-----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, CrcBFu875XudhTV2FxDhUC4C5W3L0tDm6hKYZpfohQVOvbIv2xO2kPNrE7hRNbbn 7wzKjoitDoP6SHuRZPm19Q== 0000808064-99-000052.txt : 19990615 0000808064-99-000052.hdr.sgml : 19990615 ACCESSION NUMBER: 0000808064-99-000052 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990614 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: 99645315 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, 1999 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_____ Number of shares of the Registrant's Common Stock outstanding on June 4, 1999: 12,758,327 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page No. Item 1 - Financial Statements Consolidated Balance Sheets - April 30, 1999 and January 31, 1999................... 3 Consolidated Statements of Income - Three Months Ended April 30, 1999 and 1998............ 5 Consolidated Statements of Cash Flows - Three Months Ended April 30, 1999 and 1998............ 6 Consolidated Statements of Comprehensive Income Three Months Ended April 30, 1999 and 1998............ 8 Notes to Consolidated Financial Statements............. 9 Report of Independent Accountants...................... 17 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations...... 18 PART II. OTHER INFORMATION ................................... 24 SIGNATURES ................................................... 25 2 PART I. FINANCIAL INFORMATION Item 1 - Financial Statements C&D TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) April 30, January 31, 1999 1999 ---- ---- ASSETS Current assets: Cash and cash equivalents................. $ 9,930 $ 5,003 Accounts receivable, less allowance for doubtful accounts of $1,625 and $1,635, respectively................. 64,425 44,232 Inventories............................... 60,173 49,855 Deferred income taxes..................... 7,305 7,305 Other current assets...................... 960 2,318 ------- ------- Total current assets........... 142,793 108,713 Property, plant and equipment, net.............. 90,117 62,388 Intangible and other assets, net................ 4,072 4,393 Goodwill, net................................... 87,350 10,148 ------- ------- Total assets................... $324,332 $185,642 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt......... $ 8,552 $ 532 Accounts payable.......................... 33,660 23,997 Accrued liabilities....................... 23,525 17,714 Income taxes ............................. 546 - Other current liabilities................. 3,621 2,782 ------- ------- Total current liabilities...... 69,904 45,025 Deferred income taxes........................... 3,097 2,887 Long-term debt.................................. 106,590 1,750 Other liabilities............................... 15,207 12,442 ------- ------- Total liabilities.............. 194,798 62,104 ------- ------- 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, 1999 1999 ---- ---- Commitments and contingencies Stockholders' equity: Common stock, $.01 par value, 75,000,000 shares authorized; 13,467,429 and 13,368,719 shares issued, respectively ........................... 135 134 Additional paid-in capital.................. 44,585 43,429 Treasury stock, at cost, 905,102 shares .... (10,819) (10,819) Accumulated other comprehensive loss........ (319) (169) Retained earnings........................... 95,952 90,963 ------- ------- Total stockholders' equity....... 129,534 123,538 ------- ------- Total liabilities and stockholders' equity........... $324,332 $185,642 ======= ======= 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, 1999 1998 ---- ---- Net sales............................ $ 99,611 $ 78,909 Cost of sales........................ 73,072 58,221 ------- ------- Gross profit..................... 26,539 20,688 Selling, general and administrative expenses.......... 14,369 9,512 Research and development expenses......................... 2,259 2,035 ------- ------- Operating income................. 9,911 9,141 Interest expense, net................ 1,439 30 Other expense, net................... 136 46 ------- ------- Income before income taxes....... 8,336 9,065 Provision for income taxes........... 3,001 3,309 ------- ------- Net income....................... $ 5,335 $ 5,756 ======= ======= Net income per common share*......... $ .43 $ .47 ======= ======= Net income per common share - assuming dilution*............... $ .42 $ .45 ======= ======= Dividends per share*................. $ .0275 $ .01375 ======= ======= * Per share amounts have been adjusted to reflect the Company's two-for-one stock split, effected in the form of a 100% stock dividend, where appropriate (see Footnote 2). 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, 1999 1998 ---- ---- Cash flows provided (used) by operating activities: Net income ..................................... $ 5,335 $ 5,756 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............. 4,881 3,058 Deferred income taxes..................... 210 - Loss on disposal of assets................ 111 157 Changes in: Accounts receivable................. (5,696) (1,839) Inventories......................... 258 (1,723) Other current assets................ 405 (162) Accounts payable.................... 5,131 (1,597) Accrued liabilities................. 2,938 741 Income taxes payable................ 2,122 (85) Other current liabilities........... 39 (155) Other liabilities................... 790 596 Other, net................................ 114 - -------- -------- Net cash provided by operating activities........... 16,638 4,747 -------- -------- Cash flows provided (used) by investing activities: Acquisition of business, net ................... (121,465) - Acquisition of property, plant and equipment.... (3,205) (4,333) Proceeds from disposal of property, plant and equipment................................ 1 4 -------- -------- Net cash used by investing activities............... (124,669) (4,329) -------- -------- Cash flows provided (used) by financing activities: Repayment of long-term debt..................... (2,554) (578) Proceeds from new borrowings ................... 118,051 - Financing costs of long-term debt .............. (2,749) - Repayment of note receivable from stockholder... - 1,057 Proceeds from issuance of common stock, net..... 544 188 Payment of common stock dividends............... (343) (169) -------- -------- 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, 1999 1998 ---- ---- Net cash provided by financing activities......... 112,949 498 -------- -------- Effect of exchange rate changes on cash........... 9 5 -------- -------- Increase in cash and cash equivalents............. 4,927 921 Cash and cash equivalents at beginning of period...................................... 5,003 1,167 -------- -------- Cash and cash equivalents at end of period........ $ 9,930 $ 2,088 ======== ======== SCHEDULE OF NONCASH INVESTING AND FINANCIAL ACTIVITIES Acquired business Estimated fair value of assets acquired ...... $ 53,714 $ - Goodwill and identifiable intangible assets... 