10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended January 3, 2003
	or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                           to

Commission file number:  33-96858-01	Commission file number:  33-96858
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION	COMMUNICATIONS & POWER INDUSTRIES, INC
(Exact Name of Registrant as Specified in Its Charter)	(Exact Name of Registrant as Specified in Its Charter)
Delaware (State or Other Jurisdiction of Incorporation or Organization)	Delaware (State or Other Jurisdiction of Incorporation or Organization)
77-0407395 (I.R.S. Employer Identification No.)	77-0405693 (I.R.S. Employer Identification No.)
811 Hansen Way Palo Alto, California 94303-1110 (650) 846-2900 (Address of Principal Executive Offices and Telephone Number, Including Area Code)	811 Hansen Way Palo Alto, California 94303-1110 (650) 846-2900 (Address of Principal Executive Offices and Telephone Number, Including Area Code)

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 o .

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: 4,908,172 shares of Common Stock, $.01 par value, at February 3, 2003. Communications & Power Industries, Inc.: 1 share of Common Stock, $.01 par value, at February 3, 2003.

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
	ITEM 1: CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
		CONSOLIDATED CONDENSED BALANCE SHEETS
		CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
		CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
		CONSOLIDATED CONDENSED BALANCE SHEETS
		CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
		CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED                      CONDENSED FINANCIAL STATEMENTS
	ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4: CONTROLS AND PROCEDURES
PART II: OTHER INFORMATION
SIGNATURES AND CERTIFICATION
EXHIBIT INDEX
EXHIBIT 10.1
EXHIBIT 99.1
EXHIBIT 99.2
EXHIBIT 99.3
EXHIBIT 99.4

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
	COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
		Consolidated Condensed Balance Sheets, January 3, 2003 and September 27, 2002	2
		Consolidated Condensed Statements of Operations for the 14-week period ended January 3, 2003 and the 13-week period ended December 28, 2001	3
		Consolidated Condensed Statements of Cash Flows for the 14-week period ended January 3, 2003 and the 13-week period ended December 28, 2001	4
		Notes to Consolidated Condensed Financial Statements	8
	COMMUNICATIONS & POWER INDUSTRIES, INC.
		Consolidated Condensed Balance Sheets, January 3, 2003 and September 27, 2002	5
		Consolidated Condensed Statements of Operations for the 14-week period ended January 3, 2003 and the 13-week period ended December 28, 2001	6
		Consolidated Condensed Statements of Cash Flows for the 14-week period ended January 3, 2003 and the 13-week period ended December 28, 2001	7
		Notes to Consolidated Condensed Financial Statements	8
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			13
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			19
ITEM 4: CONTROLS AND PROCEDURES			20
PART II: OTHER INFORMATION			21
SIGNATURES AND CERTIFICATIONS			22

-1-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)

		January 3,			September 27,
		2003			2002
ASSETS
Current Assets
	Cash and cash equivalents	$	12,925			2,724
	Accounts receivable, net		31,122			29,937
	Inventories		35,818			39,927
	Other current assets		3,580			2,637
Total current assets			83,445			75,225
Property, plant, and equipment, net			54,567			55,846
Goodwill			19,149			19,149
Intangibles, net			1,425			1,613
Debt issue costs, net			3,246			3,329
Total assets		$	161,832			155,162
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current Liabilities			1
	Current portion of capital leases	$	18			45
	Mortgage financing		17,500			17,750
	Accounts payable		10,665			14,111
	Accrued expenses		19,147			17,304
	Product warranty		5,081			4,823
	Income taxes payable		4,363			2,959
	Accrued dividends payable		10,940			9,538
	Advance payments from customers		11,955			7,594
Total current liabilities			79,669			74,124
Senior subordinated notes			100,000			100,000
Total liabilities			179,669			174,124
Senior Redeemable Preferred Stock of CPI			28,747			28,693
Junior Preferred Stock of CPI			26,363			25,449
Commitments and contingencies
Stockholders’ Deficit
	Common stock		49			49
	Additional paid-in capital		19,111			19,111
	Accumulated deficit		(90,875	)		(91,041	)
	Stockholder loans		(1,232	)		(1,223	)
Net stockholders’ deficit			(72,947	)		(73,104	)
Total liabilities, preferred stock and stockholders’ deficit		$	161,832			155,162

See accompanying notes to the unaudited consolidated condensed financial statements.

-2-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands — unaudited)

		14-Week			13-Week
		period ended			period ended
		January 3,			December 28,
		2003			2001
Sales		$	61,626			66,228
Cost of sales			44,936			52,069
Gross profit			16,690			14,159
Operating costs and expenses:
	Research and development		1,445			1,255
	Selling and marketing		3,924			3,946
	General and administrative		3,878			4,587
Total operating costs and expenses			9,247			9,788
Operating income			7,443			4,371
Other income			267			—
Interest expense			(3,670	)		(4,725	)
Income (loss) before taxes			4,040			(354	)
Income tax expense			1,504			680
Net income (loss)			2,536			(1,034	)
Preferred dividends:
	Senior redeemable preferred stock		1,402			1,194
	Junior preferred stock		914			796
Net income (loss) attributable to common stock		$	220			(3,024	)

See accompanying notes to the unaudited consolidated condensed financial statements.

-3-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(in thousands — unaudited)

		14-Week			13-Week
		period ended			period ended
		January 3,			December 28,
		2003			2001
OPERATING ACTIVITIES
	Net cash provided by operating activities	$	10,995			9,815
INVESTING ACTIVITIES
	Purchase of property, plant and equipment, net		(263	)		(664	)
	Net cash used in investing activities		(263	)		(664	)
FINANCING ACTIVITIES
	Repayments on capital leases		(27	)		(257	)
	Payment of debt issue costs		(254	)		—
	Repayment of revolving credit facility		—			(8,307	)
	Repayment of mortgage financing		(250	)		—
	Net cash used in financing activities		(531	)		(8,564	)
NET INCREASE IN CASH AND CASH EQUIVLENTS			10,201			587
Cash and cash equivalents at beginning of period			2,724			2,903
Cash and cash equivalents at end of period		$	12,925			3,490

See accompanying notes to the unaudited consolidated condensed financial statements.

-4-

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)

		January 3,			September 27,
		2003			2002
ASSETS
Current Assets
	Cash and cash equivalents	$	12,925			2,724
	Accounts receivable, net		31,122			29,937
	Inventories		35,818			39,927
	Other current assets		3,580			2,637
Total current assets			83,445			75,225
Property, plant, and equipment, net			41,359			42,478
Goodwill			19,149			19,149
Intangibles, net			1,425			1,613
Debt issue costs, net			3,203			3,259
Note receivable from parent			5,750			5,750
Total assets		$	154,331			147,474
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current Liabilities
	Current portion of capital leases	$	18			45
	Accounts payable		10,665			14,111
	Accrued expenses		19,997			18,313
	Product warranty		5,081			4,823
	Income taxes payable		4,445			2,964
	Accrued dividends payable		10,940			9,538
	Advance payments from customers		11,955			7,594
Total current liabilities			63,101			57,388
Senior subordinated notes			100,000			100,000
Deferred income on sale-leaseback			7,205			7,311
Total liabilities			170,306			164,699
Senior Redeemable Preferred Stock			28,747			28,693
Commitments and contingencies
Stockholders’ Deficit:
	Junior preferred stock		2			2
	Common stock		—			—
	Additional paid-in capital		45,522			44,608
	Accumulated deficit		(89,014	)		(89,305	)
	Stockholder loans		(1,232	)		(1,223	)
Net stockholders’ deficit			(44,722	)		(45,918	)
Total liabilities, senior redeemable preferred stock and stockholders’ deficit		$	154,331			147,474

See accompanying notes to the unaudited consolidated condensed financial statements.

-5-

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands — unaudited)

		14-Week			13-Week
		period ended			period ended
		January 3,			December 28,
		2003			2001
Sales		$	61,626			66,228
Cost of sales			44,936			52,069
Gross profit			16,690			14,159
Operating costs and expenses:
	Research and development		1,445			1,255
	Selling and marketing		3,924			3,946
	General and administrative		4,222			4,933
Total operating costs and expenses			9,591			10,134
Operating income			7,099			4,025
Other income			267			—
Interest expense			(3,124	)		(4,197	)
Income (loss) before taxes			4,242			(172	)
Income tax expense			1,581			510
Net income (loss)			2,661			(682	)
Preferred dividends:
	Senior redeemable preferred stock		1,402			1,194
	Junior preferred stock		914			796
Net income (loss) attributable to common stock		$	345			(2,672	)

See accompanying notes to the unaudited consolidated condensed financial statements.

