-----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, D7E5fGdIvIHKZmTZjm7uaMdm2bZDngFfLTYFvrkaaQ+Vy0Z8gSplnP6kS2y+1dzp SAHYjYEm+92fcv+Mh+Pv/A== 0000891618-98-003954.txt : 19980818 0000891618-98-003954.hdr.sgml : 19980818 ACCESSION NUMBER: 0000891618-98-003954 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980703 FILED AS OF DATE: 19980817 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNICATIONS & POWER INDUSTRIES HOLDING CORP CENTRAL INDEX KEY: 0001000654 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 770407395 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-96858-01 FILM NUMBER: 98692679 BUSINESS ADDRESS: STREET 1: 607 HANSEN WY CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154934000 MAIL ADDRESS: STREET 1: 607 HANSEN WAY M/S A2000 STREET 2: P O BOX 51110 CITY: PALO ALTO STATE: CA ZIP: 94303-1110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNICATIONS & POWER INDUSTRIES INC CENTRAL INDEX KEY: 0001000564 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 770405693 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-96858 FILM NUMBER: 98692680 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 PERIOD ENDED JULY 3, 1998 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended July 3, 1998 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 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 principal executive offices) executive offices) Securities registered pursuant to Section 12(b) of the Act: Securities registered pursuant to Section 12(b) of the Act: NONE NONE Securities registered pursuant to Section 12(g) of the Act: Securities registered pursuant to Section 12(g) of the Act: NONE NONE
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: 198,770 SHARES OF COMMON STOCK, $.01 PAR VALUE, AT JULY 3, 1998. COMMUNICATIONS & POWER INDUSTRIES, INC.: 1 SHARE OF COMMON STOCK, $.01 PAR VALUE, AT JULY 3, 1998. 2 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) PART 1: FINANCIAL INFORMATION COMMUNICATIONS & POWER INDUSTRIES, INC. Consolidated Condensed Balance Sheets, July 3, 1998 (unaudited) and October 3, 1997.................................................................. 2 Consolidated Condensed Statements of Operations, 13-week period ended July 3, 1998 (unaudited) and 13-week period ended July 4, 1997 (unaudited)....... 3 Consolidated Condensed Statements of Operations, 39-week period ended July 3, 1998 (unaudited) and 40-week period ended July 4, 1997 (unaudited)....... 4 Consolidated Condensed Statements of Cash Flows, 39-week period ended July 3, 1998 (unaudited) and 40-week period ended July 4, 1997 (unaudited)....... 5 Notes to Consolidated Condensed Financial Statements (unaudited)................. 6 Management's Discussion and Analysis of Financial Condition and Results of Operations (unaudited)........................................................ 12 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION Consolidated Condensed Balance Sheets, July 3, 1998 (unaudited) and October 3, 1997.................................................................. 7 Consolidated Condensed Statements of Operations, 13-week period ended July 3, 1998 (unaudited) and 13-week period ended July 4, 1997 (unaudited)....... 8 Consolidated Condensed Statements of Operations, 39-week period ended July 3, 1998 (unaudited) and 40-week period ended July 4, 1997 (unaudited)....... 9 Consolidated Condensed Statements of Cash Flows, 39-week period ended July 3, 1998 (unaudited) and 40-week period ended July 4, 1997 (unaudited)....... 10 Notes to Consolidated Condensed Financial Statements (unaudited)................. 11 Management's Discussion and Analysis of Financial Condition and Results of Operations (unaudited)........................................................ 12 PART II: OTHER INFORMATION Other Information ............................................................... 14 SIGNATURES............................................................................ 15
-1- 3 COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands-unaudited)
July 3, October 3, 1998 1997 --------- --------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,283 $ 2,027 Accounts receivable, net 46,850 52,326 Inventories 55,871 50,750 Deferred taxes 7,133 7,133 Other current assets 653 1,221 --------- --------- Total current assets 112,790 113,457 Property, plant, and equipment, net 78,074 79,994 Goodwill, net 23,593 24,144 Debt issue costs, net 6,781 7,893 Deferred taxes 11,920 11,908 Other assets 1,913 -- --------- --------- Total assets $ 235,071 $ 237,396 ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY CURRENT LIABILITIES Revolving credit facility $ 15,700 $ 22,800 Current portion of term loans 6,200 5,700 Current portion of capital leases 351 -- Accounts payable - trade 11,012 10,419 Accrued expenses 20,323 15,088 Product warranty 3,625 4,211 Income taxes payable 12,511 11,975 Advance payments from customers 1,923 2,797 --------- --------- Total current liabilities 71,645 72,990 Senior term loans 25,300 29,950 Senior subordinated notes 100,000 100,000 Obligations under capital leases 2,406 1,584 --------- --------- Total liabilities 199,351 204,524 --------- --------- SENIOR REDEEMABLE PREFERRED STOCK 19,866 17,566 --------- --------- Commitments and contingencies STOCKHOLDERS' EQUITY: Junior Preferred Stock 1 1 Common Stock -- -- Additional paid-in capital 33,542 32,143 Accumulated deficit (16,588) (15,738) Less stockholder loans (1,101) (1,100) --------- --------- Net stockholders' equity 15,854 15,306 --------- --------- Total liabilities, redeemable preferred stock and equity $ 235,071 $ 237,396 ========= =========