77,973 - Cash paid, net of cash acquired .............. (121,465) - -------- -------- Liabilities assumed .......................... $ 10,222 $ - ======== ======== Dividends declared but not paid .................. $ 346 $ 169 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, 1999 1998 ---- ---- Net income ............................ $5,335 $5,756 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustments ........ (150) 40 ----- ----- Total comprehensive income............. $5,185 $5,796 ===== ===== 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, except per share data) (UNAUDITED) 1. INTERIM STATEMENTS The accompanying interim consolidated financial statements of C&D TECHNOLOGIES, INC. (together with its operating subsidiaries, the "Company") 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, 1999. The January 31, 1999 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, 1999 and the consolidated statements of income for the three months ended April 30, 1999 and 1998 and the consolidated statements of cash flows for the three months ended April 30, 1999 and 1998 and the consolidated statements of comprehensive income for the three months ended April 30, 1999 and 1998. However, interim results of operations necessarily involve more estimates than annual results and may not be indicative of results for the full fiscal year. 2. STOCK SPLIT On July 24, 1998 the Company completed a two-for-one stock split, effected in the form of a 100% stock dividend to stockholders of record on July 10, 1998. This transaction resulted in a transfer on the Company's balance sheet of $66 to common stock from additional paid-in-capital. The accompanying financial statements, including all share and per share amounts, have been adjusted to reflect this transaction. 3. ACQUISITION Effective March 1, 1999, the Company acquired substantially all of the assets of the Specialty Battery Division of Johnson Controls, Inc. ("JCI"), (subsequently re-named the Dynasty Division by the Company) including, without limitation, certain assets of Johnson Controls Technology Company, a wholly owned subsidiary of JCI, and 100% of the ordinary shares of Johnson Controls Battery (U.K.) Limited, an indirect wholly owned subsidiary of JCI. In consideration of the assets acquired, the Company paid approximately $120,000, subject to certain adjustments as set forth in the purchase agreement. In addition, the Company assumed certain liabilities of the seller. The acquisition of an interest of the Specialty Battery Division in a joint venture in Shanghai, China, for approximately $15,000, plus the assumption of certain liabilities, is expected to be consummated in the near future, subject to certain third party consents. The joint venture manufactures, markets and distributes industrial and starting, lighting and ignition batteries. The Specialty Battery Division was engaged in the business of designing, manufacturing, marketing and distributing industrial batteries. The Company intends to continue using the assets acquired in such business. The source of the funds for the acquisition was advances under a new credit agreement consisting of a term loan in the amount of $100,000 and a revolving loan not to exceed $120,000 which includes a letter of credit facility not to exceed $30,000 and swingline loans not to exceed $10,000. 9 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 3. ACQUISITION (continued) The following unaudited pro forma financial information combines the consolidated results of operations as if the acquisition of the Specialty Battery Division (excluding the interest in the joint venture in Shanghai, China which is expected to be consummated in the near future) had occurred as of the beginning of the periods presented. Pro forma adjustments include only the effects of events directly attributed to a transaction that are factually supportable and expected to have a continuing impact. The pro forma adjustments contained in the table below include amortization of intangibles and goodwill, depreciation adjustments due to the write up of property, plant and equipment to estimated fair market value, amortization of deferred debt costs and interest expense on the acquisition debt, working capital management fees which will not continue and the related income tax effects. Three months ended April 30, 1999 1998 ---- ---- Net sales ......................... $107,359 $102,060 Net income ........................ $ 5,270 $ 4,573 Net income per common share ....... $ 0.42 $ 0.37 Net income per common share - assuming dilution ............ $ 0.41 $ 0.36 The pro forma financial information does not necessarily reflect the operating results that would have occurred had the acquisition been consummated as of the above dates, nor is such information indicative of future operating results. In addition, the pro forma financial results contain estimates since the acquired business did not maintain information on a period comparable with the Company's fiscal year-end. 4. INVENTORIES Inventories consisted of the following: April 30, January 31, 1999 1999 ---- ---- Raw materials ........................... $21,670 $20,013 Work-in-progress ........................ 12,546 10,785 Finished goods .......................... 25,957 19,057 ------ ------ $60,173 $49,855 ====== ====== 10 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 5. 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, 1999 1998 ---- ---- U.S. statutory income tax ...................... 35.0% 35.0% State tax, net of federal income tax benefit.... 3.2 3.5 Foreign sales corporation ...................... (0.3) (1.1) Tax effect of foreign operations ............... (1.3) (0.9) Research and development credit ................ (0.8) - Other........................................... 0.2 - ---- ---- 36.0% 36.5% ==== ==== 6. NET INCOME PER COMMON SHARE Net income per common share for the three months ended April 30, 1999 and 1998 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. (Unaudited) Three months ended April 30, 1999 1998* ---- ---- Net income (A).................... $5,335 $5,756 Weighted average shares of common stock outstanding (B)................ 12,489,862 12,329,846 Assumed conversion of stock options, net of shares assumed reacquired............. 337,063 485,676 ------- ------- Weighted average common shares - assuming dilution (C)................... 12,826,925 12,815,522 Net income per common share (A/B).................... $0.43 $0.47 Net income per common share - assuming dilution (A/C)................. $0.42 $0.45 * Restated to reflect the Company's two-for-one stock split, effected in the form of a 100% stock dividend, where appropriate. 11 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 7. CONTINGENT LIABILITIES With regard to the following contingent liabilities there have been no material changes since January 31, 1999. Because the Company uses lead and other hazardous substances in its manufacturing processes, it is subject to numerous international, federal, 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. 