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 July 31, 2000
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 September 6,
2000: 26,182,634
<PAGE>
C&D TECHNOLOGIES, INC.
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets -
July 31, 2000 and January 31, 2000.................... 3
Consolidated Statements of Income - Three and
Six Months Ended July 31, 2000 and 1999............... 5
Consolidated Statements of Cash Flows -
Six Months Ended July 31, 2000 and 1999............... 6
Consolidated Statements of Comprehensive Income -
Three and Six Months Ended July 31, 2000 and 1999..... 8
Notes to Consolidated Financial Statements............. 9
Report of Independent Accountants...................... 18
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations...... 19
PART II. OTHER INFORMATION.................................... 26
SIGNATURES.................................................... 27
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
July 31, January 31,
2000 2000
---- ----
ASSETS
Current assets:
Cash and cash equivalents................. $ 5,904 $ 7,121
Accounts receivable, less allowance for
doubtful accounts of $3,686 and
$3,080, respectively................. 82,452 76,161
Inventories............................... 65,426 60,965
Deferred income taxes..................... 10,158 10,158
Other current assets...................... 2,841 1,256
------- -------
Total current assets........... 166,781 155,661
Property, plant and equipment, net.............. 108,350 100,813
Deferred income taxes........................... 987 803
Intangible and other assets, net................ 21,701 22,692
Goodwill, net................................... 72,229 74,146
------- -------
Total assets................... $370,048 $354,115
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt........................... $ 17,832 $ 20,393
Accounts payable.......................... 35,597 36,680
Accrued liabilities....................... 32,065 26,996
Income taxes.............................. - 2,018
Other current liabilities................. 5,052 4,495
------- -------
Total current liabilities...... 90,546 90,582
Long-term debt.................................. 66,742 76,459
Other liabilities............................... 21,005 20,663
------- -------
Total liabilities.............. 178,293 187,704
------- -------
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)
July 31, January 31,
2000 2000
---- ----
Commitments and contingencies
Minority interest................................. 5,176 4,345
Stockholders' equity:
Common stock, $.01 par value, 75,000,000
shares authorized; 28,093,338 and
27,867,480 shares issued,
respectively*........................... 281 279
Additional paid-in capital*................. 58,111 53,829
Treasury stock, at cost, 1,885,204 and
1,810,204 shares, respectively*......... (13,670) (10,819)
Accumulated other comprehensive loss........ (1,260) (617)
Retained earnings........................... 143,117 119,394
------- -------
Total stockholders' equity....... 186,579 162,066
------- -------
Total liabilities and
stockholders' equity........... $370,048 $354,115
======= =======
* Adjusted to reflect the Company's June 16, 2000 two-for-one stock split,
effected in the form of a 100% stock dividend.
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)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Three months ended Six months ended
July 31, July 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales............................ $146,562 $111,819 $280,044 $211,430
Cost of sales........................ 103,427 82,126 197,794 155,198
------- ------- ------- -------
Gross profit..................... 43,135 29,693 82,250 56,232
Selling, general and
administrative expenses.......... 16,875 14,450 33,252 28,819
Research and development
expenses......................... 2,525 2,227 5,008 4,486
------- ------- ------- -------
Operating income................. 23,735 13,016 43,990 22,927
Interest expense, net................ 1,613 1,936 3,464 3,375
Other(income)expense, net............ (165) 72 150 208
------- ------- ------- -------
Income before income taxes and
minority interest............. 22,287 11,008 40,376 19,344
Provision for income taxes........... 8,336 3,963 15,101 6,964
------- ------- ------- -------
Net income before minority
interest...................... $ 13,951 $ 7,045 $ 25,275 $ 12,380
Minority interest................ 560 - 831 -
------- ------- ------- -------
Net income....................... $ 13,391 $ 7,045 $ 24,444 $ 12,380
======= ======= ======= =======
Net income per common share*......... $ .51 $ .28 $ .93 $ .49
======= ======= ======= =======
Net income per common share -
assuming dilution*............... $ .49 $ .27 $ .90 $ .48
======= ======= ======= =======
Dividends per share*................. $ .01375 $ .01375 $ .02750 $ .02750
======= ======= ======= =======
</TABLE>
* Per share amounts have been adjusted to reflect the Company's June 16, 2000
two-for-one stock split, effected in the form of a 100% stock dividend.
The accompanying notes are an integral part of these statements.
