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C&D News
C&D Technologies Reports Fiscal 2006 Third Quarter Financial Results and Announces Third Quarter Dividend
BLUE BELL, Pa., Dec. 12 /PRNewswire-FirstCall/ -- C&D Technologies, Inc. (NYSE: CHP), a leading global producer and marketer of electrical power storage and conversion products used in telecommunications and industrial applications, today announced financial results for the third quarter ended October 31, 2005. For the three-month period, the company's net loss was $60.0 million, or a loss of $2.36 per diluted share, on revenues of $127.0 million. Net cash provided by operating activities during the quarter was $4.1 million, and the company completed the quarter with $26.4 million of cash and $130.4 million of long-term debt.
The company also announced that its Board of Directors declared, at its recent meeting, its regular third quarter cash dividend of 1.375 cents per share, payable on January 5, 2006, to stockholders of record as of the close of business on December 21, 2005.
On a GAAP basis, the company reported an operating loss of $37.8 million. This included the following pretax special charges:
-- A non-cash charge for the Power Electronics Division totaling $35.9
million for the impairment of Goodwill ($13.7 million), Identifiable
Intangible Assets ($20.0 million), and Long Lived Assets ($2.2
million);
-- An inventory write-down in the Power Electronics Division of
approximately $2.4 million in connection with our customers'
accelerated implementation of the European Union's Restriction on the
Use of Hazardous Substances (RoHS) and comparable laws in the US;
--
Assimilation charges of approximately $800,000 related to the
integration of acquisitions in the Power Electronics Division completed
in fiscal year 2005; and
-- Severance and related charges totaling approximately $800,000 in
conjunction with the realignment of the company's management team.
Excluding the above special charges, the company would have reported operating income of $2.1 million for the quarter. During the quarter, the company also recorded the write-off of approximately $14.7 million in tax assets due to the negative evidence related to the realizability of these assets.
For the nine-month period, the company's net loss was $60.6 million, or a loss of $2.39 per diluted share, on revenues of $372.9 million. On a GAAP basis, the company reported an operating loss of $36.2 million. This included the previously listed special charges as well as an additional $2.4 million of severance and related charges. Excluding these special charges, the company would have reported operating income of $6.1 million.
Dr. Jeffrey A. Graves, President and Chief Executive Officer, commented, "This quarter, as a result of the charges and actions taken, we believe we have put the issues of the past year behind us. As a result, we exit the quarter with a balance sheet that has been largely transformed from a financial standpoint and a clean start on the fourth quarter and the upcoming new year."
Dr. Graves continued, "The non-cash impairment charges recorded this quarter reflect the realities of some of the acquisitions made by C&D in fiscal year 2005. Those acquisitions provided great technology and design capabilities and access to some of the best customers in the world, as well as enhanced sales and distribution channels. However, financially they have not yet delivered the results we expected. At the same time, the convertible senior notes we issued in November, in combination with the new credit facilities put in place in early December, provide the company with increased financial flexibility going forward."
"We have much work yet to do, but I am pleased that each of our operating divisions has now laid the foundation for operational improvements on a quarter-by-quarter basis moving forward."
The Motive Power Division posted an operating loss of $1.8 million on revenues of $13.8 million for the quarter. In the comparable prior year period, Motive Power posted an operating loss of $5.3 million on revenues of $14.9 million. The prior year loss included impairment and environmental charges totaling $4.6 million. On a sequential basis, Motive Power's revenues were up 8.8%. Dr. Graves commented, "Motive Power took a significant step in the right direction this quarter, with strong top line growth. The realignment of our Motive Power sales team under new management has driven a positive response from customers, and our renewed focus on superior quality through implementation of Six Sigma initiative is beginning to generate solid progress. Going forward, a price increase instituted in late November should result in more discipline in our pricing structure in the face of a challenging raw material environment."
The Standby Power Division posted operating income of $4.8 million on $69.9 million in revenues during the quarter, compared to an operating loss of $5.3 million on sales of $62.2 million in the prior year's comparable quarter. The prior year's loss included impairment and environmental charges totaling $8.9 million. On a sequential basis, revenues are up 4.7% and operating income is up 29%.
