x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
(State or Other Jurisdiction of Incorporation or Organization)
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75-3142681
(I.R.S. Employer Identification No.)
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811 Hansen Way, Palo Alto, California 94303
(Address of Principal Executive Offices and Zip Code)
|
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(650) 846-2900
(Registrant’s telephone number, including area code)
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Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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Large accelerated filer
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¨
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Accelerated filer
|
x
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Non-accelerated filer
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¨ (Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Page |
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5
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6
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7
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37
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51
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53
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54
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54
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54
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55
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55
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55
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55
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56
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July 2,
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October 2,
|
|||||||
2010
|
2009
|
|||||||
Assets
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 47,183 | $ | 26,152 | ||||
Restricted cash
|
1,040 | 1,561 | ||||||
Accounts receivable, net
|
43,433 | 45,145 | ||||||
Inventories
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78,407 | 66,996 | ||||||
Deferred tax assets
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10,485 | 8,652 | ||||||
Prepaid and other current assets
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4,321 | 6,700 | ||||||
Total current assets
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184,869 | 155,206 | ||||||
Property, plant, and equipment, net
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54,650 | 57,912 | ||||||
Deferred debt issue costs, net
|
2,607 | 3,609 | ||||||
Intangible assets, net
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73,218 | 75,430 | ||||||
Goodwill
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162,225 | 162,225 | ||||||
Other long-term assets
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3,786 | 3,872 | ||||||
Total assets
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$ | 481,355 | $ | 458,254 | ||||
Liabilities and stockholders’ equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
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$ | 21,164 | $ | 22,665 | ||||
Accrued expenses
|
27,955 | 19,015 | ||||||
Product warranty
|
4,830 | 3,845 | ||||||
Income taxes payable
|
3,608 | 4,305 | ||||||
Deferred income taxes
|
328 | - | ||||||
Advance payments from customers
|
12,899 | 12,996 | ||||||
Total current liabilities
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70,784 | 62,826 | ||||||
Deferred income taxes, non-current
|
23,997 | 24,726 | ||||||
Long-term debt
|
194,931 | 194,922 | ||||||
Other long-term liabilities
|
2,009 | 2,227 | ||||||
Total liabilities
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291,721 | 284,701 | ||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity
|
||||||||
Common stock ($0.01 par value, 90,000 shares authorized; 17,016 and 16,807 shares issued; 16,810 and 16,601 shares outstanding)
|
170 | 168 | ||||||
Additional paid-in capital
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79,257 | 75,630 | ||||||
Accumulated other comprehensive income
|
506 | 598 | ||||||
Retained earnings
|
112,501 | 99,957 | ||||||
Treasury stock, at cost (206 shares)
|
(2,800 | ) | (2,800 | ) | ||||
Total stockholders’ equity
|
189,634 | 173,553 | ||||||
Total liabilities and stockholders' equity
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$ | 481,355 | $ | 458,254 |
Three Months Ended
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Nine Months Ended
|
|||||||||||||||
July 2,
2010
|
July 3,
2009
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July 2,
2010
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July 3,
2009
|
|||||||||||||
Sales
|
$ | 93,876 | $ | 82,520 | $ | 264,995 | $ | 241,569 | ||||||||
Cost of sales
|
64,953 | 58,236 | 185,910 | 175,603 | ||||||||||||
Gross profit
|
28,923 | 24,284 | 79,085 | 65,966 | ||||||||||||
Operating costs and expenses:
|
||||||||||||||||
Research and development
|
3,542 | 2,731 | 9,287 | 8,071 | ||||||||||||
Selling and marketing
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5,178 | 4,762 | 15,392 | 14,552 | ||||||||||||
General and administrative
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6,373 | 5,073 | 18,560 | 15,537 | ||||||||||||
Amortization of acquisition-related intangible assets
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688 | 691 | 2,062 | 2,076 | ||||||||||||
Merger expenses
|
3,589 | - | 3,800 | - | ||||||||||||
Total operating costs and expenses
|
19,370 | 13,257 | 49,101 | 40,236 | ||||||||||||
Operating income
|
9,553 | 11,027 | 29,984 | 25,730 | ||||||||||||
Interest expense, net
|
3,780 | 4,204 | 11,516 | 12,965 | ||||||||||||
Gain on debt extinguishment
|
- | (51 | ) | - | (248 | ) | ||||||||||
Income before income taxes
|
5,773 | 6,874 | 18,468 | 13,013 | ||||||||||||
Income tax expense (benefit)
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1,562 | 3,004 | 5,924 | (2,201 | ) | |||||||||||
Net income
|
$ | 4,211 | $ | 3,870 | $ | 12,544 | $ | 15,214 | ||||||||
Other comprehensive income, net of tax
|
||||||||||||||||
Net unrealized (loss) gain on cash flow hedges and minimum pension liability adjustment
|
(1,096 | ) | 3,346 | (92 | ) | 84 | ||||||||||
Comprehensive income
|
$ | 3,115 | $ | 7,216 | $ | 12,452 | $ | 15,298 | ||||||||
Earnings per common share - Basic
|
$ | 0.25 | $ | 0.23 | $ | 0.75 | $ | 0.92 | ||||||||
Earnings per common share - Diluted
|
$ | 0.23 | $ | 0.22 | $ | 0.69 | $ | 0.86 | ||||||||
Shares used to compute earnings per common share - Basic
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16,631 | 16,362 | 16,534 | 16,316 | ||||||||||||
Shares used to compute earnings per common share - Diluted
|
17,961 | 17,535 | 17,787 | 17,402 |
Nine Months Ended
|
||||||||
July 2,
|
July 3,
|
|||||||
2010
|
2009
|
|||||||
Cash flows from operating activities
|
||||||||
Net cash provided by operating activities
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$ | 22,516 | $ | 20,308 | ||||
Cash flows from investing activities
|
||||||||
Capital expenditures
|
(2,824 | ) | (2,349 | ) | ||||
Payment of patent application fees
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(36 | ) | - | |||||
Net cash used in investing activities
|
(2,860 | ) | (2,349 | ) | ||||
Cash flows from financing activities
|
||||||||
Repayments of debt
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- | (12,358 | ) | |||||
Proceeds from issuance of common stock to employees
|
579 | 781 | ||||||
Proceeds from exercise of stock options
|
214 | 82 | ||||||
Excess tax benefit on stock option exercises
|
582 | 51 | ||||||
Net cash provided by (used in) financing activities
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1,375 | (11,444 | ) | |||||
Net increase in cash and cash equivalents
|
21,031 | 6,515 | ||||||
Cash and cash equivalents at beginning of period
|
26,152 | 28,670 | ||||||
Cash and cash equivalents at end of period
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$ | 47,183 | $ | 35,185 | ||||
Supplemental cash flow disclosures
|
||||||||
Cash paid for interest
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$ | 8,008 | $ | 9,742 | ||||
Cash paid for income taxes, net of refunds
|
$ | 8,069 | $ | 2,417 |
1.
|
The Company and a Summary of its Significant Accounting Policies
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2.
|
Recently Issued Accounting Standards
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July 2,
|
October 2,
|
|||||||
2010
|
2009
|
|||||||
Accounts receivable
|
$ | 43,522 | $ | 45,240 | ||||
Less: Allowance for doubtful accounts
|
(89 | ) | (95 | ) | ||||
Accounts receivable, net
|
$ | 43,433 | $ | 45,145 |
July 2,
|
October 2,
|
|||||||
2010
|
2009
|
|||||||
Raw material and parts
|
$ | 43,933 | $ | 38,205 | ||||
Work in process
|
24,855 | 20,542 | ||||||
Finished goods
|
9,619 | 8,249 | ||||||
$ | 78,407 | $ | 66,996 |
Nine Months Ended
|
||||||||
July 2,
|
July 3,
|
|||||||
2010
|
2009
|
|||||||
Balance at beginning of period
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$ | 4,068 | $ | 1,928 | ||||
Provision for loss contracts, charged to cost of sales
|
2,886 | 2,696 | ||||||
Credit to cost of sales upon revenue recognition
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(3,347 | ) | (1,522 | ) | ||||
Balance at end of period
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$ | 3,607 | $ | 3,102 |
July 2,
|
July 3,
|
|||||||
2010
|
2009
|
|||||||
Inventories
|
$ | 3,468 | $ | 3,092 | ||||
Accrued expenses
|
139 | 10 | ||||||
$ | 3,607 | $ | 3,102 |
Nine Months Ended
|
||||||||
July 2,
|
July 3,
|
|||||||
2010
|
2009
|
|||||||
Beginning accrued warranty
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$ | 3,845 | $ | 4,159 | ||||
Actual costs of warranty claims
|
(4,087 | ) | (3,347 | ) | ||||
Estimates for product warranty, charged to cost of sales
|
5,072 | 2,990 | ||||||
Ending accrued warranty
|
$ | 4,830 | $ | 3,802 |
July 2,
|
October 2,
|
|||||||
2010
|
2009
|
|||||||
Unrealized gain on cash flow hedges, net of tax
|
$ | 742 | $ | 828 | ||||
Unrealized actuarial loss and prior service credit for pension liability, net of tax
|
(236 | ) | (230 | ) | ||||
$ | 506 | $ | 598 |
Level 1
|
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
Level 2
|
Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
Level 3
|
Unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
Fair Value Measurements at July 2, 2010 Using
|
||||||||||||||||
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable
Inputs
|
Significant Unobservable Inputs
|
||||||||||||||
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
Assets:
|
||||||||||||||||
Money market and overnight U.S. Government securities1
|
$ | 41,650 | $ | 41,650 | $ | - | $ | - | ||||||||
Mutual funds2
|
153 | 153 | - | - | ||||||||||||
Foreign exchange forward derivatives3
|
659 | - | 659 | - | ||||||||||||
Total assets at fair value
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$ | 42,462 | $ | 41,803 | $ | 659 | - | |||||||||
Liabilities:
|
||||||||||||||||
Foreign exchange forward derivatives4
|
20 | 20 | ||||||||||||||
Interest rate swap derivative4
|
$ | 1,109 | $ | - | $ | 1,109 | $ | - | ||||||||
Total liabilities at fair value
|
$ | 1,129 | $ | - | $ | 1,129 | $ | - |
1 The money market and overnight U.S. Government securities are classified as part of cash and cash equivalents and restricted cash in the condensed consolidated balance sheet.
