SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended June 28, 2002

OR

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition ~~quarter~~period ~~ended December 28, 2001~~from OR to

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934


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 of Incorporation)		Delaware (State of Incorporation)

77-0407395 (I.R.S. employer identification number)		77-0405693 (I.R.S. employer identification number)

811 Hansen Way Palo Alto, California 94303-1110 (650) 846-2900 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)		811 Hansen Way Palo Alto, California 94303-1110 (650) 846-2900 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:		Securities registered pursuant to Section 12(b) of the Act:
None		None

Securities registered pursuant to Section 12(g) of the Act:		Securities registered pursuant to Section 12(g) of the Act:
None		None

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 of Incorporation)		Delaware (State of Incorporation)
77-0407395		77-0405693
(I.R.S. employer identification number) 811 Hansen Way		(I.R.S. employer identification number) 811 Hansen Way
Palo Alto, California 94303-1110 (650) 846-2900		Palo Alto, California 94303-1110 (650) 846-2900
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)		(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:		Securities registered pursuant to Section 12(b) of the Act:
None		None
Securities registered pursuant to Section 12(g) of the Act:		Securities registered pursuant to Section 12(g) of the Act:
None		None

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ].

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding for each of the Registrant’s classes of Common Stock, as of the latest practicable date: Communications & Power Industries Holding Corporation: 4,908,172 shares of Common Stock, $.01 par value, at ~~February~~July 531, 2002. Communications & Power Industries, Inc.: 1 share of of Common Stock, $.01 par value, at ~~February~~July 531, 2002.

TABLE OF CONTENTS

		COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS
COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
		COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
		Consolidated Condensed Balance Sheets, June 28, 2002 and September 28, 2001
		COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
		Consolidated Condensed Statements of Operations for the 13-week periods ended June 28, 2002 and June 29, 2001
		COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS
		Consolidated Condensed Statements of Operations for the 39-week periods ended June 28, 2002 and June 29, 2001
		COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
		Consolidated Condensed Statements of Cash Flows for the 39-week periods June 28, 2002 and June 29, 2001
		COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
COMMUNICATIONS & POWER INDUSTRIES, INC.
		NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
		Consolidated Condensed Balance Sheets, June 28, 2002 and September 28, 2001
	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
		Consolidated Condensed Statements of Operations for the 13-week periods ended June 28, 2002 and June 29, 2001
		Consolidated Condensed Statements of Operations for the 39-week periods ended June 28, 2002 and June 29, 2001
		Consolidated Condensed Statements of Cash Flows for the 39-week periods June 28, 2002 and June 29, 2001
		Notes to Consolidated Condensed Financial Statements
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II: OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS.
	ITEM 2: CHANGES IN SECURITIES.
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
	ITEM 5. OTHER INFORMATION.
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
SIGNATURES
EXHIBIT 10.11.1
EXHIBIT 10.12.1
EXHIBIT 10.13.1
EXHIBIT 10.14.1
EXHIBIT 99.1
EXHIBIT 99.2
EXHIBIT 99.3
EXHIBIT 99.4

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

PART I: FINANCIAL INFORMATION
ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
		Consolidated Condensed Balance Sheets, December 28, 2001 and September 28, 2001	2
		Consolidated Condensed Balance Sheets, June 28, 2002 and September 28, 2001	2
		Consolidated Condensed Statements of Operations for the 13-week periods ended December 28, 2001 and December 29, 2000	3
		Consolidated Condensed Statements of Operations for the 13-week periods ended June 28, 2002 and June 29, 2001	3
		Consolidated Condensed Statements of Cash Flows for the 13-week periods ended December 28, 2001 and December 29, 2000	4
		Consolidated Condensed Statements of Operations for the 39-week periods ended June 28, 2002 and June 29, 2001	4
		Notes to Consolidated Condensed Financial Statements	8
		Consolidated Condensed Statements of Cash Flows for the 39-week periods June 28, 2002 and June 29, 2001	5
		Notes to Consolidated Condensed Financial Statements	10
	COMMUNICATIONS & POWER INDUSTRIES, INC.
		Consolidated Condensed Balance Sheets, December 28, 2001 and September 28, 2001	5
		Consolidated Condensed Balance Sheets, June 28, 2002 and September 28, 2001	6
		Consolidated Condensed Statements of Operations for the 13-week periods ended December 28, 2001 and December 29, 2000	6
		Consolidated Condensed Statements of Operations for the 13-week periods ended June 28, 2002 and June 29, 2001	7
		Consolidated Condensed Statements of Cash Flows for the 13-week periods ended December 28, 2001 and December 29, 2000	7
		Consolidated Condensed Statements of Operations for the 39-week periods ended June 28, 2002 and June 29, 2001	8
		Notes to Consolidated Condensed Financial Statements	8
		Consolidated Condensed Statements of Cash Flows for the 39-week periods June 28, 2002 and June 29, 2001	9
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			10
		Notes to Consolidated Condensed Financial Statements	10
PART II: OTHER INFORMATION			15
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			13
SIGNATURES			16
PART II: OTHER INFORMATION			21
SIGNATURES			22

- 1 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands-unaudited)

		December 28,			September 28,
		June 28,			September 28,
		2001			2001
		2002			2001
ASSETS
Current Assets
	Cash and cash equivalents	$	32,~~490~~459		$	2,903
	Accounts receivable, net		4236,~~629~~686			46,738
	Inventories		5043,~~835~~959			57,678
	Deferred taxes		~~2,960~~876			3,500
	Other current assets		12,~~965~~192			2,241
Total current assets			~~101~~86,~~879~~172			113,060
Property, plant, and equipment, net			6057,~~685~~267			62,698
Goodwill and other intangibles, net			23,~~038~~132			23,452
Debt issue costs, net			43,~~404~~649			4,857
Total assets		$	~~190~~170,~~006~~220		$	204,067
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
LIABILITIES, PREFERRED STOCK ANDSTOCKHOLDERS’ DEFICIT
Current Liabilities
	Revolving credit facility	$	127,~~986~~685		$	21,293
	Current portion of capital leases		~~697~~151			919
	Mortgage financing		1817,~~000~~750			18,000
	Senior term loans		20,000			20,000
	Senior term loan		—			20,000
	Accounts payable		1013,~~380~~274			14,729
	Accrued expenses		1920,~~765~~778			17,859
	Product warranty		4,~~210~~467			4,225
	Income taxes payable		~~671~~3,034			407
	Accrued dividends payable		58,~~581~~183			4,387
	Advance payments from customers		69,~~934~~567			9,193
Total current liabilities			9984,~~224~~889			111,012
Senior subordinated notes			100,000			100,000
Obligations under capital leases			55—			90
Total liabilities			~~199~~184,~~279~~889			211,102
Senior Redeemable Preferred Stock of Subsidiary			28,~~532~~640			28,479
Junior Preferred Stock of Subsidiary			2224,~~891~~567			22,094
Commitments and contingencies
Stockholders’ Deficit
	Common stock		49			49
	Additional paid-in capital		19,111			19,111
	Accumulated deficit		(7885,~~664~~823	)		(75,587	)
	Stockholder loans		(1,~~192~~213	)		(1,181	)
Net stockholders’ deficit			(6067,~~696~~876	)		(57,608	)
Total liabilities, preferred stock and stockholders’ deficit		$	~~190~~170,~~006~~220		$	204,067

