-----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, WKuvt7/1UeoY+8uSBOSOz3rCI+dsGzxuot3SZ3bTmyULlDQ4DOBF7CbkbQQg1aCT q+2luvEodcGbFQHSbNHyZg== 0000891618-98-002517.txt : 19980519 0000891618-98-002517.hdr.sgml : 19980519 ACCESSION NUMBER: 0000891618-98-002517 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980403 FILED AS OF DATE: 19980518 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: 98626982 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: 98626983 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 4/3/98 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 April 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 (Exact name of registrant as specified in its charter) 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 (Address, including zip code, and telephone number, number, including area code, of registrant's including area code, of registrant's principal executive offices) principal 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: 198,850 SHARES OF COMMON STOCK, $.01 PAR VALUE, AT APRIL 3, 1998. COMMUNICATIONS & POWER INDUSTRIES, INC.: 1 SHARE OF COMMON STOCK, $.01 PAR VALUE, AT APRIL 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, April 3, 1998 (unaudited) and October 3, 1997................................................................... 2 Consolidated Condensed Statements of Operations, 13-week period ended April 3, 1998 (unaudited) and 13-week period ended April 4, 1997 (unaudited)....................................................................... 3 Consolidated Condensed Statements of Operations, 26-week period ended April 3, 1998 (unaudited) and 27-week period ended April 4, 1997 (unaudited)....................................................................... 4 Consolidated Condensed Statements of Cash Flows, 26-week period ended April 3, 1998 (unaudited) and 27-week period ended April 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, April 3, 1998 (unaudited) and October 3, 1997................................................................... 7 Consolidated Condensed Statements of Operations, 13-week period ended April 3, 1998 (unaudited) and 13-week period ended April 4, 1997 (unaudited)....................................................................... 8 Consolidated Condensed Statements of Operations, 26-week period ended April 3, 1998 (unaudited) and 27-week period ended April 4, 1997 (unaudited)....................................................................... 9 Consolidated Condensed Statements of Cash Flows, 26-week period ended April 3, 1998 (unaudited) and 27-week period ended April 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) INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
April 3, October 3, 1998 1997 ASSETS (unaudited) (audited) ------------ ------------ CURRENT ASSETS Cash and cash equivalents $ 327 $ 2,027 Accounts receivable, net 47,730 52,326 Inventories 53,405 50,750 Deferred taxes 7,133 7,133 Other current assets 1,397 1,221 ------------ ------------ Total current assets 109,992 113,457 Property, plant, and equipment, net 78,562 79,994 Goodwill, net 23,858 24,144 Debt issue costs, net 7,077 7,893 Deferred taxes 11,916 11,908 Other assets 1,995 -- ------------ ------------ Total assets $ 233,400 $ 237,396 ============ ============ LIABILITIES, REDEEMABLE PREFERRED STOCK AND EQUITY CURRENT LIABILITIES Revolving credit facility $ 16,600 $ 22,800 Current portion of term loans 6,200 5,700 Current portion of capital leases 165 -- Accounts payable - trade 12,438 10,419 Accrued expenses 16,288 15,088 Product warranty 3,878 4,211 Income taxes payable 12,487 11,975 Advance payments from customers 1,444 2,797 ------------ ------------ Total current liabilities 69,500 72,990 Senior term loans 26,850 29,950 Senior subordinated notes 100,000 100,000 Obligations under capital leases 2,287 1,584 ------------ ------------ Total liabilities 198,637 204,524 ------------ ------------ SENIOR REDEEMABLE PREFERRED STOCK 19,075 17,566 ------------ ------------ Commitments and contingencies STOCKHOLDERS' EQUITY: Junior Preferred Stock 1 1 Common Stock -- -- Additional paid-in capital 33,002 32,143 Accumulated deficit (16,185) (15,738) Less stockholder loans (1,130) (1,100) ------------ ------------ Net stockholders' equity 15,688 15,306 ------------ ------------ Total liabilities, redeemable preferred stock and equity $ 233,400 $ 237,396 ============ ============
