed Balance Sheets, January 1, 1999 and October 2, 1998..................................6
Consolidated Condensed Statements of Operations, 13-week period ended
January 1, 1999 and 13-week period ended January 2, 1998....................................................7
Consolidated Condensed Statements of Cash Flows, 13-week period ended
January 1, 1999 and 13-week period ended January 2, 1998....................................................8
Notes to Consolidated Condensed Financial Statements........................................................9
Management's Discussion and Analysis of Financial Condition and Results of Operations......................10
PART II: OTHER INFORMATION
Other Information .........................................................................................14
SIGNATURES..........................................................................................................15
</TABLE>
-1-
<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>
January 1, October 2,
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,482 $ 448
Accounts receivable, net 41,632 49,484
Inventories 57,400 52,923
Deferred taxes 6,981 6,981
Other current assets 1,562 1,440
--------- ---------
Total current assets 109,057 111,276
Property, plant, and equipment, net 78,027 78,099
Goodwill and other intangibles, net 30,625 25,147
Debt issue costs, net 6,462 6,522
Deferred taxes 8,168 8,168
--------- ---------
Total assets $ 232,339 $ 229,212
========= =========
LIABILITIES, REDEEMABLE
PREFERRED STOCK AND EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 19,000 $ 13,300
Current portion of term loans 6,200 6,200
Current portion of capital leases 684 541
Accounts payable - trade 11,604 13,140
Accrued expenses 18,089 15,612
Product warranty 3,725 3,734
Income taxes payable 9,198 10,259
Advance payments from customers 2,116 2,533
--------- ---------
Total current liabilities 70,616 65,319
Senior term loans 22,200 23,750
Senior subordinated notes 100,000 100,000
Obligations under capital leases 2,523 2,548
--------- ---------
Total liabilities 195,339 191,617
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK 21,527 20,683
--------- ---------
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Junior Preferred Stock 1 1
Common Stock -- --
Additional paid-in capital 34,108 33,582
Accumulated deficit (17,567) (15,614)
Less stockholder loans (1,069) (1,057)
--------- ---------
Net stockholders' equity 15,473 16,912
--------- ---------
Total liabilities, redeemable
preferred stock and equity $ 232,339 $ 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
January 1, January 2,
1999 1998
------------ ------------
<S> <C> <C>
Sales $ 57,781 $ 57,373
Cost of sales 43,654 42,726
======== ========
Gross profit 14,127 14,647
-------- --------
Operating costs and expenses:
Research and development 2,066 1,804
Marketing 4,594 4,706
General and administrative 3,908 3,326
======== ========
Total operating costs and expenses 10,568 9,836
-------- --------
Operating income 3,559 4,811
Foreign currency gain/(loss) (158) 160
Interest income/(expense) (4,406) (4,654)
-------- --------
Earnings (loss) before taxes (1,005) 317
Income tax expense (benefit) (422) 119
-------- --------
Net earnings (loss) (583) 198
Preferred dividends:
Senior Redeemable Preferred Stock 790 689
Junior Preferred Stock 527 459
======== ========
(Loss)/earnings attributable to common stock $ (1,900) $ (950)
======== ========
</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 CASH FLOWS
(in thousands - unaudited)
<TABLE>
<CAPTION>
13-Week 13-Week
period ended period ended
January 1, January 2,
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities $ 7,713 $ 15,409
-------- --------
INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment -- 5
Purchase of property, plant and equipment, net (1,841) (1,162)
Product lines acquisitions (8,961) (2,730)
-------- --------
Net cash used in investing activities (10,802) (3,887)
-------- --------
FINANCING ACTIVITIES
Net (Repayments)/Proceeds from debt issue costs (29) --
Net (Repayments)/Proceeds goodwill and other intangibles, net 2 --
Net (Repayments)/Proceeds from revolving credit facility 5,700 (9,300)
Net (Repayments)/Proceeds from senior term loans (1,550) (1,050)
-------- --------
Net cash provided by (used in) financing activities 4,123 (10,350)
-------- --------
NET DECREASE IN
CASH AND CASH EQUIVALENTS 1,034 1,172
Cash and cash equivalents at beginning of period 448 2,027
-------- --------
Cash and cash equivalents at end of period $ 1,482 $ 3,199
======== ========
</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)
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,
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.