5
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six months ended
July 31,
2000 1999
---- ----
Cash flows provided (used) by operating activities:
Net income...................................... $ 24,444 $ 12,380
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest......................... 831 -
Depreciation and amortization............. 13,211 10,398
Deferred income taxes..................... (184) 423
Loss on disposal of assets................ 573 160
Changes in:
Accounts receivable................. (6,848) (11,297)
Inventories......................... (4,796) 872
Other current assets................ 390 130
Accounts payable.................... (1,550) 5,103
Accrued liabilities................. 5,609 2,980
Income taxes payable................ (2,117) (561)
Other current liabilities........... 557 104
Other liabilities................... 343 1,968
Other, net................................ 523 293
-------- --------
Net cash provided by operating activities........... 30,986 22,953
-------- --------
Cash flows provided (used) by investing activities:
Acquisition of business, net.................... - (121,465)
Acquisition of property, plant and equipment.... (18,436) (6,455)
Proceeds from disposal of property, plant
and equipment................................ 149 22
-------- --------
Net cash used by investing activities............... (18,287) (127,898)
-------- --------
Cash flows provided (used) by financing activities:
Repayment of debt............................... (16,317) (5,116)
Proceeds from new borrowings.................... 3,700 110,253
Financing costs of long-term debt............... - (2,749)
Proceeds from issuance of common stock, net..... 2,227 2,834
Purchase of treasury stock...................... (2,306) -
Payment of common stock dividends............... (1,081) (1,040)
-------- --------
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)
Six months ended
July 31,
2000 1999
---- ----
Net cash (used) provided by
financing activities........................... (13,777) 104,182
-------- --------
Effect of exchange rate changes on cash........... (139) (15)
-------- --------
Decrease in cash and cash equivalents............. (1,217) (778)
Cash and cash equivalents at beginning
of period...................................... 7,121 5,003
-------- --------
Cash and cash equivalents at end of period........ $ 5,904 $ 4,225
======== ========
SCHEDULE OF NONCASH INVESTING AND
FINANCIAL ACTIVITIES
Acquired business
Estimated fair value of assets acquired ...... $ - $ 53,677
Goodwill...................................... - 60,612
Identifiable intangible assets................ - 17,840
Cash paid, net of cash acquired............... - (121,465)
-------- --------
Liabilities assumed........................... $ - $ 10,664
======== ========
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) (Unaudited)
Three months ended Six months ended
July 31, July 31,
2000 1999 2000 1999
---- ---- ---- ----
Net income....................... $13,391 $7,045 $24,444 $12,380
Other comprehensive loss,
net of tax:
Foreign currency
translation adjustments... (332) (77) (643) (227)
------ ----- ------ ------
Total comprehensive income....... $13,059 $6,968 $23,801 $12,153
====== ===== ====== ======
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, 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 Stockholders for the
fiscal year ended January 31, 2000. The January 31, 2000 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
July 31, 2000 and the consolidated statements of income for the three and six
months ended July 31, 2000 and 1999 and the consolidated statements of cash
flows for the six months ended July 31, 2000 and 1999 and the consolidated
statements of comprehensive income for the three and six months ended July 31,
2000 and 1999. However, interim results of operations may not be indicative of
results for the full fiscal year.
2. STOCK SPLIT
On June 16, 2000 the Company completed a two-for-one stock split, effected
in the form of a 100% stock dividend to stockholders of record on June 2, 2000.
This transaction resulted in a transfer on the Company's balance sheet of $140
to common stock from additional paid-in capital. The accompanying financial
statements and related footnotes, 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"),
including, without limitation, certain assets of Johnson Controls Technology
Company, a wholly owned subsidiary of JCI, and 100 percent 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, plus additional acquisition related costs, subject to
certain adjustments as set forth in the purchase agreement. In addition, the
Company assumed certain liabilities of the seller. The Specialty Battery
Division was engaged in the business of designing, manufacturing, marketing and
distributing industrial batteries. The Company continues to use the assets
acquired in such business. The source of the funds for the acquisition was
advances under a 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.
On August 2, 1999 the Company completed the acquisition of JCI's 67 percent
ownership interest in a joint venture battery business in Shanghai, China for
$15,000 in cash. The joint venture manufactures, markets and distributes
industrial batteries. The Company has continued the joint venture operations in
such business. The cash portion of the acquisition was financed by the Company's
revolving credit facility.
For reporting purposes, the acquisition of the Specialty Battery Division
and JCI's 67 percent ownership interest in the joint venture battery business in
Shanghai, China have collectively been re-named the Dynasty Division. The
Dynasty acquisition was accounted for using the purchase method of accounting.
The results of the joint venture have been consolidated in the financial
statements and related notes.
9
<PAGE>
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 (including the interest in the joint venture in Shanghai, China
which was completed on August 2, 1999) had occurred as of the beginning of the
period presented. Pro forma adjustments include only the effects of events
directly attributed to a transaction that is 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 and working capital management fees, which will not continue,
and the related income tax effects.
