-----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, N5hoxIs5xHigGZ29rqi6TTgRzUlhINtg+/cSiVWkRBOsrYD0ep9RvTLLK03yb8A9 b/BhOprzAM9U5SVZL9wRLA== 0000891618-96-001663.txt : 19960814 0000891618-96-001663.hdr.sgml : 19960814 ACCESSION NUMBER: 0000891618-96-001663 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960628 FILED AS OF DATE: 19960812 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 033-96858 FILM NUMBER: 96609815 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 June 28, 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: 33-96858-01 ------------- 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: 33-96858-02 ------------- 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 HOLDING CORPORATION: 200,000 SHARES OF COMMON STOCK, $.01 PAR VALUE, AT MAY 1, 1996. COMMUNICATIONS & POWER INDUSTRIES, INC.: 1 SHARE OF COMMON STOCK, $.01 PAR VALUE, AT MAY 1, 1996. 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 AND POWER INDUSTRIES, INC. Consolidated Condensed Balance Sheets, June 28, 1996 (Unaudited) and September 29, 1995 .................................................... 2 Consolidated Condensed Statements of Operations, 13-week period ended June 28, 1996 (unaudited) and June 30, 1995 (unaudited) ............... 3 Consolidated Condensed Statements of Operations, 39-week period ended June 28, 1996 (unaudited) and June 30, 1995 (unaudited) ............... 4 Consolidated Condensed Statements of Cash Flows, 39-week period ended June 28,1996 (unaudited) and June 30, 1995 (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 AND POWER INDUSTRIES HOLDING CORPORATION Consolidated Condensed Balance Sheets, June 28, 1996 (Unaudited) and September 29, 1995 .................................................... 7 Consolidated Condensed Statements of Operations, 13-week period ended June 28, 1996 (unaudited) and June 30, 1995 (unaudited) ............... 8 Consolidated Condensed Statements of Operations, 39-week period ended June 28, 1996 (unaudited) and June 30, 1995 (unaudited) ............... 9 Consolidated Condensed Statements of Cash Flows, 39-week period ended June 28,1996 (unaudited) and June 30, 1995 (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 ..................................................... 15 SIGNATURES ................................................................. 16
-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)
June 28, September 29, ASSETS 1996 1995 --------- --------- CURRENT ASSETS Cash and cash equivalents $ 3,051 8,267 Accounts receivable, net 40,939 44,743 Inventories 51,538 44,765 Other current assets 4,469 2,566 --------- --------- Total current assets 99,997 100,341 Property, plant, and equipment, net 77,587 74,071 Goodwill, net 25,435 26,098 Other assets 10,287 14,392 --------- --------- Total assets $ 213,306 214,902 ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY (DEFICIT) CURRENT LIABILITIES Revolving credit facility $ 14,400 19,600 Accounts payable - trade 10,873 16,474 Accrued expenses 32,799 25,863 Current portion of term loans 3,200 3,200 --------- --------- Total current liabilities 61,272 65,137 Senior term loans 37,200 38,800 Senior subordinated notes 100,000 100,000 Deferred taxes 289 43 --------- --------- Total liabilities 198,761 203,980 --------- --------- SENIOR REDEEMABLE PREFERRED STOCK 14,189 12,460 --------- --------- Commitments and contingencies STOCKHOLDERS' EQUITY (DEFICIT): Junior Preferred Stock 1 1 Common Stock -- -- Additional paid-in capital 30,134 29,088 Accumulated deficit (28,804) (29,627) Less stockholder loans (975) (1,000) --------- --------- Net stockholders' equity (deficit) 356 (1,538) --------- --------- Total liabilities, redeemable preferred stock and equity (deficit) $ 213,306 214,902 ========= =========
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 June 28, June 30, 1996 1995 --------------- --------------- Sales $ 62,048 69,565 Cost of sales 46,027 52,108 -------- -------- Gross Profit 16,021 17,457 -------- -------- Operating costs and expenses: Research and development 2,281 2,367 Marketing 4,519 5,194 General and administrative 3,616 6,256 -------- -------- Total operating costs and expenses 10,416 13,817 -------- -------- Operating income 5,605 3,640 Interest expense 4,552 -- -------- -------- Earnings before taxes 1,053 3,640 Income tax expense 390 1,345 -------- -------- Net earnings (loss) 663 2,295 Preferred dividends: Senior Redeemable Preferred Stock 561 -- Junior Preferred Stock 374 -- -------- -------- Earnings attributable to common stock $ (272) 2,295 ======== ========
