SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended October 31, l995 Commission File No. 1-9389
CHARTER POWER SYSTEMS, 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.)
3043 Walton Road
Plymouth Meeting, Pennsylvania 19462
(Address of principal executive office) (Zip Code)
(610) 828-9000
(Registrant's telephone number, including area code)
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
December 11, 1995: 6,250,101
<PAGE>
CHARTER POWER SYSTEMS, INC.
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets -
October 31, 1995 and January 31, 1995 3
Consolidated Statements of Income -
Three and Nine Months Ended October 31, 1995
and 1994 5
Consolidated Statements of Cash Flows -
Nine Months Ended October 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 8
Report of Independent Accountants 12
Item 2 - Management's Discussion and Analysis 13
of Financial Condition and Results
of Operations
PART II. OTHER INFORMATION 16
SIGNATURES 17
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
October 31, January 31,
1995 1995
---- ----
ASSETS:
Current assets:
Cash and cash equivalents $ 1,259 $ 1,097
Restricted cash and cash equivalents -- 75
Accounts receivable, less allowance for
doubtful accounts of $1,545 and
$1,404, respectively 34,600 30,253
Inventories 36,443 26,869
Deferred income taxes 5,510 5,231
Other current assets 1,254 553
------- -------
Total current assets 79,066 64,078
Property, plant and equipment, net 40,980 40,059
Intangible and other assets, net 5,152 5,314
Goodwill, net 2,637 2,686
------- -------
Total assets $127,835 $112,137
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt $ 2,517 $ 3,670
Accounts payable 21,186 15,601
Accrued liabilities 15,565 13,994
Other current liabilities 2,257 3,067
------- -------
Total current liabilities 41,525 36,332
Deferred income taxes 3,741 3,552
Long-term debt 13,624 14,183
Other liabilities 7,475 6,348
------- -------
Total liabilities 66,365 60,415
------- -------
The accompanying notes are an integral part of these statements.
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(Dollars in thousands)
(Unaudited)
October 31, January 31,
1995 1995
---- ----
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value,
10,000,000 shares authorized;
6,017,491 and 5,971,041 shares
issued, respectively 60 60
Additional paid-in capital 32,597 32,053
Notes receivable from stockholders (1,656) (1,656)
Retained earnings 31,773 21,265
Treasury stock, at cost, 57,400 shares (1,304) --
------- -------
Total stockholders' equity 61,470 51,722
------- -------
Total liabilities and
stockholders' equity $127,835 $112,137
======= =======
The accompanying notes are an integral part of these statements.
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited) (Unaudited)
Three months ended Nine months ended
October 31, October 31,
1995 1994 1995 1994
----- ----- ----- -----
Net sales $61,456 $54,617 $183,614 $144,880
Cost of sales 46,712 41,724 139,754 110,659
------ ------ ------ -------
Gross profit 14,744 12,893 43,860 34,221
Selling, general and
administrative expenses 7,056 6,840 21,503 18,280
Research and development
expenses 1,564 1,443 4,604 3,768
------ ------ ------ ------
Operating income 6,124 4,610 17,753 12,173
Interest expense, net 288 374 813 964
Other expense, net 17 89 272 383
------ ------ ------ ------
Income before income
taxes 5,819 4,147 16,668 10,826
Provision for income taxes 1,923 1,396 5,667 3,897
------ ------ ------ ------
Net income $ 3,896 $ 2,751 $ 11,001 $ 6,929
====== ====== ====== ======
Net income per common and
common equivalent share $ .60 $ .44 $ 1.71 $ 1.12
====== ====== ====== ======
Weighted average common and
common equivalent shares 6,443 6,262 6,424 6,162
====== ====== ====== ======
Dividends per share $0.0275 $0.0275 $ 0.0825 $ 0.0825
====== ====== ======= ======
The accompanying notes are an integral part of these statements.