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)
13-Week 13-Week period ended period ended April 3, April 4, 1998 1997 ------------ ------------ Sales $ 68,802 $ 63,869 Cost of sales 50,754 46,096 ------------ ------------ Gross profit 18,048 17,773 ------------ ------------ Operating costs and expenses: Research and development 1,915 1,831 Marketing 4,626 5,250 General and administrative 4,163 2,885 ------------ ------------ Total operating costs and expenses 10,704 9,966 ------------ ------------ Operating income 7,344 7,807 Interest expense 4,467 4,722 ------------ ------------ Earnings before taxes 2,877 3,085 Income tax expense 1,079 195 ------------ ------------ Net earnings 1,798 2,890 Preferred dividends: Senior Redeemable Preferred Stock 713 621 Junior Preferred Stock 475 414 ------------ ------------ Earnings attributable to common stock $ 610 $ 1,855 ============ ============
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)
26-Week 27-Week period ended period ended April 3, April 4, 1998 1997 ------------ ------------ Sales $ 126,175 $ 119,191 Cost of sales 93,480 88,562 ------------ ------------ Gross profit 32,695 30,629 ------------ ------------ Operating costs and expenses: Research and development 3,719 3,724 Marketing 9,332 10,088 General and administrative 7,329 5,555 ------------ ------------ Total operating costs and expenses 20,380 19,367 ------------ ------------ Operating income 12,315 11,262 Interest expense 9,121 9,492 ------------ ------------ Earnings before taxes 3,194 1,770 Income tax expense 1,198 195 ------------ ------------ Net earnings 1,996 1,575 Preferred dividends: Senior Redeemable Preferred Stock 1,402 1,221 Junior Preferred Stock 934 814 ------------ ------------ Loss attributable to common stock $ (340) $ (460) ============ ============
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)
26-Week 27-Week period ended period ended April 3, April 4, 1998 1997 ------------ ------------ OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ 12,437 $ (347) ------------ ------------ INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment 29 -- Purchase of property, plant and equipment, net (2,561) (6,528) Product lines acquisitions (2,730) -- ------------ ------------ Net cash used in investing activities (5,262) (6,528) ------------ ------------ FINANCING ACTIVITIES Net (Repayments)/Proceeds from debt issue costs -- (192) Net (Repayments)/Proceeds from revolving credit facility (6,200) 9,600 Net (Repayments)/Proceeds from senior term loans (2,600) (2,900) Purchase of treasury stock (75) -- ------------ ------------ Net cash provided by (used in) financing activities (8,875) 6,508 ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (1,700) (367) Cash and cash equivalents at beginning of period 2,027 1,753 ============ ============ Cash and cash equivalents at end of period $ 327 $ 1,386 ============ ============
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") 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 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 a fair statement of the results 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 April 3, 1998, CPI paid preferred dividends on its Senior Redeemable Preferred Stock and its Junior Preferred Stock through the issuance of 7,128 additional shares of its Senior Redeemable Preferred Stock and 4,752 shares of its Junior Preferred Stock, respectively. During the first half ended April 3, 1998, the Company paid preferred dividends through the issuance of 14,015 shares of its Senior Redeemable Preferred Stock and 9,344 shares of its Junior Preferred Stock. -6- 8 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION and subsidiaries INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