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 --------------- --------------- 39-Week 39-Week period ended period ended June 28, June 30, 1996 1995 --------------- --------------- Sales $188,148 192,304 Cost of sales 137,866 142,959 -------- -------- Gross Profit 50,282 49,345 -------- -------- Operating costs and expenses: Research and development 5,981 6,366 Marketing 14,252 14,834 General and administrative 10,163 16,500 -------- -------- Total operating costs and expenses 30,396 37,700 -------- -------- Operating income 19,886 11,645 Interest expense 14,172 -- -------- -------- Earnings before taxes 5,714 11,645 Income tax expense 2,115 4,309 -------- -------- Net earnings (loss) 3,599 7,336 Preferred dividends: Senior Redeemable Preferred Stock 1,568 -- Junior Preferred Stock 1,046 -- -------- -------- Earnings attributable to common stock $ 985 7,336 ======== ========
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 --------------- --------------- 39-Week 39-Week period ended period ended June 28, June 30, 1996 1995 --------------- --------------- OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ 10,334 12,044 -------- -------- INVESTING ACTIVITIES Purchase of property, plant and equipment, net (8,422) (4,679) (Increase) decrease in other non current assets (73) 742 -------- -------- Net cash used in investing activities (8,495) (3,937) -------- -------- FINANCING ACTIVITIES Repayment of intercompany funding to Varian -- (4,383) Debt issue costs (280) -- Proceeds from Stockholder loans 25 -- Borrowings (payments) on revolving credit facility, net (6,800) -- -------- -------- Net cash provided by (used in) financing activities (7,055) (4,383) -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,216) 3,724 Cash and cash equivalents at beginning of period 8,267 5,713 -------- -------- Cash and cash equivalents at end of period $ 3,051 9,437 ======== ========
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 Communications & Power Industries, Inc. ("CPI" 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 CPI'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, CPI'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 electronic devices, microwave amplifiers, modulators and various other power supply equipment and devices. On August 11, 1995, CPI acquired these assets from Varian (the "Acquisition") and was then merged with a wholly owned subsidiary of Communications & Power Industries Holding Corporation ("Holding", both CPI and Holding together referred to as "the Company"), 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 nine months of 1996 are not necessarily comparable to the operations of the corresponding period of the prior year. During the quarter ended June 28, 1996, CPI paid preferred dividends on its Senior Redeemable Preferred Stock and its Junior Preferred Stock through the issuance of 5,603 additional shares of its Senior Redeemable Preferred Stock and 3,735 shares of its Junior Preferred Stock, respectively. During the first half ended June 28, 1996, CPI paid preferred dividends through the issuance of 15,683 shares of its Senior Redeemable Preferred Stock and 10,455 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 HOLDING CORPORATION and subsidiaries INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands - unaudited)
June 28, September 29, ASSETS 1996 1995 ------ --------- --------- CURRENT ASSETS Cash and cash equivalents $ 3,051 8,267 Accounts receivable, net 40,939 44,743 Inventories 51,538 44,765 Other current assets 4,469 2,566 --------- --------- Total current assets 99,997 100,341 Property, plant, and equipment, net 77,587 74,071 Goodwill, net 25,435 26,098 Other assets 10,287 14,392 --------- --------- Total assets $ 213,306 214,902 ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK, PREFERRED STOCK OF SUBSIDIARY AND EQUITY (DEFICIT) - -------------------------------------------------- CURRENT LIABILITIES Revolving credit facility $ 14,400 19,600 Accounts payable - trade 10,873 16,474 Accrued expenses 32,799 25,863 Current portion of term loans 3,200 3,200 --------- --------- Total current liabilities 61,272 65,137 Senior term loans 37,200 38,800 Senior subordinated notes 100,000 100,000 Deferred taxes 289 43 --------- --------- Total liabilities 198,761 203,980 --------- --------- SENIOR REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 14,189 12,460 --------- --------- JUNIOR PREFERRED STOCK OF SUBSIDIARY 10,392 9,346 --------- --------- Commitments and contingencies STOCKHOLDERS' EQUITY (DEFICIT): Common Stock 2 2 Additional paid-in capital 19,741 19,741 Accumulated deficit (28,804) (29,627) Less stockholder loans (975) (1,000) --------- --------- Net stockholders' equity (deficit) (10,036) (10,884) --------- --------- Total liabilities, redeemable preferred stock, preferred stock of subsidiary and equity (deficit) $ 213,306 214,902 ========= =========
See accompanying notes to the unaudited interim condensed consolidated financial statements. -7- 9 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands - unaudited)
Successor Predecessor --------------- --------------- 13-Week 13-Week period ended period ended June 28, June 30, 1996 1995 --------------- --------------- Sales $ 62,048 69,565 Cost of sales 46,027 52,108 -------- -------- Gross Profit 16,021 17,457 -------- -------- Operating costs and expenses: Research and development 2,281 2,367 Marketing 4,519 5,194 General and administrative 3,616 6,256 -------- -------- Total operating costs and expenses 10,416 13,817 -------- -------- Operating income 5,605 3,640 Interest expense 4,552 -- -------- -------- Earnings before taxes 1,053 3,640 Income tax expense 390 1,345 -------- -------- Net earnings (loss) 663 2,295 Preferred dividends: Senior Redeemable Preferred Stock 561 -- Junior Preferred Stock 374 -- -------- -------- Earnings attributable to common stock $ (272) 2,295 ======== ========
See accompanying notes to the unaudited interim condensed consolidated financial statements. -8- 10 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands - unaudited)
Successor Predecessor --------------- --------------- 39-Week 39-Week period ended period ended June 28, June 30, 1996 1995 --------------- --------------- Sales $188,148 192,304 Cost of sales 137,866 142,959 -------- -------- Gross Profit 50,282 49,345 -------- -------- Operating costs and expenses: Research and development 5,981 6,366 Marketing 14,252 14,834 General and administrative 10,163 16,500 -------- -------- Total operating costs and expenses 30,396 37,700 -------- -------- Operating income 19,886 11,645 Interest expense 14,172 -- -------- -------- Earnings before taxes 5,714 11,645 Income tax expense 2,115 4,309 -------- -------- Net earnings (loss) 3,599 7,336 Preferred dividends: Senior Redeemable Preferred Stock 1,568 -- Junior Preferred Stock 1,046 -- -------- -------- Earnings attributable to common stock $ 985 7,336 ======== ========
See accompanying notes to the unaudited interim condensed consolidated financial statements. -9- 11 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries STATEMENTS OF CASH FLOWS (in thousands - unaudited)
Successor Predecessor --------------- --------------- 39-Week 39-Week period ended period ended June 28, June 30, 1996 1995 --------------- --------------- OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ 10,334 12,044 -------- -------- INVESTING ACTIVITIES Purchase of property, plant and equipment, net (8,422) (4,679) (Increase) decrease in other non current assets (73) 742 -------- -------- Net cash used in investing activities (8,495) (3,937) -------- -------- FINANCING ACTIVITIES Repayment of intercompany funding to Varian -- (4,383) Debt issue costs (280) -- Proceeds from Stockholder loans 25 -- Borrowings (payments) on revolving credit facility, net (6,800) -- -------- -------- Net cash provided by (used in) financing activities (7,055) (4,383) -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,216) 3,724 Cash and cash equivalents at beginning of period 8,267 5,713 -------- -------- Cash and cash equivalents at end of period $ 3,051 9,437 ======== ========
