-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MhiiEdxkdH8bjFsY2JSMs7P1Fc3SuPtpQ/0kR9S7rYoCZG/XrCZ8/+KT7+2xFeJ/ DYaSh8yGE3SzSdSPT6nmrw== 0000808064-98-000013.txt : 19980615 0000808064-98-000013.hdr.sgml : 19980615 ACCESSION NUMBER: 0000808064-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980612 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: C&D TECHNOLOGIES INC CENTRAL INDEX KEY: 0000808064 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 133314599 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09389 FILM NUMBER: 98646918 BUSINESS ADDRESS: STREET 1: 1400 UNION MEETING ROAD CITY: BLUE BELL STATE: PA ZIP: 19422 BUSINESS PHONE: 2156192700 MAIL ADDRESS: STREET 1: 1400 UNION MEETING ROAD CITY: BLUE BELL STATE: PA ZIP: 19422 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ___________________ Commission File No. 1-9389 C&D TECHNOLOGIES, INC. (Exact name of Registrant as specified in its charter) Delaware 13-3314599 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1400 Union Meeting Road Blue Bell, Pennsylvania 19422 (Address of principal executive office) (Zip Code) (215) 619-2700 (Registrant's telephone number, including area code) ______________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO_____ Indicate the number of shares of the Registrant's Common Stock outstanding on June 5, 1998: 6,173,893 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page No. Item 1 - Financial Statements Consolidated Balance Sheets - April 30, 1998 and January 31, 1998................. 3 Consolidated Statements of Income - Three Months Ended April 30, 1998 and 1997.......... 5 Consolidated Statements of Cash Flows - Three Months Ended April 30, 1998 and 1997.......... 6 Consolidated Statements of Comprehensive Income - Three Months Ended April 30, 1998 and 1997 ......... 8 Notes to Consolidated Financial Statements.......... 9 Report of Independent Accountants................... 14 Item 2 - Management's Discussion and Analysis Of Financial Condition and Results of Operations.... 15 PART II. OTHER INFORMATION 19 SIGNATURES 20 2 Item 1. C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) April 30, January 31, 1998 1998 ---- ---- ASSETS Current assets: Cash and cash equivalents ................. $ 2,088 $ 1,167 Accounts receivable, less allowance for doubtful accounts of $1,930 and $1,701, respectively ................. 44,631 42,742 Inventories ............................... 42,499 40,735 Deferred income taxes ..................... 7,871 7,871 Other current assets ...................... 1,055 885 ------- ------- Total current assets ........... 98,144 93,400 Property, plant and equipment, net .............. 58,448 57,058 Intangible and other assets, net ................ 5,131 5,339 Goodwill, net ................................... 10,570 10,701 ------- ------- Total assets ................... $172,293 $166,498 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt ......... $ 261 $ 321 Accounts payable .......................... 21,204 22,791 Accrued liabilities ....................... 16,764 16,012 Income taxes .............................. 3,552 3,689 Other current liabilities ................. 3,091 3,245 ------- ------- Total current liabilities ...... 44,872 46,058 Deferred income taxes ........................... 2,376 2,376 Long-term debt .................................. 9,752 10,267 Other liabilities ............................... 11,091 10,492 ------- ------- Total liabilities .............. 68,091 69,193 ------- ------- The accompanying notes are an integral part of these statements. 3 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (continued) (Dollars in thousands) (Unaudited) April 30, January 31, 1998 1998 ---- ---- Commitments and contingencies Stockholders' equity: Common stock, $.01 par value, 10,000,000 shares authorized; 6,621,113 and 6,614,449 shares issued, respectively .................. 66 66 Additional paid-in capital ................. 41,672 41,430 Treasury stock, at cost, 452,551 shares .... (10,819) (10,819) Note receivable from stockholder, net of discount of $0 and $28, respectively ..................... - (1,029) Accumulated other comprehensive expense: Cumulative translation adjustment ..... (208) (248) Retained earnings .......................... 73,491 67,905 ------- ------- Total stockholders' equity ...... 104,202 97,305 ------- ------- Total liabilities and stockholders' equity .......... $172,293 $166,498 ======= ======= The accompanying notes are an integral part of these statements. 4 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited) Three months ended April 30, 1998 1997 ---- ---- Net sales .................................. $78,909 $73,346 Cost of sales .............................. 58,221 54,363 ------ ------ Gross profit ......................... 20,688 18,983 Selling, general and administrative expenses ................................ 9,512 9,255 Research and development expenses .......... 2,035 2,076 ------ ------ Operating income ..................... 