|
||
2 The mutual funds are classified as part of other long-term assets in the condensed consolidated balance sheet.
|
||
3 The foreign currency derivatives are classified as part of prepaid and other current assets in the condensed consolidated balance sheet.
|
||
4 The foreign currency and interest rate swap derivatives are classified as part of accrued expenses in the condensed consolidated balance sheet.
|
Fair Value Measurements at October 2, 2009 Using
|
||||||||||||||||
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable Inputs
|
Significant Unobservable Inputs
|
||||||||||||||
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
Assets:
|
||||||||||||||||
Money market and overnight U.S. Government securities1
|
$ | 22,464 | $ | 22,464 | $ | - | $ | - | ||||||||
Mutual funds2
|
152 | 152 | - | - | ||||||||||||
Foreign exchange forward derivatives3
|
3,467 | - | 3,467 | - | ||||||||||||
Total assets at fair value
|
$ | 26,083 | $ | 22,616 | $ | 3,467 | - | |||||||||
Liabilities:
|
||||||||||||||||
Interest rate swap derivative4
|
$ | 2,323 | $ | - | $ | 2,323 | $ | - | ||||||||
Total liabilities at fair value
|
$ | 2,323 | $ | - | $ | 2,323 | $ | - |
1 The money market and overnight U.S. Government securities are classified as part of cash and cash equivalents and restricted cash in the condensed consolidated balance sheet.
|
||||||||||||||||
2 The mutual funds are classified as part of other long-term assets in the condensed consolidated balance sheet.
|
||||||||||||||||
3 The foreign currency derivatives are classified as part of prepaid and other current assets in the condensed consolidated balance sheet.
|
||||||||||||||||
4 The interest rate swap derivatives are classified as part of accrued expenses and other long-term liabilities in the condensed consolidated balance sheet.
|
Asset Derivatives
|
Liability Derivatives
|
|||||||||||||||||
|
Fair Value
|
|
Fair Value
|
|||||||||||||||
Balance Sheet Location
|
July 2,
2010
|
October 2,
2009
|
Balance Sheet Location
|
July2,
2010
|
October 2,
2009
|
|||||||||||||
Derivatives designated as hedging instruments
|
||||||||||||||||||
Interest rate contracts
|
Accrued expenses
|
$ | (1,109 | ) | $ | (1,766 | ) | |||||||||||
Interest rate contracts
|
Other long-term liabilities
|
- | (557 | ) | ||||||||||||||
Forward contracts
|
Prepaid and other current assets
|
$ | 659 | $ | 3,467 |
Accrued expenses
|
(20 | ) | ||||||||||
Total derivatives designated as hedging instruments | $ | 659 | $ | 3,467 | $ | (1,129 | ) | $ | (2,323 | ) |
Derivatives in Cash Flow Hedging Relationships
|
Amount of
(Loss) Gain Recognized
in OCI on Derivative
(Effective Portion)
|
Location of
(Loss) Gain Reclassified from Accumulated
OCI into Income
(Effective Portion)
|
Amount of
(Loss) Gain Reclassified from Accumulated OCI into Income
(Effective Portion)
|
Location of
(Loss) Gain Recognized in Income on Derivative (Ineffective and Excluded Portion)
|
Amount of (Loss) Gain
Recognized in Income on Derivative
(Ineffective and Excluded Portion )
|
|||||||||||||||||||||
Three Months Ended
|
Three Months Ended
|
Three Months Ended
|
||||||||||||||||||||||||
July 2, 2010
|
July 3, 2009
|
July 2, 2010
|
July 3, 2009
|
July 2, 2010
|
July 3, 2009
|
|||||||||||||||||||||
Interest rate contracts
|
$ | (33 | ) | $ | (302 | ) |
Interest expense, net
|
$ | (443 | ) | $ | (528 | ) |
Interest expense, net
|
$ | (9 | ) | $ | (12 | ) | ||||||
Forward contracts
|
(667 | ) | 3,591 |
Cost of sales
|
149 | (62 | ) |
General and administrative(a)
|
3 | (60 | ) | |||||||||||||||
Research and development
|
65 | (33 | ) | |||||||||||||||||||||||
Selling and marketing
|
94 | (101 | ) | |||||||||||||||||||||||
General and administrative
|
69 | (121 | ) | |||||||||||||||||||||||
Total
|
$ | (700 | ) | $ | 3,289 | $ | 1,064 | $ | (2,045 | ) | $ | (6 | ) | $ | (72 | ) |
(a) The amount of gain recognized in income during the three months ended July 2, 2010 represents a $3 loss related to the amount excluded from the assessment of hedge effectiveness. The amount of loss recognized in income during the three months ended July 3, 2009 represents a $64 loss related to the amount excluded from the assessment of hedge effectiveness, net of $4 gain related to the ineffective portion of the hedging relationships.
|
||||||||||||||||||||||||||
Nine Months Ended
|
Nine Months Ended
|
Nine Months Ended
|
||||||||||||||||||||||||
July 2, 2010
|
July 3, 2009
|
July 2, 2010
|
July 3, 2009
|
July 2, 2010
|
July 3, 2009
|
|||||||||||||||||||||
Interest rate contracts
|
$ | (281 | ) | $ | (1,889 | ) |
Interest expense, net
|
$ | (1,495 | ) | $ | (1,228 | ) |
Interest expense, net
|
$ | (28 | ) | $ | (40 | ) | ||||||
Forward contracts
|
888 | (2,791 | ) |
Cost of sales
|
1805 | (3,167 | ) |
General and administrative(b)
|
51 | (285 | ) | |||||||||||||||
Research and development
|
307 | (176 | ) | |||||||||||||||||||||||
Selling and marketing
|
134 | (96 | ) | |||||||||||||||||||||||
General and administrative
|
185 | (289 | ) | |||||||||||||||||||||||
Total
|
$ | 607 | $ | (4,680 | ) | $ | 936 | $ | (4,956 | ) | $ | 23 | $ | (325 | ) |
(b) The amount of gain recognized in income during the nine months ended July 2, 2010 represents a $62 gain related to the ineffective portion of the hedging relationships, net of a $11 loss related to the amount excluded from the assessment of hedge effectiveness. The amount of loss recognized in income during the nine months ended July 3, 2009 represents a $286 loss related to the amount excluded from the assessment of hedge effectiveness, net of a $1 gain related to the ineffective portion of the hedging relationships.