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 Corporation ("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 provided for their joint funding on a proportionate basis of certain remedial investigation and feasibility study activities with respect to that site. 12 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 7. CONTINGENT LIABILITIES (continued) 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 was completed during fiscal 1999. 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. 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 Company and the PRPs initiated remedial action at the site in 1998 and expect to complete the majority of the action by the end of 1999. 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 during 1999. 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 or state environmental agencies with regard to four other Third Party Facilities, one in September 1991, one (the "Chicago Site") in October 1991, one (the "ILCO Site") in October 1993, and the fourth (the "M&J Site") in March 1999. Of the four sites, the Company has been identified as a PRP at the ILCO, Chicago, and M&J 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 a 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 13 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 7. CONTINGENT LIABILITIES (continued) 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. Sufficient information is not yet available for the M&J site to estimate the Company's allocable share of liability. However, based on the information currently available, the Company's liability exposure at this site appears to be limited and is not expected to have a material adverse effect on the Company. Allied has accepted responsibility under the Acquisition Agreement for potential liabilities relating to all Third Party Facilities other than the aforementioned Sites. The Company is also aware of the existence of potential contamination at two of its properties which may require expenditures for further investigation and remediation. At the Company's Huguenot, New York facility, fluoride contamination in an inactive lagoon exceeding the state's groundwater standards, which existed prior to the Company's acquisition of the site, has resulted in the site being listed on the registry of inactive hazardous waste disposal sites maintained by the New York State Department of Environmental Conservation. The prior owner of the site ultimately may bear some, as yet undetermined, share of the costs associated therewith. The Company's Conyers, Georgia facility is listed on the Georgia State Hazardous Sites Inventory. Soil at the site, which was likely contaminated from a leaking underground acid neutralization tank and possibly storm water runoff, has been excavated and disposed. A hydrogeologic study was undertaken to assess the impact to groundwater. That study did not reveal any groundwater impact, and assessment and remediation of off-site contamination has been completed and the full remediation report was submitted to the state on February 22, 1999. The state environmental agency may request further information and additional investigation or remediation may be necessary before the site may be removed from its Hazardous Sites Inventory. The Company, together with JCI, is conducting an assessment and remediation of contamination at the newly acquired Dynasty Division facility in Milwaukee, Wisconsin. The majority of this project is expected to be completed by the end of fiscal 2000. Under the purchase agreement with JCI, the Company is responsible for (i) one-half of the cost of the assessment and remediation, with a cap of $1,750, (ii) any environmental liabilities at the facility which are not remediated as part of the current project and (iii) environmental liabilities for claims made after the fifth anniversary of the closing that arise from migration from a pre-closing condition at the facility to locations other than the facility, but specifically excluding liabilities relating to pre-closing offsite disposal. JCI has retained all other environmental liabilities. Based on currently available information, management of the Company believes that the foregoing will not have a material adverse effect on Company's business, financial condition or results of operations. 14 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 8. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes new procedures for accounting for derivatives and hedging activities and supersedes and amends a number of existing standards. In May 1999, the FASB delayed the effective date of this statement by one year to fiscal years beginning after June 15, 2000. The Company currently uses derivatives such as interest rate swap agreements, currency swaps and currency forwards to effectively fix the interest rate on a portion of the Company's floating rate debt and the exchange rate on a portion of the Company's foreign assets, liabilities and cash flows. Under current accounting standards, no gain or loss is recognized on changes in the fair value of these derivatives. Under this statement, gains or losses will be recognized based on changes in the fair value of the derivatives which generally occur as a result of changes in interest rates and foreign currency exchange rates. The Company is currently evaluating the financial impact of adoption of this statement. The Company believes that the adoption of SFAS No. 133 will not have a material effect on its financial position or results of operations. 9. RESTRUCTURING CHARGE During the first quarter of fiscal 2000, the Company recorded a pre-tax charge of $1,627, or $.08 per share after-tax, primarily relating to the restructuring of the Power Electronics Division. The restructuring includes the closing of the Company's Costa Mesa, California power supply production facility. These production activities will be transferred to the Company's existing facilities in Tucson, Arizona and Nogales, Mexico. $1,251 of this pre-tax charge is included in selling, general and administrative expenses with the remaining $376 included in cost of sales in the accompanying consolidated statement of income for the three months ended April 30, 1999. The $1,627 restructuring charge relates to severance, inventory and property, plant and equipment write downs, and other related costs. Of this amount $376 is included as a reduction of inventory and the remainder is included in accrued liabilities as of April 30, 1999. 