See accompanying notes to the unaudited interim condensed consolidated financial statements. -10- 12 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The accompanying unaudited interim condensed consolidated financial statements of Communications & Power Industries Holding Corporation ("Holding" 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 Holding'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, Communications & Power Industries, Inc.'s ("CPI", both CPI and Holding together referred to as "the Company") 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 electronic devices, microwave amplifiers, modulators and various other power supply equipment and devices. On August 11, 1995, Holding's subsidiary, "CPI", acquired these assets from Varian (the "Acquisition") and was then merged with a wholly owned subsidiary of Holding, 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 nine months of 1996 are not necessarily comparable to the operations of the corresponding period of the prior year. During the quarter ended June 28, 1996, CPI paid preferred dividends on its Senior Redeemable Preferred Stock and its Junior Preferred Stock through the issuance of 5,603 additional shares of its Senior Redeemable Preferred Stock and 3,735 shares of its Junior Preferred Stock, respectively. During the first half ended June 28, 1996, CPI paid preferred dividends through the issuance of 15,683 shares of its Senior Redeemable Preferred Stock and 10,455 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. -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 Sales for the third quarter of Fiscal 1996 were $62.0 million, a decrease of $7.6 million, or 10.8%, from the third quarter of Fiscal 1995. Sales for the first nine months of 1996 were $188.1 million, a decrease of $4.2 million, or 2.2% below the comparable period in the prior fiscal year. Sales for the quarter and the first nine months were affected by short term delays in shipping new products, consolidation efforts between the Company's facilities in Salt Lake City, Utah and San Carlos, California as well as several non-production issues including paperwork delays and customer-requested rescheduling of delivery. In terms of markets, the sales decline for the first nine months was primarily due to lower sales in electronic countermeasures, radar, and scientific markets partially offset by higher industrial and medical sales. Communications sales remained relatively flat compared to the same time period in the prior fiscal year due to the delays in shipping new products as well as delays due to San Carlos consolidation efforts. Electronic countermeasure sales, also impacted by several short term delays, decreased $2.5 million, or 16.7%. Radar sales decreased $2.3 million, or 4.0% primarily due to U.S. Government budgetary constraints. Scientific sales decreased $1.5 million or 34.1% due to a slow down in development programs from the U.S. Department of Energy. Industrial sales increased approximately $1.5 million, or 8.8% as a result of the new applications for microwave amplifiers and increased marketing efforts for power grid vacuum electronic devices. Medical sales increased slightly by $.3 million or 2.5%. Incoming orders during the third quarter of Fiscal 1996 were $61.5 million as compared to $63.3 for the third quarter of Fiscal 1995, a decrease of 2.9%. Orders during the first nine months of Fiscal 1996 were $198.3 million as compared to $190.4 million over the comparable period in the prior fiscal year, a growth rate of 4.1%. However, as shown by the third quarter of Fiscal 1996, 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 these orders will be recognized as sales. Gross profit decreased from $17.5 million in the third quarter of Fiscal 1995 to $16.0 million in the third quarter of Fiscal 1996, principally related to lower sales volume. Lower depreciation expense of approximately $1.8 million in Fiscal 1996, recorded in connection with the Acquisition, was partially offset by increased cost of sales related to the Company's consolidation efforts. Gross profit increased from $49.3 million, or 25.7% of sales, in the first nine months of Fiscal 1995 to $50.3 million, or 26.7% of sales, in the first nine months of Fiscal 1996 as a result of a $4.1 million reduction in depreciation expense partially offset by a $1.7 million charge to cost of sales related to the write-up of inventory (both recorded in connection with the Acquisition) and lower sales volume. -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) Research and development expenses decreased by $.1 million and $.4 million for the 13-week period and 39-week period ended June 28, 1996, respectively, as compared to the same time periods ended June 30, 1995. As a percent of sales, these expenses have remained relatively stable from 3.3% in the first nine months of Fiscal 1995 to 3.2% in the first nine months 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 percent of sales were 13.1% and 13.0% for the 13-week and 39-week periods ended June 28, 1996, respectively, as compared to 16.5% and 16.3% for the 13-week and 39-week periods ended June 30, 1995, respectively. 