|
Fiscal Year
|
Operating Leases
|
|||
2010 (remaining three months)
|
$ | 482 | ||
2011
|
1,324 | |||
2012
|
1,125 | |||
2013
|
633 | |||
2014
|
420 | |||
Thereafter
|
2,634 | |||
$ | 6,618 |
Fiscal Year
|
Purchase Contracts
|
|||
2010 (remaining nine months)
|
$ | 20,253 | ||
2011
|
9,710 | |||
2012
|
166 | |||
2013
|
37 | |||
2014
|
25 | |||
$ | 30,191 |
Oustanding Options
|
Exercisable Options
|
|||||||||||||||||||||||||||||||
Number of Shares
|
Weighted-Average Exercise Price
|
Weighted-Average Remaining Contractual Term (Years)
|
Aggregate Intrinsic Value
|
Number of Shares
|
Weighted-Average Exercise Price
|
Weighted-Average Remaining Contractual Term (Years)
|
Aggregate Intrinsic Value
|
|||||||||||||||||||||||||
Balance at October 2, 2009
|
3,382,763 | $ | 6.38 | 4.95 | $ | 20,362 | 2,845,996 | $ | 4.73 | 4.43 | $ | 20,227 | ||||||||||||||||||||
Granted
|
108,000 | 9.66 | ||||||||||||||||||||||||||||||
Exercised
|
(122,795 | ) | 1.75 | |||||||||||||||||||||||||||||
Forfeited or cancelled
|
(17,125 | ) | 16.42 | |||||||||||||||||||||||||||||
Balance at July 2, 2010
|
3,350,843 | $ | 6.60 | 4.49 | $ | 30,435 |
2,912,134
|
$ | 5.58 | 4.00 | $ | 29,230 |
Number of
Shares
|
Weighted-Average Grant-Date Fair Value Per Share
|
|||||||
Nonvested at October 2, 2009
|
218,298 | $ | 11.27 | |||||
Granted
|
163,307 | $ | 10.04 | |||||
Vested
|
(65,914 | ) | $ | 11.87 | ||||
Forfeited
|
(4,350 | ) | $ | 10.62 | ||||
Nonvested at July 2, 2010
|
311,341 | $ | 10.51 |
Expected term (in years)
|
7.79 | |||
Expected volatility
|
60.50 | % | ||
Risk-free rate
|
3.00 | % | ||
Dividend yield
|
0 | % |
Contractual term (in years)
|
10.00 | |||
Expected volatility
|
51.50 | % | ||
Risk-free rate
|
3.53 | % | ||
Dividend yield
|
0 | % |
Expected volatility
|
51.50 | % | ||
Risk-free rate
|
3.54 | % | ||
Dividend yield
|
0 | % |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
July 2,
2010
|
July 3,
2009
|
July 2,
2010
|
July 3,
2009
|
|||||||||||||
Share-based compensation cost recognized in the income statement by caption:
|
||||||||||||||||
Cost of sales
|
$ | 152 | $ | 131 | $ | 432 | $ | 375 | ||||||||
Research and development
|
51 | 43 | 161 | 130 | ||||||||||||
Selling and marketing
|
74 | 75 | 214 | 216 | ||||||||||||
General and administrative
|
505 | 453 | 1,493 | 1,303 | ||||||||||||
$ | 782 | $ | 702 | $ | 2,300 | $ | 2,024 | |||||||||
Share-based compensation cost capitalized in inventory
|
$ | 153 | $ | 131 | $ | 444 | $ | 386 | ||||||||
Share-based compensation cost remaining in inventory at end of period
|
$ | 98 | $ | 87 | $ | 98 | $ | 87 | ||||||||
Share-based compensation expense by type of award:
|
||||||||||||||||
Stock options
|
$ | 460 | $ | 455 | $ | 1,375 | $ | 1,327 | ||||||||
Restricted stock and units
|
286 | 215 | 823 | 599 | ||||||||||||
Stock purchase plan
|
36 | 32 | 102 | 98 | ||||||||||||
$ | 782 | $ | 702 | $ | 2,300 | $ | 2,024 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
July 2, 2010
|
July 3, 20091
|
July 2, 2010
|
July 3, 20091
|
|||||||||||||
Basic Earnings per Share
|
||||||||||||||||
Net income
|
$ | 4,211 | $ | 3,870 | $ | 12,544 | $ | 15,214 | ||||||||
Income allocated to participating securities
|
(78 | ) | (52 | ) | (222 | ) | (175 | ) | ||||||||
Net income available to common shareholders
|
$ | 4,133 | $ | 3,818 | $ | 12,322 | $ | 15,039 | ||||||||
Basic weighted average common shares outstanding
|
16,631 | 16,362 | 16,534 | 16,316 | ||||||||||||
Net income per common share - Basic
|
$ | 0.25 | $ | 0.23 | $ | 0.75 | $ | 0.92 | ||||||||
Diluted Earnings per Share
|
||||||||||||||||
Net income
|
$ | 4,211 | $ | 3,870 | $ | 12,544 | $ | 15,214 | ||||||||
Income allocated to participating securities
|
(72 | ) | (49 | ) | (206 | ) | (164 | ) | ||||||||
Net income available to common shareholders
|
$ | 4,139 | $ | 3,821 | $ | 12,338 | $ | 15,050 | ||||||||
Basic weighted average common shares outstanding
|
16,631 | 16,362 | 16,534 | 16,316 | ||||||||||||
Effect of dilutive stock options
|
1,330 | 1,173 | 1,253 | 1,086 | ||||||||||||
Diluted weighted average common shares outstanding
|
17,961 | 17,535 | 17,787 | 17,402 | ||||||||||||
Net income per common share - Diluted
|
$ | 0.23 | $ | 0.22 | $ | 0.69 | $ | 0.86 |
1 Restated in accordance with ASC 260.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
July 2,
|
July 3,
|
July 2,
|
July 3,
|
|||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Sales to external customers
|
||||||||||||||||
VED
|
$ | 66,701 | $ | 62,572 | $ | 191,006 | $ | 180,269 | ||||||||
Satcom equipment
|
21,621 | 15,704 | 62,666 | 49,329 | ||||||||||||
Other
|
5,554 | 4,244 | 11,323 | 11,971 | ||||||||||||
$ | 93,876 | $ | 82,520 | $ | 264,995 | $ | 241,569 | |||||||||
Intersegment product transfers
|
||||||||||||||||
VED
|
$ | 5,853 | $ | 3,536 | $ | 18,257 | $ | 13,323 | ||||||||
Satcom equipment
|
94 | - | 95 | 9 | ||||||||||||
$ | 5,947 | $ | 3,536 | $ | 18,352 | $ | 13,332 | |||||||||
EBITDA
|
||||||||||||||||
VED
|
$ | 17,744 | $ | 15,248 | $ | 47,862 | $ | 37,449 | ||||||||
Satcom equipment
|
1,737 | 1,078 | 6,455 | 3,123 | ||||||||||||
Other
|
(7,160 | ) | (2,545 | ) | (16,080 | ) | (6,514 | ) | ||||||||
$ | 12,321 | $ | 13,781 | $ | 38,237 | $ | 34,058 |
|
•
|
EBITDA is a component of the measures used by the Company’s board of directors and management team to evaluate the Company’s operating performance;
|
|
•
|
the Company’s Senior Credit Facilities contain a covenant that requires the Company to maintain a senior secured leverage ratio that contains EBITDA as a component, and the Company’s management team uses EBITDA to monitor compliance with this covenant;
|
|
•
|
EBITDA is a component of the measures used by the Company’s management team to make day-to-day operating decisions;
|
|
•
|
EBITDA facilitates comparisons between the Company’s operating results and those of competitors with different capital structures and, therefore, is a component of the measures used by the Company’s management to facilitate internal comparisons to competitors’ results and the Company’s industry in general; and
|
|
•
|
the payment of management bonuses is contingent upon, among other things, the satisfaction by the Company of certain targets that contain EBITDA as a component.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
July 2,
2010
|
July 3,
2009
|
July 2,
2010
|
July 3,
2009
|
|||||||||||||
Operating income
|
||||||||||||||||
VED
|
$ | 16,232 | $ | 13,788 | $ | 43,367 | $ | 33,128 | ||||||||
Satcom equipment
|
1,566 | 894 | 5,927 | 2,568 | ||||||||||||
Other
|
(8,245 | ) | (3,655 | ) | (19,310 | ) | (9,966 | ) | ||||||||
$ | 9,553 | $ | 11,027 | $ | 29,984 | $ | 25,730 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
July 2,
2010
|
July 3,
2009
|
July 2,
2010
|
July 3,
2009
|
|||||||||||||
Net income
|
$ | 4,211 | $ | 3,870 | $ | 12,544 | $ | 15,214 | ||||||||
Depreciation and amortization
|
2,768 | 2,703 | 8,253 | 8,080 | ||||||||||||
Interest expense, net
|
3,780 | 4,204 | 11,516 | 12,965 | ||||||||||||
Income tax expense (benefit)
|
1,562 | 3,004 | 5,924 | (2,201 | ) | |||||||||||
EBITDA
|
$ | 12,321 | $ | 13,781 | $ | 38,237 | $ | 34,058 |
Parent
