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C&D News
C&D Technologies Announces Improved Second Quarter Sequential Results
BLUE BELL, Pa., Sept. 11 /PRNewswire-FirstCall/ -- C&D Technologies, Inc. (NYSE: CHP), a leading North American producer and marketer of electrical power storage and conversion systems used in telecommunications, industrial and motive applications, today announced financial results for the second quarter ended July 31, 2006.
For the second quarter, the Company reported a net loss of $3.6 million, or 14 cents per diluted share, on revenues of $132.4 million. This compared to a net loss of $8.7 million or 34 cents per diluted share in the Company's first quarter, on revenues of $129.2 million. Results for the second quarter included $1.1 million of costs associated with the closure of the Motive Power Division's Huguenot facility; approximately $463,000 for costs associated with the transition of manufacturing to new contract manufacturers in the Power Electronics Division; approximately $700,000 in severance costs from recent headcount actions as we align our resources to better support the business and $115,000 of costs related to compliance with the Reduction of Hazardous Substances (RoHS) Act.
In commenting on the financial results for the second quarter, Dr. Jeffrey A. Graves, President and CEO of the Company, said, "We are pleased that C&D returned to operating profitability during the second quarter. Sequentially, Standby Power and Power Electronics divisions both experienced top line growth, but more importantly delivered substantially better operating results. In addition our strategy for Motive Power continued on plan, with the closure of our plant in Huguenot, NY and transition of production to Reynosa, Mexico. Excluding $1.1 million of costs associated with this transition and the impact of higher warranty costs, results were in line with our expectations and support the turnaround of this business."
Standby Power:
In the second quarter, the Standby Power Division posted total net sales of $69.3 million, and operating income of $4.5 million. Revenues grew 4% year over year and sequentially. Operating income was up from $3.7 million in last year's second quarter and up substantially from $605,000 in the fiscal first quarter of 2007.
In commenting on Standby Power Division results, Dr. Graves said, "The Standby Power Division executed well in the quarter, with solid revenue growth reported on both a year-over-year and sequential basis, principally driven by the benefit of pricing actions taken over the last six months. Improved sales performance combined with the favorable cost impact from our Six Sigma program and the benefit from lower lead prices, led to a strong turnaround in operating profitability in the quarter. We're seeing continued momentum in our key end markets - particularly telecommunications and UPS - and we are having increasing success bringing our industry-leading products to new international markets. While we expect our third quarter top line performance to be relatively flat, the full impact of our sales initiatives and the associated new business wins that we have recently announced, including the Taiwan Power nuclear project, will become apparent in the fourth quarter."
Motive Power:
In the second quarter, the Motive Power Division posted total net sales of $14.1 million, up 12% year over year and down 4% on a sequential basis. The Division's operating loss, which included the previously mentioned one-time plant transition costs of $1.1 million, increased to $3.1 million in the fiscal 2007 second quarter, from $2.5 million in the prior year's second quarter and $2.0 million in the fiscal 2007 first quarter. In addition to the plant closure-related costs, significantly higher warranty costs related to product manufactured in the early 2000's negatively impacted results in the quarter.
Dr. Graves stated, "Our primary goals in fiscal 2007 for the Motive Power division were to stabilize the top line, eliminate excess cost from the business and significantly improve profitability performance. I'm pleased with our progress to date: the revenue run rate is stable, and the transition of manufacturing to our Reynosa facility, which will be completed in the third quarter, will leave us with 100% of our manufacturing for the division in one of the most modern and lowest-cost battery manufacturing facilities in North America. Importantly, the surge in warranty costs that we experienced in the first half of the year, related to product manufactured in the early 2000's, clearly declined later in the quarter and we expect it to return to historical norms going forward. Looking forward, as the transition to our new plant is completed we continue to expect Motive's operating loss to moderate in each of the next two quarters, and that the business will return to profitability in fiscal 2008.