15 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (Dollars in thousands, except per share data) (UNAUDITED) 10. OPERATIONS BY INDUSTRY SEGMENT The Company has identified the following four reportable business segments: The Powercom Division manufactures and markets integrated reserve power systems and components for the standby power market which includes telecommunications, uninterruptible power supplies and utilities and controls. Integrated reserve power systems monitor and regulate electric power flow and provide backup power in the event of a primary power loss or interruption. The Powercom Division also produces the individual components of these systems, including power rectifiers, system monitors, power boards, chargers and reserve batteries. The Dynasty Division manufactures and markets industrial batteries primarily for the uninterruptible power supply, telecommunications and broadband cable markets. The Motive Power Division manufactures complete systems and individual components (including power electronics and batteries) to power, monitor, charge and test the batteries used in electric industrial vehicles, including fork-lift trucks, automated guided vehicles and airline ground support equipment. These products are marketed to end users in a broad array of industries, dealers of fork-lift trucks and other material handling vehicles, and, to a lesser extent, original equipment manufacturers ("OEMs"). The Power Electronics Division manufactures and markets custom, standard and modified standard electronic power supply systems for large OEMs of telecommunications equipment, office products, computers and workstations. The Power Electronics Division also manufactures cellular phone battery chargers. Summarized financial information related to the Company's business segments for the three months ended April 30, 1999 and 1998 is shown below:
Motive Power Powercom Dynasty Power Electronics Division Division Division Division Consolidated -------- -------- -------- ----------- ------------ Three months ended April 30, 1999: Net sales.................................. $49,868 $17,376 $18,977 $13,390 $99,611 Operating income........................... $8,343 $3,162 $788 $(2,382) $9,911 Three months ended April 30, 1998: Net sales.................................. $40,468 $ - $17,195 $21,246 $78,909 Operating income........................... $6,047 $ - $1,031 $2,063 $9,141
16 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 ("the Company") as of April 30, 1999 and the related consolidated statements of income and comprehensive income for each of the three-month periods ended April 30, 1999 and 1998, and the related consolidated statements of cash flows for the three-month periods ended April 30, 1999 and 1998. 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 interim financial statements for them to be in conformity with generally accepted accounting principles. We previously audited in accordance with generally accepted auditing standards the consolidated balance sheet as of January 31, 1999 and the related consolidated statements of income, stockholders' equity, cash flows and comprehensive income for the year then ended (not presented herein), and in our report dated March 8, 1999 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, 1999, is fairly presented in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ PricewaterhouseCoopers LLP - ------------------------------ PRICEWATERHOUSECOOPERS LLP Philadelphia, Pennsylvania May 27, 1999 17 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Effective March 1, 1999, C&D TECHNOLOGIES, INC. (together with its operating subsidiaries, "we", "our" or "C&D") purchased substantially all of the assets of the Specialty Battery Division of Johnson Controls, Inc. ("JCI"), (subsequently re-named the Dynasty Division by C&D), a designer, manufacturer, marketer and distributor of industrial batteries based in Milwaukee, Wisconsin. These assets included all of the ordinary shares of Johnson Controls Battery (U.K.) Limited, an indirect wholly owned subsidiary of JCI. In addition, we expect to consummate the acquisition of an interest of the Specialty Battery Division in a joint venture in Shanghai, China in the near future, subject to certain third party consents. The joint venture manufactures, markets and distributes industrial and starting, lighting and ignition batteries. Net sales for the fiscal 2000 first quarter increased $20,702,000 or 26 percent compared to the equivalent quarter of the prior year. This increase was primarily the result of $17,376,000 of net sales recorded by the recently acquired Dynasty Division, coupled with higher Powercom and Motive Power Divisional net sales, up $9,400,000 and $1,782,000, respectively, partially offset by a $7,856,000 decrease in net sales by the Power Electronics Division. The Powercom net sales increase of 23 percent in the first quarter of fiscal 2000 over the same quarter of the prior year was mainly due to higher sales to the telecommunications markets. Power Electronics net sales decreased 37 percent during the first quarter of fiscal 2000 versus the comparable period of the prior year, primarily as a result of lower sales of cellular phone battery chargers to the telecommunications market, as well as lower sales to non-telecommunications related markets. The Company expects the lower sales volumes of cellular phone battery chargers to continue at least into the third quarter of fiscal 2000. Gross profit for the first quarter of fiscal 2000 increased $5,851,000 or 28 percent to $26,539,000 from $20,688,000 in the fist quarter of fiscal 1999, resulting in a gross margin of 26.6 percent versus 26.2 percent in the first quarter of the prior year. The increase in gross profit was primarily due to the gross profit generated by the Dynasty Division as well as increased gross profits related to the higher sales volumes provided by the Powercom and Motive Power Divisions during the first quarter of fiscal 2000 as compared to the first quarter of the prior year. These increases in gross profits were partially offset by lower gross profit generated by the Power Electronics Division as a result of lower sales volume during the first quarter of fiscal 2000 versus the same period of the prior year. During the first quarter of fiscal 2000, we incurred a $1,627,000 pre-tax charge (or eight cents per share after-tax), primarily related to the restructuring of the Power Electronics Division. The restructuring charge included $376,000 related to inventory obsolescence that was charged to cost of sales. The balance of the restructuring charge, or $1,251,000, was charged to selling, general and administrative expenses. Selling, general and administrative expenses for the first quarter of fiscal 2000 increased $4,857,000 or 51 percent over the comparable period of the prior year. This increase was primarily due to selling, general and 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) administrative expenses (including amortization of intangibles and goodwill) related to the recent acquisition of the Dynasty Division, the aforementioned $1,251,000 restructuring charge, and higher fixed and variable selling expenses related to the Powercom and Motive Power Divisions. The increase in Motive Power Divisional fixed selling expenses during the first quarter of fiscal 2000 includes costs associated with sales branches added in the last half of fiscal 1999 which have not yet met anticipated sales levels. Research and development expenses increased $224,000 in the first quarter of fiscal 2000 versus the same quarter of the prior year primarily as a result of research and development