During the quarter ended January 1, 1999, CPI paid preferred stock dividends on
its Senior Redeemable Preferred Stock and its Junior Preferred Stock through the
issuance of 7,903 additional shares of its Senior Redeemable Preferred Stock and
5,269 shares of its Junior Preferred Stock, respectively.
During the quarter ended January 1, 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.
-5-
<PAGE> 7
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)
<TABLE>
<CAPTION>
January 1, October 2,
1999 1998
--------- ----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,482 $ 448
Accounts receivable, net 41,632 49,484
Inventories 57,400 52,923
Deferred taxes 6,981 6,981
Other current assets 1,562 1,440
--------- ---------
Total current assets 109,057 111,276
Property, plant, and equipment, net 78,027 78,099
Goodwill and other intangibles, net 30,625 25,147
Debt issue costs, net 6,462 6,522
Deferred taxes 8,168 8,168
--------- ---------
Total assets $ 232,339 $ 229,212
========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK,
PREFERRED STOCK OF SUBSIDIARY AND EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 19,000 $ 13,300
Current Portion of term loans 6,200 6,200
Current Portion of capital leases 684 541
Accounts payable - trade 11,604 13,140
Accrued expenses 18,089 15,612
Product warranty 3,725 3,734
Income taxes payable 9,198 10,259
Advance payments from customers 2,116 2,533
--------- ---------
Total current liabilities 70,616 65,319
Senior term loans 22,200 23,750
Senior subordinated notes 100,000 100,000
Obligations under capital leases 2,523 2,548
--------- ---------
Total liabilities 195,339 191,617
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 21,527 20,683
--------- ---------
JUNIOR PREFERRED STOCK OF SUBSIDIARY 14,926 14,400
--------- ---------
STOCKHOLDERS' EQUITY:
Common Stock 2 2
Additional paid-in capital 19,181 19,181
Accumulated deficit (17,567) (15,614)
Less stockholder loans (1,069) (1,057)
--------- ---------
Net stockholders' equity 547 2,512
--------- ---------
Total liabilities, redeemable preferred stock, preferred
stock of subsidiary and equity $ 232,339 $ 229,212
========= =========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-6-
<PAGE> 8
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
January 1, January 2,
1999 1998
------------ ------------
<S> <C> <C>
Sales $ 57,781 $ 57,373
Cost of sales 43,654 42,726
-------- --------
Gross profit 14,127 14,647
-------- --------
Operating costs and expenses:
Research and development 2,066 1,804
Marketing 4,594 4,706
General and administrative 3,908 3,326
-------- --------
Total operating costs and expenses 10,568 9,836
-------- --------
Operating income 3,559 4,811
Foreign currency gain/(loss) (158) 160
Interest income/(expense) (4,406) (4,654)
-------- --------
Earnings (loss) before taxes (1,005) 317
Income tax expense (benefit) (422) 119
-------- --------
Net earnings (loss) (583) 198
Preferred dividends:
Senior Redeemable Preferred Stock 790 689
Junior Preferred Stock 527 459
-------- --------
(Loss)/earnings attributable to common stock $ (1,900) $ (950)
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-7-
<PAGE> 9
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(in thousands - unaudited)
<TABLE>
<CAPTION>
13-Week 13-Week
period ended period ended
January 1, July 4,
1999 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities $ 7,713 $ 15,409
-------- --------
INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment -- 5
Purchase of property, plant and equipment, net (1,841) (1,162)
Product line acquisitions (8,961) (2,730)
-------- --------
Net cash used in investing activities (10,802) (3,887)
-------- --------
FINANCING ACTIVITIES
Net (Repayments)/Proceeds from debt issue costs (29) --
Net (Repayments)/Proceeds from goodwill and other intangible, net 2 --
Net (Repayments)/Proceeds from revolving credit facility 5,700 (9,300)
Net (Repayments)/Proceeds from senior term loans (1,550) (1,050)
-------- --------
Net cash provided by (used in) financing activities 4,123 (10,350)
-------- --------
NET DECREASE IN
CASH AND CASH EQUIVALENTS 1,034 1,172
Cash and cash equivalents at beginning of period 448 2,027
-------- --------
Cash and cash equivalents at end of period $ 1,482 $ 3,199
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-8-
<PAGE> 10
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, 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.
