<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 March 31, 2000
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 including area code, of registrant's
executive offices) principal executive offices)
Securities registered pursuant to Section Securities registered pursuant to Section
12(b) of the Act: 12(b) of the Act:
NONE NONE
Securities registered pursuant to Section Securities registered pursuant to Section
12(g) of the Act: 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: 4,910,500 SHARES OF COMMON STOCK, $.01 PAR
VALUE, AT MARCH 31, 2000. COMMUNICATIONS & POWER INDUSTRIES, INC.: 1 SHARE OF
COMMON STOCK, $.01 PAR VALUE, AT MARCH 31, 2000.
<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, March 31, 2000 and October 1, 1999 .................. 2
Consolidated Condensed Statements of Operations, 13-week period ended March 31, 2000 and
13-week period ended April 2, 1999 ......................................................... 3
Consolidated Condensed Statements of Operations, 26-week period ended March 31, 2000 and
26-week period ended April 2, 1999 ......................................................... 4
Consolidated Condensed Statements of Cash Flows, 26-week period ended March 31, 2000 and
26-week period ended April 2, 1999 ......................................................... 5
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
Consolidated Condensed Balance Sheets, March 31, 2000 and October 1, 1999 .................. 6
Consolidated Condensed Statements of Operations, 13-week period ended March 31, 2000 and
13-week period ended April 2, 1999 ......................................................... 7
Consolidated Condensed Statements of Operations, 26-week period ended March 31, 2000 and
26-week period ended April 2, 1999 ......................................................... 8
Consolidated Condensed Statements of Cash Flows, 26-week period ended March 31, 2000
and 26-week period ended April 2, 1999 ..................................................... 9
Notes to Consolidated Condensed Financial Statements ....................................... 10
Management's Discussion and Analysis of Financial Condition and Results of
Operations ................................................................................. 13
PART II: OTHER INFORMATION
Other Information .......................................................................... 16
SIGNATURES .......................................................................................... 17
</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>
March 31, October 1,
ASSETS 2000 1999
--------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,090 $ 4,247
Accounts receivable, net 39,117 49,596
Inventories 60,332 52,526
Deferred taxes 6,899 6,899
Other current assets 1,124 1,524
--------- ---------
Total current assets 111,562 114,792
Property, plant, and equipment, net 72,646 76,225
Goodwill and other intangibles, net 27,386 28,723
Debt issue costs, net 5,093 5,594
Deferred taxes 8,250 8,250
--------- ---------
Total assets $ 224,937 $ 233,584
========= =========
LIABILITIES, REDEEMABLE
PREFERRED STOCK AND EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 30,300 $ 35,000
Current portion of term loans 6,447 7,700
Current portion of capital leases 922 885
Accounts payable 14,462 13,522
Accrued expenses 15,052 16,489
Product warranty 3,521 3,575
Income taxes payable 8,878 8,978
Advance payments from customers 8,393 1,736
--------- ---------
Total current liabilities 87,975 87,885
Senior term loans 14,000 15,986
Senior subordinated notes 100,000 100,000
Obligations under capital leases 1,374 1,825
--------- ---------
Total liabilities 203,349 205,696
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK 26,181 24,228
--------- ---------
Commitments and contingencies
STOCKHOLDERS' (DEFICIT) EQUITY:
Junior preferred stock 1 1
Common stock -- --
Additional paid-in capital 37,034 35,804
Accumulated deficit (40,497) (31,039)
Stockholder loans (1,131) (1,106)
--------- ---------
Net stockholders' (deficit) equity (4,593) 3,660
--------- ---------
Total liabilities, senior redeemable
preferred stock and stockholders' equity $ 224,937 $ 233,584
========= =========
</TABLE>
See accompanying notes to the unaudited 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
March 31, April 2,
2000 1999
------------ ------------
<S> <C> <C>
Sales $ 60,340 $ 67,119
Cost of sales 47,040 50,959
-------- --------
Gross profit 13,300 16,160
-------- --------
Operating costs and expenses:
Research and development 2,186 2,694
Selling and marketing 4,524 4,992