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)

				13-Week			13-Week
				period ended			period ended
				December 28,			December 29,
				June 28,			June 29,
				2001			2000
				2002			2001
	Sales			$	6664,~~228~~792		$	6072,~~376~~724
	Cost of sales				5248,~~069~~128			4757,~~578~~071
	Gross profit				1416,~~159~~664			1215,~~798~~653
	Operating costs and expenses:
			Research and development		1,~~255~~584			1,~~388~~466
			Selling and marketing		34,~~946~~097			34,~~912~~648
			General and administrative		4,~~662~~807			45,~~300~~954
	Total operating costs and expenses				910,~~863~~488			912,~~600~~068
	Operating income				46,~~296~~176			3,~~198~~585
	Foreign currency gain (loss)				75			(186	)
	Interest expense				(4,228	)		(5,208	)
	Interest expense				(4,725	)		(5,167	)
	Income (loss) before taxes				1,948			(1,623	)
	Loss before taxes				(354	)		(2,155	)
	Income tax expense				2,987			250
	Income tax expense				680			250
	Net loss				(1,039	)		(1,873	)
	Net loss				(1,034	)		(2,405	)
Preferred dividends:
	Preferred dividends:
		Senior redeemable preferred stock			1,310			1,115
			Senior redeemable preferred stock		1,194			1,041
		Junior preferred stock			853			743
			Junior preferred stock		796			694
Net loss attributable to common stock				$	(3,202	)	$	(3,731	)
Net loss attributable to common stock				$	(3,024	)	$	(4,140	)

See accompanying notes to the unaudited consolidated condensed financial statements.

- 3 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands — unaudited)


				39-Week			39-Week
				period ended			period ended
				June 28,			June 29,
				2002			2001

	Sales			$	191,632		$	199,670
	Cost of sales				147,863			158,596

	Gross profit				43,769			41,074

	Operating costs and expenses:
			Research and development		4,356			4,395
			Selling and marketing		11,682			12,975
			General and administrative		13,950			16,216

	Total operating costs and expenses				29,988			33,586

	Operating income				13,781			7,488
	Gain on sale of property, plant and equipment				—			887
	Interest expense				(12,767	)		(15,739	)

	Income (loss) before taxes				1,014			(7,364	)
	Income tax expense				4,820			750

	Net loss				(3,806	)		(8,114	)
Preferred dividends:
		Senior redeemable preferred stock			3,796			3,233
		Junior preferred stock			2,473			2,155

Net loss attributable to common stock				$	(10,075	)	$	(13,502	)

See accompanying notes to the unaudited consolidated condensed financial statements.

-4-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

		13-Week			13-Week
		39-Week			39-Week
		period ended			period ended
		December 28,			December 29,
		June 28,			June 29,
		2001			2000
		2002			2001
OPERATING ACTIVITIES
	Net cash provided by operating activities	$	9,815		$	1,203
	Net cash provided by (used in) operating activities	$	36,517		$	(3,984	)
INVESTING ACTIVITIES
	Purchase of property, plant and equipment, net		(664	)		(896	)
	Proceeds from sale of property, plant and equipment		—			1,922
	Net cash used in investing activities		(664	)		(896	)
	Purchase of property, plant and equipment		(2,144	)		(3,784	)
	Net cash used in investing activities		(2,144	)		(1,862	)
FINANCING ACTIVITIES
	Repayments on capital leases		(~~257~~858	)		(~~228~~595	)
	Payment of debt issue costs		—(101	)		(2,~~153~~368	)
	Repayment of terminated revolving credit facility		—			(40,000	)
	(Repayment) proceeds from revolving credit facility		(8,307	)		20,942
	Net (repayment) proceeds from revolving credit facility		(13,608	)		25,580
	Repayments on terminated senior term loans		—			(16,049	)
	Proceeds from senior term loan		—			20,000
	(Repayment) proceeds from senior term loan		(20,000	)		20,000
	Proceeds from mortgage financing		—			18,000
	(Repayment) proceeds from mortgage financing		(250	)		18,000
	Net cash (used in) provided by financing activities		(834,~~564~~817	)		~~512~~4,568
NET INCREASE IN CASH AND CASH EQUIVALENTS			587			819
NET DECREASE IN CASH AND CASH EQUIVALENTS			(444	)		(1,278	)
Cash and cash equivalents at beginning of period			2,903			4,766
Cash and cash equivalents at end of period		$	32,~~490~~459		$	53,~~585~~488

See accompanying notes to the unaudited consolidated condensed financial statements.

- 4 5-

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

CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands — -unaudited)

		December 28,			September 28,
		June 28,			September 28,
ASSETS		2001			2001
		2002			2001
ASSETS
Current Assets
	Cash and cash equivalents	$	32,~~490~~459		$	2,903
	Accounts receivable, net		4236,~~629~~686			46,738
	Inventories		5043,~~835~~959			57,678
	Deferred taxes		~~3,100~~876			3,500
	Other current assets		12,~~965~~192			2,241
Total current assets			~~102~~86,~~019~~172			113,060
Property, plant, and equipment, net			4643,~~818~~725			48,672
Goodwill and other intangibles, net			23,~~038~~132			23,452
Debt issue costs, net			43,~~331~~558			4,715
Note receivable from parent			5,750			5,750
Total assets		$	~~181~~162,~~956~~337		$	195,649
LIABILITIES, REDEEMABLE PREFERRED STOCK AND DEFICIT
Current Liabilities
	Revolving credit facility	$	127,~~986~~685		$	21,293
	Current portion of capital leases		~~697~~151			919
	Senior term loans		20,000			20,000
	Senior term loan		—			20,000
	Accounts payable		1013,~~380~~274			15,175
	Accrued expenses		2021,~~700~~690			18,196
	Product warranty		4,~~210~~467			4,225
	Income taxes payable		~~641~~3,197			407
	Accrued dividends		5,581			4,387
	Accrued dividends payable		8,183			4,387
	Advance payments from customers		69,~~934~~567			9,193
Total current liabilities			8268,~~129~~214			93,795
Senior subordinated notes			100,000			100,000
Deferred income on sale-leaseback			7,~~630~~417			7,735
Obligations under capital leases			55—			90
Total liabilities			~~189~~175,~~814~~631			201,620
Senior Redeemable Preferred Stock			28,~~532~~640			28,479
Commitments and contingencies
Stockholders’ Deficit:
	Junior preferred stock		2			2
	Common stock		—			—
	Additional paid-in capital		4243,~~048~~724			41,252
	Accumulated deficit		(7784,~~248~~447	)		(74,523	)
	Stockholder loans		(1,~~192~~213	)		(1,181	)
Net stockholders’ deficit			(3641,~~390~~934	)		(34,450	)
Total liabilities, senior redeemable preferred stock and stockholders’ deficit		$	~~181~~162,~~956~~337		$	195,649

See accompanying notes to the unaudited consolidated condensed financial statements.