-6-

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS
(in thousands — unaudited)

		14-Week			13-Week
		period ended			period ended
		January 3,			December 28,
		2003			2001
OPERATING ACTIVITIES
	Net cash provided by operating activities	$	10,745			9,815
INVESTING ACTIVITIES
	Purchase of property, plant and equipment, net		(263	)		(664	)
	Net cash used in investing activities		(263	)		(664	)
FINANCING ACTIVITIES
	Repayments on capital leases		(27	)		(257	)
	Payment of debt issue costs		(254	)		—
	Repayments on revolving credit facility		—			(8,307	)
	Net cash used in financing activities		(281	)		(8,564	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			10,201			587
Cash and cash equivalents at beginning of period			2,724			2,903
Cash and cash equivalents at end of period		$	12,925			3,490

See accompanying notes to the unaudited consolidated condensed financial statements.

-7-

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 Holding Corporation (“Holding”) and Communications & Power Industries, Inc. (“CPI”, 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 Annual Report on Form 10-K for the year ended September 27, 2002. 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 2003.

2. Inventories

Inventories are stated at the lower of average cost or market (net realizable value). The main components of inventories are as follows:

		January 3,		September 27,
(In thousands)		2003		2002
Raw materials and parts		$	28,805		30,638
Work in process			4,342		6,507
Finished goods			2,671		2,782
	Total inventories	$	35,818		39,927

3. Supplemental Cash Flow Information

	Holding				CPI
	14-Week Period		13-Week Period		14-Week Period		13-Week Period
	Ended January 3,		Ended December 28,		Ended January 3,		Ended December 28,
(In millions)	2003		2001		2003		2001
Cash Payments
Interest payments	$	0.5	$	1.2	$	0.1	$	0.9
Tax payments	$	0.0	$	0.2	$	0.0	$	0.2
Non-cash Financing
Unpaid cash dividends on senior preferred stock	$	1.4	$	1.2	$	1.4	$	1.2

-8-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

4. Segments and Related Information

The Company has two reportable segments: vacuum electronic devices (“VEDs”) and satcom equipment. Management evaluates performance and allocates resources based on 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 was sold in September 2002, and did not meet the quantitative thresholds to be reported separately, and certain unallocated corporate-level operating expenses. Intersegment product transfers are recorded at cost.

			Satcom
(In thousands)	VED's		Equipment		Other			Total
For the 14-Week Period Ended January 3, 2003:
Revenues from external customers	$	50,956		10,586		84			61,626
Intersegment product transfers		2,207		—		—			2,207
EBITDA — Holding		9,608		1,298		(1,479	)		9,427
EBITDA — CPI		9,608		1,298		(1,983	)		8,923
For the 13-Week Period Ended December 28, 2001:
Revenues from external customers	$	51,329		15,861		(962	)		66,228
Intersegment product transfers		2,259		—		76			2,335
EBITDA — Holding		8,073		281		(889	)		7,465
EBITDA — CPI		8,073		281		(1,398	)		6,956

A reconciliation of EBITDA from reportable segments to Income (loss) before taxes is as follows:

	Holding					CPI
	14-Week Period		13-Week Period			14-Week Period		13-Week Period
	Ended January 3,		Ended December 28,			Ended January 3,		Ended December 28,
(In thousands)	2003		2001			2003		2001
Segment EBITDA	$	9,427		7,465		$	8,923		6,956
Less:
Depreciation and amortization		1,717		3,094			1,557		2,931
Interest expense		3,670		4,725			3,124		4,197
Income (loss) before taxes	$	4,040		(354	)	$	4,242		(172	)

-9-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

Sales by geographic area to unaffiliated customers (based on the location of customer) are as follows:

	14-Week		13-Week
	Period Ended		Period Ended
(In thousands)	January 3,		December 28,
	2003		2001
United States	$	38,036		49,817
All foreign countries		23,590		16,411
Total Sales	$	61,626		66,228

CPI has a single customer that accounts for 10% or more of consolidated sales. Sales to this customer were $11.5 million and $10.0 million of the Company’s consolidated sales for the 14-week period ended January 3, 2003 and the 13-week period ended December 28, 2001, respectively. A substantial majority of these sales were VED segment products, but this customer also purchased satcom equipment products.

5. Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations”, in August 2001, and SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets”, in October 2001. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002 and requires that the fair value of an asset retirement obligation be recorded as a liability in the period in which it incurs the obligation. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. It provides a single accounting model for long-lived assets to be disposed of and replaces SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of.” The Company adopted these Statements on September 28, 2002. The adoption did not have a material impact on the Company’s consolidated financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” This Statement rescinds SFAS Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment of that Statement, SFAS Statement No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” This Statement amends SFAS Statement No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of SFAS No. 145 are effective in fiscal years beginning after May 15, 2002, with early adoption permitted and, in general, are to be applied prospectively. The Company adopted this Statement on September 28, 2002. The adoption did not have a material impact on the Company’s consolidated financial position or results of operations.

-10-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit and Disposal Activities.” SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. The provisions of SFAS No. 146 are effective prospectively for exit or disposal activities initiated after December 31, 2002. The Company does not expect the adoption of this statement to have a material effect on the Company’s consolidated financial position or results of operations.

In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of SFAS 123.” SFAS 148 provides additional transition guidance for those entities that elect to voluntarily adopt the accounting provisions of SFAS 123, “Accounting for Stock-Based Compensation.” Since the Company intends to continue to apply the intrinsic value method of accounting for stock-based compensation, the adoption of SFAS 148 will not have an effect on its financial condition or results of operations. However, the Company will provide the additional disclosures required by SFAS 148 beginning in the second quarter of fiscal year 2003.

6. Goodwill and Other Intangible Assets

In June 2001, the FASB issued SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 141 also specifies the criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be reviewed for impairment annually or more frequently if certain indicators arise. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated lives and be reviewed for impairment. The Company adopted the provisions of SFAS No. 141 and SFAS No. 142 and ceased amortization of its goodwill, beginning in fiscal year 2003.

Upon adoption of SFAS No. 142, the Company performed a transitional goodwill impairment evaluation to assess whether goodwill was impaired as of the date of adoption. Based on the results of the first step of the transitional goodwill impairment test it was determined that no potential impairment exists. As a result, the Company has recognized no transitional impairment loss in connection with the adoption of SFAS No. 142. Also upon adoption of SFAS No. 142, as required by SFAS No. 141, the Company reassessed the useful lives and residual values of all intangible assets acquired in purchase business combinations, and no significant changes were deemed necessary.

Goodwill

As of January 3, 2003 and September 27, 2002, the Company had $19.1 million of goodwill, $13.4 million of which has been allocated to the VED segment and $5.7 million of which has been allocated to the satcom equipment segment. There were no changes in the carrying amount of goodwill for the quarter ended January 3, 2003.

-11-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

The following table presents the impact of adopting SFAS No. 142 on net income (loss) had the standard been in effect for the comparable period of fiscal year 2002.

	Holding					CPI
	14-Week Period		13-Week Period			14-Week Period		13-Week Period
	Ended January 3,		Ended December 28,			Ended January 3,		Ended December 28,
(In thousands)	2003		2001			2003		2001
Net income (loss) as reported	$	2,536		(1,034	)	$	2,661		(682	)
Adjustments:
Goodwill amortization, net of tax		—		321			—		321
Adjusted net income (loss)	$	2,536		(713	)	$	2,661		(361	)

Intangible Assets

As of January 3, 2003 and September 27, 2002, the Company had $1.9 million of intangible assets at cost, with accumulated amortization of $0.5 million and $0.3 million, respectively. Amortization of intangible assets for the fiscal quarters ended January 3, 2003 and December 28, 2001 was approximately $0.2 million and $0.1 million, respectively. Amortization expense for these intangible assets is projected to be approximately $0.4 million per year through fiscal year 2006.

7. Amendment to Credit Facility

In December 2002, the Company amended its credit facility to increase the maximum amount of its revolving credit line by $20.0 million (the amount of a prepaid term loan formerly outstanding under the same credit facility) from $41.0 million to $61.0 million and to extend the expiration date from December 22, 2004 to May 31, 2005. The credit facility continues to be secured by substantially all of the assets of CPI and guaranteed by Holding and all of CPI’s subsidiaries. Availability under the revolving credit facility continues to be based upon eligible receivables, machinery and equipment and certain real estate.