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Consolidating
|
Consolidated
|
|||||||||||||||||||
(CPI Int'l)
|
(CPI)
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Total
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Current assets:
|
||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 689 | $ | 33,092 | $ | 683 | $ | 12,719 | $ | - | $ | 47,183 | ||||||||||||
Restricted cash
|
- | - | 952 | 88 | - | 1,040 | ||||||||||||||||||
Accounts receivable, net
|
- | 19,403 | 9,490 | 14,540 | - | 43,433 | ||||||||||||||||||
Inventories
|
- | 47,715 | 10,119 | 21,175 | (602 | ) | 78,407 | |||||||||||||||||
Deferred tax assets
|
- | 10,467 | 2 | 16 | - | 10,485 | ||||||||||||||||||
Intercompany receivable
|
- | 6,687 | 9,776 | 9,882 | (26,345 | ) | - | |||||||||||||||||
Prepaid and other current assets
|
25 | 3,052 | 476 | 768 | - | 4,321 | ||||||||||||||||||
Total current assets
|
714 | 120,416 | 31,498 | 59,188 | (26,947 | ) | 184,869 | |||||||||||||||||
Property, plant and equipment, net
|
- | 39,413 | 2,902 | 12,335 | - | 54,650 | ||||||||||||||||||
Deferred debt issue costs, net
|
302 | 2,305 | - | - | - | 2,607 | ||||||||||||||||||
Intangible assets, net
|
- | 53,534 | 13,074 | 6,610 | - | 73,218 | ||||||||||||||||||
Goodwill
|
- | 93,307 | 20,973 | 47,945 | - | 162,225 | ||||||||||||||||||
Other long-term assets
|
- | 3,559 | 227 | - | - | 3,786 | ||||||||||||||||||
Investment in subsidiaries
|
229,313 | 117,007 | - | - | (346,320 | ) | - | |||||||||||||||||
Total assets
|
$ | 230,329 | $ | 429,541 | $ | 68,674 | $ | 126,078 | $ | (373,267 | ) | $ | 481,355 | |||||||||||
Liabilities and stockholders' equity
|
||||||||||||||||||||||||
Current liabilities:
|
||||||||||||||||||||||||
Accounts payable
|
$ | 2 | $ | 11,223 | $ | 2,611 | $ | 7,328 | $ | - | $ | 21,164 | ||||||||||||
Accrued expenses
|
2,417 | 19,142 | 1,801 | 4,595 | - | 27,955 | ||||||||||||||||||
Product warranty
|
- | 2,378 | 823 | 1,629 | - | 4,830 | ||||||||||||||||||
Income taxes payable
|
- | (82 | ) | 201 | 3,489 | - | 3,608 | |||||||||||||||||
Deferred income taxes
|
- | - | - | 328 | - | 328 | ||||||||||||||||||
Advance payments from customers
|
- | 4,261 | 4,492 | 4,146 | - | 12,899 | ||||||||||||||||||
Intercompany payable
|
26,345 | - | - | - | (26,345 | ) | - | |||||||||||||||||
Total current liabilities
|
28,764 | 36,922 | 9,928 | 21,515 | (26,345 | ) | 70,784 | |||||||||||||||||
Deferred income taxes, non-current
|
- | 20,064 | - | 3,933 | - | 23,997 | ||||||||||||||||||
Long-term debt
|
11,931 | 183,000 | - | - | - | 194,931 | ||||||||||||||||||
Other long-term liabilities
|
- | 1,319 | 36 | 654 | - | 2,009 | ||||||||||||||||||
Total liabilities
|
40,695 | 241,305 | 9,964 | 26,102 | (26,345 | ) | 291,721 | |||||||||||||||||
Common stock
|
170 | - | - | - | - | 170 | ||||||||||||||||||
Parent investment
|
- | 54,939 | 43,167 | 59,077 | (157,183 | ) | - | |||||||||||||||||
Additional paid-in capital
|
79,257 | - | - | (8,211 | ) | 8,211 | 79,257 | |||||||||||||||||
Accumulated other comprehensive income
|
506 | 506 | - | 786 | (1,292 | ) | 506 | |||||||||||||||||
Retained earnings
|
112,501 | 132,791 | 15,543 | 48,324 | (196,658 | ) | 112,501 | |||||||||||||||||
Treasury stock, at cost
|
(2,800 | ) | - | - | - | - | (2,800 | ) | ||||||||||||||||
Total stockholders’ equity
|
189,634 | 188,236 | 58,710 | 99,976 | (346,922 | ) | 189,634 | |||||||||||||||||
Total liabilities and stockholders' equity
|
$ | 230,329 | $ | 429,541 | $ | 68,674 | $ | 126,078 | $ | (373,267 | ) | $ | 481,355 |
Parent
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Consolidating
|
Consolidated
|
|||||||||||||||||||
(CPI Int'l)
|
(CPI)
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Total
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 10 | $ | 15,055 | $ | 759 | $ | 10,328 | $ | - | $ | 26,152 | ||||||||||||
Restricted cash
|
- | - | 1,467 | 94 | - | 1,561 | ||||||||||||||||||
Accounts receivable, net
|
- | 18,456 | 12,581 | 14,108 | - | 45,145 | ||||||||||||||||||
Inventories
|
- | 41,877 | 7,622 | 18,117 | (620 | ) | 66,996 | |||||||||||||||||
Deferred tax assets
|
- | 8,494 | 2 | 156 | - | 8,652 | ||||||||||||||||||
Intercompany receivable
|
- | 9,033 | 6,751 | 10,534 | (26,318 | ) | - | |||||||||||||||||
Prepaid and other current assets
|
- | 5,396 | 475 | 829 | - | 6,700 | ||||||||||||||||||
Total current assets
|
10 | 98,311 | 29,657 | 54,166 | (26,938 | ) | 155,206 | |||||||||||||||||
Property, plant and equipment, net
|
- | 42,048 | 3,001 | 12,863 | - | 57,912 | ||||||||||||||||||
Deferred debt issue costs, net
|
344 | 3,265 | - | - | - | 3,609 | ||||||||||||||||||
Intangible assets, net
|
- | 54,891 | 13,477 | 7,062 | - | 75,430 | ||||||||||||||||||
Goodwill
|
- | 93,307 | 20,973 | 47,945 | - | 162,225 | ||||||||||||||||||
Other long-term assets
|
- | 3,645 | 227 | - | - | 3,872 | ||||||||||||||||||
Intercompany notes receivable
|
- | 1,035 | - | - | (1,035 | ) | - | |||||||||||||||||
Investment in subsidiaries
|
211,575 | 114,416 | - | - | (325,991 | ) | - | |||||||||||||||||
Total assets
|
$ | 211,929 | $ | 410,918 | $ | 67,335 | $ | 122,036 | $ | (353,964 | ) | $ | 458,254 | |||||||||||
Liabilities and stockholders' equity
|
||||||||||||||||||||||||
Accounts payable
|
$ | (1 | ) | $ | 11,100 | $ | 2,730 | $ | 8,836 | $ | - | $ | 22,665 | |||||||||||
Accrued expenses
|
137 | 13,293 | 1,634 | 3,951 | - | 19,015 | ||||||||||||||||||
Product warranty
|
- | 1,893 | 452 | 1,500 | - | 3,845 | ||||||||||||||||||
Income taxes payable
|
- | 1,683 | 151 | 2,471 | - | 4,305 | ||||||||||||||||||
Advance payments from customers
|
- | 7,389 | 4,368 | 1,239 | - | 12,996 | ||||||||||||||||||
Intercompany payable
|
26,318 | - | - | - | (26,318 | ) | - | |||||||||||||||||
Total current liabilities
|
26,454 | 35,358 | 9,335 | 17,997 | (26,318 | ) | 62,826 | |||||||||||||||||
Deferred income taxes, non-current
|
- | 20,342 | - | 4,384 | - | 24,726 | ||||||||||||||||||
Intercompany notes payable
|
- | - | - | 1,035 | (1,035 | ) | - | |||||||||||||||||
Long-term debt, less current portion
|
11,922 | 183,000 | - | - | - | 194,922 | ||||||||||||||||||
Other long-term liabilities
|
- | 1,720 | 36 | 471 | - | 2,227 | ||||||||||||||||||
Total liabilities
|
38,376 | 240,420 | 9,371 | 23,887 | (27,353 | ) | 284,701 | |||||||||||||||||
Common stock
|
168 | - | - | - | - | 168 | ||||||||||||||||||
Parent investment
|
- | 52,241 | 43,167 | 58,615 | (154,023 | ) | - | |||||||||||||||||
Additional paid-in capital
|
75,630 | - | - | (211 | ) | 211 | 75,630 | |||||||||||||||||
Accumulated other comprehensive gain (loss)
|
598 | 598 | - | (223 | ) | (375 | ) | 598 | ||||||||||||||||
Retained earnings
|
99,957 | 117,659 | 14,797 | 39,968 | (172,424 | ) | 99,957 | |||||||||||||||||
Treasury stock
|
(2,800 | ) | - | - | - | - | (2,800 | ) | ||||||||||||||||
Total stockholders’ equity
|
173,553 | 170,498 | 57,964 | 98,149 | (326,611 | ) | 173,553 | |||||||||||||||||
Total liabilities and stockholders' equity
|
$ | 211,929 | $ | 410,918 | $ | 67,335 | $ | 122,036 | $ | (353,964 | ) | $ | 458,254 |
Parent
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Consolidating
|
Consolidated
|
|||||||||||||||||||
