<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 December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 33-96858-01
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State of Incorporation)
77-0407395
(I.R.S. employer identification number)
607 HANSEN WAY
PALO ALTO, CALIFORNIA 94303-1110
(415) 846-2900
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section
12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Commission File Number: 33-96858
COMMUNICATIONS & POWER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State of Incorporation)
77-0405693
(I.R.S. employer identification number)
607 HANSEN WAY
PALO ALTO, CALIFORNIA 94303-1110
(415) 846-2900
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding for each of the Registrant's classes
of Common Stock, as of the latest practicable date: COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION: 196,420 SHARES OF COMMON STOCK, $.01 PAR VALUE,
AT DECEMBER 31, 1999. COMMUNICATIONS & POWER INDUSTRIES, INC.: 1 SHARE OF COMMON
STOCK, $.01 PAR VALUE, AT DECEMBER 31, 1999.
<PAGE> 2
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
<TABLE>
<S> <C>
PART 1: FINANCIAL INFORMATION
COMMUNICATIONS & POWER INDUSTRIES, INC.
Consolidated Condensed Balance Sheets, December 31, 1999 and October 1, 1999 ....... 2
Consolidated Condensed Statements of Operations, 13-week period ended December
31, 1999 and 13-week period ended January 1, 1999 .................................. 3
Consolidated Condensed Statements of Cash Flows, 13-week period ended December
31, 1999 and 13-week period ended January 1, 1999 .................................. 4
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
Consolidated Condensed Balance Sheets, December 31, 1999 and October 1, 1999 ....... 5
Consolidated Condensed Statements of Operations, 13-week period ended December
31, 1999 and 13-week period ended January 1, 1999 .................................. 6
Consolidated Condensed Statements of Cash Flows, 13-week period ended December
31, 1999 and 13-week period ended January 1, 1999 .................................. 7
Notes to Consolidated Condensed Financial Statements .................................... 8
Management's Discussion and Analysis of Financial Condition and Results of
Operations ............................................................................. 10
PART II: OTHER INFORMATION
Other Information ...................................................................... 13
SIGNATURES .............................................................................. 14
</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>
December 31, October 1,
ASSETS 1999 1999
------------ ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,758 $ 4,247
Accounts receivable, net 40,922 49,596
Inventories 55,481 52,526
Deferred taxes 6,899 6,899
Other current assets 1,049 1,524
--------- ---------
Total current assets 108,109 114,792
Property, plant, and equipment, net 74,583 76,225
Goodwill and other intangibles, net 28,061 28,723
Debt issue costs, net 5,339 5,594
Deferred taxes 8,250 8,250
========= =========
Total assets $ 224,342 $ 233,584
========= =========
LIABILITIES, REDEEMABLE
PREFERRED STOCK AND EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 29,600 $ 35,000
Current portion of term loans 5,891 7,700
Current portion of capital leases 904 885
Accounts payable 11,703 13,522
Accrued expenses 18,382 16,489
Product warranty 3,605 3,575
Income taxes payable 8,937 8,978
Advance payments from customers 2,960 1,736
--------- ---------
Total current liabilities 81,982 87,885
Senior term loans 16,000 15,986
Senior subordinated notes 100,000 100,000
Obligations under capital leases 1,606 1,825
--------- ---------
Total liabilities 199,588 205,696
--------- ---------
SENIOR REDEEMABLE PREFERRED STOCK 25,188 24,228
--------- ---------
Commitments and contingencies
STOCKHOLDERS' (DEFICIT) EQUITY:
Junior preferred stock 1 1
Common stock -- --
Additional paid-in capital 36,408 35,804
Accumulated deficit (35,725) (31,039)
Stockholder loans (1,118) (1,106)
--------- ---------
Net stockholders' (deficit) equity (434) 3,660
--------- ---------
Total liabilities, senior redeemable
preferred stock and stockholders' equity $ 224,342 $ 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
December 31 January 1,
1999 1999
------------ ------------
<S> <C> <C>
Sales $54,990 $57,781
Cost of sales 42,838 43,654
------- -------
Gross profit 12,152 14,127
------- -------
Operating costs and expenses:
Research and development 1,923 2,066
Selling and marketing 4,574 4,594
General and administrative 3,953 3,908
------- -------
Total operating costs and expenses 10,450 10,568
------- -------
Operating income 1,702 3,559
Foreign currency loss (80) (158)
Interest expense (4,550) (4,406)
------- -------
Loss before taxes (2,928) (1,005)
Income tax expense (benefit) 195 (422)
------- -------
Net loss (3,123) (583)
Preferred dividends:
Senior redeemable preferred stock 907 790
Junior preferred stock 605 527
------- -------
Net loss attributable to common stock $(4,635) $(1,900)
======= =======
</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
December 31 January 1,
1999 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $ 8,353 $ 7,715
------- --------
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (1,417) (1,762)
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 -- (6,447)
------- --------
Net cash used in investing activities (1,417) (10,723)
------- --------
FINANCING ACTIVITIES
Repayments on capital leases (200) (79)
Net repayments on debt issue costs -- (29)
Net (repayments)/proceeds from revolving credit facility (5,400) 5,700
Net repayments on senior term loans (1,825) (1,550)
------- --------
Net cash provided by (used in) financing activities (7,425) 4,042
------- --------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (489) 1,034
Cash and cash equivalents at beginning of period 4,247 448
------- --------
Cash and cash equivalents at end of period $ 3,758 $ 1,482
======= ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-4-
<PAGE> 6
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)
<TABLE>
<CAPTION>
December 31, October 1,
ASSETS 1999 1999
------------ ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,758 $ 4,247
Accounts receivable, net 40,922 49,596
Inventories 55,481 52,526
Deferred taxes 6,899 6,899
Other current assets 1,049 1,524
-------- --------
Total current assets 108,109 114,792
Property, plant, and equipment, net 74,583 76,225
Goodwill and other intangibles, net 28,061 28,723
Debt issue costs, net 5,339 5,594
Deferred taxes 8,250 8,250
======== ========
Total assets $224,342 $233,584
======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK,
PREFERRED STOCK OF SUBSIDIARY AND EQUITY
CURRENT LIABILITIES
Revolving credit facility $ 29,600 $ 35,000
Current portion of term loans 5,891 7,700
Current portion of capital leases 904 885
Accounts payable 11,703 13,522
Accrued expenses 18,382 16,489
Product warranty 3,605 3,575
Income taxes payable 8,937 8,978
Advance payments from customers 2,960 1,736
-------- --------
Total current liabilities 81,982 87,885
Senior term loans 16,000 15,986
Senior subordinated notes 100,000 100,000
Obligations under capital leases 1,606 1,825
-------- --------
Total liabilities 199,588 205,696
-------- --------
SENIOR REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 25,188 24,228
-------- --------
JUNIOR PREFERRED STOCK OF SUBSIDIARY 17,226 16,622
-------- --------
STOCKHOLDERS' (DEFICIT):
Common stock 2 2
Additional paid-in capital 19,181 19,181
Accumulated deficit (35,725) (31,039)
Stockholder loans (1,118) (1,106)
-------- --------
Net stockholders' (deficit) (17,660) (12,962)
-------- --------
Total liabilities, senior redeemable preferred stock
and stockholders' equity $224,342 $233,584
======== ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-5-
<PAGE> 7
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
December 31 January 1,
1999 1999
------------ ------------
<S> <C> <C>
Sales $54,990 $57,781
Cost of sales 42,838 43,654
------- -------
Gross profit 12,152 14,127
------- -------
Operating costs and expenses:
Research and development 1,923 2,066
Selling and marketing 4,574 4,594
General and administrative 3,953 3,908
------- -------
Total operating costs and expenses 10,450 10,568
------- -------
Operating income 1,702 3,559
Foreign currency loss (80) (158)
Interest expense (4,550) (4,406)
------- -------
Loss before taxes (2,928) (1,005)
Income tax expense (benefit) 195 (422)
------- -------
Net loss (3,123) (583)
Preferred dividends:
Senior redeemable preferred stock 907 790
Junior preferred stock 605 527
------- -------
Net loss attributable to common stock $(4,635) $(1,900)
======= =======
</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 CASH FLOWS
(in thousands - unaudited)
<TABLE>
<CAPTION>
13-Week 13-Week
period ended period ended
December 31, January 1,
1999 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities $ 8,353 $ 7,715
------- --------
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net (1,417) (1,762)
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 -- (6,447)
------- --------
Net cash used in investing activities (1,417) (10,723)
------- --------
FINANCING ACTIVITIES
Repayments on capital leases (200) (79)
Net repayments on debt issue costs -- (29)
Net (repayments)/proceeds from revolving credit facility (5,400) 5,700
Net repayments on senior term loans (1,825) (1,550)
------- --------
Net cash provided by (used in) financing activities (7,425) 4,042
------- --------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (489) 1,034
Cash and cash equivalents at beginning of period 4,247 448
======= ========
Cash and cash equivalents at end of period $ 3,758 $ 1,482
======= ========
</TABLE>
See accompanying notes to the unaudited consolidated condensed financial
statements.