- 5 6-

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

CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands — unaudited)

				13-Week			13-Week
				period ended			period ended
				December 28,			December 29,
				June 28,			June 29,
				2001			2000
				2002			2001
	Sales			$	6664,~~228~~792		$	6072,~~376~~724
	Cost of sales				5248,~~069~~128			4757,~~578~~071
	Gross profit				1416,~~159~~664			1215,~~798~~653
	Operating costs and expenses:
			Research and development		1,~~255~~584			1,~~388~~466
			Selling and marketing		34,~~946~~097			34,~~912~~648
			General and administrative		5,~~008~~154			46,~~289~~359
	Total operating costs and expenses				10,~~209~~835			912,~~589~~473
	Operating income				35,~~950~~829			3,~~209~~180
	Foreign currency gain (loss)				75			(186	)
	Interest expense				(3,731	)		(4,530	)
	Interest expense				(4,197	)		(5,087	)
	Income (loss) before taxes				2,098			(1,350	)
	Loss before taxes				(172	)		(2,064	)
	Income tax expense				3,150			250
	Income tax expense				510			250
	Net loss				(1,052	)		(1,600	)
	Net loss				(682	)		(2,314	)
Preferred dividends:
	Preferred dividends:
		Senior redeemable preferred stock			1,310			1,115
			Senior redeemable preferred stock		1,194			1,041
		Junior preferred stock			853			743
			Junior preferred stock		796			694
Net loss attributable to common stock				$	(3,215	)	$	(3,458	)
Net loss attributable to common stock				$	(2,672	)	$	(4,049	)

See accompanying notes to the unaudited consolidated condensed financial statements.

- 6 7-

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

CONSOLIDATED CONDENSED
STATEMENTS OF OPERATIONS
(in thousands — unaudited)


				39-Week			39-Week
				period ended			period ended
				June 28,			June 29,
				2002			2001

	Sales			$	191,632		$	199,670
	Cost of sales				147,863			158,596

	Gross profit				43,769			41,074

	Operating costs and expenses:
			Research and development		4,356			4,395
			Selling and marketing		11,682			12,975
			General and administrative		14,985			16,896

	Total operating costs and expenses				31,023			34,266

	Operating income				12,746			6,808
	Gain on sale of property, plant and equipment				—			887
	Interest expense				(11,257	)		(14,253	)

	Income (loss) before taxes				1,489			(6,558	)
	Income tax expense				4,983			750

	Net loss				(3,494	)		(7,308	)
Preferred dividends:
		Senior redeemable preferred stock			3,796			3,233
		Junior preferred stock			2,473			2,155

Net loss attributable to common stock				$	(9,763	)	$	(12,696	)

See accompanying notes to the unaudited consolidated condensed financial statements.

-8-

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

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

		13-Week			13-Week
		39-Week			39-Week
		period ended			period ended
		December 28,			December 29,
		June 28,			June 29,
		2001			2000
		2002			2001
OPERATING ACTIVITIES
	Net cash provided by operating activities	$	9,815		$	1,053
	Net cash provided by (used in) operating activities	$	36,166		$	(3,708	)
INVESTING ACTIVITIES
	Proceeds from sale of property to parent		—			17,250
	Purchase of property, plant and equipment, net		(664	)		(896	)
	Proceeds from sale of property, plant and equipment					1,922
	Net cash (used in) provided by investing activities		(664	)		16,354
	Purchase of property, plant and equipment		(2,144	)		(3,784	)
	Net cash (used in) provided by investing activities		(2,144	)		15,388
FINANCING ACTIVITIES
	Repayments on capital leases		(~~257~~858	)		(~~228~~595	)
	Payment of debt issue costs		—			(1,~~709~~894	)
	Repayments of terminated revolving credit facility		—			(40,000	)
	(Repayments) proceeds from revolving credit facility		(8,307	)		20,942
	Net (repayments) proceeds from revolving credit facility		(13,608	)		25,580
	Repayments of terminated senior term loans		—			(16,049	)
	Proceeds from senior term loan		—			20,000
	(Repayments) proceeds from senior term loan		(20,000	)		20,000
	Net cash used by financing activities		(834,~~564~~466	)		(1712,~~044~~958	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			587			363
NET DECREASE IN CASH AND CASH EQUIVALENTS			(444	)		(1,278	)
Cash and cash equivalents at beginning of period			2,903			4,766
Cash and cash equivalents at end of period		$	32,~~490~~459		$	53,~~129~~488

See accompanying notes to the unaudited consolidated condensed financial statements.

- 7 9-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
(unaudited)

1. Basis of Presentation

The accompanying unaudited consolidated condensed financial statements of Communications & Power Industries 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 September 28, 2001 Annual Report on Form 10-K. Management believes that these unaudited interim condensed financial statements contain all adjustments, all of which are of a normal recurring nature, necessary to present fairly the financial position of the Company, and its results of operations and cash flows for the interim period presented. The results for the interim periods reported are not necessarily indicative of the results for the complete fiscal year 2002.

2. Inventories

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

	December 28,		September 28,
	June 28,		September 28,
(Dollars in thousands)	2001		2001
	2002		2001
Raw materials and parts	$	37,299	$	40,776
	(In thousands)
Work in process		10,894		14,874
Raw materials and parts	$	32,339	$	40,776
Finished goods		2,642		2,028
Work in process		8,004		14,874
Total inventories	$	50,835	$	57,678
Finished goods		3,616		2,028
Total inventories	$	43,959	$	57,678

3. Supplemental Cash Flow Information

Cash paid by Holding for interest was $1.2 million and $1.9 million for the 13-week periods ended December 28, 2001 and December 29, 2000, respectively. Cash paid by CPI for interest was $0.9 million and $1.9 million for the 13-week periods ended December 28, 2001 and December 29, 2000, respectively. Cash paid (refunded) for taxes was $0.2 million and $(0.2) million for the 13-week periods ended December 28, 2001 and December 29, 2000, respectively.


	Holding				CPI

	39-Week Period Ended				39-Week Period Ended

	June 28,		June 29,		June 28,		June 29,
	2002		2001		2002		2001

	(In millions)
Cash Payments
Interest payments	$	9.0	$	11.6	$	8.3	$	10.9
Tax payments	$	0.7	$	0.6	$	0.7	$	0.6
Non-cash Financing
Unpaid cash dividends on senior preferred stock	$	8.2	$	3.2	$	8.2	$	3.2

~~Non~~-~~cash financing activities included the following: Dividends on Senior~~10- ~~Redeemable Preferred Stock of $1.2 million and $1.0 million for the fiscal~~ ~~quarters ended December 28, 2001 and December 29, 2000, respectively.~~ ~~Preferred stock dividends on Junior Preferred Stock through the issuance of~~ ~~7,962 and 6,938 shares of Junior Preferred Stock during the quarters ended December 28, 2001 and December 29, 2000, respectively.~~

- 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. The CEO, identified as the Chief Operating Decision Maker, evaluates performance and allocates resources based on the Company’s ~~principle~~principal performance measure,: earnings before income taxes, interest, depreciation and amortization (“EBITDA”).

Summarized financial information concerning the Company’s reportable segments is shown in the following table. Included in the “Other” column is financial information for the Company’s Solid State Products Division, which did not meet the quantitative thresholds, and certain unallocated corporate-level operating expenses. Intersegment product transfers are recorded at cost.