During the quarter ended January 1, 1999, CPI paid preferred stock dividends on
its Senior Redeemable Preferred Stock and its Junior Preferred Stock through the
issuance of 7,903 additional shares of its Senior Redeemable Preferred Stock and
5,269 shares of its Junior Preferred Stock, respectively.
During the quarter ended January 1, 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.
-9-
<PAGE> 11
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 first quarter of Fiscal 1999 were $51.6 million as compared to
$62.1 million for the first quarter of Fiscal 1998, a decrease of 16.9%
primarily related to the Far East economic conditions and delays in several
major programs that continue to hinder growth in the Company's communications
and industrial markets. This reduced level of orders was anticipated by the
Company and backlog as of the end of the first quarter of Fiscal 1999 declined
to $155.0 million, or approximately seven months of sales. 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.
Sales for the first quarter of Fiscal 1999 were $57.8 million including $1.4
million of sales from the Company's new operating division that was acquired in
October of 1998. This recent acquisition has added a line of high quality, solid
state microwave and millimeter wave amplifiers, frequency converters and
multiplier amplifiers that are sold into the communications market. Sales for
the first quarter of Fiscal 1999 were consistent with sales in the first quarter
of Fiscal 1998 of $57.4 million but the mix by end market shifted slightly.
Products sold to the radar, medical and electronic countermeasures markets
increased by $1.6 million, $1.0 million, $0.7 million, respectively due to the
on-going demand for logistic spares, increased business in European x-ray
markets and increase production levels of the Company's new transmitter
products. Products sold to the communications and industrial markets decreased
by $2.3 million and $.5 million, respectively due to the slowdown from Far East
customers mentioned above partially offset by new product introductions.
Products sold to the scientific market were flat. The communications market
remains the Company's largest market with sales of $24.9 million, or 43.1% of
total sales, during the first quarter of Fiscal 1999 compared to $27.2 million,
or 47.4% of total sales, in the first quarter of Fiscal 1998. The Company's
second largest market is the radar market with sales of $18.1 million, or 31.4%
of total sales, during the first quarter of Fiscal 1999 compared to $16.5
million, or 28.8% of total sales, during the same period in Fiscal 1998.
Gross profit was $14.1 million, or 24.4% of sales, in the first quarter of
Fiscal 1999 compared to $14.6 million, or 25.5% of sales, in the first quarter
of Fiscal 1998 due primarily to product mix with lower margins realized on the
development and initial production of new products as well as higher
depreciation costs.
Operating costs and expenses were $10.6 million, or 18.6% of sales for the first
quarter of Fiscal 1999, as compared to $9.8 million, or 17.1%, for the first
quarter of Fiscal 1998. Operating costs and expenses increased between the two
time periods primarily due to higher amortization costs of $0.5 million related
to the Company's recent acquisition and to higher research and development
spending of $0.3 million as the Company continues its focus on releasing new
products.
-10-
<PAGE> 12
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries
Holding Corporation)
Earnings before interest, income taxes, depreciation and amortization
("EBITDA")(1) for the first quarter of Fiscal 1999 was approximately $6.8
million, or 11.8% of sales, compared to approximately $7.7 million, or 13.3% of
sales, for the first quarter of Fiscal 1998. EBITDA declined by $0.9 million, or
3.3%, due primarily to product mix and higher research and development spending
mentioned above.
FINANCIAL CONDITION
Cash flows provided by operating activities for the first quarter of Fiscal 1999
were $7.7 million, a decrease of $7.7 million from the $15.4 million provided by
operating activities during the first quarter of Fiscal 1998. Cash flow
decreased $4.4 million due to the timing of receivable collections as days sales
outstanding (DSO) increased to 63 days at the end of the first quarter of Fiscal
1999 from 61 days at the end of the first quarter of Fiscal 1998. The timing of
accounts payable and accrued expense payments decreased cash from operations by
approximately $1.9 million and slightly higher levels of inventory decreased
cash by $0.8 million.
Investing activities increased to $10.8 million in the first quarter of Fiscal
1999 compared to $3.9 million in the first quarter of Fiscal 1998 due to the
acquisition of the Microwave Components Division of Aydin Corporation, which was
completed in October 1998. In the first quarter of Fiscal 1998, the Company
invested $2.7 million in two small product line acquisitions to add to products
that were currently being manufactured in the Company's Beverly, Massachusetts
and Palo Alto, California facilities. The current acquisition will be operating
in stand-alone, leased facilities in San Jose, California.
