Prospectus Filed Pursuant to Rule 424



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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-173372

         PROSPECTUS

LOGO

CPI INTERNATIONAL, INC.

         Offer to exchange $215 million aggregate principal amount of 8.00% Senior Notes due 2018 (which we refer to as the "outstanding notes") for $215 million aggregate principal amount of 8.00% Senior Notes due 2018 (which we refer to as the "exchange notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"). When we use the term "notes" in this prospectus, the term includes the outstanding notes and the exchange notes, unless otherwise indicated or the context otherwise requires.

        The exchange offer will expire at 5:00 p.m., New York City time, on August 18, 2011, unless we extend the exchange offer.

        Terms of the exchange offer:

        There is no established trading market for the exchange notes or the outstanding notes.

        Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the Expiration Date (as defined herein), we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution."

         See "Risk Factors" beginning on page 19 for a discussion of risks you should consider prior to tendering your outstanding notes for exchange.

         Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.



The date of this prospectus is July 21, 2011.



Table of Contents

Information Included in this Prospectus

  ii

Market and Industry Data

  iii

Use of Non-GAAP Financial Measures

  iii

Special Note Regarding Forward-Looking Statements

  iv

Summary

  1

Risk Factors

  19

Use of Proceeds

  35

Capitalization

  36

Unaudited Pro Forma Condensed Consolidated Financial Information

  37

Selected Historical Consolidated Financial Information

  45

Management's Discussion and Analysis of Financial Condition and Results of Operations

  49

Business

  78

Management

  95

Executive Compensation

  99

Security Ownership of Certain Beneficial Owners and Management

  129

The Transactions

  131

Certain Relationships and Related Party Transactions

  132

Description of the Senior Secured Credit Facilities

  133

The Exchange Offer

  135

Description of the Exchange Notes

  144

Certain United States Federal Income Tax Considerations

  192

Plan of Distribution

  193

Certain ERISA Considerations

  194

Legal Matters

  195

Experts

  195

Where You Can Find Additional Information

  195

Index to Consolidated Financial Statements

  F-1

i



INFORMATION INCLUDED IN THIS PROSPECTUS

        On February 11, 2011, CPI International LLC (formerly, CPI International, Inc., "Predecessor"), a then Delaware corporation and publicly traded company, completed its merger with Catalyst Acquisition, Inc. ("Merger Sub"), a Delaware corporation and wholly owned subsidiary of CPI International, Inc. (formerly, CPI International Acquisition, Inc., "CPII"), a Delaware corporation and wholly owned subsidiary of CPI International Holding Corp. ("Parent" or "Successor"). Pursuant to the Merger, Merger Sub merged with and into Predecessor (the "Merger"), with Predecessor continuing as the surviving corporation and a wholly owned subsidiary of CPII. The Merger was effected pursuant to the Agreement and Plan of Merger, dated as of November 24, 2010, among Predecessor, CPII and Merger Sub (the "Merger Agreement"). Immediately following the consummation of the Merger and related transactions, Predecessor was converted into a limited liability company and liquidated, and CPI International Acquisition, Inc. changed its name to CPI International, Inc.

        As used herein, unless the context indicates or otherwise requires, (i) for periods prior to the Merger, the terms "we," "us," "our," and "Company" refer to Predecessor and its consolidated subsidiaries, and for periods after the Merger, those terms refer to Parent (Successor), its consolidated subsidiaries and, where the context so requires, its parent company, (ii) the term "Veritas Fund" refers to The Veritas Capital Fund IV, L.P. and (iii) the terms "Veritas Capital" and "Sponsor" refer collectively to The Veritas Capital Fund IV, L.P., The Veritas Capital Fund III, L.P. and their affiliates, including CICPI Holdings LLC. See "—The Transactions." Our ultimate parent, CPI International Holding LLC ("Holding LLC"), owns all of the outstanding common stock of Parent, which in turn owns all of the outstanding common stock of CPII, which in turn owns all of the outstanding equity interests of Communications & Power Industries LLC (formerly, Communications & Power Industries, Inc., "CPI") and Communications & Power Industries Canada Inc. ("CPI Canada"), our main operating subsidiaries. Holding LLC, Parent and CPII are holding companies with no material assets or operations other than their respective direct or indirect equity interests in CPI and CPI Canada and activities related thereto.

        Our fiscal year 2010 ended on October 1, 2010, and our first six months of fiscal year 2011 ended on April 1, 2011. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Financial information included herein for periods prior to and including February 10, 2011 reflect the results of Predecessor on a consolidated basis prior to the Merger. Financial information for periods after February 10, 2011 reflect the results of Parent (Successor) on a consolidated basis after giving effect to the Merger. Parent is a guarantor of the outstanding notes and will be a guarantor of the exchange notes. Pursuant to the rules of the Securities and Exchange Commission and the reporting covenant in the indenture governing notes, consolidated financial information of Parent may be provided in lieu of such information of CPII, the issuer of the notes. The consolidated financial information of CPII is substantially the same as that of Parent, except with respect to certain intercompany transactions that do not materially impact the information presented.

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MARKET AND INDUSTRY DATA

        Market data and other statistical information used throughout this prospectus are based on independent industry publications, government publications, reports by market research firms or other published independent sources or based upon our estimates using such sources when available. While we believe that such information and estimates are reasonable and reliable, we have not independently verified any data from third-party sources. Similarly, our internal research is based upon our understanding of industry conditions, and such information has not been verified by any independent sources.


USE OF NON-GAAP FINANCIAL MEASURES

        We have included certain non-GAAP financial measures in this prospectus, including EBITDA, which represents earnings before net interest expense, provision for income taxes and depreciation and amortization, and Adjusted EBITDA, which represents EBITDA adjusted to exclude certain non-recurring, non-cash, unusual and other items. Adjusted EBITDA as defined in this prospectus is calculated in accordance with the definitions contained in the indenture governing the notes and our senior secured credit facilities and is the basis for the calculations to determine our compliance with various covenants contained therein. We believe that U.S. GAAP-based (based on generally accepted accounting principles in the United States) financial information for leveraged businesses such as ours should be supplemented by EBITDA and Adjusted EBITDA so that investors better understand our financial performance in connection with their analysis of our business. We believe that EBITDA is useful to assess our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures. In addition, we believe that Adjusted EBITDA is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business and to monitor compliance with, and our ability to engage in certain activities under, covenants contained in our debt agreements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash and Working Capital," "Description of the Senior Secured Credit Facilities" and "Description of the Exchange Notes—Certain Covenants." We use EBITDA for business planning purposes and in measuring our performance relative to that of our competitors.

        We believe EBITDA and Adjusted EBITDA are measures commonly used by securities analysts and investors to evaluate our performance and that of our competitors and other leveraged businesses. EBITDA and Adjusted EBITDA are not presentations made in accordance with U.S. GAAP and should not be considered as alternatives to net income (loss), operating income or any other performance measures derived in accordance with U.S. GAAP as measures of operating performance or operating cash flows as measures of liquidity. Our use of the terms EBITDA and Adjusted EBITDA varies from others in our industry. The calculation of Adjusted EBITDA in accordance with our debt agreements allows us to add back certain charges that are deducted in calculating EBITDA and/or net income (loss). However, some of these expenses may recur, vary greatly and are difficult to predict. Our presentation of EBITDA and Adjusted EBITDA should not be construed to imply that our future results will be unaffected by unusual or non-recurring items.

        EBITDA and Adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as substitutes for analysis of our results as reported under U.S. GAAP. For example, EBITDA and Adjusted EBITDA:

    exclude certain tax payments that may represent a reduction in cash available to us;

    do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;

    do not reflect changes in, or cash requirements for, our working capital needs; and

    do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements, within the meaning of securities laws, that relate to future events or our future financial performance. In some cases, readers can identify forward-looking statements by terminology such as "may," "will," "should," "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 we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from the results projected, expected or implied by the forward-looking statements. These risk factors include, without limitation, risks associated with:

    competition in our end markets;

    our significant amount of debt and our ability to refinance our debt;

    changes or reductions in the United States defense budget;

    currency fluctuations;

    goodwill impairment considerations;

    customer cancellations of sales contracts;

    U.S. Government contracts;

    export restrictions and other laws and regulations;

    international laws;

    changes in technology;

    the impact of unexpected costs;

    the impact of a general slowdown in the global economy;

    the impact of environmental laws and regulations; and

    inability to obtain raw materials and components.

        We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform such statements to actual results or to changes in our expectations. You should carefully consider the various risks and uncertainties that impact our business and the other information in this prospectus and, in particular, information appearing under the headings "Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business."

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SUMMARY

         This summary highlights key aspects of the information contained elsewhere in this prospectus and may not contain all of the information you should consider before exchanging your outstanding notes for exchange notes. You should read this summary together with the entire prospectus, including the information presented under the heading "Information Included in this Prospectus," "Risk Factors," "Unaudited Pro Forma Condensed Consolidated Financial Information" and the historical financial statements and related notes included elsewhere in this prospectus.

Our Company

        We are a leading provider of microwave, radio frequency ("RF"), power and control products for applications in the defense, communications, medical and scientific industries. We develop, manufacture and distribute products used to generate, amplify, transmit and receive high-power/high-frequency microwave and RF signals and/or provide power and control for various defense and commercial applications. Our products are used for transmitting radar signals for threat tracking and navigation; transmitting decoy and jamming signals for electronic warfare; transmitting and amplifying voice, data and video signals for broadcasting, data links, the Internet, flight testing and other types of communications; providing power and control for medical diagnostic imaging; generating microwave energy for radiation therapy in the treatment of cancer; and for various industrial and scientific applications.

        We have an extensive portfolio of more than 4,500 products that includes a wide range of vacuum electron devices ("VEDs"), satellite communications amplifiers, medical x-ray generators, advanced antenna technology, solid state devices, and various electronic power supply and control equipment.

        We estimate that our products are currently installed on more than 125 U.S. defense systems and more than 180 commercial systems. Both defense and commercial applications require the generation, control and transmission of high-power and high-frequency microwave and RF signals for which VED products are the most efficient technology. Our products are elements of U.S. and foreign military programs and platforms, including numerous airborne, ship-borne and ground-based platforms. In addition to our strong presence in defense applications, we have successfully applied our key technologies to commercial end markets, including communications, medical, industrial and scientific applications, which provide us with a diversified base of sales. Revenues during fiscal year 2010 were split approximately evenly between defense and commercial applications.

        We believe the majority of our VED products are consumable with an average life of between three and seven years, and once they are installed in original equipment, they generate recurring sales of spares and repairs. We regularly work with our customers, often utilizing customer-funded R&D programs to create and upgrade customized products with enhanced bandwidth, power and reliability. We estimate that approximately 36% of our total sales for fiscal year 2010 were generated from sales of spares and repairs, including upgraded replacements for existing products, providing us with a relatively stable business that is less vulnerable to dramatic shifts in market conditions. In addition, in fiscal year 2010, we generated approximately 58% of our total sales from products for which we believe, based on information we collect during the ordering process, that we were the only supplier solicited by the applicable customers to provide such products.

        We are organized into six divisions operating five manufacturing facilities in North America. We sell and service our products to customers globally through our internal sales, marketing and service force of approximately 145 professionals and 64 external sales organizations. Products are sold directly to the U.S. Department of Defense ("DoD"), foreign military services and commercial customers, as well as to original equipment manufacturers ("OEMs") and systems integrators for ultimate sales to those customers. The U.S. Government is our only customer that accounted for more than 10% of our sales in fiscal year 2010. Approximately 34%, 33% and 35% of our sales in our 2010, 2009 and 2008

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fiscal years, respectively, were made to the U.S. Government, either directly or indirectly through prime contractors or subcontractors.

        In fiscal year 2010 and the six months ended April 1, 2011, we generated total sales of $360.4 million and $184.3 million, respectively, net income (loss) of $6.7 million and $(11.4) million, respectively, and Adjusted EBITDA of $61.6 million and $29.0 million, respectively. See note 7 under "Summary Historical and Pro Forma Financial Information" for additional information regarding Adjusted EBITDA.

Our End Markets

        Approximately half of our product sales for fiscal year 2010 were for U.S. and foreign government and military end use. We are one of three companies in the United States that have the facilities and expertise to produce a broad range of high-power microwave products customized to the demanding specifications required for advanced military applications. Defense applications of our products include transmitting and receiving radar signals for locating and tracking threats, weapons guidance and navigation, as well as transmitting decoy and jamming signals for electronic warfare. Key defense platforms on which we provide components include the Aegis Combat System; Phalanx and Hawk radar systems; ALE-50 airborne and MK-53 NULKA shipboard decoy systems; SIRFC on-board jamming system; and many of the U.S. military radar and electronic warfare systems in service. In recent years, we have expanded our focus in the communications market to include military communications applications, as we believe that there is a significant and growing market for our products for these applications. Military communications applications now make up a growing portion of our total communications business, and approximately one-third of our total communications sales in fiscal year 2010 were for military communications purposes. We believe satellite communication will be a critical element for supplying real time, high data-rate communications, intelligence and battlefield information to the front-line soldier. We currently provide satellite communication amplifiers for military platforms such as the Warfighter Information Network—Tactical ("WIN-T") and Navy Multiband Terminal ("NMT") systems. In addition, military data link communications systems use our products to transmit and receive real-time command and control, intelligence, surveillance and reconnaissance data between airborne platforms (including unmanned aerial vehicles ("UAVs")) and their associated ground-based and ship-based terminals. We currently provide the data links for several major UAV platforms and the Apache attack helicopter. As a provider of products for U.S. Government and military end use, we are subject to certain risks particular to such activities. For example, the U.S. Government has the ability to terminate or modify our contracts and to audit our contract-related costs and fees. In addition, we are subject to additional laws and regulations as a U.S. Government contractor as well as possible false claim suits and "qui tam" or "whistleblower" suits. We also are a sole provider of some business to the U.S. Government that may be subject to competitive bidding in the future. For additional information regarding these risks, see "Risk Factors—Risks Relating To Our Business—We are subject to risks particular to companies supplying defense-related equipment and services to the U.S. Government. The realization of any of these risks could cause a loss of or decline in our sales to the U.S. Government."

        In addition to our strong presence in defense applications, we have successfully applied our key technologies to commercial end markets, including communications, medical, industrial and scientific applications, which provide us with a diversified base of sales. Within the commercial communications end market, we offer one of the industry's most comprehensive lines of satellite communications amplifiers, with offerings for virtually every currently applicable frequency and power requirement. We estimate that we have a worldwide installed base of more than 25,000 satellite communications ("satcom") amplifiers. Furthermore, we are participating in the growing area of Ka-band for commercial satcom applications including conventional and high-definition television for direct-to-home satellite broadcast as well as satellite communications for broadband data communications. Key

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programs are ViaSat's Ka-band satellite-delivered broadband services and DirecTV's direct-to-home broadcast applications.

        Within the medical end market, we supply VEDs for high-end radiation therapy machines and x-ray generators. Radiotherapy treatment sales have grown in the last several years as major suppliers of therapy equipment have introduced a number of key technological advances that enable their equipment to treat a greater number of oncology-related problems. We believe this trend will drive continued growth in demand for our products. In addition, we believe that we are one of the leading independent suppliers of x-ray generators in the world, and we believe that this market provides long-term growth opportunities for us.

        The industrial market includes applications for a wide range of systems used for material processing, instrumentation and voltage generation, and we offer a number of specialized product lines to address this diverse market. We produce fully integrated amplifiers that include the associated high-power microwave devices used in instrumentation applications for electromagnetic interference and compatibility testing. Our products are also installed in the power supply modules of industrial equipment using RF energy to perform pipe and plastic welding, textile drying and semiconductor wafer fabrication. In addition, we have a line of industrial RF generators that use high-power microwave technology for various industrial heating and material processing applications.

        Our scientific market consists primarily of equipment used in reactor fusion programs and accelerators for the study of high-energy particle physics, referred to as "Big Science." Generally, in scientific applications, our products are used to generate high levels of microwave or RF energy to accelerate a beam of electrons in order to study the atom and its elementary particles. Our products are also used in research related to the generation of electricity from fusion reactions.

Our Competitive Strengths

        We believe we are well positioned in our end markets and that our key competitive strengths are:

    Leadership in Microwave and RF Technology.   Since 1948, we have been a leader in microwave technology. More than 60 years ago, the founders of the Company pioneered a breakthrough technology that led to the commercialization of radar. Since then, we have improved our solutions, enabling technological advances in radar, electronic warfare and communications systems, which have required higher-power and higher-frequency solutions, and we have been designing and producing cutting-edge products that specifically address the evolving needs of our customers. In response to our customers' needs, we have designed and developed microwave systems that provide what we believe is a market-leading combination of power, frequency, bandwidth, control and reliability for our commercial and military customers. We have maintained our technological and production expertise through our experienced team of scientists and engineers, our recurring investment in research and development, over half of which is customer-funded, and our focus on continuous process improvement. Our leadership in design and quality is demonstrated by what we believe are sole-source relationships with customers from whom we generated a majority of our sales in fiscal year 2010.

    Leading Market Positions in Attractive End Markets.   We have developed leading market positions across the end markets we serve by offering customers superior design expertise, product quality and customer service. We believe we are a market leader in the sale of high-power, high-frequency microwave devices and related products for the defense, communications, medical, industrial and scientific end markets.

    Substantial Sole Provider Position.   Our market leading technology, customer focus, and long history as a reliable supplier to our government and commercial customers, have resulted in our products being designed into and installed on a large number of platforms and systems. We

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      believe that in many cases we are the sole provider of high-power microwave equipment on these systems. In fiscal year 2010, we generated approximately 58% of our sales from products for which we believe, based on information we collect during the ordering process, we were the only supplier solicited by the applicable customers to provide such products.

    Large Installed Product Base with Recurring Spares and Repairs Sales.   We provide products embedded within a large and growing installed base of defense systems and commercial systems. We estimate that our products are currently installed on more than 125 U.S. defense systems and more than 180 commercial systems. Furthermore, once our products have been designed and installed into a customer's system, high costs would have to be incurred by the customer in order to requalify a new supplier's component and redesign the customer's end product, which creates significant disincentives to switch to a competitor. This large installed base, high switching costs and our sole provider position enable us to capture a long-term stream of replacements, spares and repairs sales. We estimate that approximately 36% of our total sales for fiscal year 2010 were generated from recurring sales of replacements, spares and repairs.

    Diversified Sales Base.   Our sales are diversified by customer, by end market, by product and by geography. Our top 15 customers comprised less than 50% of total sales in fiscal year 2010, with only the U.S. Government accounting for more than 10% of our sales during such period. We sell our products to customers in five end markets: the radar and electronic warfare (defense), communications, medical, industrial and scientific markets. No end market represented more than 37% of total sales in fiscal year 2010. Within each of our markets, we also sell a variety of products. These products may be sold as stand-alone products or as part of a fully integrated subsystem. For example, we supply each U.S. Navy DDG-51 destroyer with many different products, ranging from coupled-cavity traveling wave tubes for the early warning radar system to power-grid replacement products and services. Our product diversification reduces our dependence on any one part of any market for our overall success and profitability. Finally, our leadership in our markets allows us to penetrate other important geographic markets, as evidenced by the fact that 36% of our total sales in fiscal year 2010 came from customers outside the United States. These international customers provide us with further diversification, as they span all of our end markets.

    Strong Cash Flow Generation and Low Capital Expenditures.   We generate substantial operating cash flow and have relatively low capital expenditures. For the three years ended October 1, 2010, our average annual net cash provided by continuing operating activities before cash interest expense, cash income tax and strategic alternative transaction expenses was $55.1 million, while average annual capital expenditures were $4.0 million. We expect capital expenditures to remain low as a percentage of total sales as we continue to actively manage our capital expenditure needs. For fiscal year 2010, capital expenditures equaled 1.2% of total sales.

    Strong and Experienced Management Team with a Successful Track Record.   Our management team averages more than 25 years experience with the Company and its predecessor, Varian Associates, Inc. Since assuming its leadership responsibilities in 2002, our management team has instilled a culture that places a heavy emphasis on cost consciousness, profitable growth, meeting goals and targets, and cash generation through efficient management of inventories, receivables, accounts payable and customer advances. In addition, management has consolidated several facilities, reduced labor costs, overhead and general and administrative expenses, and renewed the Company's commitment to operational excellence principles in its factories. During the tenure of our management team, our total sales increased from $251.2 million in fiscal year 2002 to $360.4 in fiscal year 2010, while our Adjusted EBITDA and net income (loss) increased from $30.1 million and $(6.7) million, respectively, in fiscal year 2002 to $61.6 million and $6.7 million, respectively, in fiscal year 2010.

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Our Business Strategy

        Our goal is to continually improve our position as a leading supplier of products and systems into our core defense, medical, commercial and scientific markets. Our strategies to achieve this objective include:

    Expanding Our Business in the Emerging Military Communications Market.   We believe that real-time network communications between intelligence agencies, military commands and soldiers on the front lines will play an increasingly critical role in the U.S. military and that the procurement of new military communications systems will be a critical component of this trend. Microwave technology is well suited to provide the significant bandwidth required to enable the rapid and seamless transfer of large quantities of voice, video and other forms of information that are critical to military communications. We believe we are well positioned to continue to be a key supplier of microwave technology for the growing military satellite communications market, having made significant investments over the past several years to bring to market internally developed, proprietary microwave solutions tailored for military satellite communications use.