April 3, October 3, 1998 1997 ASSETS (unaudited) (audited) ------------ ------------ CURRENT ASSETS Cash and cash equivalents $ 327 $ 2,027 Accounts receivable, net 47,730 52,326 Inventories 53,405 50,750 Deferred taxes 7,133 7,133 Other current assets 1,397 1,221 ------------ ------------ Total current assets 109,992 113,457 Property, plant, and equipment, net 78,562 79,994 Goodwill, net 23,858 24,144 Debt issue costs, net 7,077 7,893 Deferred taxes 11,916 11,908 Other assets 1,995 -- ------------ ------------ Total assets $ 233,400 $ 237,396 ============ ============ LIABILITIES, REDEEMABLE PREFERRED STOCK, PREFERRED STOCK OF SUBSIDIARY AND EQUITY CURRENT LIABILITIES Revolving credit facility $ 16,600 $ 22,800 Current Portion of term loans 6,200 5,700 Current Portion of capital leases 165 -- Accounts payable - trade 12,438 10,419 Accrued expenses 16,288 15,088 Product warranty 3,878 4,211 Income taxes payable 12,487 11,975 Advance payments from customers 1,444 2,797 ------------ Total current liabilities 69,500 72,990 Senior term loans 26,850 29,950 Senior subordinated notes 100,000 100,000 Obligations under capital leases 2,287 1,584 ------------ ------------ Total liabilities 198,637 204,524 ------------ ------------ SENIOR REDEEMABLE PREFERRED STOCK OF SUBSIDIARY 19,075 17,566 ------------ ------------ JUNIOR PREFERRED STOCK OF SUBSIDIARY 13,399 12,465 ------------ ------------ STOCKHOLDERS' EQUITY: Common Stock 2 2 Additional paid-in capital 19,602 19,677 Accumulated deficit (16,185) (15,738) Less stockholder loans (1,130) (1,100) ------------ ------------ Net stockholders' equity 2,289 2,841 ------------ ------------ Total liabilities, redeemable preferred stock, preferred stock of subsidiary and equity $ 233,400 $ 237,396 ============ ============
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)
13-Week 14-Week period ended period ended April 3, April 4, 1998 1997 ------------ ------------ Sales $ 68,802 $ 63,869 Cost of sales 50,754 46,096 ------------ ------------ Gross profit 18,048 17,773 ------------ ------------ Operating costs and expenses: Research and development 1,915 1,831 Marketing 4,626 5,250 General and administrative 4,163 2,885 ------------ ------------ Total operating costs and expenses 10,704 9,966 ------------ ------------ Operating income 7,344 7,807 Interest expense 4,467 4,722 ------------ ------------ Earnings before taxes 2,877 3,085 Income tax expense 1,079 195 ------------ ------------ Net earnings 1,798 2,890 Preferred dividends: Senior Redeemable Preferred Stock 713 621 Junior Preferred Stock 475 414 ------------ ------------ Earnings attributable to common stock $ 610 $ 1,855 ============ ============
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)
26-Week 27-Week period ended period ended April 3, April 4, 1998 1997 ------------ ------------ Sales $ 126,175 $ 119,191 Cost of sales 93,480 88,562 ------------ ------------ Gross profit 32,695 30,629 ------------ ------------ Operating costs and expenses: Research and development 3,719 3,724 Marketing 9,332 10,088 General and administrative 7,329 5,555 ------------ ------------ Total operating costs and expenses 20,380 19,367 ------------ ------------ Operating income 12,315 11,262 Interest expense 9,121 9,492 ------------ ------------ Earnings before taxes 3,194 1,770 Income tax expense 1,198 195 ------------ ------------ Net earnings 1,996 1,575 Preferred dividends: Senior Redeemable Preferred Stock 1,402 1,221 Junior Preferred Stock 934 814 ------------ ------------ Loss attributable to common stock $ (340) $ (460) ============ ============
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)
26-Week 27-Week period ended period ended April 3, April 4, 1998 1997 ------------ ------------ OPERATING ACTIVITIES Net cash provided by (used in) operating activities $ 12,437 $ (347) ------------ ------------ INVESTING ACTIVITIES Proceeds from sale of property, plant and equipment 29 -- Purchase of property, plant and equipment, net (2,561) (6,528) Product line acquisitions (2,730) -- ------------ ------------ Net cash used in investing activities (5,262) (6,528) ------------ ------------ FINANCING ACTIVITIES Net (Repayments)/Proceeds from debt issue costs -- (192) Net (Repayments)/Proceeds from revolving credit facility (6,200) 9,600 Net (Repayments)/Proceeds from senior term loans (2,600) (2,900) Purchase of treasury stock (75) -- ------------ ------------ Net cash provided by (used in) financing activities (8,875) 6,508 ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (1,700) (367) Cash and cash equivalents at beginning of period 2,027 1,753 ============ ============ Cash and cash equivalents at end of period $ 327 $ 1,386 ============ ============