costs incurred by the recently acquired Dynasty Division. Research and development expenses as a percent of sales decreased slightly from 2.6 percent in the first quarter of fiscal 1999 to 2.3 percent in the first quarter of fiscal 2000. Operating income increased $770,000 (after the aforementioned $1,627,000 restructuring charge) to $9,911,000 in the first quarter of fiscal 2000 compared to $9,141,000 in the first quarter of fiscal 1999 as a result of operating income generated by the recently acquired Dynasty Division, coupled with higher Powercom Divisional operating income. These increases in operating income were partially offset by lower Motive Power Divisional operating income during the first quarter of fiscal 2000 and an operating loss incurred by the Power Electronics Division in the current quarter versus operating income in the first quarter of fiscal 1999. We expect our Power Electronics Division to incur an operating loss in the second quarter of fiscal 2000. Interest expense, net, increased $1,409,000 from the first quarter of fiscal 1999 to the first quarter of fiscal 2000 due to higher debt balances outstanding used to finance the recent acquisition of the Dynasty Division. Income tax expense decreased $308,000 primarily as a result of lower income before income taxes during the first quarter of fiscal 2000 versus the same quarter of the prior year. As a result of the above, net income decreased $421,000 from the first quarter of fiscal 1999 to $5,335,000 or 43 cents per common share - basic and 42 cents per common share - assuming dilution. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities increased $11,891,000 or 250 percent to $16,638,000 for the first quarter of fiscal 2000 compared to $4,747,000 for the same quarter of the prior year. This increase was primarily due to an increase in accounts payable in the first quarter of fiscal 2000 compared to a decrease in the prior year. The increase in accounts payable during the first quarter of fiscal 2000 is mainly due to the timing of payments 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) to JCI related to services performed under a transition services agreement associated with the recent acquisition of the Dynasty Division. Also contributing to increased net cash provided by operating activities was an increase in income taxes payable during the first quarter of fiscal 2000 versus a slight decrease in the same quarter of the prior year due to timing of tax payments. In addition, net cash provided by operating activities increased as a result of a greater increase in accrued liabilities during the first quarter of fiscal 2000 versus the comparable period of the prior year, primarily due to accruals related to the aforementioned restructuring reserve and accrued interest associated with the higher debt levels. These changes resulting in higher net cash provided by operating activities, were partially offset by a larger increase in accounts receivable during the current first quarter compared to the first quarter of fiscal 1999 due to higher sales volumes. Net cash used by investing activities totaling $124,669,000 in the first quarter of fiscal 2000 includes our purchase of the Specialty Battery Division of JCI (subsequently re-named the Dynasty Division by C&D). Net cash provided by financing activities was $112,949,000 for the first quarter of fiscal 2000 versus $498,000 in the prior year's first quarter. The proceeds from new borrowings in the current year's first quarter were used primarily for the funding of the acquisition of the Dynasty Division. On March 1, 1999 we entered into a credit agreement in which the lenders named therein, and Nationsbank, N.A. as administrative agent, provided a $220,000,000 credit facility consisting of a term loan in the amount of $100,000,000 and a revolving loan not to exceed $120,000,000. The funds borrowed under this credit agreement were used to finance the acquisition of the Specialty Battery Division of JCI, to refinance existing debt and to finance working capital and certain other expenditures. Our availability under the current loan agreement is expected to be sufficient to meet our ongoing cash needs for working capital requirements, debt service, capital expenditures and possible strategic acquisitions. Capital expenditures during the first quarter of fiscal 2000 were incurred primarily to fund capacity expansion, new product development, a continuing series of cost reduction programs, normal maintenance capital, and regulatory compliance. Fiscal 2000 capital expenditures are expected to be approximately $20,000,000 for similar purposes. READINESS FOR YEAR 2000 We are taking action to ensure that our operations will not be adversely affected by potential Year 2000 computer failures and have developed a Year 2000 Readiness Plan. Our Chief Financial Officer is responsible for overseeing the execution of the plan and reports quarterly to our Board of Directors on the 20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) status of the Year 2000 Readiness Plan. The plan addresses the following four areas: o information technology systems (consisting of computer hardware and software related to our business systems as well as our engineering and test equipment); o non-information technology systems (including embedded technology such as microcontrollers, which are typically found in such things as telephone systems, security systems, fax machines, etc.); o products sold to customers; and o third party issues (including significant suppliers and customers). Our Year 2000 Readiness Plan generally includes the following phases for each of the four areas noted above: o identification and risk assessment; o development and implementation of a remediation plan; o acceptance testing; and o contingency planning for high risk critical areas. We have identified certain deficiencies related to our information technology systems and have addressed them through upgrades or other remediation. We have two main computer systems that are utilized to run our business systems. Year 2000 remediation work on our business systems that run on our computers located in Blue Bell, Pennsylvania and Tucson, Arizona have been completed and these business systems are now Year 2000 compliant. In terms of non-information technology systems, we have identified those items which may require remediation or replacement. We are in the process of addressing those items and expect to complete remediation or replacement and testing by the middle of fiscal 2000. We have completed our assessment of Year 2000 compliance with respect to our battery and electronics products that are currently being sold to customers and have concluded that all significant products are compliant. With respect to third parties, we have identified and have been contacting our significant suppliers and will shortly begin to contact our major customers to determine the extent to which we may be vulnerable to such third parties' failure to address their own Year 2000 issues. This process includes the solicitation