-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PrJw966gL5x74hAAiYzfJBlgkhlOcYOCRsqFMUEXyHpKfU/8aogOYGL7KvIHwhHv +YDp/hvvsH4BWUbFfUtZ8g== 0000891618-96-000366.txt : 19960702 0000891618-96-000366.hdr.sgml : 19960702 ACCESSION NUMBER: 0000891618-96-000366 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960329 FILED AS OF DATE: 19960510 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNICATIONS & POWER INDUSTRIES INC CENTRAL INDEX KEY: 0001000564 STANDARD INDUSTRIAL CLASSIFICATION: 3670 IRS NUMBER: 770405693 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-96858 FILM NUMBER: 96559893 BUSINESS ADDRESS: STREET 1: 607 HANSEN WAY CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154934000 MAIL ADDRESS: STREET 1: 607 HANSEN WAY M/S A200 STREET 2: P O BOX 51110 CITY: PALO ALTO STATE: CA ZIP: 94303-1110 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED MARCH 29,1996 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 29, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period from_________to_________ - - -------------------------------------------------------------------------------- Commission File Number: 33-96858-02 - - -------------------------------------------------------------------------------- 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, INC.: 1 SHARE OF COMMON STOCK, $.01 PAR VALUE, AT FEBRUARY 1, 1996. 2 COMMUNICATIONS & POWER INDUSTRIES INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) PART 1 PART 1: FINANCIAL INFORMATION Consolidated Condensed Balance Sheets, March 29, 1996 (Unaudited) and September 29, 1995............................................................................................2 Consolidated Condensed Statements of Operations, 13-week period ended March 29, 1996 (unaudited) and March 31, 1995 (unaudited).....................................................3 Consolidated Condensed Statements of Operations, 26-week period ended March 29, 1996 (unaudited) and March 31, 1995 (unaudited).....................................................4 Consolidated Condensed Statements of Cash Flows, 26-week period ended March 29,1996 (unaudited) and March 31, 1995 (unaudited)..................................................5 Notes to Consolidated Condensed Financial Statements (unaudited)....................................6 Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)..............................................................................7 PART II: OTHER INFORMATION Other Information ..................................................................................9 Signatures ........................................................................................10
-1- 3 COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands - unaudited)
March 29, September 29, ASSETS 1996 1995 --------- --------- CURRENT ASSETS Cash and cash equivalents $ 4,804 8,267 Accounts receivable, net 44,950 44,743 Inventories 49,805 44,765 Other current assets 2,509 2,566 --------- --------- Total current assets 102,068 100,341 Property, plant, and equipment, net 75,288 74,071 Goodwill, net 25,693 26,098 Other assets 12,615 14,392 ========= ========= Total assets $ 215,664 214,902 ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY (DEFICIT) CURRENT LIABILITIES Revolving credit facility $ 17,300 19,600 Accounts payable - trade 12,624 16,474 Accrued expenses 30,332 25,863 Current portion of term loans 3,200 3,200 --------- --------- Total current liabilities 63,456 65,137 Senior term loans 38,000 38,800 Senior subordinated notes 100,000 100,000 Deferred taxes 343 43 --------- --------- Total liabilities 201,799 203,980 --------- --------- SENIOR REDEEMABLE PREFERRED STOCK 13,575 12,460 --------- --------- Commitments and contingencies STOCKHOLDERS' EQUITY (DEFICIT): Junior Preferred Stock 1 1 Common Stock -- -- Additional paid-in capital 29,761 29,088 Accumulated deficit (28,482) (29,627) Less stockholder loans (990) (1,000) --------- --------- Net stockholders' equity (deficit) 290 (1,538) --------- --------- Total liabilities, redeemable preferred stock and equity (deficit) $ 215,664 214,902 ========= =========
See accompanying notes to the unaudited interim condensed consolidated financial statements. -2- 4 COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands - unaudited)
