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C&D News
C&D Technologies Announces Third Quarter Financial Results
BLUE BELL, Pa., Dec. 7 /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 third quarter ended October 31, 2006.
For the third quarter, the Company reported a net loss of $21.7 million, or 85 cents per diluted share, on revenues of $130.7 million. This compared to a net loss of $60 million, or $2.36 per diluted share, in the prior year's third quarter, on revenues of $127 million. Results for the third quarter of fiscal 2007 included a non-cash goodwill impairment charge of $13.9 million, $1.5 million in costs and unabsorbed overhead associated with the closure of the Company's Motive Power Division Huguenot facility and approximately $600,000 of severance costs associated with cost reduction efforts in the Power Electronics Division -- principally related to the recently announced closure of the Company's Portland facility. Results for the third quarter of fiscal 2006 included $35.8 million of non-cash impairment charges associated with goodwill, intangible and fixed asset write-offs.
In commenting on the financial results for the third quarter, Dr. Jeffrey A. Graves, President and CEO of the Company, said, "During the third quarter, our results were again pressured by raw material costs as lead soared to historic levels. We estimate that the increased cost of lead, the primary raw material for our Standby Power and Motive Power divisions, negatively impacted operating profits, net of pricing recoveries and benefits from hedging, by over $2 million on a year-over-year basis and by over $3 million against our most recent second quarter. We continue to address this commodity challenge through a combination of pricing actions, including the recent implementation of a new lead surcharge mechanism to help counter the volatility of the lead markets, hedging and related sourcing activities."
Dr. Graves continued, "After quarter end, we announced two significant strategic initiatives. We stabilized our capital structure with the completion of a $54.5 million convertible debt offering. Proceeds were substantially used to repay our second lien term loan and related fees and expenses associated with the offering. The refinancing lowers our annual interest burden by approximately $3.5 million and eliminated certain restrictive monthly financial covenants that were previously in place. In addition, we announced that we are exploring strategic alternatives for our Power Electronics Division, including possible divestiture of that business. We believe that these actions will position C&D as directly focused on the fast-growing energy storage market, and will provide additional capital to improve our balance sheet, funding for important cost reduction opportunities and the flexibility to invest in new energy storage technologies and growth."
Standby Power:
In the third quarter, the Standby Power Division reported net sales of $68.8 million, down 1.6% from $69.9 million in the third quarter of fiscal 2006. Operating income of $1.7 million was down from $4.8 million in last year's third quarter.
In commenting on Standby Power Division results, Dr. Graves said, "Standby Power's third quarter results were negatively impacted by lead costs, with average London Metal Exchange ("LME") prices escalating to approximately 61 cents per pound this quarter against 43 cents per pound in the third quarter of fiscal 2006 and 48 cents per pound in the second quarter of this fiscal year. Including benefits from hedging and pricing actions, unrecovered higher lead costs negatively impacted operating income for Standby Power by slightly over $2 million against last years third quarter. In addition, the delay of several large customer orders from late Q3 into Q4, and prior year volume strength from Hurricane Katrina-related orders, resulted in a slight volume decrease on a year-over-year basis.
"While the third quarter results were disappointing, we remain confident in Standby's growth prospects and value proposition. We have industry-leading energy storage technology, leading market share in North America and strong support from world-class customers in fast-growing end markets like telecommunications, UPS, and Cable TV. With the benefit of recent pricing actions still to be realized and significant cost reduction opportunities to be attacked, we expect to deliver improving results from this business going forward."
Motive Power:
In the third quarter, the Motive Power Division posted total net sales of $14.6 million, up 5.7% year over year from $13.8 million in the third quarter of fiscal 2006. The Division's operating loss, which included $1.5 million of costs and unabsorbed overheads associated with the closure of Huguenot, increased to $3.4 million in the fiscal 2007 third quarter, from $1.8 million in the prior year's third quarter. Higher warranty costs related to product manufactured in the early 2000s negatively impacted third quarter results by approximately $900,000, compared to the third quarter of fiscal 2006.