-7-
<PAGE> 9
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 (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) December October 1,
31, 1999 1999
-------- ----------
<S> <C> <C>
Raw materials and parts $41,439 $39,953
Work in process 11,477 9,878
Finished goods 2,565 2,695
------- -------
Total inventories $55,481 $52,526
======= =======
</TABLE>
3. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest was $1.3 million and $0.7 million for the 13-week period
ended December 31, 1999 and January 1, 1999, respectively. Cash paid for taxes
was $0.04 million and $0.2 million for the 13-week period ended December 31,
1999 and January 1, 1999, respectively.
Non-cash financing activities of the Company included the payment of preferred
stock dividends on its Senior Redeemable Preferred Stock and its Junior
Preferred Stock through the issuance of 9,069 additional shares of its Senior
Redeemable Preferred Stock and 6,046 shares of its Junior Preferred Stock,
respectively.
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
-8-
<PAGE> 10
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries
COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications &
Power Industries Holding Corporation)
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
Three Months Ended VED's Equipment Other Total
------- --------- ------- -------
<S> <C> <C> <C> <C>
December 31, 1999:
Revenues from external customers $41,556 $12,055 $1,379 $54,990
Intersegment product transfers 2,239 -- 179 2,418
EBITDA 5,578 494 (695) 5,377
January 1, 1999:
Revenues from external customers 41,918 15,204 659 57,781
Intersegment product transfers 3,301 -- -- 3,301
EBITDA 6,352 1,294 (853) 6,793
</TABLE>
A reconciliation of EBITDA from reportable segments to Loss before Taxes is as
follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
(Dollars in thousands) December 31, January 1,
1999 1999
------------ ----------
<S> <C> <C>
Segment EBITDA $ 5,377 $ 6,793
Less:
Depreciation and amortization 3,755 3,299
Other -- 93
Interest expense 4,550 4,406
------- -------
Loss before taxes $(2,928) $(1,005)
======= =======
</TABLE>
-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
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 first quarter of Fiscal 2000 were $61.6 million as compared to
$51.6 million for the first quarter of Fiscal 1999. This increase of $10.0
million, or 19.3%, was primarily due to higher demand for products used in the
electronic countermeasures and radar markets, which increased by $7.2 million
and $4.4 million, respectively. Electronic countermeasures benefited from the
exercise of a contract option for airborne decoy product that will be delivered
over a sixteen-month period. 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 December 31, 1999, the Company had order backlog of $153.3 million,
representing approximately seven months of sales, compared to order backlog of
$155.0 million as of January 1, 1999. Order backlog increased during the first
quarter of Fiscal 2000 by $6.9 million from $146.4 million at the end of Fiscal
1999.
Sales for the first quarter of Fiscal 2000 were $55.0 million compared to $57.8
million for the same period in Fiscal 1999. Sales decreased by $2.8 million, or
4.8%, due to a planned full week shutdown in December 1999. This impacted the
Company's two Palo Alto operations by reducing the number of production workdays
and closing shipping and receiving areas but was required to facilitate a power
transformer upgrade to the building. In terms of markets, sales to the
communications and medical markets were down by $2.6 million and $0.8 million,
respectively, primarily due to the facilities shutdown impacting Palo Alto
operations. This was partially offset by products sold into the radar market
that increased by $0.8 million. Sales of products to the Company's other markets
in the first quarter of Fiscal 2000 were consistent in terms of dollars with the
first quarter of Fiscal 1999.
Gross profit for the first quarter of Fiscal 2000 was $12.2 million, or 22.1% of
sales, compared to $14.1 million, or 24.4% of sales, in the first quarter of
Fiscal 1999 due to lower volume and changes in product mix.
Operating costs and expenses were consistent between the two time periods as the
Company spent $10.5 million, or 19.0% of sales, for the first quarter of Fiscal
2000, as compared to $10.6 million, or 18.3%, for the first quarter of Fiscal
1999. The Company continues to focus on research and development
-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)
efforts, spending approximately 3.5% of sales in the first quarter of Fiscal
2000, primarily related to the release of its new Gen IV amplifier product line
to the communications market.
Earnings before interest, income taxes, depreciation and amortization
("EBITDA")1 for the first quarter of Fiscal 2000 were $5.4 million, or 9.8% of
sales, compared to $6.8 million, or 11.8% of sales, for the first quarter of
Fiscal 1999. EBITDA declined by $1.4 million due to lower volume and product mix
issues mentioned above.