(Dollars in thousands)
			Satcom
13-Week Period Ended	VED's		Equipment			Other			Total
(In thousands)	VED”s		Equipment			Other			Total
December 28, 2001:
For the 13-Week Period Ended June 28, 2002:
Revenues from external customers	$	5154,~~329~~103	$	1510,~~861~~015		$	~~(962~~674	)	$	6664,~~228~~792
Intersegment product transfers		23,~~259~~531		0—			76229			23,~~335~~760
EBITDA — Holding		811,~~073~~535		~~281~~541			(~~889~~3,135	)		78,~~465~~941
EBITDA — CPI		811,~~073~~535		~~281~~541			(13,~~398~~642	)		68,~~956~~434
December 29, 2000:
For the 13-Week Period Ended June 29, 2001:
Revenues from external customers	$	4752,~~344~~775	$	1117,~~516~~124		$	12,~~516~~825		$	6072,~~376~~724
Intersegment product transfers		36,~~558~~196		—			~~414~~480			36,~~972~~676
EBITDA — Holding		79,~~460~~108		(62260	)		(1,~~050~~929	)		6,~~348~~919
EBITDA — CPI		79,~~460~~108		(62260	)		(12,~~050~~495	)		6,~~348~~353
For the 39-Week Period Ended June 28, 2002:
Revenues from external customers	$	152,962	$	36,920		$	1,750		$	191,632
Intersegment product transfers		8,400		—			855			9,255
EBITDA — Holding		27,724		768			(5,890	)		22,602
EBITDA — CPI		27,724		768			(7,409	)		21,083
For the 39-Week Period Ended June 29, 2001:
Revenues from external customers	$	148,819	$	44,191		$	6,660		$	199,670
Intersegment product transfers		14,936		—			1,178			16,114
EBITDA — Holding		24,189		(921	)		(4,897	)		18,371
EBITDA — CPI		24,189		(921	)		(5,911	)		17,357

~~A reconciliation of EBITDA from reportable segments to Loss before Taxes is as~~-11- ~~follows:~~

	Holding						CPI
	13-Week Period Ended						13-Week Period Ended
	December 28,			December 29,			December 28,			December 29,
(Dollars in thousands)	2001			2000			2001			2000
Segment EBITDA	$	7,465		$	6,348		$	6,956		$	6,348
Less:
Depreciation and amortization		3,094			3,336			2,931			3,325
Interest expense		4,725			5,167			4,197			5,087
Loss before taxes	$	(354	)	$	(2,155	)	$	(172	)	$	(2,064	)

- 9 -

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

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


	Holding					CPI

	13-Week Period Ended					13-Week Period Ended

(In thousands)	June 28, 2002		June 29, 2001			June 28, 2002		June 29, 2001

Segment EBITDA	$	8,941	$	6,919		$	8,434	$	6,353
Less:
Depreciation and amortization		2,765		3,334			2,605		3,173
Interest expense		4,228		5,208			3,731		4,530

Income (loss) before taxes	$	1,948	$	(1,623	)		2,098	$	(1,350	)


	Holding					CPI

	39-Week Period Ended					39-Week Period Ended

(In thousands)	June 28, 2002		June 29, 2001			June 28, 2002		June 29, 2001

Segment EBITDA	$	22,602	$	18,371		$	21,083	$	17,357
Less:
Depreciation and amortization		8,821		9,996			8,337		9,662
Interest expense		12,767		15,739			11,257		14,253

Income (loss) before taxes	$	1,014	$	(7,364	)	$	1,489	$	(6,558	)

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


	13-Week Period Ended				39-Week Period Ended

(In thousands)	June 28, 2002		June 29, 2001		June 28, 2002		June 29, 2001

United States	$	42,289	$	46,318	$	135,078	$	134,989
All foreign countries		22,503		26,406		56,554		64,681

Total Sales	$	64,792	$	72,724	$	191,632	$	199,670

CPI has a single customer that accounts for 10% or more of consolidated sales. Sales to this customer were $14.2 million and $11.2 million of the Company’s consolidated sales for the 13-week period ended June 28, 2002 and June 29, 2001, respectively. Sales to this customer were $34.4 million and $32.3 million of the Company’s consolidated sales for the 39-week period ended June 28, 2002 and June 29, 2001, respectively. A substantial majority of these sales were VED segment products, but this customer also purchased satcom equipment products.

5. Mortgage Refinancing

On June 1, 2002, Holding’s mortgage financing of $18.0M was refinanced. Under the terms of the refinancing, the loan was extended until June 1, 2003 and the Company agreed to pay two principal installments of $250,000 on June 1, 2002 and December 1, 2002. The mortgage bears interest at a rate of LIBOR plus 4.25%.

-12-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion reflects the condensed consolidated results of Communications & Power Industries Holding Corporation, 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~~CRITICAL ~~Company~~ACCOUNTING ~~serves the communications, radar, electronic countermeasures,~~POLICIES ~~industrial, medical and scientific markets. In addition, the Company divides~~ the communications market into applications for ground-based satellite uplinks for military and commercial uses (“satcom”) and broadcast sectors. The Company defines and discusses its orders and sales trends by the end markets to more clearly relate its business to outside investors. Internally, however, the Company is organized into six operating units that are differentiated based on products. Four of these operating units comprise the Company’s vacuum electronic device (“VED”) segment. The Company also has a satellite communications equipment segment and a solid state products segment. Segment data is included in Note 4 of the Notes to Consolidated Condensed Financial Statements.

~~Orders~~Management ~~during~~is ~~the~~required ~~first quarter of Fiscal 2002 were $71.4 million as compared~~ to ~~$67.8 million~~make ~~for~~judgements, ~~the~~assumptions ~~first~~and ~~quarter~~estimates ~~of Fiscal 2001. This increase of $3.6~~in ~~million~~preparing ~~for~~its ~~the~~financial ~~quarter~~statements ~~reflects~~and arelated ~~higher~~disclosures ~~demand for products~~ in ~~the~~conformity ~~radar and~~with ~~scientific~~accounting ~~markets,~~principles ~~offset~~generally ~~somewhat~~accepted ~~by decreases~~ in ~~orders for~~ the ~~Company’s remaining~~United ~~four markets~~States. ~~Radar~~The ~~orders increased by $7.6 million, or 29.7%, due to higher demand for spare and rebuilt VED~~Company’s ~~used in military applications.~~ ~~Orders~~significant inaccounting ~~the~~policies ~~scientific~~are ~~market~~described ~~increased $5.0 million from approximately $1.0 million~~ in ~~the~~Note ~~first~~2 ~~quarter of Fiscal 2001 due primarily~~ to the ~~booking of the~~Consolidated ~~final~~Financial ~~phase~~Statements ofin anthe ~~order~~Annual ~~from~~Report aon ~~government research laboratory. Communication orders decreased $4.4~~Form ~~million~~10-K orfor ~~17.3% from~~ the ~~first~~fiscal ~~quarter of Fiscal 2001~~year ~~due~~ended ~~to reduced capital spending by the Company’s customers driven by current economic conditions. Medical, electronic countermeasures and industrial orders also decreased by $1.9~~September ~~million~~28, $02001.~~7 million~~ ~~and~~The ~~$1.9 million,~~following ~~respectively, due~~critical ~~primarily~~accounting topolicies ~~timing~~are ~~of order releases from quarter to quarter. Overall,~~those ~~incoming~~policies ~~order~~that ~~levels~~management ~~fluctuate~~believes ~~significantly~~can onaffect aits ~~quarterly~~financial ~~basis~~statements materially and ~~a particular~~involves ~~quarter’s~~subjective ~~order rate may not be indicative of future order levels. In addition~~assumptions, ~~the Company’s sales are highly dependent upon manufacturing scheduling~~judgements, ~~performance~~or ~~and shipments and, accordingly, it is not possible to accurately predict when these orders will be recognized as sales~~estimates.