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 $16.3 million was available as of January
29, 1999). In the first quarter of Fiscal 1999, the Company borrowed $5.7
million to repay $1.6 million of term loans and to complete the acquisition
mentioned above. 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.
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.
- ---------------------
(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.
-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)
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 conversions, corrective actions, work
arounds and tests completed by October 31, 1999. To date, two of the Company's
six Divisions have successfully modified or replaced Enterprise Resource
Planning ("ERP") systems. The other four are scheduled to "go-live" on a new ERP
system starting in March 1999 and being completed in June 1999.
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 $5.0 million primarily through a capital lease program
to replace outdated Varian legacy systems. To date, approximately $4.4 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 expected to be completed by June
1999.
-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)
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.
-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)
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.
(a) The following exhibits are being filed as part of this report:
10.1.5 Fifth 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 February 12, 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 January 1,
1999.
-14-
<PAGE> 16
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: February 12, 1998
By: /s/ Lynn E. Harvey
--------------------------------------------------
Lynn E. Harvey
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
Date: February 12, 1998
-15-
<PAGE> 17
EXHIBIT INDEX
Exhibit
No. Document
---- --------
10.1.5 Fifth 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 February 12, 1999
27.1 Financial Data Schedule (Communications & Power
Industries, Inc.)
27.2 Financial Data Schedule (Communications & Power
Industries Holding Corporation)
<PAGE> 1
EXHIBIT 10.1.5
AMENDMENT NO. 5 TO CREDIT AGREEMENT
This AMENDMENT No. 5 TO CREDIT AGREEMENT (this "Amendment"), is made
and entered into as of February 12, 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 the same has been amended and modified through the
date hereof, the "Agreement"), among the Obligors, the Agent and the Lenders.
W I T N E S S E T H:
WHEREAS, the Obligors, the Agent and the Lenders desire to amend
certain provisions of the Agreement;
NOW, THEREFORE, in consideration of the foregoing, the premises and
mutual covenants contained herein and for other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, 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 Amendment. This Amendment shall become
effective and the Agreement shall be deemed amended as provided herein as of
December 31, 1998 on the first date (the "Effective Date") on which each of the
following conditions shall be satisfied or waived:
(a) Execution of Amendment. Each Obligor, the Agent and the
Required Lenders shall have executed a copy of this Amendment (whether
the same or different copies) and shall have delivered the same to the
Agent.
(b) No Default; Representations and Warranties. The Required
Lenders shall be satisfied that, on the Effective Date and after giving
effect to this Amendment, (i) there shall exist no Default or Event of
Default and (ii) the representations and warranties of each Obligor,
each Guarantor and each Pledgor contained in the Loan Documents to
which such Person is a party are true and correct in all material
respects as of the Effective Date with the same effect as though such
representations and warranties had been made on and as of the Effective
Date (except for such representations and warranties made as of a
specified date, which shall be true and correct in all material
respects as of such specified date).
<PAGE> 2
(c) Amendment Fee. For consenting to the amendments contained
in this Amendment, each Lender that executes this Amendment shall have
received on the Effective Date a fee in immediately available funds
equal to the product of (i) 0.25% and (ii) the aggregate amount of such
Lender's Commitments.
(d) Other Payments. The Agent and each Lender shall have
received all other amounts, if any, amounts owing from the Obligors to
such Person through and including the Effective Date.
3. Amendments. As of December 31, 1998:
(a) Annex A to the Agreement shall be amended by:
(i) deleting the defined terms: "Consolidated Fixed
Charges", "Consolidated Net Worth" and "Fixed Charge Coverage
Ratio";
(ii) adding the following defined term after the
defined term "Currency Agreement": `"Current Maturities of
Funded Indebtedness" shall have the meaning provided in ANNEX
F.'; and
(iii) adding the following defined term after the
defined term "Letters of Credit": `"Leverage Ratio" shall have
the meaning provided in ANNEX F.'.
(b) Annex F to the Agreement shall be deleted in its
entirety and Exhibit A to this Amendment shall be substituted
therefor.