General and administrative 4,770 4,311
-------- --------
Total operating costs and expenses 11,480 11,997
-------- --------
Operating income 1,820 4,163
Foreign currency loss (90) (283)
Interest expense (4,677) (4,445)
-------- --------
Loss before taxes (2,947) (565)
Income tax expense 206 --
-------- --------
Net loss (3,153) (565)
Preferred dividends:
Senior redeemable preferred stock 939 818
Junior preferred stock 626 545
-------- --------
Net loss attributable to common stock $ (4,718) $ (1,928)
======== ========
</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>
26-Week 26-Week
period ended period ended
March 31, April 2,
2000 1999
------------ ------------
<S> <C> <C>
Sales $ 115,330 $ 124,900
Cost of sales 89,878 94,613
--------- ---------
Gross profit 25,452 30,287
--------- ---------
Operating costs and expenses:
Research and development 4,109 4,760
Selling and marketing 9,098 9,586
General and administrative 8,723 8,219
--------- ---------
Total operating costs and expenses 21,930 22,565
--------- ---------
Operating income 3,522 7,722
Foreign currency loss (170) (441)
Interest expense (9,227) (8,851)
--------- ---------
Loss before taxes (5,875) (1,570)
Income tax expense (benefit) 401 (422)
--------- ---------
Net loss (6,276) (1,148)
Preferred dividends:
Senior redeemable preferred stock 1,846 1,608
Junior preferred stock 1,231 1,072
--------- ---------
Net loss attributable to common stock $ (9,353) $ (3,828)
========= =========
</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>
26-Week 26-Week
period ended period ended
March 31, April 2,
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $ 11,116 $ 6,525
-------- --------
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (2,764) (3,977)
Purchase of net current assets in connection with acquisitions -- (1,991)
Purchase of property, plant and equipment in connection
with acquisitions -- (523)
Purchase of intangible assets in connection with acquisitions -- (6,396)
-------- --------
Net cash used in investing activities (2,764) (12,887)
-------- --------
FINANCING ACTIVITIES
Net (repayments)/proceeds on capital leases (414) 55
Net (repayments)/proceeds from revolving credit facility (4,700) 10,900
Net repayments on senior term loans (3,395) (3,280)
-------- --------
Net cash (used in) provided by financing activities (8,509) 7,675
-------- --------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (157) 1,313
Cash and cash equivalents at beginning of period 4,247 448
-------- --------
Cash and cash equivalents at end of period $ 4,090 $ 1,761
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
- 5 -
<PAGE> 7
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)
<TABLE>
<CAPTION>
March 31, October 1,
ASSETS 2000 1999
--------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,090 $ 4,247
Accounts receivable, net 39,117 49,596
Inventories 60,332 52,526
Deferred taxes 6,899 6,899
Other current assets 1,124 1,524
--------- ---------
Total current assets 111,562 114,792
Property, plant, and equipment, net 72,646 76,225
Goodwill and other intangibles, net 27,386 28,723
Debt issue costs, net 5,093 5,594
Deferred taxes 8,250 8,250
--------- ---------
Total assets $ 224,937 $ 233,584
========= =========
LIABILITIES, PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Revolving credit facility $ 30,300 $ 35,000
Current portion of term loans 6,447 7,700
Current portion of capital leases 922 885
Accounts payable 14,462 13,522
Accrued expenses 15,052 16,489
Product warranty 3,521 3,575
Income taxes payable 8,878 8,978
Advance payments from customers 8,393 1,736
--------- ---------
Total current liabilities 87,975 87,885
Senior term loans 14,000 15,986
Senior subordinated notes 100,000 100,000
Obligations under capital leases 1,374 1,825
--------- ---------
Total liabilities 203,349 205,696
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 26,181 24,228
--------- ---------
JUNIOR PREFERRED STOCK OF SUBSIDIARY 17,852 16,622
--------- ---------
Commitments and contingencies
STOCKHOLDERS' DEFICIT:
Common stock 49 49
Additional paid-in capital 19,134 19,134
Accumulated deficit (40,497) (31,039)
Stockholder loans (1,131) (1,106)
--------- ---------
Net stockholders' deficit (22,445) (12,962)
--------- ---------
Total liabilities, preferred stock and
stockholders' deficit $ 224,937 $ 233,584
========= =========
</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
March 31, April 2,
2000 1999
------------ ------------
<S> <C> <C>
Sales $ 60,340 $ 67,119
Cost of sales 47,040 50,959
-------- --------
Gross profit 13,300 16,160
-------- --------