Six months ended July 31, 1999:
Net sales.......................... $226,540
Net income......................... $ 12,361
Net income per common share*....... $ 0.49
Net income per common share -
assuming dilution*............ $ 0.48
* Per share amounts have been adjusted to reflect the Company's June 16, 2000
two-for-one stock split, effected in the form of a 100% stock dividend.
The pro forma financial information does not necessarily reflect the
operating results that would have occurred had the acquisitions 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 businesses did not maintain information on a period comparable with
the Company's fiscal year-end.
4. INVENTORIES
Inventories consisted of the following:
July 31, January 31,
2000 2000
---- ----
Raw materials............................ $27,797 $28,522
Work-in-progress......................... 19,138 14,602
Finished goods........................... 18,491 17,841
------ ------
$65,426 $60,965
====== ======
10
<PAGE>
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:
Six months ended
July 31,
2000 1999
---- ----
U.S. statutory income tax....................... 35.0% 35.0%
State tax, net of federal income tax benefit.... 3.4 3.2
Foreign sales corporation....................... (0.3) (0.6)
Tax effect of foreign operations................ (0.1) (0.3)
Research and development credit................. (0.9) (1.6)
Other........................................... 0.3 0.3
---- ----
37.4% 36.0%
==== ====
6. NET INCOME PER COMMON SHARE
Net income per common share for the three and six months ended July 31,
2000 and 1999 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. Weighted
average common shares and common shares - assuming dilution were as follows:
Three months ended Six months ended
July 31, July 31,
2000 1999 2000 1999
---- ---- ---- ----
Weighted average shares
of common stock
outstanding*.............. 26,236,986 25,449,844 26,184,497 25,218,680
Assumed exercise of stock
options, net of shares
assumed reacquired*....... 1,177,824 553,808 963,395 613,970
---------- ---------- ---------- ----------
Weighted average common
shares - assuming
dilution*................. 27,414,810 26,003,652 27,147,892 25,832,650
========== ========== ========== ==========
* Share amounts have been adjusted to reflect the Company's June 16, 2000
two-for-one stock split, effected in the form of a 100% stock dividend,
where appropriate.
11
<PAGE>
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, 2000.
Legal:
In January 2000, the Company was sued in an action captioned PUERTO RICO
ELECTRIC POWER AUTHORITY V. C&D TECHNOLOGIES, INC., Case No. 00-1104 in the
United States District Court for the District of Puerto Rico for an alleged
breach of contract in connection with the sale of certain batteries dating back
to the mid-1990's. The Company has entered into a settlement with respect to
this claim.
Environmental:
The Company is subject to extensive and evolving environmental laws and
regulations regarding the clean-up and protection of the environment, worker
health and safety and the protection of third parties. These laws and
regulations include, but are not limited to: (i) requirements relating to the
handling, storage, use and disposal of lead, other hazardous materials used in
manufacturing processes and solid wastes; (ii) record keeping and periodic
reporting to governmental entities regarding the use of hazardous substances and
disposal of hazardous wastes; (iii) monitoring and permitting of air and water
emissions; and (iv) monitoring and protecting workers from unpermitted exposure
to hazardous substances, including lead used in our manufacturing processes.
Notwithstanding such compliance, if injury or 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 therefor), 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. In fiscal 1993 in accordance with an EPA order, a group comprised
of the Company and 30 other parties commenced work on the clean-up of a portion
of one of the Third Party Facilities, the former NL Industries facility in
Pedricktown, New Jersey (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.
12
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
7. CONTINGENT LIABILITIES (continued)
With regard to the remainder of the NL Site, the Company and four other
potentially responsible parties ("PRPs") have agreed upon a cost sharing
arrangement for the design phase of the project. A reliable range of the
potential cost to the Company for the ultimate remediation of the site cannot
currently be determined, nor have all PRPs been identified. Accordingly, the
Company has not established a 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 other PRPs initiated and completed remedial action at the site in fiscal
1999. The Company believes its only remaining liability relates to long-term
monitoring at the site, the cost of which is estimated to be an immaterial
amount for which the Company has established an adequate reserve.
The Company responded to requests for information from the EPA and the state
environmental agency with regard to another Third Party Facility, the "Chicago
Site", in October 1991. 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.
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 has
established what it believes to be an adequate reserve for all but the
remediation costs, the extent of which are not known, as a remediation plan has
not yet been approved by the State of New York.
13
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
7. CONTINGENT LIABILITIES (continued)
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. 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 is removed from
its Hazardous Sites Inventory.
The Company, together with JCI, is conducting an assessment and remediation
of contamination at our Dynasty Division facility site in Milwaukee, Wisconsin.
The majority of this project is expected to be completed in fiscal 2002. 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.