AsRevenue is recognized on a sale to a customer when persuasive evidence of ~~December 28,~~an arrangement ~~2001~~exists, ~~the~~delivery ~~Company~~has ~~had~~occurred, anthe ~~order~~price ~~backlog~~is offixed ~~$157.0 million~~or determinable, ~~representing~~and ~~approximately~~collectibility ~~seven-and-a-half~~is ~~months~~reasonably ofassured. ~~sales,~~The ~~compared~~Company tomonitors ~~order~~the ~~backlog~~creditworthiness of ~~$166.8 million,~~its orcustomers ~~approximately~~and ~~eight~~does ~~months~~not ofrecord revenue on sales, asif collection ofis not reasonably assured. The Company’s products are generally ~~December 29~~subject to warranties, ~~2000.~~and ~~Order~~the ~~backlog~~Company ~~increased~~provides ~~during~~for the ~~first~~estimated ~~quarter~~future costs of ~~Fiscal 2002~~repair, byreplacement ~~$5.5 million~~or ~~from~~customer ~~$151.5 million~~accommodation at the ~~end~~time of ~~Fiscal~~sale ~~2001~~as an additional cost of product.

~~Sales~~Inventories ~~for~~are ~~the~~stated ~~first~~at ~~quarter~~the lower of ~~Fiscal~~average ~~2002~~cost ~~were~~or ~~$66~~market.~~2 million,~~ anThe ~~increase~~carrying value of ~~$5.8 million,~~ inventory is reduced for estimated obsolescence or ~~9.6%,~~unmarketable inventory ~~from~~based ~~the~~upon ~~same~~assumptions ~~period~~about infuture ~~Fiscal~~demand ~~2001~~and market conditions. ~~This~~If actual ~~increase~~demand ~~was~~were to be substantially lower than estimated, further ~~driven~~write-downs ~~primarily~~could bybe ~~sales~~required. inWhile ~~the~~these ~~communications~~estimates ~~and~~require ~~scientific~~management ~~markets,~~to ~~which~~make ~~demonstrated~~assumptions ~~growth~~and judgements, management believes its understanding of ~~20.1%~~the markets and ~~113.9%~~customers ~~respectively,~~the ~~compared~~Company toserves as well as the ~~first quarter~~mature nature of ~~Fiscal~~many of ~~2001.~~the ~~Sales~~products in the ~~communications~~Company ~~market~~manufactures ~~for~~provides it with the ~~first~~ability to make ~~quarter~~reliable ofestimates. ~~Fiscal~~Management ~~2002~~also ~~included~~evaluates the ~~final~~carrying ~~units~~value of inventory for lower of cost or market on an individual product or contract basis. Analyses are performed based on the XMestimated ~~Radio~~costs ~~project~~at completion and if necessary, ~~which~~a provision is recorded to properly reflect the product or contract ~~contributed~~at ~~sales~~the lower of ~~approximately~~cost $5or net realizable value (selling price less estimated cost of disposal).~~0 million.~~ ~~Sales~~If actual contract costs were to be substantially higher than estimated, further provisions could be required.

The Company reviews long-lived 10assets 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 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.

-13-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. The Company’s ~~other~~assesses ~~markets~~the ~~were~~recoverability upof ~~slightly~~the oncarrying amount ~~average~~of ~~from~~goodwill by determining whether the ~~first~~carrying ~~quarter~~amount of goodwill can be recovered through undiscounted net cash flows of ~~Fiscal~~the ~~2001~~acquired operation over the remaining amortization period. If determined to be impaired, the carrying amount is reduced to its estimated fair value which is based on an estimate of discounted future net cash flows. Adverse changes in the industries served by the Company, customer demand or other market conditions could result in future impairments of goodwill.

~~Gross~~RESULTS ~~profit~~OF ~~for the first quarter of Fiscal 2002 was $14.2 million, or 21.4%~~OPERATIONS ~~of sales, consistent with the $12.8 million, or 21.2% of sales, earned in the~~ ~~first quarter of Fiscal 2001. Margin fluctuations are expected due to the mix of products sold during any quarter.~~

~~Operating~~The ~~costs~~Company ~~and~~serves ~~expenses~~the ~~were~~communications, ~~$9.9 million~~radar, orelectronic ~~14.9~~countermeasures, industrial, %medical ofand ~~sales~~scientific markets. In addition, ~~for~~the Company divides the communications market into applications for ground-based satellite uplinks ~~first~~for ~~quarter~~military ofand ~~Fiscal~~commercial ~~2002~~uses as(“satcom”) ~~compared~~and tobroadcast $9sectors.~~6 million,~~ orThe ~~15.9~~Company defines %and ofdiscusses its orders and sales~~, for~~ trends by the ~~first~~end ~~quarter~~markets ofto ~~Fiscal~~more clearly ~~2001.~~relate ~~This~~its ~~improvement~~business asto aoutside ~~percentage~~investors. ~~of sales~~Internally, ~~reflects~~however, the Company ~~cost~~is ~~savings~~organized ~~resulting~~into ~~from~~six ~~the~~operating ~~Company’s~~units ~~cost~~that ~~cutting measures~~are ~~implemented~~differentiated inbased ~~the~~on products. ~~latter~~Four ~~half~~ of ~~Fiscal~~these ~~2001~~operating ~~and~~units incomprise the ~~first~~Company’s ~~quarter~~vacuum ofelectronic ~~Fiscal~~device ~~2002~~(“VED”) segment. The ~~reduction~~Company inalso ~~expenses~~has ~~was~~a ~~offset~~satellite communications inequipment ~~part~~unit, bywhich ~~approximately~~is a separate segment, and a solid state ~~$370~~products unit,~~000~~ ~~associated~~which ~~with~~is ~~the~~not ~~relocation~~reported ofas ~~the~~a ~~Satcom~~separate ~~Division~~segment. ~~operation~~Segment ~~from~~data for ~~Palo~~VED ~~Alto,~~and ~~California~~satcom toequipment ~~the~~segments ~~facility~~are included in ~~Ontario,~~Note ~~Canada~~4 of the Notes to Consolidated Condensed Financial Statements.