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") 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 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 a fair statement of the results 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 April 3, 1998, CPI paid preferred dividends on its Senior Redeemable Preferred Stock and its Junior Preferred Stock through the issuance of 7,128 additional shares of its Senior Redeemable Preferred Stock and 4,752 shares of its Junior Preferred Stock, respectively. During the first half ended April 3, 1998, the Company paid preferred dividends through the issuance of 14,015 shares of its Senior Redeemable Preferred Stock and 9,344 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 second quarter of Fiscal 1998 were $81.6 million as compared to $75.5 million for the second quarter of Fiscal 1997, an increase of 8.2%. Orders during the first six months of Fiscal 1997 were $143.8 million, an increase of $2.0 million, or 1.4%, over 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 April 3, 1998, the Company had order backlog of $184.3 million, representing approximately eight months of sales, compared to order backlog of $173.2 million as of April 4, 1997. Sales for the second quarter of Fiscal 1998 were $68.8 million compared to $63.9 million for the same period in Fiscal 1997, an increase of 7.7% due primarily to increased demand for products used in radar applications. Sales for the first six months of Fiscal 1998 were $126.2 million compared to $119.2 million for the first six months of Fiscal 1997. This increase of $7.0 million for the first six months, or 5.9%, was, as mentioned above, primarily the result of increased demand for products used in the radar market, but also resulted from progress being made on a number of product development contracts and improved production uniformity since the first half of Fiscal 1998 was not disrupted by consolidation efforts that negatively impacted the first half of Fiscal 1997. In terms of markets, the sales increase for the first six months of Fiscal 1998 was reflected in higher sales to four of the Company's six markets, with a slight decline in sales of products to the industrial and scientific markets. In the communications market, sales were $58.1 million, or 46.0% of total sales, compared to $55.1 million, or 46.2% of total sales, in the first six months of Fiscal 1997. Communications sales were up by $3.0 million, or 5.4%, primarily due to demand for amplifier products in the area of satellite communications. Sales to the radar market, the Company's second largest market, were $40.7 million, or 32.2% of total sales, during the first six months of Fiscal 1998 compared to $38.1 million, or 32.0% of total sales, during the same period in Fiscal 1997. This increase of $2.6 million, or 6.7%, was the result of increased demand over the past eighteen months 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 $27.4 million, or 21.7% of total sales, in the first six months of Fiscal 1998 compared to $26.0 million, or 21.8% of total sales, in the first six months of Fiscal 1997. Gross profit was $18.0 million, or 26.2% of sales, in the second quarter of Fiscal 1998 compared to $17.8 million, or 27.8% of sales, in the second quarter of Fiscal 1997 as higher volume was offset by changes in product mix. Gross profit for the first six months of Fiscal 1998 was $32.7 million, or 25.9% of sales compared to $30.6 million, or 25.7% of sales, over the comparable period in Fiscal 1997. This increase of $2.1 million, or 6.7% was the result of additional sales volume and improvements from consolidation efforts partially offset by an increase in depreciation (approximately $.7 million, or 20%, higher in the first half of Fiscal 1998 than in the same time period in Fiscal 1997) and lower margins on several new product development contracts. -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) Operating costs and expenses were $10.7 million for the second quarter of Fiscal 1998, as compared to $10.0 million for the second quarter of Fiscal 1997. Although operating costs and expenses as a percentage of sales remained flat at 15.6% between the two time periods, the mix between marketing and general and administrative costs changed somewhat. During the second quarter of Fiscal 1998, marketing costs decreased $.6 million compared to the second quarter of Fiscal 1997 as the result of specific cost reduction efforts in both the Company's domestic and international field sales offices