In January 1999, the Company has received notification from the EPA of
alleged violations of permit effluent and pretreatment discharge limits at its
plant in Attica, Indiana. The Company has submitted a compliance plan to the
EPA. A penalty assessment could be made, however, the amount of such assessment,
if any, has not been determined.
The Company accrues reserves for liabilities in the Company's consolidated
financial statements and periodically reevaluates the reserved amounts for these
liabilities in view of the most current information available. 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.
14
<PAGE>
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 June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137 amends
SFAS No. 133 by delaying its effective date by one year to fiscal years
beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities."
This new statement addresses a limited number of issues causing implementation
difficulties for a large number of entities getting ready to apply SFAS No. 133.
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 these statements, 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 these
statements. The Company believes that the adoption of these statements will not
have a material effect on its financial position or results of operations.
Recently, the FASB's Emerging Issue Task Force ("EITF") released Issue
00-10, "Accounting for Shipping and Handling Revenues and Costs," which requires
amounts charged to customers for shipping and handling be classified as revenue.
This EITF is applicable no later than the fourth quarter of fiscal years
beginning after December 15, 1999. Since this EITF only relates to financial
statement classification, the adoption of this EITF will not affect the
Company's financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." This SAB summarizes certain of the staff's views in applying
generally accepted accounting principles to selected revenue recognition issues.
Accordingly, guidance is provided with respect to the recognition, presentation,
and disclosure of revenue in the financial statements. Adoption of SAB No. 101,
as amended by SAB No. 101A, "Amendment: Revenue Recognition in Financial
Statements" and SAB No. 101B, "Second Amendment: Revenue Recognition in
Financial Statements" is no later than the fourth quarter of fiscal years
beginning after December 15, 1999. The Company has not yet determined the impact
of the implementation of these SABs.
9. RESTRUCTURING CHARGE
During the first quarter of fiscal 2000, the Company recorded a pre-tax
charge of $1,627, or $.04 per share after tax (as adjusted for the Company's
June 16, 2000 two-for-one stock split, effected in the form of a 100% stock
dividend), primarily relating to the restructuring of the Power Electronics
Division. Of this pre-tax charge, $1,251 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 six months ended July 31,
1999. The restructuring charge consisted of estimated costs to close the
15
<PAGE>
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
9. RESTRUCTURING CHARGE (continued)
Company's Costa Mesa, California power supply production facility as well as
contractual severance liabilities associated with the non-renewal of the
employment contracts of two of the Company's former officers. With respect to
the closing of the Costa Mesa, California production facility, the Company
implemented a restructuring plan that consisted of transferring production
primarily to its existing facility in Nogales, Mexico. Major actions of the
restructuring plan consisted of: (i) disposition of inventory; (ii) write-off of
impaired property, plant and equipment that was not transferred to other
facilities; and (iii) termination of the Power Electronics' Costa Mesa,
California work force. Restructuring activity for the six months ended July 31,
2000 and 1999 was as follows:
Balance at Balance at
January 31, Cash Provision July 31,
2000 Reductions Reduction 2000
---- ---------- --------- ----
Employee severance....... $256 $(195) $(61) -
--- ---- --- ---
Total.................... $256 $(195) $(61) -
=== ==== === ===
April Balance at
1999 Cash Non-Cash July 31,
Provision Reductions Activity 1999
--------- ---------- -------- ----
Write-off of inventory... $ 376 - $(376) -
Write-down of property,
plant and equipment.... 355 - - $355
Employee severance....... 741 $(239) - 502
Other.................... 155 (33) - 122
----- --- --- ----
Total.................... $1,627 $(272) $(376) $979
===== ==== ==== ====
The $376 inventory write-off was determined based upon identification of
inventory associated with discontinued products. This inventory was disposed of
during the second quarter of fiscal 2000. The $355 write-down of impaired
property, plant and equipment was determined based upon the estimated cost to
completely write-down the net book value of assets not transferred to other
facilities. The Company completed the disposition of the impaired property,
plant and equipment during the third quarter of fiscal 2000. Employee severance
of $741 was charged to selling, general and administrative expenses and provided
for a reduction of approximately 50 employees, consisting of production and
administrative employees related to the Power Electronics' Costa Mesa,
California facility, and two former officers of the Company. All Power
Electronics employee terminations were completed by the end of the third quarter
of fiscal 2000, with payments being made in accordance with contractual
agreements through the second quarter of fiscal 2001.
16
<PAGE>
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. 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
reserve batteries, power rectifiers, system monitors, power boards and chargers.
The Dynasty Division manufactures and markets industrial batteries
primarily for the uninterruptible power supply, broadband cable and
telecommunications markets. Major applications of these products include
corporate data center powering and computer network back up for use during power
utility outages, CATV signal powering and wireless and wireline telephone
infrastructure.