Operating costs and expenses:
Research and development 2,186 2,694
Selling and marketing 4,524 4,992
General and administrative 4,770 4,311
-------- --------
Total operating costs and expenses 11,480 11,997
-------- --------
Operating income 1,820 4,163
Foreign currency loss (90) (283)
Interest expense (4,677) (4,445)
-------- --------
Loss before taxes (2,947) (565)
Income tax expense 206 --
-------- --------
Net loss (3,153) (565)
Preferred dividends:
Senior redeemable preferred stock 939 818
Junior preferred stock 626 545
-------- --------
Net loss attributable to common stock $ (4,718) $ (1,928)
======== ========
</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 OPERATIONS
(in thousands - unaudited)
<TABLE>
<CAPTION>
26-Week 26-Week
period ended period ended
March 31, April 2,
2000 1999
------------ ------------
<S> <C> <C>
Sales $ 115,330 $ 124,900
Cost of sales 89,878 94,613
--------- ---------
Gross profit 25,452 30,287
--------- ---------
Operating costs and expenses:
Research and development 4,109 4,760
Selling and marketing 9,098 9,586
General and administrative 8,723 8,219
--------- ---------
Total operating costs and expenses 21,930 22,565
--------- ---------
Operating income 3,522 7,722
Foreign currency loss (170) (441)
Interest expense (9,227) (8,851)
--------- ---------
Loss before taxes (5,875) (1,570)
Income tax expense (benefit) 401 (422)
--------- ---------
Net loss (6,276) (1,148)
Preferred dividends:
Senior redeemable preferred stock 1,846 1,608
Junior preferred stock 1,231 1,072
--------- ---------
Net loss attributable to common stock $ (9,353) $ (3,828)
========= =========
</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 CASH FLOWS
(in thousands - unaudited)
<TABLE>
<CAPTION>
26-Week 26-Week
period ended period ended
March 31, April 2,
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $ 11,116 $ 6,525
-------- --------
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (2,764) (3,977)
Purchase of net current assets in connection with acquisitions -- (1,991)
Purchase of property, plant and equipment in connection
with acquisitions -- (523)
Purchase of intangible assets in connection with acquisitions -- (6,396)
-------- --------
Net cash used in investing activities (2,764) (12,887)
-------- --------
FINANCING ACTIVITIES
Net (repayments)/proceeds on capital leases (414) 55
Net (repayments)/proceeds from revolving credit facility (4,700) 10,900
Net repayments on senior term loans (3,395) (3,280)
-------- --------
Net cash (used in) provided by financing activities (8,509) 7,675
-------- --------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (157) 1,313
Cash and cash equivalents at beginning of period 4,247 448
======== ========
Cash and cash equivalents at end of period $ 4,090 $ 1,761
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
- 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)
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of
Communications & Power Industries, Inc. ("CPI") and Communications & Power
Industries Holding Corporation ("Holding", both companies together referred to
as the "Company") 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 the
Company's October 1, 1999 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 the Company, 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 complete fiscal year 2000.
2. INVENTORIES
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) March 31, October 1,
2000 1999
--------- ----------
<S> <C> <C>
Raw materials and parts $44,809 $39,953
Work in process 13,366 9,878
Finished goods 2,157 2,695
------- -------
Total inventories $60,332 $52,526
======= =======
</TABLE>
3. SUPPLEMENTAL CASH FLOW INFORMATIOn
Cash paid for interest was $8.6 million and $8.1 million for the 26-week period
ended March 31, 2000 and April 2, 1999, respectively. Cash paid for taxes was
$0.1 million and $0.5 million for the 26-week period ended March 31, 2000 and
April 2, 1999, respectively.
Non-cash financing activities of CPI included the payment of preferred stock
dividends on its Senior Redeemable Preferred Stock and its Junior Preferred
Stock through the issuance of 9,387 additional shares of its Senior Redeemable
Preferred Stock and 6,258 shares of its Junior Preferred Stock, respectively
during the quarter ended March 31, 2000. During the six months ended March 31,
2000, CPI paid preferred stock dividends on its Senior Redeemable Preferred
Stock and its Junior Preferred Stock through the issuance of 18,456 additional
shares of its Senior Redeemable Preferred Stock and 12,304 shares of its Junior
Preferred Stock, respectively.