    Supporting Other Emerging Military Initiatives.   We believe the DoD is increasingly exploring high-power microwave solutions for a growing number of threat countermeasures and non-lethal weapons applications. We offer many products and are working with the military on new products for many of these applications, including next-generation electronic warfare systems that transmit decoy and jamming signals to deceive an enemy threat. In addition, the recent proliferation of non-traditional weapons has led to the exploration of technologies that can disable or destroy these devices. High-power microwave technology has shown a significant promise as a countermeasure against Improvised Explosive Devices ("IEDs"), and we expect that the DoD will actively pursue high-power technology solutions in this area.

    Developing and Expanding Technologies.   Through a combination of customer-funded research and development and our own internal research and development efforts, we intend to continue our focus on the development of our key technologies in core programs to increase market share and in adjacent, high-growth areas with significant long-term potential, including UAV technology, advanced radar applications, solid-state satcom amplifiers, next-generation x-ray machines and other complementary markets. We continue to analyze emerging technologies and aggressively pursue related market opportunities. For example, we have greatly increased our investment in solid-state technology for power amplifiers to address new mobile satcom applications. In addition, in the medical market we have recently introduced new x-ray generators with image processing systems to assist customers in their migration from film-based radiology systems to digital radiology systems. In fiscal year 2010, our total research and development spending was approximately $28.5 million, of which $12.4 million was internally funded and $16.1 million was customer-funded.

    Pursuing Attractive Commercial Opportunities.   We intend to develop new products to pursue growth areas in the commercial markets we serve. Recent examples of our product innovation include the introduction of a line of SuperLinear® high-powered, satellite communications amplifiers, which are more efficient, use less prime power and generate less heat, making them smaller and lighter and, therefore, better suited for modern, compact communications systems, as well as being more environmentally friendly, than comparable amplifiers. In addition, we provide high-powered Ka-band amplifiers for the growing area of commercial communications services via satellite, including the latest broadband (Internet) and HDTV applications. In the medical market, we have recently introduced new products, including x-ray generators with image processing systems as mentioned earlier.

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    Leveraging Incumbent Relationships.   We intend to leverage our relationships with the U.S. Government, prime defense contractors and key commercial customers by continuing to deliver high levels of performance on our existing contracts, which will help to preserve our access to a valuable stream of spares and repairs business and enhance our ability to win new, upgrade and follow-on business.

    Exploring Strategic Acquisitions.   We intend to selectively explore strategic acquisitions in the rapidly consolidating defense and microwave components industries. Strategic acquisitions could permit us to acquire complementary technologies and products, achieve higher levels of system integration, grow our existing product base, and/or increase our geographic coverage by leveraging our extensive corporate sales and marketing organization.

The Transactions

        On November 24, 2010, CPII, Predecessor and Merger Sub entered into the Merger Agreement pursuant to which CPII acquired Predecessor through the merger of Merger Sub with and into Predecessor. On February 11, 2011, contemporaneously with the consummation of the Merger, the separate corporate existence of Merger Sub ceased, and Predecessor became the surviving corporation. Predecessor's common stock is no longer publicly traded as a result of the Merger. Immediately following the consummation of the Merger and related transactions, Predecessor was converted into a limited liability company and liquidated, and we changed our name to CPI International, Inc. from CPI International Acquisition, Inc.

        In connection with the Merger, Veritas Capital invested $200.0 million, solely for the purpose of purchasing equity securities of Holding LLC in order to provide a portion of the financing required for the Merger and the transactions contemplated by the Merger Agreement. Certain officers of Predecessor also invested in equity securities of Holding LLC in an aggregate amount of $11.1 million.

        On February 11, 2011, we issued the $215 million aggregate principal amount of outstanding notes, and we entered into the senior secured credit facilities, comprised of a $150.0 million six-year term loan facility and a $30.0 million five-year revolving credit facility with UBS AG, Stamford Branch, as administrative agent, and the financial institutions party thereto (the "Senior Secured Credit Facilities"). We borrowed the full amount of the term loan thereunder in connection with the Merger, and the revolving credit facility was undrawn at closing (other than for approximately $4.5 million of outstanding letters of credit). Our obligations under the Senior Secured Credit Facilities are fully and unconditionally guaranteed by the Parent and, subject to certain exceptions, each of the Parent's existing and future domestic restricted subsidiaries (other than CPII). In addition, our obligations under the Senior Secured Credit Facilities and the guarantees of those obligations are secured by (a) pledges of all of the equity interests held by us and each guarantor and (b) liens on substantially all of our assets and the assets of each guarantor, in each case subject to certain exceptions. Please see "Description of the Senior Secured Credit Facilities" for a more complete description of the Senior Secured Credit Facilities.

        In addition, in connection with the Merger, on January 13, 2011 CPI offered to purchase all $117.0 million aggregate principal amount of its existing outstanding 8% Senior Subordinated Notes due 2012 (the "8% Notes"), and Predecessor offered to purchase all $12.0 million aggregate principal amount of its existing outstanding Floating Rate Senior Notes due 2015 (the "FR Notes") pursuant to tender offers and related consent solicitations. All outstanding FR Notes and a portion of the 8% Notes were tendered pursuant to such tender offers and purchased by Predecessor and CPI, respectively, on February 11, 2011. CPI redeemed all remaining outstanding 8% Notes on March 14, 2011.

        We used the equity contributions, borrowings under the term loan facility and the net proceeds from the outstanding notes to pay the Merger consideration, consummate the tender offers and

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redemption, repay amounts under CPI's existing senior credit facilities and pay related fees and expenses. In this prospectus, we refer to the Merger and these related transactions as the "Transactions."

        In connection with the Transactions, on February 11, 2011 we entered into an advisory agreement with Veritas Capital Fund Management, L.L.C. ("Veritas Management"), a Delaware limited liability company and an affiliate of our Sponsor, pursuant to which Veritas Management provides us with certain management, advisory and consulting services including, without limitation, business and organizational strategy, financial and advisory services. We will pay Veritas Management the fees and expenses specified therein for such services. The initial term of the advisory agreement will end December 31, 2023 and the agreement will renew automatically for additional one-year terms thereafter unless Veritas Management or we terminate the advisory agreement. If we terminate the advisory agreement in specified circumstances, we will be required to pay additional amounts to Veritas Management. For additional information regarding the advisory agreement, see "Certain Relationships and Related Party Transactions—Arrangements with Veritas—Advisory Agreement."

Information About Our Company

        We were incorporated in Delaware on November 24, 2010 initially under the name Catalyst Holdings, Inc., and we changed our name to CPI International Acquisition, Inc. on January 26, 2011. On February 11, 2011, immediately following the consummation of the Transactions, we changed our name to CPI International, Inc. Our principal executive offices are located at 811 Hansen Way, Palo Alto, California 94303, and our telephone number is (650) 846-2900. Our website is located at www.cpii.com. The information on, or accessible through, the website is not a part of this prospectus.

Information About Our Sponsor

        Veritas Capital is a leading private equity firm that specializes in making investments in companies that provide products and services to government-related end markets and customers around the world, including healthcare, education, energy, defense, infrastructure, national security and aerospace. Founded in 1992, Veritas has made 20 platform investments in the government services sector, including CPI International, Inc. Veritas' current portfolio companies include Aeroflex Incorporated; CRGT, Inc.; Excelitas Technologies Corp.; Global Tel*Link; KeyPoint Government Solutions, Inc.; The SI Organization, Inc.; and Vangent, Inc.

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SUMMARY DESCRIPTION OF THE EXCHANGE OFFER

         On February 11, 2011, in connection with the Merger, we completed the private placement of $215,000,000 aggregate principal amount of 8.00% Senior Notes due 2018 (the "outstanding notes"). The term "exchange notes" refers to 8.00% Senior Notes due 2018 registered under the Securities Act. The term "notes" refers to both the outstanding notes and the exchange notes, unless otherwise indicated or the context so requires.

General

  In connection with the private placement, we entered into a registration rights agreement with UBS Securities LLC and KKR Capital Markets LLC, the initial purchasers of the outstanding notes (the "initial purchasers"), in which we and the guarantors agreed, among other things, to use our commercially reasonable efforts to complete the exchange offer for the outstanding notes within 270 days after the date of issuance of the outstanding notes.

 

You are entitled to exchange in the exchange offer your outstanding notes for exchange notes, which are identical in all material respects to the outstanding notes except:

 

•        the exchange notes have been registered under the Securities Act;

 

•        the exchange notes are not entitled to certain registration rights which are applicable to the outstanding notes under the registration rights agreement; and

 

•        certain additional interest rate provisions are no longer applicable.

Exchange Offer

 

We are offering to issue up to $215 million aggregate principal amount of the exchange notes in exchange for a like principal amount of the outstanding notes to satisfy our obligations under the registration rights agreement that was executed when the outstanding notes were issued in a transaction in reliance upon the exemptions from registration provided by Rule 144A and Regulation S of the Securities Act. Outstanding notes may be tendered in minimum denominations of principal amount of $1,000 and integral multiples of $1,000. We will issue the exchange notes promptly after expiration of the exchange offer. See "The Exchange Offer—Terms of the Exchange; Period for Tendering Outstanding notes."

Expiration Date; Tenders

 

The exchange offer will expire at 5:00 p.m., New York City time, on August 18, 2011, unless extended by us. By tendering your outstanding notes, you represent to us that:

 

•        you are not our "affiliate," as defined in Rule 405 under the Securities Act;

 

•        any exchange notes you receive in the exchange offer are being acquired by you in the ordinary course of your business;

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•        neither you nor anyone receiving exchange notes from you has any arrangement or understanding with any person to participate in a distribution, as defined in the Securities Act, of the exchange notes;

 

•        you are not holding outstanding notes that have, or are reasonably likely to have, the status of an unsold allotment in the initial offering;

 

•        if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes that were acquired by you as a result of your market-making or other trading activities, you will deliver a prospectus in connection with any resale of the exchange notes you receive. For further information regarding resales of the exchange notes by participating broker-dealers, see the discussion under the caption "Plan of Distribution."

Withdrawal; Non-Acceptance

 

You may withdraw any outstanding notes tendered by you in the exchange offer at any time prior to 5:00 p.m., New York City time, on August 18, 2011. If we decide for any reason not to accept any outstanding notes tendered for exchange, the outstanding notes will be returned to the registered holder at our expense promptly after the expiration or termination of the exchange offer. In the case of the outstanding notes tendered by book-entry transfer into the exchange agent's account at The Depository Trust Company, any withdrawn or unaccepted outstanding notes will be credited to the tendering holder's account at DTC. For further information regarding the withdrawal of tendered outstanding notes, see "The Exchange Offer—Terms of the Exchange Offer; Period for Tendering Outstanding notes" and the "The Exchange Offer—Withdrawal Rights."

Conditions to the Exchange Offer

 

The exchange offer is subject to customary conditions, which we may waive. In the event of a material change in the exchange offer, including the waiver of a material condition, we will extend the offer period if necessary so that at least five business days remain in the exchange offer following notice of the material change. See the discussion below under the caption "The Exchange Offer—Conditions to the Exchange Offer" for more information regarding the conditions to the exchange offer.

Consequences of Not Exchanging Your Outstanding Notes

 

If you are eligible to participate in the exchange offer and you do not tender your outstanding notes, you will not have any further registration or exchange rights and your outstanding notes will continue to be subject to transfer restrictions. These transfer restrictions and the availability of the exchange notes may adversely affect the liquidity of your outstanding notes. See "The Exchange Offer—Consequences of Exchanging or Failing to Exchange Outstanding notes."

   

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Procedures for Tendering the Outstanding Notes

 

You must do the following on or prior to the expiration or termination of the exchange offer to participate in the exchange offer:

 

•        tender your outstanding notes by sending the certificates for your outstanding notes, in proper form for transfer, a properly completed and duly executed letter of transmittal, with any required signature guarantees, and all other documents required by the letter of transmittal, to The Bank of New York Mellon Trust Company, N.A., as exchange agent, at one of the addresses listed below under the caption "The Exchange Offer—Exchange Agent," or

 

•        tender your outstanding notes by using the book-entry transfer procedures described below and transmitting a properly completed and duly executed letter of transmittal, with any required signature guarantees, or an agent's message instead of the letter of transmittal, to the exchange agent. In order for a book-entry transfer to constitute a valid tender of your outstanding notes in the exchange offer, The Bank of New York Mellon Trust Company, N.A., as exchange agent, must receive a confirmation of book-entry transfer of your outstanding notes into the exchange agent's account at DTC prior to the expiration or termination of the exchange offer. For more information regarding the use of book-entry transfer procedures, including a description of the required agent's message, see the discussion below under the caption "The Exchange Offer—Book-Entry Transfers."

Special Procedures for Beneficial Owners

 

If you are a beneficial owner whose outstanding notes are registered in the name of the broker, dealer, commercial bank, trust company or other nominee and you wish to tender your outstanding notes in the exchange offer, you should promptly contact the person in whose name the outstanding notes are registered and instruct that person to tender on your behalf. If you wish to tender in the exchange offer on your own behalf, prior to completing and executing the letter of transmittal and delivering your outstanding notes, you must either make appropriate arrangements to register ownership of the outstanding notes in your name or obtain a properly completed bond power from the person in whose name the outstanding notes are registered.

Certain United States Federal Income Tax Considerations

 

The exchange of the outstanding notes for exchange notes in the exchange offer will not be a taxable transaction for United States federal income tax purposes. See the discussion under the caption "Certain United States Federal Income Tax Considerations "for more information regarding the tax consequences to you of the exchange offer.

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Use of Proceeds

 

We will not receive any proceeds from the exchange offer.

Exchange Agent

 

The Bank of New York Mellon Trust Company, N.A. is the exchange agent for the exchange offer. You can find the address and telephone number of the exchange agent below under the caption "The Exchange Offer—Exchange Agent."

Resales

 

Based on interpretations by the staff of the Securities and Exchange Commission ("SEC") as set forth in no-action letters issued to the third parties, we believe that the exchange notes you receive in the exchange offer may be offered for resale, resold or otherwise transferred without compliance with the registration and prospectus delivery provisions of the Securities Act. However, you will not be able to freely transfer the exchange notes if:

 

•        you are our "affiliate," as defined in Rule 405 under the Securities Act;

 

•        you are not acquiring the exchange notes in the exchange offer in the ordinary course of your business;

 

•        you are participating or intend to participate, or have an arrangement or understanding with any person to participate in the distribution, as defined in the Securities Act, of the exchange notes you will receive in the exchange offer; or

 

•        you are holding outstanding notes that have or are reasonably likely to have the status of an unsold allotment in the initial offering.

 

If you fall within one of the exceptions listed above, you cannot rely on the applicable interpretations of the staff of the SEC, you will not be entitled to participate in the exchange offer and you must comply with the applicable registration and prospectus delivery requirements of the Securities Act in connection with any resale transactions. See the discussion below under the caption "The Exchange Offer—Procedures for Tendering Outstanding notes" for more information.

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Broker-Dealer

 

Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the Expiration Date (as defined herein), we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution."

 

Furthermore, a broker-dealer that acquired any of its outstanding notes directly from us:

 

•        may not rely on the applicable interpretations of the staff or the SEC's position contained in Exxon Capital Holdings Corp., SEC no-action letter (Apr. 13, 1988); Morgan Stanley & Co. Inc., SEC no-action letter (June 5, 1991); or Shearman & Sterling, SEC no-Action Letter (July 2, 1993); and

 

•        must also be named as a selling security holder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction.

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SUMMARY DESCRIPTION OF THE EXCHANGE NOTES

         The summary below describes the principal terms of the exchange notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The "Description of the Exchange Notes" section of this prospectus contains more detailed descriptions of the terms and conditions of the exchange notes.

Issuer

  CPI International, Inc.

Exchange Notes Offered

 

We are offering up to $215,000,000 aggregate principal amount of our 8.00% Senior Notes due 2018.

Interest

 

The exchange notes will accrue interest from the date of their issuance at the rate of 8.00% per year. Interest on the exchange notes will be payable semi-annually in arrears on each February 15 and August 15, commencing on August 15, 2011.

Maturity Date

 

February 15, 2018.

Guarantees

 

The exchange notes will be guaranteed on a senior unsecured basis, jointly and severally, by the Parent and by all of our existing and future restricted subsidiaries (other than any "Excluded Subsidiary" as defined under "Description of the Exchange Notes—Certain Definitions").

 

There are risks related to the guarantees of the exchange notes. The lenders under the Senior Secured Credit Facilities have the discretion to release the subsidiary guarantees under the Senior Secured Credit Facilities in a variety of circumstances, which will result in those subsidiary guarantors automatically being released from their guarantees of the exchange notes. Further, since the Parent has no significant operations or assets, its guarantee of the notes provides little, if any, additional credit support for the notes. In addition, certain bankruptcy and fraudulent transfer laws may allow courts to void the guarantees in certain circumstances. For additional information regarding these and other risks relating to this exchange offer, the notes and the guarantees, see "Risk Factors—Risks Related to the Exchange Offer and Holding of the Notes."

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Ranking

 

The exchange notes and the guarantees will be senior unsecured obligations of ours and each of the guarantors, as applicable, and will be equal in right of payment with all of our and such guarantor's existing and future senior unsecured obligations. The exchange notes and the guarantees thereof will be senior in right of payment to any of our and each guarantor's existing and future obligations that are, by their terms, expressly subordinated in right of payment to the exchange notes and the guarantees. The exchange notes and the guarantees thereof will be effectively subordinated to our and each guarantor's existing and future secured obligations, including the Senior Secured Credit Facilities, to the extent of the value of the assets securing such obligations. As of April 1, 2011, we and the guarantors had $364.6 million of total debt (excluding $4.5 million in letters of credit and $0.7 million of original issue discount), $149.6 million of which was secured, and we had an additional $25.5 million available to be borrowed under the revolving credit facility included in the Senior Secured Credit Facilities.

Optional Redemption

 

We may redeem the exchange notes, in whole or in part, at any time on or after February 15, 2015, at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably to par and accrued and unpaid interest as set forth under "Description of the Exchange Notes—Optional redemption."

 

At any time before February 15, 2014, we may redeem up to 35% of the aggregate principal amount of the exchange notes issued under the indenture with the net cash proceeds of one or more qualified equity offerings at a redemption price equal to 108.00% of the principal amount of the exchange notes to be redeemed, plus accrued and unpaid interest.

 

In addition, we may redeem some or all of the exchange notes prior to February 15, 2015 at a redemption price equal to 100% of the principal amount thereof, plus a "make-whole" premium. See "Description of the Exchange Notes—Optional redemption."

Change of Control

 

Upon a change of control, each holder of exchange notes may be entitled to require us to purchase all or a portion of its exchange notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest. See "Description of the Exchange Notes—Change of control." Our ability to purchase the exchange notes upon a change of control may be limited by the terms of our debt agreements, including the Senior Secured Credit Facilities. We cannot assure you that we will have the financial resources to purchase the exchange notes in such circumstances.

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Certain Covenants

 

The indenture governing the exchange notes will contain covenants that, among other things, will limit our ability and the ability of our restricted subsidiaries to:

 

•        incur additional indebtedness;

 

•        pay dividends or repurchase or redeem capital stock;

 

•        limit dividends or other payments by our restricted subsidiaries to us or our other restricted subsidiaries;

 

•        make certain investments;

 

•        incur liens;

 

•        enter into certain types of transactions with our affiliates; and

 

•        sell assets or consolidate or merge with or into other companies.

 

These and other covenants that will be contained in the indenture governing the exchange notes are subject to important exceptions and qualifications, which are described under "Description of the Exchange Notes."

Risk Factors

 

Holding the exchange notes involves a high degree of risk. You should carefully consider the risk factors set forth under the heading "Risk Factors" and the other information contained in this prospectus prior to exchanging the outstanding notes for exchange notes.

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

        The following table presents our summary historical and pro forma financial information as of and for the periods presented. The summary historical financial information as of October 2, 2009 and October 1, 2010 and for the fiscal years ended 2008, 2009 and 2010 have been derived from Predecessor's audited financial statements included elsewhere in this prospectus. The summary historical financial information as of October 3, 2008 has been derived from Predecessor's audited financial statements not included in this prospectus. The summary financial information of Predecessor for the six months ended April 2, 2010 and the period October 2, 2010 to February 10, 2011 has been derived from Parent's unaudited financial statements included elsewhere in this prospectus. The balance sheet data as of April 2, 2010 has been derived from Predecessor's unaudited financial statements that are not included in this prospectus. The summary financial information for the period February 11, 2011 to April 1, 2011 and the balance sheet data as of April 1, 2011 have been derived from Parent's unaudited financial statements included elsewhere in this prospectus. Results for the periods October 2, 2010 to February 10, 2011 and February 11, 2011 to April 1, 2011 are not necessarily indicative of the results that may be expected for the year ended September 30, 2011 or for any future period. The combined results for the six-months ended April 1, 2011 represent the addition of the results of Predecessor for the period from October 2, 2010 to February 10, 2011 and the results of Parent and its consolidated subsidiaries for the period from February 11, 2011 to April 1, 2011. This combination does not comply with generally accepted accounting principles in the United States or with the rules for pro forma presentation but is presented because we believe it facilitates the ability of investors to more meaningfully compare our operating results. Immediately following the consummation of the Transactions, Predecessor was converted into a limited liability company and liquidated.

        The summary unaudited pro forma financial information gives effect to the Transactions as if they had occurred on October 3, 2009 and October 2, 2010 for purposes of the unaudited pro forma condensed consolidated statements of operations for the year ended October 1, 2010 and for the six months ended April 1, 2011, respectively. We based the unaudited pro forma adjustments upon available information and certain assumptions that we believe are reasonable under the circumstances. The preliminary allocation of the purchase price to the assets acquired and the liabilities assumed is based on preliminary estimates of the fair values of the assets acquired and liabilities assumed, based on available information and certain assumptions. The final adjustments will depend on a number of factors, including the finalization of asset valuations. Therefore, the actual adjustments will differ from the pro forma adjustments, and the differences may be material.