The Power Electronics Division manufactures and markets DC to DC converters
for large original equipment manufacturers ("OEMs") of telecommunications
equipment used in telecommunications and internet infrastructure applications.
The division also manufactures and markets standard and custom power supplies
used in office equipment.
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,
OEMs.
Summarized financial information related to the Company's business segments
for the three and six months ended July 31, 2000 and 1999 is shown below:
<TABLE>
<CAPTION>
Power Motive
Powercom Dynasty Electronics Power
Division Division Division Division Consolidated
-------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
Three months ended July 31, 2000:
Net sales................................. $64,872 $38,011 $24,404 $19,275 $146,562
Operating income.......................... $12,527 $8,928 $1,475 $805 $23,735
Three months ended July 31, 1999:
Net sales.................................. $53,860 $25,818 $14,629 $17,512 $111,819
Operating income (loss).................... $9,444 $3,674 $(346) $244 $13,016
Six months ended July 31, 2000:
Net sales................................. $125,275 $72,931 $44,197 $37,641 $280,044
Operating income.......................... $24,670 $16,221 $2,241 $858 $43,990
Six months ended July 31, 1999:
Net sales.................................. $103,728 $43,194 $28,019 $36,489 $211,430
Operating income (loss).................... $17,787 $6,836 $(2,728) $1,032 $22,927
</TABLE>
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
C&D Technologies, Inc.
We have reviewed the accompanying consolidated balance sheet of C&D
Technologies, Inc. and Subsidiaries ("the Company") as of July 31, 2000 and the
related consolidated statements of income and comprehensive income for each of
the three and six month periods ended July 31, 2000 and 1999, and the related
consolidated statement of cash flows for the six month periods ended July 31,
2000 and 1999. 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, 2000 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 10, 2000 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, 2000, is fairly
stated in all material respects in relation to the consolidated balance sheet
from which it has been derived.
/s/ PricewaterhouseCoopers LLP
------------------------------
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
August 22, 2000
18
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
Within the following discussion, unless otherwise stated, "quarter" and
"six-month period" refer to the second quarter of fiscal 2001 and the six months
ended July 31, 2000. All comparisons are with the corresponding periods in the
previous year, unless otherwise stated.
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"), a
designer, manufacturer, marketer and distributor of industrial batteries based
in Milwaukee, Wisconsin. These assets included certain assets of Johnson
Controls Technology Company, a wholly owned subsidiary of JCI and all of the
ordinary shares of Johnson Controls Battery (U.K.) Limited, an indirect wholly
owned subsidiary of JCI. In addition, on August 2, 1999 we completed the
acquisition of JCI's 67 percent ownership interest of a joint venture battery
business in Shanghai, China. The joint venture manufactures, markets and
distributes industrial batteries. For reporting purposes, the acquisition of the
Specialty Battery Division and JCI's 67 percent ownership interest in the joint
venture battery business in Shanghai, China have collectively been re-named the
Dynasty Division by C&D. As a result of the timing of the above acquisitions,
the six-month period ending July 31, 1999 does not include revenue or expenses
for one month of the six-month period with respect to our acquisition of the
Special Battery Division of JCI and does not include any revenue or expenses
related to our acquisition of JCI's 67 percent ownership interest in the joint
venture battery business.
Net sales increased $34,743 or 31 percent for the quarter and $68,614 or 32
percent for the six-month period. The increase in sales during the quarter was
the result of higher sales by all divisions. Sales of the Dynasty Division
increased $12,193 or 47 percent during the quarter primarily as a result of
higher sales to the UPS, telecommunications and CATV markets. A portion of the
increase in Dynasty's sales during the second quarter of fiscal 2001 was due to
sales recorded by our 67 percent ownership interest in the joint venture battery
business, which was not acquired until the third quarter of fiscal 2000. Sales
of the Powercom Division increased $11,012 or 20 percent during the quarter,
primarily due to higher sales to the telecommunications market. Power
Electronics divisional sales increased $9,775 or 67 percent during the quarter
due to higher DC to DC converter sales, partially offset by lower sales of
custom power supplies. Also contributing to the sales increase were sales by the
Motive Power Division which were up $1,763 or 10 percent. The increase in sales
during the six-month period was also the result of higher sales by all
divisions. Sales of the Dynasty Division increased $29,737 or 69 percent during
the six-month period primarily as a result of higher sales to the UPS,
telecommunications and CATV markets. A portion of this increase was due to the
recording of a full six months of sales by the Specialty Battery component of
the Dynasty Division during the six-month period ended July 31, 2000, compared
to only five months of sales in the first six months of the comparable period of
the prior year. Also contributing to the increase in Dynasty Division sales
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
(Dollars in thousands, except per share data)
during the six-month period was the recording of six months of sales related to
our 67 percent ownership interest in the joint venture battery business,
compared to no sales in the same period of the prior year. Sales of the Powercom
Division increased $21,547 or 21 percent during the six-month period, primarily
due to higher sales to the telecommunications market. Power Electronics
divisional sales increased $16,178 or 58 percent during the six-month period due
to higher DC to DC converter sales, partially offset by lower sales of custom
power supplies. Also contributing to the sales increase during the first six
months of fiscal 2001 were sales by the Motive Power Division, which were up
$1,152 or three percent.