4. Representations and Warranties. Each Obligor makes, as of
the Effective Date, each of the representations and warranties set forth in
Section 3 of the Agreement, and such representations and warranties are, by this
reference, incorporated herein as if set forth herein in their entirety,
provided that references to "Loan Documents" shall, for purposes of this
paragraph, be deemed to include this Amendment.
5. Miscellaneous.
(a) Except as expressly modified by this Amendment,
the Agreement and Schedules and Annexes thereto shall continue
to be and remain in full force and effect in accordance with
their terms. Any future reference to the Agreement and
Schedules and Annexes thereto shall, from and after the
Effective Date, be deemed to be a reference to the Agreement
and Schedules and Annexes thereto as amended by this
Amendment.
(b) This Amendment 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.
(c) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO CONFLICTS OF LAW RULES.
2
<PAGE> 3
(d) This Amendment 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.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment 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
3
<PAGE> 4
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
4
<PAGE> 5
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
5
<PAGE> 6
DRESDNER BANK AG,
New York Branch and
Grand Cayman Branch
By
-------------------------------------------
Name:
Title:
By
-------------------------------------------
Name:
Title:
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/GILLES MARCHAND
-----------------------------------------
Name: Gilles Marchand, CFA
Title: Authorized Signatory
ROYALTON COMPANY
By PACIFIC INVESTMENT MANAGEMENT
COMPANY, as Investment Adviser
By /s/BRADLEY W. PAULSON
-----------------------------------------
Name: Bradley W. Paulson
Title: Vice President
6
<PAGE> 7
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/STEPHEN R. SWEENEY
-----------------------------------------
Name: Stephen R. Sweeney
Title: Vice President
7
<PAGE> 8
F-8
ANNEX F
to
Credit Agreement
FINANCIAL COVENANTS
Each of the following covenants shall be calculated in accordance with
GAAP, consistently applied:
1. Borrower will not permit Consolidated EBITDA for any Test Period
determined as of the last day of the applicable Fiscal Quarter set forth below
to be less than the amount set forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Consolidated
Fiscal Quarter EBITDA
-------------- ------------
<S> <C>
Q1, 1999 $33,000,000
Q2, 1999 $33,000,000
Q3, 1999 $33,000,000
Q4, 1999 $33,000,000
Q1, 2000 $33,000,000
Q2, 2000 $33,000,000
Q3, 2000 $34,000,000
Q4, 2000 $35,000,000
Q1, 2001 $35,000,000
Q2, 2001 $35,000,000
Q3, 2001 $36,000,000
Q4, 2001 $37,000,000
Q1, 2002 $37,000,000
Q2, 2002 $37,000,000
Q3, 2002 $38,000,000
Q4, 2002 $39,000,000
</TABLE>
F-1
<PAGE> 9
2. Borrower will not permit the Interest Coverage Ratio for any Test
Period determined as of the last day of the applicable Fiscal Quarter set forth
below to be less than the ratio set forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ratio
-------------- -----
<S> <C>
Q1, 1999 2.0:1.0
Q2, 1999 2.0:1.0
Q3, 1999 2.0:1.0
Q4, 1999 2.1:1.0
Q1, 2000 2.1:1.0
Q2, 2000 2.2:1.0
Q3, 2000 2.3:1.0
Q4, 2000 2.4:1.0
Q1, 2001 2.5:1.0
Q2, 2001 2.6:1.0
Q3, 2001 2.7:1.0
Q4, 2001 2.8:1.0
Q1, 2002 2.9.1.0
Q2, 2002 3.0:1.0
Q3, 2002 3.0:1.0
Q4, 2002 3.0:1.0
</TABLE>
F-2
<PAGE> 10
3. Borrower will not permit the Leverage Ratio for any Test Period
determined as of the last day of the applicable Fiscal Quarter set forth below
to be less than the ratio set forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ratio
-------------- -----
<S> <C>
Q1, 1999 4.7:1.0
Q2, 1999 4.7:1.0
Q3, 1999 4.6:1.0
Q4, 1999 4.5:1.0
Q1, 2000 4.5:1.0
Q2, 2000 4.3:1.0
Q3, 2000 4.1:1.0
Q4, 2000 3.9.1.0
Q1, 2001 3.8:1.0
Q2, 2001 3.6:1.0
Q3, 2001 3.4:1.0
Q4, 2001 3.2:1.0
Q1, 2002 3.0:1.0
Q2, 2002 3.0:1.0
Q3, 2002 3.0:1.0
Q4, 2002 3.0:1.0
</TABLE>
F-3
<PAGE> 11
4. Borrower will not, and will not permit any of its Subsidiaries to,
make any Capital Expenditures, except that during any Fiscal Year (taken as one
accounting period) Parent and its Subsidiaries may make Capital Expenditures so
long as such Capital Expenditures do not exceed in any such Fiscal Year set
forth below the amount set forth opposite such Fiscal Year below:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1998 $12,000,000
1999 $13,000,000
2000 $13,000,000
2001 $13,000,000
2002 $13,000,000
</TABLE>
