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