        The unaudited pro forma financial information is for illustrative and informational purposes only and does not purport to represent or be indicative of what our financial condition or results of operations would have been had the Transactions occurred on such dates. See "The Transactions." The unaudited pro forma financial information should not be considered representative of our future financial condition or results of operations.

        Each of Parent and CPII was incorporated solely for the purpose of effectuating the Merger and related transactions. Neither Parent nor CPII conducted any other activities prior to consummation of the Merger.

        You should read this information together with the information included under the headings "Information Included in this Prospectus," "Use of non-GAAP financial measures," "Risk factors," "Unaudited pro forma condensed consolidated financial information," "Selected historical consolidated financial information," "Management's discussion and analysis of financial condition and results of operations," and our historical financial statements and related notes included elsewhere in the prospectus.

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  Historical   Pro Forma  
 
  Predecessor   Parent   Combined   Parent  
 
  Fiscal Year
Ended
October 3,
2008
  Fiscal Year
Ended
October 2,
2009
  Fiscal Year
Ended
October 1,
2010
  Six Months
Ended
April 2,
2010
  October 2,
2010 to
February 10,
2011
  February 11,
2011 to
April 1,
2011
  Six Months
Ended
April 1,
2011
  Fiscal Year
Ended
October 1,
2010
  Six months
Ended
April 1,
2011
 
 
  (dollars in thousands)
   
   
   
 

Statement of Income Data:

                                                       

Sales

  $ 370,014   $ 332,876   $ 360,434   $ 171,119   $ 124,223   $ 60,094   $ 184,317   $ 360,434   $ 184,317  

Cost of sales(1)

    261,086     239,385     251,987     120,957     91,404     43,883     135,287     253,763     132,030  
                                       

Gross profit

    108,928     93,491     108,447     50,162     32,819     16,211     49,030     106,671     52,287  
                                       

Research and development

    10,789     10,520     12,429     5,745     4,994     2,163     7,157     12,429     6,914  

Selling and marketing

    21,144     19,466     20,794     10,214     8,264     2,706     10,970     20,794     10,585  

General and administrative

    22,951     20,757     24,988     12,187     11,853     3,125     14,978     25,688     12,780  

Amortization of acquisition-related intangible assets

    3,103     2,769     2,749     1,374     999     2,316     3,315     20,701     10,350  

Strategic alternative transaction expenses(2)

            19,913     211     4,668     8,785     13,453     19,913     1,518  
                                       

Total operating costs and expenses

    57,987     53,512     80,873     29,731     30,778     19,095     49,873     99,525     42,147  
                                       

Operating income (loss)

    50,941     39,979     27,574     20,431     2,041     (2,884 )   (843 )   7,146     10,140  

Interest expense, net

    19,055     16,979     15,213     7,736     5,788     4,138     9,926     27,185     13,587  

Loss (gain) on debt extinguishment(3)

    633     (248 )               134     134          

Income tax expense (benefit)

    10,804     (218 )   5,622     4,362     983     (440 )   543     (6,366 )   3,302  
                                       

Net income (loss)(4)

  $ 20,449   $ 23,466   $ 6,739     8,333   $ (4,730 ) $ (6,716 ) $ (11,446 ) $ (13,673 ) $ (6,749 )
                                       

Other Financial Data:

                                                       

Net cash provided by (used in) operating activities

  $ 33,881   $ 30,114   $ 19,808   $ 11,548   $ 4,277   $ (4,885 ) $ (608 )            

Net cash used in investing activities(5)

    (2,794 )   (3,365 )   (4,533 )   (1,868 )   (2,440 )   (371,447 )   (373,887 )            

Net cash (used in) provided by financing activities

    (22,891 )   (29,267 )   1,402     697     2,203     351,154     353,357              

Capital expenditures

    4,262     3,365     4,492     1,835     2,434     957     3,391              

Depreciation and amortization(6)

    10,963     10,794     11,072     5,485     4,117     3,558     7,675   $ 30,800   $ 15,400  

EBITDA(7)

    61,271     51,021     38,646     25,916     6,158     540     6,698     37,946     25,540  

Adjusted EBITDA(7)

    64,039     53,452     61,599     27,645     15,381     13,638     29,019     62,699     29,433  

Ratio of total debt to Adjusted EBITDA(8)

                                              5.82        

Operating Data (at period end):

                                                       

Backlog

  $ 201,277   $ 225,957   $ 241,943   $ 240,697               $ 269,239              

Balance Sheet Data (at period end):

                                                       

Working capital(9)

  $ 88,103   $ 92,380   $ 44,753   $ 107,814               $ 84,743              

Total assets

    466,948     458,254     478,276     470,575                 727,713              

Long-term debt, including current portion

    225,660     194,922     194,934     194,928                 363,890              

Total stockholders' equity

    143,865     173,553     183,940     185,065                 190,653              

(1)
For the period February 11, 2011 to April 1, 2011, includes $3,567 of utilization of the net increase in cost basis of inventory due to purchase accounting.

(2)
For the fiscal year ended October 1, 2010 and the six months ended April 2, 2010, represents the termination fee relating to a terminated merger agreement between Predecessor and Comtech Telecommunications Corp. and non-recurring transaction costs, such as fees for investment bankers, attorneys and other professional services rendered in conjunction with exploring strategic alternatives for the Predecessor. For the period October 2, 2010 to February 10, 2011, represents transaction expenses relating to the sale of the Predecessor. For the period February 11, 2011 to April 1, 2011, represents transaction expenses relating to the Merger.

(3)
The redemption of $10,000 of Predecessor's floating rate senior notes in fiscal year 2008 resulted in a loss on debt extinguishment of approximately $633, including non-cash write-offs of $420 of unamortized debt issue costs and issue discount costs and $213 in cash payments primarily for call premiums. The repurchase of $8,000 of CPI's 8% senior subordinated notes during fiscal year 2009 resulted in a gain on debt extinguishment of $248 which was comprised of a discount of $392, partially offset by a non-cash write-off of $144 unamortized debt issue costs. The repayment, redemption or repurchase, as applicable, of an aggregate amount of $195,000 of Predecessor's term loan facility and floating rate senior notes and CPI's 8% senior subordinated notes during the period February 11, 2011 to April 1, 2011 resulted in a loss on debt extinguishment of approximately $134, which comprised bond tender fees and other related expenses of $621, offset by $487 gain from debt repayment at less than fair value.

(4)
Net income for fiscal year 2009 includes discrete tax benefits, in the aggregate, of $7,900. Net income for fiscal year 2010 includes strategic alternative transaction expenses, after taxes, of $15,200.

(5)
For the period February 11, 2011 to April 1, 2011, includes $370,490 of cash used for the acquisition of Predecessor.

(6)
Excludes amortization of deferred debt issuance costs, which are included in interest expense, net.

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(7)
EBITDA represents earnings before net interest expense, provision for income taxes and depreciation and amortization. We believe that EBITDA is useful to assess our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures. Our use of the term EBITDA may vary from others in our industry. The term EBITDA is not defined under U.S. GAAP. EBITDA is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. For additional information regarding our use of EBITDA and limitations on its usefulness as an analytical tool, see "Use of Non-GAAP Financial Measures."

Adjusted EBITDA represents EBITDA adjusted to exclude certain non-recurring, non-cash, unusual and other items. We believe that Adjusted EBITDA is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business and to monitor compliance with certain covenants contained in our debt agreements. Our use of the term Adjusted EBITDA may vary from others in our industry. The calculation of Adjusted EBITDA is based on the definitions in our debt agreements and is not defined under U.S. GAAP. Adjusted EBITDA is not a measure of operating income, performance or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. For additional information regarding our use of Adjusted EBITDA and limitations on its usefulness as an analytical tool, see "Use of Non-GAAP Financial Measures."

         The following table reconciles net income to EBITDA and Adjusted EBITDA:

 
  Historical   Pro Forma  
 
  Predecessor   Parent   Combined   Parent  
 
  Fiscal Year
Ended
October 3,
2008
  Fiscal Year
Ended
October 2,
2009
  Fiscal Year
Ended
October 1,
2010
  Six Months
Ended
April 2,
2010
  October 2,
2010 to
February 10,
2011
  February 11,
2011 to
April 1,
2011
  Six Months
Ended
April 1,
2011
  Fiscal Year
Ended
October 1,
2010
  Six months
Ended
April 1,
2011
 

Net income (loss)

  $ 20,449   $ 23,466   $ 6,739   $ 8,333   $ (4,730 ) $ (6,716 ) $ (11,446 ) $ (13,673 ) $ (6,749 )

Depreciation and amortization(a)

    10,963     10,794     11,072     5,485     4,117     3,558     7,675     30,800     15,400  

Interest expense, net

    19,055     16,979     15,213     7,736     5,788     4,138     9,926     27,185     13,587  

Income tax expense (benefit)

    10,804     (218 )   5,622     4,362     983     (440 )   543     (6,366 )   3,302  
                                       

EBITDA

  $ 61,271   $ 51,021   $ 38,646   $ 25,916   $ 6,158   $ 540   $ 6,698   $ 37,946   $ 25,540  

Plus adjustments:

                                                       

Stock compensation expense(b)

    2,135     2,679     3,040     1,518     4,555     312     4,867     3,040     1,475  

Loss (gain) on debt extinguishment(c)

    633     (248 )               134     134          

Strategic alternative transaction expenses(d)

            19,913     211     4,668     8,785     13,453     19,913     1,518  

Veritas Management management fee(e)

                        300     300     1,800     900  

Utilization of net increase in cost basis of inventory(f)

                        3,567     3,567          
                                       

Adjusted EBITDA

  $ 64,039   $ 53,452   $ 61,599   $ 27,645   $ 15,381   $ 13,638   $ 29,019   $ 62,699   $ 29,433  
                                       

    (a)
    Excludes amortization of deferred debt issuance costs, which are included in interest expense, net.

    (b)
    Represents a non-cash charge for stock options, restricted stock awards, restricted stock unit awards and the employee discount related to our employee stock purchase plan.

    (c)
    For the fiscal year ended October 3, 2008, represents expenses related to the $10,000 redemption of FR Notes including the write-off of unamortized deferred debt issue costs, issue discount costs, redemption premiums and other costs. For the fiscal year ended October 2, 2009, represents the discount related to the $8,000 repurchase of 8% Notes partially offset by the write-off of unamortized deferred debt issue costs. For the period February 11, 2011 to April 1, 2011, represents bond tender fees and other expenses related to the repayment, redemption or repurchase, as applicable, of an aggregate amount of $195,000 of term loan facility, FR Notes and 8% Notes partially offset by a gain from debt repayment at less than fair value.

    (d)
    For the fiscal year ended October 1, 2010 and the six months ended April 2, 2010, represents transaction expenses related to exploring strategic alternatives, including for the fiscal year ended October 1, 2010, a $15,000 termination fee relating to the terminated merger agreement between Predecessor and Comtech Telecommunications Corp. For the period October 2, 2010 to February 10, 2011, represents transaction expenses relating to the sale of the Predecessor. For the period February 11, 2011 to April 1, 2011, represents transaction expenses relating to the Merger.

    (e)
    Represents a management fee payable to Veritas Management for advisory and consulting services.

    (f)
    Represents $3,567 of utilization of the net increase in cost basis of inventory due to purchase accounting.

(8)
Long-term debt, including current portion, divided by pro forma Adjusted EBITDA.

(9)
Current assets minus current liabilities.

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RISK FACTORS

         You should carefully consider the risks described below and other information in this prospectus before deciding to tender your outstanding notes and participate in the exchange offer. Some of the following factors relate principally to our business and the industry in which we operate. Other factors relate principally to the exchange notes offered hereby. The risks and uncertainties described below are not intended to be exhaustive but represent the risks that we believe are material. Additional risks and uncertainties not presently known to us, or which we currently deem immaterial, may also have a material adverse effect on our business, financial condition and operating results and could therefore affect your investment in the exchange notes.

Risks Relating To Our Business

We face competition in the markets in which we sell our products.

        The U.S. and foreign markets in which we sell our products are competitive. Our ability to compete in these markets depends on our ability to provide high-quality products with short lead times at competitive prices, as well our ability to create innovative new products. In addition, our competitors could introduce new products with greater capabilities, which could have a material adverse effect on our business. Certain of our competitors are owned by companies that have substantially greater financial resources than we do. Also, our foreign competitors may not be subject to U.S. Government export restrictions, which may make it easier in certain circumstances for them to sell to foreign customers. If we are unable to compete successfully against our current or future competitors, our business and sales will be harmed.

A significant portion of our sales is, and is expected to continue to be, from contracts with the U.S. Government, and any significant reduction in the U.S. defense budget or any disruption or decline in U.S. Government expenditures could negatively affect our results of operations and cash flows.

        Approximately 34%, 33% and 35% of our sales in our 2010, 2009 and 2008 fiscal years, respectively, were made to the U.S. Government, either directly or indirectly through prime contractors or subcontractors. Because our U.S. Government contracts are dependent on the U.S. defense budget, any significant disruption or decline in U.S. Government defense expenditures in the future, changes in U.S. Government spending priorities, other legislative changes or changes in our relationship with the U.S. Government could result in the loss of some or all of our government contracts, which, in turn, could result in a decrease in our sales and cash flow.

        In addition, U.S. Government contracts are also conditioned upon continuing Congressional approval and the appropriation of necessary funds. Congress usually appropriates funds for a given program each fiscal year even though contract periods of performance may exceed one year. Consequently, at the outset of a major program, multi-year contracts are usually funded for only the first year, and additional monies are normally committed to the contract by the procuring agency only as Congress makes appropriations for future fiscal years. We cannot ensure that any of our government contracts will continue to be funded from year to year. If such contracts are not funded, our sales may decline, which could negatively affect our results of operations and result in decreased cash flows.

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We are subject to risks particular to companies supplying defense-related equipment and services to the U.S. Government. The realization of any of these risks could cause a loss of or decline in our sales to the U.S. Government.

U.S. Government contracts contain termination provisions and are subject to audit and modification.

        The U.S. Government has the ability to:

    terminate existing contracts, including for the convenience of the government or because of a default in our performance of the contract;

    reduce the value of existing contracts;

    change the terms of performance of existing contracts;

    cancel multi-year contracts or programs;

    audit our contract-related costs and fees, including allocated indirect costs;

    suspend or debar us from receiving new contracts pending resolution of alleged violations of procurement laws or regulations or other laws that apply to the performance of government contracts; and

    control and potentially prohibit the export of our products, services, technology or other data.

        Each of our U.S. Government contracts can be terminated by the U.S. Government either for its convenience or if we default by failing to perform under the contract. If such contracts are terminated or reduced in scope, our sales may decline, which would negatively affect our results of operations and result in decreased cash flow. Termination-for-convenience provisions provide only for our recovery of costs incurred or committed, settlement expenses and profit on the work completed prior to termination. Termination-for-default provisions may provide for the contractor to be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. Our contracts with foreign governments generally contain similar provisions relating to termination at the convenience of the customer.

        The U.S. Government may review or audit our direct and indirect costs and performance on certain contracts, as well as our accounting and general business practices, for compliance with complex statutes and regulations, including the Truth in Negotiations Act, Federal Acquisition Regulations, Cost Accounting Standards and other administrative regulations. The U.S. Government audits our costs and performance on a continual basis, and we have outstanding audits like most government contractors. Based on the results of these audits, the U.S. Government may reduce our contract-related costs and fees, including allocated indirect costs. In addition, under U.S. Government regulations, some of our costs, including certain financing costs, research and development costs and marketing expenses, may not be reimbursable under U.S. Government contracts.

We are subject to laws and regulations related to our U.S. Government contracts business which may impose additional costs on our business.

        As a U.S. Government contractor, we must comply with, and are affected by, laws and regulations related to our performance of our government contracts and our business. These laws and regulations may impose additional costs on our business. In addition, we are subject to audits, reviews and investigations of our compliance with these laws and regulations. In the event that we are found to have failed to comply with these laws and regulations, we may be fined, we may not be reimbursed for costs incurred in performing the contracts, our contracts may be terminated and we may be unable to obtain new contracts. If a government review, audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including

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forfeiture of claims and profits, suspension of payments, statutory penalties, damages related to the illegal activity, fines and suspension or debarment from government contracts.

        In addition, many of our U.S. Government contracts require our employees to maintain various levels of security clearances, and we are required to maintain certain facility clearances. Complex regulations and requirements apply to obtaining and maintaining personnel and facility security clearances, and obtaining such clearances can be a lengthy process. To the extent we are not able to obtain or maintain personnel or facility security clearances, we also may not be able to seek or perform future classified contracts. If we are unable to do any of the foregoing, we will not be able to maintain or grow our business, and our revenue may decline.

As a result of our U.S. Government business, we may be subject to false claim suits, and a judgment against us in any of these suits could cause us to be liable for substantial damages.

        Our business with the U.S. Government, subjects us to "qui tam," or "whistleblower," suits brought by private plaintiffs in the name of the U.S. Government upon the allegation that we submitted a false claim to the U.S. Government, as well as to false claim suits brought by the U.S. Government. A judgment against us in a qui tam or false claim suit could cause us to be liable for substantial damages (including treble damages and monetary penalties) and could carry penalties of suspension or debarment, which would make us ineligible to receive any U.S. Government contracts for a period of up to three years. Any material judgment, or any suspension or debarment, could result in increased costs and a loss of revenue, which could negatively affect our results of operations. In addition, any of the foregoing could cause a loss of customer confidence and could negatively harm our business and our future prospects.

Some of our sole-provider business from the U.S. Government in the future may be subject to competitive bidding.

        Some of the business that we will seek from the U.S. Government in the future may be awarded through a competitive bidding process. The competitive bidding process may reduce the price at which we sell our products to the U.S. Government and reduce our net income. Competitive bidding on government contracts presents risks such as:

    the need to bid on programs in advance of contract performance, which may result in unforeseen performance issues and costs; and

    the expense and delay that may arise if our competitors protest or challenge the award made to us, which could result in a reprocurement, modified contract, or reduced work.

        If we fail to win competitively bid contracts or fail to perform under these contracts in a profitable manner, our sales and results of operations could suffer.

We have experienced and expect to experience fluctuations in our operating results.

        We have experienced, and in the future expect to experience, fluctuations in our operating results, including net orders and sales. The timing of customers' order placement and customers' willingness to commit to purchase products at any particular time are inherently difficult to predict or forecast. Once orders are received, factors that may affect whether these orders become sales and translate into revenues in a particular quarter include:

    delay in shipments due to various factors, including cancellations by a customer, delays in a customer's own production schedules, natural disasters or manufacturing difficulties;

    delay in a customer's acceptance of a product; or

    a change in a customer's financial condition or ability to obtain financing.

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    Our operating results may also be affected by a number of other factors, including:

    general economic conditions in the geographical markets that we serve;

    sensitivity to rapid technological innovation and obsolescence of existing products;

    changes or anticipated changes in third-party reimbursement amounts or policies applicable to treatments using our products;

    revenues becoming affected by seasonal influences;

    changes in foreign currency exchange rates;

    changes in the relative portion of our revenues represented by our various products;

    timing of the announcement, introduction and delivery of new products or product enhancements by us and by our competitors;

    disruptions in the supply or changes in the costs of raw materials, labor, product components or transportation services;

    the impact of changing levels of sales to sole purchasers of certain of our products; and

    the unfavorable outcome of any litigation.

Our business and operating results could be adversely affected by losses under fixed-price contracts.

        Most of our governmental and commercial contracts are fixed-price contracts. Fixed-price contracts require us to perform all work under the contract for a specified lump-sum price. Fixed-price contracts expose us to a number of risks, including underestimation of costs, ambiguities in specifications, unforeseen costs or difficulties, problems with new technologies, delays beyond our control, failure of subcontractors to perform and economic or other changes that may occur during the contract period. In addition, some of our fixed-price contracts contain termination provisions that permit our customer to terminate the contract if we are unsuccessful in fulfilling our obligations under the contract. In that event, we could be liable for the excess costs incurred by our customer in completing the contract.

The end markets in which we operate are subject to technological change, and changes in technology could adversely affect our sales.

        Our defense and commercial end markets are subject to technological change. Advances in existing technology, or the development of new technology, could adversely affect our business and results of operations. Historically, we have relied on a combination of internal research and development and customer-funded research and development activities. To succeed in the future, we must continually engage in effective and timely research and development efforts in order to introduce innovative new products for technologically sophisticated customers and end markets and to benefit from the activities of our customers. If we fail to adapt successfully to technological changes or fail to obtain access to important technologies, our sales could suffer.

We may not be successful in implementing part of our growth strategy if we are unable to identify and acquire suitable acquisition targets or integrate acquired companies successfully.

        Finding and consummating acquisitions is one of the components of our growth strategy. Our ability to grow by acquisition depends on the availability of acquisition candidates at reasonable prices and our ability to obtain additional acquisition financing on acceptable terms. In making acquisitions, we may experience competition from larger companies with significantly greater resources. We are likely to use significant amounts of cash and/or incur additional debt in connection with future acquisitions, each of which could have a material adverse effect on our business. There can be no

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assurance that we will be able to obtain the necessary funds to carry out acquisitions on commercially reasonable terms, or at all.

        In addition, acquisitions could place demands on our management and/or our operational and financial resources and could cause or result in the following:

    difficulties in assimilating and integrating the operations, technologies and products acquired;

    the diversion of our management's attention from other business concerns;

    our operating and financial systems and controls being inadequate to deal with our growth; and

    the potential loss of key employees.

        Future acquisitions of companies may also provide us with challenges in implementing the required processes, procedures and controls in our acquired operations. Acquired companies may not have disclosure controls and procedures or internal control over financial reporting that are as thorough or effective as those required by securities laws in the United States.