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 nine months of Fiscal 1995. Operating income was $5.6 million (9.0% of sales) for the third quarter of Fiscal 1996, as compared to $3.6 million (5.2% of sales) for the third quarter of Fiscal 1995, a 54% improvement. Operating income was $19.9 million (10.6% of sales) for the first nine months of Fiscal 1996, as compared to $11.6 million (6.1% of sales) for the first nine months of Fiscal 1995, a 71% 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 went from $9.6 million in the first nine months of Fiscal 1995 to $5.7 million in the first nine months of Fiscal 1996. Earnings before interest, income taxes, depreciation and amortization ("EBITDA") for the third quarter of Fiscal 1996 was $7.6 million, compared to $6.9 million for the third quarter of 1995. EBITDA for the first nine months of Fiscal 1996 was $27.3 million (excluding the $1.7 million charge for the write-up of inventory), compared to $21.3 million for the first nine months of 1995. Earnings before taxes amounted to $1.0 million and $5.7 million for the 13-week and 39-week periods ended June 28, 1996, respectively, as compared to $3.6 million and $11.6 million for the same time periods ended June 30, 1995. The decrease of $2.6 million, or 71.1%, for the third quarter and the decrease of $5.9 million, or 50.9%, for the first nine months was due to the incurrence of $4.6 million and $14.2 million, respectively, of interest expense ($4.1 million and $12.7 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 nine months of Fiscal 1996 were $10.3 million, a decrease of $1.7 million from the $12.0 million provided by operating activities during the first nine months of Fiscal 1995. The primary reason for the decrease in cash provided was lower net earnings driven by higher interest expense along with higher inventories which were partially offset by accounts receivable collections and advance payments from customers. Operating activities funded $6.8 million of paydowns during the first nine months against CPI's revolving credit facility. -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 flow from investing activities was comprised principally of capital expenditures for property and equipment, which amounted to $8.4 million for the first nine months of Fiscal 1996 as compared to $4.7 million for the first half of Fiscal 1995. The $3.7 million increase was substantially attributable to the Company's consolidation efforts. As of June 28, 1996, the Company had working capital of approximately $38.7 million, an increase of $3.5 million, or 10%, from September 29, 1995. The increase of working capital was substantially attributable to a lower balance on the CPI'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 $16.9 million was available as of July 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. -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. No reports were filed on Form 8-K during the quarter ended June 28, 1996. -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 6, 1996 By: /s/ Lynn E. Harvey --------------------------------------------------- Lynn E. Harvey Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) Date: August 6, 1996 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) INTERIM CONDENSED CONSOLIDATED BALANCE SHEET & STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10Q - COMMUNICATIONS & POWER INDUSTRIES, INC. FOR QUARTER ENDED JUNE 28, 1996. 0001000564 COMMUNICATIONS & POWER INDUSTRIES, INC. 1,000 9-MOS SEP-27-1996 SEP-30-1995 JUN-28-1996 3,051 0 40,939 0 51,538 99,997 77,587 0 213,306 61,272 137,200 14,189 1 0 355 213,306 188,148 188,148 137,866 137,866 0 0 14,172 5,714 2,115 3,599 0 0 0 3,599 0 0
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