(CPI Int'l)
|
(CPI)
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Total
|
|||||||||||||||||||
Sales
|
$ | - | $ | 57,946 | $ | 19,237 | $ | 35,629 | $ | (18,936 | ) | $ | 93,876 | |||||||||||
Cost of sales
|
- | 41,111 | 16,167 | 26,689 | (19,014 | ) | 64,953 | |||||||||||||||||
Gross profit
|
- | 16,835 | 3,070 | 8,940 | 78 | 28,923 | ||||||||||||||||||
Operating costs and expenses:
|
||||||||||||||||||||||||
Research and development
|
- | 1,477 | 12 | 2,053 | - | 3,542 | ||||||||||||||||||
Selling and marketing
|
- | 1,849 | 1,068 | 2,261 | - | 5,178 | ||||||||||||||||||
General and administrative
|
- | 4,053 | 1,116 | 1,204 | - | 6,373 | ||||||||||||||||||
Amortization of acquisition-related intangible assets
|
- | 390 | 146 | 152 | - | 688 | ||||||||||||||||||
Merger expenses
|
2,256 | 1,333 | 3,589 | |||||||||||||||||||||
Total operating costs and expenses
|
2,256 | 9,102 | 2,342 | 5,670 | - | 19,370 | ||||||||||||||||||
Operating income (loss)
|
(2,256 | ) | 7,733 | 728 | 3,270 | 78 | 9,553 | |||||||||||||||||
Interest expense (income), net
|
201 | 3,581 | - | (2 | ) | - | 3,780 | |||||||||||||||||
Income (loss) before income tax expense
|
||||||||||||||||||||||||
and equity in income of subsidiaries
|
(2,457 | ) | 4,152 | 728 | 3,272 | 78 | 5,773 | |||||||||||||||||
Income tax expense (benefit)
|
(134 | ) | 632 | 258 | 806 | - | 1,562 | |||||||||||||||||
Equity in income of subsidiaries
|
6,534 | 3,014 | - | - | (9,548 | ) | - | |||||||||||||||||
Net income
|
$ | 4,211 | $ | 6,534 | $ | 470 | $ | 2,466 | $ | (9,470 | ) | $ | 4,211 |
Parent
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Consolidating
|
Consolidated
|
|||||||||||||||||||
(CPI Int'l)
|
(CPI)
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Total
|
|||||||||||||||||||
Sales
|
$ | - | $ | 53,852 | $ | 17,956 | $ | 30,481 | $ | (19,769 | ) | $ | 82,520 | |||||||||||
Cost of sales
|
- | 38,936 | 14,826 | 24,379 | (19,905 | ) | 58,236 | |||||||||||||||||
Gross profit
|
- | 14,916 | 3,130 | 6,102 | 136 | 24,284 | ||||||||||||||||||
Operating costs and expenses:
|
||||||||||||||||||||||||
Research and development
|
- | 881 | - | 1,850 | - | 2,731 | ||||||||||||||||||
Selling and marketing
|
- | 1,830 | 1,094 | 1,838 | - | 4,762 | ||||||||||||||||||
General and administrative
|
- | 2,697 | 805 | 1,571 | - | 5,073 | ||||||||||||||||||
Amortization of acquisition-related intangible assets
|
- | 387 | 152 | 152 | - | 691 | ||||||||||||||||||
Total operating costs and expenses
|
- | 5,795 | 2,051 | 5,411 | - | 13,257 | ||||||||||||||||||
Operating income
|
- | 9,121 | 1,079 | 691 | 136 | 11,027 | ||||||||||||||||||
Interest expense, net
|
237 | 3,955 | - | 12 | - | 4,204 | ||||||||||||||||||
Gain on debt extinguishment
|
- | (51 | ) | - | - | - | (51 | ) | ||||||||||||||||
(Loss) income before income tax expense
|
||||||||||||||||||||||||
and equity in income of subsidiaries
|
(237 | ) | 5,217 | 1,079 | 679 | 136 | 6,874 | |||||||||||||||||
Income tax (benefit) expense
|
(88 | ) | 4,231 | 209 | (1,348 | ) | - | 3,004 | ||||||||||||||||
Equity in income of subsidiaries
|
4,019 | 3,033 | - | - | (7,052 | ) | - | |||||||||||||||||
Net income
|
$ | 3,870 | $ | 4,019 | $ | 870 | $ | 2,027 | $ | (6,916 | ) | $ | 3,870 |
Parent
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Consolidating
|
Consolidated
|
|||||||||||||||||||
(CPI Int'l)
|
(CPI)
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Total
|
|||||||||||||||||||
Sales
|
$ | - | $ | 159,203 | $ | 54,612 | $ | 109,759 | $ | (58,579 | ) | $ | 264,995 | |||||||||||
Cost of sales
|
- | 116,279 | 46,420 | 81,808 | (58,597 | ) | 185,910 | |||||||||||||||||
Gross profit
|
- | 42,924 | 8,192 | 27,951 | 18 | 79,085 | ||||||||||||||||||
Operating costs and expenses:
|
||||||||||||||||||||||||
Research and development
|
- | 2,911 | 79 | 6,297 | - | 9,287 | ||||||||||||||||||
Selling and marketing
|
- | 5,248 | 3,415 | 6,729 | - | 15,392 | ||||||||||||||||||
General and administrative
|
1 | 11,462 | 3,055 | 4,042 | - | 18,560 | ||||||||||||||||||
Amortization of acquisition-related intangible assets
|
- | 1,170 | 439 | 453 | - | 2,062 | ||||||||||||||||||
Merger expenses
|
2,256 | 1,544 | 3,800 | |||||||||||||||||||||
Total operating costs and expenses
|
2,257 | 22,335 | 6,988 | 17,521 | - | 49,101 | ||||||||||||||||||
Operating (loss) income
|
(2,257 | ) | 20,589 | 1,204 | 10,430 | 18 | 29,984 | |||||||||||||||||
Interest expense (income), net
|
626 | 10,840 | (2 | ) | 52 | - | 11,516 | |||||||||||||||||
(Loss) income before income tax expense
|
||||||||||||||||||||||||
and equity in income of subsidiaries
|
(2,883 | ) | 9,749 | 1,206 | 10,378 | 18 | 18,468 | |||||||||||||||||
Income tax (benefit) expense
|
(295 | ) | 3,737 | 460 | 2,022 | - | 5,924 | |||||||||||||||||
Equity in income of subsidiaries
|
15,132 | 9,120 | - | - | (24,252 | ) | - | |||||||||||||||||
Net income
|
$ | 12,544 | $ | 15,132 | $ | 746 | $ | 8,356 | $ | (24,234 | ) | $ | 12,544 |
Parent
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Consolidating
|
Consolidated
|
|||||||||||||||||||
(CPI Int'l)
|
(CPI)
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Total
|
|||||||||||||||||||
Sales
|
$ | - | $ | 152,707 | $ | 54,740 | $ | 92,714 | $ | (58,592 | ) | $ | 241,569 | |||||||||||
Cost of sales
|
- | 115,000 | 45,563 | 73,690 | (58,650 | ) | 175,603 | |||||||||||||||||
Gross profit
|
- | 37,707 | 9,177 | 19,024 | 58 | 65,966 | ||||||||||||||||||
Operating costs and expenses:
|
||||||||||||||||||||||||
Research and development
|
- | 2,639 | 3 | 5,429 | - | 8,071 | ||||||||||||||||||
Selling and marketing
|
- | 5,392 | 3,329 | 5,831 | - | 14,552 | ||||||||||||||||||
General and administrative
|
- | 10,648 | 2,959 | 1,930 | - | 15,537 | ||||||||||||||||||
Amortization of acquisition-related intangible assets
|
- | 1,167 | 456 | 453 | - | 2,076 | ||||||||||||||||||
Total operating costs and expenses
|
- | 19,846 | 6,747 | 13,643 | - | 40,236 | ||||||||||||||||||
Operating income
|
- | 17,861 | 2,430 | 5,381 | 58 | 25,730 | ||||||||||||||||||
Interest expense (income), net
|
768 | 12,153 | (8 | ) | 52 | - | 12,965 | |||||||||||||||||
Gain on debt extinguishment
|
- | (248 | ) | - | - | - | (248 | ) | ||||||||||||||||
(Loss) income before income tax expense
|
||||||||||||||||||||||||
and equity in income of subsidiaries
|
(768 | ) | 5,956 | 2,438 | 5,329 | 58 | 13,013 | |||||||||||||||||
Income tax (benefit) expense
|
(291 | ) | 146 | 595 | (2,651 | ) | - | (2,201 | ) | |||||||||||||||
Equity in income of subsidiaries
|
15,691 | 9,881 | - | - | (25,572 | ) | - | |||||||||||||||||
Net income
|
$ | 15,214 | $ | 15,691 | $ | 1,843 | $ | 7,980 | $ | (25,514 | ) | $ | 15,214 |
Parent
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Consolidating
|
Consolidated
|
|||||||||||||||||||
(CPI Int'l)
|
(CPI)
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Total
|
|||||||||||||||||||
Cash flows from operating activities
|
||||||||||||||||||||||||
Net cash (used in) provided by operating activities
|
$ | (444 | ) | $ | 19,972 | $ | 199 | $ | 2,789 | $ | - | $ | 22,516 | |||||||||||
Cash flows from investing activities
|
||||||||||||||||||||||||