- 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)
4. SEGMENTS AND RELATED INFORMATION
The Company has two reportable segments: vacuum electronic devices ("VEDs") and
satcom equipment. The CEO, identified as the Chief Operating Decision Maker,
evaluates performance and allocates resources based on the Company's principle
performance measure, earnings before income taxes, interest, depreciation and
amortization ("EBITDA").
Summarized financial information concerning the Company's reportable segments is
shown in the following table. Included in the "Other" column is financial
information for the Company's Solid State Products Division, which did not meet
the quantitative thresholds of SFAS 131, and certain unallocated corporate-level
operating expenses. Intersegment product transfers are recorded at cost.
<TABLE>
<CAPTION>
(Dollars in thousands)
Satcom
13-Week Period Ended VED's Equipment Other Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 2000:
Revenues from external customers $ 46,513 $ 12,638 $ 1,189 $ 60,340
Intersegment product transfers 1,921 -- 228 2,149
EBITDA 6,593 272 (1,206) 5,659
April 2, 1999:
Revenues from external customers 48,108 15,822 3,189 67,119
Intersegment product transfers 4,121 -- 720 4,841
EBITDA 6,536 853 (146) 7,243
</TABLE>
<TABLE>
<CAPTION>
Satcom
26-Week Period Ended VED's Equipment Other Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 2000:
Revenues from external customers $ 87,654 $ 24,693 $ 2,983 $115,330
Intersegment product transfers 4,509 -- 407 4,916
EBITDA 12,171 766 (1,901) 11,036
April 2, 1999:
Revenues from external customers $ 89,976 31,026 3,898 $124,900
Intersegment product transfers 7,422 -- 720 8,142
EBITDA 12,888 2,147 (999) 14,036
</TABLE>
- 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)
A reconciliation of EBITDA from reportable segments to Loss before Taxes is as
follows:
<TABLE>
<CAPTION>
13-Week Period Ended 26-Week Period Ended
-----------------------------------------------------------
(Dollars in thousands) March 31, April 2, March 31, April 2,
2000 1999 2000 1999
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Segment EBITDA $ 5,659 $ 7,243 $ 11,036 $ 14,036
Less:
Depreciation and amortization 3,929 3,316 7,684 6,615
Other -- 47 -- 140
Interest expense 4,677 4,445 9,227 8,851
-----------------------------------------------------------
Loss before taxes $ (2,947) $ (565) $ (5,875) $ (1,570)
===========================================================
</TABLE>
5. STOCK SPLIT AND STOCK OPTION DISCLOSURE
In March 2000, the Board of Directors approved an increase in the number of
common shares authorized to 6,500,000 and a twenty-five (25) for one (1) stock
split on all of its issued and outstanding shares of Common Stock. The Board of
Directors also approved the adoption of the 2000 Stock Option Plan ("the Plan").
The number of shares of Common Stock that will be reserved for issuance under
the Plan is 250,000. There were no stock options outstanding as of March 31,
2000. Prior year statements have been restated to give affect to the stock
split. This section on stock split and stock options applies only to Holding.
- 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)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company serves the communications, radar, electronic countermeasures,
industrial, medical and scientific markets. In addition, the Company divides the
communications market into applications for ground-based satellite uplinks for
military and commercial uses ("satcom") and broadcast sectors. The Company
defines and discusses its orders and sales trends by the end markets to more
clearly relate its business to outside investors. Internally, however, the
Company is organized into six operating units that are differentiated based on
products. Four of these operating units comprise the Company's vacuum electronic
device ("VED") segment. The Company also has a satellite communications
equipment segment and a solid state products segment. Segment data is included
in Note 4 of the Notes to Unaudited Consolidated Condensed Financial Statements.
Orders during the second quarter of Fiscal 2000 were $84.3 million as compared
to $63.5 million for the second quarter of Fiscal 1999. This increase of $20.8
million, or 32.7%, was due primarily to the Company's participation in the
terrestrial wireless portion of the XM Radio satellite service, which will
provide digital-quality audio programming across the United States. This new
business opportunity generated an order for $14.0 million in the second quarter
of Fiscal 2000 with delivery scheduled to start in the fourth quarter of this
fiscal year. Orders for the first six months of Fiscal 2000 were $145.9 million
as compared to $115.1 million during the same time period in Fiscal 1999. This
increase of $30.8 million, or 26.7%, was due to higher demand for products in
five of the Company's six markets. Communications increased by $16.7 million, or
38.4%, primarily due to the XM Radio opportunity. Radar, medical, electronic
countermeasures and industrial orders also increased by $8.2 million, $3.8
million. $2.4 million and $2.2 million, respectively. Orders for products sold
to the scientific market declined modestly by $2.6 million. 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 March 31, 2000, the Company had order backlog of $175.2 million,
representing approximately eight months of sales, compared to order backlog of
$152.8 million, or approximately seven months of sales, as of April 2, 1999.