Goodwill and other intangibles resulting from our acquisitions could become impaired.

        As of April 1, 2011, our goodwill, developed and core technology and other intangibles amounted to $454.1 million, net of accumulated amortization. We expect to amortize approximately $7.3 million in the last two quarters of fiscal year 2011, $15.4 million, $9.8 million and $8.3 million in fiscal years 2012, 2013 and 2014, respectively, and $192.2 million thereafter. To the extent we do not generate sufficient cash flows to recover the net amount of any investment in goodwill and other intangibles recorded, the investment could be considered impaired and subject to a non-cash write off. We expect to record further goodwill and other intangible assets as a result of any future acquisitions. Future amortization of such other intangible assets or impairments, if any, of goodwill would adversely affect our results of operations in any given period.

Laws and regulations governing the export of our products could adversely impact our business.

        Licenses or other authorizations are required from U.S. Government agencies for the export of many of our products in accordance with various regulations, including the United States Export Administration Regulations (for commercial products, including "dual use" products with military applications) administered by the Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce and the International Traffic in Arms Regulations (for defense articles and defense services) administered by the Directorate of Defense Trade Controls of the U.S. Department of State. Under these regulations, a license or other authorization may be required before transferring certain export-controlled articles or technical data, or providing defense services, to foreign persons, whether in the United States or abroad; before exporting certain of our products, services, and technical data outside the United States; before engaging in brokering activities involving export-controlled defense articles; and for the temporary import of certain defense articles and technical data. In addition, regulations administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury govern transactions with countries and persons subject to U.S. trade sanctions, including import as well as export transactions. We are also subject to U.S. Government restrictions on transactions with specific entities and individuals, including, without limitation, those set forth on the Entity List, the Specially Designated Nationals List, the Denied Persons List, the Unverified List, and the U.S. State Department's lists of debarred parties. We are also subject to U.S. customs laws and regulations, including customs duties, when applicable. Additionally, we are subject to the Anti-Boycott Regulations administered by the U.S. Department of Commerce, Office of Antiboycott Compliance ("OAC") and the Boycott Provisions of the Internal Revenue Code (Section 999) administered by the

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Internal Revenue Service. These laws and regulations could materially adversely impact our sales and business in the following scenarios:

    In order to obtain the license for the sale of such a product, we are required to obtain information from the potential customer and provide it to the U.S. Government. If the U.S. Government determines that the sale presents national security risks or is otherwise contrary to U.S. policy, it may not approve the sale.

    Delays caused by the requirement to obtain a required license or other authorization may cause delays in our production, sales and export activities, and may cause us to lose potential sales.

    If we violate these laws and regulations, we could be subject to fines or penalties, including debarment as an exporter and/or debarment or suspension as a government contractor.

        Our internal compliance program has identified, and we have made voluntary self-disclosures regarding potential compliance issues to (i) OFAC regarding assistance provided by the Swiss branch office of one of our U.S. subsidiaries (the "Swiss Branch") with respect to sales of medical x-ray equipment by our Canadian subsidiary to distributors for resale to end-users in Iran; (ii) to OFAC and BIS regarding the repair of a U.S.-origin power supply for a customer in Syria and the re-export to Syria of a U.S.-origin part that was used in such repair, by the Netherlands branch office of one of our European subsidiaries; and (iii) OAC regarding the acceptance by the Swiss Branch of purchase orders that contained boycott language with respect to sales of power tetrodes to Saudi Arabia. Each of Iran and Syria is a country that is subject to U.S. trade sanctions. On July 14, 2011, the Company received a warning letter from BIS, closing the matter without any imposition of penalties on the Company. While it is not possible to predict the response of the U.S. authorities, the Company could be assessed substantial fines or other penalties as a result of these matters still pending before OFAC and OAC.

        In addition to U.S. laws and regulations, foreign countries may also have laws and regulations governing imports and exports.

We generate sales from contracts with foreign governments, and significant changes in government policies or to appropriations of those governments could have an adverse effect on our business, results of operations and financial condition.

        We estimate that approximately 13%, 15% and 12% of our sales in fiscal years 2010, 2009 and 2008, respectively, were made directly or indirectly to foreign governments. Significant changes to appropriations or national defense policies, disruptions of our relationships with foreign governments or terminations of our foreign government contracts could have an adverse effect on our business, results of operations and financial condition. Our contracts with foreign governments also subject us to U.S. and international anti-corruption laws, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act (which also reaches commercial bribery). A judgment or settlement under the provisions of these acts could subject us to substantial monetary penalties and damages, as well as suspension and/or debarment. Suspension or debarment could deny us the ability to retain or obtain U.S. government contracts or restrict our exporting activity. In addition, any material judgment in this area could result in increased costs, which could negatively affect our results of operations, and could cause a loss of customer confidence, thus adversely affecting our business and future prospects.

Our international operations subject us to the social, political and economic risks of doing business in foreign countries.

        We conduct a substantial portion of our business, employ a substantial number of employees and use external sales organizations in Canada and in other countries outside of the United States. As a result, we are subject to certain risks of doing business internationally. Direct sales to customers located outside the United States were approximately 36%, 37% and 36% in fiscal years 2010, 2009 and 2008,

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respectively. Circumstances and developments related to international operations that could negatively affect our business, results of operations and financial condition include the following:

    changes in currency rates with respect to the U.S. dollar;

    changes in regulatory requirements;

    potentially adverse tax consequences;

    U.S. and foreign government policies;

    currency restrictions, which may prevent the transfer of capital and profits to the United States;

    restrictions imposed by the U.S. Government on the export of certain products and technology;

    the responsibility of complying with multiple and potentially conflicting laws;

    difficulties and costs of staffing and managing international operations;

    the impact of regional or country specific business cycles and economic instability; and

    geopolitical developments and conditions, including international hostilities, acts of terrorism and governmental reactions, trade relationships and military and political alliances.

        Limitations on imports, currency exchange control regulations, transfer pricing regulations and tax laws and regulations could adversely affect our international operations, including the ability of our non-U.S. subsidiaries to declare dividends or otherwise transfer cash among our subsidiaries to pay interest and principal on our debt.

We are subject to risks of currency fluctuations and related hedging operations.

        A portion of our business is conducted in currencies other than the U.S. dollar. In particular, we incur significant expenses in Canadian dollars in connection with our Canadian operations, but do not receive significant revenues in Canadian dollars. Changes in exchange rates among certain currencies, such as the Canadian dollar and the U.S. dollar, will affect our cost of sales, operating margins and revenues. Specifically, if the Canadian dollar strengthens relative to the U.S. dollar, our expenses will increase, and our results of operations will suffer. We use financial instruments, primarily Canadian dollar forward contracts, to hedge a portion of the Canadian dollar-denominated costs for our manufacturing operation in Canada. If these hedging activities are not successful or we change or reduce these hedging activities in the future, we may experience significant unexpected expenses from fluctuations in exchange rates.

Environmental and zoning laws and regulations and other obligations relating to environmental matters could subject us to liability for fines, clean-ups and other damages, require us to incur significant costs to modify our operations and/or increase our manufacturing costs.

Environmental and zoning laws and regulations could limit our ability to operate as we are currently operating and could result in additional costs.

        We are subject to a variety of U.S. federal, state and local, as well as foreign, environmental and zoning laws and regulations relating, among other things, to wastewater discharge, air emissions, storage and handling of hazardous materials, disposal of hazardous and other wastes and remediation of soil and groundwater contamination. We use a number of chemicals or similar substances and generate wastes that are classified as hazardous. We require permits to conduct many of our operations. Violations of environmental and zoning laws and regulations could result in substantial fines, penalties and other sanctions. Changes in environmental and zoning laws or regulations (or in their enforcement) affecting or limiting, for example, our chemical uses, certain of our manufacturing processes or our disposal practices, could restrict our ability to operate as we are currently operating or

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could impose additional costs. In addition, we may experience releases of regulated materials or discover existing contamination, which could cause us to incur material cleanup costs or other damages. Some environmental laws impose strict, and in certain circumstances joint and several, liability for costs of investigation and remediation of contaminated sites on current and former owners and operators of those sites, and also impose liability for related damages to natural resources. In addition, owners and operators of contaminated sites may be subject to claims for damage to property or personal injury alleged to result from the contamination.

We could be subject to significant environmental liabilities related to our electron devices business.

        When we purchased our electron devices business in 1995, Varian Medical Systems generally agreed to indemnify us for various environmental liabilities relating to the business prior to the purchase, with certain exceptions and limitations. Varian Medical Systems is undertaking the environmental investigation and remedial work at the manufacturing facilities that are known to require environmental remediation. In addition, Varian Medical Systems has been sued or threatened with suit with respect to environmental obligations related to these manufacturing facilities. If Varian Medical Systems does not comply fully with its indemnification obligations to us or does not continue to have the financial resources to comply fully with those obligations, we could be subject to significant liabilities.

        In connection with our sale of the former Varian facility in San Carlos, California, the buyer of the facility obtained insurance to cover the expected environmental remediation costs and other potential environmental liabilities at that facility, and we released Varian Medical Systems from certain of its indemnification obligations with respect to that facility. If the proceeds of the environmental insurance are insufficient to cover the required remediation costs and potential other environmental liabilities at that facility, we could be required to bear a portion of those liabilities which would be significant.

We have only a limited ability to protect our intellectual property rights, which are important to our success.

        Our success depends, in part, upon our ability to protect our proprietary technology and other intellectual property. We rely on a combination of trade secrets, confidentiality policies, nondisclosure and other contractual arrangements and patent, copyright and trademark laws to protect our intellectual property rights. The steps we take to protect our intellectual property may not be adequate to prevent or deter infringement or other violations of our intellectual property, and we may not be able to detect unauthorized use or to take appropriate and timely steps to enforce our intellectual property rights. In addition, we cannot be certain that our processes and products do not or will not infringe or otherwise violate the intellectual property rights of others. Infringement or other violations of intellectual property rights could cause us to incur significant costs, prevent us from selling our products and have a material adverse effect on our business, results of operations and financial condition.

Our inability to obtain certain necessary raw materials and key components could disrupt the manufacture of our products and cause our sales and results of operations to suffer.

        We obtain certain raw materials and key components necessary for the manufacture of our products, such as molybdenum, cupronickel, oxygen-free high conductivity (OFHC) copper and some cathodes, from a limited group of, or occasionally sole, suppliers. We have long-standing business relationships with our key suppliers and many of our critical commodities are covered by long-term blanket agreements. If any of our suppliers fails to meet our needs, we may not have readily available alternatives. Delays in component deliveries could cause delays in product shipments and require the redesign of certain products. If we are unable to obtain necessary raw materials and key components from our suppliers under favorable purchase terms and/or on a timely basis or to develop alternative

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sources, our ability to manufacture products could be disrupted or delayed, and our sales and results of operations could suffer.

If we are unable to retain key management and other personnel, our business and results of operations could be adversely affected.

        Our business and future performance depends on the continued contributions of key management personnel. Our current management team has an average of more than 25 years experience with us (and our predecessors) in various capacities. Since assuming their current leadership roles in 2002, this team has increased our sales, reduced our costs and grown our business. The unanticipated departure of any key member of our management team could have an adverse effect on our business and our results of operations. In addition, some of our technical personnel, such as our key engineers, could be difficult to replace.

Our backlog is subject to modifications and terminations of orders, which could negatively impact our sales.

        Backlog represents firm orders for which goods and services are yet to be provided, including with respect to government contracts that are cancelable at will. As of April 1, 2011, we had an order backlog of $269.2 million. Although historically the amount of modifications and terminations of our orders has not been material compared to our total contract volume, customers can, and sometimes do, terminate or modify these orders. Cancellations of purchase orders or reductions of product quantities in existing contracts could substantially and materially reduce our backlog and, consequently, our future sales. Our failure to replace canceled or reduced backlog could negatively impact our sales and results of operations.

Changes in our effective tax rate may have an adverse effect on our results of operations.

        Our future effective tax rates may be adversely affected by a number of factors including:

    the jurisdictions in which profits are determined to be earned and taxed;

    the resolution of issues arising from tax audits with various tax authorities;

    changes in the valuation of our deferred tax assets and liabilities;

    adjustments to estimated taxes upon finalization of various tax returns;

    increases in expenses not deductible for tax purposes;

    changes in available tax credits;

    changes in share-based compensation expense;

    changes in tax laws, or the interpretation of such tax laws, and changes in generally accepted accounting principles; and/or

    the repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes.

        Any significant increase in our future effective tax rates could adversely impact net income for future periods.

Our Sponsor controls us and may have conflicts of interest with us or you in the future.

        Veritas Capital indirectly beneficially owns substantially all of our outstanding voting shares. As a result of this ownership, our Sponsor will be entitled to elect all or substantially all of our directors, to appoint new management and to approve actions requiring the approval of our stockholder, including

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approving or rejecting proposed mergers or sales of all or substantially all of our assets, regardless of whether noteholders believe that any such transactions are in their own best interests.

        The interests of our Sponsor may differ from yours in material respects. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of the equity holders might conflict with your interests as a noteholder. Our Sponsor also may have an interest in pursuing acquisitions, divestitures, financings (including financings that are secured) or other transactions that, in their judgment, could enhance their equity investments, even though such transactions might involve risks to you as a noteholder. Additionally, the indenture governing the notes will permit us to pay advisory fees, dividends or make other restricted payments under certain circumstances, and our Sponsor or their affiliates may have an interest in our doing so.

        Our Sponsor or its affiliates are in the business of making investments in companies, and own, or may from time to time in the future acquire, interests in businesses or provide advice that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. They may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. You should consider that the interests of these holders may differ from yours in material respects. See "Security Ownership of Certain Beneficial Owners and Management," "Certain Relationships and Related Party Transactions," "Description of the Senior Secured Credit Facilities" and "Description of the Exchange Notes."

Litigation related to the Merger could adversely affect our financial results.

        A putative stockholder class action complaint was filed against Predecessor, the members of the Predecessor board of directors, and Comtech Telecommunications Corp. in the California Superior Court for the County of Santa Clara in connection with the previously proposed merger between us and Comtech Telecommunications Corp. The complaint, as amended, alleges claims against Predecessor, the members of the Predecessor board of directors, Cypress Associates II LLC, and our Sponsor and its affiliates. On January 10, 2011, Predecessor and the other defendants entered into a Memorandum of Understanding with Continuum Capital, whereby the plaintiff will dismiss its third amended complaint with prejudice in exchange for, among other agreements, an agreement by Predecessor to make certain additional disclosures concerning the currently proposed Merger, which disclosures were included in a definitive proxy statement filed by Predecessor on January 11, 2011. In addition, the Memorandum of Understanding also provides that, upon court approval and dismissal of the action, Predecessor, its insurers or its successor in interest will cause to be paid to the plaintiff's counsel $575,000 in full settlement of any claim for attorneys' fees and all expenses. We expect the majority of this payment to be borne by our insurers. It is possible that additional lawsuits will be filed against us and our directors in connection with the Merger. The cost of defending such lawsuits and paying any judgment or settlement in connection therewith could have an adverse impact on our financial results. See "Business—Legal Proceedings" for more information.

Risks Related To the Exchange Offer and Holding of the Notes

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under the notes.

        We are highly leveraged. As of April 1, 2011, our total indebtedness was $364.6 million (excluding approximately $4.5 million of letters of credit and $0.7 million of original issue discount), including the notes. We also had an additional $25.5 million available for borrowing under the new revolving credit facility included in the Senior Secured Credit Facilities.

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        Our high degree of leverage could have important consequences for you, including:

    increasing our vulnerability to adverse economic, industry or competitive developments;

    requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;

    exposing us to the risk of increased interest rates because certain of our borrowings, including borrowings under our Senior Secured Credit Facilities, will be at variable rates of interest;

    making it more difficult for us to satisfy our obligations with respect to our indebtedness, including the notes, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under the indenture governing the notes and the agreements governing such other indebtedness;

    restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;

    limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions and general corporate or other purposes; and

    limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who therefore, may be able to take advantage of opportunities that our leverage prevents us from exploiting.

        Our pro forma cash interest expense for the fiscal year ended October 1, 2010 and the six months ended April 1, 2011 would have been $27.2 million and $13.6 million, respectively. At April 1, 2011, we had $149.6 million aggregate principal amount of variable interest rate indebtedness under our Senior Secured Credit Facilities.

Despite our high indebtedness level, we and our subsidiaries will still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial indebtedness.

        We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the indenture governing the notes and the Senior Secured Credit Facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. See "Description of the Exchange Notes—Certain Covenants—Limitations on Additional Indebtedness" for additional information about these qualifications and exceptions. In addition to the $25.5 million that was available to us as of April 1, 2011 for borrowing under the new revolving credit facility included in the Senior Secured Credit Facilities, we have the option to increase the amount available under the Senior Secured Credit Facilities by up to an aggregate of $50.0 million on an uncommitted basis. If new debt is added to our and our subsidiaries' existing debt levels, the related risks that we now face would increase. In addition, the indenture governing the notes will not prevent us from incurring obligations that do not constitute indebtedness under those agreements.

We will require a significant amount of cash to service our indebtedness. Our ability to service our indebtedness depends on many factors.

        Our ability to pay principal and interest on and to refinance our debt, including the notes, depends upon the operating performance of our subsidiaries, which will be affected by, among other things,

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general economic, financial, competitive, legislative, regulatory and other factors, some of which are beyond our control. Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under the Senior Secured Credit Facilities, will be adequate to meet our future liquidity needs for at least the next twelve months, barring any unforeseen circumstances that are beyond our control. We cannot assure you, however, that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the Senior Secured Credit Facilities or otherwise in an amount sufficient to enable us to pay our indebtedness, including the notes, or to fund our other liquidity needs. In addition, the indenture governing the notes allows us to make significant restricted payments and other dividends. The making of such restricted payments or other dividend payments could affect our ability to pay principal and interest on our debt. We may need to refinance all or a portion of our indebtedness, including the notes, on or before the stated maturity of such indebtedness. We cannot assure you that we will be able to refinance any of our indebtedness, including the Senior Secured Credit Facilities and the notes, on commercially reasonable terms, on terms acceptable to us or at all.

The notes and the guarantees will be unsecured and effectively subordinated to our and each guarantor's existing and future secured indebtedness.

        The notes and guarantees will not be secured by any of our or the guarantors' assets. The indenture governing the notes permits us and the guarantors to incur secured debt, including pursuant to the Senior Secured Credit Facilities and other forms of secured debt. As a result, the notes and the guarantees will be effectively subordinated to all of our and each guarantor's secured obligations to the extent of the value of the assets securing such obligations.

        If we or the guarantors were to become insolvent or otherwise fail to make payment on the notes or the guarantees, holders of any of our and each guarantor's secured obligations would be paid first and would receive payments from the assets securing such obligations before the holders of the notes would receive any payments. You may therefore not be fully repaid if we or the guarantors become insolvent or otherwise fail to make payment on the notes.

Claims of noteholders will be structurally subordinated to claims of creditors of our subsidiaries that do not guarantee the notes.

        Claims of holders of the notes will be structurally subordinated to the claims of creditors of our subsidiaries that do not guarantee the notes, including trade creditors. All obligations of these subsidiaries will have to be satisfied before any of the assets of such subsidiaries would be available for distribution, upon a liquidation or otherwise, to us or creditors of us, including the holders of the notes.

        Our non-guarantor subsidiaries accounted for approximately $26.5 million, or 44%, of our net sales for the period February 11, 2011 to April 1, 2011, and approximately $251.4 million, or 35%, of our total assets (net of cash and cash equivalents) as of April 1, 2011. Amounts are presented after giving effect to intercompany eliminations.

The agreements and instruments governing our debt impose restrictions that may limit our operating and financial flexibility.

        The Senior Secured Credit Facilities and the indenture governing the notes contain a number of significant restrictions and covenants that limit our ability to:

    incur additional indebtedness;

    sell assets or consolidate or merge with or into other companies;

    pay dividends or repurchase or redeem capital stock;

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    make certain investments;

    issue capital stock of our subsidiaries;

    incur liens;

    prepay, redeem or repurchase subordinated debt; and

    enter into certain types of transactions with our affiliates.

        These covenants could have the effect of limiting our flexibility in planning for or reacting to changes in our business and the markets in which we compete.

        In addition, the Senior Secured Credit Facilities require us to comply with financial maintenance covenants. Operating results below current levels or other adverse factors, including a significant increase in interest rates, could result in our being unable to comply with our financial covenants contained in the Senior Secured Credit Facilities. If we violate these covenants and are unable to obtain waivers from our lenders, our debt under these agreements would be in default and could be accelerated by our lenders. Because of cross-default provisions in the agreements and instruments governing our indebtedness, a default under one agreement or instrument could result in a default under, and the acceleration of, our other indebtedness. In addition, the lenders under the Senior Secured Credit Facilities could proceed against the collateral securing that indebtedness.

        If our indebtedness is accelerated, we may not be able to repay our debt or borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms, on terms that are acceptable to us or at all. If our debt is in default for any reason, our business, financial condition and results of operations could be materially and adversely affected. In addition, complying with these covenants may also cause us to take actions that are not favorable to holders of the notes and may make it more difficult for us to successfully execute our business strategy and compete against companies who are not subject to such restrictions.

The lenders under the Senior Secured Credit Facilities have the discretion to release any subsidiary guarantor under the Senior Secured Credit Facilities in a variety of circumstances, which will cause those subsidiary guarantors to be released from their guarantees of the notes.