To the extent that the amount of Capital Expenditures made by Obligors during
any Fiscal Year set forth in the table above is less than the amount applicable
to the respective Fiscal Year set forth in the table above (without giving
effect to any increase in such amount as provided below), the lesser of (a) such
unused amount and (b) 25% of the respective scheduled amount (such lesser
amount, the "Rollover Amount") may be carried forward and utilized by Obligors
to make additional Capital Expenditures in the immediately succeeding Fiscal
Year, provided that no amount once carried forward to the next Fiscal Year may
be carried forward to a Fiscal Year thereafter, provided further, that Capital
Expenditures made during any Fiscal Year shall be first deemed made in respect
of the Rollover Amount and then deemed made in respect of the scheduled amount
permitted for such Fiscal Year.
As used in this ANNEX F and the Agreement, the following terms shall
have the meanings herein specified unless the context otherwise requires:
"Acquisition" shall mean from and after December 31, 1998, any
acquisition by any Obligor of an equity interest in (whether by purchase of such
equity interest or merger, consolidation or other similar transaction), or all
or substantially all of the assets of, or any smaller portion that constitutes
an operating unit or division or, any Person as permitted pursuant to the
Agreement.
"Acquisition EBITDA" of a Target for a period shall mean the
Consolidated EBITDA of such Target for such period based on historical financial
statements for such Target previously delivered to the Lenders, it being
understood that Acquisition EBITDA shall not include any income, expenses or
other items relating to assets not acquired in the applicable Acquisition.
"Capital Expenditures" shall mean, on a Consolidated basis for Parent
and its Subsidiaries without duplication, all payments or accruals (including
the incurrence of Capital Lease Indebtedness) for any fixed assets or
improvements or for replacements, substitutions or additions thereto, that have
a useful life of more than one year and that are required to be capitalized
under GAAP; provided, that the term "Capital Expenditures" shall not include
F-4
<PAGE> 12
expenditures permitted under Section 5.5(d) for the purchase, replacement or
restoration of assets from the proceeds of any insurance or condemnation award.
"Consolidated Current Assets" shall mean, at any time, the current
assets (other than cash, Cash Equivalents and deferred income taxes to the
extent included in current assets) of Parent and its Subsidiaries at such time
determined on a Consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time, the current
liabilities of Parent and its Subsidiaries determined on a Consolidated basis,
but excluding deferred income taxes and the current portion of and accrued but
unpaid interest on any Indebtedness under the Agreement and any other Funded
Indebtedness which would otherwise be included therein.
"Consolidated EBITDA" shall mean, without duplication for any period,
Consolidated Net Income adjusted by adding (to the extent deducted in computing
Consolidated Net Income) or subtracting (to the extent added in computing
Consolidated Net Income) thereto the following on a Consolidated basis for such
period for Parent and its Subsidiaries: (a) provisions for taxes based on income
and foreign withholding taxes for such period, (b) Consolidated Interest Expense
and interest income for such period, and (c) the amount of all depreciation
expense and amortization expense that was deducted in determining Consolidated
Net Income for such period; in each case determined without giving effect (to
the extent reflected in Consolidated Net Income for such period) to (i) any
extraordinary gains or losses, (ii) gains or losses from sales of assets (other
than sales of Inventory in the ordinary course of business), (iii) any write-off
of in-process research and development made in connection with the Acquisition,
(iv) any write-up of Inventory made in connection with the Acquisition, and (v)
any other non-recurring charges (including fees and closing costs in connection
with the Acquisition); provided, however, that for purposes of calculating the
Leverage Ratio only, Consolidated EBITDA shall include Acquisition EBITDA for
the applicable four Fiscal Quarter period of each Target acquired during or
after such period to the extent such Acquisition EBITDA has not otherwise been
taken into account in the calculation of Consolidated EBITDA.