Order backlog increased during the first six months of Fiscal 2000 by $28.8
million from $146.4 million at the end of Fiscal 1999 reflecting the increase in
orders mentioned above.
Sales for the second quarter of Fiscal 2000 were $60.3 million, a decrease of
$6.8 million, or 10.1%, compared to $67.1 million for the same period in Fiscal
1999. This decrease was anticipated by the Company based on the release of new
products and the timing of order receipts that have customer-defined delivery
schedules that are more heavily weighted in the third and fourth quarters of
Fiscal 2000. In other words, low backlog entering Fiscal 2000 (since improved by
strong order receipts as described above) resulted in the lower sales
performance for the first and second quarters of the year. Rapidly improving
backlog is expected to result in higher sales in the third and fourth quarters.
Sales for the second quarter did increase $5.3 million, or 9.7%, from the $55.0
million reported in the first quarter of Fiscal 2000. Sales for the first six
months of Fiscal 2000 were $115.3 million compared to $124.9 million for the
first six months of Fiscal 1999, a decrease of $9.6 million, or 7.7%, due to a
planned
- 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)
facility shutdown in the first quarter of Fiscal 2000 and due to
customer-defined delivery schedules mentioned above. In terms of markets, sales
for the first six months to the communications, medical and scientific markets
were down by $7.9 million, $1.8 million and $1.1 million, respectively,
primarily due to the timing of order receipts. This was partially offset by
products sold into the radar, electronic countermeasures and industrial markets
that collectively increased by $1.3 million.
Gross profit for the second quarter of Fiscal 2000 was $13.3 million, or 22.0%
of sales, which was consistent with the margin percentage of the first quarter
of Fiscal 2000 but was down $2.9 million compared to gross profit of $16.2
million (24.1% of sales) generated in the second quarter of Fiscal 1999. Gross
profit for the first six months of Fiscal 2000 was $25.5 million, or 22.1% of
sales compared to $30.3 million, or 24.2% of sales, during the first six months
of Fiscal 1999. This decrease of $4.8 million was primarily attributable to
lower volume and shifts in product mix.
Operating costs and expenses were $11.5 million, or 19.0% of sales, for the
second quarter of Fiscal 2000 as compared to $12.0 million, or 17.9% of sales,
for the second quarter of Fiscal 1999. Operating costs and expenses for the
first six months of Fiscal 2000 were $21.9 million, or 19.0% of sales, compared
to $22.6 million, or 18.1% of sales, for the first six months of Fiscal 1999.
This decrease of $0.7 million was attributable to lower research and development
costs now that the Company has put its new Gen IV amplifier product line into
production and lower third party commissions related to lower sales volume.
These reductions were partially offset by higher general and administrative
expenses related to information system enhancements.
Earnings before interest, income taxes, depreciation and amortization
("EBITDA")(1) for the second quarter of Fiscal 2000 were $5.7 million, or 9.4%
of sales, compared to $7.2 million, or 10.8% of sales, for the second quarter of
Fiscal 1999. EBITDA for the first six months of Fiscal 2000 was $11.0 million,
or 9.6% of sales, compared to $14.0 million, or 11.2% of sales, for the same
time period in Fiscal 1999. This decrease in EBITDA of $1.5 million for the
second quarter and $3.0 million for the first six months was primarily due to
lower sales volume and shifts in product mix partially offset by lower operating
costs and expenses.
FINANCIAL CONDITION
Cash flows provided by operating activities for the first six months of Fiscal
2000 were $11.1 million, an increase of approximately $4.6 million from the $6.5
million provided by operating activities during the first six months of Fiscal
1999. This increase was due primarily to a $5.9 million increase in advanced
payments from customers related to the increase in order receipts partially
offset by higher net losses in the first six months of Fiscal 2000.
Investing activities decreased cash by $2.8 million in the first six months of
Fiscal 2000 compared to $12.8 million in the first six months of Fiscal 1999.
This decrease of $10.0 million was primarily related
- ----------
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.