Gross profit for the quarter increased $13,442 or 45 percent to $43,135
from $29,693 in the second quarter of the prior year, resulting in an increase
in gross margin from 26.6 percent in the second quarter of the prior year to
29.4 percent in the second quarter of the current year. Gross profit during the
quarter was higher for all divisions, primarily due to the increased sales
volumes provided by all of the divisions. Gross profit for the six-month period
increased $26,018 or 46 percent to $82,250 from $56,232 in the comparable period
of the prior year, resulting in an increase in gross margin from 26.6 percent in
the first six months of fiscal 2000 to 29.4 percent in the first six months of
the current year. Gross profit for the six-month period was higher in the
Dynasty, Powercom and Power Electronics divisions, primarily due to the
increased sales volumes provided by these divisions. This increase in gross
profit during the six-month period was partially offset by a slight decrease in
gross profit of the Motive Power Division.
Selling, general and administrative expenses for the quarter increased
$2,425 or 17 percent over the comparable quarter of the prior year. This
increase was primarily due to: (i) higher variable selling costs associated with
the increased sales volumes; (ii) higher bonus and legal accruals; and (iii)
selling, general and administrative expenses recorded during the quarter related
to our 67 percent ownership interest in the joint venture battery business which
was acquired in the third quarter of the prior year. For the six-month period,
selling, general and administrative expenses increased $4,433 or 15 percent. The
increase during the six-month period was primarily due to: (i) higher legal and
bonus accruals; (ii) higher variable selling costs associated with the increased
sales volumes; (iii) the recording of a full six months of selling, general and
administrative expenses during the six month period ended July 31, 2000 by the
Specialty Battery component of the Dynasty Division, compared to only five
months in the prior year's six-month period ended July 31, 1999; (iv) selling,
general and administrative expenses recorded during the six-month period of the
current year related to our 67 percent ownership interest in the joint venture
battery business which was acquired in the third quarter of the prior year; and
(v) the absence in the current six-month period of a restructuring charge,
primarily related to the Power Electronics Division, which was recorded in the
first six months of the prior year.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
(Dollars in thousands, except per share data)
Research and development expenses for the quarter and six-month period
remained proportional to sales as a relative percentage compared to the same
periods of the prior year at approximately two percent of sales.
Operating income for the quarter increased $10,719 or 82 percent to $23,735
as a result of higher operating income generated by all divisions, including the
Power Electronics Division, which generated operating income during the quarter,
compared to an operating loss in the second quarter of the prior year. For the
six-month period, operating income increased $21,063 or 92 percent to $43,990.
This increase was due to higher operating income generated by the Dynasty,
Powercom and Power Electronics divisions, partially offset by lower operating
income generated by the Motive Power Division. The Power Electronics Division
generated operating income during the current six-month period, compared to an
operating loss in the first six months of the prior year.
Interest expense, net, decreased $323 in the quarter primarily due to lower
debt balances outstanding, coupled with higher capitalized interest resulting
from our increased level of capital spending. For the six-month period, interest
expense, net, increased $89 primarily due to higher debt balances outstanding
due to the acquisition of the Dynasty Division on March 1, 1999, partially
offset by higher capitalized interest resulting from our increased level of
capital spending.
Income tax expense increased $4,373 for the quarter and $8,137 for the
six-month period primarily as a result of higher income before income taxes and
a higher effective tax rate. The effective tax rate consists of statutory rates
adjusted for the tax impacts of our foreign sales corporation, research and
development credits and foreign operations. The effective tax rate for the first
six months of fiscal 2001 increased to 37.4 percent from 36.0 percent in the
comparable period of the prior year, primarily as a result of less tax benefit
associated with research and development tax credits.
Minority interest of $560 for the quarter and $831 for the first six months
fiscal 2001 reflects the 33 percent ownership interest in the joint venture
battery business located in Shanghai, China that is not owned by C&D.