Capital expenditures
|
- | (2,187 | ) | (239 | ) | (398 | ) | - | (2,824 | ) | ||||||||||||||
Payment of patent application fees
|
- | - | (36 | ) | - | - | (36 | ) | ||||||||||||||||
Net cash used in investing activities
|
- | (2,187 | ) | (275 | ) | (398 | ) | - | (2,860 | ) | ||||||||||||||
Cash flows from financing activities
|
||||||||||||||||||||||||
Proceeds from issuance of common stock to employees
|
579 | - | - | - | - | 579 | ||||||||||||||||||
Proceeds from exercise of stock options
|
214 | - | - | - | - | 214 | ||||||||||||||||||
Excess tax benefit on stock option exercises
|
- | 582 | - | - | - | 582 | ||||||||||||||||||
Intercompany dividends
|
330 | (330 | ) | - | - | - | - | |||||||||||||||||
Net cash provided by financing activities
|
1,123 | 252 | - | - | - | 1,375 | ||||||||||||||||||
Net increase (decrease) in cash and cash equivalents
|
679 | 18,037 | (76 | ) | 2,391 | - | 21,031 | |||||||||||||||||
Cash and cash equivalents at beginning of period
|
10 | 15,055 | 759 | 10,328 | - | 26,152 | ||||||||||||||||||
Cash and cash equivalents at end of period
|
$ | 689 | $ | 33,092 | $ | 683 | $ | 12,719 | $ | - | $ | 47,183 |
Parent
|
Issuer
|
Guarantor
|
Non-Guarantor
|
Consolidating
|
Consolidated
|
|||||||||||||||||||
(CPI Int'l)
|
(CPI)
|
Subsidiaries
|
Subsidiaries
|
Eliminations
|
Total
|
|||||||||||||||||||
Cash flows from operating activities
|
||||||||||||||||||||||||
Net cash (used in) provided by operating activities
|
$ | (1,266 | ) | $ | 19,527 | $ | 423 | $ | 1,624 | $ | - | $ | 20,308 | |||||||||||
Cash flows from investing activities
|
||||||||||||||||||||||||
Capital expenditures
|
- | (2,053 | ) | (215 | ) | (81 | ) | - | (2,349 | ) | ||||||||||||||
Net cash used in investing activities
|
- | (2,053 | ) | (215 | ) | (81 | ) | - | (2,349 | ) | ||||||||||||||
Cash flows from financing activities
|
||||||||||||||||||||||||
Repayments of debt
|
- | (12,358 | ) | - | - | - | (12,358 | ) | ||||||||||||||||
Proceeds from issuance of common stock to employees
|
781 | - | - | - | - | 781 | ||||||||||||||||||
Proceeds from exercise of stock options
|
82 | - | - | - | - | 82 | ||||||||||||||||||
Excess tax benefit on stock option exercises
|
- | 51 | - | - | - | 51 | ||||||||||||||||||
Intercompany dividends / loan repayments
|
396 | (8,607 | ) | - | 8,211 | - | - | |||||||||||||||||
Net cash provided by (used in) financing activities
|
1,259 | (20,914 | ) | - | 8,211 | - | (11,444 | ) | ||||||||||||||||
Net (decrease) increase in cash and cash equivalents
|
(7 | ) | (3,440 | ) | 208 | 9,754 | - | 6,515 | ||||||||||||||||
Cash and cash equivalents at beginning of period
|
84 | 26,272 | 493 | 1,821 | - | 28,670 | ||||||||||||||||||
Cash and cash equivalents at end of period
|
$ | 77 | $ | 22,832 | $ | 701 | $ | 11,575 | $ | - | $ | 35,185 |
Nine Months Ended
|
||||||||||||||||||||||||
July 2, 2010
|
July 3, 2009
|
Increase (Decrease)
|
||||||||||||||||||||||
% of
|
% of
|
|||||||||||||||||||||||
Amount
|
Orders
|
Amount
|
Orders
|
Amount
|
Percent
|
|||||||||||||||||||
Radar and Electronic Warfare
|
$ | 102.6 | 36 | % | $ | 113.0 | 42 | % | $ | (10.4 | ) | (9 | ) % | |||||||||||
Medical
|
52.5 | 19 | 49.5 | 18 | 3.0 | 6 | ||||||||||||||||||
Communications
|
98.3 | 35 | 91.0 | 33 | 7.3 | 8 | ||||||||||||||||||
Industrial
|
18.0 | 6 | 15.9 | 6 | 2.1 | 13 | ||||||||||||||||||
Scientific
|
12.0 | 4 | 1.9 | 1 | 10.1 | 532 | ||||||||||||||||||
Total
|
$ | 283.4 | 100 | % | $ | 271.3 | 100 | % | $ | 12.1 | 4 | % |
·
|
Radar and Electronic Warfare: The majority of our products in the radar and electronic warfare markets are for domestic and international defense and government end uses. Orders in these markets are characterized by many smaller orders in the $0.5 million to $3.0 million range by product or program, and the timing of these orders may vary from year to year. On a combined basis, orders for the radar and electronic warfare markets decreased approximately 9% from an aggregate of $113.0 million in the first nine months of fiscal year 2009 to an aggregate of $102.6 million in the first nine months of fiscal year 2010. The decrease in orders for these combined markets was primarily due to the timing of orders to support certain radar and electronic warfare systems, including a foreign radar program, several airborne electronic countermeasure systems and the HAWK missile system. In the first nine months of fiscal year 2009, we received $4.1 million in orders for a foreign radar program; this large order was not expected to, and did not, repeat in the first nine months of fiscal year 2010.
|
·
|
Medical: Orders for our medical products consist of orders for medical imaging applications, such as x-ray imaging, magnetic resonance imaging (“MRI”) and positron emission tomography (“PET”) applications, and for radiation therapy applications for the treatment of cancer. The 6% increase in medical orders resulted from an increase in demand for products to support MRI applications, and was partially offset by a decrease in orders of products to support radiation therapy applications. In fiscal year 2009, orders to support radiation therapy applications were higher than the historical average, while sales of these products remained at normal levels.
|
·
|
Communications: Orders for our communications products consist of orders for commercial communications applications and military communications applications. The 8% increase in communications orders was primarily due to increases in orders to support commercial communications applications, such as fixed satellite broadcast and commercial radio broadcast applications. Excluding the Warfighter Information Network – Tactical (“WIN-T”) military communications program, demand for products to support military communications programs also increased during the most recent period. Orders for the WIN-T program decreased $20 million in the most recent period due to the atypical receipt of multiple large orders in the first nine months of fiscal year 2009; the size and frequency of these large orders were not expected to, and did not, repeat in the first nine months of fiscal year 2010. Military communications is a relatively new sector of the overall communications market for us, and,
|
|
with the exception of the WIN-T program, is characterized by numerous programs that are relatively modest in size and for which the timing may vary from year to year. Over the long-term, we expect our participation in military communications programs to continue to grow.
|
·
|
Industrial: Orders in the industrial market are cyclical and are generally tied to the state of the economy. The $2.1 million increase in industrial orders was primarily due to an increase in demand for products used in semiconductor and liquid crystal display (“LCD”) screen manufacturing applications.
|
·
|
Scientific: Orders in the scientific market are historically one-time projects and can fluctuate significantly from period to period. The $10.1 million increase in scientific orders was primarily the result of the receipt of orders for products to support fusion research and scientific accelerators at domestic and European laboratories.