-12-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statements Regarding Forward-Looking Statements

This document contains forward-looking statements that relate to future events or the Company’s future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “except,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. All written and oral forward-looking statements made in connection with this report which are attributable to the Company or persons acting on the Company’s behalf are expressly qualified in their entirety by the “risk factors” and other cautionary statements included herein. The Company is under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in the Company’s expectations.

The information in this report is not a complete description of the Company’s business or the risks associated with an investment in the Company’s securities. We urge you to carefully review and consider the various disclosures made by the Company in this report and in the Company’s other reports filed with the SEC.

Overview

The following discussion reflects the condensed consolidated results of Holding, which are materially consistent with those of CPI except as identified below and should be read in conjunction with the condensed consolidated financial statements and notes thereto:

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 five 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. Segment data is included in Note 4 of the Notes to Consolidated Condensed Financial Statements.

The Company’s fiscal years are the 52- or 53-week periods which end on the Friday nearest September 30. Fiscal year 2003 will be comprised of the 53-week period ended October 3, 2003, and fiscal year

-13-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

2002 was comprised of the 52-week period ended September 27, 2002. The first quarter of fiscal year2003 was comprised of 14 weeks, whereas the first quarter of fiscal year 2002 was comprised of 13 weeks.

Orders during the first quarter of fiscal year 2003 were $75.3 million, as compared to $71.4 million for the first quarter of fiscal year 2002. This increase of $3.9 million for the quarter reflects a higher demand for products in the communications, electronic countermeasures and medical markets, offset somewhat by decreases in orders for the Company’s remaining three markets. This quarter’s communication orders demonstrated the first quarter-on-quarter increase in over a year. The increase of $3.1 million or 15.4% from the first quarter of fiscal year 2002 is due primarily to the receipt of a large order from a direct-to-home service supplier. The increase in communication orders is not expected to be sustained in the upcoming quarters as the Company believes that communication companies are continuing to maintain their capital spending at the moderate rates we have seen in the last several quarters. Electronic countermeasures orders for the first quarter of fiscal year 2003 were $11.5 million, an increase of $9.4 million from the first quarter of fiscal year 2002. The increase is due primarily to timing of order releases from quarter to quarter by OEM’s and government logistics agencies, and annual orders in this market are expected to be consistent with fiscal year 2002 levels. Medical orders increased by $1.6 million to $7.3 million in the first quarter of fiscal year 2003 as compared to the first quarter of fiscal year 2002. Radar, industrial and scientific orders decreased by $2.1 million, $2.8 million and $5.3 million, respectively, from the first quarter of 2002 to the first quarter of 2003 due principally to fluctuations in the timing of order receipts, with several significant orders received in the first quarter of fiscal year 2002 which were not repeated in the first quarter of 2003. 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 January 3, 2003, the Company had an order backlog of $159.0 million, representing approximately eight months of sales, compared to an order backlog of $157.0 million, or approximately seven-and-a-half months of sales, as of December 28, 2001. Order backlog increased during the first quarter of fiscal year 2003 by $13.9 million from $145.1 million at the end of fiscal year 2002.

Critical Accounting Policies

Management is required to make judgments, assumptions and estimates in preparing its financial statements and related disclosures in conformity with accounting principles generally accepted in the United States. The Company’s significant accounting policies are described in Note 2 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the fiscal year ended September 27, 2002. The following critical accounting policies are those policies that management believes affect its more significant estimates and assumptions used in preparation of its consolidated financial statements.

Revenue Recognition

The estimated sales values of performance under certain contracts to commercial customers and U. S. Government fixed-price and fixed-price incentive contracts are recognized under the percentage of completion method of accounting. When applying the percentage of completion

-14-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

method, the Company relies on estimates of total expected contract revenue and costs. Recognized revenues and profit are subject to revisions as the contract progresses towards completion. Revisions in profit estimates are charged to income in the period in which they become determinable. Sales under cost-reimbursement contracts, primarily research and development contracts, are recorded as costs are incurred and include estimated earned fees in the proportion that costs incurred to date bear to total estimated costs. The fees under certain U.S. Government contracts may be increased or decreased in accordance with cost or performance incentive provisions which measure actual performance against established targets or other criteria. Such incentive fee awards or penalties are included in revenue at the time the amounts can be reasonably determined.

Allowance for Doubtful Accounts

The Company monitors the creditworthiness of its customers based on a variety of factors including the length of time the receivables are past due, the financial health of the customer, economic conditions and historical experience. If collectibility is considered uncertain, then the Company will record a reserve to reduce the receivable to the amount considered collectable. If circumstances change, then further adjustments could be required.

Warranty Reserves

The Company’s products are generally subject to warranties, and the Company provides for the estimated future costs of repair, replacement or customer accommodation at the time of sale as an additional cost of product. Management’s estimates are based on historical costs for warranty, and are adjusted when circumstances indicate that future costs are expected to vary from historical levels. If actual product failure rates or material usage incurred differs from the Company’s estimates, then revisions to the estimated warranty liability would be required.

Inventory Valuation

Inventories are stated at the lower of average cost or market (net realizable value). The carrying value of inventory is reduced for estimated obsolescence or unmarketability based upon assumptions about future demand, market conditions, product lifecycles and product pricing. If the Company’s assumptions were to be substantially different than estimated, further adjustments could be required. While these estimates require management to make assumptions and judgments, management believes its understanding of the markets and customers the Company serves, as well as the mature nature of many of the products the Company manufactures, provides it with the ability to make reliable estimates. Management also evaluates the carrying value of inventory for lower of cost or market on an individual product or contract basis. Analyses are performed based on the estimated costs at completion and if necessary, a provision is recorded to properly reflect the inventory value of the products or contracts at the lower of cost or net realizable value (selling price less estimated cost of disposal). If actual contract costs were to be substantially higher than estimated, further provisions could be required.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, excluding intangible assets which are covered by SFAS 142, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying

-15-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

amount to future net cash flows expected to be generated from the operation and sale of long-lived assets. If such assets are considered to be impaired, the Company’s carrying value is reduced to its estimated fair value. Adverse changes in the customers and markets served by the Company could result in future impairments of long-lived assets.

Goodwill Impairment

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. The Company performed a goodwill impairment test in the first quarter of fiscal year 2003, upon adoption of SFAS No. 142. The Company plans to perform another goodwill impairment test during the fourth quarter of the 2003 fiscal year, or earlier if an event or circumstance indicates that an impairment loss has occurred. Goodwill and certain other corporate assets and liabilities are assigned to the reporting units which are consistent with the Company’s operating divisions. The fair value of the reporting units are then compared to the carrying value to determine if there is any potential impairment. The process of evaluating potential impairment is subjective and requires judgements regarding revenue forecasts, discount rates, and weighted average cost of capital among other things. Adverse changes in the industries served by the Company, customer demand or other market conditions could result in future impairments of goodwill.

Results of Operations

Sales. Sales for the first quarter of fiscal year 2003 were $61.6 million, a decrease of $4.6 million, or 6.9%, from the same period in fiscal year 2002. This decrease is attributable to the fact that sales in the communications market for the first quarter of fiscal year 2002 included the final units of the XM Radio project, which contributed sales of approximately $5.0 million.

Gross Margin. Gross margins for the first quarter of fiscal year 2003 were 27.1%, an increase of 5.7% from the first quarter of fiscal year 2002. The increase is attributable to a more favorable product mix, negotiated reductions in component costs and gains in production efficiencies.

Operating Costs and Expenses. Operating costs and expenses were $9.2 million, or 15.0 % of sales, for the first quarter of fiscal year 2003 as compared to $9.8 million, or 14.8 % of sales, for the first quarter of fiscal year 2002. In absolute dollars, the decrease of $0.6 million can be attributed to decreased general and administrative costs resulting from the absence of goodwill amortization upon adoption of SFAS 142 and cost-cutting measures, offset in part by increased research and development expenses.

EBITDA. Earnings before interest, income taxes, depreciation and amortization (“EBITDA”)¹ for the first quarter of fiscal year 2003 were $9.4 million, or 15.3% of sales, compared to $7.5 million, or 11.3% of sales, for the first quarter of fiscal year 2002. This increase in EBITDA can be attributed primarily to the improvement in gross margins as discussed above.

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) or cash flow from operations, or as a measure of operating results, or liquidity.

-16-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

Other Income. Other income of $0.3 million in the first quarter of fiscal year 2003 represents the Company’s portion of the fair value of stock received from its life and disability insurance provider resulting from the insurance company’s 2001 demutualization.