"The Standby Power Division continues to benefit from outstanding market acceptance of our msEndur(TM) product," said Dr. Graves. "Following its launch in fiscal year 2005 and completion of key qualifications this year, our msEndur(TM) product has seen steady improvement in sales with our key wireless telecom customers. In the third quarter, msEndur(TM) sales were approximately $8.7 million, up 47% from the second quarter. We were also very proud of the results of C&D's offer to assist in the rebuilding of infrastructure in hurricane-impacted regions, which contributed to our flooded battery sales at levels not experienced since fiscal year 2001. From an operations standpoint, Standby Power continues to benefit from many of the same improvements we are driving in Motive Power: transition to lower cost manufacturing environments, improved pricing discipline, and implementation of quality improvement initiatives."
Operating losses for the Power Electronics Division were $40.8 million for the quarter. This loss would have been $1.4 million excluding the above listed special charges of impairments, inventory write-downs, assimilation charges and the division's portion ($259,000) of the severance and related charges. Revenues were $43.3 million, up 21.7% compared to the prior year's comparable quarter, which included only one month of the CPS acquisition. Dr. Graves continued, "Addressing the various issues facing the Power Electronics Division following the acquisitions of fiscal year 2005 has been a challenging task over the last few months, but we have made significant progress with this quarter's integration efforts and write-offs. We still have much operational improvement work ahead to ensure we have the right contract manufacturing partners and supply chain in place to fulfill our customers' expectations. We've taken short-term action by placing additional C&D personnel onsite with our current manufacturing partners, and we are evaluating their performance on a quarter-by-quarter basis. With the significant qualification requirements and performance expectations that customers of power conversion products have, our estimate is that it will be a nine-month process to complete the establishment of a truly robust manufacturing supply chain. During this period, however, we do expect to make steady sequential improvements in operating profitability quarter by quarter."
In commenting on the outlook for the balance of the year, Dr. Graves stated, "Based on our backlog and the tone of business from our customers, I am optimistic that the fourth quarter will represent another step forward in our operational execution and resulting financial performance for the company. We continue to enforce our lead hedging policy while seeking price increases for all our battery products as the purchase price of lead continues to rise from the previous quarter. With the foundation in place, C&D is headed in the right direction, and we are optimistic that we can restore financial momentum and shareholder credibility in the near term."
C&D Technologies will hold a conference call on Wednesday, December 14, 2005, at 9:00 AM Eastern Standard Time to discuss these results. To participate, please call 706-679-4521 approximately five minutes before the conference call start time. A telephone replay of the conference call will begin immediately following the call and will be available through Wednesday, December 28, 2005, at midnight Eastern Standard Time. Please call 800-642- 1687 (706-645-9291 for international callers) and enter PIN number 3363899 to access the replay.
A simultaneous webcast of the conference call may be accessed at the investor relations section of our website at http://www.cdtechno.com. To listen to the live call, please go to the website at least 15 minutes early to register, download and install any necessary audio software. An archive of the conference call will be available approximately two hours after the conference call ends and will remain available on the company's website until Wednesday, December 28, 2005.
Forward-looking Statements:
This press release may contain 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), which are based on management's current expectations and are subject to uncertainties and changes in circumstances. 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. Factors that appear with the forward- looking statements, or in the company's Securities and Exchange Commission filings (including without limitation the company's annual report on Form 10-K for the fiscal year ended January 31, 2005, or the quarterly and current reports filed on Form 10-Q and Form 8-K thereafter), could cause the company's actual results to differ materially from those expressed in any forward- looking statements made herein.