of written responses to questionnaires and/or meetings with certain of such third parties. As a result, our assessment will be substantially dependent on information provided by third parties. We have completed this initial notification and solicitation process with our significant suppliers and have now begun the next phase of re-contacting those companies who have not responded. We believe this process will continue through the second and third quarters of fiscal 2000. Based upon our current estimates, total costs associated with our Year 2000 compliance are expected to be immaterial. The majority of these costs were incurred in fiscal 1999 and include third party consultants and programmers, 21 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) remediation of existing software, and replacement or remediation of embedded chips. Such costs do not include internal management time, which is not expected to be material to our results of operations or financial condition. We believe that our most significant risk with respect to Year 2000 issues relates to the performance and readiness status of third parties. As with all manufacturing companies, a reasonable worst case Year 2000 scenario would be the result of failures of third parties (including without limitation, governmental entities, utilities and entities with which we have no direct involvement) that negatively impact our raw material supply chain or ability to provide products to customers or the ability of customers to purchase products, or events affecting regional, national or global economies generally. The impact of these failures cannot be estimated at this time; however, we are considering contingency plans to limit, to the extent possible, the financial impact of these failures on our results of operations. Any such plans would necessarily be limited to matters which we can reasonably control. Our Year 2000 efforts are ongoing and our overall plan, as well as the consideration of contingency plans, will continue to evolve as new information becomes available. While we anticipate continuity of our business activities, that continuity will be dependent upon our ability, and the ability of third parties with whom we rely on directly, or indirectly, to be Year 2000 compliant. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes new procedures for accounting for derivatives and hedging activities and supersedes and amends a number of existing standards. In May 1999, the FASB delayed the effective date of this statement by one year to fiscal years beginning after June 15, 2000. We currently use derivatives such as interest rate swap agreements, currency swaps and currency forwards to effectively fix the interest rate on a portion of our floating rate debt and the exchange rate on a portion of our foreign assets, liabilities and cash flows. Under current accounting standards, no gain or loss is recognized on changes in the fair value of these derivatives. Under this statement, gains or losses will be recognized based on changes in the fair value of the derivatives which generally occur as a result of changes in interest rates and foreign currency exchange rates. We are currently evaluating the financial impact of adoption of this statement. We believe that the adoption of SFAS No. 133 will not have a material effect on our financial position or results of operations. 22 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 our actual results and could cause our actual results to differ materially from those expressed in any forward-looking statements made by C&D in this Quarterly Report on Form 10-Q. 23 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 10.1 Lease Agreement dated February 15, 1994 by and between Sequatchie Associates, Incorporated and C&D Charter Power Systems, Inc. (which has since been merged into C&D) (filed herewith). 10.2 C&D TECHNOLOGIES, INC. Incentive Compensation Plan (filed here- with). 15. Letter from PricewaterhouseCoopers LLP, independent accountants for C&D, regarding unaudited interim financial information (filed herewith). 27. Financial Data Schedule (filed herewith). (b) Reports on Form 8-K: C&D has filed with the Securities and Exchange Commission during the quarter ended April 30, 1999 a Current Report on Form 8-K dated March 1, 1999 (as amended by a Form 8-K/A filed May 14, 1999) reporting under Item 2 that C&D had acquired substantially all of the assets of the Specialty Battery Division of JCI, including, without limitation, certain assets of Johnson Controls Technology Company, a wholly owned subsidiary of JCI, and 100% of the ordinary shares of Johnson Controls Battery (U.K.) Limited, an indirect wholly owned subsidiary of JCI. The acquisition of an interest of the Specialty Battery Division in a joint venture in Shanghai, China, is expected to be consummated in the near future, subject to certain third party consents. Additionally, we reported under Item 5 a credit agreement entered into among C&D, the lenders named therein and NationsBank, N.A. as administrative agent. The 8-K/A filed May 14, 1999 contains historical financial statements and pro forma financial information of the acquired business, including the joint venture in Shanghai, China. 24 SIGNATURES - ------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. C&D TECHNOLOGIES, INC. June 11, 1999 BY: /s/ Wade H. Roberts, Jr. --------------------------------- Wade H. Roberts, Jr. President, Chief Executive Officer and Director (Principal Executive Officer) June 11, 1999 BY: /s/ Stephen E. Markert, Jr. ---------------------------------- Stephen E. Markert, Jr. Vice President Finance (Principal Financial and Accounting Officer) 25 EXHIBIT INDEX 10.1 Lease Agreement dated February 15, 1994 by and between Sequatchie Associates, Incorporated and C&D Charter Power Systems, Inc. (which has since been merged into C&D). 10.2 C&D TECHNOLOGIES, INC. Incentive Compensation Plan. 15. Letter from PricewaterhouseCoopers LLP, independent accountants for C&D, regarding unaudited interim financial information. 27. Financial Data Schedule. 