Net Income (Loss). Net income was $2.5 million for the first quarter of fiscal year 2003 compared to a net loss of $1.0 million for the corresponding period of fiscal year 2002. The increase in the Company’s net income from the first quarter of fiscal year 2002 can be attributed to improved operating income as discussed above and reduced interest expense resulting from lower outstanding debt, offset in part by an increase in tax expense resulting from the Company’s return to profitability in fiscal year 2003.

Differences between Holding and CPI. CPI’s operating results differ from those of Holding due to a sale-leaseback transaction between CPI and Holding which took place in December 2000. In the first quarter of fiscal year 2003, CPI’s income before taxes was $4.2 million, which was approximately $0.2 million higher than Holdings’ income before taxes of $4.0 million. As a result of the sale-leaseback transaction, operating costs for CPI were approximately $0.3 million higher than those of Holding due to rental payments paid by CPI to Holding for use of the San Carlos facility offset by amortization of the deferred gain on the sale-leaseback and additional depreciation on the San Carlos facility. Interest expense, net, for CPI was approximately $0.5 million lower than that of Holding. The decrease primarily relates to the fact that Holding’s interest expense includes interest paid on the mortgage financing of the San Carlos facility combined with CPI’s interest income on a note receivable from Holding. All other operations data for CPI is consistent with Holding’s operations data for the first quarter of fiscal year 2003.

Financial Condition

The Company generated positive cash flows from operating activities during the first quarter of fiscal year 2003 as well as each quarter of fiscal year 2002. Cash flows provided by operating activities for the first quarter of fiscal year 2003 were $11.0 million, an increase of $1.2 million from the $9.8 million provided by operating activities during the first quarter of fiscal year 2002. The incremental positive cash flow was generated primarily from cash generated from operating earnings, further reductions in inventories and increased advance payments from customers, offset by decreases in accounts payable.

Investing activities were comprised principally of purchases of property, plant and equipment totaling $0.3 million for the first quarter of fiscal year 2003. Purchases of property, plant and equipment were down $0.4 million from $0.7 million in the first quarter of fiscal year 2002. The Company currently anticipates that capital expenditure requirements for fiscal year 2003 will be approximately $3.5 million, similar to the amounts spent in fiscal years 2002 and 2001.

Financing activities during the first quarter of fiscal year 2003 were related to a principal payment of $0.3 million made on the mortgage financing held by Holding related to the San Carlos facility and debt issuance costs related to an amendment of the Company’s credit facility.

In December 2002, the Company amended its credit facility to increase the maximum amount of its revolving credit line by $20.0 million (the amount of a prepaid term loan formerly outstanding under the

-17-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

same credit facility) from $41.0 million to $61.0 million and to extend the expiration date from December 22, 2004 to May 31, 2005. The credit facility continues to be secured by substantially all of the assets of CPI and guaranteed by Holding and all of CPI’s subsidiaries. Availability under the revolving credit facility continues to be based upon eligible receivables, machinery and equipment and certain real estate

As of January 3, 2003, the Company had $27.7 million available under its revolving line of credit.

The following is a summary of certain obligations and commitments of the Company as of January 3, 2003:

		Due in Fiscal Years
										2007 and
(In thousands)		2003		2004		2005		2006		Thereafter		Total
Debt obligations, including capital lease obligations		$	17,518		—		100,000		—		—		117,518
Noncancellable operating leases			668		617		458		89		41		1,873
Senior Redeemable Preferred Stock			—		—		—		—		28,747		28,747
	Total cash obligations	$	18,186		617		100,458		89		28,788		148,138
Standby letters of credit		$	2,075		2,211		11		—		—		4,297

Holding’s short-term debt includes mortgage financing of $17.5 million that expires on June 1, 2003. Restrictions in the Senior Subordinated Notes Indenture and in the Company’s credit facility prohibit CPI from distributing cash to Holding to satisfy this obligation. Management expects to either refinance this obligation or to enter into a sale or other transaction with respect to this property.

In connection with the sale of the Company’s Solid State Products Division (“SSPD”) in September 2002 to KMIC Technology, Inc., a company owned by the former management of SSPD, the Company was required to provide a $100,000 letter of credit as a partial guarantee for the new company’s leased facilities. The guarantee expires in November 2003.

CPI’s financial condition differs from that of Holding, as discussed above, in that CPI’s debt obligations and financing activities do not include $17.5 million of mortgage financing due in 2003. This mortgage financing resulted from Holding’s purchase of the San Carlos facility from CPI in a sale-leaseback transaction which took place in December 2000. In connection with the sale-leaseback transaction, CPI entered into a non-cancelable lease with Holding for the San Carlos real property for a term of twenty years with a fixed annual rent of $2.45 million.

Generally, there can be no assurance that the combination of cash generated by operations, borrowing availability from the Company’s credit facility and additional collateral-based financing will be sufficient to meet the Company’s cash requirements. If the Company is unable to satisfy such cash requirements from these sources, the Company will adopt one or more alternatives, such as reducing or delaying

-18-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

capital expenditures, reducing discretionary costs, and attempting to negotiate an increase to the Company’s borrowing capacity under its line of credit.

Recent Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit and Disposal Activities.” SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value only when the liability is incurred. The provisions of SFAS No. 146 are effective prospectively for exit or disposal activities initiated after December 31, 2002. The Company does not expect the adoption of this statement to have a material effect on the Company’s consolidated financial position or results of operations.

In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of SFAS 123.” SFAS 148 provides additional transition guidance for those entities that elect to voluntarily adopt the accounting provisions of SFAS 123, “Accounting for Stock-Based Compensation.” Since the Company intends to continue to apply the intrinsic value method of accounting for stock-based compensation, the adoption of SFAS 148 will not have an effect on its financial condition or results of operations. However, the Company will provide the additional disclosures required by SFAS 148 beginning in the second quarter of fiscal year 2003.

Risk Factors

You should carefully consider the various risks and uncertainties that impact the Company’s business and the other information in this report and the Company’s other filings with the SEC before you decide to invest in the Company or to maintain or increase your investment. Such risks and uncertainties include, but are not limited to, the following: 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; production interruptions due to power shutdowns and volatility in energy costs; U.S. Government export policies; changes in Governmental appropriations, national defense policies and availability of Government funds; changes in environmental regulation and legislation; availability of certain critical materials and raw material price fluctuations; the Company’s significant leverage; the Company’s ability to generate the significant amount of cash needed to service its debt; and the Company’s ability to obtain financing in the future. Any of the foregoing factors could cause the Company’s business, results of operations, or financial condition to suffer, and actual results could differ materially from those expected.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risk disclosures set forth in its Annual Report on Form 10-K for the fiscal year ended September 27, 2002, have not changed materially.

-19-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

COMMUNICATIONS & POWER INDUSTRIES, INC.,
and subsidiaries
(A wholly owned subsidiary of Communications & Power Industries Holding Corporation)

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. Based on their evaluation as of a date within 90 days of the filing date of this Report, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-14 (c) and 15d-14 (c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.

-20-

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:

Exhibit No.	Description
10.1	Amendment Number One to Loan and Security Agreement by and among CPI as borrower, the other obligors named as signatories therein, the lenders that are signatories as lenders, and Foothill Capital Corporation as the arranger and administrative agent, dated as of December 16, 2002.
99.1	Certification of the Chief Executive Officer of Holding pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification of the Chief Financial Officer of Holding Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.3	Certification of the Chief Executive Officer of CPI pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.4	Certification of the Chief Financial Officer of CPI pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)  Reports on Form 8-K:

     No reports were filed on Form 8-K during the quarter ended January 3, 2003.