"Consolidated Interest Expense" shall mean, for any period, the sum of
(a) the total interest expense (including that attributable to Capital Leases in
accordance with GAAP) of Parent and its Subsidiaries determined on a
Consolidated basis with respect to all outstanding Indebtedness of Parent and
its Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs or benefits under any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement, but excluding,
however, amortization of deferred financing costs, original issue discount and
any interest expense on deferred compensation arrangements to the extent
included in total interest expense and (b) the cash dividends, if any, paid by
the Parent in respect of its Stock during such period.
"Current Maturities of Funded Indebtedness" shall mean at any time and
with respect to any item of Funded Indebtedness, the portion of such Funded
Indebtedness outstanding at such time which by the terms of such Funded
Indebtedness or the terms of any
F-5
<PAGE> 13
instrument or agreement relating thereto is due on demand or within one year
from such time (whether by sinking fund, other required prepayment or final
payment at maturity) and is not directly or indirectly renewable, extendible or
refundable at the option of the Obligor under an agreement or firm commitment in
effect at such time to a date one year or more from such time
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after provision for taxes, of Parent and its Subsidiaries on a
Consolidated basis for such period taken as a single accounting period but
excluding any unrealized losses and gains for such period resulting from
mark-to-market of any foreign exchange contracts, currency swap agreements or
other similar agreements or arrangements designed to protect against
fluctuations in currency values.
"Excess Cash Flow" shall mean, for any period an amount equal to the
greater of zero or,
(a) the sum of, without duplication:
(i) Consolidated Net Income for such period; plus
(ii) the amount of all non-cash charges (including, without
limitation or duplication, depreciation, amortization and non-cash
components of interest expense) which reduce Consolidated Net Income
for such period; plus
(iii) the decrease, if any, in Working Capital from the first
day to the last day of such period; plus
(iv) the decrease in the principal amount of loans to Parent
and employees or officers of the Obligors (to the extent such loans
were permitted by the Agreement) from the first day to the last day of
such period; plus
(v) the decrease in any deferred tax assets and long-term cash
assets (not including pension funds) from the first day to the last day
of such period; plus
(vi) the increase in any deferred tax liabilities and
long-term cash liabilities (not including Indebtedness) from the first
day to the last day of such period;
minus, without duplication (b) the sum of:
(i) an amount equal to all Capital Expenditures made during
such period that were not financed by Indebtedness (including Capital
Lease Indebtedness but excluding Loans hereunder); plus
(ii) the amount of all non-cash charges (including, without
limitation or duplication, depreciation, amortization and non-cash
components of interest expense) which increase Consolidated Net Income
for such period; and
F-6
<PAGE> 14
(iii) the aggregate principal amount of permanent principal
payments of Indebtedness for borrowed money of Borrower and its
Subsidiaries (other than repayments of Loans, provided that repayments
of Loans shall be deducted in determining Excess Cash Flow if such
repayments were (A) required pursuant to Section 1.4(d) of the
Agreement or (B) made as a voluntary prepayment with internally
generated funds (but in the case of a voluntary prepayment of the
Revolving Credit Loan, only to the extent accompanied by a voluntary
reduction to the Maximum Revolving Credit Commitment)) during such
period; plus
(iv) the increase, if any, in Working Capital from the first
day to the last day of such period; plus
(v) the increase in the principal amount of loans to Parent
and employees or officers of the Obligors (to the extent such loans
were permitted by the Agreement) from the first day to the last day of
such period; plus
(vi) the increase in any deferred tax assets and long-term
cash assets (not including pension funds) from the first day to the
last day of such period; plus
(vii) the decrease in any deferred tax liabilities and
long-term cash liabilities (not including Indebtedness) from the first
day to the last day of such period; plus
(viii) the aggregate amount of cash dividends or other cash
distributions on the capital stock of Borrower paid by Borrower, to the
extent permitted by the Agreement, during such period.