Power Electronics Division:
In the second quarter, the Power Electronics Division posted total net sales of $49.0 million and an operating loss of $778,000. Revenues were up 12% on a year-over-year basis and 3% sequentially. Second quarter operating loss compares to an operating profit of $1.6 million in last year's second quarter and an operating loss of $2.6 million in the fiscal first quarter of 2007. Costs associated with RoHS compliance and transition of contract manufacturers totaled approximately $578,000 for the second quarter.
Dr. Graves commented, "We saw strong sequential improvements in the Power Electronics Division, with healthy top line growth and a solid turnaround on the operating loss line. Our new contract manufacturers are performing extremely well, and product quality has been excellent. As we finish the transition to our new contract manufacturing partners, we should see greater benefit from the projected cost savings later in the third quarter and beyond."
Outlook:
Dr. Graves concluded, "We were pleased with the progress we made in driving sequential operating income improvements in the second quarter. These improvements reflected solid execution of our manufacturing moves, a focus on cost reduction through our Six Sigma efforts, and the emphasis we have placed on growing closer to our customers. Looking ahead to the remainder of the year, our execution plans in the third quarter are solidly on track; however, we see some headwinds in materials costs, principally due to the recent run up in lead from the low 40 cents per lb range in June to a high of over 60 cents per lb last week. We also now expect some push out of scheduled shipment activity from October into an already strong fourth quarter. While these net effects will temper our move to break-even in the third quarter, our strong sales backlog across all three segments combined with realization of the first full benefits of this year's cost-reduction activities, continue to support a return to profitability in the fourth quarter.
Conference call:
C&D management will host a conference call to discuss these financial results on Monday, September 11, 2006 at 10:00 a.m. Eastern Daylight Savings Time. Those parties interested in participating in the conference call via telephone should dial 706-679-4521 and enter conference ID number 5741097. A telephone replay of the conference call will begin immediately following the call and will be available through September 25, 2006 at midnight Eastern Daylight Savings Time. To access the rebroadcast, please dial 800-642-1687 (706-645-9291 for international callers) and enter code 5741097. A webcast of the conference call will also be available at http://www.cdtechno.com.
About C&D Technologies:
C&D Technologies, Inc. provides solutions and services for the switchgear and control (utility), motive (material handling), telecommunications, and uninterruptible power supply (UPS) as well as emerging markets such as solar power. C&D Technologies engineers, manufactures, sells and services fully integrated reserve power systems for regulating and monitoring power flow and providing backup power in the event of primary power loss until the primary source can be restored. Through our Power Electronics Division, we manufacture and market custom, standard and modified-standard electronic power supply systems, including DC to DC converters, for large OEMs of telecommunications and networking equipment, as well as office and industrial equipment. The division also manufactures power conversion products sold into military and CATV applications as well as digital panel meters and data acquisition components. C&D Technologies' unique ability to offer complete systems, designed and produced to high technical standards, sets it apart from its competition. C&D Technologies is headquartered in Blue Bell, PA. For more information about C&D Technologies, visit http://www.cdtechno.com.