FINANCIAL CONDITION
Cash flows provided by operating activities for the first quarter of Fiscal 2000
were $8.4 million, an increase of approximately $0.7 million from the $7.7
million provided by operating activities during the first quarter of Fiscal
1999. This increase was due primarily to a $1.6 million increase in advanced
payments from customers as other changes in working capital were consistent
between the two time periods and higher net losses in the first quarter of
Fiscal 2000 were partially offset by non-cash increases in depreciation,
amortization and income taxes payable.
Investing activities decreased cash by $1.4 million in the first quarter of
Fiscal 2000 compared to $10.7 million in the first quarter of Fiscal 1999. This
decrease of $9.3 million was primarily related to the fact that the first
quarter of Fiscal 1999 was impacted by the Company's $8.5 million acquisition of
its Solid State Products Division.
The Company's current primary source of liquidity, other than funds generated
from operations, is the $45.0 million revolving credit facility provided under
its senior credit agreement (of which $10.4 million was available as of January
28, 2000). In the first quarter of Fiscal 2000, the Company reduced its
borrowing under this facility by $5.4 million and also repaid $1.6 million of
term loans and $0.2 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 twelve months.
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.
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.
Evaluation of the Company's products is complete and, to date, no significant
problems have been found in existing CPI products. Also, 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 has completed its migration to modified or replaced Enterprise
Resource Planning ("ERP") systems at five of its six operating Divisions. The
Company's most recently acquired Division is in the process of upgrading the
latest version of its accounting software and is expected to complete this task
by the end of February 2000. At this time, the old version is functioning
adequately.
Management currently estimates that it has spent approximately $6.8 million to
replace non-compliant Varian legacy systems, of which $3.4 million was through a
capital lease program. Other remediation efforts completed in Fiscal 1999 and
Fiscal 1998 have included a mix of capital expenditures and operating expense
costs totaling $1.3 million and an estimated $0.4 million is planned for the
remainder of Fiscal 2000.
To date, the Company has not experienced any significant incidents related to
the Year 2000 problem. However, there remains a risk that failure of systems and
products of the other companies on which the Company relies could have an
adverse effect on the business.
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.
-12-
<PAGE> 14
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:
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 December 31,
1999.
-13-
<PAGE> 15
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: February 11, 2000
By: /s/ Lynn E. Harvey
---------------------------------------------
Lynn E. Harvey
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)
Date: February 11, 2000
-14-
<PAGE> 16
EXHIBIT INDEX
<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 SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER
INDUSTRIES, INC. FOR THE QUARTER ENDED DECEMBER 31, 1999.
</LEGEND>
<CIK> 0001000564
<NAME> COMMUNICATIONS & POWER INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-29-2000
<PERIOD-START> OCT-02-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,758
<SECURITIES> 0
<RECEIVABLES> 40,922
<ALLOWANCES> 0
<INVENTORY> 55,481
<CURRENT-ASSETS> 108,109
<PP&E> 74,583
<DEPRECIATION> 0
<TOTAL-ASSETS> 224,342
<CURRENT-LIABILITIES> 81,982
<BONDS> 117,606
25,188
1
<COMMON> 0
<OTHER-SE> (435)
<TOTAL-LIABILITY-AND-EQUITY> 224,342
<SALES> 54,990
<TOTAL-REVENUES> 54,990
<CGS> 42,838
<TOTAL-COSTS> 42,838
<OTHER-EXPENSES> 1,923
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,550
<INCOME-PRETAX> (2,928)
<INCOME-TAX> 195
<INCOME-CONTINUING> (3,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,123)
<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 SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION FOR THE QUARTER ENDED DECEMBER 31, 1999.
</LEGEND>
<CIK> 0001000654
<NAME> COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-29-2000
<PERIOD-START> OCT-02-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,758
<SECURITIES> 0
<RECEIVABLES> 40,922
<ALLOWANCES> 0
<INVENTORY> 55,481
<CURRENT-ASSETS> 108,109
<PP&E> 74,583
<DEPRECIATION> 0
<TOTAL-ASSETS> 224,342
<CURRENT-LIABILITIES> 81,982
<BONDS> 117,606
25,188
0
<COMMON> 2
<OTHER-SE> (17,662)
<TOTAL-LIABILITY-AND-EQUITY> 224,342
<SALES> 54,990
<TOTAL-REVENUES> 54,990
<CGS> 42,838
<TOTAL-COSTS> 42,838
<OTHER-EXPENSES> 1,923
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,550
<INCOME-PRETAX> (2,928)
<INCOME-TAX> 195
<INCOME-CONTINUING> (3,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,123)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