|
Three Months Ended
|
||||||||||||||||||||
July 2, 2010
|
July 3, 2009
|
Increase
(Decrease)
|
||||||||||||||||||
% of
|
% of
|
|||||||||||||||||||
Amount
|
Sales
|
Amount
|
Sales
|
Amount
|
||||||||||||||||
Sales
|
$ | 93.9 | 100.0 | % | $ | 82.5 | 100.0 | % | $ | 11.4 | ||||||||||
Cost of sales
|
65.0 | 69.2 | 58.2 | 70.5 | 6.8 | |||||||||||||||
Gross profit
|
28.9 | 30.8 | 24.3 | 29.5 | 4.6 | |||||||||||||||
Research and development
|
3.5 | 3.7 | 2.7 | 3.3 | 0.8 | |||||||||||||||
Selling and marketing
|
5.2 | 5.5 | 4.8 | 5.8 | 0.4 | |||||||||||||||
General and administrative
|
6.4 | 6.8 | 5.1 | 6.2 | 1.3 | |||||||||||||||
Amortization of acquisition-related intangibles
|
0.7 | 0.7 | 0.7 | 0.8 | - | |||||||||||||||
Merger expenses
|
3.6 | 3.8 | - | - | 3.6 | |||||||||||||||
Operating income
|
9.6 | 10.2 | 11.0 | 13.3 | (1.4 | ) | ||||||||||||||
Interest expense, net
|
3.8 | 4.0 | 4.2 | 5.1 | (0.4 | ) | ||||||||||||||
Gain on debt extinguishment
|
- | - | (0.1 | ) | (0.1 | ) | 0.1 | |||||||||||||
Income before taxes
|
5.8 | 6.2 | 6.9 | 8.4 | (1.1 | ) | ||||||||||||||
Income tax expense
|
1.6 | 1.7 | 3.0 | 3.6 | (1.4 | ) | ||||||||||||||
Net income
|
$ | 4.2 | 4.5 | % | $ | 3.9 | 4.7 | % | $ | 0.3 | ||||||||||
Other Data:
|
||||||||||||||||||||
EBITDA (a)
|
$ | 12.3 | 13.1 | % | $ | 13.8 | 16.7 | % | $ | (1.5 | ) |
Note: Totals may not equal the sum of the components due to independent rounding. Percentages are calculated based on rounded dollar amounts presented.
|
(a)
|
EBITDA represents earnings before net interest expense, provision for income taxes and depreciation and amortization. For the reasons listed below, we believe that U.S. generally accepted accounting principles (“GAAP”) based financial
|
|
information for leveraged businesses such as ours should be supplemented by EBITDA so that investors better understand our financial performance in connection with their analysis of our business:
|
|
•
|
EBITDA is a component of the measures used by our board of directors and management team to evaluate our operating performance;
|
|
•
|
our senior credit facilities contain a covenant that requires us to maintain a senior secured leverage ratio that contains EBITDA as a component, and our management team uses EBITDA to monitor compliance with this covenant;
|
|
•
|
EBITDA is a component of the measures used by our management team to make day-to-day operating decisions;
|
|
•
|
EBITDA facilitates comparisons between our operating results and those of competitors with different capital structures and, therefore, is a component of the measures used by the management to facilitate internal comparisons to competitors’ results and our industry in general; and
|
|
•
|
the payment of management bonuses is contingent upon, among other things, the satisfaction by us of certain targets that contain EBITDA as a component.
|
|
Other companies may define EBITDA differently and, as a result, our measure of EBITDA may not be directly comparable to EBITDA of other companies. Although we use EBITDA as a financial measure to assess the performance of our business, the use of EBITDA is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. When analyzing our performance, EBITDA should be considered in addition to, and not as a substitute for or superior to, net income, cash flows from operating activities or other statements of income or statements of cash flows data prepared in accordance with GAAP.
|
|
For a reconciliation of Net Income to EBITDA, see Note 11 of the accompanying unaudited condensed consolidated financial statements.
|
Three Months Ended
|
||||||||||||||||||||||||
July 2, 2010
|
July 3, 2009
|
Increase (Decrease)
|
||||||||||||||||||||||
% of
|
% of
|
|||||||||||||||||||||||
Amount
|
Sales
|
Amount
|
Sales
|
Amount
|
Percent
|
|||||||||||||||||||
Radar and Electronic Warfare
|
$ | 35.4 | 37 | % | $ | 35.7 | 43 | % | $ | (0.3 | ) | (1 | ) % | |||||||||||
Medical
|
17.7 | 19 | 15.5 | 19 | 2.2 | 14 | ||||||||||||||||||
Communications
|
32.6 | 35 | 24.0 | 29 | 8.6 | 36 | ||||||||||||||||||
Industrial
|
5.6 | 6 | 5.9 | 7 | (0.3 | ) | (5 | ) | ||||||||||||||||
Scientific
|
2.6 | 3 | 1.4 | 2 | 1.2 | 86 | ||||||||||||||||||
Total
|
$ | 93.9 | 100 | % | $ | 82.5 | 100 | % | $ | 11.4 | 14 | % |
·
|
Radar and Electronic Warfare: The majority of our products in the radar and electronic warfare markets are for domestic and international defense and government end uses. The timing of orders receipts and subsequent shipments in these markets may vary from year to year. On a combined basis, at $35.4 million in the three months ended July 2, 2010, sales for these two markets were essentially unchanged from the $35.7 million in the three months ended July 3, 2009. An increase in sales of products to support the Aegis weapons system and electronic warfare systems in the most recent period largely offset a decrease in sales of products to support the APN-245 Automatic Carrier Landing System and the HAWK missile system.
|
·
|
Medical: Sales of our medical products consist of sales for medical imaging applications, such as x-ray imaging, MRI and PET applications, and for radiation therapy applications for the treatment of cancer. The 14% increase in sales of our medical products in the three months ended July 2, 2010 was due to increased sales of products to support MRI and x-ray imaging applications.
|
·
|
Communications: Sales of our communications products consist of sales for commercial communications applications and military communications applications. The 36% increase in sales in the communications market was due to increases in sales to support commercial communications applications, particularly fixed satellite broadcast applications, as well as increases in sales to support a variety of military communications applications, including the WIN-T program. Military communications is a relatively new sector of the overall communications market for us, and, with the exception of the WIN-T program, is characterized by numerous programs that are relatively modest in size and for which the timing may vary from year to year. Over the long-term, we expect our participation in military communications programs to continue to grow.
|
·
|
Industrial: Sales in the industrial market are cyclical and are generally tied to the state of the economy. The $0.3 million decrease in sales of industrial products in the most recent period was primarily due to decreased sales of products for instrumentation applications, partially offset by increased sales to support semiconductor manufacturing applications.
|
·
|
Scientific: Sales in the scientific market are historically one-time projects and can fluctuate significantly from period to period. The $1.2 million increase in scientific sales was primarily the result of increased sales for a fusion research program.
|
Three Months Ended
|
||||||||
July 2,
|
July 3,
|
|||||||
2010
|
2009
|
|||||||
Company sponsored
|
$ | 3.5 | $ | 2.7 | ||||
Customer sponsored, charged to cost of sales
|
4.0 | 4.8 | ||||||
$ | 7.5 | $ | 7.5 |
Nine Months Ended
|
||||||||||||||||||||
July 2, 2010
|
July 3, 2009
|
Increase
(Decrease)
|
||||||||||||||||||
% of
|
% of
|
|||||||||||||||||||
Amount
|
Sales
|
Amount
|
Sales
|
Amount
|
||||||||||||||||
Sales
|
$ | 265.0 | 100.0 | % | $ | 241.6 | 100.0 | % | $ | 23.4 | ||||||||||
Cost of sales
|
185.9 | 70.2 | 175.6 | 72.7 | 10.3 | |||||||||||||||
Gross profit
|
79.1 | 29.8 | 66.0 | 27.3 | 13.1 | |||||||||||||||
Research and development
|
9.3 | 3.5 | 8.1 | 3.4 | 1.2 | |||||||||||||||
Selling and marketing
|
15.4 | 5.8 | 14.6 | 6.0 | 0.8 | |||||||||||||||
General and administrative
|
18.6 | 7.0 | 15.6 | 6.5 | 3.0 | |||||||||||||||
Amortization of acquisition-related intangibles
|
2.1 | 0.8 | 2.1 | 0.9 | - | |||||||||||||||
Merger expense
|
3.8 | 1.4 | - | - | 3.8 | |||||||||||||||
Operating income
|
30.0 | 11.3 | 25.7 | 10.6 | 4.3 | |||||||||||||||
Interest expense, net
|
11.5 | 4.3 | 13.0 | 5.4 | (1.5 | ) | ||||||||||||||
Gain on debt extinguishment
|
- | - | (0.2 | ) | (0.1 | ) | 0.2 | |||||||||||||
Income before taxes
|
18.5 | 7.0 | 13.0 | 5.4 | 5.5 | |||||||||||||||
Income tax expense (benefit)
|
5.9 | 2.2 | (2.2 | ) | (0.9 | ) | 8.1 | |||||||||||||
Net income
|
$ | 12.5 | 4.7 | % | $ | 15.2 | 6.3 | % | $ | (2.7 | ) | |||||||||
Other Data:
|
||||||||||||||||||||
EBITDA (a)
|
$ | 38.2 | 14.4 | % | $ | 34.1 | 14.1 | % | $ | 4.1 |
Note: Totals may not equal the sum of the components due to independent rounding. Percentages are calculated based on rounded dollar amounts presented.