        While any obligations under the Senior Secured Credit Facilities remain outstanding, any subsidiary guarantee of the notes may be released without action by, or consent of, any holder of the notes or the trustee under the indenture governing the notes, at the discretion of lenders under the Senior Secured Credit Facilities, if the related subsidiary guarantor is no longer a guarantor of obligations under the Senior Secured Credit Facilities or any other indebtedness. See "Description of the Exchange Notes." The lenders under the Senior Secured Credit Facilities will have the discretion to release the subsidiary guarantees under the Senior Secured Credit Facilities in a variety of circumstances. You will not have a claim as a creditor against any subsidiary that is no longer a guarantor of the notes, and the indebtedness and other liabilities, including trade payables, whether secured or unsecured, of those subsidiaries will effectively be senior to claims of noteholders.

The Parent's guarantee of the notes may not provide any additional credit support for the notes.

        Since the Parent has no significant operations or assets, its guarantee of the notes provides little, if any, additional credit support for the notes and investors should not rely on this guarantee in evaluating an investment in the notes. The indenture permits the Parent to be released from its guarantee of the notes at any time without the consent of any holder of notes.

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Federal and state statutes may allow courts, under specific circumstances, to void the guarantees and require noteholders to return payments received from guarantors.

        Under federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee could be deemed a fraudulent transfer if the guarantor received less than a reasonably equivalent value in exchange for giving the guarantee and

    was insolvent on the date that it gave the guarantee or became insolvent as a result of giving the guarantee, or

    was engaged in business or a transaction, or was about to engage in business or a transaction, for which property remaining with the guarantor was an unreasonably small capital, or

    intended to incur, or believed that it would incur, debts that would be beyond the guarantor's ability to pay as those debts matured.

        A guarantee could also be deemed a fraudulent transfer if it was given with actual intent to hinder, delay or defraud any entity to which the guarantor was or became, on or after the date the guarantee was given, indebted.

        The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, a guarantor would be considered insolvent if:

    the sum of its debts, including contingent liabilities, is greater than all its assets, at a fair valuation, or

    the present fair saleable value of its assets is less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature, or

    it could not pay its debts as they become due.

        The indenture will contain a "savings" provision intended to limit each subsidiary guarantor's liability under its guarantee to the maximum amount that it could incur without causing the guarantee to be a fraudulent transfer. This provision may not be effective to protect the subsidiary guarantees from being voided under fraudulent transfer law. There can be no assurance that this provision will be upheld as intended. In a recent case, the U.S. Bankruptcy Court in the Southern District of Florida found the "savings" provision in that case to be ineffective, and held the subsidiary guarantees to be fraudulent transfers and voided them in their entirety.

        If a guarantee is deemed to be a fraudulent transfer, it could be voided altogether, or it could be subordinated to all other debts of the guarantor. In such case, any payment by the guarantor pursuant to its guarantee could be required to be returned to the guarantor or to a fund for the benefit of the creditors of the guarantor. If a guarantee is voided or held unenforceable for any other reason, holders of the notes would cease to have a claim against the subsidiary based on the guarantee and would be creditors only of CPII and any guarantor whose guarantee was not similarly voided or otherwise held unenforceable.

We may not have the ability to raise funds necessary to finance any change of control offer required under the indenture.

        If a change of control (as defined in the indenture) occurs, we will be required to offer to purchase your notes at 101% of their principal amount plus accrued and unpaid interest. If a purchase offer obligation arises under the indenture governing the notes, a change of control could also have occurred under the new Senior Secured Credit Facilities, which could result in the acceleration of the indebtedness outstanding thereunder. Any of our future debt agreements may contain similar

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restrictions and provisions. If a purchase offer were required under the indenture for our debt, we may not have sufficient funds to pay the purchase price of all debt, including your notes, that we are required to purchase or repay.

Our ability to repay our indebtedness, including the notes, is dependent on the cash flow generated by our operating subsidiaries.

        Our operating subsidiaries own substantially all of our assets and conduct all of our operations. Accordingly, repayment of our indebtedness, including the notes, will be dependent on the generation of cash flow by the operating subsidiaries and their ability to make such cash available to CPII, directly or indirectly, by dividend, debt repayment or otherwise. The operating subsidiaries may not be able to or may not be permitted to, make distributions to enable the CPII to make payments in respect of its indebtedness, including the notes. Each operating subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit the CPII's ability to obtain cash from the operating subsidiaries. While the indenture governing the notes limits the ability of the operating subsidiaries to incur consensual encumbrances or restrictions on their ability to pay dividends or make other intercompany payments, those limitations are subject to waiver and certain qualifications and exceptions.

Holders who fail to exchange their outstanding notes will continue to be subject to restrictions on transfer.

        If you do not exchange your outstanding notes for exchange notes in the exchange offer, you will continue to be subject to the restrictions on transfer of your outstanding notes described in the legend on the certificates for your outstanding notes. The restrictions on transfer of your outstanding notes arise because we issued the outstanding notes under exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, you may only offer or sell the outstanding notes if they are registered under the Securities Act and applicable state securities laws, or offered and sold under an exemption from these requirements. We do not plan to register the outstanding notes under the Securities Act. In addition, if a large number of outstanding notes are exchanged for exchange notes and there is only small amount of outstanding notes outstanding, there may not be an active market in the outstanding notes, which may adversely affect the market price and liquidity of the outstanding notes. For further information regarding the consequences of tendering your outstanding notes in the exchange offer, see the discussions below under the captions "The Exchange Offer—Consequences of Exchanging or Failing to Exchange Outstanding Notes" and "Certain United States Federal Income Tax Considerations."

You must comply with the exchange offer procedures in order to receive freely tradable exchange notes.

        Delivery of exchange notes in exchange for outstanding notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of the following:

    certificates for outstanding notes or a book-entry confirmation of a book-entry transfer of outstanding notes into the exchange agent's account at DTC, New York, New York as depository;

    a completed and signed letter of transmittal (or facsimile thereof), with any required signature guarantees, or an agent's message in lieu of the letter of transmittal; and

    any other documents required by the letter of transmittal.

        Therefore, holders of outstanding notes who would like to tender outstanding notes in exchange for exchange notes should be sure to allow enough time for the outstanding notes to be delivered on

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time. We are not required to notify you of defects or irregularities in tenders of outstanding notes for exchange. Outstanding notes that are not tendered or that are tendered but we do not accept for exchange will, following consummation of the exchange offer, continue to be subject to the existing transfer restrictions under the Securities Act and, upon consummation of the exchange offer, certain registration and other rights under the registration rights agreement will terminate. See "The Exchange Offer—Procedures for Tendering Outstanding Notes" and "The Exchange Offer—Consequences of Exchanging or Failing to Exchange Outstanding Notes."

An active trading market may not develop for the notes.

        The notes are a new issue of securities. There is no active public trading market for the notes. We do not intend to apply for listing of the notes on a security exchange or to include the notes in any automated quotation system. The initial purchasers of the notes have informed us that they intend to make a market in the notes. However, the initial purchasers may cease their market-making at any time. Therefore, we cannot assure you that an active trading market for the notes will develop or, if developed, that it will continue. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the notes. We cannot assure you that any such disruptions may not adversely affect the prices at which you sell your notes. In addition, subsequent to their initial issuance, the notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance, our ability to effect the exchange offer and other factors.

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USE OF PROCEEDS

        The exchange offer is intended to satisfy our obligations under the registration rights agreement that we entered into in connection with the private placement of the outstanding notes. We will not receive any cash proceeds from the issuance of the exchange notes in the exchange offer. As consideration for issuing the exchange notes as contemplated in this prospectus we will receive in exchange a like principal amount of outstanding notes, the terms of which are identical in all material respects to the exchange notes, except that the exchange notes will not contain terms with respect to transfer restrictions or additional interest upon a failure to fulfill certain of our obligations under the registration rights agreement. The outstanding notes that are surrendered in exchange for the exchange notes will be returned and cancelled and cannot be reissued. As a result, the issuance of the exchange notes will not result in any increase or decrease in our capitalization.

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CAPITALIZATION

        The following table sets forth Parent's capitalization as of April 1, 2011. You should read the data set forth in the table below in conjunction with "Selected Historical Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our historical financial statements and related notes thereto included elsewhere in this prospectus.

 
  As of April 1, 2011  
 
  (dollars in millions)
 

Debt:

       
 

Senior Secured Credit Facilities

       
   

Revolving credit facility

     
   

Term loan facility

    149.6  
 

8.00% Senior Notes due 2018

    215.0  
       

Total debt

    364.6  
       

Total stockholders' equity

    190.7  
       

Total capitalization

  $ 555.3  
       

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

        The following unaudited pro forma condensed consolidated statements of operations have been derived from our historical audited annual consolidated financial statements for the year ended October 1, 2010 and our unaudited condensed consolidated financial statements for the periods October 2, 2010 to February 10, 2011 and February 11, 2011 to April 1, 2011, included elsewhere in this prospectus, as adjusted to give effect to the Transactions. Periods prior to and including February 10, 2011 reflect the results of operations of Predecessor prior to the Merger. Periods after February 10, 2011 reflect the results of operations of Parent and its consolidated subsidiaries after the Merger.

        The unaudited pro forma condensed consolidated statements of operations for the six months ended April 1, 2011 and the year ended October 1, 2010 give effect to the Transactions as if they had occurred on October 2, 2010 and October 3, 2009, respectively.

        We based the unaudited pro forma adjustments upon available information and certain assumptions that we believe are reasonable under the circumstances. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated financial information is presented for informational purposes only. The unaudited pro forma condensed consolidated financial information does not purport to represent what our results of operations or financial condition would have been had the Transactions actually occurred on the dates indicated, and they do not purport to project our results of operations or financial condition for any future period or as of any future date. Further, the unaudited pro forma condensed consolidated statements of operations do not reflect the impact of non-recurring charges that resulted from or in connection with the Transactions, including: (i) the amortization of inventory, (ii) settlement of unvested stock awards and (iii) expenses in connection with the Transactions.

        The unaudited pro forma condensed consolidated financial information should be read in conjunction with the sections of this prospectus entitled "Information Included in this Prospectus," "Capitalization," "Selected Historical Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations," our historical consolidated financial statements and related notes thereto included elsewhere in this prospectus.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended April 1, 2011
(in thousands)

 
  Historical    
   
  Pro Forma  
 
  October 2,
2010 to
February 10,
2011
(Predecessor)
  February 11,
2011 to
April 1,
2011
(Parent)
  Six Months
Ended
April 1,
2011
(Combined)
  Pro Forma
Adjustments
   
  Six Months
Ended
April 1,
2011
(Parent)
 

Sales

  $ 124,223   $ 60,094   $ 184,317   $       $ 184,317  

Cost of sales

    91,404     43,883     135,287     (3,257 ) (A,E)     132,030  
                           

Gross profit

    32,819     16,211     49,030     3,257         52,287  
                           

Operating costs and expenses:

                                   
 

Research and development

    4,994     2,163     7,157     (243 ) (E)     6,914  
 

Selling and marketing

    8,264     2,706     10,970     (385 ) (E)     10,585  
 

General and administrative

    11,853     3,125     14,978     (2,198 ) (B,C,E)     12,780  
 

Amortization of acquisition-related intangible assets

    999     2,316     3,315     7,035   (A)     10,350  
 

Strategic alternative transaction expenses

    4,668     8,785     13,453     (11,935 ) (E)     1,518  
                           

Total operating costs and expenses

    30,778     19,095     49,873     (7,726 )       42,147  
                           

Operating income (loss)

    2,041     (2,884 )   (843 )   10,983         10,140  

Interest expense, net

    5,788     4,138     9,926     3,661   (D)     13,587  

Loss on debt extinguishment

        134     134     (134 ) (E)      
                           

Loss before income taxes

    (3,747 )   (7,156 )   (10,903 )   7,456         (3,447 )

Income tax (benefit) expense

    983     (440 )   543     2,759   (F)     3,302  
                           

Net loss

  $ (4,730 ) $ (6,716 ) $ (11,446 ) $ 4,697       $ (6,749 )
                           

See notes to unaudited pro forma condensed consolidated financial statements.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended October 1, 2010
(in thousands)

 
  Historical
Predecessor
  Pro Forma
Adjustments
   
  Pro Forma
Parent
 

Sales

  $ 360,434   $       $ 360,434  

Cost of sales

    251,987     1,776   (A)     253,763  
                   

Gross profit

    108,447     (1,776 )       106,671  
                   

Operating costs and expenses:

                       
 

Research and development

    12,429             12,429  
 

Selling and marketing

    20,794             20,794  
 

General and administrative

    24,988     700   (B,C)     25,688  
 

Amortization of acquisition-related intangible assets

    2,749     17,952   (A)     20,701  
 

Strategic alternative transaction expenses

    19,913             19,913  
                   

Total operating costs and expenses

    80,873     18,652         99,525  
                   

Operating income

    27,574     (20,428 )       7,146  

Interest expense, net

    15,213     11,972   (D)     27,185  
                   

Income (loss) before income taxes

    12,361     (32,400 )       (20,039 )

Income tax expense (benefit)

    5,622     (11,988 ) (F)     (6,366 )
                   

Net income (loss)

  $ 6,739     (20,412 )       (13,673 )
                   

See notes to unaudited pro forma condensed consolidated financial statements.

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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands except shares)

1.    Basis of pro forma presentation

        The unaudited pro forma condensed consolidated statements of operations for the six months ended April 1, 2011 and the year ended October 1, 2010 give effect to the merger (the "Merger") of Catalyst Acquisition, Inc., a wholly owned subsidiary of CPI International, Inc. (formerly CPI International Acquisition, Inc., "CPII") and an indirect wholly owned subsidiary of CPI International Holding Corp. ("Parent" or "Successor"), with and into CPI International LLC (formerly CPI International, Inc., "Predecessor") and the related transactions described herein (collectively, the "Transactions") as if the Transactions had been completed on October 2, 2010 and October 3, 2009, respectively. Immediately following the consummation of the Transactions, Predecessor was converted into a limited liability company and liquidated. The unaudited pro forma condensed consolidated statements of operations were derived by adjusting Predecessor's historical financial statements for the Transactions.

        The Merger constitutes a "transaction or event in which an acquirer obtains control of one or more "businesses" or a "business combination" and, accordingly, is accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification ("ASC") 805, "Business Combinations," in which Parent is deemed to be the accounting acquirer. Under this method of accounting, all assets acquired and liabilities assumed are recorded at their respective fair values at the date of the completion of the Merger. Any excess of the purchase price over those fair values is recorded as goodwill.

        The pro forma information presented herein, including allocations of purchase price, is based on preliminary estimates of the fair values of assets acquired and liabilities assumed, which, upon further evaluation, may require modification. The final purchase price allocation is dependent on, among other things, the finalization of asset and liability valuations. As of the date of this prospectus, we have not completed all aspects of the valuation process necessary to estimate the fair values of the assets we have acquired and liabilities we have assumed and the related allocation of purchase price. We have allocated the total purchase price, calculated as described in Note 3, to the assets acquired and liabilities assumed based on preliminary estimates of their fair values. A final determination of these fair values will reflect our consideration of a final valuation prepared by a third-party appraiser. This final valuation will be based on the actual net tangible and identifiable intangible assets that existed as of the closing date of the Merger. Any final adjustment will change the allocations of purchase price, which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma condensed consolidated financial data.

2.    Preliminary purchase price

        Pursuant to the terms of the Merger Agreement, each outstanding share of common stock of Predecessor was converted into the right to receive $19.50 in cash in the Merger. Subject to certain exceptions, each option to purchase shares of Predecessor's common stock that was granted under its equity compensation plans and outstanding immediately prior to the closing became vested and was canceled at (or shortly following) the closing in exchange for cash equal to the excess, if any, of (i) $19.50 reduced by (ii) the per-share exercise price of such option. Subject to certain exceptions, each restricted stock award and restricted stock unit granted under Predecessor's equity compensation plans outstanding immediately prior to the closing was canceled at the closing in exchange for a payment, in cash, equal to $19.50.

        The consideration transferred by the acquirer was $19.50 per share of common stock of Predecessor, as set forth in the Merger Agreement. No portion of share-based payment awards of Predecessor were exchanged for awards of the acquirer. As the consideration was payable solely in

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cash, we determined that the per share purchase price for the common stock of Predecessor was $19.50.

        The following table presents the total preliminary purchase price based on the number of outstanding shares of common stock, restricted stock awards and units, and stock options of Predecessor as of February 10, 2011:

 
  Predecessor
shares
  Preliminary
purchase price
 

Common stock

    16,742,279   $ 326,474  

Restricted stock awards

    112,316     930  

Restricted stock units

    208,925     1,194  

Stock options

    3,354,222     41,892  
             
 

Total

        $ 370,490  
             

        The preliminary purchase price for restricted stock awards and units and stock options is net of $5.2 million cash paid for the unvested portion of the stock awards for which vesting was accelerated as of the closing date in accordance with the terms of the Merger Agreement. Cash payments made by the acquirer in a business combination to settle unvested stock awards are immediately expensed after the acquisition date in the post combination financial statements in accordance with ASC 805, "Business Combinations."

        The following table reflects the preliminary allocation of the total purchase price as of the date of the Merger to the assets acquired and the liabilities assumed and the resulting goodwill based on the preliminary estimates of fair value:

Preliminary purchase price

  $ 370,490  

Less: Estimated fair value of assets acquired:

       
 

Net current assets

    (111,484 )
 

Property, plant and equipment

    (82,879 )
 

Identifiable intangible assets

    (274,580 )
 

Other long-term assets

    (5,438 )
       

    (474,381 )
       

Add: Estimated fair value of liabilities assumed:

       
 

Deferred tax liabilities

    85,744  
 

Long-term debt

    195,487  
 

Other long-term liabilities

    4,641  
       

    285,872  
       

Goodwill

  $ 181,981  
       

        The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. For purposes of measuring the estimated fair value of the assets acquired and liabilities assumed, we used the guidance in ASC 820, "Fair Value Measurement and Disclosure," which established a framework for measuring fair values. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Market participants are assumed to be buyers and sellers in the principal (most advantageous) market for the asset or liability. Additionally, under ASC 820, fair value measurements for an asset assume the highest and best use of that asset by market participants. As a result, we may have been required to value the

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acquired assets at fair value measures that do not reflect our intended use of those assets. Use of different estimates and judgments could yield different results.

        Identified intangible assets acquired include core and developed technology, trade names, backlog, in-process research and development ("IPR&D") and leasehold interests. We use variations of the income approach method to value the intangible assets. Under these methods, fair value is estimated based upon the present value of cash flows that the applicable asset is expected to generate. The valuation of core technology and trade names were based on the relief-from-royalty method; developed technology, backlog and IPR&D are valued using the excess earnings method; and leasehold interests are valued using discounted cash flows method. The royalty rates used in the relief-from-royalty method were based on both a return-on-asset method and market comparable rates.

        The preliminary allocation of the purchase price was based upon valuation information and estimates and assumptions available at the date of the Merger. The areas of the purchase price allocation that are not yet finalized and are subject to change within the measurement period (up to one year from the Merger date) relate to the completion of identifiable intangible assets, tax related items, working capital adjustments and the resulting goodwill adjustment.

3.    Pro forma financial statement adjustments

        The following adjustments are included in the unaudited pro forma condensed consolidated financial statements:

(A)
Represents the adjustment to historical depreciation and amortization expense as a result of the fair market value adjustments to intangibles and property, plant and equipment acquired. The adjustment to fair value of property, plant and equipment and intangible assets was $29.4 million and $203.2 million, respectively. In addition, the useful lives of the assets were updated to reflect their estimated remaining useful lives. The estimated fair value of the assets acquired is amortized on a straight-line basis over their respective estimated useful lives.

 
  For the Six Months Ended
April 1, 2011
  For the Year Ended
October 1, 2010
 
 
  Historical   New   Adjustment   Historical   New   Adjustment  

Reported in cost of sales:

                                     
 

Property, plant and equipment depreciation

  $ 4,147   $ 4,560   $ 413   $ 8,076   $ 9,121   $ 1,045  
 

Leasehold interest amortization

    214     489     275     247     978     731  
                                   

              $ 688               $ 1,776  
                                   

Reported in amortization of acquisition-related intangible assets:

                                     
 

Identifiable intangibles, other than leasehold interest

  $ 3,315   $ 10,350   $ 7,035   $ 2,749   $ 20,701   $ 17,952  
                                   

              $ 7,035               $ 17,952  
                                   

    The unaudited pro forma condensed consolidated statements of operations presented herein do not include the amortization of inventory as this item is a nonrecurring charge and is included in the statement of operations only during the first year after the Merger.

(B)
Reflects the adjustment to certain estimated cost savings and operating synergies totaling $412 and $1,100 for the six months ended April 1, 2011 and the year ended October 1, 2010, respectively, projected to result from the Merger through elimination of redundant public company and other general and administrative expenses.

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(C)
Reflects estimated advisory fee of $600 and $1,800 for the six months ended April 1, 2011 and the year ended October 1, 2010, respectively, pursuant to the Advisory Agreement entered into in connection with the Merger.