See accompanying notes to the unaudited interim consolidated condensed financial statements. -2- 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)
13-Week 13-Week period ended period ended July 3, July 4, 1998 1997 -------- -------- Sales $ 64,450 $ 66,198 Cost of sales 48,702 46,754 -------- -------- Gross profit 15,748 19,444 -------- -------- Operating costs and expenses: Research and development 1,687 1,941 Marketing 5,065 4,783 General and administrative 3,192 3,758 -------- -------- Total operating costs and expenses 9,944 10,482 -------- -------- Operating income 5,804 8,962 Interest expense 4,399 4,753 -------- -------- Earnings before taxes 1,405 4,209 Income tax expense 527 463 -------- -------- Net earnings 878 3,746 Preferred dividends: Senior Redeemable Preferred Stock 738 643 Junior Preferred Stock 492 429 -------- -------- (Loss)/earnings attributable to common stock $ (352) $ 2,674 ======== ========
See accompanying notes to the unaudited consolidated condensed financial statements. -3- 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)
39-Week 40-Week period ended period ended July 3, July 4, 1998 1997 --------- --------- Sales $ 190,625 $ 185,389 Cost of sales 142,181 135,316 --------- --------- Gross profit 48,444 50,073 --------- --------- Operating costs and expenses: Research and development 5,406 5,665 Marketing 14,397 14,871 General and administrative 10,521 9,313 --------- --------- Total operating costs and expenses 30,324 29,849 --------- --------- Operating income 18,120 20,224 Interest expense 13,520 14,245 --------- --------- Earnings before taxes 4,600 5,979 Income tax expense 1,725 658 --------- --------- Net earnings 2,875 5,321 Preferred dividends: Senior Redeemable Preferred Stock 2,140 1,864 Junior Preferred Stock 1,426 1,243 --------- --------- (Loss)/earnings attributable to common stock $ (691) $ 2,214 ========= =========
See accompanying notes to the unaudited consolidated condensed financial statements. -4- 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)
39-Week 40-Week period ended period ended July 3, July 4, 1998 1997 -------- -------- OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ 18,592 $ 5,677 -------- -------- INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment 29 -- Purchase of property, plant and equipment, net (4,387) (7,937) Product lines acquisitions (2,730) -- (Increase) decrease in other non current assets (1) -- -------- -------- Net cash used in investing activities (7,089) (7,937) -------- -------- FINANCING ACTIVITIES Net (Repayments)/Proceeds from debt issue costs -- (193) Net (Repayments)/Proceeds from revolving credit facility (7,100) 6,900 Net (Repayments)/Proceeds from senior term loans (4,150) (3,950) Net (Repayments)/Proceeds from stockholder loans 30 -- Purchase of treasury stock (723) (15) Issuance of treasury stock 696 -- -------- -------- Net cash provided by (used in) financing activities (11,247) 2,742 -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS 256 482 Cash and cash equivalents at beginning of period 2,027 1,753 -------- -------- Cash and cash equivalents at end of period $ 2,283 $ 2,235 ======== ========
See accompanying notes to the unaudited consolidated condensed financial statements. -5- 7 COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited) The accompanying unaudited consolidated condensed financial statements of Communications & Power Industries, Inc. ("CPI") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted and, accordingly, these financial statements should be read in conjunction with the financial statements and the notes thereto contained in CPI's October 3, 1997 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 1998. During the quarter ended July 3, 1998, CPI paid preferred stock dividends on its Senior Redeemable Preferred Stock and its Junior Preferred Stock through the issuance of 7,378 additional shares of its Senior Redeemable Preferred Stock and 4,919 shares of its Junior Preferred Stock, respectively. During the nine months ended July 3, 1998, the Company paid preferred stock dividends through the issuance of 21,393 shares of its Senior Redeemable Preferred Stock and 14,263 shares of its Junior Preferred Stock. -6- 8 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands-unaudited)