|
(a)
|
EBITDA represents earnings before net interest expense, provision for income taxes and depreciation and amortization. For the reasons listed below, we believe that U.S. generally accepted accounting principles (“GAAP”) based financial information for leveraged businesses such as ours should be supplemented by EBITDA so that investors better understand our financial performance in connection with their analysis of our business:
|
|
•
|
EBITDA is a component of the measures used by our board of directors and management team to evaluate our operating performance;
|
|
•
|
our senior credit facilities contain a covenant that requires us to maintain a senior secured leverage ratio that contains EBITDA as a component, and our management team uses EBITDA to monitor compliance with this covenant;
|
|
•
|
EBITDA is a component of the measures used by our management team to make day-to-day operating decisions;
|
|
•
|
EBITDA facilitates comparisons between our operating results and those of competitors with different capital structures and, therefore, is a component of the measures used by the management to facilitate internal comparisons to competitors’ results and our industry in general; and
|
|
•
|
the payment of management bonuses is contingent upon, among other things, the satisfaction by us of certain targets that contain EBITDA as a component.
|
|
Other companies may define EBITDA differently and, as a result, our measure of EBITDA may not be directly comparable to EBITDA of other companies. Although we use EBITDA as a financial measure to assess the performance of our business, the use of EBITDA is limited because it does not include certain material costs, such as interest and taxes, necessary to operate our business. When analyzing our performance, EBITDA should be considered in addition to, and not as a substitute for or superior to, net income, cash flows from operating activities or other statements of income or statements of cash flows data prepared in accordance with GAAP.
|
|
For a reconciliation of Net Income to EBITDA, see Note 11 of the accompanying unaudited condensed consolidated financial statements.
|
Nine Months Ended
|
||||||||||||||||||||||||
July 2, 2010
|
July 3, 2009
|
Increase (Decrease)
|
||||||||||||||||||||||
% of
|
% of
|
|||||||||||||||||||||||
Amount
|
Sales
|
Amount
|
Sales
|
Amount
|
Percent
|
|||||||||||||||||||
Radar and Electronic Warfare
|
$ | 96.9 | 36 | % | $ | 98.0 | 41 | % | $ | (1.1 | ) | (1 | ) % | |||||||||||
Medical
|
54.6 | 21 | 46.9 | 19 | 7.7 | 16 | ||||||||||||||||||
Communications
|
90.4 | 34 | 75.5 | 31 | 14.9 | 20 | ||||||||||||||||||
Industrial
|
16.0 | 6 | 15.8 | 7 | 0.2 | 1 | ||||||||||||||||||
Scientific
|
7.1 | 3 | 5.4 | 2 | 1.7 | 31 | ||||||||||||||||||
Total
|
$ | 265.0 | 100 | % | $ | 241.6 | 100 | % | $ | 23.4 | 10 | % |
·
|
Radar and Electronic Warfare: The majority of our sales in the radar and electronic warfare markets are for products for domestic and international defense and government end uses. The timing of the receipt of orders and subsequent shipments in these markets may vary from year to year. On a combined basis, sales for these markets were essentially unchanged at $96.9 million in the nine months ended July 2, 2010 as compared to $98.0 million in the nine months ended July 3, 2009. In the most recent period, an increase in sales to support electronic warfare systems and certain radar systems partially offset a decrease in sales to support foreign radar systems and the HAWK missile system.
|
·
|
Medical: Sales of our medical products consist of sales for medical imaging applications, such as x-ray imaging, MRI and PET applications, and for radiation therapy applications for the treatment of cancer. The 16% increase in sales of our medical products was primarily due to increased sales to support MRI applications. Sales of products for x-ray imaging applications also increased.
|
·
|
Communications: The 20% increase in sales in the communications market was attributable to increases in sales to support a variety of commercial communications applications, particularly fixed satellite broadcast applications, and military communications applications, including the WIN-T program. Military communications is a relatively new sector of the overall communications market for us, and, with the exception of the WIN-T program, is characterized by numerous programs that are relatively modest in size and for which the timing may vary from year to year. Over the long term, we expect our participation in military communications programs to continue to grow.
|
·
|
Industrial: Sales in the industrial market are cyclical and are generally tied to the state of the economy. The $0.2 million increase in industrial sales was due to an increase in sales of products for cargo screening and semiconductor manufacturing applications, partially offset by a decrease in sales of products for instrumentation applications.
|
·
|
Scientific: Sales in the scientific market are historically one-time projects and can fluctuate significantly from period to period. The $1.7 million increase in scientific sales was primarily the result of increased sales for a fusion research program.
|
Nine Months Ended
|
||||||||
July 2,
|
July 3,
|
|||||||
2010
|
2009
|
|||||||
Company sponsored
|
$ | 9.3 | $ | 8.1 | ||||
Customer sponsored, charged to cost of sales
|
11.7 | 12.1 | ||||||
$ | 21.0 | $ | 20.2 |
July 2,
|
October 2,
|
|||||||
2010
|
2009
|
|||||||
Cash and cash equivalents
|
$ | 47.2 | $ | 26.2 | ||||
Working capital
|
$ | 114.1 | $ | 92.4 |
Nine Months Ended
|
||||||||
July 2,
|
July 3,
|
|||||||
2010
|
2009
|
|||||||
Net cash provided by operating activities
|
$ | 22.5 | $ | 20.3 | ||||
Net cash used in investing activities
|
(2.9 | ) | (2.3 | ) | ||||
Net cash provided by (used in) financing activities
|
1.4 | (11.5 | ) | |||||
Net increase in cash and cash equivalents
|
$ | 21.0 | $ | 6.5 |
Fiscal Year
|
||||||||||||||||||||
Total
|
2010
(remaining
three months)
|
2011 - 2012 | 2013 - 2014 |
Thereafter
|
||||||||||||||||
Operating leases
|
$ | 6,618 | $ | 482 | $ | 2,449 | $ | 1,053 | $ | 2,634 | ||||||||||
Purchase commitments
|
30,191 | 20,253 | 9,876 | 62 | - | |||||||||||||||
Debt obligations
|
195,000 | - | 183,000 | - | 12,000 | |||||||||||||||
Interest on debt obligations
|
21,011 | 3,358 | 15,963 | 1,452 | 238 | |||||||||||||||
Uncertain tax positions
|
2,672 | 2,672 | - | - | - | |||||||||||||||
Total cash obligations
|
$ | 255,492 | $ | 26,765 | $ | 211,288 | $ | 2,567 | $ | 14,872 | ||||||||||
Standby letters of credit
|
$ | 4,571 | $ | 4,571 |
·
|
We and Comtech may be unable to obtain the regulatory approvals or satisfy other closing conditions required to complete the merger. We and Comtech have received a request for additional information and documents—often referred to as a second request—from the Department of Justice in connection with the proposed merger. Failure to complete the merger could negatively impact our stock price and our future business and financial results.
|
·
|
Although we and Comtech expect that the merger will result in benefits to the combined company, the combined company may not realize those benefits because of various challenges.
|
·
|
The price of Comtech common stock may decline, which would decrease the value of the total merger consideration to be received by our stockholders in the merger.
|
·
|
The merger agreement limits our ability to pursue alternatives to the merger.
|
·
|
The merger agreement imposes customary restrictions on the conduct of our business outside of the ordinary course prior to the closing of the transaction or the termination of the merger agreement, which may also adversely affect our ability to manage our operations effectively in light of changes in economic or market conditions or to execute our business strategy and meet our financial goals.
|
·
|
The pendency of the proposed merger, whether or not consummated, may result in a diversion of management’s attention from day-to-day operations, a loss of key personnel, and a disruption of our operations. The announcement and pendency of the proposed transaction may also affect our relationships with third parties.
|
·
|
Under certain circumstances, we may be required under the merger agreement to pay Comtech a termination fee of up to $15 million.
|
·
|
Certain of our directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of our stockholders.
|
·
|
A lawsuit has been filed and other lawsuits may be filed against us and Comtech challenging the merger, and an adverse ruling in any such lawsuit may prevent the merger from being completed.
|
No.
|
Description
|
||
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-15(e) and Rule 15d-15(e), promulgated under the Securities Exchange Act of 1934, as amended.
|
||
31.2 |
Certification of Chief Financial Officer pursuant to Rule 13a-15(e) and Rule 15d-15(e), promulgated under the Securities Exchange Act of 1934, as amended.
|
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32.1 |
Certifications of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2 |
Certifications of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Dated: August 11, 2010
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/s/ JOEL A. LITTMAN
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Joel A. Littman
Chief Financial Officer, Treasurer and Secretary
(Duly Authorized Officer and Chief Financial Officer)
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