-21-

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 HOLDING CORPORATION
By:	/s/ O. Joe Caldarelli
	O. Joe Caldarelli Chief Executive Officer Date: February 12, 2003
By:	/s/ Joel Littman
	Joel Littman Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) Date: February 12, 2003

-22-

CERTIFICATION

I, O. Joe Caldarelli, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Communications & Power Industries Holding Corporation;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	February 12, 2003	Signature:	/s/ O. Joe Caldarelli
			O. Joe Caldarelli, Chief Executive Officer

-23-

CERTIFICATION

I, Joel A. Littman, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Communications & Power Industries Holding Corporation;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	February 12, 2003	Signature:	/s/ Joel A. Littman
			Joel A. Littman, Chief Financial Officer

-24-

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 O. Joe Caldarelli
	O. Joe Caldarelli Chief Executive Officer Date: February 12, 2003
By:	/s/ Joel Littman
	Joel Littman Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) Date: February 12, 2003

-25-

CERTIFICATION

I, O. Joe Caldarelli, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Communications & Power Industries, Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

7. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	February 12, 2003	Signature:	/s/ O. Joe Caldarelli
			O. Joe Caldarelli, Chief Executive Officer

-26-

CERTIFICATION

I, Joel A. Littman, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Communications & Power Industries, Inc.;
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

7. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:	February 12, 2003	Signature:	/s/ Joel A. Littman
			Joel A. Littman, Chief Financial Officer

-27-

EXHIBIT INDEX

Exhibit No.	Description
10.1	Amendment Number One to Loan and Security Agreement by and among CPI as borrower, the other obligors named as signatories therein, the lenders that are signatories as lenders, and Foothill Capital Corporation as the arranger and administrative agent, dated as of December 16, 2002.
99.1	Certification of the Chief Executive Officer of Holding pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification of the Chief Financial Officer of Holding Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.3	Certification of the Chief Executive Officer of CPI pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.4	Certification of the Chief Financial Officer of CPI pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10.1

                                                                    Exhibit 10.1


               AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT

            THIS AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT (this
"Amendment"), dated as of December 16, 2002 (the "Effective Date"), is entered
into by and among COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware
corporation ("Borrower"), each of the Obligors that is a signatory to this
Amendment (collectively, "Obligors"), each of the lenders that is a signatory to
this Amendment (collectively, "Lenders"), and FOOTHILL CAPITAL CORPORATION, a
California corporation, as the arranger and administrative agent for the Lenders
(in such capacity, "Agent" and together with the Lenders, collectively, the
"Lender Group"), in light of the following:

                               W I T N E S S E T H

            WHEREAS, Borrower, the Lender Group and the other Obligors are
parties to that certain Loan and Security Agreement, dated as of December 15,
2000 (as amended, restated, supplemented, or modified from time to time, the
"Loan Agreement");

            WHEREAS, the Term Loan was fully prepaid as of June 26, 2002;

            WHEREAS, Borrower has requested that the Loan Agreement be amended
to provide for, among other things, an increase of the Maximum Revolver Amount;
and

            WHEREAS, subject to the satisfaction of the conditions set forth
herein, the Lender Group is willing to so consent to the amendment of the Loan
Agreement.

            NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree to amend the
Loan Agreement as follows:

1. DEFINITIONS. Capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement, as amended
hereby.

2. AMENDMENTS TO LOAN AGREEMENT.

      (a) The parties acknowledge that the Term Loan was prepaid in full prior
to the Term Loan Maturity Date. All references in the Loan Agreement to the
"Term Loan" (including the use of the terms "Maximum Term Loan Amount,"
"Required Term Loan Lenders," "Term Loan Amount," "Term Loan Commitment" and
"Term Loan Maturity Date") shall hereafter have no further force or effect.
Without limiting the foregoing, the Term Loan Amount and the Term Loan
Commitment are now zero.

      (b) Exhibit B-1 of the Loan Agreement and all references in the Loan
Agreement to the "Borrowing Base Certificate" and to "Exhibit B-1" are hereby
deleted in their entirety.


                                       1

      (c) Section 1.1 of the Loan Agreement is hereby amended by adding the
following defined terms in proper alphabetical order or amending and restating
the following definitions in their entirety, as the case may be:

            "`APPLICABLE PREPAYMENT PREMIUM' means, as of any date of
      determination, an amount equal to (a) during the period of time from and
      after the date of the execution and delivery of this Agreement up to the
      date that is the first anniversary of the Closing Date, 2% times the
      Maximum Revolver Amount, and (b) during the period of time from and
      including the date that is the first anniversary of the Closing Date up to
      and including May 31, 2004, 1% times the Maximum Revolver Amount."

            "`EFFECTIVE APPRAISAL DATE' means the date that is five (5) Business
      Days following the date that Agent receives, with respect to the 2002
      fiscal year of Borrower, valuations in accordance with Section 2.1(b)
      evidencing the Real Property Collateral Appraised Value and the Net
      Orderly Liquidation Value of Eligible Equipment."

            "`MAXIMUM REVOLVER AMOUNT' means $61,000,000."

            "`REQUIRED LENDERS' means, at any time, Lenders whose Pro Rata
      Shares aggregate 75% as determined pursuant to clause (d) of the
      definition of `Pro Rata Share.'"

            "`THRESHOLD ADVANCE' means, with respect to any Lender, any
      additional Advance described in Section 2.1(e) which, when combined with
      such Lender's Pro Rata Share of other outstanding Obligations, would
      exceed its respective lending limit set forth on Schedule C-2 attached
      hereto."

            "`THRESHOLD EXCESS AVAILABILITY' means Excess Availability of not
      less than the required amount set forth in the following table for the
      applicable period in any year set forth opposite thereto; provided,
      however, that the Threshold Excess Availability shall be $10,000,000 from
      and after the date that the Wells Fargo Note is paid in full:



         APPLICABLE AMOUNT                    APPLICABLE PERIOD
                            
            $10,000,000           Prior to the first day of the fifth full
                                calendar month prior to the Wells Fargo Note
                                                Maturity Date

            $13,000,000         From the first day of the fifth full calendar
                                month prior to the Wells Fargo Note Maturity
                                Date through and including the last day of the
                                fifth full calendar month prior to the Wells
                                          Fargo Note Maturity Date

            $16,000,000        From the first day of the fourth full calendar
                                month prior to the Wells Fargo Note Maturity
                               Date through and including the last day of the
                                fourth full calendar month prior to the Wells
                                          Fargo Note Maturity Date

            $19,000,000         From the first day of the third full calendar
                                month prior to the Wells Fargo Note Maturity
                               Date through and including the last day of the
                                   third full calendar month prior to the



                                       2

                            
                                       Wells Fargo Note Maturity Date

            $22,000,000        From the first day of the second full calendar
                                month prior to the Wells Fargo Note Maturity
                               Date through and including the last day of the
                                second full calendar month prior to the Wells
                                          Fargo Note Maturity Date

            $25,000,000         From the first day of the first full calendar
                                month prior to the Wells Fargo Note Maturity
                               Date through and including the Wells Fargo Note
                                                Maturity Date



            "`WELLS FARGO NOTE' means the promissory note made by Communications
      & Power Industries Holding Corporation to Wells Fargo, in the original
      principal amount of $18,000,000 and secured by the San Carlos Property."

            "`WELLS FARGO NOTE MATURITY DATE' means June 1, 2003 or any
      extension thereof."

      (d) Section 2.1(a) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

            "Subject to the terms and conditions of this Agreement, and during
      the term of this Agreement, each Lender with a Revolver Commitment agrees
      (severally, not jointly or jointly and severally) to make advances
      ('Advances') to Borrower in an amount at any one time outstanding not to
      exceed such Lender's Pro Rata Share of an amount equal to the lesser of
      (i) the Maximum Revolver Amount less the Letter of Credit Usage, or (ii)
      the Borrowing Base less the Letter of Credit Usage. For purposes of this
      Agreement, 'Borrowing Base,' as of any date of determination, shall mean
      the result of:

                        (w) the lesser of

                              (i) 85% of the amount of Eligible Accounts, less
      the amount, if any, of the Dilution Reserve; provided that in no event
      shall the amount of credit availability created by Eligible Foreign
      Accounts exceed $5,000,000; or

                              (ii) an amount equal to two-thirds of the
      Collateral Obligors' Collections with respect to Collateral Obligors'
      Accounts for the immediately preceding 13-week period; plus

                        (x) (i) prior to the Effective Appraisal Date, the lower
      of (i) (A) from and after the Closing Date up to the first anniversary of
      the Closing Date, 80% of the Net Orderly Liquidation Value of Eligible
      Equipment, (B) from and after the first anniversary of the Closing Date up
      to the second anniversary of the Closing Date, 70% of the Net Orderly
      Liquidation Value of Eligible Equipment, (C) from and after the second
      anniversary of the Closing Date up to the third anniversary of the Closing
      Date, 60% of the Net Orderly Liquidation Value of Eligible Equipment, and
      (D) from and after the third anniversary of the Closing Date up to the
      fourth anniversary of the Closing Date, 50% of the Net Orderly Liquidation
      Value of Eligible Equipment, and (ii) $8,250,000; and


                                       3

                              (ii) as of the Effective Appraisal Date, the lower
      of (i) (A) from and after the Effective Appraisal Date up to the third
      anniversary of the Closing Date, 80% of the Net Orderly Liquidation Value
      of Eligible Equipment, (B) from and after the third anniversary of the
      Closing Date up to the fourth anniversary of the Closing Date, 63.5% of
      the Net Orderly Liquidation Value of Eligible Equipment, and (C) from and
      after the fourth anniversary of the Closing Date up to the Maturity Date,
      47% of the Net Orderly Liquidation Value of Eligible Equipment, and (ii)
      $8,500,000, plus

                        (y) (i) prior to the Effective Appraisal Date, the
      lowest of

                                    (A) $16,000,000,

                                    (B) 30% of the Real Property Collateral
      Appraised Value,

                                    (C) 100% of the amount of credit
      availability created under clause (w) above, and

                                    (D) 50% of the Real Property Collateral
      Appraised Value; and

                              (ii) as of the Effective Appraisal Date, the lower
      of

                                    (A) $18,000,000, and

                                    (B) 35% of the Real Property Collateral
      Appraised Value; minus

                        (z) the aggregate amount of reserves, if any,
      established by Agent under Section 2.1(b)."