(D)
In connection with the Merger, CPI issued $215.0 million aggregate principal amount of 8.00% senior notes due 2018 and entered into the Senior Secured Credit Facilities, comprised of a $150.0 million six-year term loan facility and a $30.0 million five-year revolving credit facility that includes sub-limits for letters of credit and swingline loans. CPI borrowed the full amount of the term loan, and the revolver was undrawn (other than for approximately $4.5 million of outstanding letters of credit) at the closing of the Transactions. In addition, shortly after the date of the Merger, we purchased or redeemed all of Predecessor's then existing outstanding senior subordinated notes of $117.0 million and floating rate senior notes of $12.0 million and repaid outstanding indebtedness of $66.0 million under Predecessor's then existing senior credit facilities. We incurred a total of $15.6 million of debt issuance costs and issue discount associated with the Senior Secured Credit Facilities and 8.00% senior notes. Debt issuance costs and issue discount are capitalized and amortized and recognized as interest expense under the effective interest method over the expected term of the related debt. See Note 6 to the unaudited condensed consolidated financial statements contained elsewhere in the prospectus,

    The elimination of Predecessor's prior long-term debt and the issuance of the outstanding notes and term loan described above resulted in an adjustment to interest expense, assuming the three-month LIBOR rate remains below 1.0%, as follows:

 
  For the Six Months Ended
April 1, 2011
  For the Year Ended
October 1, 2010
 

Historical interest expense, net

  $ (9,926 ) $ (15,213 )

Pro forma cash interest expense

    12,548     25,078  

Pro forma amortization of debt issuance costs

    1,039     2,107  
           
 

Pro forma adjustment

  $ 3,661   $ 11,972  
           

    The pro forma cash interest expense above reflects a blended interest rate of 6.4% for the new notes and term loan, including fees associated with letters of credit and the undrawn revolving credit facility.

(E)
Represents elimination of nonrecurring charges that are directly related to the Merger and included in the statement of operations only during the first year after the Merger.

 
  For the Six Months Ended
April 1, 2011
 

Loss on debt extinguishment

  $ 134  

Utilization of the net increase in cost basis of inventory due to purchase accounting (cost of sales)

    3,567  

Strategic alternative transaction expenses

    11,935  

Settlement of unvested stock awards:

       
 

Cost of sales

    378  
 

Research and development

    243  
 

Selling and marketing

    385  
 

General and administrative

    2,386  
       

    3,392  
       
   

Total pro forma adjustment

  $ 19,028  
       

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(F)
Records the estimated net provision for income taxes associated with the unaudited pro forma adjustments recorded in the unaudited pro forma condensed consolidated statements of operations for the six months ended April 1, 2011 and the year ended October 1, 2010. Unaudited pro forma adjustments for the periods presented were taxed at the estimated incremental rate of 37.0%.

Parent's effective tax rate for the period February 11, 2011 to April 1, 2011 differs from the federal statutory rate of 35% primarily due to non-deductible Merger expenses, and U.S. inclusion of foreign income and foreign tax rate differences that increased income tax expense by $1.3 million and $0.8 million, respectively, which on a combined basis decreased the effective tax rate benefit by approximately 30%. Predecessor's effective tax rate for the period October 2, 2010 to February 10, 2011 differs from the federal statutory rate of 35% primarily due to non-deductible Merger expenses, and U.S. inclusion of foreign income and foreign tax rate differences that increased income tax expense by $1.1 million and $1.4 million, respectively, which on a combined basis decreased the effective tax rate benefit by approximately 67%.

Predecessor's effective tax rate for the year ended October 1, 2010 was 45.5% and diverged from the federal and state statutory rate primarily due to a discrete tax expense of $2.2 million, net of discrete tax benefits, which comprises the following: (1) $3.1 million tax expense related to the uncertainty of obtaining a tax deduction for strategic alternative transaction expenses incurred during the year, (2) $0.3 million tax benefit true-up related to the filing of fiscal year 2009 income tax returns, (3) $0.3 million tax benefit to adjust deferred tax accounts for a reduction to future Canadian income tax rates, and (4) $0.3 million for research and development tax credit benefits claimed on prior year income tax returns.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

        The following table presents Predecessor's selected historical consolidated financial information as of and for the periods presented. The selected historical financial information as of October 2, 2009 and October 1, 2010 and for the fiscal years ended 2008, 2009 and 2010 has been derived from Predecessor's audited financial statements included elsewhere in this prospectus. The selected historical financial information as of September 29, 2006, September 28, 2007 and October 3, 2008 and for the fiscal years ended 2006 and 2007 presented below has been derived from Predecessor's audited financial statements that are not included in this prospectus. The selected financial information of Predecessor for the six months ended April 2, 2010 and the period October 2, 2010 to February 10, 2011 has been derived from Parent's unaudited financial statements included elsewhere in this prospectus. The selected balance sheet data as of April 2, 2010 has been derived from Predecessor's unaudited financial statements that are not included in this prospectus. The selected financial information for the period February 11, 2011 to April 1, 2011 and the selected balance sheet data as of April 1, 2011 have been derived from Parent's unaudited financial statements included elsewhere in this prospectus. Results for the periods October 2, 2010 to February 10, 2011 and February 11, 2011 to April 1, 2011 are not necessarily indicative of the results that may be expected for the year ended September 30, 2011 or for any future period. The combined results for the six-months ended April 1, 2011 represent the addition of the results of Predecessor for the period from October 2, 2010 to February 10, 2011 and the results of Parent and its consolidated subsidiaries for the period from February 11, 2011 to April 1, 2011. This combination does not comply with generally accepted accounting principles in the United States or with the rules for pro forma presentation but is presented because we believe it facilitates the ability of investors to more meaningfully compare our operating results. Immediately following the consummation of the Transactions, Predecessor was converted into a limited liability company and liquidated.

        Each of Parent and CPII was incorporated solely for the purpose of effectuating the Merger and related transactions. Neither Parent nor CPII conducted any other activities prior to consummation of the Merger.

        You should read this information together with the information included under the headings "Information Included in this Prospectus," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our historical consolidated financial statements and related notes included elsewhere in this prospectus.

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  Predecessor    
   
 
 
  Parent   Combined  
 
  Fiscal year ended    
   
 
 
   
  October 2,
2010 to
February 10,
2011
  February 11,
2011 to
April 1,
2011
  Six Months
Ended
April 1,
2011
 
 
  September 29,
2006
  September 28,
2007
  October 3,
2008
  October 2,
2009
  October 1,
2010
  Six months
ended
April 2, 2010
 
 
  (dollars in thousands)
   
 

Statement of Income Data:

                                                       

Sales

  $ 339,717   $ 351,090   $ 370,014   $ 332,876   $ 360,434   $ 171,119   $ 124,223   $ 60,094   $ 184,317  

Cost of sales(1)

    236,063     237,789     261,086     239,385     251,987     120,957     91,404     43,883     135,287  
                                       

Gross profit

    103,654     113,301     108,928     93,491     108,447     50,162     32,819     16,211     49,030  
                                       

Research and development

    8,550     8,558     10,789     10,520     12,429     5,745     4,994     2,163     7,157  

Selling and marketing

    19,827     19,258     21,144     19,466     20,794     10,214     8,264     2,706     10,970  

General and administrative

    23,004     21,648     22,951     20,757     24,988     12,187     11,853     3,125     14,978  

Amortization of acquisition-related intangible assets

    2,190     2,316     3,103     2,769     2,749     1,374     999     2,316     3,315  

Strategic alternative transaction expenses(2)

                    19,913     211     4,668     8,785     13,453  
                                       

Total operating costs and expenses

    53,571     51,780     57,987     53,512     80,873     29,731     30,778     19,095     49,873  
                                       

Operating income (loss)

    50,083     61,521     50,941     39,979     27,574     20,431     2,041     (2,884 )   (843 )

Interest expense, net

    23,806     20,939     19,055     16,979     15,213     7,736     5,788     4,138     9,926  

Loss (gain) on debt extinguishment(3)

        6,331     633     (248 )               134     134  

Income tax expense (benefit)

    9,058     11,748     10,804     (218 )   5,622     4,362     983     (440 )   543  
                                       

Net income (loss)(4)

  $ 17,219   $ 22,503   $ 20,449   $ 23,466   $ 6,739   $ 8,333   $ (4,730 ) $ (6,716 ) $ (11,446 )
                                       

Other Financial Data:

                                                       

Net cash provided by (used in) operating activities

  $ 10,897   $ 21,659   $ 33,881   $ 30,114   $ 19,808   $ 11,548   $ 4,277   $ (4,885 ) $ (608 )

Net cash used in investing activities(5)(6)

    (156 )   (30,343 )   (2,794 )   (3,365 )   (4,533 )   (1,868 )   (2,440 )   (371,447 )   (373,887 )

Net cash (used in) provided by financing activities

    (7,099 )   (995 )   (22,891 )   (29,267 )   1,402     697     2,203     351,154     353,357  

Capital expenditures(5)

    10,913     8,169     4,262     3,365     4,492     1,835     2,434     957     3,391  

Depreciation and amortization(7)

    9,013     9,098     10,963     10,794     11,072     5,485     4,117     3,558     7,675  

EBITDA(8)

    59,096     64,288     61,271     51,021     38,646     25,916     6,158     540     6,698  

Adjusted EBITDA(8)

    67,202     71,287     64,039     53,452     61,599     27,645     15,381     13,638     29,019  

Ratio of earnings to fixed charges(9)

    2.08x     2.59x     2.57x     2.30x     1.77x     2.56x                    

Operating Data (at period end):

                                                       

Backlog

  $ 187,405   $ 196,363   $ 201,277   $ 225,957   $ 241,943   $ 240,697         $ 269,239   $ 269,239  

Balance Sheet Data (at period end):

                                                       

Working capital(10)

  $ 77,113   $ 81,547   $ 88,103   $ 92,380   $ 44,753   $ 107,814         $ 84,743   $ 84,743  

Total assets

    441,759     476,222     466,948     458,254     478,276     470,575           727,713     727,713  

Long-term debt, including current portion

    246,781     246,567     225,660     194,922     194,934     194,928           363,890     363,890  

Total stockholders' equity

    99,673     125,906     143,865     173,553     183,940     185,065           190,653     190,653  

(1)
For the period February 11, 2011 to April 1, 2011, includes $3,567 of utilization of the net increase in cost basis of inventory due to purchase accounting.

(2)
For the fiscal year ended October 1, 2010 and the six months ended April 2, 2010, represents the termination fee relating to a terminated merger agreement between Predecessor and Comtech Telecommunications Corp and non-recurring transaction costs, such as fees for investment bankers, attorneys and other professional services rendered in conjunction with exploring strategic alternatives for the Predecessor. For the period October 2, 2010 to February 10, 2011, represents transaction expenses relating to the sale of the Predecessor. For the period February 11, 2011 to April 1, 2011, represents transaction expenses relating to the Merger.

(3)
The debt refinancing during fiscal year 2007 resulted in a loss on debt extinguishment of approximately $6,331, including non-cash write-offs of $4,659 of unamortized debt issue costs and issue discount costs and $1,953 in cash payments for call premiums, partially offset by $281 of cash proceeds from the early termination of the related interest rate swap agreement. The redemption of $10,000 of Predecessor's floating rate senior notes in fiscal year 2008 resulted in a loss on debt extinguishment of approximately $633, including non-cash write-offs of $420 of unamortized debt issue costs and issue discount costs and $213 in cash payments primarily for call premiums. The repurchase of $8,000 of our 8% Notes during fiscal year 2009 resulted in a gain on debt extinguishment of $248 which was comprised of a discount of $392, partially offset by a non-cash write-off of $144 unamortized debt issue costs. The repayment, redemption or repurchase, as applicable, of an aggregate amount of $195,000 of Predecessor's term loan facility and floating rate senior notes and CPI's 8% senior subordinated notes during the period February 11, 2011 to April 1, 2011 resulted in a loss on debt extinguishment of approximately $134, which comprised bond tender fees and other related expenses of $621, offset by $487 gain from debt repayment at less than fair value.

(4)
Net income for fiscal year 2009 includes discrete tax benefits, in aggregate, of $7,900. Net income for fiscal year 2010 includes strategic alternative transaction expenses, after taxes, of $15,200.

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(5)
Fiscal year 2006 includes capital expenditures of approximately $4,700 resulting from the relocation of our former San Carlos, California facility to Palo Alto, California and Mountain View, California. Fiscal years 2006 and 2007 include approximately $2,300 and $4,100, respectively, of capital expenditures for the expansion of our building in Georgetown, Ontario, Canada.

(6)
Fiscal year 2007 includes approximately $22,200 of cash outflow for the acquisition of Malibu Research Associates, Inc., as a result of which the Malibu Division was formed. For the period February 11, 2011 to April 1, 2011, includes $370,490 of cash used for the acquisition of Predecessor.

(7)
Excludes amortization of deferred debt issuance costs, which are included in interest expense, net.

(8)
EBITDA represents earnings before net interest expense, provision for income taxes and depreciation and amortization. We believe that EBITDA is useful to assess our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures. Our use of the term EBITDA may vary from others in our industry. The term EBITDA is not defined under U.S. GAAP. EBITDA is not a measure of operating income, operating performance or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. For additional information regarding our use of EBITDA and limitations on its usefulness as an analytical tool, see "Use of non-GAAP financial measures."

Adjusted EBITDA represents EBITDA adjusted to exclude certain non-recurring, non-cash, unusual and other items. We believe that Adjusted EBITDA is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business and to monitor compliance with certain covenants contained in our debt agreements. Our use of the term Adjusted EBITDA may vary from others in our industry. The calculation of Adjusted EBITDA is based on the definitions in our debt agreements and is not defined under U.S. GAAP. Adjusted EBITDA is not a measure of operating income, performance or liquidity presented in accordance with U.S. GAAP and is subject to important limitations. For additional information regarding our use of Adjusted EBITDA and limitations on its usefulness as an analytical tool, see "Use of Non-GAAP Financial Measures."


The following table reconciles net income to EBITDA and Adjusted EBITDA:

   
  Predecessor    
   
 
   
  Parent    
 
   
  Fiscal year ended    
   
 
Combined
 
   
  Six months
ended
April 2,
2010
  October 2,
2010 to
February 10,
2011
  February 11,
2011 to
April 1,
2011
  Six Months
Ended
April 1,
2011
 
   
  September 29,
2006
  September 28,
2007
  October 3,
2008
  October 2,
2009
  October 1,
2010
 
 

Net income (loss)

  $ 17,219   $ 22,503   $ 20,449   $ 23,466   $ 6,739   $ 8,333   $ (4,730 ) $ (6,716 ) $ (11,446 )
 

Depreciation and amortization(a)

    9,013     9,098     10,963     10,794     11,072     5,485     4,117     3,558     7,675  
 

Interest expense, net

    23,806     20,939     19,055     16,979     15,213     7,736     5,788     4,138     9,926  
 

Income tax expense (benefit)

    9,058     11,748     10,804     (218 )   5,622     4,362     983     (440 )   543  
                                         
 

EBITDA

  $ 59,096   $ 64,288   $ 61,271   $ 51,021   $ 38,646   $ 25,916   $ 6,158   $ 540   $ 6,698  
 

Plus adjustments:

                                                       
 

Stock compensation expense(b)

    274     1,239     2,135     2,679     3,040     1,518     4,555     312     4,867  
 

Loss (gain) on debt extinguishment(c)

        6,331     633     (248 )               134     134  
 

Consolidation costs(d)

    4,582                                  
 

Special bonuses(e)

    3,250                                  
 

Repair inventory correction(f)

        (571 )                            
 

Strategic alternative transaction expenses(g)

                    19,913     211     4,668     8,785     13,453  
 

Veritas Management management fee(h)

                                300     300  
 

Utilization of net increase in cost basis of inventory(i)

                                3,567     3,567  
                                         
 

Adjusted EBITDA

  $ 67,202   $ 71,287   $ 64,039   $ 53,452   $ 61,599   $ 27,645   $ 15,381   $ 13,638   $ 29,019  
                                         

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(9)
For purposes of computing the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes and fixed charges less capitalized interest. Fixed charges consist of interest expense, including amortization of debt issuance costs and that portion of rental expenses that management considers to be a reasonable approximation of interest.
(10)
Current assets minus current liabilities.

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

         The following discussion and analysis of our results of operations and financial condition contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section of this prospectus. Actual results may differ materially from those contained in any forward-looking statements.

         Each of Parent and CPII was incorporated solely for the purpose of effectuating the Merger and related transactions. Neither Parent nor CPII conducted any other activities prior to consummation of the Merger. Accordingly, financial information for each such entity and a discussion and analysis of its results of operations and financial condition for its respective period of operations prior to the Transactions would not be meaningful and has not been presented.

         Our fiscal years are the 52- or 53-week periods that end on the Friday nearest September 30. Fiscal years 2010 and 2009 comprised the 52-week period ending October 1, 2010 and October 2, 2009, respectively. Fiscal year 2008 comprised the 53-week period ended October 3, 2008. The six months ended April 1, 2011 and April 2, 2010 each included 26 weeks. The discussion and analysis of results of operations and financial condition for the six months ended April 1, 2011 included herein is based on combined results of Parent for the period February 11, 2011 through April 1, 2011 and Predecessor for the period October 2, 2010 through February 10, 2011. This presentation of the combined results of operations for the six months ended April 1, 2011 does not comply with generally accepted accounting principles in the United States or with the rules for pro forma presentation but is presented because we believe it facilitates the ability of investors to more meaningfully compare our operating results. We have also presented below a separate discussion of the results of operations for Parent for the period from February 11, 2011 through April 1, 2011.

         You should read the following discussion of our results of operations and financial condition together with "Information Included in this Prospectus," "Unaudited Pro Forma Condensed Consolidated Financial Information," "Selected Historical Consolidated Financial Information," the audited financial statements and the unaudited financial statements included elsewhere in this prospectus.

Overview

        CPI International Holding Corp., or Parent, headquartered in Palo Alto, California, is the parent company of CPI International, Inc. or CPII, which is in turn the parent company of Communications & Power Industries LLC, or CPI, a provider of microwave, radio frequency, power and control solutions for defense, communications, medical, scientific and other applications. CPI develops, manufactures and distributes products used to generate, amplify, transmit and receive high-power/high-frequency microwave and radio frequency signals and/or provide power and control for various applications. End-use applications of these systems include the transmission of radar signals for navigation and location; transmission of deception signals for electronic countermeasures; transmission and amplification of voice, data and video signals for broadcasting, Internet and other types of commercial and military communications; providing power and control for medical diagnostic imaging; and generating microwave energy for radiation therapy in the treatment of cancer and for various industrial and scientific applications.

The Merger And Related Transactions

        On November 24, 2010, CPII, Predecessor and Merger Sub entered into the Merger Agreement pursuant to which CPII acquired Predecessor through the Merger of Merger Sub with and into Predecessor. On February 11, 2011, contemporaneously with the consummation of the Merger, the separate corporate existence of Merger Sub ceased, and Predecessor became the surviving corporation. Predecessor's common stock is no longer publicly traded as a result of the Merger. Immediately

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following the consummation of the Merger and related transactions, Predecessor was converted into a limited liability company and liquidated, and we changed our name to CPI International, Inc. from CPI International Acquisition, Inc.

        In connection with the Merger, Veritas Capital invested $200.0 million solely for the purpose of purchasing equity securities of Holding LLC in order to provide a portion of the financing required for the Merger and the transactions contemplated by the Merger Agreement. Certain officers of Predecessor also invested in equity securities of Holdings LLC in an aggregate amount of $11.1 million. In addition, we issued the $215 million aggregate principal amount of 8.00% outstanding notes due 2018 and entered into the Senior Secured Credit Facilities, comprised of a $150.0 million six-year term loan facility and a $30.0 million five-year revolving credit facility, to finance a portion of the Merger and related transactions. See "The Transactions," and "Unaudited Pro Forma Condensed Consolidated Financial Information."

        As a result of the Transactions, our assets and liabilities were adjusted to their fair market value at the closing date of the Transactions. We have made a preliminary allocation of the purchase price in the accompanying condensed consolidated pro forma financial statements. This preliminary allocation will be subject to change upon finalization of our fair value assessment and any adjustments could be material. After giving effect to the Transactions, our outstanding indebtedness and our annual interest expense will increase substantially. In addition, in connection with the Transactions, we will record a number of one-time charges relating to the Transactions, including the amortization of backlog and fair value adjustment of inventory, the settlement of unvested stock awards and certain Transaction-related costs. See "Unaudited Pro Forma Condensed Consolidated Financial Information—Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements—Notes 5(D), 5(H) and 5(K)" for further information regarding these one-time charges.

Orders

        We sell our products into five end markets: defense (radar and electronic warfare), medical, communications, industrial and scientific.

        Our customer sales contracts are recorded as orders when we accept written customer purchase orders or contracts. Customer purchase orders with an undefined delivery schedule, or blanket purchase orders, are not reported as orders until the delivery date is determined. Our government sales contracts are not reported as orders until we have been notified that the contract has been funded. Total orders for a fiscal period represent the total dollar amount of customer orders recorded by us during the fiscal period, reduced by the dollar amount of any order cancellations or terminations during the fiscal period.

        Incoming order levels can fluctuate significantly on a quarterly or annual basis, and a particular quarter's or year's order rate may not be indicative of future order levels. In addition, our sales are highly dependent upon manufacturing scheduling and performance and, accordingly, it is not possible to accurately predict when orders will be recognized as sales.