Dr. Graves stated, "The closure of Huguenot is behind us with the close of Q3 and we can now look forward to improving the performance of this Division as we continue our turnaround plan. We believe that the transition of Motive manufacturing to modern low-cost facilities with the elimination of a significant fixed overhead burden, combined with other cost reduction initiatives and a strong focus on product quality through our Six Sigma program, significantly improves our cost structure to allow us to more effectively compete in this market."
Power Electronics Division:
In the third quarter, the Power Electronics Division posted total net sales of $47.3 million, up 9.4% on a year-over-year basis from $43.3 million. Operating loss for the quarter was $15.7 million, compared to $40.8 million in last year's third quarter. In the third quarter of fiscal 2007, operating loss included a non-cash goodwill impairment charge of $13.9 million, approximately $600,000 of severance and other costs related to the closure of the Portland design center and approximately $200,000 of contact manufacturer transition costs, while last year's third quarter included approximately $35.8 million of non-cash impairment charges, $2.4 million in inventory write-offs of non-RoHS product and approximately $770,000 in acquisition-related integration costs.
Dr. Graves commented, "Year-over-year, the third quarter reflected solid revenue growth and better year-over-year operating performance in the Power Electronics Division. While results were down against the second quarter reflecting customer push-outs and some softness in certain end markets, overall we continue to be encouraged by customer support that validates our premise that PED has excellent product design capability, a terrific customer base, and a strong, low-cost manufacturing footprint. Our transition to new Asian contract manufacturers is near completion and is beginning to drive cost improvements. Furthermore, the closure of our Portland facility is expected to deliver approximately $5 million of additional annual cost savings, with initial benefits beginning in the fourth quarter and the full impact seen in Q1 of next year. Both of these initiatives serve PED well in enhancing the Division's profitability and the attractiveness of this asset."
Dr. Graves concluded, "Last week, C&D celebrated its 100th anniversary as a company, and it's 10th anniversary of listing on the New York Stock Exchange, by ringing the closing bell to end the week of trading. C&D was founded in 1906 as an innovator in energy storage technology, and since that time has grown to become North America's largest provider of back-up power. We are confident that we have the products, customers, leadership, capital base, and strategic plan to carry us forward. With growth in our core markets and an improving cost structure in our business we are excited about the future of our company."
Conference call:
C&D management will host a conference call to discuss these financial results on Friday, December 8, 2006 at 9:00 a.m. Eastern Time. Those parties interested in participating in the conference call via telephone should dial 706-679-4521 and enter conference ID number 4001263. A telephone replay of the conference call will begin immediately following the call and will be available through December 15, 2006 at midnight Eastern Time. To access the rebroadcast, please dial 800-642-1687 (706-645-9291 for international callers) and enter code 4001263. 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 BALANCE SHEETS
(Dollars in thousands, except par value)
(UNAUDITED)
October 31, January 31,
2006 2006
ASSETS
Current assets:
Cash and cash equivalents $13,671 $25,693
Accounts receivable, less allowance for
doubtful accounts of $1,982 and $2,889 82,315 78,420
Inventories, net 90,336 83,803
Deferred income taxes 3,493 3,430
Prepaid taxes 6,583 6,838
Other current assets 9,131 8,892
Total current assets 205,529 207,076
Property, plant and equipment, net 99,889 91,041
Goodwill 68,243 81,451
Intangible and other assets, net 36,033 38,450
Deferred income taxes 374 401
TOTAL ASSETS $410,068 $418,419
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $5,474 $1,038
Accounts payable 45,516 50,199