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine months ended
October 31,
1995 1994
---- ----
Cash flows provided (used) by operating activities:
Net income $11,001 $ 6,929
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 4,750 5,227
Deferred taxes (90) 72
Loss (gain) on disposal of assets 175 (225)
Stock option compensation -- 405
Changes in:
Accounts receivable (4,279) (11,702)
Inventories (9,536) (3,320)
Other current assets (425) (301)
Accounts payable 5,583 4,166
Accrued liabilities 1,714 2,175
Income taxes payable (271) (867)
Other current liabilities (815) (1,677)
Other liabilities 1,127 710
Other, net (278) 17
------ ------
Net cash provided by operating
activities 8,656 1,609
------ ------
Cash flows provided (used) by investing activities:
Acquisition of business, net -- (5,966)
Acquisition of property, plant and equipment (5,455) (5,491)
Proceeds from disposal of property,
plant and equipment -- 551
------ ------
Net cash used by investing activities (5,455) (10,906)
------ ------
Cash flows provided (used) by financing activities:
Reduction of long-term debt (3,619) (13,407)
Proceeds from new borrowings 1,907 21,414
Financing costs of long-term debt -- (456)
Issuance of shares under stock option plan 544 917
Payment of common stock dividends (657) (647)
Purchase of treasury stock (1,304) --
------ ------
The accompanying notes are an integral part of these statements.
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in thousands)
(Unaudited)
Nine months ended
October 31,
1995 1994
---- ----
Net cash (used) provided by financing
activities (3,129) 7,821
------ ------
Effect of exchange rate changes on cash 15 (10)
------ ------
Increase(decrease) in cash and cash equivalents 87 (1,486)
Cash and cash equivalents at beginning
of period 1,172 3,821
------ ------
Cash and cash equivalents at end of
period $ 1,259 $ 2,335
====== ======
SUPPLEMENTAL CASH FLOW
DISCLOSURES
Interest paid, net $ 1,078 $1,109
Income taxes paid 6,029 4,692
SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Liabilities assumed in acquisition $ -- $3,022
The accompanying notes are an integral part of these statements.
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CHARTER POWER SYSTEMS, 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, 1995. 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 October 31, 1995, the
consolidated statements of income for the three and nine months ended
October 31, 1995 and 1994 and consolidated statements of cash flows
for the nine months ended October 31, 1995 and 1994. 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:
October 31, January 31,
1995 1995
---- ----
Raw materials $13,670 $ 9,780
Work-in-progress 11,281 7,893
Finished goods 11,492 9,196
------- -------
$36,443 $26,869
======= =======
3. INCOME TAXES
A reconciliation of the provision for income taxes from the
statutory rate to the effective rate is as follows:
Nine months ended
October 31,
1995 1994
---- ----
U.S. statutory income tax 35.0% 35.0%
State tax, net of federal income
tax benefit 3.4 3.1
Reduction in valuation allowance (3.8) --
Other (0.6) (2.1)
---- ----
34.0% 36.0%
==== ====
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands)
(UNAUDITED)
4. CONTINGENT LIABILITIES
With regard to the following contingent liabilities there have
been no material changes since January 31, 1995.
Because the Company uses lead and other hazardous substances in
its manufacturing processes, it is subject to numerous federal,
Canadian, Mexican, state and local laws and regulations that are
designed to protect the environment and employee health and safety.
These laws and regulations include requirements of periodic reporting
to governmental agencies regarding the use and disposal of hazardous
substances and compliance with rigorous criteria regarding exposure to
employees and the disposal of scrap. 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 or
generated in the conduct of the Company's business, the Company may be
held liable for the damage and be required to pay the cost of
remedying the same, and the amount of any such liability might 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, with the concurrence of Allied,
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.
9 of 17
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands)
(UNAUDITED)
4. 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 is now completed. Based on currently available
information and well defined contribution levels of the other parties,
including NL Industries, the Company does not expect to incur costs in
excess of the $138 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 created 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 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
potentially responsible parties 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 three to five years.
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.
10 of 17
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CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
4. CONTINGENT LIABILITIES (continued)
Based on currently available information, the Company believes that
the potential cost of remediation at the ILCO Site is likely to range
between $54,000 and $59,000 (based on the estimated costs of the
remedial approach selected by the EPA). 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. However, on
October 31, 1995 the Company received confirmation from EPA that it is
a de minimis PRP at the ILCO Site. Based on currently available
information the Company believes that its most likely exposure with
respect to the ILCO Site is an immaterial amount which has been
previously reserved, most of which is expected to be paid over the
next three to five years.
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 the available preliminary
information, however, the Company believes that its exposure with
regard to the Chicago Site will be approximately $283, which has been
reserved for in the Company's consolidated financial statements, the
majority of which is expected to be paid over the next two to five
years.
