UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 25, 2003
C&D Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9389 13-3314599
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1400 Union Meeting Road, Blue Bell, Pennsylvania 19422
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 619-2700
N/A
(Former name or former address, if changed since last report)
Introductory Statement
This Amendment to Registrant's Form 8-K Current Report under Item 2
and Item 7 dated September 25, 2003 (date of earliest event reported), filed
with the Securities and Exchange Commission on October 10, 2003, is being filed
to add the information set forth in Item 7.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements:
Balance sheet of MSE Storage Battery Production Line of Matsushita
Battery Industrial Corporation of America as of March 31, 2003 and
related statements of operations and production line deficit and
cash flows for the year ended March 31, 2003.
Unaudited balance sheets of MSE Storage Battery Production Line of
Matsushita Battery Industrial Corporation of America as of June 30,
2003 and March 31, 2003 and related statements of operations and
cash flows for the three month periods ended June 30, 2003 and 2002.
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
INDEX TO FINANCIAL STATEMENTS
MSE Storage Battery Production Line of
Matsushita Battery Industrial Corporation of America
Page
----
Audited Financial Statements
Independent Auditors' Report ............................................ F-1
Balance Sheet as of March 31, 2003 ...................................... F-2
Statements of Operations and Production Line Deficit for the Year
Ended March 31, 2003 .................................................. F-3
Statement of Cash Flows for the Year Ended March 31, 2003 ............... F-4
Notes to Financial Statements ........................................... F-5
Unaudited Financial Statements
Balance Sheets as of June 30, 2003 and March 31, 2003 ................... F-13
Statements of Operations for the Three Month Periods Ended June 30, 2003
and 2002 .............................................................. F-14
Statements of Cash Flows for the Three Month Periods Ended June 30, 2003
and 2002 .............................................................. F-15
Notes to Unaudited Financial Statements ................................. F-16
Independent Auditors' Report
The Board of Directors
Matsushita Battery Industrial Corporation of America:
We have audited the accompanying balance sheet of the MSE Storage Battery
Production Line of Matsushita Battery Industrial Corporation of America as of
March 31, 2003, and the related statements of operations and production line
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the MSE Storage Battery
Production Line of Matsushita Battery Industrial Corporation of America as of
March 31, 2003, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.
/s/ KPMG LLP
Atlanta, Georgia
November 22, 2003
F-1
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Balance Sheet
March 31, 2003
Assets (Note 5)
Current assets:
Cash and cash equivalents $ 1,198,223
Due from affiliates (note 2) 23,631,379
Inventories - finished goods 790,173
Other current assets 24,868
------------
Total current assets 25,644,643
------------
Property, plant, and equipment:
Land 1,500,000
Buildings and improvements 1,390,797
------------
2,890,797
------------
$ 28,535,440
============
Liabilities and Production Line Deficit
Current liabilities:
Short-term loans payable to affiliate (note 2) $ 29,348,217
Due to Affiliates (note 2) 2,524,876
Trade accounts payable and accrued expenses 219,716
Accrued warranty costs (note 6) 351,000
Accrued restructuring costs (note 5) 91,931
------------
Total current liabilities 32,535,740
------------
Production line deficit (note1(a)) (4,000,300)
Commitments and contingencies (notes 4, 6 and 7)
------------
$ 28,535,440
============
See accompanying notes to financial statements.
F-2
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Statements of Operations and Production Line Deficit
Year ended March 31, 2003
Net sales (note 2) $ 1,580,850
Cost of goods sold (note 5) 9,268,393
------------
Gross loss (7,687,543)
Selling, general, and administrative expenses 279,906
Royalty expense (note 2) 34,970
Recovery of warranty expense (note 6) (353,560)
Asset impairment charge and restructuring costs (note 5) 8,121,527
------------
Operating loss (15,770,386)
------------
Other income (expense):
Interest expense (note 2) (141,360)
Exchange loss on foreign currency transactions (7,008)
------------
Total other income (expense) (148,368)
------------
Loss before income taxes (15,918,754)
Income tax expense (note 3) 63,278
------------
Net loss (15,982,032)
Production line deficit at beginning of year (51,018,268)
Capital contribution (note 1(a)) 63,000,000
------------
Production line deficit at end of year $ (4,000,300)
============
See accompanying notes to financial statements.
F-3
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Statement of Cash Flows
Year ended March 31, 2003
Cash flows from operating activities:
Net loss $(15,982,032)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,508,840
Inventory write-off 7,868,843
Impairment loss on property, plant, and equipment 7,979,111
Changes in operating assets and liabilities:
Due from affiliates (1,587,296)
Inventories (3,799,849)
Other current assets 938,708
Due to affiliates 1,250,750
Trade accounts payable and accrued expenses (748,109)
Accrued warranty costs (353,560)
Accrued restructuring costs 91,931
------------
Net cash used in operating activities (2,832,663)
------------
Cash flows from financing activities:
Capital contribution 63,000,000
Repayment of short-term loans payable to affiliate, net (59,200,016)
------------
Net cash provided by operating activities 3,799,984
------------
Net increase in cash and cash equivalents 967,321
Cash and cash equivalents at beginning of year 230,902
------------
Cash and cash equivalents at end of year $ 1,198,223
============
Supplemental disclosure:
Cash paid for interest $ 193,153
Cash paid for income taxes 54,796
See accompanying notes to financial statements.