Successor Predecessor ------------- ------------- 13-Week 13-Week period ended period ended March 29, March 30, 1996 1995 ------------- ------------- Sales $ 63,467 64,047 Cost of sales 45,861 46,396 ------------- ------------- Gross Profit 17,606 17,651 ------------- ------------- Operating costs and expenses: Research and development 1,919 2,173 Marketing 4,892 5,054 General and administrative 2,801 5,301 ------------- ------------- Total operating costs and expenses 9,612 12,528 ------------- ------------- Operating income 7,994 5,123 Interest expense 4,620 -- ------------- ------------- Earnings before taxes 3,374 5,123 Income tax expense 1,249 1,898 ------------- ------------- Net earnings (loss) 2,125 3,225 Preferred dividends: Senior Redeemable Preferred Stock 541 -- Junior Preferred Stock 361 -- ------------- ------------- Earnings attributable to common stock $ 1,223 3,225 ============= =============
See accompanying notes to the unaudited interim condensed consolidated financial statements. -3- 5 COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands - unaudited)
Successor Predecessor ------------- ------------- 26-Week 26-Week period ended period ended March 29, March 30, 1996 1995 ------------- ------------- Sales $ 126,100 122,739 Cost of sales 91,839 90,851 ------------- ------------- Gross Profit 34,261 31,888 ------------- ------------- Operating costs and expenses: Research and development 3,700 3,999 Marketing 9,733 9,640 General and administrative 6,547 10,244 ------------- ------------- Total operating costs and expenses 19,980 23,883 ------------- ------------- Operating income 14,281 8,005 Interest expense 9,620 -- ------------- ------------- Earnings before taxes 4,661 8,005 Income tax expense 1,725 2,964 ------------- ------------- Net earnings (loss) 2,936 5,041 Preferred dividends: Senior Redeemable Preferred Stock 1,008 -- Junior Preferred Stock 672 -- ------------- ------------- Earnings attributable to common stock $ 1,256 5,041 ============= =============
See accompanying notes to the unaudited interim condensed consolidated financial statements. -4- 6 COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) STATEMENTS OF CASH FLOWS (in thousands - unaudited)
Successor Predecessor -------------- -------------- 26-Week 26-Week period ended period ended March 29, March 30, 1996 1995 -------------- -------------- OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ 4,395 6,922 -------------- -------------- INVESTING ACTIVITIES Purchase of property, plant and equipment, net (4,396) (3,160) (Increase) decrease in other non current assets (122) 638 -------------- -------------- Net cash used in investing activities (4,518) (2,522) -------------- -------------- FINANCING ACTIVITIES Repayment of intercompany funding to Varian -- (2,527) Debt issue costs (250) Proceeds from Stockholder loans 10 Borrowings on revolving credit facility, net (3,100) -- -------------- -------------- Net cash provided by (used in) financing activities (3,340) (2,527) -------------- -------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,463) 1,873 Cash and cash equivalents at beginning of period 8,267 5,713 ============== ============== Cash and cash equivalents at end of period $ 4,804 7,586 ============== ==============
See accompanying notes to the unaudited interim condensed consolidated financial statements. -5- 7 COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The accompanying unaudited interim condensed consolidated financial statements of Communication & Power Industries, Inc. (the "Company" or "Successor") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements have been condensed or omitted and, accordingly, these financial statements should be read in conjunction with the financial statements and the notes thereto contained in the Company's September 29, 1995 Annual Report on Form 10-K. Management believes that these unaudited interim condensed financial statements contain all adjustments, all of which are of a normal, recurring nature, necessary to a fair statement of the results for the interim period presented. Prior to August 11, 1995, the Company's operations were the principal operations of the Electron Devices Business (the "Predecessor"), a segment of Varian Associates, Inc. ("Varian"), except they exclude the Tempe, Arizona operations. The Predecessor consisted of substantially all of the assets of Varian and its affiliates that were used primarily in developing, manufacturing and distributing microwave and power grid vacuum electron devices, microwave amplifiers, modulators and various other power supply equipment and devices. On August 11, 1995, the Company acquired these assets from Varian (the "Acquisition") and was then merged with a wholly owned subsidiary of Communications & Power Industries Holding Corporation, a corporation