9,141 7,652 Interest expense, net ...................... 30 376 Other expense, net ......................... 46 712 ------ ------ Income before income taxes ........... 9,065 6,564 Provision for income taxes ................. 3,309 2,429 ------ ------ Net income ........................... $ 5,756 $ 4,135 ====== ====== Net income per common share ................ $ .93 $ .68 ====== ====== Weighted average shares of common stock outstanding ................ 6,165 6,083 ====== ====== Net income per common share - assuming dilution ....................... $ .90 $ .66 ====== ====== Weighted average common shares - assuming dilution ....................... 6,408 6,265 ====== ====== Dividends per share ........................ $ .0275 $ .0275 ====== ====== The accompanying notes are an integral part of these statements. 5 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Three months ended April 30, 1998 1997 ---- ---- Cash flows provided (used) by operating activities: Net income ..................................... $ 5,756 $ 4,135 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ............ 3,058 3,359 Deferred income taxes .................... - 273 Loss on disposal of assets ............... 157 - Changes in: Accounts receivable ................ (1,839) (740) Inventories ........................ (1,723) (2,625) Other current assets ............... (162) (203) Accounts payable ................... (1,597) (964) Accrued liabilities ................ 741 2,250 Income taxes payable ............... (85) 1,849 Other current liabilities .......... (155) (654) Other liabilities .................. 596 888 Other, net ............................... - (224) ------ ------ Net cash provided by operating activities ............ 4,747 7,344 ------ ------ Cash flows provided (used) by investing activities: Acquisition of property, plant and equipment ... (4,333) (2,298) Proceeds from disposal of property, plant and equipment ............................... 4 - Change in restricted cash ...................... - 1 ------ ------ Net cash used by investing activities ................ (4,329) (2,297) ------ ------ Cash flows provided (used) by financing activities: Repayment of long-term debt .................... (578) (4,919) Repayment of note receivable from stockholder... 1,057 - Proceeds from issuance of common stock ......... 188 127 Payment of common stock dividends .............. (169) (167) ------ ------ Net cash provided (used) by financing activities ..... 498 (4,959) ------ ------ Effect of exchange rate changes on cash .............. 5 (7) ------ ------ The accompanying notes are an integral part of these statements. 6 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Dollars in thousands) (Unaudited) Three months ended April 30, 1998 1997 ---- ---- Increase in cash and cash equivalents .............. 921 81 Cash and cash equivalents at beginning of period ....................................... 1,167 952 ------ ------ Cash and cash equivalents at end of period .......................................... $ 2,088 $ 1,033 ====== ====== SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Dividends declared but not paid .................... $ 169 $ 168 The accompanying notes are an integral part of these statements. 7 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) (Unaudited) Three months ended April 30, 1998 1997 ---- ---- Net income ...................................... $5,756 $4,135 Other comprehensive income (expense), net of tax: Foreign currency translation adjustments.... 40 (311) ----- ----- Total comprehensive income ...................... $5,796 $3,824 ===== ===== The accompanying notes are an integral part of these statements. 8 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands) (UNAUDITED) 1. INTERIM STATEMENTS The accompanying interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report to Shareholders for the fiscal year ended January 31, 1998. The January 31, 1998 amounts were derived from the Company's audited financial statements. The consolidated financial statements presented herein are unaudited but, in the opinion of management, include all necessary adjustments (which comprise only normal recurring items) required for a fair presentation of the consolidated financial position as of April 30, 1998 and the consolidated statements of income, comprehensive income and cash flows for the three months ended April 30, 1998 and 1997. However, interim results of operations necessarily involve more estimates than annual results and are not indicative of results for the full fiscal year. 2. INVENTORIES Inventories consisted of the following: April 30, January 31, 1998 1998 ---- ---- Raw materials ............................ $16,328 $17,099 Work-in-progress ......................... 11,416 9,990 Finished goods ........................... 14,755 13,646 ------ ------ $42,499 $40,735 ====== ====== 3. INCOME TAXES A reconciliation of the provision for income taxes from the statutory rate to the effective rate is as follows: Three months ended April 30, 1998 1997 ---- ---- U.S. statutory income tax ...................... 