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
financial condition or results of operations.
11 of 17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Charter Power Systems, Inc.
We have reviewed the accompanying consolidated balance sheet of
Charter Power Systems, Inc. and Subsidiaries as of October 31, 1995,
the related consolidated statements of income for the three and nine
months ended October 31, 1995 and 1994 and the related consolidated
statements of cash flows for the nine months ended October 31, 1995
and 1994. 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 state-
ments 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,
1995 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 24, 1995, 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, 1995, 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
November 21, 1995
12 of 17
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the fiscal 1996 third quarter and nine months ended
October 31, 1995 increased $6,839,000 or 13 percent and $ 38,734,000
or 27 percent, respectively, compared to the equivalent periods in
fiscal 1995. The combined sales of the Company's International Power
Systems, Inc. subsidiary ("IPS") which was formed early in fiscal 1995
to acquire certain assets of ITT PowerSystems Corporation (the "IPS
Acquisition") and the switching power supply division of Basler
Electric Company ("Basler") purchased as of January 24, 1995 rose 32
percent for the quarter and 94 percent year to date compared to the
equivalent periods in fiscal 1995. For the third quarter, sales of
standby power products were up 13 percent, and, for the nine months
ended October 31, 1995, sales of standby power products increased 20
percent due to higher sales in virtually every standby category.
Motive power sales for the quarter were relatively flat due to lower
volumes offset by higher prices while year to date sales increased 14
percent due to higher volumes and prices.
Gross profit increased $1,851,000 or 14 percent for the quarter and
$9,639,000 or 28 percent for the nine month period. Gross margin
increased to 24.0 percent from 23.6 percent for the third quarter and
to 23.9 percent from 23.6 percent for the year to date, primarily as a
result of higher sales volumes and continued improvements in operating
efficiencies partially offset by higher material costs. The Company
has instituted a price increase for the motive power business in the
fourth quarter.
Selling, general and administrative expenses for the quarter increased
3 percent for the quarter due to amortization of intangible costs
resulting from the Basler acquisition, coupled with slightly higher
sales expense related to sales volume increases. For the nine-month
period, selling, general and administrative expenses increased 18
percent due to the power supply business acquired, higher commission
and sales expense due to volume increases in the standby and motive
power businesses and costs associated with the Company's program to
maximize shareholder value. This program was completed in the first
half of fiscal 1996.
Page 13 of 17
<PAGE>
Research and development expenses increased for the quarter and nine-
month period $121,000 or 8 percent and $836,000 or 22 percent,
respectively, primarily due to the Basler Acquisition.
Interest expense, net, decreased 23 percent for the quarter and 16
percent for the nine-month period due to lower debt balances, offset
by slightly higher effective rates.
As a result of the above, income before income taxes increased by 40
percent for the quarter and by 54 percent for the nine-month period.
Net income for the quarter rose 42 percent to $3,896,000 or $0.60 per
share while for the nine-month period, net income rose 59 percent to
$11,001,000 or $1.71 per share.
The effective tax rate decreased to 34 percent from 36 percent for the
comparative nine-month period due to a reduction in the valuation
allowance related to the revaluation of the realization of the stock
option compensation deferred tax asset resulting from increases in the
price of the Company's common stock.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operating activities for the nine-month
period increased to $8,656,000 compared to $1,609,000 for the prior
year period. This increase was primarily due to higher current year
net income and higher payables partially offset by increased invento-
ries related to higher sales volumes and less of an increase in
receivables versus the prior period.
Net cash used by investing activities consisted of $5,455,000 for
acquisition of property, plant and equipment, a decrease of $5,451,000
from the prior year period which included the IPS Acquisition and
comparable property, plant and equipment acquisitions.
Net cash used by financing activities for the nine months ended
October 31, 1995 was $3,129,000 compared to net cash provided by
financing activities of $7,821,000 in the prior year period. Current
year cash used by financing activities included $1,304,000 related to
the purchase of treasury stock. The additional borrowings in the
prior year period were used primarily for the funding of the afore-
mentioned acquisition.
Page 14 of 17
<PAGE>
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 nine months
of fiscal 1996 were incurred primarily to fund new product development,
capacity expansion, a continuing series of cost reduction programs,
normal maintenance capital, and regulatory compliance. Fiscal 1996
capital expenditures are expected to be approximately $9,000,000
for similar purposes, excluding strategic acquisitions.