newly formed by a group of investors, including management of the Company. As a result of the Acquisition, operations of the Company for the first six months of 1996 are not necessarily comparable to the operations of the corresponding period of the prior year. During the quarter ended March 29, 1996, the Company paid preferred dividends on its Senior Redeemable Preferred Stock and its Junior Preferred Stock through the issuance of 5,410 additional shares of its Senior Redeemable Preferred Stock and 3,610 shares of its Junior Preferred Stock, respectively. During the first half ended March 29, 1996, the Company paid preferred dividends through the issuance of 10,080 shares of its Senior Redeemable Preferred Stock and 6,720 shares of its Junior Preferred Stock. Certain reclassifications have been made to the September 29, 1995 consolidated financial statements to conform with the 1996 presentation. -6- 8 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 During the second quarter of Fiscal 1996, sales were $63.5 million, a slight decrease of .9% from the second quarter of Fiscal 1995. During the first half of 1996, sales were $126.1 million, an increase of $3.4 million, or 2.7%, over the comparable period in the prior fiscal year. This increase was primarily due to increases in communication and industrial sales partially offset by radar and scientific sales declines. Communication sales increased approximately $4.2 million, or 7.9%, due to the increased demand for satellite communication uplinks. Industrial sales increased approximately $2.7 million, or 26.4%, due to stronger marketing efforts and continued strength in the semiconductor area. Sales to the radar market, which continue to decline but at a slower pace, decreased $1.6 million, or 4.3%. Sales to the scientific market decreased $1.1 million, or 36.3%, due to a slow down of development programs for the Department of Energy. Incoming orders during the second quarter of Fiscal 1996 were $66.6 million as compared to $60.5 for the second quarter of Fiscal 1995, an increase of 10.2%. Orders during the first half of Fiscal 1996 were $136.8 million as compared to $122.1 million over the comparable period in the prior fiscal year, a growth rate of 12.1%. However, incoming order levels fluctuate significantly on a quarterly basis and a particular quarters 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 predict when or if these orders will be recognized as sales. Gross profit decreased from $17.7 million in the second quarter of Fiscal 1995 to $17.6 million in the second quarter of Fiscal 1996, principally related to lower sales volume. A $1.2 million reduction in depreciation expense in the second quarter of Fiscal 1996 was offset by a $.3 million charge to cost of sales relating to the write-up of inventory, both recorded in connection with the Acquisition. Lower depreciation expense in this time period was also offset by increased product cost related to the relocation of the Company's Salt Lake City, Utah plant to San Carlos, California. Gross profit increased from $31.9 million, or 26% of sales, in the first half of Fiscal 1995 to $34.3 million, or 27.2% of sales, in the first half of Fiscal 1996 as a result of increased sales volume and $2.5 million reduction in depreciation expense offset partially by the charge to cost of sales of $1.7 million relating to the inventory write-up. Research and development expenses decreased by $.3 million for the 13-week and 26-week periods ended March 29, 1996 as compared to the same time periods ended March 30, 1995. As a percentage of sales, these expenses have dropped from 3.3% in the first half of Fiscal 1995 to 2.9% in the first half of Fiscal 1996, primarily as a result of several product development milestones being moved into the second half of Fiscal 1996. Overall the Company continues its emphasis on new products and is currently working on several customer-funded projects. Marketing, General and Administrative expenses as a percentage of sales were 12.1% and 12.9%, respectively, for the 13-week and 26-week periods ended March 29, 1996 as compared to 16.2% for the 13-week and 26-week periods ended March 30, 1995. The reduced level of these costs as a percentage of sales reflects the Company's new cost structure as an independent company in Fiscal 1996, as opposed to being an operating division of Varian during the first half of Fiscal 1995. -7- 9 COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) Operating income was $8.0 million (12.6% of sales) for the second quarter of Fiscal 1996, as