      (e) Section 2.1(c) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

            "The Lenders with Revolver Commitments shall have no obligation to
      make additional Advances hereunder to the extent such additional Advances
      would cause the Revolver Usage to exceed the Maximum Revolver Amount,
      subject to the conditions set forth in Sections 2.1(e) and 2.1(f)."

      (f) Section 2.1(e) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

            "Subject to Section 2.1(f), no Lender with a Revolver Commitment
      shall be required to make any Threshold Advance, unless:

                  (i) Borrower makes an irrevocable written request, not later
      than 90 days prior to the Funding Date applicable thereto, by an
      Authorized Person to Agent for a Borrowing of such Threshold Advance
      hereunder; and


                                       4

                  (ii) Without in any way limiting Agent's right to charge
      Borrower fees and costs in connection with future syndication or
      participation of the Commitments, Borrower pays Agent, no later than the
      date of the borrowing of such Threshold Advance, all fees and costs
      (including attorneys' fees and costs) incurred by Agent and any Lender
      (whether as assignor or assignee) or any Participant in connection with
      any syndication or participation of the Commitments as a result of or
      arising from such requested Threshold Advance.

                  Agent shall promptly advise Lenders of each such requested
      Threshold Advance. All fees and costs described in clause (ii), including
      fees and costs (including attorneys' fees and costs) incurred by any of
      the Lender Group in connection with any future syndication or
      participation of the Commitments, shall constitute Lender Group Expenses."

      (g) Section 2.1(f) of the Loan Agreement is hereby added in its entirety
as follows:

            "Following receipt of Agent's notice of Borrower's request for a
      Threshold Advance under Section 2.1(e), if any Lender is unable, despite
      good faith efforts, to syndicate or participate any portion of its Pro
      Rata Share of outstanding Obligations in order to maintain Obligations
      under its lending limit on Schedule C-2, then (i) such Lender's Pro Rata
      Share of such Threshold Advance shall not be made, and (ii) such Lender
      shall incur no liability to Borrower as a result of such Lender's failure
      to make its Pro Rata Share of such Threshold Advance."

      (h) Section 2.3(a) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

            "PROCEDURE FOR BORROWING. Subject to Section 2.1(e), each Borrowing
      shall be made by an irrevocable written request by an Authorized Person
      delivered to Agent (which notice must be received by Agent no later than
      10:00 a.m. (California time) on the Business Day prior to the date that is
      the requested Funding Date in the case of a request for an Advance or the
      Term Loan specifying (i) the amount of such Borrowing, and (ii) the
      requested Funding Date, which shall be a Business Day; provided, however,
      that in the case of a request for Swing Loan in an amount of $5,000,000 or
      less, such notice will be timely received if it is received by Agent no
      later than 10:00 a.m. (California time) on the Business Day that is the
      requested Funding Date) specifying (i) the amount of such Borrowing, and
      (ii) the requested Funding Date, which shall be a Business Day. At Agent's
      election, in lieu of delivering the above-described written request, any
      Authorized Person may give Agent telephonic notice of such request by the
      required time, with such telephonic notice to be confirmed in writing
      within 24 hours of the giving of such notice."

      (i) Section 2.11(c) of the Loan Agreement is hereby amended and restated
in its entirety as follows:

            "UNUSED LINE FEE. On the first day of each month during the term of
      this Agreement, an unused line fee in an amount equal to 0.375% per annum
      times the result of (a) (i) prior to the date that the first Threshold
      Advance is made pursuant to Section


                                       5

      2.1, $50,000,000, and (ii) thereafter, the sum of (1) $50,000,000 and (2)
      all Commitments (not to exceed $11,000,000) which are hereafter assigned
      or participated to any Assignee (other than an existing Lender as of the
      date hereof) under Section 14.1 in contemplation of the making of a
      Threshold Advance, less (b) the sum of (i) the average Daily Balance of
      Advances that were outstanding during the immediately preceding month,
      plus (ii) the average Daily Balance of the Letter of Credit Usage during
      the immediately preceding month,"

      (j) Section 3.4 of the Loan Agreement is hereby amended and restated in
its entirety as follows:

            "TERM. This Agreement shall become effective upon the execution and
      delivery hereof by Obligors, Agent, and the Lenders and shall continue in
      full force and effect for a term ending on May 31, 2005 (the `Maturity
      Date'). The foregoing notwithstanding, the Lender Group, upon the election
      of the Required Lenders, shall have the right to terminate its obligations
      under this Agreement immediately and without notice upon the occurrence
      and during the continuation of an Event of Default."

      (k) Section 7.8(a) of the Loan Agreement is hereby amended and restated in
its entirety as follows:

            "Prepay, redeem, defease, purchase, or otherwise acquire any
      Indebtedness of any Obligor, other than the Obligations in accordance with
      this Agreement, and except in connection with either of the following:

            (i) a refinancing permitted by Section 7.1(h); or

            (ii) any repurchase or redemption of Senior Subordinated Notes up to
      an aggregate maximum amount of $7,500,000 in any fiscal year of Borrower
      so long as (1) immediately prior to any such repurchase or redemption and
      after giving effect thereto, no Event of Default has occurred and is
      continuing; (2) prior to any such repurchase or redemption, Borrower's
      chief financial officer issues a certificate to Agent, in form and
      substance satisfactory to Agent in its Permitted Discretion, demonstrating
      that, immediately after any such repurchase or redemption, Borrower will
      have Availability of no less than the Threshold Excess Availability; (3)
      concurrently with any delivery by Borrower to the Trustee (as defined in
      the Indenture) of a notice of optional redemption in accordance with
      Section 3.01 of the Indenture in connection with any such redemption,
      Borrower delivers a copy of such notice to Agent; and (4) concurrently
      with any delivery by Borrower to the Holders (as defined in the Indenture)
      of a notice of redemption in accordance with Section 3.03 of the Indenture
      in connection with any such redemption, Borrower delivers a copy of such
      notice to Agent, and"

      (l) Schedule C-1 of the Loan Agreement is hereby amended and restated in
its entirety as attached hereto as Schedule C-1.


                                       6

3. CONDITIONS PRECEDENT TO THIS AMENDMENT. The satisfaction of each of the
following shall constitute conditions precedent to the effectiveness of this
Amendment and each and every provision hereof:

      (a) Borrower shall have paid Agent an amendment fee in the amount of
$250,000;

      (b) The representations and warranties in the Loan Agreement and the other
Loan Documents shall be true and correct in all respects on and as of the
Effective Date, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);

      (c) Agent shall have received the reaffirmation and consent of each
Guarantor, attached hereto as Exhibit A, duly executed and delivered by an
authorized official of each Guarantor;

      (d) Agent shall have received the confirmation, acknowledgement and
consent of CPI Canada, attached hereto as Exhibit B, duly executed and delivered
by an authorized official of CPI Canada;

      (e) No Default or Event of Default shall have occurred and be continuing
on the date hereof or as of the date of the effectiveness of this Amendment;

      (f) No injunction, writ, restraining order, or other order of any nature
prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
Governmental Authority against any Obligor or the Lender Group;

      (g) Agent shall have received an opinion of Obligors' counsel in form and
substance satisfactory to Lenders; and

      (h) Agent shall have received, for each of the Mortgages referred to in
Section 4(a) of this Amendment, the Modification and Ratification (collectively,
the "Mortgage Amendments"), substantially in the form attached hereto as Exhibit
R-2, duly executed and delivered by Agent and the applicable Obligor.