~~Earnings~~Orders ~~before~~during ~~interest, income taxes, depreciation and amortization (“EBITDA”)1 for~~ the ~~first~~third quarter of Fiscal 2002 were $755.52 million, oras ~~11.3% of sales,~~ compared to $657.35 million, ~~or 10.5% of sales,~~ for the ~~first~~third quarter of Fiscal 2001. This ~~increase~~decrease inof ~~EBITDA~~$2.3 million ~~can~~for bethe ~~attributed~~quarter toprimarily ~~the~~reflects ~~improved~~continued ~~sales~~weakness in the commercial ~~volume~~communications ~~coupled~~market ~~with~~(down $ 11.6 million) offset in part by fluctuations in the ~~impact~~timing of ~~lower~~order ~~operating~~receipts ~~costs~~ in other non-communication markets, particularly radar, when compared to the ~~current~~third quarter of Fiscal 2001.

~~Net~~Orders ~~loss~~for ~~was~~the first nine months of Fiscal 2002 of $1191.09 million ~~for~~have declined approximately $11.5 million or 5.7% from the $203.3 million in the same period of Fiscal ~~2002~~2001. ~~compared~~The decrease from Fiscal 2001 levels was expected and can be attributed primarily to athe ~~net~~decrease ~~loss~~in oforders in the commercial communications market which were down $220.4 5 million ~~for~~from the first nine months of Fiscal 2001, as communications companies continue to delay capital spending. ~~The~~This ~~decrease~~situation is expected to continue into Fiscal 2003. Orders in the ~~net~~electronic countermeasures ~~loss~~market decreased by $2.5 million from the ~~first~~comparable period last year due primarily to the timing of order releases from quarter to quarter. Industrial orders decreased $2.2 million from the first nine months of Fiscal 2001 ~~resulted~~primarily ~~from~~as ~~improved~~a ~~operating~~result ~~income~~of weak economic conditions. Offsetting these decreases somewhat are orders in the radar, medical and ~~reduced~~scientific ~~interest~~markets. ~~expense~~There ~~partially~~is ~~offset~~strong demand in radar market at this time; orders for the first nine months of Fiscal 2002 exceed the comparable period of Fiscal 2001 by an$4.5 million ~~increase~~and inthe ~~tax~~trend ~~expense~~is asexpected ato ~~result~~continue into the fourth quarter. Medical orders are $6.5 million higher than the prior year due to the receipt of alarge orders Ufor VED’s used in the treatment of cancer.S Although these orders reoccur annually, their timing was accelerated and their value has increased from the prior year. Medical orders on an annual basis are expected to be consistent ~~tax~~with ~~gain~~Fiscal 2001. Scientific orders have increased by $2.7 million on a year-to-date basis compared to Fiscal 2001 due primarily to the ~~sale~~receipt of the final ~~Satcom~~phase ~~Division~~on toan ~~Canada~~order from a government research laboratory. Excluding this order, orders in the scientific

~~CPI’s operating results differ slightly from Holding due to a sale~~-leaseback transaction between CPI and Holding which took place in December 2000. In the first quarter of Fiscal 2002, CPI’s net loss before taxes was $172,000, which was approximately $182,000 lower than Holdings’ net loss before taxes of $354,000. As a result of this transaction, operating costs for CPI were approximately $346,000 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 sales14-~~leaseback and additional depreciation on the San~~ ~~Carlos facility. Interest expense, net, for CPI was approximately $528,000~~ ~~lower than that of Holding. The decrease primarily relates to the fact that~~ ~~Holding’s interest expense figure includes interest paid on the mortgage~~ ~~financing of the San Carlos facility. All other operations data for CPI is consistent with Holding’s for the first quarter of Fiscal 2002.~~

FINANCIALTable CONDITION of Contents

~~Cash~~COMMUNICATIONS ~~flows~~& ~~provided~~POWER byINDUSTRIES ~~operating~~HOLDING ~~activities for the first quarter of Fiscal~~CORPORATION 2002 were $9.8 million, an increase of $8.6 million from the $1.2 million provided by operating activities during the first quarter of Fiscal 2001. The positive cash flow was generated primarily from reductions in accounts receivable and ~~inventories, offset by decreases in accounts payable and advance~~subsidiaries ~~payments from customers.~~

~~Investing~~COMMUNICATIONS ~~activities~~& ~~were~~POWER ~~comprised~~INDUSTRIES, ~~principally~~INC., and subsidiaries (A wholly owned subsidiary of ~~investment~~Communications in& ~~property, plant~~Power ~~and~~Industries ~~equipment~~Holding ~~totaling~~Corporation)

market are expected to be fairly consistent with Fiscal 2001 levels. 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 June 28, 2002, the Company had order backlog of $149.0 million, representing approximately seven months of sales, compared to order backlog of $160.7 million, or approximately seven-and-a-half months of sales, as of June 29, 2001. Order backlog at the end of the third quarter also decreased slightly from $151.5 million at the end of Fiscal 2001.

Sales for the third quarter of Fiscal 2002 were $64.8 million, a decrease of $7.9 million, or 10.9%, from the same period in Fiscal 2001. This decrease was driven primarily by lower sales in the commercial communications market. Sales for the first nine months of Fiscal 2002 were $191.6 million, down $8.1 million from $199.7 million in the comparable period of Fiscal 2001. This decrease can be attributed to lower demand in the commercial communications and industrial markets with sales down $11.1 million and $4.4 million, respectively, from the comparable period of Fiscal 2001. Offsetting this decrease are sales to the radar, medical and scientific markets which have increased by $2.9 million, $1.4 million and $4.0 million, respectively from the first nine months of Fiscal 2001. Sales in the radar and scientific markets have benefited from increased military and research spending. Sales in the electronic countermeasures market were down $0.9 million from the first nine months of Fiscal 2001.

Gross margin increased 4.2% to 25.7% for the third quarter of Fiscal 2002, compared with the third quarter of Fiscal 2001. The gross margin also increased for the nine-month period from 20.6% of sales in Fiscal 2001 to 22.8% of sales in Fiscal 2002. Gross margins were negatively effected in Fiscal 2001 by start-up costs on several new satcom products. In addition, margin fluctuations are expected due to the mix of products sold during any period.

Operating costs and expenses were $10.5 million, or 16.2% of sales, for the third quarter of Fiscal 2002 as compared to $12.1 million, or 16.6 % of sales, for the third quarter of Fiscal 2001. For the nine months ended June 28, 2002, operating costs and expenses decreased $3.6 million compared with a year ago from $33.6 million, or 16.8 % of sales, in Fiscal 2001 to $30.0 million, or 15.7% of sales, in Fiscal 2002. A portion of this decrease reflects a $1.3 million reduction in costs for the first nine months of Fiscal 2002 as compared to the comparable period of Fiscal 2001 which was associated with the relocation of the Satcom Division’s production from Palo Alto, California to the Company’s facility in Ontario, Canada. Fiscal 2001 operating costs also include $0.4 million for the consolidation of the Company’s administrative offices into a single building in Palo Alto. The remainder of the decrease reflects the Company’s continuing efforts to reduce costs and improve operating efficiency.

Earnings before interest, income taxes, depreciation and amortization (“EBITDA”)¹ for the third quarter of Fiscal 2002 were $8.9 million, or 13.7% of sales, compared to $6.9 million, or 9.5% of sales, for the

EBITDA is presented because some investors may use it as a financial indicator of the ability to service or incur indebtedness. EBITDA should not be considered as an alternative to net earnings (loss), as a measure of operating results, cash flows or liquidity.