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        Our orders by market for the six months ended April 1, 2011 and April 2, 2010 are summarized as follows (dollars in millions):

 
  Six Months Ended    
   
 
 
  April 1, 2011   April 2, 2010   Increase
(Decrease)
 
 
   
  % of
Orders
   
  % of
Orders
 
 
  Amount   Amount   Amount   Percent  

Radar and Electronic Warfare

  $ 88.9     43 % $ 65.7     35 % $ 23.2     35 %

Medical

    38.9     19     41.8     23     (2.9 )   (7 )

Communications

    62.4     30     59.0     32     3.4     6  

Industrial

    11.7     5     10.4     6     1.3     13  

Scientific

    5.9     3     8.2     4     (2.3 )   (28 )
                           
 

Total

  $ 207.8     100 % $ 185.1     100 % $ 22.7     12 %
                           

        Orders of $207.8 million for the six months ended April 1, 2011 were $22.7 million, or approximately 12%, higher than orders of $185.1 million for the six months ended April 2, 2010. Explanations for the order increase or decrease by market for the first six months of fiscal year 2011 compared to the first six months of fiscal year 2010 are as follows:

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        Our orders by market for fiscal years 2010 and 2009 are summarized as follows (dollars in millions):

 
  Fiscal year ended    
   
 
 
  October 1, 2010   October 2, 2009    
   
 
 
  (Decrease) increase  
 
   
  % of
orders
   
  % of
orders
 
 
  Amount   Amount   Amount   Percent  

Radar and Electronic Warfare

  $ 129.7     34 % $ 142.2     40 % $ (12.5 )   (9 )%

Medical

    70.1     19     66.9     19     3.2     5  

Communications

    131.0     35     119.2     33     11.8     10  

Industrial

    26.1     7     21.2     6     4.9     23  

Scientific

    18.0     5     6.5     2     11.5     177  
                           

Total

  $ 374.9     100 % $ 356.0     100 % $ 18.9     5 %
                           

        Orders of $374.9 million for fiscal year 2010 were $18.9 million, or 5%, higher than orders of $356.0 million for fiscal year 2009. Explanations for the order increase or decrease by market for fiscal year 2010 compared to fiscal year 2009 are as follows:

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Backlog

        As of April 1, 2011, we had an order backlog of $269.2 million compared to an order backlog of $240.7 million as of April 2, 2010. We had an order backlog of $241.9 million as of October 1, 2010 compared to an order backlog of $226.0 million as of October 2, 2009. Because our orders for government end-use products generally have much longer delivery terms than our orders for commercial business (which require quicker turn-around), our backlog is primarily composed of government end-use orders.

        Backlog represents the cumulative balance, at a given point in time, of recorded customer sales orders that have not yet been shipped or recognized as sales. Backlog is increased when an order is received, and backlog is decreased when we recognize sales. We believe that backlog and orders information is helpful to investors because this information may be indicative of future sales results. Although backlog consists of firm orders for which goods and services are yet to be provided, customers can, and sometimes do, terminate or modify these orders. However, historically the amount of modifications and terminations has not been material compared to total contract volume.

Results Of Operations

        We derive our revenue primarily from the sale of microwave and radio frequency products, including high-power microwave amplifiers, satellite communications amplifiers, medical x-ray imaging subsystems and other related products.

        Cost of goods sold generally includes costs for raw materials, manufacturing costs, including allocation of overhead and other indirect costs, charges for reserves for excess and obsolete inventory, warranty claims and losses on fixed price contracts. Operating expenses generally consist of research and development, selling and marketing and general and administrative expenses.

        We believe that the Merger will result in certain benefits, including certain cost savings and operational efficiencies through elimination of redundant public company and other general and administrative expenses. However, the Merger will also increase certain of our expenses (on a pretax basis), such as (1) estimated $16.0 million over the four fiscal quarters following the date of the Merger for the amortization of backlog and utilization of the net increase in cost basis of inventory, (2) estimated $8.3 million annual increase in depreciation and amortization expense as a result of the fair market value adjustments to all other intangibles and property, plant and equipment, (3) estimated $13.2 million annual increase in interest expense and amortization of the new debt issue costs and discount and (4) at least $1.8 million for the annual advisory fee in connection with our advisory agreement with Veritas Management.

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        The accompanying condensed consolidated statements of operations are presented for two periods, Predecessor and Successor (or Parent), which relate to the accounting periods preceding and succeeding the consummation of the Merger. The Predecessor and Parent periods have been separated by a vertical line on the face of the condensed consolidated statements of operations to highlight the fact that the financial information for such periods has been prepared under two different historical-cost bases of accounting. We prepared our discussion of the results of operations by combining the results of operations of Parent for the period February 11, 2011 to April 1, 2011 and of the Predecessor for the period October 2, 2010 to February 10, 2011 and comparing the resulting combined results of operations for the six months ended April 1, 2011 to the Predecessor's results of operations for the six months ended April 2, 2010. This combination of results of operations does not comply with generally accepted accounting principles in the United States or with the rules for pro forma presentation but is presented because we believe it facilitates the ability of investors to more meaningfully compare our operating results. We have also prepared a separate discussion of the results of operations for Parent for the period from February 11, 2011 through April 1, 2011.

        The following table sets forth our historical results of operations for each of the periods indicated (dollars in millions):

 
   
   
   
   
  Six Months Ended    
  Fiscal Year Ended
(Predecessor)
 
 
  February 11, 2011
to
April 1, 2011
(Parent)
  October 2, 2010
to
February 10, 2011
(Predecessor)
   
 
 
  April 1, 2011
(Combined)
  April 2, 2010
(Predecessor)
  Increase
(Decrease)
 
 
  October 1, 2010   October 2, 2009   October 3, 2008  
 
  Amount   % of
sales
  Amount   % of
sales
  Amount   % of
sales
  Amount   % of
sales
  Amount   Amount   % of
sales
  Amount   % of
sales
  Amount   % of
sales
 

Sales

  $ 60.1     100.0 % $ 124.2     100.0 % $ 184.3     100.0 % $ 171.1     100.0 % $ 13.2   $ 360.4     100.0 % $ 332.9     100.0 % $ 370.0     100.0 %

Cost of sales(a)

    43.9     73.0     91.4     73.6     135.3     73.4     121.0     70.7     14.3     252.0     69.9     239.4     71.9     261.1     70.6  
                                                               
 

Gross profit

  $ 16.2     27.0 % $ 32.8     26.4 % $ 49.0     26.6 % $ 50.2     29.3 % $ (1.2 ) $ 108.4     30.1 % $ 93.5     28.1 % $ 108.9     29.4 %

Research and development

    2.2     3.7     5.0     4.0     7.2     3.9     5.7     3.3     1.5     12.4     3.4     10.5     3.2     10.8     2.9  

Selling and marketing

    2.7     4.5     8.3     6.7     11.0     6.0     10.2     6.0     0.8     20.8     5.8     19.5     5.9     21.1     5.7  

General and administrative

    3.1     5.2     11.9     9.6     15.0     8.1     12.2     7.1     2.8     25.0     6.9     20.8     6.2     22.9     6.2  

Amortization of acquisition-related intangibles

    2.3     3.8     1.0     0.8     3.3     1.8     1.4     0.8     1.9     2.7     0.7     2.8     0.8     3.1     0.8  

Strategic alternative transaction expenses

    8.8     14.6     4.7     3.8     13.5     7.3     0.2     0.1     13.3     19.9     5.5                  
                                                               

Operating (loss) income

  $ (2.9 )   (4.8 )% $ 2.0     1.6 % $ (0.8 )   (0.4 )% $ 20.4     11.9 % $ (21.2 ) $ 27.6     7.7 % $ 40.0     12.0 % $ 50.9     13.8 %

Interest expense, net

    4.1     6.8     5.8     4.7     9.9     5.4     7.7     4.5     2.2     15.2     4.2     17.0     5.1     19.1     5.2  

Loss on debt extinguishment

    0.1     0.2         0.0     0.1     0.1             0.1             (0.2 )   (0.1 )   0.6     0.2  
                                                               
 

(Loss) income before taxes

    (7.2 )   (12.0 )   (3.7 )   (3.0 )   (10.9 )   (5.9 )   12.7     7.4     (23.6 ) $ 12.4     3.4 % $ 23.2     7.0 % $ 31.3     8.5 %

Income tax expense

    (0.4 )   (0.7 )   1.0     0.8     0.5     0.3     4.4     2.6     (3.9 )   5.6     1.6     (0.2 )   (0.1 )   10.8     2.9  
                                                               
 

Net (loss) income

  $ (6.7 )   (11.1 )% $ (4.7 )   (3.8 )% $ (11.4 )   (6.2 )% $ 8.3     4.9 % $ (19.7 )   6.7     1.9 % $ 23.5     7.1 % $ 20.4     5.5 %
                                                               

Other Data:

                                                                                           
 

EBITDA(b)

  $ 0.5     0.8 % $ 6.2     5.0 % $ 6.7     3.6 % $ 25.9     15.1 % $ (19.2 ) $ 38.6     10.7 % $ 51.0     15.3 % $ 61.3     16.6 %
                                                               

Note: Totals may not equal the sum of the components due to independent rounding. Percentages are calculated based on rounded dollar amounts presented.

(a)
Cost of sales for the periods February 11, 2011 to April 1, 2011 and six months ended April 1, 2011 includes $3.6 of utilization of the net increase in cost basis of inventory due to purchase accounting in connection with the Merger.

(b)
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;

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Parent results for the period February 11, 2011 to April 1, 2011

        Because our fundamental operations did not change as a result of the Merger, there were no significant changes in the underlying trends affecting our results of operations during the Parent period of February 11, 2011 to April 1, 2011. The separate results of Parent reflect the impacts of the Merger and related transactions as follows:

        Gross Profit.     Gross profit was $16.2 million, or 27.0% of sales. Gross profit reflects the $3.6 million of utilization of the net increase in cost basis of the inventory and an increase of $0.2 million in amortization of land lease and depreciation of property, plant and equipment due to purchase accounting in connection with the Merger.

        General and Administrative.     General and administrative expenses were $3.1 million, or 5.2% of sales, which reflects a management fee of $0.3 million payable to Veritas Management for advisory and consulting services in connection with the Merger.

        Amortization of Acquisition-related Intangibles.     Amortization of acquisition-related intangibles of $2.3 million consists of purchase accounting charges for technology and other intangible assets and reflects a $2.0 million increase in amortization as a result of the revaluation of intangible assets in connection with the Merger.

        Strategic Alternative Transaction Expenses.     Merger expenses of $8.8 million for the period February 11, 2011 to April 1, 2011 comprised Predecessor stock compensation expense and non-recurring transaction costs, such as fees for investment bankers, attorneys and other professional services, rendered in connection with the sale of Predecessor. Predecessor stock compensation expense of $5.2 million represents the amount of cash payments for the unvested portion of the stock awards for which vesting was accelerated as of the closing date of the Merger in accordance with the terms of the Merger Agreement. Cash payments made by the acquirer in a business combination to settle unvested stock awards are immediately expensed after the acquisition date in the post combination financial statements in accordance with ASC 805, "Business Combinations."

        Interest Expense, Net.     Interest expense, net was $4.1 million, or 6.8% of sales, which reflects the effect of the $170 million increase in debt obligations in connection with the Merger.

        Loss on Debt Extinguishment, Net.     Loss on debt extinguishment, net of $0.1 million resulted from the retirement of debt obligations in connection with the Merger and reflects $0.6 million of bond tender fees and other related expenses, net of $0.5 million gain from debt repayment at less than fair value.

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Our results for the six months ended April 1, 2011 compared to our results for the six months ended April 2, 2010

        Sales.     Our sales by market for the six months ended April 1, 2011 and April 2, 2010 are summarized as follows (dollars in millions):

 
  Six Months Ended    
   
 
 
  April 1, 2011   April 2, 2010   Increase
(Decrease)
 
 
   
  % of
Sales
   
  % of
Sales
 
 
  Amount   Amount   Amount   Percent  

Radar and Electronic Warfare

  $ 67.6     37 % $ 61.5     36 % $ 6.1     10 %

Medical

    33.3     18     36.8     21     (3.5 )   (10 )

Communications

    65.6     36     57.8     34     7.8     13  

Industrial

    11.4     6     10.4     6     1.0     9  

Scientific

    6.4     3     4.6     3     1.8     39  
                           
 

Total

  $ 184.3     100 % $ 171.1     100 % $ 13.2     8 %
                           

        Sales of $184.3 million for the six months ended April 1, 2011 were $13.2 million, or 8%, higher than sales of $171.1 million for the six months ended April 2, 2010. Explanations for the sales increase or decrease by market are as follows:

        Gross Profit.     Gross profit was $49.0 million, or 26.6% of sales, for the six months ended April 1, 2011, a $1.2 million decrease from $50.2 million, or 29.3% of sales, in the six months ended April 2,

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2010. The decrease in gross profit for the six months ended April 1, 2011 as compared to the six months ended April 2, 2010 was primarily due to the $3.6 million of utilization of the net increase in cost basis of the inventory due to purchase accounting in connection with Merger and the unfavorable impact of the strong Canadian dollar, relative to the U.S. dollar, partially offset by higher shipment volume and the related improvement in operating efficiencies in the six months ended April 1, 2011.

        Research and Development.     Research and development expenses were $7.2 million, or 3.9% of sales, for the six months ended April 1, 2011, a $1.5 million increase from $5.7 million, or 3.3% of sales, for the six months ended April 2, 2010. The increase in research and development for the six months ended April 1, 2011 is primarily due to increased investment for the development of communication amplifiers for commercial and military applications and the solid state and vacuum electron devices used in these amplifiers, and development efforts on medical x-ray generator and linear accelerator products.

        Total spending on research and development, including customer-sponsored research and development, was as follows (in millions):

 
  Six Months Ended  
 
  April 1, 2011   April 2, 2010  

Company sponsored

  $ 7.2   $ 5.7  

Customer sponsored, charged to cost of sales

    9.1     7.7  
           

  $ 16.3   $ 13.4  
           

        Selling and Marketing.     Selling and marketing expenses were $11.0 million, or 6.0% of sales, for the six months ended April 1, 2011, a $0.8 million increase from the $10.2 million, or 6.0% of sales, for the six months ended April 2, 2010. Selling and marketing expenses in the six months ended April 1, 2011 includes $0.4 million of Predecessor stock compensation expense due to accelerated vesting of stock options in connection with the Merger.

        General and Administrative.     General and administrative expenses were $15.0 million, or 8.1% of sales, for the six months ended April 1, 2011, a $2.8 million increase from the $12.2 million, or 7.1% of sales, for the six months ended April 2, 2010. The increase in general and administrative expenses in the six months ended April 1, 2011 was due to $2.4 million of Predecessor stock compensation expense due to accelerated vesting of stock options in connection with the Merger, and a $0.5 million loss contingency expense accrual for a customer contract termination.

        Amortization of Acquisition-related Intangibles.     Amortization of acquisition-related intangibles consists of purchase accounting charges for technology and other intangible assets. The $1.9 million increase in amortization of acquisition-related intangibles for the six months ended April 1, 2011 compared to the six months ended April 2, 2010 was due to the revaluation of intangible assets in connection with Merger.

        Strategic Alternative Transaction Expenses.     Merger expenses of $13.5 million for the six months ended April 1, 2011 comprised Predecessor stock compensation expense and non-recurring transaction costs, such as fees for investment bankers, attorneys and other professional services, rendered in connection with the sale of Predecessor. Predecessor stock compensation expense of $5.2 million represents the amount of cash payments for the unvested portion of the stock awards for which vesting was accelerated as of the closing date of the Merger in accordance with the terms of the Merger Agreement. Cash payments made by the acquirer in a business combination to settle unvested stock awards are immediately expensed after the acquisition date in the post combination financial statements in accordance with ASC 805, "Business Combinations."

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        Interest Expense, Net ("Interest Expense").     Interest Expense of $9.9 million for the six months ended April 1, 2011 was $2.2 million higher than interest expense of $7.7 million for the six months ended April 2, 2010. The increase in interest expense for the six months ended April 1, 2011 was primarily due to the $170 million increase in debt obligations in connection with the Merger.

        Loss on Debt Extinguishment, Net ("Loss on Debt Extinguishment").     The Loss on Debt Extinguishment of $0.1 million in the six months ended April 1, 2011 resulted from the retirement of debt obligations in connection with the Merger. The Loss on Debt Extinguishment comprises bond tender fees and other related expenses, net of $0.5 million gain from debt repayment at less than fair value.

        Income Tax Expense.     We recorded an income tax expense of $0.5 million for the six months ended April 1, 2011 and an income tax expense of $4.4 million for the six months ended April 2, 2010. The negative 5% effective income tax rate for the six months ended April 1, 2011 included non-deductible Merger expenses, and U.S. inclusion of foreign income and foreign tax rate differences, which on a combined basis decreased the tax rate benefit by approximately 43%. The effective income tax rate for the six months ended April 2, 2010 was 34%.

        Net (Loss) Income.     Net loss was $11.4 million, or negative 6.2% of sales, in the six months ended April 1, 2011 as compared to net income of $8.3 million, or 4.9% of sales, in the six months ended April 2, 2010. The decrease in net income in the six months ended April 1, 2011 as compared to the six months ended April 2, 2010 was primarily due to Merger-related expenses in the six months ended April 1, 2011, including strategic alternative transaction expenses, utilization of the net increase in cost basis of inventory, higher intangible amortization, accelerated stock compensation expense, net loss on debt extinguishment and higher interest expense; the unfavorable impact of the strong Canadian dollar, relative to the U.S. dollar, on gross profit; and higher research and development spending; partially offset by higher shipment volume and the related improvement in operating efficiencies, and a lower income tax provision.

        EBITDA.     EBITDA was $6.7 million, or 3.6% of sales, for the six months ended April 1, 2011 as compared to $25.9 million, or 15.1% of sales, for the six months ended April 2, 2010. The $19.2 million decrease in EBITDA for the six months ended April 1, 2011 as compared to the corresponding period of fiscal year 2010 was due primarily to Merger-related expenses in the six months ended April 1, 2011, including strategic alternative transaction expenses, utilization of the net increase in cost basis of inventory, accelerated stock compensation expense and net loss on debt extinguishment; the unfavorable impact of the strong Canadian dollar, relative to the U.S. dollar, on gross profit; and higher research and development spending; partially offset by higher shipment volume and the related improvement in operating efficiencies.

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Our results for fiscal year 2010 compared to our results for fiscal year 2009

        Sales.     Our sales by market for fiscal years 2010 and 2009 are summarized as follows (dollars in millions):

 
  Fiscal year ended    
   
 
 
  October 1, 2010   October 2, 2009   Increase (decrease)  
 
  Amount   % of
sales
  Amount   % of
sales
  Amount   % of
sales
 

Radar and Electronic Warfare

  $ 131.6     37 % $ 135.9     41 % $ (4.3 )   (3 )%

Medical

    70.2     19     61.2     18     9.0     15  

Communications

    124.0     34     106.4     32     17.6     17  

Industrial

    23.6     7     20.2     6     3.4     17  

Scientific

    11.0     3     9.2     3     1.8     20  
                           

Total

  $ 360.4     100 % $ 332.9     100 % $ 27.5     8 %
                           

        Sales of $360.4 million for fiscal year 2010 were $27.5 million, or approximately 8%, higher than sales of $332.9 million for fiscal year 2009. Explanations for the sales increase or decrease by market are as follows:

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        Gross Profit.     Gross profit was $108.4 million, or 30.1% of sales, for fiscal year 2010 as compared to $93.5 million, or 28.1% of sales, for fiscal year 2009. Gross profit is influenced by numerous factors including sales volume and mix, pricing, raw material and manufacturing costs, and warranty costs. The primary reason for the increase in gross profit in fiscal year 2010 as compared to fiscal year 2009 was higher shipments and improved operating efficiencies from the higher shipment volume and the favorable impact from translation of Canadian costs, net of currency hedge contracts, partially offset by lower margins due to manufacturing start-up costs for new advanced antenna products and on a foreign telemetry program.

        Research and Development.     Company-sponsored research and development expenses were $12.4 million, or 3.4% of sales, for fiscal year 2010 and $10.5 million, or 3.2% of sales for fiscal year 2009. The $1.9 million increase in research and development was primarily due to development efforts on broadband communication products and solid state devices for commercial and military applications.

        Total spending on research and development, including customer-sponsored research and development, was as follows (dollars in millions):

 
  Fiscal year ended  
 
  October 1, 2010   October 2, 2009  

Company sponsored

  $ 12.4   $ 10.5  
             

Customer sponsored, charged to cost of sales

    16.1     17.5  
           

  $ 28.5   $ 28.0  
           

        The reduction to customer-sponsored research and development to $16.1 million for fiscal year 2010 from $17.5 million for fiscal year 2009 is primarily due to the reduction of development programs for advanced antenna and telemetry products at the Malibu Division as these products are transitioning to production.

        Selling and Marketing.     Selling and marketing expenses were $20.8 million, or 5.8% of sales, for fiscal year 2010, a $1.3 million increase from the $19.5 million, or 5.9% of sales, for fiscal year 2009. The increase in selling and marketing expenses in fiscal year 2010 as compared to fiscal year 2009 was primarily due to higher sales incentive expenses from improved operating performance and additional expenses to support growth in the commercial communications market.

        General and Administrative.     General and administrative expenses were $25.0 million, or 6.9% of sales, for fiscal year 2010, a $4.2 million increase from the $20.8 million, or 6.2% of sales, for fiscal year 2009. The increase in general and administrative expenses in fiscal year 2010 as compared to fiscal year 2009 was primarily due to the elimination of certain cost reduction measures and higher management bonuses as a result of improved operating performance, unfavorable currency translation expense and an increase in expenses for income tax planning services.

        Amortization of Acquisition-related Intangibles.     Amortization of acquisition-related intangibles consists of purchase accounting charges for technology and other intangible assets. Amortization of acquisition-related intangibles was $2.7 million for fiscal year 2010 and $2.8 million for fiscal year 2009. Amortizable acquisition-related intangible assets are amortized over periods of up to 50 years.