As a result of the above, net income increased $6,346 for the quarter to
$13,391 or 51 cents per common share - basic and 49 cents per common share -
assuming dilution. For the six-month period, net income increased $12,064 to
$24,444 or 93 cents per common share - basic and 90 cents per common share -
assuming dilution. The above per share amounts reflect our June 16, 2000
two-for-one stock split, effected in the form of a 100 percent stock dividend.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
(Dollars in thousands, except per share data)
RESTRUCTURING CHARGE
During the first quarter of fiscal 2000, we recorded a pre-tax charge of
$1,627, or $.04 per share after tax (as adjusted for our June 16, 2000
two-for-one stock split, effected in the form of a 100% stock dividend),
primarily relating to the restructuring of the Power Electronics Division. Of
this pre-tax charge, $1,251 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 six months ended July 31, 1999. The
restructuring charge consisted of estimated costs to close our Costa Mesa,
California power supply production facility as well as contractual severance
liabilities associated with the non-renewal of the employment contracts of two
of our former officers. With respect to the closing of the Costa Mesa,
California production facility, we implemented a restructuring plan that
consisted of transferring production primarily to our existing facility in
Nogales, Mexico. Major actions of the restructuring plan consisted of: (i)
disposition of inventory; (ii) write-off of impaired property, plant and
equipment that was not transferred to other facilities; and (iii) termination of
the Power Electronics' Costa Mesa, California work force. Restructuring activity
for the six months ended July 31, 2000 and 1999 was as follows:
Balance at Balance at
January 31, Cash Provision July 31,
2000 Reductions Reduction 2000
---- ---------- --------- ----
Employee severance....... $256 $(195) $(61) -
--- ---- --- ---
Total.................... $256 $(195) $(61) -
=== ==== === ===
April Balance at
1999 Cash Non-Cash July 31,
Provision Reductions Activity 1999
--------- ---------- -------- ----
Write-off of inventory... $ 376 - $(376) -
Write-down of property,
plant and equipment.... 355 - - 355
Employee severance....... 741 $(239) - 502
Other.................... 155 (33) - 122
----- ---- ---- ---
Total.................... $1,627 $(272) $(376) $979
===== ==== ==== ===
The $376 inventory write-off was determined based upon identification of
inventory associated with discontinued products. This inventory was disposed of
during the second quarter of fiscal 2000. The $355 write-down of impaired
property, plant and equipment was determined based upon the estimated cost to
completely write-down the net book value of assets not transferred to other
facilities. We completed the disposition of the impaired property, plant and
equipment during the third quarter of fiscal 2000. Employee severance of $741
was charged to selling, general and administrative expenses and provided for a
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
(Dollars in thousands, except per share data)
reduction of approximately 50 employees, consisting of production and
administrative employees related to the Power Electronics' Costa Mesa,
California facility, and two former officers of the Company. All Power
Electronics employee terminations were completed by the end of the third quarter
of fiscal 2000, with payments being made in accordance with contractual
agreements through the second quarter of fiscal 2001.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased $8,033 or 35 percent to
$30,986 for the six-month period ended July 31, 2000 compared to $22,953 for the
comparable period of the prior year. This increase in net cash provided by
operating activities was primarily due to: (i) an increase in net income and
depreciation during the six-month period; (ii) a smaller increase in accounts
receivable in first half of the current year compared to the same period of the
prior year; and (iii) a larger increase in accrued liabilities in the current
six-month period than the prior year. These changes resulting in higher net cash
provided by operating activities were partially offset by a decrease in accounts
payable during the current half year versus an increase in the comparable period
of the prior year, and an increase in inventories during the current six-month
period compared to a decrease in the prior half year.
Net cash used by investing activities totaled $18,287 in the first six
months of fiscal 2001, resulting in a decrease of $109,611 versus the same
period of the prior year, which included the acquisition of the Specialty
Battery Division of JCI.
Net cash used by financing activities was $13,777 for the first six months
of fiscal 2001 compared to net cash provided by financing activities of $104,182
in the prior year's first six months. The proceeds from new borrowings in the
prior year's first six months were used primarily for funding the acquisition of
the Specialty Battery Division of JCI. Net cash used for financing activities
during the first six months of fiscal 2001 includes $2,306 for the purchase of
treasury stock.
The availability under our 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 six months of fiscal 2001 were incurred primarily
to fund capacity expansion, new product development, cost reduction programs,
normal maintenance capital, and regulatory compliance. Fiscal 2001 capital
expenditures are expected to be approximately $50,000 for similar purposes.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
(Dollars in thousands, except per share data)
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 June 1999, the FASB issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137 amends
SFAS No. 133 by delaying its effective date by one year to fiscal years
beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities."
This new statement addresses a limited number of issues causing implementation
difficulties for a large number of entities getting ready to apply SFAS No. 133.
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 these
statements, 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 these statements. We believe that the
adoption of these statements will not have a material effect on our financial
position or results of operations.
Recently, the FASB's Emerging Issue Task Force ("EITF") released Issue
00-10, "Accounting for Shipping and Handling Revenues and Costs," which requires
amounts charged to customers for shipping and handling be classified as revenue.