- 11 15-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

~~$664,000~~third quarter of Fiscal 2001. EBITDA for the first ~~quarter~~nine months of Fiscal 2002 were $22.6 million, ~~Purchases~~or 11.8% of ~~property~~sales, ~~plant~~compared ~~and~~to ~~equipment~~$18.4 million, ~~were~~or ~~down slightly~~9.2% ~~from~~of ~~approximately $896~~sales,~~000~~ in for the first ~~quarter~~nine months of Fiscal 2001. ~~The Company~~This ~~currently~~increase ~~anticipates~~in ~~that~~EBITDA ~~capital~~can ~~expenditure requirements for Fiscal~~be ~~2002~~attributed ~~will be approximately $4.5 million, similar~~ to the ~~amounts~~improved ~~spent~~margins incoupled ~~Fiscal 2001~~with ~~and~~the ~~2000~~impact ~~for~~of ~~normal~~lower ~~operations~~operating costs.

~~Financing~~Income ~~activities~~tax ~~during~~expense for the ~~first~~third quarter of Fiscal 2002 ~~were~~was ~~related~~$3.0 million compared to ~~repayments~~ on$0.3 million for the ~~Company’s~~third ~~secured~~quarter ~~credit~~of ~~facility~~Fiscal ~~(“Credit~~2001. ~~Facility”)~~For ofthe nine months ended June 28, 2002, the income tax expense was $84.3 8 million ~~and~~compared ~~repayments~~to $0.8 million onfor ~~capital~~the ~~leases~~corresponding period of ~~$257,000~~Fiscal 2001. The increase in income tax expense relates primarily to taxable income resulting from a timing difference in conjunction with the Satcom relocation to Canada.

~~During~~Net ~~Fiscal~~loss ~~2001,~~was $1.0 million for the ~~Company~~third ~~relocated~~quarter ~~its~~of ~~administrative~~Fiscal ~~offices~~2002 ~~into~~compared to a ~~single~~net ~~building~~loss inof ~~Palo~~$1.9 million ~~Alto~~for ~~and~~the asthird aquarter ~~result,~~of isFiscal ~~actively~~2001. ~~looking~~For tothe ~~sublease~~nine upmonths toended 52June 28,~~300~~ ~~square~~2002, ~~feet~~the ofnet ~~office~~loss ~~space~~was $3.8 million ~~Also~~compared ~~during~~to a net loss of $8.1 million for the corresponding period of Fiscal 2001,. ~~the~~The ~~Company~~decrease ~~relocated~~in ~~its~~the ~~Satcom~~net ~~Division’s~~loss ~~production~~for ~~operation~~both periods resulted from ~~Palo~~improved ~~Alto,~~gross ~~California~~margins, todecreased ~~its~~operating ~~facility~~and ininterest ~~Ontario,~~expenses ~~Canada.~~partially ~~The~~offset ~~relocation~~by isthe ~~substantially~~increase ~~complete,~~in ~~however~~income ~~additional~~tax ~~expenses~~expense. ofInterest ~~$300,000~~expense tohas ~~$500,000~~decreased ~~are~~due ~~expected~~ to bea ~~incurred~~reduction in ~~during~~outstanding ~~the~~debt ~~remainder~~as ofwell ~~Fiscal~~as ~~2002~~lower interest rates.

~~The Company~~CPI’s ~~short~~operating results differ slightly from Holding due to a sale-~~term~~leaseback transaction ~~debt~~between ~~includes~~CPI ~~mortgage~~and ~~financing~~Holding which took place in December 2000. In the first nine months of Fiscal 2002, CPI’s net income before taxes was $181.5 million, which was approximately $0.5 million ~~and~~higher than Holdings’ net income ~~senior~~before ~~term~~taxes ~~loans~~of $1.0 million. As a result of this transaction, operating costs for CPI were approximately $201.0 million ~~that~~higher ~~expire~~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 ~~June 1,~~the ~~2002~~sales-leaseback and additional ~~December 22~~depreciation on the San Carlos facility. Interest expense, ~~2002~~ net, for ~~respectively~~CPI was approximately $1.5 million ~~Management~~lower ~~expects~~than that ~~cash~~of Holding. The decrease primarily relates to bethe ~~generated~~fact bythat ~~operations~~Holding’s interest expense includes interest ~~and~~paid ~~borrowing~~on ~~under~~the ~~its~~mortgage ~~Credit~~financing ~~Facility~~of inthe ~~conjunction~~San ~~with~~Carlos ~~either~~facility ~~extending~~combined orwith CPI’s ~~finding~~interest ~~alternative~~income ~~financing~~on ~~will~~a ~~allow~~note itreceivable towith ~~meet~~Holding. All other operations data for CPI is consistent with Holding’s for the ~~obligations~~third quarter of Fiscal 2002.

~~There~~FINANCIAL ~~can be no assurance that the combination of cash generated by operations,~~CONDITION ~~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 capital expenditures, reducing discretionary costs, negotiating an increase to the Company’s borrowing capacity under its line of credit, and selling and leasing back its facility in San Carlos, California in a transaction with an outside party.

Cash flows provided by operating activities for the first nine months of Fiscal 2002 were $36.5 million, compared with cash used in operating activities of $4.0 million during the first nine months of Fiscal 2001. The positive cash flow was generated primarily from reductions in accounts receivable and inventories from Fiscal 2001 balances. The Company began the year with significant amounts of accounts receivable and inventory and has made substantial progress in reducing the balances by $10.1 million and $13.7 million, respectively, contributing to improved cash performance.

Investing activities were comprised of investment in property, plant and equipment totaling $2.1 million for the first nine months of Fiscal 2002. Purchases of property, plant and equipment decreased approximately $1.7 million from the comparable period of Fiscal 2001 of which approximately $1.0 million can be attributed to the relocation of the Company’s satcom operations to its facility in Ontario, Canada. The remaining decrease is a result of the Company’s continued focus on cash management. The Company currently anticipates that capital expenditure requirements for Fiscal 2002 will be down

-16-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

significantly from the $5.8 million spent in Fiscal 2001 of which $4.4 million related to ongoing capital improvement requirements.

Financing activities during the first nine months of Fiscal 2002 were related primarily to repayment of the Company’s $20.0 million senior term loan and repayments on the Company’s secured credit facility (“Credit Facility”) of $13.6 million. The $20.0 million senior term loan was repaid in June 2002 using approximately $9.3 million in available cash and drawing $10.7 million from its line of credit.

As of June 28, 2002, the Company had $23.5 million available under its revolving line of credit that expires December 22, 2004. The following is a summary of certain obligations and commitments of the Company as of June 28, 2002:


		Due in Fiscal Years

												2007 and
(In thousands)		2002		2003		2004		2005		2006		Thereafter		Total

Debt obligations, including capital lease obligations		$	7,805	$	17,781	$	—	$	100,000	$	—	$	—	$	125,586
Noncancellable operating leases			288		593		430		294		9		—		1,614
Senior Redeemable Preferred Stock			—		—		—		—		—		28,640		28,640

	Total cash obligations	$	8,093	$	18,374	$	430	$	100,294	$	9	$	28,640	$	155,840

Standby letters of credit		$	349	$	4,528	$	18	$	—	$	—	$	—	$	4,895

The Company’s debt obligations include mortgage financing of $17.8 million which was refinanced in June 2002. Under the terms of the refinancing, the loan was extended until June 1, 2003 and the Company agreed to pay two principal installments of $250,000 on June 1, 2002 and December 1, 2002. Management expects that cash to be generated by operations and borrowing under its Credit Facility in conjunction with either extending or finding alternative financing will allow it to meet this obligation. However, 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 capital expenditures, reducing discretionary costs, negotiating an increase to the Company’s borrowing capacity under its line of credit, and selling and leasing back its facility in San Carlos, California in a transaction with an outside party.