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, 2006, 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 Six months ended
July 31, July 31,
2006 2005 2006 2005
NET SALES $132,430 $123,076 $261,597 $245,897
COST OF SALES 108,779 99,639 219,269 200,709
GROSS PROFIT 23,651 23,437 42,328 45,188
OPERATING EXPENSES:
Selling, general and
administrative expenses 15,762 14,345 30,958 31,024
Research and
development expenses 7,256 6,311 14,696 12,524
OPERATING INCOME (LOSS) 633 2,781 (3,326) 1,640
Interest expense, net 3,372 2,309 6,400 4,313
Other expense (income), net 115 (258) 430 56
(LOSS) INCOME BEFORE
INCOME TAXES AND
MINORITY INTEREST (2,854) 730 (10,156) (2,729)
Provision (benefit)
for income taxes 855 (256) 2,425 (1,907)
(LOSS) INCOME BEFORE
MINORITY INTEREST (3,709) 986 (12,581) (822)
Minority interest (102) (64) (316) (163)
NET (LOSS) INCOME $(3,607) $1,050 $(12,265) $(659)
Net (loss) income per
common share - basic $(0.14) $0.04 $(0.48) $(0.03)
Net (loss) income per
common share - diluted $(0.14) $0.04 $(0.48) $(0.03)
Dividends per share $- $0.01375 $0.01375 $0.02750
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(UNAUDITED)
July 31, January 31,
2006 2006
ASSETS
Current assets:
Cash and cash equivalents $21,623 $25,693
Accounts receivable, less allowance for
doubtful accounts of $2,404 and $2,889 85,463 78,420
Inventories 90,536 83,803
Deferred income taxes 3,309 3,430
Prepaid taxes 6,774 6,838
Other current assets 2,560 8,892
Total current assets 210,265 207,076
Property, plant and equipment, net 94,237 91,041
Deferred income taxes 554 401
Intangible and other assets, net 36,755 38,450
Goodwill 81,956 81,451
TOTAL ASSETS $423,767 $418,419
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $921 $1,038
Accounts payable 41,309 50,199
Book overdrafts 4,230 71
Accrued liabilities 25,464 23,440
Other current liabilities 32,010 35,578
Total current liabilities 103,934 110,326
Deferred income taxes 12,546 11,660
Long-term debt 153,097 133,067
Other liabilities 33,007 24,051
Total liabilities 302,584 279,104
Commitments and contingencies
Minority interest 8,289 8,498
Stockholders' equity:
Common stock, $.01 par value, 75,000,000
shares authorized; 29,006,560 and
28,828,428 shares issued, respectively 290 288
Additional paid-in capital 73,912 72,599
Treasury stock, at cost 3,393,518 and
3,380,102 shares, respectively (47,127) (47,094)
Accumulated other comprehensive loss (18,464) (11,876)
Retained earnings 104,283 116,900
Total stockholders' equity 112,894 130,817
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $423,767 $418,419
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
Six months ended
July 31,
2006 2005*
Cash flows from operating activities:
Net loss $(12,265) $(659)
Adjustments to reconcile net loss to net
cash (used) provided by operating activities:
Minority interest (316) (163)
Stock option compensation 174 -
Depreciation and amortization 9,959 11,883
Deferred taxes 850 (256)
(Gain) loss on disposal of assets (33) 214
Annual retainer to Board of Directors
paid by the issuance of common stock 224 198
Changes in:
Accounts and other notes receivable (6,559) (2,570)
Inventories (6,329) (4,421)
Other current assets (108) (122)
Accounts payable (9,475) 6,492
Accrued liabilities 1,879 177
Income taxes payable 73 (4,199)
Other current liabilities (982) 3,590
Other liabilities 4,801 911
Other long-term assets 118 906
Other, net (522) 1,701
Net cash (used) provided by
operating activities (18,511) 13,682
Cash flows provided (used) by
investing activities:
Acquisition of property, plant and equipment (10,262) (4,136)
Proceeds from disposal of property,
plant and equipment 45 71
Net cash used by investing activities (10,217) (4,065)
Cash flows provided (used)
by financing activities:
Reduction of long-term debt (524) (7,014)
Proceeds from new borrowings 20,555 -
Financing cost of long-term debt (700) (735)
Increase (decrease) in book overdrafts 4,159 (7,575)
Purchase of treasury stock (122) (154)
Proceeds from issuance of common stock, net 975 47
Payment of common stock dividends (352) (349)
Net cash provided (used)
by financing activities 23,991 (15,780)
Effect of exchange rate changes on
cash and cash equivalents 667 223
Decrease in cash and cash equivalents (4,070) (5,940)
Cash and cash equivalents, beginning of period 25,693 26,855
Cash and cash equivalents, end of period $21,623 $20,915
* Reclassified for comparative purposes.
SOURCE C&D Technologies, Inc.
09/11/2006
CONTACT: Shareholder Contacts: Ian J. Harvie of C&D, +1-215-619-7835 or
Joseph Crivelli of Gregory FCA, for C&D, +1-610-642-8253
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