35.0% 35.0% State tax, net of federal income tax benefit ... 3.5 3.6 Tax effect of foreign operations ............... (0.9) (1.4) Foreign sales corporation ...................... (1.1) (1.2) Other .......................................... -- 1.0 ---- ---- 36.5% 37.0% ==== ==== 9 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands) (UNAUDITED) 4. NET INCOME PER COMMON SHARE Net income per common share for the periods ended April 30, 1998 and 1997 is based on the weighted average number of shares of Common Stock outstanding. Net income per common share - assuming dilution reflects the potential dilution that could occur if stock options were exercised. Three months ended April 30, 1998 1997 ---- ---- Net income (A) ..................... $5,756 $4,135 Weighted average shares of common stock outstanding (B) ..... 6,164,923 6,082,824 Assumed conversion of stock options, net of shares assumed reacquired ............... 242,838 182,013 --------- --------- Weighted average common shares - assuming dilution (C) ............ 6,407,761 6,264,837 Net income per common share (A/B)... $.93 $.68 Net income per common share - assuming dilution (A/C) .......... $.90 $.66 5. CONTINGENT LIABILITIES With regard to the following contingent liabilities there have been no material changes since January 31, 1998. Because the Company uses lead and other hazardous substances in its manufacturing processes, it is subject to numerous federal, Canadian, Mexican, Irish, state and local laws and regulations that are designed to protect the environment and employee health and safety. These laws and regulations include requirements relating to the handling, storage, use and disposal of hazardous materials and solid wastes, recordkeeping and periodic reporting to governmental entities regarding the use of hazardous substances and disposal of hazardous wastes, monitoring and permitting of air and water emissions and monitoring and protecting workers from exposure to hazardous substances, including lead used in the Company's manufacturing processes. In the opinion of the Company, the Company complies in all material respects with these laws and regulations. 10 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands) (UNAUDITED) 5. CONTINGENT LIABILITIES (continued) Notwithstanding such compliance, if damage to persons or the environment has been or is caused by hazardous substances used, generated or disposed of in the conduct of the Company's business (or that of a predecessor to the extent the Company is not indemnified therefore), the Company may be held liable for the damage and be required to pay the cost of investigating and remedying the same, and the amount of any such liability could be material to the results of operations or financial condition. However, under the terms of the purchase agreement with Allied for the Acquisition of the Company (the "Acquisition Agreement"), Allied is obligated to indemnify the Company for any liabilities of this type resulting from conditions existing at January 28, 1986 that were not disclosed by Allied to the Company in the schedules to the Acquisition Agreement. The Company, along with numerous other parties, has been requested to provide information to the United States Environmental Protection Agency (the "EPA") in connection with investigations of the source and extent of contamination at several lead smelting facilities (the "Third Party Facilities") to which the Company had made scrap lead shipments for reclamation prior to the date of the Acquisition. As of January 16, 1989, the Company entered into an agreement with other potentially responsible parties ("PRPs") relating to remediation of a portion of one of the Third Party Facilities, the former NL Industries ("NL"), facility in Pedricktown, New Jersey (the "NL Site"), which agreement provides for their joint funding on a proportionate basis of certain remedial investigation and feasibility study activities with respect to that site. In fiscal 1993 in accordance with an EPA order, a group comprised of the Company and 30 other parties commenced work on the cleanup of a portion of the NL Site based on a specified remedial approach which is now completed. The Company did not incur costs in excess of the amount previously reserved. With regard to the remainder of the NL Site, the EPA is pursuing negotiations with NL and the other PRPs, including the Company, regarding the conduct and funding of the remedial work plan. The EPA has proposed a cost allocation plan, however, the allocation percentages between parties and the basis for allocation of cost are not defined in the plan or elsewhere. Therefore, a reliable range of the potential cost to the Company of this phase of the clean-up cannot currently be determined. Accordingly, the Company has not established any reserve for this potential exposure. 