July 3, October 3, 1998 1997 --------- --------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,283 $ 2,027 Accounts receivable, net 46,850 52,326 Inventories 55,871 50,750 Deferred taxes 7,133 7,133 Other current assets 653 1,221 --------- --------- Total current assets 112,790 113,457 Property, plant, and equipment, net 78,074 79,994 Goodwill, net 23,593 24,144 Debt issue costs, net 6,781 7,893 Deferred taxes 11,920 11,908 Other assets 1,913 -- --------- --------- Total assets $ 235,071 $ 237,396 ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK PREFERRED STOCK OF SUBSIDIARY AND EQUITY CURRENT LIABILITIES Revolving credit facility $ 15,700 $ 22,800 Current Portion of term loans 6,200 5,700 Current Portion of capital leases 351 -- Accounts payable - trade 11,012 10,419 Accrued expenses 20,323 15,088 Product warranty 3,625 4,211 Income taxes payable 12,511 11,975 Advance payments from customers 1,923 2,797 --------- --------- Total current liabilities 71,645 72,990 Senior term loans 25,300 29,950 Senior subordinated notes 100,000 100,000 Obligations under capital leases 2,406 1,584 --------- --------- Total liabilities 199,351 204,524 --------- --------- SENIOR REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 19,866 17,566 --------- --------- JUNIOR PREFERRED STOCK OF SUBSIDIARY 13,891 12,465 --------- --------- STOCKHOLDERS' EQUITY: Common Stock 2 2 Additional paid-in capital 19,650 19,677 Accumulated deficit (16,588) (15,738) Less stockholder loans (1,101) (1,100) --------- --------- Net stockholders' equity 1,963 2,841 --------- --------- Total liabilities, redeemable preferred stock, preferred stock of subsidiary and equity $ 235,071 $ 237,396 ========= =========
See accompanying notes to the unaudited consolidated condensed financial statements. -7- 9 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands - unaudited)
13-Week 13-Week period ended period ended July 3, July 4, 1998 1997 -------- -------- Sales $ 64,450 $ 66,198 Cost of sales 48,702 46,754 -------- -------- Gross profit 15,748 19,444 -------- -------- Operating costs and expenses: Research and development 1,687 1,941 Marketing 5,065 4,783 General and administrative 3,192 3,758 -------- -------- Total operating costs and expenses 9,944 10,482 -------- -------- Operating income 5,804 8,962 Interest expense 4,399 4,753 -------- -------- Earnings before taxes 1,405 4,209 Income tax expense 527 463 -------- -------- Net earnings 878 3,746 Preferred dividends: Senior Redeemable Preferred Stock 738 643 Junior Preferred Stock 492 429 -------- -------- (Loss)/earnings attributable to common stock $ (352) $ 2,674 ======== ========
See accompanying notes to the unaudited consolidated condensed financial statements. -8- 10 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands - unaudited)
39-Week 40-Week period ended period ended July 3, July 4, 1998 1997 --------- --------- Sales $ 190,625 $ 185,389 Cost of sales 142,181 135,316 --------- --------- Gross profit 48,444 50,073 --------- --------- Operating costs and expenses: Research and development 5,406 5,665 Marketing 14,397 14,871 General and administrative 10,521 9,313 --------- --------- Total operating costs and expenses 30,324 29,849 --------- --------- Operating income 18,120 20,224 Interest expense 13,520 14,245 --------- --------- Earnings before taxes 4,600 5,979 Income tax expense 1,725 658 --------- --------- Net earnings 2,875 5,321 Preferred dividends: Senior Redeemable Preferred Stock 2,140 1,864 Junior Preferred Stock 1,426 1,243 --------- --------- (Loss)/earnings attributable to common stock $ (691) $ 2,214 ========= =========
See accompanying notes to the unaudited consolidated condensed financial statements. -9- 11 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (in thousands - unaudited)
39-Week 40-Week period ended period ended July 3, July 4, 1998 1997 -------- -------- OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ 18,592 $ 5,677 -------- -------- INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment 29 -- Purchase of property, plant and equipment, net (4,387) (7,937) Product line acquisitions (2,730) -- (Increase) decrease in other non current assets (1) -- -------- -------- Net cash used in investing activities (7,089) (7,937) -------- -------- FINANCING ACTIVITIES Net (Repayments)/Proceeds from debt issue costs -- (193) Net (Repayments)/Proceeds from stockholder loans 30 -- Net (Repayments)/Proceeds from revolving credit facility (7,100) 6,900 Net (Repayments)/Proceeds from senior term loans (4,150) (3,950) Purchase of treasury stock (723) (15) Issuance of treasury stock 696 -- -------- -------- Net cash provided by (used in) financing activities (11,247) 2,742 -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS 256 482 Cash and cash equivalents at beginning of period 2,027 1,753 -------- -------- Cash and cash equivalents at end of period $ 2,283 $ 2,235 ======== ========