        Strategic Transaction Expenses.     On September 7, 2010, the Company and Comtech entered into a Termination and Release Agreement, by which the Company and Comtech terminated a previously announced merger agreement, dated May 8, 2010. The termination was by mutual agreement of the companies and was unanimously approved by the Company's board of directors and the board of directors of Comtech. As part of the termination, the Company paid Comtech a termination fee of $15.0 million. In addition, the Company incurred during fiscal year 2010 transaction expenses relating

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to the proposed merger in the amount of $4.9 million. Such transaction expenses comprised fees for investment bankers, attorneys and other professional services rendered in connection with the proposed merger, as well as with the related stockholder class lawsuit under "Business—Legal Proceedings". The total expenses of $19.9 million are presented as "strategic alternative transaction expenses" in the consolidated statement of income for fiscal year 2010.

        Interest Expense, net ("Interest Expense").     Interest Expense of $15.2 million for fiscal year 2010 was $1.8 million lower than interest expense of $17.0 million for fiscal year 2009. The reduction in interest expense in fiscal year 2010 as compared to fiscal year 2009 was primarily due to repayments of debt in fiscal year 2009.

        (Gain) Loss on Debt Extinguishment.     The gain on debt extinguishment of $0.2 million in fiscal year 2009 resulted from the repurchase of $8.0 million of our 8% Notes at a discount of $0.4 million, partially offset by a $0.2 million non-cash write-off of deferred debt issue costs.

        Income Tax Expense (Benefit).     We recorded an income tax expense of $5.6 million for fiscal year 2010 and an income tax benefit of $0.2 million for fiscal year 2009. Our effective tax rates were 45% for fiscal year 2010 and a negative 0.9% for fiscal year 2009.

        Income tax expense for fiscal year 2010 includes discrete tax expense of $2.2 million, net of discrete tax benefits, which comprises the following: (1) $3.1 million tax expense related to the uncertainty of obtaining a tax deduction for all of the expenses incurred in connection with the terminated merger with Comtech Telecommunications Corp. ("Comtech"), (2) $0.3 million tax benefit true-up related to the filing of fiscal year 2009 income tax returns, (3) $0.3 million tax benefit to adjust deferred tax accounts for a reduction to future Canadian income tax rates, and (4) $0.3 million for research and development tax credit benefits claimed on prior year income tax returns.

        The following illustrates the impact the strategic alternative transaction expenses had on our income taxes in fiscal year 2010 (dollars in millions):

 
  Total   Strategic
alternative
transaction
expenses
  All other  

Income (loss) before taxes

  $ 12.4   $ (19.9 ) $ 32.3  

Income tax expense (benefit), excluding discrete items

    3.4     (7.8 )   11.2  
 

% of income before taxes

    27 %   39 %   35 %

Discrete tax expense (benefit):

                   
 

Reserve for uncertainty of tax deduction for the terminated Comtech merger

    3.1     3.1        
 

True-up related to fiscal year 2009 tax filings

    (0.3 )         (0.3 )
 

Adjust deferred tax accounts for reduction to future Canadian income tax rates

    (0.3 )         (0.3 )
 

R&D tax benefit credits claimed on prior year income tax returns

    (0.3 )       (0.3 )
               
   

Total discrete tax expense (benefit)

  $ 2.2   $ 3.1   $ (0.9 )
               

Total income tax expense (benefit)

  $ 5.6   $ (4.7 ) $ 10.3  
               
 

% of income before taxes

    45 %   24 %   32 %

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        The income tax benefit for fiscal year 2009 included several significant discrete tax benefits: (1) $4.9 million relating to our position with regard to an outstanding audit by the Canada Revenue Agency ("CRA"), (2) $1.7 million for the correction of immaterial errors to tax accounts that should have been recorded in prior year's financial statements, (3) $0.7 million related to certain provisions of the California Budget Act of 2008 signed on February 20, 2009, which will allow a taxpayer to elect an alternative method to apportion taxable income to California for tax years beginning on or after January 1, 2011, and (4) $0.6 million for refunds claimed on prior year income tax returns based on the results of a foreign nexus study. In fiscal year 2009, we also recorded a $0.4 million U.S. research and development tax credit.

        In December 2008, a new tax treaty protocol between Canada and the U.S. became effective. The new treaty requires mandatory arbitration for the resolution of double taxation disputes not settled through the competent authority process. As a result of this new treaty, our tax position on an outstanding audit by the CRA became more favorable, and we reduced our tax contingency reserve in Canada by $2.8 million, and established an income tax receivable and recognized an income tax benefit in the U.S for $2.8 million; this tax benefit was partially offset by a related increase in deferred tax liabilities of $0.7 million.

        The $1.7 million correction to prior year's financial statements in fiscal year 2009 comprises $0.9 million for changes in foreign income tax rates that were not updated in a timely manner and $0.8 million recorded in the fourth quarter of fiscal year 2009 to true-up the 2008 income tax provision. We believe that the impact of this correction was not material to our consolidated financial statements in fiscal year 2009 or in any of the prior year consolidated financial statements.

        Net Income.     Net income was $6.7 million, or 1.9% of sales, for fiscal year 2010 as compared to $23.5 million, or 7.1% of sales, for fiscal year 2009. Net income for both fiscal years 2009 and 2010 was greatly impacted by (1) for fiscal year 2009, the discrete tax benefits discussed above under the heading "Income Tax Expense (Benefit)," aggregating to a $7.9 million benefit, (2) for fiscal year 2010, the $0.9 million of discrete tax benefits in the "All other" column of the table above under the heading "Income Tax Expense (Benefit)," and (3) for fiscal year 2010, the after-tax expense from strategic alternative transaction expenses of $15.2 million. Excluding these items, fiscal year 2010 net income was approximately $5.4 million higher than fiscal year 2009 primarily due to higher shipment volume and improved operating efficiency from the higher shipment volume, and lower interest expense, in fiscal year 2010, partially offset by higher operating expense in fiscal year 2010. The higher operating expense in fiscal year 2010 is primarily due to higher management bonuses and sales incentive expenses because of improved operating performance and from the elimination of certain cost reduction initiatives in fiscal year 2010.

        EBITDA.     EBITDA was $38.6 million, or 10.7% of sales, for fiscal year 2010 as compared to $51.0 million, or 15.3% of sales, in fiscal year 2009. The $12.4 million decrease in EBITDA in fiscal year 2010 as compared to fiscal year 2009 was due primarily to strategic alternative transaction expenses of $19.9 million and higher operating expense in fiscal year 2010, partially offset by higher shipment volume and improved operating efficiency from the higher shipment volume in fiscal year 2010.

        Calculation of Management Bonuses.     Management bonuses were $3.3 million in fiscal year 2010 compared to $1.2 million in fiscal year 2009. Management bonuses for fiscal years 2010 and 2009 were calculated pursuant to our Management Incentive Plan ("MIP") and were based on three factors: (1) EBITDA as adjusted for purposes of calculating management bonuses; (2) a measure of cash generated by operations; and (3) individual goals that were customized for certain participating members of management. The weight given to each of these factors varied for each person. Generally, for our officers, equal weight was given to the first two factors, and the third factor was not applicable. For our other members of management, equal weight was given to each of the three factors described above. Management bonuses are paid in cash approximately three months after the end of the fiscal

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year. EBITDA as adjusted for purposes of calculating management bonuses is equal to EBITDA for the fiscal year adjusted to exclude the impact of certain non-recurring or non-cash charges as pre-determined in our MIP for the fiscal year. EBITDA for purposes of calculating management bonuses for fiscal year 2010 was $61.6 million compared to $53.5 million in fiscal year 2009. The non-recurring and non-cash charges that were excluded from EBITDA in calculating management bonuses were (a) for fiscal year 2010, strategic alternative transaction expenses of $19.9 million and stock-based compensation expense of $3.0 million, and (b) for fiscal year 2009, gain on debt extinguishment of $0.2 million and stock-based compensation expense of $2.7 million. We are presenting EBITDA as adjusted for purposes of calculating management bonuses here to help investors understand how our management bonuses were calculated, and not as a measure to be used by investors to evaluate our operating results or liquidity.

Our results for fiscal year 2009 compared to our results for fiscal year 2008

        Sales.     Our sales by market for fiscal years 2009 and 2008 are summarized as follows (dollars in millions):

 
  Fiscal year ended    
   
 
 
  October 2, 2009   October 3, 2008   Decrease  
 
  Amount   % of sales   Amount   % of sales   Amount   % of sales  

Radar and Electronic Warfare

  $ 135.9     41 % $ 151.8     40 % $ (15.9 )   (10 )%

Medical

    61.2     18     65.8     18     (4.6 )   (7 )

Communications

    106.4     32     117.8     32     (11.4 )   (10 )

Industrial

    20.2     6     25.1     7     (4.9 )   (20 )

Scientific

    9.2     3     9.5     3     (0.3 )   (3 )
                           
 

Total

  $ 332.9     100 % $ 370.0     100 % $ (37.1 )   (10 )%
                           

        In the first six months of fiscal year 2009, product shipments in our defense markets, which include our radar and electronic warfare markets, were delayed due to delays in the receipt of orders, having a negative effect on our defense sales. In the last six months of fiscal year 2009, the order levels in our defense markets stabilized, but certain defense programs experienced delays in orders and subsequent sales.

        Our commercial markets, which include our medical, commercial communications, industrial and scientific markets, were negatively impacted in fiscal year 2009 by the weakening of the U.S. and foreign economy. Many of the commercial programs in which we participate depend on customers upgrading their current equipment or expanding their infrastructures. With the softening of global economy, many of our customers delayed, reduced or cancelled their upgrade or expansion plans. We believe that the weak global economy resulted in a decrease in demand for our products to support commercial programs in fiscal year 2009.

        Sales of $332.9 million for fiscal year 2009 were $37.1 million, or approximately 10%, lower than sales of $370.0 million for fiscal year 2008. Explanations for the sales decrease by market are as follows:

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        Cost-reduction Initiatives in Fiscal Year 2009.     In fiscal year 2009, we implemented a number of temporary and permanent cost-saving measures to counter the impact of lower sales due to the worldwide economic slowdown, including reducing our worldwide workforce by approximately 7%, or 120 people. In addition, we implemented a salary freeze and salary reductions, temporary shutdowns of facilities, increased employees' mandatory time off, initiated work-share programs and reduced our contributions to certain employee retirement plans.

        Gross Profit.     Gross profit was $93.5 million, or 28.1% of sales, for fiscal year 2009 as compared to $108.9 million, or 29.4% of sales, for fiscal year 2008. The primary reason for the reduction in gross profit in fiscal year 2009 as compared to fiscal year 2008 was lower sales volume and, therefore, lower manufacturing cost absorption due to the reduction in sales volume. This decrease was partially offset by improved gross margins at our Malibu Division and lower expenses from cost-reduction initiatives in fiscal year 2009.

        Research and Development.     Company-sponsored research and development expenses were $10.5 million, or 3.2% of sales, for fiscal year 2009 and $10.8 million, or 2.9% of sales for fiscal year 2008. Customer-sponsored research and development expenses were $17.5 million in fiscal year 2009, an increase of $5.5 million as compared to fiscal year 2008, representing an increase of approximately 46%. This increase was primarily in advanced antenna system products used for telemetry and tactical common data link ("TCDL") applications.

        Total spending on research and development, including customer-sponsored research and development, was as follows (dollars in millions):

 
  Fiscal year ended  
 
  October 2, 2009   October 3, 2008  

Company sponsored

  $ 10.5   $ 10.8  

Customer sponsored, charged to cost of sales

    17.5     12.0  
           

  $ 28.0   $ 22.8  
           

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        Selling and Marketing.     Selling and marketing expenses were $19.5 million, or 5.9% of sales, for fiscal year 2009, a $1.6 million decrease from the $21.1 million in fiscal year 2008. The reduction in selling and marketing expenses in fiscal year 2009 as compared to fiscal year 2008 was primarily due to lower expenses from cost-reduction initiatives and the favorable impact from currency translation of our foreign-based expenses in fiscal year 2009.

        General and Administrative.     General and administrative expenses were $20.8 million, or 6.2% of sales, for fiscal year 2009, a $2.1 million decrease from the $22.9 million, or 6.2% of sales, for fiscal year 2008. The decrease in general and administrative expenses in fiscal year 2009 as compared to fiscal year 2008 was primarily due to lower expenses related to the implementation of cost-reduction initiatives during fiscal year 2009.

        Amortization of Acquisition-related Intangibles.     Amortization of acquisition-related intangibles consists of purchase accounting charges for technology and other intangible assets. Amortization of acquisition-related intangibles was $2.8 million for fiscal year 2009 and $3.1 million for fiscal year 2008. The $0.3 million decrease in amortization of acquisition- related intangibles in fiscal year 2009 was primarily due to completed amortization of customer backlog in fiscal year 2008 for our Malibu Division, which was acquired in August 2007. Amortizable acquisition-related intangible assets are amortized over periods of up to 50 years.

        Interest Expense, net ("Interest Expense").     Interest Expense of $17.0 million for fiscal year 2009 was $2.1 million lower than interest expense of $19.1 million for fiscal year 2008. The reduction in interest expense in fiscal year 2009 as compared to fiscal year 2008 was primarily due to repayments of debt.

        (Gain) Loss on Debt Extinguishment.     The gain on debt extinguishment of $0.2 million in fiscal year 2009 resulted from the repurchase of $8.0 million of our 8% Notes at a discount of $0.4 million, partially offset by a $0.2 million non-cash write-off of deferred debt issue costs. The loss on debt extinguishment of $0.6 million in fiscal year 2008 resulted from the early redemption of $10.0 million of our floating rate senior notes, consisting of $0.4 million in non-cash write-off of deferred debt issue costs and issue discount costs and $0.2 million in cash payments for call premiums.

        Income Tax (Benefit) Expense.     We recorded an income tax benefit of $0.2 million for fiscal year 2009 and an income tax expense of $10.8 million for fiscal year 2008. Our effective tax rates were a negative 0.9% for fiscal year 2009 and 34.6% for fiscal year 2008.

        The income tax benefit for fiscal year 2009 included several significant discrete tax benefits: (1) $4.9 million relating to our position with regard to an outstanding audit by the CRA, (2) $1.7 million for the correction of immaterial errors to tax accounts that should have been recorded in prior year's financial statements, (3) $0.7 million related to certain provisions of the California Budget Act of 2008 signed on February 20, 2009, which will allow a taxpayer to elect an alternative method to apportion taxable income to California for tax years beginning on or after January 1, 2011, and (4) $0.6 million for refunds claimed on prior year income tax returns based on the results of a foreign nexus study. In fiscal year 2009, we also recorded a $0.4 million U.S. research and development tax credit.

        In December 2008, a new tax treaty protocol between Canada and the U.S. became effective. The new treaty requires mandatory arbitration for the resolution of double taxation disputes not settled through the competent authority process. As a result of this new treaty, our tax position on an outstanding audit by the CRA became more favorable, and we reduced our tax contingency reserve in Canada by $2.8 million, and established an income tax receivable and recognized an income tax benefit in the U.S for $2.8 million; this tax benefit was partially offset by a related increase in deferred tax liabilities of $0.7 million.

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        The $1.7 million correction to prior year's financial statements in fiscal year 2009 comprises $0.9 million for changes in foreign income tax rates that were not updated in a timely manner and $0.8 million recorded in the fourth quarter to true-up the 2008 income tax provision. Fiscal year 2008 included a discrete tax benefit of $0.4 million that is attributable to fiscal year 2007 related to the correction of an immaterial error in the computation of the deferred taxes for warranty expenses in a foreign tax jurisdiction. We believe that the impact of these corrections was not material to our fiscal year 2009 consolidated financial statements or in any of the prior year consolidated financial statements.

        Net Income.     Net income was $23.5 million, or 7.1% of sales, for fiscal year 2009 as compared to $20.4 million, or 5.5% of sales, for fiscal year 2008. The $3.1 million increase in net income in fiscal year 2009 as compared to fiscal year 2008 was primarily due to discrete income tax benefits, lower expenses from the implementation of cost-reduction initiatives and lower interest expense in fiscal year 2009, partially offset by lower gross profit from the reduction in sales volume in fiscal year 2009.

        EBITDA.     EBITDA was $51.0 million, or 15.3% of sales, for fiscal year 2009 as compared to $61.3 million, or 16.6% of sales, in fiscal year 2008. The $10.3 million decrease in EBITDA in fiscal year 2009 as compared to fiscal year 2008 was due primarily to lower gross profit from the reduction in sales volume, partially offset by lower expenses from the implementation of cost-reduction initiatives in fiscal year 2009.

        Calculation of Management Bonuses.     Management bonuses were $1.2 million in fiscal year 2009 compared to $1.9 million in fiscal year 2008. Management bonuses for fiscal years 2009 and 2008 were calculated pursuant to our MIP and were based on three factors: (1) EBITDA as adjusted for purposes of calculating management bonuses; (2) a measure of cash generated by operations; and (3) individual goals that were customized for certain participating members of management. The weight given to each of these factors varied for each person. Generally, for our officers, equal weight was given to the first two factors, and the third factor was not applicable. For our other members of management, equal weight was given to each of the three factors described above. Management bonuses are paid in cash approximately three months after the end of the fiscal year. EBITDA as adjusted for purposes of calculating management bonuses is equal to EBITDA for the fiscal year adjusted to exclude the impact of certain non-recurring or non-cash charges as pre-determined in our MIP for the fiscal year. EBITDA for purposes of calculating management bonuses for fiscal year 2009 was $53.5 million compared to $64.0 million in fiscal year 2008. The non-recurring and non-cash charges that were excluded from EBITDA in calculating management bonuses were (a) for fiscal year 2009, gain on debt extinguishment of $0.2 million and stock-based compensation expense of $2.7 million, and (b) for fiscal year 2008, loss on debt extinguishment of $0.6 million and stock-based compensation expense of $2.1 million. We are presenting EBITDA as adjusted for purposes of calculating management bonuses here to help investors understand how our management bonuses were calculated, and not as a measure to be used by investors to evaluate our operating results or liquidity.

Liquidity And Capital Resources

Overview

        Our liquidity is affected by many factors, some of which are based on normal ongoing operations of our business and others that are related to uncertainties in the markets in which we compete and other global economic factors. We have historically financed, and intend to continue to finance, our capital and working capital requirements including debt service and internal growth, through a combination of cash flows from our operations and borrowings under our Senior Secured Credit Facilities. Our primary uses of cash are cost of sales, operating expenses, debt service and capital expenditures.

        In connection with the Merger, in February 2011, we received funding through an equity contribution from the Veritas Fund and certain of its affiliates and net proceeds from the offering of

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the outstanding notes and borrowings under the Senior Secured Credit Facilities. We used a portion of the financial resources from the Transactions to pay our old long-term debt and related costs. We believe that cash flows from operations and availability under our new revolving credit facility included in the Senior Secured Credit Facilities will be sufficient to fund our working capital needs, capital expenditures and other business requirements for at least the next twelve months. We may need to incur additional financings to make strategic acquisitions or investments or if our cash flows from operations are less than we expect. We cannot assure you that financing will be available to us on acceptable terms or that financing will be available at all.

        Our ability to make payments to fund working capital, capital expenditures, debt service, strategic acquisitions, joint ventures and investments will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, regulatory and other factors that are beyond our control. Future indebtedness may impose various restrictions and covenants on us which could limit our ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business opportunities.

Cash and Working Capital

        The following summarizes our cash and cash equivalents and working capital (dollars in millions):

 
  Parent   Predecessor  
 
  April 1,
2011
  April 2,
2010
  October 1,
2010
  October 2,
2009
  October 3,
2008
 

Cash and cash equivalents

  $ 21.7   $ 36.5   $ 42.8   $ 26.2   $ 28.7  

Working capital

  $ 84.7   $ 107.8   $ 44.8   $ 92.4   $ 88.1  

        We invest cash balances in excess of operating requirements in overnight U.S. Government securities and money market accounts. In addition to the above cash and cash equivalents, we had restricted cash of $2.0 million and $1.8 million as of April 1, 2011 and October 1, 2010, respectively, consisting of bank guarantees from customer advance payments to our international subsidiaries and cash collateral for certain performance bonds. The bank guarantees become unrestricted cash when performance under the sales contract is complete. The cash collateral for the performance bonds will become unrestricted cash when the performance bonds expire.

        We are highly leveraged. As of April 1, 2011, our total outstanding indebtedness was $364.6 million (excluding approximately $4.5 million of outstanding letters of credit) compared to 195.0 million at October 1, 2010. At April 1, 2011 we also had an additional $25.5 million available for borrowing under our new revolving credit facility. Our liquidity requirements will be significant, primarily due to debt service requirements. Our cash interest paid for the periods February 11, 2011 to April 1, 2011, and October 2, 2010 to February 10, 2011 was $1.4 million and $6.4 million, respectively.

        In December 2010, our European subsidiary entered into a $2.0 million bank guarantee facility to be used for issuance of bank guarantees for advanced payments from customers and for securing certain of our obligations in projects under customer contracts. No guarantees were outstanding under such facility at April 1, 2011.

        Our current most significant debt covenant compliance requirements are maintaining a maximum leverage ratio of 7.0:1 and a minimum cash interest ratio of 1.65:1. Our current leverage ratio is approximately 5.4:1 and our cash interest ratio is approximately 2.5:1.

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Historical Operating, Investing and Financing Activities

Our operating, investing and financing activities for six months ended April 1, 2011 and six months ended April 2, 2010

        In summary, our cash flows were as follows (in millions):

 
  Fiscal Year  
 
  2011   2010  
 
  February 11, 2011
to
April 1, 2011
(Parent)
  October 2, 2010
to
February 10, 2011
(Predecessor)
  26-Week
Period Ended
April 2, 2010
(Predecessor)
 

Net cash (used in) provided by operating activities

  $ (4.9 ) $ 4.3   $ 11.5  

Net cash used in investing activities

  $ (371.5 ) $ (2.5 ) $ (1.8 )

Net cash provided by financing activities

  $ 351.2   $ 2.2   $