11 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands) (UNAUDITED) 5. CONTINGENT LIABILITIES (continued) The remedial investigation and feasibility study at a second Third Party Facility, the former Tonolli Incorporated facility at Nesquehoning, Pennsylvania (the "Tonolli Site"), was completed in fiscal 1993. The EPA and the PRPs are continuing to evaluate the draft remedial design work plan for the site. Based on the estimated cost of the remedial approach selected by the EPA, the Company believes that the potential cost of remedial action at the Tonolli Site is likely to range between $16,000 and $17,000. The Company's allocable share of this cost has not been finally determined, and will depend on such variables as the financial capability of various other PRPs to fund their respective allocable shares of the remedial cost. Based on currently available information, however, the Company believes that its most likely exposure with respect to the Tonolli Site will be the approximately $579 previously reserved, the majority of which is expected to be paid over the next two years. The Company expects to recover a portion of its monetary obligations for the remediation of the Tonolli site through litigation against third parties and recalcitrant PRPs. The Company has responded to requests for information from the EPA with regard to three other Third Party Facilities, one in September 1991, one (the "Chicago Site") in October 1991, and the third (the "ILCO Site") in October 1993. Of the three sites, the Company has been identified as a PRP at the ILCO and Chicago Sites only. On October 31, 1995 the Company received confirmation from the EPA that it is a de minimis PRP at the ILCO Site. In May 1998, the ILCO site was resolved with the payment of an immaterial amount, which was less than the amount previously reserved. Based on currently available information, the Company believes that the potential cost of the remediation at the Chicago Site is likely to range between $8,000 and $10,500 (based on the preliminary estimated costs of the remediation approach negotiated with the EPA). Sufficient information is not available to determine the Company's allocable share of this cost. Based on currently available information, however, the Company believes that its most likely exposure with respect to the Chicago Site will be the approximately $283 previously reserved, the majority of which is expected to be paid over the next two to five years. 12 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands) (UNAUDITED) 5. CONTINGENT LIABILITIES (continued) Allied has accepted responsibility under the Acquisition Agreement for potential liabilities relating to all Third Party Facilities other than the aforementioned Sites. Based on currently available information, management of the Company believes that the foregoing will not have a material adverse effect on the Company's business, financial condition or results of operations. 6. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information," which is effective for fiscal years beginning after December 15, 1997. This statement establishes standards for the disclosure of segment results. It requires that segments be determined using the "management approach," which means the way management organizes the segments within the enterprise for making operating decisions and assessing performance. The Company has not yet determined the impact of the implementation of SFAS No. 131. In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This statement significantly changes current financial statement disclosure requirements from those that were required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Some of the more significant effects of SFAS No. 132 are that it: (i) standardizes the disclosure requirements for pensions and other postretirement benefits and presents them in one footnote; (ii) requires that additional information be disclosed regarding changes in the benefit obligation and fair values of plan assets; (iii) eliminates certain disclosures that are no longer considered useful, including general descriptions of the plans; (iv) permits the aggregation of information about certain plans; (v) provides reduced disclosure requirements for nonpublic entities; (vi) revises disclosures about defined contribution plans; and (vii) changes disclosures relating to multi-employer plans. SFAS No. 132 does not change the existing measurement or recognition provisions of SFAS Nos. 87, 88 or 106. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. The Company has not yet determined the impact of the implementation of SFAS No. 132. In April 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires costs of start-up activities and organization costs to be charged to expense as incurred. SOP 98-5 is effective for financial statements for years beginning after December 15, 1998. The Company believes that the adoption of this SOP will not have a material effect on its financial position or results of operations. 