Page 15 of 17
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Employment Agreement dated August 15, 1995 between
Stephen Weglarz, Esq. and the Company (filed herewith).
11. Computation of per share earnings (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
16 of 17
<PAGE>
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.
CHARTER POWER SYSTEMS, INC.
December 13, 1995 BY: \s\ Alfred Weber
_________________________________
Alfred Weber
President and Chief
Executive Officer
December 13, 1995 BY: \s\ Stephen E. Markert, Jr.
_________________________________
Stephen E. Markert, Jr.
Vice President Finance and
Treasurer
Principal Financial and
Accounting Officer
17 of 17
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EXHIBIT INDEX
10.1 Employment Agreement dated August 15, 1995 between Stephen
Weglarz, Esq. and the Company.
11. Computation of per share earnings.
15. Letter from Coopers & Lybrand L.L.P., independent accountants
for the Company regarding unaudited interim financial
information.
27. Financial Data Schedule.
EXHIBIT 10.1
C&D CHARTER POWER SYSTEMS, INC.
3043 Walton Road
Plymouth Meeting, PA 19462
August 15, 1995
Stephen J. Weglarz, Esq.
753 Martingale Road
Schwenksville, PA 19473
Dear Mr. Weglarz:
C&D Charter Power Systems, Inc., a Delaware corporation
(the "Company"), agrees to employ you, and you agree to accept
such employment, under the following terms and conditions:
1. Term of Employment.
1.1 Except for earlier termination as is provided in
Section 10 below, your employment under this
Agreement shall be for a term (the "Initial Term")
commencing on August 1, 1995 (the "Effective Date")
and terminating on July 31, 1996.
1.2 This Agreement shall be automatically renewed for
successive terms of one month each, unless either
party shall have given to the other party at least
30 days' prior written notice of the termination of
this Agreement. If such 30 days' prior written
notice is given by either party, (i) the Company
shall, without any liability to you, have the right,
exercisable at any time after such notice is sent,
to elect any other person to the office or offices
in which you are then serving and to remove you from
such office or offices, but (ii) all other
obligations each of you and the Company have to the
other, including the Company's obligation to pay
your compensation and make available the medical and
dental insurance which you are entitled hereunder,
<PAGE>
August 15, 1995
Page 2
shall continue until the date your employment
terminates as specified in such notice.
2. Compensation.
2.1 You shall be compensated for all services rendered
by you under this Agreement at the rate of $120,000
per annum (such salary, as it is from time to time
adjusted, is herein referred to as the "Base
Salary"). Such Base Salary shall be payable in
periodic installments twice monthly in accordance
with the Company's payroll practices for salaried
employees. The Compensation Committee of the Board
of Directors shall review such Base Salary prior to
April 30, 1996 and each year thereafter during the
term of this Agreement, including any renewal term,
and shall make such adjustments, if any, as the
Compensation Committee shall determine; provided,
however, that no adjustment shall reduce the Base
Salary below $120,000.
2.2 If your employment hereunder shall be terminated (i)
by the Company without Cause (as defined in Section
10.3) therefor having been given to you (other than
pursuant to Sections 10.1 or 10.2), or (ii) as a
result of the non-renewal of this Agreement by the
Company upon expiration of the Initial Term or any
renewal term, then for a one year period after the
effective date of such termination the Company shall
pay you at the rate of your Base Salary in effect at
the time of such termination.
3. Duties.
3.1 During the term of your employment hereunder,
including any renewal thereof, you agree to serve as
the Vice President-Corporate Services and Corporate
Counsel or in such other capacity with duties and
<PAGE>
August 15, 1995
Page 3
responsibilities of a similar nature as those
initially undertaken by you hereunder as the
President of the Company may from time to time
determine. Your duties may be changed at any time
and from time to time hereafter, upon mutual
agreement, in a manner appropriate to the Company
for the times and circumstances for which the change
is to be made. You also agree to perform such other
services and duties consistent with the office or
offices in which you are serving as its
responsibilities as may from time to time be
prescribed by the Board of Directors, and you also
agree to serve, if elected as an officer and/or
director of the Company, and/or any of the Company's
other direct or indirect subsidiaries, in all cases
in conformity to the by-laws of each such
corporation. Unless you otherwise agree, you will
not be required to relocate from the Company's
headquarters in the Plymouth Meeting, Pennsylvania
area.