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(UNAUDITED)
Three months ended Nine months ended
October 31, October 31,
2005 2004 2005 2004
NET SALES $126,966 $112,732 $372,863 $292,164
COST OF SALES 109,167 103,824 309,876 247,194
GROSS PROFIT 17,799 8,908 62,987 44,970
OPERATING EXPENSES:
Selling, general and
administrative
expenses 15,582 12,844 46,606 32,545
Research and
development expenses 6,329 5,463 18,853 11,319
Identifiable intangible
asset impairment 20,045 -- 20,045 --
Goodwill impairment 13,674 -- 13,674 --
OPERATING (LOSS)
INCOME (37,831) (9,399) (36,191) 1,106
Interest expense,
net 2,568 1,894 6,881 2,988
Other (income)
expense, net (23) 202 33 1,261
LOSS BEFORE INCOME
TAXES AND MINORITY
INTEREST (40,376) (11,495) (43,105) (3,143)
Provision (benefit)
for income taxes 19,613 (4,126) 17,706 (887)
LOSS BEFORE MINORITY
INTEREST (59,989) (7,369) (60,811) (2,256)
Minority interest (6) (16) (169) (113)
NET LOSS $(59,983) $(7,353) $(60,642) $(2,143)
Net loss per common
share - basic $(2.36) $(0.29) $ (2.39) $(0.08)
Net loss per common
share - diluted $(2.36) $(0.29) $ (2.39) $(0.08)
Dividends per share $0.01375 $ -- $0.04125 $0.04125
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(UNAUDITED)
October 31, January 31,
2005 2005*
ASSETS
Current assets:
Cash and cash equivalents $26,391 $26,855
Accounts receivable, less allowance
for doubtful accounts of $2,527 and
$2,018 77,479 73,621
Inventories 81,843 77,272
Deferred income taxes -- 14,481
Prepaid taxes 162 1,644
Other current assets 3,365 2,008
Total current assets 189,240 195,881
Property, plant and equipment, net 93,378 104,130
Deferred income taxes -- 287
Intangible and other assets, net 59,490 83,863
Goodwill 81,256 97,247
TOTAL ASSETS $423,364 $481,408
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $1,078 $1,874
Accounts payable 44,438 34,808
Book overdrafts 963 8,674
Accrued liabilities 28,263 24,254
Other current liabilities 12,877 10,374
Total current liabilities 87,619 79,984
Deferred income taxes 9,183 12,216
Long-term debt 130,412 135,004
Other liabilities 38,325 36,705
Total liabilities 265,539 263,909
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(Dollars in thousands, except par value)
(UNAUDITED)
October 31, January 31,
2005 2005*
Commitments and contingencies
Minority interest 8,354 8,171
Stockholders' equity:
Common stock, $.01 par value,
75,000,000 shares authorized;
28,788,128 and 28,714,973 shares
issued, respectively 288 287
Additional paid-in capital 72,347 71,956
Treasury stock, at cost 3,381,235
and 3,368,676 shares, respectively (47,125) (47,151)
Accumulated other comprehensive income 6,691 5,275
Retained earnings 117,270 178,961
Total stockholders' equity 149,471 209,328
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 423,364 $481,408
* Reclassified for comparative purposes.
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
Nine months ended
October 31,
2005 2004*
Cash flows from operating activities:
Net loss $(60,642) $(2,143)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Minority interest (169) (113)
Depreciation and amortization 17,520 17,730
Impairment of fixed assets 2,160 9,602
Impairment of goodwill 13,674 --
Impairment of identifiable intangible assets 20,045 --
Deferred income taxes 11,764 (3,497)
Write-off of acquired in-process research
and development -- 440
Loss (gain) on disposal of assets 208 (66)
Annual retainer to Board of Directors 199 156
Changes in assets and liabilities:
Accounts receivable (4,209) (1,918)
Inventories (4,884) (5,655)
Other current assets (1,405) (205)
Accounts payable 10,075 7,763
Accrued liabilities 4,657 4,383
Income taxes payable 1,556 (1,511)
Other current liabilities 2,555 1,074
Other liabilities 1,246 1,314
Other long-term assets 467 814
Other, net 2,963 1,672
Net cash provided by operating activities 17,780 29,840
Cash flows from investing activities:
Acquisition of business, net -- (128,301)
Acquisition of property, plant and equipment (5,101) (8,734)
Proceeds from disposal of property, plant
and equipment 74 15,703
Net cash used in investing activities (5,027) (121,332)
Cash flows from financing activities:
Repayment of debt (4,225) (438)
Proceeds from new borrowings -- 106,190
(Decrease) increase in book overdrafts (7,711) 1,809
Financing cost of long-term debt (955) (753)
Proceeds from issuance of common stock, net 307 913
Purchase of treasury stock (158) (2,983)
Payment of common stock dividends (699) (1,047)
Payment of minority interest dividends -- (10)
Net cash (used in) provided by financing
activities (13,441) 103,681
Effect of exchange rate changes on cash and
cash equivalents 224 72
(Decrease) increase in cash and cash equivalents (464) 12,261
Cash and cash equivalents, beginning of period 26,855 12,306
Cash and cash equivalents, end of period $26,391 $24,567
* Reclassified for comparative purposes.
SOURCE C&D Technologies, Inc.
12/12/2005
CONTACT: Stephen E. Markert, Jr. of C&D, +1-215-619-7835, or Joseph
Crivelli of Gregory FCA for C&D, +1-610-642-8253 Ext. 23
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