13 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of C&D TECHNOLOGIES, INC. We have reviewed the accompanying consolidated balance sheet of C&D TECHNOLOGIES, INC. and Subsidiaries as of April 30, 1998, the related consolidated statements of income for the three months ended April 30, 1998 and 1997, the related consolidated statements of cash flows for the three months ended April 30, 1998 and 1997 and the related consolidated statements of comprehensive income for the three months ended April 30, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of January 31, 1998 and the related consolidated statements of income, stockholders' equity and cash flows for the year then ended (not presented herein); and in our report dated March 10, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of January 31, 1998, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Coopers & Lybrand L.L.P. ------------------------ COOPERS & LYBRAND L.L.P. 2400 Eleven Penn Center Philadelphia, Pennsylvania May 28, 1998 14 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales for the fiscal 1999 first quarter increased $5,563,000 or eight percent compared to the equivalent quarter in fiscal 1998. This increase was primarily due to a 23 percent increase in telecommunications-related sales partially offset by a 17 percent decrease in non-telecommunications-related power conversion sales. On a company-wide basis, fiscal 1999 first quarter telecommunications-related-sales were approximately 51 percent of total company sales versus 44 percent for the first quarter of fiscal 1998. Motive power sales for the first quarter of fiscal 1999 were down slightly compared to the same quarter of the prior year due to relatively flat volume coupled with slightly lower prices. Gross profit for the first quarter of fiscal 1999 increased $1,705,000 or nine percent to $20,688,000 from $18,983,000 in the first quarter of fiscal 1998, resulting in a gross margin of 26.2 percent versus 25.9 percent in the first quarter of the prior year. Gross margins increased primarily as a result of lower material costs. Selling, general and administrative expenses for the first quarter of fiscal 1999 increased $257,000 or three percent over the comparable period of the prior year. This increase was primarily due to higher payroll and travel related selling expenses in the first quarter of fiscal 1999, partially offset by the absence in the current quarter of charges related to the accelerated write-off of goodwill and intangible assets and the resolution of legal disputes that occurred in the first quarter of fiscal 1998. Research and development expenses were flat and remained at approximately three percent of sales for the first quarter of fiscal 1999 and fiscal 1998. Interest expense, net, for the first quarter of fiscal 1999 decreased $346,000 versus the same quarter of the prior year primarily due to significantly lower debt balances outstanding during the first quarter of fiscal 1999 and higher capitalized interest related to plant expansions. Other expense, net, for the first quarter of fiscal 1999 decreased $666,000 from the first quarter of the prior year as a result of a smaller foreign exchange loss and the absence of amortization expense associated with capitalized debt acquisition costs related to the Company's credit facility and the Development Authority of Rockdale County Industrial Revenue Bonds. As a result of the above, income before income taxes for the first quarter of fiscal 1999 increased $2,501,000 or 38 percent over the same quarter of the prior year. Net income for the current quarter rose 39 percent from the first quarter of fiscal 1998 to $5,576,000 or 93 cents per common share and 90 cents per common share - assuming dilution. 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources - ------------------------------- Net cash provided by operating activities decreased $2,597,000 or 35 percent to $4,747,000 for the first quarter of fiscal 1999 compared to $7,344,000 for the same quarter of the prior year. This decrease was primarily due to a larger increase in accounts receivable during the current first quarter; a smaller increase in accrued liabilities; and a decrease in income taxes payable versus an increase in the first quarter of the prior year. These changes resulting in lower cash flows from operations were partially offset by higher net income and less of an increase in inventory during the first quarter of fiscal 1999. Net cash used by investing activities during the first quarter of fiscal 1999 increased $2,032,000 to $4,329,000 versus the prior year's first quarter. This increase was primarily due to higher spending related to the acquisition of property, plant and equipment. Net cash provided by financing activities was $498,000 for the first quarter of fiscal 1999 compared to net cash used by financing activities of $4,959,000 in same quarter of the prior year as a result of lower cash provided by operating activities and higher capital spending during the current year's first quarter. The Company's availability under the current loan agreement is expected to be sufficient