3.2 You shall devote your full employment energies,
interest, abilities, time and attention during
normal business hours (excluding the vacation
periods provided in Section 4.2 below) exclusively
to the business and affairs of the Company, its
parent corporation and subsidiaries, if any, and
shall not engage in any activity which conflicts or
interferes with the performance of duties hereunder.
3.3 You agree to cooperate with the Company, including
taking such reasonable medical examinations as may
be necessary, in the event the Company shall desire
or be required (such as pursuant to the terms of any
bank loan or any other agreement) to obtain life
insurance insuring your life.
3.4 You shall, except as otherwise provided herein, be
subject to the Company's rules, practices and
policies applicable to the Company's senior
executive employees. Without limiting the
<PAGE>
August 15, 1995
Page 4
generality of the foregoing, you shall, with respect
to the Company and its parents, subsidiaries, assets
and stockholders, act in a manner consistent with
your fiduciary responsibilities as an executive of
the Company.
4. Benefits.
4.1 You shall have the benefit of such life and medical
insurance, bonus, stock option and other similar
plans as the Company may have or may establish from
time to time, and in which you would be entitled to
participate, by reason of your position with the
Company, pursuant to the terms thereof. Also, to
the extent you have met the qualifications required,
you may participate in the Company's Savings and
Retirement plans. The foregoing, however, shall not
be construed to require the Company to establish any
such plans or to prevent the Company from modifying
or terminating any such plans, and no such action or
failure thereof shall affect this Agreement.
4.2 You shall be entitled to a vacation of four weeks
each year.
4.3 The Company will provide you with an annual physical
examination.
5. Working and Other Facilities.
During the Initial Term of this Agreement and any
renewal term thereof, you shall be furnished with
such working facilities and other services as are
suitable to your position and adequate for the
performance of your duties.
6. Expenses.
<PAGE>
August 15, 1995
Page 5
The Company will reimburse you for reasonable
expenses (consistent with Company policy), including
traveling expenses, incurred by you in connection
with the business of the Company, upon the
presentation by you of appropriate substantiation
for such expenses.
7. Restrictive Covenants.
7.1 During such time as you shall be employed by the
Company, and for a period of one year thereafter,
you shall not, without the written consent of the
Board of Directors, directly or indirectly become
associated with, render services to, invest in,
represent, advise or otherwise participate as an
officer, employee, director, stockholder, partner,
agent of or consultant for, any business which is
competitive with the business in which the Company
is engaged at the time your employment with the
Company ceases (a "Competitive Business").
7.2 During such time as you shall be employed by the
Company, and for a period of one year thereafter or
for such longer period as may be required by
applicable ethical standards, you shall not, without
the written consent of the Board of Directors,
represent any client in any matter (an "Adverse
Matter") which is adverse to (i) the Company, (ii)
any of its subsidiaries or (iii) to the extent
arising out of or related to their position with the
Company, any officers, directors or employees of the
Company or any of its subsidiaries. For purposes of
this Agreement, the term "Adverse Matter" includes,
but is not limited to, (a) judicial or
administrative proceedings and positions taken
therein, (b) transactions and other contractual
matters and (c) the provision of advisory or other
services.
<PAGE>
August 15, 1995
Page 6
7.3 Nothing herein (i) shall prevent you from investing
without limit in the securities of any company
listed on a national securities exchange or quoted
on the NASDAQ quotation system, provided that your
involvement with any such company is solely that of
a stockholder, or (ii) is intended to prevent you
from being employed during the one-year period
following the termination of your employment with
the Company referred to herein by any business other
than a Competitive Business or by any client other
than with respect to an Adverse Matter. Nothing
herein shall limit any ethical standard otherwise
applicable to you.
7.4 The parties hereto intend that the covenant
contained in this Section 7 shall be deemed a series
of separate covenants for each state, county and
city. If, in any judicial proceeding, a court shall
refuse to enforce all the separate covenants deemed
included in this Section 7, because, taken together,
they cover too extensive a geographic area, the
parties intend that those of such covenants (taken
in order of the states, counties and cities therein
which are least populous), which, if eliminated,
would permit the remaining separate covenants to be
enforced in such proceeding, shall, for the purpose
of such proceeding, be deemed eliminated from the
provisions of this Section 7.