and the impact of favorable currency valuation rates in Europe. This was offset, however, by higher general and administrative costs of $1.3 million primarily related to recent product line acquisition activity, software upgrade costs that address Year 2000 compliance at the Company's Massachusetts facility and a $.4 million bad debt reserve established due to economic problems in Indonesia affecting the collectibility of a receivable from an Indonesian customer. Operating costs and expenses for the first six months of Fiscal 1998 were $20.4 million compared to $19.4 million for the first six months of Fiscal 1997 but, again, as a percentage of sales, both were consistent at 16.2%. During the first half of Fiscal 1998, lower marketing costs of $.8 million were offset by $1.8 million of higher general and administrative costs as a result of the second quarter issues mentioned above plus higher management incentive accruals due to improved year-to-date performance and 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 second quarter of Fiscal 1998 was $10.2 million, or 14.8% of sales, compared to $10.2 million, or 15.9% of sales, for the second quarter of Fiscal 1997. EBITDA for the first six months of Fiscal 1998 was $17.8 million, or 14.1% of sales, compared to $15.8 million, or 13.3% of sales, for the same time period in Fiscal 1997. This improvement was, as mentioned above, related to higher volume and efficiencies resulting from consolidation efforts. LIQUIDITY AND CAPITAL RESOURCES Cash flows provided by operating activities for the first six months of Fiscal 1998 were $12.4 million, an increase of $12.7 million from the $.3 million used by operating activities during the first six months of Fiscal 1997. The primary reasons for this increase in cash were improved earnings, decreased levels of current operating assets and increases to accounts payable and accrued expenses. In the first six months of Fiscal 1997, the timing of payments required for payroll, supplemental property taxes and interest payments consumed cash of $7.0 million compared to providing cash of $1.2 million in the first six months of Fiscal 1998. Inventory levels have also been more stable in the first half of Fiscal 1998 consuming only $2.3 million of cash, offset by a $2.0 million increase in accounts payable, compared to inventory changes in the first half of Fiscal 1997 that consumed $5.0 million of cash, only partially offset by a $1.1 million increase in accounts payable. Overall, operating activities funded $8.8 million of repayments against the Company's revolving credit facility and senior term loans during the first half 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 six months of Fiscal 1998, the Company invested $2.6 million in new capital equipment compared to $6.5 million spent in the first half of Fiscal 1997. This capital expenditure reduction of $3.9 million was anticipated by the Company and was primarily related to completing consolidation efforts in Fiscal 1997. Also during the first half of 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 six months of Fiscal 1998 included $.9 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 $11.9 million was available as of May 1, 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 April 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: May 13, 1998 By: /s/ Lynn E. Harvey --------------------------------------------------- Lynn E. Harvey Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) Date: May 13, 1998 -16- EX-27.1 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q COMMUNICATIONS & POWER INDUSTRIES, INC. FOR THE QUARTER ENDED APRIL 3, 1998 0001000564 COMMUNICATIONS & POWER INDUSTRIES, INC. 1,000 6-MOS OCT-02-1998 OCT-04-1997 APR-03-1998 327 0 47,730 0 53,405 109,992 78,562 0 233,400 69,500 129,137 19,075 1 0 15,687 233,400 126,175 126,175 93,480 93,480 3,719 0 9,121 3,194 1,198 1,996 0 0 0 1,996 0 0
EX-27.2 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION FOR THE QUARTER ENDED APRIL 3, 1998. 0001000654 COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION 1,000 6-MOS OCT-02-1998 OCT-04-1997 APR-03-1998 327 0 47,730 0 53,405 109,992 78,562 0 233,400 69,500 129,137 19,075 0 2 2,287 233,400 126,175 126,175 93,480 93,480 3,719 0 9,121 3,194 1,198 1,996 0 0 0 1,996 0 0
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