"Funded Indebtedness" shall mean, with respect to Parent and its
Subsidiaries on a Consolidated basis, all Indebtedness of such Obligors (other
than Indebtedness in respect of undrawn letters of credit which shall, for
purposes of calculating the Leverage Ratio, be excluded from Funded
Indebtedness) which by its terms or by the terms of any instrument or agreement
related thereto has a final stated maturity which is more than one year from, or
is directly renewable or extendible at the option of any such Obligor to a date
more than one year from (including an option of any such Obligor under a
revolving credit or similar agreement obligating the lender or lenders
thereunder to extend credit over a period of one year or more from) the date of
the creation thereof, provided that Funded Indebtedness shall include, as at any
date of determination, Current Maturities of Funded Indebtedness.
"Interest Coverage Ratio" shall mean, for any period, the ratio of (a)
Consolidated EBITDA to (b) Consolidated Interest Expense for such period.
"Leverage Ratio" shall mean, for any period, the ratio of (a) Funded
Indebtedness as of the last day of such period to (b) Consolidated EBITDA for
such period.
"Q1" shall mean, for any Fiscal Year, the first Fiscal Quarter of such
Fiscal Year.
F-7
<PAGE> 15
"Q2" shall mean, for any Fiscal Year, the second Fiscal Quarter of such
Fiscal Year.
"Q3" shall mean, for any Fiscal Year, the third Fiscal Quarter of such
Fiscal Year.
"Q4" shall mean, for any Fiscal Year, the fourth Fiscal Quarter of such
Fiscal Year.
"Target" shall mean the Person an equity interest in (whether by
purchase of such equity interest or merger, consolidation or other similar
transaction) which is to be acquired, or the Person whose assets are to be
acquired, in any Acquisition.
"Test Period" shall mean, as of the end of any Fiscal Quarter, the
immediately preceding four (4) Fiscal Quarters, including the Fiscal Quarter
then ending, taken as one period.
"Working Capital" shall mean, as of any date or determination,
Consolidated Current Assets less Consolidated Current Liabilities, in each case,
as of such date.
F-8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
CONDENSED CONSOLIDATED 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 JANUARY 1, 1999.
</LEGEND>
<CIK> 0001000564
<NAME> COMMUNICATIONS & POWER INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-01-1999
<PERIOD-START> OCT-03-1998
<PERIOD-END> JAN-01-1999
<CASH> 1,482
<SECURITIES> 0
<RECEIVABLES> 41,632
<ALLOWANCES> 0
<INVENTORY> 57,400
<CURRENT-ASSETS> 109,057
<PP&E> 78,027
<DEPRECIATION> 0
<TOTAL-ASSETS> 232,339
<CURRENT-LIABILITIES> 70,616
<BONDS> 124,723
21,527
1
<COMMON> 0
<OTHER-SE> 15,472
<TOTAL-LIABILITY-AND-EQUITY> 232,339
<SALES> 57,781
<TOTAL-REVENUES> 57,781
<CGS> 43,654
<TOTAL-COSTS> 43,654
<OTHER-EXPENSES> 2,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,406
<INCOME-PRETAX> (1,005)
<INCOME-TAX> (422)
<INCOME-CONTINUING> (583)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (583)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
CONDENSED CONSOLIDATED 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 JANUARY 1, 1999.
</LEGEND>
<CIK> 0001000654
<NAME> COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-01-1999
<PERIOD-START> OCT-03-1998
<PERIOD-END> JAN-01-1999
<CASH> 1,482
<SECURITIES> 0
<RECEIVABLES> 41,632
<ALLOWANCES> 0
<INVENTORY> 57,400
<CURRENT-ASSETS> 109,057
<PP&E> 78,027
<DEPRECIATION> 0
<TOTAL-ASSETS> 232,339
<CURRENT-LIABILITIES> 70,616
<BONDS> 124,723
21,527
0
<COMMON> 2
<OTHER-SE> 545
<TOTAL-LIABILITY-AND-EQUITY> 232,339
<SALES> 57,781
<TOTAL-REVENUES> 57,781
<CGS> 43,654
<TOTAL-COSTS> 43,654
<OTHER-EXPENSES> 2,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,406
<INCOME-PRETAX> (1,005)
<INCOME-TAX> (422)
<INCOME-CONTINUING> (583)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (583)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