See accompanying notes to the unaudited consolidated condensed financial statements. -10- 12 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 3, 1997 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 1998. During the quarter ended July 3, 1998, CPI paid preferred stock dividends on its Senior Redeemable Preferred Stock and its Junior Preferred Stock through the issuance of 7,378 additional shares of its Senior Redeemable Preferred Stock and 4,919 shares of its Junior Preferred Stock, respectively. During the nine months ended July 3, 1998, the Company paid preferred stock dividends through the issuance of 21,393 shares of its Senior Redeemable Preferred Stock and 14,263 shares of its Junior Preferred Stock. -11- 13 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Orders during the third quarter of Fiscal 1998 were $53.4 million as compared to $74.1 million for the third quarter of Fiscal 1997, a decrease of 27.9% primarily related to the economic issues currently being faced by certain Far East customers and domestic OEM's that sell to the Far East. Orders during the first nine months of Fiscal 1998 were $197.2 million, a decrease of $18.6 million, or 8.6% below the comparable period in the prior fiscal year. 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. As of July 3, 1998, the Company had order backlog of $168.5 million, representing approximately eight months of sales, compared to order backlog of $180.9 million as of July 4, 1997. Sales for the third quarter of Fiscal 1998 were $64.5 million compared to $66.2 million for the same period in Fiscal 1997, a decrease of 2.6%, primarily due to the timing of customer-defined delivery schedules. Sales for the first nine months of Fiscal 1998 were $190.6 million compared to $185.4 million for the first nine months of Fiscal 1997. This increase of $5.2 million, or 2.8%, was primarily the result of increased demand for products used in the radar market and the successful transition of new transmitter product from development into production. In terms of markets, the sales increase for the first nine months of Fiscal 1998 was reflected in higher sales of products to the radar, electronic countermeasures and medical markets of $7.7 million, $2.2 million and $1.1 million, respectively, partially offset by slight declines in the Company's other three markets. In the communications market, the Company's largest market, sales were $85.6 million, or 44.9% of total sales, compared to $88.8 million, or 47.9% of total sales, in the first nine months of Fiscal 1997. Communications sales were down by $3.2 million, or 3.6%, primarily due to temporary weakness in Asian markets, the completion of a major military satcom program and delays in the procurement process of products identified for use in the wireless communications market. Sales to the radar market, the Company's second largest market, were $64.3 million, or 33.7% of total sales, during the first nine months of Fiscal 1998 compared to $56.6 million, or 30.5% of total sales, during the same period in Fiscal 1997. This increase of $7.7 million, or 13.6%, was the result of increased demand for logistic spares and receipt of funding for several large upgrade programs. Sales to the Company's other four markets (electronic countermeasures, industrial, medical and scientific) were $40.7 million, or 21.4% of total sales, in the first nine months of Fiscal 1998 compared to $40.0 million, or 21.6% of total sales, in the first nine months of Fiscal 1997. Gross profit was $15.7 million, or 24.4% of sales, in the third quarter of Fiscal 1998 compared to $19.4 million, or 29.4% of sales, in the third quarter of Fiscal 1997 due to the lower sales volume mentioned above, lower margins realized on the development and initial production of new products and higher depreciation costs. Gross profit for the first nine months of Fiscal 1998 was $48.4 million, or 25.4% of sales compared to $50.1 million, or 27.0% of sales, over the comparable period in Fiscal 1997. This -12- 14 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) decrease of approximately $1.6 million, or 3.3% was primarily the result of an increase in depreciation (approximately $1.0 million, or 17.4%, higher in the first nine months of Fiscal 1998 than in the same time period in Fiscal 1997) and lower margins on several new product development contracts partially offset by higher sales volume. Operating costs and expenses were $9.9 million, or 15.4% of sales for the third quarter of Fiscal 1998, as compared to $10.5 million, or 15.8%, for the third quarter of Fiscal 1997. Operating costs and expenses decreased between the two time periods primarily due to accrual rates for the Company's management incentive plan and the impact of favorable currency valuation rates in Europe. Operating costs and expenses for the first nine months of Fiscal 1998 were $30.3 million, or 15.9% of sales, compared to $29.8 million, or 16.1% of sales, for the first nine months of Fiscal 1997. During the first nine months of Fiscal 1998, operating costs increased by $0.5 million as $1.2 million of higher general and administrative costs were partially offset by lower marketing and research and development costs. The increase in general and administrative expenses was primarily related to higher goodwill amortization from a product