to meet its ongoing cash needs for working capital requirements, debt service, capital expenditures and possible strategic acquisitions. Capital expenditures in the first quarter of fiscal 1999 were incurred primarily to fund capacity expansion, new product development, a continuing series of cost reduction programs, normal maintenance capital, and regulatory compliance. Aggregate fiscal 1999 capital expenditures are expected to be approximately $20,000,000 for similar purposes. Readiness for Year 2000 - ----------------------- The Company has taken actions to understand the nature and extent of the work required to make its computer systems Year 2000 compliant. The Company has completed its assessment of its requirements to become Year 2000 compliant, has developed an action plan and currently has resources dedicated to carry out the Company's Year 2000 action plan which the Company expects to complete by December 31, 1998. The Company continues to evaluate the estimated future costs associated with its Year 2000 action plan but does not currently anticipate that such costs will have a material impact on the Company's results of operations or financial position. The Company has received inquires from its major customers 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) and has initiated formal communications with its significant suppliers to determine the extent to which the Company might be impacted by those third parties' failure to be Year 2000 compliant. New Accounting Pronouncements Not Yet Adopted - --------------------------------------------- In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which is effective for fiscal years beginning after December 15, 1997. This statement establishes standards for the disclosure of segment results. It requires that segments be determined using the "management approach," which means the way management organizes the segments within the enterprise for making operating decisions and assessing performance. The Company has not yet determined the impact of the implementation of SFAS No. 131. In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This statement significantly changes current financial statement disclosure requirements from those that were required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Some of the more significant effects of SFAS No. 132 are that it: (i) standardizes the disclosure requirements for pensions and other postretirement benefits and presents them in one footnote; (ii) requires that additional information be disclosed regarding changes in the benefit obligation and fair values of plan assets; (iii) eliminates certain disclosures that are no longer considered useful, including general descriptions of the plans; (iv) permits the aggregation of information about certain plans; (v) provides reduced disclosure requirements for nonpublic entities; (vi) revises disclosures about defined contribution plans; and (vii) changes disclosures relating to multi-employer plans. SFAS No. 132 does not change the existing measurement or recognition provisions of SFAS Nos. 87, 88 or 106. SFAS No. 132 is effective for fiscal years beginning after December 15, 1997. The Company has not yet determined the impact of the implementation of SFAS No. 132. In April 1998, the American Institute of Certified Public Accountants issued SOP 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires costs of start-up activities and organization costs to be charged to expense as incurred. SOP 98-5 is effective for financial statements for years beginning after December 15, 1998. The Company believes that the adoption of this SOP will not have a material effect on its financial position or results of operations. 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Forward Looking Statements - -------------------------- Certain information contained in this Quarterly Report on Form 10-Q, including, without limitation, information appearing under Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Factors that appear with the forward-looking statements, or in the Company's other Securities and Exchange Commission filings, could affect the Company's actual results and could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by the Company in this Quarterly Report on Form 10-Q. 18 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 10.1 C&D TECHNOLOGIES, INC. Incentive Compensation Plan (filed herewith). 15. Letter from Coopers & Lybrand L.L.P., independent accountants for the Company, regarding unaudited interim financial information (filed herewith). 27. Financial Data Schedule (filed herewith). (b) Reports on Form 8-K: None. 19 SIGNATURES - ------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. C&D TECHNOLOGIES, INC. June 12, 1998 BY: /s/ Alfred Weber --------------------------------- Alfred Weber Chairman, President and Chief Executive Officer June 12, 1998 BY: /s/ Stephen E. Markert, Jr. ---------------------------------- Stephen E. Markert, Jr. Vice President Finance (Principal Financial and Accounting Officer) 20 EXHIBIT INDEX 10.1 C&D TECHNOLOGIES, INC. Incentive Compensation Plan (filed herewith). 