compared to $5.1 million (8.0% of sales) for the second quarter of Fiscal 1995, a 56% improvement. Operating income was $14.3 million (11.3% of sales) for the first half of Fiscal 1996, as compared to $8.0 million (6.5% of sales) for the first half of Fiscal 1995, a 78% improvement. In addition to the various items mentioned, operating income was positively affected by a reduction in depreciation expense due to the revaluation of the Company's assets in connection with the Acquisition, which lowered depreciation from $6.4 million in the first half of Fiscal 1995 to $3.7 million in the first half of Fiscal 1996. Earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the second quarter of Fiscal 1996 was $10.1 million (excluding the effect of the $.3 million charge during the quarter relating to the write-up of inventory as described above), compared to $8.4 million for the second quarter of 1995. EBITDA for the first half of Fiscal 1996 was $19.7 million (excluding the $1.7 million charge for the write-up of inventory), compared to $14.4 million for the first half of 1995. Earnings before taxes amounted to $3.4 million and $4.7 million for the 13-week and 26-week periods ended March 29, 1996, respectively, as compared to $5.1 million and $8.0 million for the same time periods ended March 30, 1995. The decrease of $1.7 million, or 34.1%, for the second quarter and the decrease of $3.3 million, or 41.8%, for the first half is due to the incurrence of $4.6 million and $9.6 million, respectively, of interest expense ($4.3 million and $8.6 million, respectively, of cash interest expense) associated with the debt incurred in connection with the Acquisition. LIQUIDITY AND CAPITAL RESOURCES Cash flows provided by operating activities for the first half of Fiscal 1996 were $4.4 million, a decrease in cash flow of $2.5 million from the $6.9 million provided by operating activities during the first half of Fiscal 1995. The primary reason for the decrease in cash provided was an increase in inventories of $5.0 million affected by a build up of transition stock for product lines being relocated from Salt Lake City to San Carlos as well as delayed shipments caused primarily by late vendor deliveries. This was partially offset by an increase in cash advances primarily related to customer-funded research and development. Operating activities funded $3.1 million of paydowns during the first half against the Company's revolving credit facility. Cash flow from investing activities was comprised principally of capital expenditures for property and equipment, which amounted to $4.4 million for the first half of Fiscal 1996 as compared to $3.2 million for the first half of Fiscal 1995. As of March 29, 1996, the Company had working capital of approximately $38.6 million, an increase of approximately $3.4 million (9.7%) from September 29, 1995. The increase of working capital is substantially attributable to higher inventory levels and a lower balance on the Company's revolving credit facility. Prior to the Acquisition, the Predecessor's short-term cash requirements were provided by Varian through an intercompany credit facility arrangement. The Company's current primary source of liquidity, other than funds generated from operations, is the $35.0 million revolving credit facility provided under its senior credit agreement (of which $15.4 million was available as of April 26, 1996). 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. -8- 10 COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) PART II: OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2: CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. No reports were filed on Form 8-K during the quarter ended March 29, 1996. -9- 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMMUNICATIONS & POWER INDUSTRIES, INC. By: /s/ Al D. Wilunowski ----------------------------------------------------- Al D. Wilunowski Chief Executive Officer and President Date: May 6, 1996 By: /s/ Lynn E. Harvey ----------------------------------------------------- Lynn E. Harvey Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) Date: May 6, 1996 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q - COMMUNICATIONS & POWER INDUSTRIES, INC. FOR QUARTER ENDED MARCH 29, 1996. 0001000564 COMMUNICATIONS & POWER INDUSTRIES, INC. 1,000 3-MOS SEP-27-1996 DEC-30-1995 MAR-29-1996 4,804 0 44,950 0 49,805 102,068 75,288 0 215,664 63,456 138,000 13,575 1 0 289 215,664 63,467 63,467 45,861 45,861 0 0 4,620 3,374 1,249 2,125 0 0 0 2,125 0 0
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