- 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)
to the fact that Fiscal 1999 was impacted by the Company's $8.9 million
acquisition of its Solid State Products Division. Capital expenditures have also
been reduced by $1.2 million during the first six months of Fiscal 2000 but
capital expenditures are anticipated to return to Fiscal 1999 spending levels in
the second half of the year when sales volumes are also expected to increase.
The Company's 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 $10.8 million was available as of March 31,
2000). In the six months of Fiscal 2000, the Company reduced its borrowing under
this facility by $4.7 million and also repaid $3.1 million of term loans and
$0.4 million of its debt related to capital leases. 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 nine months.
The Company's Senior Credit Agreement is scheduled to terminate on January 1,
2001 but management anticipates extending this agreement or replacing it before
the end of Fiscal 2000.
Market Risk
The Company's market risk disclosures set forth in its Annual Report on Form
10-K for the fiscal year ended October 1, 1999 have not changed significantly.
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.
- 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)
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2: CHANGES IN SECURITIES
In March 2000, the Board of Directors approved an increase in the number of
common shares authorized from 400,000 to 6,500,000 and a twenty-five (25) for
one (1) stock split on all of its issued and outstanding shares of Common Stock.
This increase in shares and stock split applies only to Communication & Power
Industries Holding Corporation.
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:
<TABLE>
<S> <C>
27.1 Financial Data Schedule (Communications & Power Industries,
Inc.)
27.2 Financial Data Schedule (Communications & Power Industries
Holding Corporation)
</TABLE>
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended March 31, 2000.
- 16 -
<PAGE> 18
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/ Bart F. Petrini
---------------------------------------------------
Bart F. Petrini
Chief Executive Officer and President
Date: May 10, 2000
By: /s/ Lynn E. Harvey
---------------------------------------------------
Lynn E. Harvey
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
Date: May 10, 2000
- 17 -
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27.1 Financial Data Schedule (Communications & Power Industries,
Inc.)
27.2 Financial Data Schedule (Communications & Power Industries
Holding Corporation)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER
INDUSTRIES, INC. FOR THE QUARTER ENDED MARCH 31, 2000.
</LEGEND>
<CIK> 0001000564
<NAME> COMMUNICATIONS & POWER INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-29-2000
<PERIOD-START> OCT-02-1999
<PERIOD-END> MAR-31-2000
<CASH> 4,090
<SECURITIES> 0
<RECEIVABLES> 39,117
<ALLOWANCES> 0
<INVENTORY> 60,332
<CURRENT-ASSETS> 111,562
<PP&E> 72,646
<DEPRECIATION> 0
<TOTAL-ASSETS> 224,937
<CURRENT-LIABILITIES> 87,975
<BONDS> 115,374
26,181
1
<COMMON> 0
<OTHER-SE> (4,594)
<TOTAL-LIABILITY-AND-EQUITY> 224,937
<SALES> 115,330
<TOTAL-REVENUES> 115,330
<CGS> 89,878
<TOTAL-COSTS> 89,878
<OTHER-EXPENSES> 4,109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,227
<INCOME-PRETAX> (5,875)
<INCOME-TAX> 401
<INCOME-CONTINUING> (6,276)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,276)
<EPS-BASIC> 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 SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION FOR THE QUARTER ENDED MARCH 31, 2000.
</LEGEND>
<CIK> 0001000654
<NAME> COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-29-2000
<PERIOD-START> OCT-02-1999
<PERIOD-END> MAR-31-2000
<CASH> 4,090
<SECURITIES> 0
<RECEIVABLES> 39,117
<ALLOWANCES> 0
<INVENTORY> 60,332
<CURRENT-ASSETS> 111,562
<PP&E> 72,646
<DEPRECIATION> 0
<TOTAL-ASSETS> 224,937
<CURRENT-LIABILITIES> 87,975
<BONDS> 115,374
26,181
0
<COMMON> 49
<OTHER-SE> (22,494)
<TOTAL-LIABILITY-AND-EQUITY> 224,937
<SALES> 115,330
<TOTAL-REVENUES> 115,330
<CGS> 89,878
<TOTAL-COSTS> 89,878
<OTHER-EXPENSES> 4,109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,227
<INCOME-PRETAX> (5,875)
<INCOME-TAX> 401
<INCOME-CONTINUING> (6,276)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,276)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