Book overdrafts 3,134 71
Accrued liabilities 26,425 23,440
Other current liabilities 30,384 35,578
Total current liabilities 110,933 110,326
Deferred income taxes 12,509 11,660
Long-term debt 145,465 133,067
Other liabilities 34,484 24,051
Total liabilities 303,391 279,104
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(Dollars in thousands, except par value)
(UNAUDITED)
October 31, January 31,
2006 2006
Commitments and contingencies
Minority interest 8,304 8,498
Stockholders' equity:
Common stock, $.01 par value, 75,000,000
shares authorized; 29,040,960 and 28,828,428
shares issued and 25,647,442 and 25,448,326
outstanding, respectively 291 288
Additional paid-in capital 73,972 72,599
Unearned stock grant compensation 197 --
Treasury stock, at cost 3,393,518 and
3,380,102 shares, respectively (47,127) (47,094)
Accumulated other comprehensive loss (11,542) (11,876)
Retained earnings 82,582 116,900
Total stockholders' equity 98,373 130,817
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $410,068 $418,419
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,
2006 2005 2006 2005
NET SALES $130,707 $126,966 $392,304 $372,863
COST OF SALES 112,695 109,167 331,964 309,876
GROSS PROFIT 18,012 17,799 60,340 62,987
OPERATING EXPENSES:
Selling, general and
administrative expenses 14,663 15,582 45,621 46,606
Research and development
expenses 6,888 6,329 21,584 18,853
Identifiable intangible
asset impairment -- 20,045 -- 20,045
Goodwill impairment 13,947 13,674 13,947 13,674
OPERATING LOSS (17,486) (37,831) (20,812) (36,191)
Interest expense, net 3,256 2,568 9,656 6,881
Other expense (income), net 439 (23) 869 33
LOSS BEFORE INCOME TAXES
AND MINORITY INTEREST (21,181) (40,376) (31,337) (43,105)
Provision for income taxes 575 19,613 3,000 17,706
LOSS BEFORE MINORITY
INTEREST (21,756) (59,989) (34,337) (60,811)
Minority interest (55) (6) (371) (169)
NET LOSS $(21,701) $(59,983) $(33,966) $(60,642)
Net loss per common share
- basic $(0.85) $(2.36) $(1.33) $(2.39)
Net loss per common share
- diluted $(0.85) $(2.36) $(1.33) $(2.39)
Dividends per share $-- $0.01375 $0.01375 $0.04125
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
Nine months ended
October 31,
2006 2005
Cash flows from operating activities:
Net loss $(33,966) $(60,642)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Minority interest in net loss of
consolidated subsidiary (371) (169)
Stock based compensation 197 --
Depreciation and amortization 14,714 17,520
Impairment of fixed assets and long-lived
assets -- 2,160
Impairment of goodwill 13,947 13,674
Impairment of intangible assets -- 20,045
Deferred income taxes 809 11,764
(Gain) loss on disposal of assets (38) 208
Annual retainer to Board of Directors
paid by the issuance of common stock 224 199
Changes in:
Accounts receivable and other receivable (3,328) (4,209)
Inventories (5,930) (4,884)
Other current assets (686) (1,405)
Accounts payable (5,077) 10,075
Accrued liabilities 2,730 4,657
Income taxes payable 100 1,556
Other current liabilities (1,750) 2,555
Other liabilities 6,133 1,246
Other long-term assets 83 467
Other, net (923) 2,963
Net cash (used in) provided by
operating activities (13,132) 17,780
Cash flows provided (used in) by investing
activities:
Acquisition of property, plant and
equipment (19,553) (5,101)
Proceeds from disposal of property, plant
and equipment 54 74
Net cash used by investing activities (19,499) (5,027)
Cash flows provided (used in) by financing
activities:
Reduction of long-term debt (781) (4,225)
Proceeds from new borrowings 17,428 --
Financing cost of long-term debt (701) (955)
Increase (decrease) in book overdrafts 3,063 (7,711)
Purchase of treasury stock (122) (158)
Proceeds from issuance of common stock, net 1,210 307
Payment of common stock dividends (352) (699)
Net cash provided by (used in) financing
activities 19,745 (13,441)
Effect of exchange rate changes on cash and
cash equivalents 864 224
Decrease in cash and cash equivalents (12,022) (464)
Cash and cash equivalents, beginning of period 25,693 26,855
Cash and cash equivalents, end of period $13,671 $26,391
SOURCE C&D Technologies, Inc.
12/07/2006
CONTACT: Ian 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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