26 EX-10.1 2 EXHIBIT 10.1 L E A S E --------- THIS AGREEMENT, made this 15th day of February, 1994, by and between SEQUATCHIE ASSOCIATES, INCORPORATED, hereinafter referred to as "Lessor", and C&D CHARTER POWER SYSTEMS, INCORPORATED, hereinafter referred to as "Lessee". WITNESSETH THAT: The Lessor hereby leases to the Lessee the premises owned by the Lessor, situated in the Fourth Civil District of Sequatchie County, Tennessee, and described in Deed Book 39, page 304, Register's Office for said County. (A copy of said deed is attached hereto.) This lease shall be for a period of ten (10) years, beginning on the 15th day of February, 1994, and ending the 15th day of January, 2004, and Lessor covenants to keep the Lessee in quiet possession of the premises during said term. IN CONSIDERATION WHEREOF, the Lessee agrees to pay the sum of Five Thousand Five Hundred ($5,500.00) Dollars on the first day of each and every calendar month in advance, being at the rate of Sixty Six Thousand ($66,000.00) Dollars per annum, and to take good care of the premises, and return the same at the expiration of said time, in as good order as received, ordinary wear and tear and natural decay excepted, unless destroyed by lightning or other natural causes, or fire not caused by its default; and not to erect, or to permit to be erected on the premises any nuisance or commit any waste. This rental amount is for the original structure located on the premises. The Lessee also agrees to pay the sum of Two Thousand Nine Hundred Twenty Five ($2,925.00) Dollars per month for a period of ten (10) years, beginning February 15, 1994, for the 10,000 square feet building addition constructed by the Lessor in 1989. The Lessee additionally agrees to pay the sum of Five Thousand Ten ($5,010.00) Dollars per month for a period of ten (10) years, beginning February 15, 1994, for a new addition to be constructed by the Lessor, which addition is to consist of (1) a nominal 15,000 square feet addition complete with lighting, sprinklers, gas heat and landscape work, and (2) a new mezzanine office, HVCA, ceiling and restrooms in the detached "warehouse" building. A copy of the plans for said addition are attached to this Lease. The total amount of the monthly rental payments on the original building, the 1989 addition, and the new addition shall be $13,435.00 per month, making the total rent $161,220.00 per annum. The lease amount for the addition is based on the amortized cost of the project, including interest, taxes, insurance, and maintenance. Lessor agrees that any benefits realized from the Rural Electrification Authority (REA) 10 year, no interest loan (up to $400,000.00) will be passed on the C&D Charter Power Systems. The principal portion of the lease payment is to be amended to match the amount of the loan granted. The following additional stipulations are hereby declared to be a part of this lease: 1. The Lessee shall have the right to sublet the premises, upon giving thirty (30) days written notice to the Lessor. However, the parties agree that the original Lessee will be responsible for all agreements in this Lease, regardless of any agreements made to sublet the premises. 2. At the expiration of this Lease, the Lessee shall have the option to renew this Lease for a period of time and for an amount to be renogotiated by the parties. 3. It is mutually agreed that the Lessee shall have, any time during the initial lease period, the option to purchase said premises for the sum of $1,160,000.00. 4. The Lessee will pay the rents hereby reserved according to the terms of this lease, and will also pay for all utilities used by it on the demised premises, including gas, water, sewer, heat, electricity, power, and telephone services. 5. Lessor convenants that Lessor is well seized of and has good right to lease the premises, will warrant and defend its title thereto, and will indemnify Lessee against any damage and expense which Lessee may suffer by reason of any lien, encumbrance, restriction, or defect in the title to or description herein of the premises. Lessor represents and warrants that the premises may be used by Lessee during the demised term for the purpose and uses set forth in paragraph six herein below. 6. Lessee shall have the right to enter the premises as described at any time after the date of this Lease for the purposes of making investigations and surveys and to use the premises during the term for the warehousing, sale, manufacture, and assembly of C&D Charter Power Systems, Inc., products, together with such other activities as may be related or incidental thereto. 7. During the demised term, Lessor shall carry fire and lightning and extended coverage insurance on the demised premises in such amounts as are now maintained by Lessor, and Lessee shall pay the difference between the amounts of such premiums and any increase thereof resulting from the occupancy of the premises by Lessee, Lessee to be named as an insured on said policy or policies as its interest shall appear. During the demised term, Lessee shall carry a public liability and property damage insurance policy with minimum limits of $100,000.00 per person and $300,000.00 per occurrence for personal injuries and $50,000.00 for property damage. 8. Lessor agrees that if the demised premises or any part thereof are rendered untenantable by reason of fire or except for the negligent acts or omissions of Lessee or any other cause, Lessor will promptly repair or restore the premises to condition comparable to its present condition, provided however, that if the repairs or restoration have not been started and diligently pursued within thirty (30) days after being rendered untenantable, Lessee may, at its option, terminate the Lease without further obligation to Lessor, except for such rent as may then be due and payable hereunder. Lessor further agrees that if the demised premises or any part thereof are rendered untenantable for any period of time during the term hereof, the rent during such period shall abate to the same extent and in the same proportion as the untenantable portion of the demised premises bears to the whole of said premises. 9. The Lessee shall keep the demised premises in good condition during the continuance of this Lease, remove all ashes, rubbish, and refuse matter therefrom, replace or repair any electric fixtures or wiring that may be damaged or broken during the tenancy. Lessor shall be responsible for structural and exterior repair of the demised premises. 10. Lessee may at its own expense, make such alterations, additions, and changes to the premises as it may deem necessary or expedient in the operation of the premises, including the installation of a loading dock and interior partitioning. All improvements, equipment, trade fixtures, and other property constructed, installed, or placed upon the premises by Lessee or acquired by Lessee, at any time during the demised term shall be and remain Lessee's property, and Lessee shall have the right to remove any or all of the same from the premises at any time during this Lease, repairing at its own expense any damage caused by such removal. Any improvements, equipment, trade fixtures, or other property not removed upon termination of this lease or within ten (10) days thereafter, shall be deemed to have been abandoned by Lessee and shall become the property of Lessor, and Lessee shall not be required to remove the same from the premises. Upon the termination of this lease, the Lessee shall deliver up the said premises to the Lessor in as good order and repair as the same now are, reasonable wear and tear and damage by fire, casualty, or resulting from acts or omissions of Lessor excepted. 