4. CONDITIONS SUBSEQUENT TO THIS AMENDMENT. The satisfaction, no later than the
dates set forth below, of each of the following shall constitute conditions
subsequent to the effectiveness of this Amendment and each and every provision
hereof (and the failure by Borrower to so perform or cause to be performed
constituting an Event of Default):

      (a) No later than 30 days after the Effective Date, Agent shall have
received from First American Title Insurance Company ("Title Company") CLTA
endorsements (collectively, the "Endorsements"), satisfactory to Agent, to Title
Insurance Policy Nos. 519100 (dated December 22, 2000), and 100633050 (dated
September 27, 2001) (collectively, the "Policies") issued by Title Company,
insuring the same priority of the Mortgages referred to therein, as amended by
the Mortgage Amendments, as such Mortgages enjoyed as of the original dates of
the Policies; and


                                       7

(b) No later than 30 days after the Effective Date, Borrower shall have paid
Agent all of Agent's attorneys' fees and costs and recording costs incurred in
connection with the preparation and execution of this Amendment and the Mortgage
Amendments, the cost of recording the Mortgage Amendments and the cost of the
premiums for the issuance by Title Company of the Endorsements.

5. CONSTRUCTION. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED IN THE STATE OF NEW YORK.

6. ENTIRE AMENDMENT; EFFECT OF AMENDMENT. This Amendment, and terms and
provisions hereof, constitute the entire agreement among the parties pertaining
to the subject matter hereof and supersedes any and all prior or contemporaneous
amendments relating to the subject matter hereof. Except for the amendments to
the Loan Agreement expressly set forth in Section 2 hereof, the Loan Agreement
and other Loan Documents shall remain unchanged and in full force and effect. To
the extent any terms or provisions of this Amendment conflict with those of the
Loan Agreement or other Loan Documents, the terms and provisions of this
Amendment shall control. This Amendment is a Loan Document.

7. COUNTERPARTS; TELEFACSIMILE EXECUTION. This Amendment may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Amendment by
signing any such counterpart. Delivery of an executed counterpart of this
Amendment by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Amendment. Any party delivering an
executed counterpart of this Amendment by telefacsimile also shall deliver an
original executed counterpart of this Amendment, but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Amendment.

8. MISCELLANEOUS.

      (a) Upon the effectiveness of this Amendment, each reference in the Loan
Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like
import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.

      (b) Upon the effectiveness of this Amendment, each reference in the Loan
Documents to the "Loan Agreement", "thereunder", "therein", "thereof" or words
of like import referring to the Loan Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.


                            [Signature page follows.]


                                       8

            IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered as of the Effective Date.

                                    BORROWER:

                                    COMMUNICATIONS & POWER INDUSTRIES, INC.,
                                    a Delaware corporation


                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------



                                    FOOTHILL:

                                    FOOTHILL CAPITAL CORPORATION,
                                    a California corporation, as Agent and as a
                                    Lender


                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    OTHER LENDERS:

                                    FOOTHILL INCOME TRUST II, L.P.

                                    By:   FIT II GP, LLC,
                                          Its General Partner

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                  [Signatures continue on the following page.]


                                       9

                                    OTHER OBLIGORS:

                                    COMMUNICATIONS & POWER INDUSTRIES HOLDING
                                    CORPORATION,

                                    a Delaware corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    CPI SUBSIDIARY HOLDINGS  INC.,
                                    a Delaware corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    COMMUNICATIONS & POWER INDUSTRIES
                                    INTERNATIONAL  INC.,

                                    a Delaware corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    COMMUNICATIONS & POWER INDUSTRIES ASIA INC.,
                                    a Delaware corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    COMMUNICATIONS & POWER INDUSTRIES CANADA,
                                    INC.,
                                    an Ontario corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                       10

                                    EXHIBIT A

                            REAFFIRMATION AND CONSENT

            All capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to them in that certain Loan and Security
Agreement by and among COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware
corporation ("Borrower"), the other Obligors identified on the signature pages
thereof, each of the lenders that is a signatory thereto (collectively,
"Lenders"), and FOOTHILL CAPITAL CORPORATION, a California corporation, as the
arranger and administrative agent for the Lenders (in such capacity, "Agent" and
together with the Lenders, collectively, the "Lender Group"), dated as of
December 15, 2000 (as amended, restated, supplemented or otherwise modified, the
"Loan Agreement"), or in Amendment Number One to Loan and Security Agreement,
dated as of December 16, 2002 (the "Amendment"), among Borrower, the other
Obligors and the Lender Group. The undersigned each hereby (a) represents and
warrants to the Lender Group that the execution, delivery, and performance of
this Reaffirmation and Consent are within its powers, have been duly authorized
by all necessary action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected; (b) consents to the transactions
contemplated by the Amendment; (c) acknowledges and reaffirms its obligations
owing to the Lender Group under any Loan Documents to which it is a party; and
(d) agrees that each of the Loan Documents to which it is a party is and shall
remain in full force and effect. Although the undersigned has been informed of
the matters set forth herein and has acknowledged and agreed to same, it
understands that the Lender Group has no obligations to inform it of such
matters in the future or to seek its acknowledgment or agreement to future
amendments, and nothing herein shall create such a duty. Delivery of an executed
counterpart of this Reaffirmation and Consent by telefacsimile shall be equally
as effective as delivery of an original executed counterpart of this
Reaffirmation and Consent. Any party delivering an executed counterpart of this
Reaffirmation and Consent by telefacsimile also shall deliver an original
executed counterpart of this Reaffirmation and Consent but the failure to
deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Reaffirmation and Consent. This
Reaffirmation and Consent shall be governed by the laws of the State of New
York.

                            [Signature page follows.]


                                       1

IN WITNESS WHEREOF, the undersigned have each caused this Reaffirmation and
Consent to be executed as of the date of the Amendment.

                                    COMMUNICATIONS & POWER INDUSTRIES
                                    HOLDING CORPORATION,
                                    a Delaware corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    CPI SUBSIDIARY HOLDINGS  INC.,
                                    a Delaware corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    COMMUNICATIONS & POWER INDUSTRIES
                                    INTERNATIONAL  INC.,
                                    a Delaware corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    COMMUNICATIONS & POWER INDUSTRIES ASIA INC.,
                                    a Delaware corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    COMMUNICATIONS & POWER INDUSTRIES CANADA,
                                    INC.,
                                    an Ontario corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                       2

                                    EXHIBIT B

                    CONFIRMATION, ACKNOWLEDGMENT AND CONSENT

All capitalized terms used herein but not otherwise defined herein shall have
the meanings ascribed to them in that certain Loan and Security Agreement by and
among COMMUNICATIONS & POWER INDUSTRIES, INC., a Delaware corporation
("Borrower"), the other Obligors identified on the signature pages thereof, each
of the lenders that is a signatory thereto (collectively, "Lenders"), and
FOOTHILL CAPITAL CORPORATION, a California corporation, as the arranger and
administrative agent for the Lenders (in such capacity, "Agent" and together
with the Lenders, collectively, the "Lender Group"), dated as of December 15,
2000 (as amended, restated, supplemented or otherwise modified, the "Loan
Agreement"), or in Amendment Number One to Loan and Security Agreement, dated as
of December 16, 2002 (the "Amendment"), among Borrower, the other Obligors and
the Lender Group.

TO:         THE AGENT AND THE LENDER GROUP

FROM:       COMMUNICATIONS & POWER INDUSTRIES CANADA INC. (the "Canadian
            Subsidiary")

RE:         Amendment Number One. to Loan Agreement - Confirmation of continuing
            liability under Guarantee, General Security Agreement and Mortgage;

WHEREAS;

A. Pursuant to a Guarantee (the "Guarantee") dated December 15, 2000, the
Canadian Subsidiary guaranteed to the Agent as Agent for itself and for other
lenders the Guaranteed Obligations, as defined in the Guarantee, of the
Borrower;

B. As collateral security for its obligations pursuant to the Loan Agreement and
the Guarantee the Canadian Subsidiary granted to the Agent as Agent for itself
and for other lenders a General Security Agreement (the "GSA") dated effective
as of December 15, 2000;

C. As collateral security for its obligations pursuant to the Loan Agreement and
the Guarantee the Canadian Subsidiary granted a mortgage (the "Mortgage") to the
Agent as Agent for itself and for other lenders which Mortgage is registered in
the Land Registry Office for the Land Titles Division of Halton (No. 20)
registration No. HR53586;

NOW WITNESS that in consideration of the mutual covenants and agreements set
forth in the Amendment and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Canadian Subsidiary
hereby consents to the changes made in the Amendment and acknowledges and
agrees, in addition to its confirmation contained in Exhibit A to the Amendment
but without limiting same, that the Guarantee, the Mortgage and the GSA remain
in full force and effect, and the Mortgage and the GSA stand as security for the
all of the obligations of the Canadian Subsidiary and the Borrower to the Lender
Group pursuant to the Loan and Security Agreement and the Amendment.