8. Confidentiality, Non-Interference, Inventions and
Proprietary Information.
8.1 Confidentiality. In the course of your employment
by the Company hereunder and prior hereto, you will
have and have had access to confidential or
proprietary data or information of the Company. You
will not at any time divulge or communicate to any
person nor shall you direct any Company employee to
<PAGE>
August 15, 1995
Page 7
divulge or communicate to any person (other than to
a person bound by confidentiality obligations
similar to those contained herein and other than as
necessary in performing your duties hereunder) or
use to the detriment of the Company any of such data
or information. The provisions of this Section 8.1
shall survive your employment hereunder, whether by
the normal expiration thereof or otherwise. The
term "confidential or proprietary data or
information" as used in this Agreement shall mean
information not generally available to the public,
including, without limitation, personnel
information, financial information, customer lists,
supplier lists, product and tooling specifications,
trade secrets, product composition and formulae,
tools and dies, drawings and schematics,
manufacturing processes, knowhow, computer and any
other processed or collated data, computer programs,
pricing, marketing and advertising data.
8.2 Non-Interference. You agree that you will not at
any time after the termination of your employment by
the Company, for your own account or for the account
of any other person, interfere with the Company's
relationship with any of its suppliers, customers or
employees; provided that your employment by a
competitor of the Company or retainer by a client,
if not in violation of your agreements contained in
Article 7 above, and your contacting of suppliers
and customers in connection therewith, if not in
violation of Section 8.1 above or Sections 8.3 or
8.4 below, shall not constitute "interference"
hereunder.
8.3 Inventions. It is understood that you may, during
your employment, conceive or develop certain
inventions, innovations or discoveries related to
any business in which the Company may be engaged,
either solely or jointly with others. In connection
<PAGE>
August 15, 1995
Page 8
with the conception or development thereof, you
agree to disclose promptly to the Company all such
inventions, innovations and discoveries, to assign,
and hereby do assign, to the Company all of your
right, title and interest in and to said inventions,
innovations and discoveries, and to do all things
and sign all documents deemed by the Company to be
necessary or appropriate to vest in it, its
successors and assigns, all of your right, title and
interest in and to such inventions, innovations or
discoveries, and to procure for it, at the Company's
expense, patents, copyrights and/or trademarks
covering such inventions, innovations or discoveries
in the United States and its possessions and in
foreign countries, at the discretion and under the
direction of the Company. In the event the Company
is unable for any reason to obtain your signature on
such documents, you irrevocably appoint the Company
and its duly authorized officers and agents as your
agents and attorneys-in-fact to execute such
documents and to do such things with the same legal
force and effect as if executed or done by you.
8.4 Return of Property. All written materials, records
and documents made by you or coming into your
possession during your employment concerning any
products, processes or equipment, manufactured,
used, developed, investigated or considered by the
Company or otherwise concerning the business or
affairs of the Company, shall be the sole property
of the Company, and upon termination of your
employment, or upon request of the Company during
your employment, you shall promptly deliver the same
to the Company. In addition, upon termination of
your employment, or upon request of the Company
during your employment, you shall promptly deliver
the same to the Company. In addition, upon
termination of your employment, or upon request of
the Company during your employment, you will deliver
<PAGE>
August 15, 1995
Page 9
to the Company all other Company property in your
possession or under your control, including, but not
limited to, financial statements, marketing and sale
data, patent applications, drawings and other
documents, and all Company credit cards and
automobiles.
9. Equitable Relief. With respect to the covenants
contained in Articles 7 and 8 of this Agreement, you
agree that any remedy at law for any breach of said
covenants may be inadequate and that the Company shall be
entitled to specific performance or any other mode of
injunctive and/or other equitable relief to enforce its
rights hereunder or any other relief a court might award.
10. Earlier Termination. Your employment hereunder shall
terminate prior to the Initial Term (or any renewal term,
in the event of renewal) on the following terms and
conditions:
10.1 This Agreement shall terminate automatically on the
date of your death. Notwithstanding the foregoing,
if you die during the term of this Agreement, the
Company shall (i) continue to make payments to your
estate of your Base Salary as then in effect
pursuant to this Agreement for six (6) months after
your death, and (ii) pay your estate any
reimbursable expenses which otherwise would have
been paid to you to the date of your death.