This EITF is applicable no later than the fourth quarter of fiscal years
beginning after December 15, 1999. Since this EITF only relates to financial
statement classification, the adoption of this EITF will not affect our
financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." This SAB summarizes certain of the staff's views in applying
generally accepted accounting principles to selected revenue recognition issues.
Accordingly, guidance is provided with respect to the recognition, presentation,
and disclosure of revenue in the financial statements. Adoption of SAB No. 101,
as amended by SAB No. 101A, "Amendment: Revenue Recognition in Financial
Statements" and SAB No. 101B, "Second Amendment: Revenue Recognition in
Financial Statements" is no later than the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. We have not yet determined the impact of the
implementation of these SABs.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
(Dollars in thousands, except per share data)
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, also known
as the Private Securities Litigation Reform Act of 1995). Words and expressions
reflecting something other than historical fact are intended to identify
forward-looking statements, but are not the exclusive means of identifying such
statements. These statements are made on the basis of management's views and
assumptions, as of the time the statements are made, regarding future events and
business performance. There can be no assurance, however, that management's
expectations will necessarily come to pass. A number of factors could materially
affect future developments and performance. Factors that appear with the
forward-looking statements, or in the Company's other Securities and Exchange
Commission filings, 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.
25
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its annual meeting of stockholders on June 27, 2000.
(b) See Item 4 (c) below.
(c) William Harrall, III was elected as a director by a vote of 22,749,640
for and 270,120 withheld. Wade H. Roberts, Jr. was elected as a
director by a vote of 18,747,912 for and 4,271,848 withheld. Adrian A.
Basora was elected as a director by a vote of 22,745,140 for and
274,620 withheld. Peter R. Dachowski was elected as a director by a
vote of 22,743,940 for and 275,820 withheld. Kevin P. Dowd was elected
as a director by a vote of 22,749,840 for and 269,920 withheld. Pamela
S. Lewis was elected as a director by a vote of 22,744,540 for and
275,220 withheld. George MacKenzie was elected as a director by a vote
of 22,741,340 for and 278,420 withheld. John A. H. Shober was elected
as a director by a vote of 22,748,540 for and 271,220 withheld.
The proposal to amend the C&D Technologies, Inc. Amended and Restated
1998 Option Plan was ratified by a vote of 18,665,130 for and
1,068,962 against, with 77,862 abstentions.
The resolution to approve the C&D Technologies, Inc. Executive Stock
Purchase Loan Program was ratified by a vote of 18,543,928 for and
1,185,684 against, with 82,342 abstentions.
The appointment of PricewaterhouseCoopers LLP as the Company's
independent accounts for the year ending January 31, 2001 was ratified
by a vote of 22,967,392 for and 10,410 against, with 41,958
abstentions.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Second Amendment dated July 20, 2000 to our Credit Agreement
dated as of March 1, 1999 among C&D as borrower, certain
subsidiaries and affiliates of C&D as guarantor, the lenders
therein and Bank of America as administrative agent (filed
herewith).
10.2 Third Amendment dated July 24, 2000 to our Credit Agreement
dated as of March 1, 1999 among C&D as borrower, certain
subsidiaries and affiliates of C&D as guarantor, the lenders
therein and Bank of America as administrative agent (filed
herewith).
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:
On May 25, 2000, C&D filed a Form 8-K current report under Item 5 to
report that our Board of Directors had approved a two-for-one split of
C&D's Common Stock, to be effected in the form of a 100% stock
dividend. The additional shares were issued on June 16, 2000 to
stockholders of record on June 2, 2000.
26
<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.
September 13, 2000 BY: /s/ Wade H. Roberts, Jr.
---------------------------------
Wade H. Roberts, Jr.
President, Chief Executive
Officer and Director
(Principal Executive Officer)
September 13, 2000 BY: /s/ Stephen E. Markert, Jr.
----------------------------------
Stephen E. Markert, Jr.
Vice President Finance
(Principal Financial and
Accounting Officer)
27
<PAGE>
EXHIBIT INDEX
10.1 Second Amendment dated July 20, 2000 to our Credit Agreement
dated as of March 1, 1999 among C&D as borrower, certain
subsidiaries and affiliates of C&D as guarantor, the lenders
therein and Bank of America as administrative agent.
10.2 Third Amendment dated July 24, 2000 to our Credit Agreement
dated as of March 1, 1999 among C&D as borrower, certain
subsidiaries and affiliates of C&D as guarantor, the lenders
therein and Bank of America as administrative agent.
15. Letter from PricewaterhouseCoopers LLP, independent accountants
for C&D, regarding unaudited interim financial information.
27. Financial Data Schedule.
28