11. If Lessee is prevented from conducting its business or if Lessee's operations for the purposes set forth in Paragraph Six hereof are impaired as a result of zoning laws, ordinances, or regulations, or of taking for a public or quasi-public use by condemnation proceeding or otherwise, Lessee may terminate this Lease by giving Lessor at least thirty (30) days notice without further liability to Lessor except for rent prorated to the date of termination. Neither the existence nor Lessee's exercise of any right under this Lease, nor any abatement of rent, shall waive, limit, or affect in way way Lessee's rights, then accrued or thereafter to accrue, in any proceeding, settlement, or award for condemnation or for damage resulting from any other of the events specified in this article. 12. Lessee agrees to comply with local, state, and federal statutes, ordinances, and regulations pertaining to Lessee's use of the demised premises and save the Lessor harmless from penalties, fines, costs or damages resulting from failure to do so. The failure to comply with existing zoning ordinances and regulations with respect to the Lessee's use of the premises as set forth in Paragraph Six shall not be deemed a default or breach of this Lease. 13. If Lessee fails to pay any installment of rent when due or within five (5) days thereafter and fails to remedy the deficiency, or defaults in its performance of any other obligation under this Lease, and fails to make remedy within fifteen (15) days following receipt of notice thereof from Lessor, then in any of these events Lessor may terminate this Lease without prejudice to Lessee's rights under paragraph Ten. However, the Lessee will be liable for the total rental amount for the balance of the ten (10) year lease period as set out in Paragraph 20 hereinafter. 14. Lessor agrees to pay all property taxes assessed on the premises during Lease period. 15. All notices required hereunder shall be by certified or registered mail and shall be deemed to have been received by the addressee upon deposit in the U.S. Mail, postage prepaid, and addressed to the party at the following addresses or such other addresses as such party may have substituted therefor by proper notice to the other: (A) To Lessor at Sequatchie Associates, Inc., 222 Ridge Road, Dunlap, Tennessee 37327; and (B) To Lessee at C&D Charter Power Systems, Inc., Route 1, Box 535-D, Dunlap, Tennessee 37327. 16. This lease shall inure to the benefit of and be binding upon the heirs, executors, administrators, successors, and assigns of the parties hereto. 17. It is agreed that if there shall be more than one (1) Lessor or Lessee they shall be bound jointly and severally by the terms, covenants, and agreements herein, and the term "Lessor" or "Lessee" shall be deemed and taken to include each and every person or party named as Lessor or Lessee herein, be the same one or more. In the event there by more than one Lessee, notice to one of such Lessees of any act or agreement herein required shall be deemed notice to all Lessees. It is understood that the masculine herein shall be deemed to include wherever necessary the feminine. 18. Lessor warrants that the demised premises shall be in good condition and repair at the commencement of the term of this lease agreement. 19. This lease shall replace any prior leases and supersedes any and all other leases, written or oral, expressed or implied, which may presently exist between the parties hereto or any other agreements or extensions of any Lease, and can be amended only by written document signed by Lessor and Lessee. 20. The parties agree that the term of this Lease is ten (10) years, and should the Lessee terminate the Lease prior to the expiration of said ten (10) year period, the Lessee will be responsible for the monthly rental amount for the balance of the ten year period. 21. The parties agree that if, without fault, either Lessor or Lessee is made a party to any litigation instituted by or against the other, the other will indemnify the faultless one against all loss, liability, and expense, including reasonable attorney's fees and court costs incurred in connection with such litigation. 22. This lease will be governed by the laws of the State of Tennessee, and will be construed and interpreted according to these laws without regard to any conflict or choice of law provisions therein. IN WITNESS WHEREOF, the said parties have hereunto set their hands on the day and year first above written. ATTEST: SEQUATCHIE ASSOCIATES, INC. /s/ Robert S. Dunkin III BY: /s/ A. Weber, President & CEO - ---------------------------- ------------------------------- C&D CHARTER POWER SYSTEMS, INC. /s/ Naomi M. Barker /s/ Flavius A. Barker, Pres. - ---------------------------- -------------------------------- EX-10.2 3 Exhibit 10.2 C&D TECHNOLOGIES, INC. INCENTIVE COMPENSATION PLAN FOR EXECUTIVE AND KEY SALARIED EMPLOYEES (Excludes Sales Compensation Program) FOR THE YEAR ENDING JANUARY 31, 2000 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 President/CEO, 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 judgement of the individual's direct manager, the President/CEO, 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. EXHIBIT #1 PAGE 1 of 2 C&D TECHNOLOGIES, INC. BONUS OBJECTIVES YEAR ENDING JANUARY 31, 2000 1. ACHIEVE DILUTED EARNINGS PER SHARE Earnings Per Share % of Bonus Earned ------------------ ----------------- 2.14 0% 2.15 50% 2.20 60% 2.25 70% 2.30 80% 2.35 90% - ------------------------------------------------------------------------------ Goal 2.40 100% - ------------------------------------------------------------------------------ 2.41 102% 2.43 106% Increased by 2% 2.45 for each .01 increase 110% in diluted EPS 2.50 from 2.15 to 2.65 120% 2.53 126% 2.55 130% 2.60 140% 2.65 (or more) 150% Maximum - ------------------------------------------------------------------------------ EXHIBIT #1 2 OF 2 C&D TECHNOLOGIES, INC. BONUS OBJECTIVES YEAR ENDING JANUARY 31, 2000 NOTE:In accordance with Section IV of the Incentive Compensation Plan, special bonuses may be granted to individuals to recognize significant contributions. If the company completes any acquisitions, those specific individuals who have made a major contribtuion to the closing and implementation or integration of such acquistions may be considered for an additional bonus amount based on their specific contributions as deemed appropriate for recommendation by the President and CEO. EX-15 4 EXHIBIT 15 June 11, 1999 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, No. 333-38891, and No. 333-59177) and on Form S-3 (registration No. 333-38893) We are aware that our report dated May 27, 1999 on our review of interim financial information of C&D TECHNOLOGIES, INC. and Subsidiaries (the "Company") for the period ended April 30, 1999 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 No. 333-59177) and on Form S-3 (Registration No. 333-38893). Very truly yours, /s/ PRICEWATERHOUSECOOPERS LLP - ------------------------------ PricewaterhouseCoopers LLP EX-27 5
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF 4/30/99 AND STATEMENT OF INCOME FOR THE PERIOD ENDED 4/30/99 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-31-2000 APR-30-1999 9930 0 66050 1625 60173 142793 90117 0 324332 69904 106590 0 0 135 129399 324332 99611 99611 73072 73072 2259 0 1439 8336 3001 5335 0 0 0 5335 .43 .42
-----END PRIVACY-ENHANCED MESSAGE-----