15. Letter from Coopers & Lybrand L.L.P., independent accountants for the Company regarding unaudited interim financial information (filed herewith). 27. Financial Data Schedule (filed herewith). 21 EX-10 2 C&D TECHNOLOGIES, INC. INCENTIVE COMPENSATION PLAN FOR EXECUTIVE AND KEY SALARIED EMPLOYEES (EXCLUDES SALES BONUS PROGRAM) FOR THE YEAR ENDING JANUARY 31, 1999 I. INTRODUCTION The Incentive Compensation Plan for Executives and Key Salaried Employees as adopted and amended by the Compensation Committee of the Board of Directors is designed to reward individual performance as measured against specified objectives. The Plan is also designed to recognize employees for a completely discretionary bonus based upon significant contribution. Executive and key employees who joined the company in the plan year may, with the approval of the Chairman/President, participate in the Incentive Compensation Plan on a prorated basis (based on the number of full months they are actively employed). II. ESTABLISHMENT OF OBJECTIVES Each executive and key employee shall establish at the beginning of each year, with his/her supervisor, objectives against which his/her performance for that year shall be measured. These objectives must correspond to the overall goals of the company. III. OBJECTIVES Objectives include: achieving earnings per share goals, achieving corporate cash flow goals, and other significant individual goals; all of which must be measurable. IV. ADDITIONAL CRITERIA & CONDITIONS - 60% or more of individual participants' priorities must be accomplished to earn any bonus. - It is possible for participants to receive in excess of 100% achievement of an individual goal. However, these achievements must satisfy the combined judgment of the individual's direct manager, the Chairman/President, and the Compensation Committee in the case of executive officer bonuses. In no situation can achievement of an individual goal exceed 150%. - At its sole discretion, the Board reserves the right to recognize significant issues, factors or contributions related to individual participants and to adjust all or part of any participant's bonus accordingly. The Board reserves the right to alter, amend, reduce, suspend or terminate the Incentive Plan. Only active employees (those physically performing their assigned duties) are eligible to participate in the Incentive Compensation Plan. - Employees who terminate their employment with the company, or employees who are terminated by the company for any reason whatsoever, are not eligible for incentive compensation for the fiscal year during which employment is terminated. EX-15 3 EXHIBIT 15 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 re: C&D TECHNOLOGIES, INC. and Subsidiaries Registration on Forms S-8 (Registration No. 33-31978, No. 33-71390, No. 33-86672, No. 333-17979 and No. 333-38891) and Form S-3 Registration No. 333-38893 We are aware that our report dated May 28, 1998 on our review of interim financial information of C&D TECHNOLOGIES, INC. and Subsidiaries for the period ended April 30, 1998 and included in the Company's quarterly report on Form 10-Q for the quarter then ended is incorporated by reference in the registration statements of C&D TECHNOLOGIES, INC. and Subsidiaries on Forms S-8 (Registration No. 33-31978, No. 33-71390, No. 33-86672, No. 333-17979, No. 333-38891) and Form S-3 Registration No. 333-38893. Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statement prepared or certified by us within the meaning of Sections 7 and 11 of that Act. /s/ Coopers & Lybrand L.L.P. COOPERS & LYBRAND L.L.P. 2400 Eleven Penn Center Philadelphia, Pennsylvania June 12, 1998 EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF 4/30/98 AND STATEMENT OF INCOME FOR THE PERIOD ENDED 4/30/98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1000 3-MOS JAN-31-1999 APR-30-1998 2088 0 46561 1930 42499 98144 58448 0 172293 44872 9752 0 0 66 104136 172293 78909 78909 58221 58221 2035 0 30 9065 3309 5756 0 0 0 5756 0.93 0.90
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5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF 1/31/98 AND STATEMENT OF INCOME FOR THE YEAR ENDED 1/31/98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 YEAR JAN-31-1998 JAN-31-1998 1167 0 44443 1701 40735 93400 115864 58806 166498 46058 10267 0 0 66 97239 166498 308054 308054 226880 226880 8610 0 1129 31044 11359 19685 0 0 0 19685 3.22 3.12
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5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF 1/31/97 AND STATEMENT OF INCOME FOR THE PERIOD ENDED 1/31/97 AND IS QUALIFIED IN ITS ENTIRETY BY REVERENCE TO SUCH FINANCIAL STATEMENTS. 1000 YEAR JAN-31-1997 JAN-31-1997 953 0 43096 1414 38943 89330 104205 51736 159973 43894 29351 0 0 65 74841 159973 286907 286907 219819 219819 8143 0 1396 23058 8121 14937 0 0 0 14937 2.39 2.32
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