10.2 This Agreement shall be terminated if you are unable
to perform your duties hereunder for a period of any
180 days in any 365 consecutive day period by reason
of physical or mental disability. Notwithstanding
the foregoing, if this Agreement is terminated
pursuant to this Section, the Company shall pay any
accrued but unpaid Base Salary through the date of
termination and any reimbursable expenses due to you
hereunder. For purposes of this Agreement "physical
<PAGE>
August 15, 1995
Page 10
or mental disability" shall mean your inability, due
to health reasons, to discharge properly your duties
of employment, supported by the opinion of a
physician satisfactory to both you and the Company.
If the parties do not agree on a physician mutually
satisfactory to both you and the Company within ten
days of written demand by one or the other, a
physician shall be selected by the president of the
Pennsylvania Medical Association, and the physician
shall, within 30 days thereafter, make a
determination as to whether disability exists and
certify the same in writing. Services of the
physician shall be paid for by the Company. You
shall fully cooperate with the examining physician
including submitting yourself to such examinations
as may be requested by the physician for the purpose
of determining whether you are disabled.
10.3 This Agreement shall terminate immediately upon the
Company's sending you written notice terminating
your employment hereunder for Cause. The Company
may terminate this Agreement for Cause, but only
after written notice specifying the Cause of such
action shall have been rendered to you by the
President of the Company. "Cause" shall mean any of
the following:
(i) Breach of this Agreement.
(ii) Refusal or inability (other than pursuant to
Sections 10.1 or 10.2) to perform duties
assigned in accordance with the terms of
this Agreement or overt and willful
disobedience of orders or directives issued
to you by the Company and within the scope
of your duties to the Company.
(iii) Willful misconduct in the performance of
your duties, functions and responsibilities.
<PAGE>
August 15, 1995
Page 11
(iv) Commission of acts which are illegal in
connection with the performance of your
duties, functions and responsibilities under
this Agreement.
(v) Commission of acts which would constitute a
felony offense during the term of this
Agreement.
(vi) Violation of Company rules and regulations
concerning conflict of interest.
(vii) Gross mismanagement of the assets of the
Company.
(viii) Gross incompetence, gross insubordination or
gross neglect in the performance of your
duties hereunder or being under the habitual
influence of alcohol while on duty or
possession, use, manufacture, distribution,
dispensation or sale of illegal drugs while
on or off duty.
(ix) Any act or omission, whether or not included
in the foregoing, that a court of competent
jurisdiction would determine to constitute
cause for termination.
If the Company terminates this Agreement for Cause
under this Section, the Company shall not be
obligated to make any further payments under this
Agreement except for amounts due at the time of such
termination.
Existence of Cause shall be conclusively determined
for all purposes hereunder by the President of the
Company. Such advice and consultation shall be
utilized as such officer regards as appropriate, and
<PAGE>
August 15, 1995
Page 12
no obligation or duty with respect to any procedure
or formality is created by this Agreement.
11. Post-Employment Benefits Coverage.
11.1 Your coverage under the benefits program provided by
the Company will cease effective on your termination
date. You will be entitled to elect continuation of
your medical and dental benefits at the same cost
the Company pays, pursuant to the provisions of the
Consolidated Omnibus Budget Reconciliation Act
(COBRA). Details with regard to COBRA continuation
coverage will be provided to you shortly after your
termination date.
11.2 Life Insurance coverage will cease upon your
termination date. You may, however, apply to
General American Life Insurance Company (or such
other insurance company as may provide group life
insurance to the Company's employees at the time)
for an individual converted life policy, with such
application and payment of the first premium
required to be accomplished within 31 days after
your termination date. Details regarding this
conversion option will be provided to you shortly
after your termination date.
11.3 Accidental Death and Dismemberment and Long Term
Disability coverages cease with your termination
date and may not be extended or converted.
12. Termination of Prior Agreements; Modification. This
Agreement constitutes the full and complete understanding
of the parties, and will, on the Effective Date,
supersede all prior agreements and understandings, oral
or written, between the parties. This Agreement may not
be modified or amended except by an instrument in writing
<PAGE>
August 15, 1995
Page 13
signed by the party against which enforcement thereof may
be sought.
13. Entire Agreement. Each party to this Agreement
acknowledges that no representations, inducements,
promises or agreements, oral or written, have been made
by either party or anyone acting on behalf of either
party, which are not embodied herein and that no other
agreement, statement or promise not contained in this
Agreement shall be valid or binding.
14. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
15. Waiver of Breach. The waiver by either party of a breach
of any provision of this Agreement shall not operate as
or be construed as a waiver of any subsequent breach.
16. Notices. All notices hereunder shall be in writing and
shall be sent by express mail or by certified or
registered mail, postage prepaid, return receipt
requested; if to you, to your residence as listed in the
Company's records; and if to the Company, to the address
set forth above with copies to the President.
17. Assignability; Binding Effect. This Agreement shall not
be assigned by you without the written consent of the
Board of Directors of the Company. This Agreement shall
be binding upon and inure to the benefit of you, your
legal representatives, heirs and distributees, and shall
be binding upon and inure to the benefit of the Company,
its successors and assigns.
<PAGE>
August 15, 1995
Page 14
18. Governing Law. All questions pertaining to the validity,
construction, execution and performance of this Agreement
shall be construed and governed in accordance with the
laws of the Commonwealth of Pennsylvania, without giving
effect to the conflicts or choice of law provisions
thereof.
19. Headings. The headings of this Agreement are intended
solely for convenience of reference and shall be given no
effect in the construction or interpretation of this
Agreement.
<PAGE>
August 15, 1995
Page 15
If this Agreement correctly sets forth our
understanding, please sign the duplicate original in the space
provided below and return it to the Company, whereupon this shall
constitute the employment agreement between you and the Company
effective and for the term as stated herein.
C&D CHARTER POWER SYSTEMS, INC.
By \s\ Alfred Weber
Alfred Weber
President
Agreed as of the date
first above written:
\s\ Stephen J. Weglarz
Stephen J. Weglarz
EXHIBIT 11
CHARTER POWER SYSTEMS, INC. AND SUBSIDIARIES
EARNINGS PER SHARE COMPUTATIONS
(Dollars and shares in thousands)
(Unaudited) (Unaudited)
Three months ended Nine Months ended
October 31, October 31,
1995 1994 1995 1994
----- ----- ----- -----
NET INCOME $3,896 $2,751 $11,001 $6,929
===== ===== ====== =====
Weighted average number of
common shares outstanding 5,955 5,942 5,967 5,889
Effect of shares issuable
under stock option plan 488 320 457 273
------ ------ ----- -----
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
(PRIMARY) 6,443 6,262 6,424 6,162
====== ====== ===== =====
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
(PRIMARY) $ .60 $ .44 $ 1.71 $ 1.12
====== ====== ===== =====
Weighted average number of
common shares outstanding 5,955 5,942 5,967 5,889
Effect of shares issuable
under stock option plan 488 372 461 315
------ ------ ------ ------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
(FULLY DILUTED) 6,443 6,314 6,428 6,204
====== ====== ====== ======
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
(FULLY DILUTED) $ .60 $ .44 $ 1.71 $ 1.12
====== ====== ===== =====
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
re: Charter Power Systems, Inc. and Subsidiaries
Registration on Forms S-8 (Registration No. 33-31978,
No. 33-71390 and No. 33-86672)
We are aware that our report dated November 21, 1995 on our
review of interim financial information of Charter Power Systems,
Inc. and Subsidiaries for the period ended October 31, 1995 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 Charter Power Systems, Inc. and Subsidiaries
on Forms S-8 (Registration No. 33-31978, No. 33-71390 and No.
33-86672). 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
December 13, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF 10/31/95 AND STATEMENT OF INCOME FOR THE PERIOD
ENDED 10/31/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> OCT-31-1995
<CASH> 1259
<SECURITIES> 0
<RECEIVABLES> 36145
<ALLOWANCES> 1545
<INVENTORY> 36443
<CURRENT-ASSETS> 79066
<PP&E> 40980
<DEPRECIATION> 0
<TOTAL-ASSETS> 127835
<CURRENT-LIABILITIES> 41525
<BONDS> 13624
<COMMON> 60
0
0
<OTHER-SE> 61410
<TOTAL-LIABILITY-AND-EQUITY> 127835
<SALES> 183614
<TOTAL-REVENUES> 183614
<CGS> 139754
<TOTAL-COSTS> 139754
<OTHER-EXPENSES> 26379
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 813
<INCOME-PRETAX> 16668
<INCOME-TAX> 5667
<INCOME-CONTINUING> 11001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11001
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.71
</TABLE>