                                       1

DATED as of the 16th day of December, 2002.

COMMUNICATIONS & POWER INDUSTRIES
CANADA, INC.

Per:

- -----------------------------------------
Authorized Signatory

Title
     ---------------------


                                       2

                                   EXHIBIT R-2

                                [Modification and Ratification of Deed of Trust]

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:


Joel J. Berman, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
1900 Avenue of the Stars
7th Floor
Los Angeles, California  90067


    ------------- MODIFICATION AND RATIFICATION OF DEED OF TRUST ------------


      This MODIFICATION AND RATIFICATION OF DEED OF TRUST (this "Modification")
is made as of the 16th day of December, 2002, by and between FOOTHILL CAPITAL
CORPORATION, a California corporation ("Agent"), whose address is 2450 Colorado
Avenue, Suite 3000 West, Santa Monica, California 90404, and COMMUNICATIONS &
POWER INDUSTRIES, INC., a Delaware corporation ("Trustor"), whose address is 607
Hansen Way, Palo Alto, California 94303, with reference to the following facts:

      A. Trustor, each of the other Obligors that is a signatory thereto, each
of the lenders that is a signatory thereto (collectively, "Lenders"), and Agent,
as the arranger and administrative agent for the Lenders, are parties to that
certain Loan and Security Agreement, dated as of December 15, 2000 (as amended,
restated, supplemented, or modified from time to time, the "Loan Agreement").
Capitalized terms, which are used herein but not defined herein, shall have the
meanings ascribed to them in the Loan Agreement.

      B. To secure Trustor's obligations under the Loan Agreement, Trustor, as
trustor, executed in favor of Agent, as beneficiary, a deed of trust (the "Deed
of Trust") encumbering real property in Santa Clara County, California (the
"Real Property"). The Real Property is legally described in the Deed of Trust
and in Exhibit "A" attached hereto and incorporated by reference herein. The
Deed of Trust was recorded on December 22, 2000 in the Office of the Santa Clara
County Recorder as Instrument No. 155004246 as a lien on the Real Property.

      C. Trustor, the other Obligors, Lenders and Agent have agreed to
modification of certain provisions of the Loan Agreement pursuant to that
certain Amendment Number One to Loan Agreement (the "First Amendment") of even
date, which is incorporated by reference herein.


                                       1

      D. As a condition precedent to the execution of the First Amendment, Agent
requires that Trustor and Agent amend a certain provision of the Deed of Trust
as hereinafter set forth.

      NOW THEREFORE, the parties agree as follows:

      (a) Pursuant to the First Amendment, Trustor and Agent have, among other
things, increased the Maximum Revolver Amount. The obligations secured by the
Deed of Trust, as set forth in the Deed of Trust, include without limitation the
obligations of Trustor to Agent under the Loan Agreement, as modified by the
First Amendment, and all further modifications thereof.

      (b) Except as herein specifically supplemented and amended, the Deed of
Trust, which is incorporated by reference herein, is hereby ratified and
confirmed, and the same shall continue in full force and effect.

      (c) This Modification may be executed in counterparts, each of which, when
executed and delivered, shall be deemed to be an original, and all of which,
when taken together, shall constitute but one and the same instrument.

                                    AGENT:

                                    FOOTHILL CAPITAL CORPORATION,
                                    a California corporation, as Agent

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                    TRUSTOR:

                                    COMMUNICATIONS & POWER INDUSTRIES, INC.,
                                    a Delaware corporation

                                    By:
                                       ----------------------------------------
                                    Title:
                                          -------------------------------------


                                       2

                                    EXHIBIT A

                      [Legal Description of Real Property]

STATE OF CALIFORNIA           )
                              )
COUNTY OF _____________       )

            On December ___, 2002, before me, ____________________, personally
appeared ____________________________,


[ ]   personally known to me        [ ]   proved to me on the basis of
                                          satisfactory evidence

to be the persons whose names are subscribed to the within instrument and
acknowledged to me that they executed the same in their authorized capacities,
and that by their signatures on the instrument the persons, or the entity upon
behalf of which the persons acted, executed the instrument.

            WITNESS my hand and official seal.



                                          ------------------------------
                                          Signature of Notary

                           CAPACITY CLAIMED BY SIGNER:


[ ]   Individual(s)                       [ ]   Attorney-In-Fact
[ ]   Partner(s)                          [ ]   Subscribing Witness
[ ]   Trustee(s)                          [ ]   Guardian/Conservator
[X]   Corporate                           [ ]   Other:
                --------------------                  ----------------------
      Officer(s)
                --------------------      ----------------------------------
                      Title(s)
                                          ----------------------------------


                             SIGNER IS REPRESENTING:

Name of Person(s) or Entity(ies): FOOTHILL CAPITAL CORPORATION

- --------------------------------------------------------------------------------

STATE OF CALIFORNIA           )
                              )
COUNTY OF _____________       )


            On December ___, 2002, before me, ____________________, personally
appeared ____________________________,

[ ]   personally known to me        [ ]   proved to me on the basis of
                                          satisfactory evidence

to be the persons whose names are subscribed to the within instrument and
acknowledged to me that they executed the same in their authorized capacities,
and that by their signatures on the instrument the persons, or the entity upon
behalf of which the persons acted, executed the instrument.

            WITNESS my hand and official seal.



                                          -------------------------------------
                                          Signature of Notary

                           CAPACITY CLAIMED BY SIGNER:

[ ]   Individual(s)                       [ ]   Attorney-In-Fact
[ ]   Partner(s)                          [ ]   Subscribing Witness
[ ]   Trustee(s)                          [ ]   Guardian/Conservator
[X]   Corporate                           [ ]   Other:
                --------------------                  ----------------------
      Officer(s)
                --------------------      ----------------------------------
                      Title(s)
                                          ----------------------------------


                             SIGNER IS REPRESENTING:

Name of Person(s) or Entity(ies): COMMUNICATIONS & POWER INDUSTRIES, INC.

- --------------------------------------------------------------------------------

                                  SCHEDULE C-1
                                   COMMITMENTS



                                            TERM LOAN
     LENDER          REVOLVER COMMITMENT    COMMITMENT     TOTAL COMMITMENT
     ------          -------------------    ----------     ----------------
                                                  
Foothill Capital         $44,634,000                         $44,634,000
Corporation

Foothill Income          $16,366,000                         $16,366,000
Trust II, L.P.



All Lenders              $61,000,000           $0            $61,000,000


                                  SCHEDULE C-2
                                  LENDING LIMIT



               LENDER                                 LENDING LIMIT
               ------                                 -------------
                                                   
Foothill Capital Corporation                           $36,585,000
Foothill Income Trust II, L.P.                         $13,415,000
Combined Limit of Foothill Capital                     $50,000,000
Corporation and Foothill Income Trust II, L.P.

EX-99.1

EXHIBIT 99.1

                                                                    EXHIBIT 99.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Communications & Power Industries
Holding Corporation (the "Company") on Form 10-Q for the period ending January
3, 2003 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, O. Joe Caldarelli, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

      (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



/s/ O. Joe Caldarelli


O. Joe Caldarelli
Chief Executive Officer
February 12, 2003

EX-99.2

EXHIBIT 99.2

                                                                    EXHIBIT 99.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Communications & Power Industries
Holding Corporation (the "Company") on Form 10-Q for the period ending January
3, 2003 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Joel Littman, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

      (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



/s/ Joel Littman


Joel Littman
Chief Financial Officer
February 12, 2003

EX-99.3

EXHIBIT 99.3

                                                                    EXHIBIT 99.3

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Communications & Power Industries,
Inc. (the "Company") on Form 10-Q for the period ending January 3, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, O. Joe Caldarelli, Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

      (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



/s/ O. Joe Caldarelli


O. Joe Caldarelli
Chief Executive Officer
February 12, 2003

EX-99.4

EXHIBIT 99.4

                                                                    EXHIBIT 99.4

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Communications & Power Industries,
Inc. (the "Company") on Form 10-Q for the period ending January 3, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Joel Littman, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

      (1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



/s/ Joel Littman


Joel Littman
Chief Financial Officer
February 12, 2003