-----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, LXk0KNgkif8QwT0h7AJZdbimjZGRRA5tvJCtnRZuRDf99GeK+2QKTOFbRycY6DEj VIrlpG63PkPaKXoJP9OKJw== 0000891618-00-000893.txt : 20000215 0000891618-00-000893.hdr.sgml : 20000215 ACCESSION NUMBER: 0000891618-00-000893 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 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: 541387 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: 541388 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 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. 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, 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
-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)
December 31, October 1, ASSETS 1999 1999 ------------ ---------- 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 ========= =========
See accompanying notes to the unaudited 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 December 31 January 1, 1999 1999 ------------ ------------ 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) ======= =======
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 CASH FLOWS (in thousands - unaudited)
13-Week 13-Week period ended period ended December 31 January 1, 1999 1999 ------------ ------------ 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 ======= ========
See accompanying notes to the unaudited consolidated condensed financial statements. -4- 6 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands-unaudited)
December 31, October 1, ASSETS 1999 1999 ------------ ---------- 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 ======== ========
See accompanying notes to the unaudited consolidated condensed financial statements. -5- 7 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands - unaudited)
13-Week 13-Week period ended period ended December 31 January 1, 1999 1999 ------------ ------------ 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) ======= =======
See accompanying notes to the unaudited consolidated condensed financial statements. -6- 8 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (in thousands - unaudited)
13-Week 13-Week period ended period ended December 31, January 1, 1999 1999 ------------ ------------ 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 ======= ========
See accompanying notes to the unaudited consolidated condensed financial statements. -7- 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:
(Dollars in thousands) December October 1, 31, 1999 1999 -------- ---------- 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 ======= =======
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- 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.
(Dollars in thousands) Satcom Three Months Ended VED's Equipment Other Total ------- --------- ------- ------- 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
A reconciliation of EBITDA from reportable segments to Loss before Taxes is as follows:
Three Months Ended ------------------------- (Dollars in thousands) December 31, January 1, 1999 1999 ------------ ---------- 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) ======= =======
-9- 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- 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- 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- 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- 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- 16 EXHIBIT INDEX
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 EXHIBIT 27.1
5 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. 0001000564 COMMUNICATIONS & POWER INDUSTRIES, INC. 1,000 3-MOS SEP-29-2000 OCT-02-1999 DEC-31-1999 3,758 0 40,922 0 55,481 108,109 74,583 0 224,342 81,982 117,606 25,188 1 0 (435) 224,342 54,990 54,990 42,838 42,838 1,923 0 4,550 (2,928) 195 (3,123) 0 0 0 (3,123) 0 0
EX-27.2 3 EXHIBIT 27.2
5 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. 0001000654 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION 1000 3-MOS SEP-29-2000 OCT-02-1999 DEC-31-1999 3,758 0 40,922 0 55,481 108,109 74,583 0 224,342 81,982 117,606 25,188 0 2 (17,662) 224,342 54,990 54,990 42,838 42,838 1,923 0 4,550 (2,928) 195 (3,123) 0 0 0 (3,123) 0 0
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