line acquisition completed in the first quarter of Fiscal 1998, software upgrade costs that address Year 2000 compliance at the Company's Massachusetts facility and a $0.4 million increase in the Company's bad debt provision required due to economic problems in Indonesia affecting the collectibility of a customer receivable, along with the fact that the first quarter of Fiscal 1997 was favorably impacted by the sale of a small product line Earnings before interest, income taxes, depreciation and amortization ("EBITDA")(1) for the third quarter of Fiscal 1998 was $8.8 million, or 13.6% of sales, compared to $11.4 million, or 17.2% of sales, for the third quarter of Fiscal 1997. EBITDA for the first nine months of Fiscal 1998 was $26.6 million, or 13.9% of sales, compared to $27.3 million, or 14.7% of sales, for the same time period in Fiscal 1997. EBITDA declined by $0.7 million, or 2.5%, due primarily to product mix and slightly lower margins on new development contract as mentioned above. LIQUIDITY AND CAPITAL RESOURCES Cash flows provided by operating activities for the first nine months of Fiscal 1998 were $18.6 million, an increase of $12.9 million from the $5.7 million provided by operating activities during the first nine months of Fiscal 1997. Cash flow increased in spite of a slight decline in earnings due to improvement in the timing of receivable collections and increased levels of accounts payable that correspond to an increased level of inventory. Also in the first nine months of Fiscal 1997, accrued expenses and the timing of payments required for payroll, supplemental property taxes and interest payments consumed cash of $2.4 million compared to providing cash of $5.3 million in the first nine months of Fiscal 1998. Overall, operating activities funded $11.2 million of repayments against the Company's revolving credit facility and senior term loans during the first nine months of Fiscal 1998. - ---------- (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. -13- 15 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries COMMUNICATIONS & POWER INDUSTRIES, INC., and subsidiaries (A wholly owned subsidiary of Communications & Power Industries Holding Corporation) Cash flows used by investing activities were comprised of expenditures for property and equipment as well as product line enhancement. During the first nine months of Fiscal 1998, the Company invested $4.4 million in new capital equipment compared to $7.9 million spent during the same time period in Fiscal 1997. This capital expenditure reduction of $3.5 million was anticipated by the Company and was primarily related to completing consolidation efforts in Fiscal 1997. Also during Fiscal 1998, the Company invested $2.7 million in two small product line acquisitions to add to products currently being manufactured in the Company's Beverly, Massachusetts and Palo Alto, California facilities. Non-cash financing activities during the first nine months of Fiscal 1998 included $1.2 million of purchases under capital leases. These purchases were related to the implementation of a new business enterprise system that is part of the Company's overall plan to address "Year 2000" issues. 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 $17.1 million was available as of July 31, 1998). 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. -14- 16 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: 27.1 Financial Data Schedule (Communications & Power Industries, Inc.) 27.2 Financial Data Schedule (Communications & Power Industries Holding Corporation) (b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter ended July 3, 1998. -15- 17 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: August 12, 1998 By: /s/ Lynn E. Harvey ----------------------------------------------- Lynn E. Harvey Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) Date: August 12, 1998 -16- 18 INDEX TO EXHIBITS
Exhibit Number Description - ------- ----------- 27.1 Financial Data Schedule (Communications & Power Industries, Inc.) 27.2 Financial Data Schedule (Communications & Power Industries Holding Corporation)
EX-27.1 2 FINANCIAL DATA SCHEDULE FOR CPI, INC.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION FOR THE QUARTER ENDED JULY 3, 1998. 0001000564 COMMUNICATION & POWER INDUSTRIES, INC. 1,000 9-MOS OCT-02-1998 OCT-04-1998 JUL-03-1998 2,283 0 46,850 0 55,871 112,790 78,074 0 235,071 71,645 127,706 19,866 0 2 1,961 235,071 190,625 190,625 142,181 142,181 5,406 0 13,520 4,600 1,725 2,875 0 0 0 2,875 0 0
EX-27.2 3 FINANCIAL DATA SCHEDULE FOR CPI HOLDING CORP.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q COMMUNICATIONS & POWER INDUSTRIES, INC. FOR THE QUARTER ENDED JULY 3, 1998. 0001000654 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION 1,000 9-MOS OCT-02-1998 OCT-04-1997 JUL-03-1998 2,283 0 46,850 0 55,871 112,790 78,074 0 235,071 71,645 127,706 19,866 1 0 15,853 235,071 190,625 190,625 142,181 142,181 5,406 0 13,520 4,600 1,725 2,875 0 0 0 2,875 0 0
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