-17-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

Market Risk

The Company’s market risk disclosures set forth in its Annual Report on Form 10-K for the fiscal year ended September 28, 2001, have not changed significantly.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. Upon adoption of SFAS No. 142, amortization of goodwill recorded for business combinations will cease. Companies are required to adopt SFAS No. 142 for fiscal years beginning after December 15, 2001, but early adoption is permitted. The Company plans to adopt this Statement beginning in the first quarter of Fiscal 2003 and therefore has not yet determined the impact on its consolidated financial position or results of operations. At the beginning of Fiscal 2003, the goodwill balance, net of amortization, is expected to be $21.7 million.

The FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” in August 2001, and SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived 12Assets,” in October 2001. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002 and will require 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 does not expect the adoption of these statements to have a material effect on the Company’s consolidated financial position or results of operations. The Company will adopt these Statements beginning in the first quarter of Fiscal 2003

In May 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 FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment of that Statement, FASB Statement No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” This Statement amends FASB 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 is currently assessing the impact of SFAS No. 145 on its financial position, results of operations and cash flows as well as timing of its adoption.

-18-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

~~The~~In July 2002, the FASB issued SFAS No. ~~143~~146, “Accounting for ~~Asset~~Costs ~~Retirement~~Associated with ~~Obligations~~Exit and Disposal Activities.”, ~~in August~~This ~~2001,~~statement revises the accounting for exit and ~~SFAS~~disposal ~~No.~~activities ~~144~~under EITF Issue 94-3, “~~Accounting~~Liability Recognition for Certain Employee Termination Benefits and other Costs to Exit an Activity,” by spreading out the ~~Impairment~~reporting of expenses related to restructuring activities. Commitment to a plan to exit an activity or ~~Disposal~~dispose of ~~Long~~ long-lived ~~Assets”,~~assets inwill no ~~October~~longer ~~2001. SFAS~~be ~~No. 143~~sufficient isto ~~effective~~record ~~for~~a ~~fiscal~~one-time ~~years~~charge ~~beginning~~for ~~after~~most ~~June 15~~anticipated costs. Instead, ~~2002~~companies ~~and~~ will ~~require~~record ~~that~~exit ~~the~~or ~~fair~~disposal ~~value~~costs ofwhen anthey ~~asset~~are ~~retirement~~“incurred” and ~~obligation~~can be ~~recorded as~~measured aat ~~liability~~fair invalue, and they will subsequently adjust the recorded ~~period~~liability infor ~~which~~changes itin ~~incurs~~estimated ~~the~~cash ~~obligation~~flows. ~~SFAS~~The provisions of SFAS No. ~~144~~146 is are effective prospectively for ~~fiscal~~exit ~~years~~or ~~beginning~~disposal activities initiated after December 1531, ~~2001~~2002. ItEarlier ~~provides~~adoption ~~a single~~is ~~accounting~~encouraged. ~~model~~Companies ~~for~~may ~~long-lived~~not restate ~~assets~~previously toissued befinancial ~~disposed~~statements for the effect of ~~and~~the ~~replaces~~provisions of SFAS No. ~~121~~146 ~~“Accounting~~and ~~for~~liabilities ~~the~~that ~~Impairment~~a ofCompany ~~Long-Lived~~previously ~~Assets~~recorded ~~and~~under ~~Long-Lived~~EITF ~~Assets~~Issue to94-3 Beare ~~Disposed Of~~grandfathered.” The Company ~~does~~is ~~not~~currently ~~expect~~assessing the ~~adoption~~impact of ~~these~~ ~~statements~~SFAS toNo. 146 ~~have~~on aits ~~material~~financial ~~effect~~position, onresults ~~the~~of ~~Company’s~~operations ~~consolidated~~and ~~financial~~cash flows as ~~position~~well oras ~~results~~timing of ~~operations~~its adoption.

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~~expect,” “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.

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~~

- 13 19-

COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION
and subsidiaries

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

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 ability to generate the significant amount of cash needed to service its debt; and the Company’s ability to obtain financing in the future. IfAny ~~any~~ of the ~~following~~foregoing ~~risks~~factors ~~actually~~could ~~occur,~~cause the Company’s business, results of operations, or ~~financial~~ financial condition ~~would~~to ~~likely~~ suffer and actual results could differ materially from those ~~projected~~ expected.

- 14 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)		None
(b)		Reports on Form 8-K:
		No reports were filed on Form 8-K during the quarter ended December 28, 2001.

(a) The following exhibits are being filed as part of this report:

- 15 -


Exhibit No.		Description

10.11.1		Modification Agreement of Secured Loan between Holding and Wells Fargo Bank, National Association, dated June 1, 2002
10.12.1		Amended and Restated Promissory Note Secured by Deed of Trust by Holding in favor of Wells Fargo Bank, National Association, dated June 1, 2002
10.13.1		Memorandum of Modification Agreement Amending Deed of Trust by Holding in favor of Wells Fargo Bank, National Association, dated June 1, 2002
10.14.1		Junior Lienor’s Consent and Subordination Agreement by CPI in favor of Wells Fargo Bank, National Association, dated June 1, 2002
99.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.3		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.4		Certification 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 June 28, 2002.

-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, INC.
	COMMUNICATIONS & POWER INDUSTRIES HOLDINGCORPORATION
	By:	/s/ ~~Bart F~~O. ~~Petrini~~Joe Caldarelli
		Bart F. Petrini Chief Executive Officer and President Date: February 8, 2002
		O. Joe Caldarelli Chief Executive Officer Date: August 8, 2002

By: /s/ Joel Littman Joel Littman Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) Date: ~~February~~August 8, 2002

- 16 22-

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: August 8, 2002


	By:	/s/ Joel Littman

		Joel Littman Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) Date: August 8, 2002

-23-

EXHIBIT INDEX


Exhibit No.		Description

10.11.1		Modification Agreement of Secured Loan between Holding and Wells Fargo Bank, National Association, dated June 1, 2002
10.12.1		Amended and Restated Promissory Note Secured by Deed of Trust by Holding in favor of Wells Fargo Bank, National Association, dated June 1, 2002
10.13.1		Memorandum of Modification Agreement Amending Deed of Trust by Holding in favor of Wells Fargo Bank, National Association, dated June 1, 2002
10.14.1		Junior Lienor’s Consent and Subordination Agreement by CPI in favor of Wells Fargo Bank, National Association, dated June 1, 2002
99.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.3		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.4		Certification 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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Filing Compare · COMMUNICATIONS & POWER INDUSTRIES HOLDING CORP