F-4
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Financial Statements
March 31, 2003
(1) Description of Business and Summary of Significant Accounting Policies
(a) Description of Business
Matsushita Battery Industrial Corporation of America (the Company)
was engaged in the production of batteries for consumer and
industrial use. The Company was incorporated under the laws of the
State of Delaware on July 17, 1991 and was 40% owned by Matsushita
Electric Industrial Co., Ltd. (MEI) and 60% owned by Matsushita
Battery Industrial Co., Ltd. (MBI), which is a wholly owned
subsidiary of MEI. Panasonic Storage Battery Division (SBD), which
is one of the Company's divisions, has a wholly owned manufacturing
subsidiary in Mexico and manufactures storage batteries for
industrial use. Effective March 31, 2003, due to declining market
demands and price competition, the Company's board of directors
adopted a plan to terminate the operations of SBD (see note 5).
The majority of the Company's sales are to related parties. The
Company is not dependent on a single supplier for its raw materials.
All of the Company's carrying value of property, plant, and
equipment is located in Mexico.
As of March 26, 2003, the shareholders of the Company entered into
an agreement pursuant to which MEI acquired all of the other
shareholders' rights, title, and interest in and to the capital
stock of the Company. As of March 31, 2003, MEI entered into a
Contribution Agreement pursuant to which all of MEI's rights, title,
and interest in and to the capital stock of the Company were
contributed to Matsushita Electric Corporation of America (MECA),
which in turn became the owner of all of the capital stock of the
Company.
(b) Basis of Presentation
The accompanying financial statements present the financial
position, results of operations and cash flows of the MSE Storage
Battery Production Line of the Company as of and for the year ended
March 31, 2003. As the MSE Storage Battery Production Line had never
been operated as a separate business entity, the accompanying
financial statements include allocations prepared by the Company's
management. The entire balances of cash and cash equivalents,
property, plant and equipment, and short-term loans payable to
affiliate, and certain balances included in inventories, other
current assets, due to affiliates, trade accounts payable and
accrued expenses in the accompanying balance sheet reflect amounts
for SBD since allocation of these balances was not practical.
The accompanying statement of operations includes the historical
revenues and all costs and expenses that are directly attributable
to the MSE Storage Battery Production Line and an allocation of
indirect expenses that relate to all production lines at SBD. Each
indirect cost and expense that relates to all production lines at
SBD was allocated between the MSE Storage Battery Production Line
and the other production lines based on either revenues, production
volume, number of production lines, or headcount. The Company's
management believes these allocations are reasonable. However, no
assurance can be given that such allocations will be indicative of
future results.
F-5 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Financial Statements
March 31, 2003
(c) Revenue Recognition
The Company recognizes revenue when products are shipped and the
customer takes ownership and assumes risk of loss, collection of the
relevant receivable is probable, persuasive evidence of an
arrangement exists and the sales price is fixed or determinable.
(d) Fair Value of Financial Instruments
The carrying amount of financial instruments approximates fair value
because of the short maturity of these instruments.
(e) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash and cash
equivalents.
(f) Inventories
Inventories are stated at the lower of cost or market (net
realizable value). Cost is determined using the first-in, first-out
method.
(g) Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and have been
adjusted to fair value because of certain impairment charges
(see note 5). Depreciation on property, plant, and equipment was
calculated using the straight-line method over the estimated useful
lives of the respective assets. Ordinary repairs and maintenance
are charged to operating costs as incurred. Estimated useful lives
used by the Company are summarized as follows:
Useful life
(in years)
-----------
Building and improvements 20
Machinery and equipment 7-10
Furniture and fixtures 3-10
Vehicles 5
(h) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred income tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred income
tax assets and liabilities of a change in tax rates is recognized as
income or expense in the period that includes the enactment date.
F-6 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Financial Statements
March 31, 2003
Federal income tax is included in the consolidated corporate income
tax return of the Company for Federal income tax purposes, and
income taxes are recorded as if the MSE Storage Battery Production
Line were a stand-alone entity.
(i) Warranty Costs
Estimated warranty costs for each product are accrued at the time
the product is sold. Estimates for warranty costs are made based on
historical warranty claim experience and management estimates of the
amount that will eventually be required to settle such obligations.
(j) Use of Estimates
The preparation of the financial statements requires management of
the Company to make a number of estimates and assumptions relating
to the reported amount of assets and liabilities and the disclosure
of contingent liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting periods. Actual results could differ from those estimates.
(k) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, on April 1, 2002. In accordance with SFAS No.
144, long-lived assets, such as property, plant and equipment, and
purchased intangibles subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by an asset.
If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the asset.
Assets to be disposed of would be separately presented in the
balance sheet and reported at the lower of carrying amount or fair
value less costs to sell, and are no longer depreciated. The assets
and liabilities of a disposed group classified as held for sale
would be presented separately in the appropriate asset and liability
sections of the balance sheet.
(l) Costs Associated with Exit Activities
In June 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force Issue 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity. The Company adopted this statement
effective January 1, 2003.
(m) Recently Issued Accounting Standards
In June 2001, FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires the Company to record
the fair value of an asset retirement obligation as a liability in
the period in which it incurs a legal obligation associated with the
retirement of tangible long-lived assets that result from the
acquisition, construction, development, and/or normal use of
F-7 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Financial Statements
March 31, 2003
the assets. The Company also records a corresponding asset that is
depreciated over the life of the asset. Subsequent to the initial
measurement of the asset retirement obligation, the obligation will
be adjusted at the end of each period to reflect the passage of time
and changes in the estimated future cash flows underlying the
obligation. The Company is required to adopt SFAS No. 143 on April
1, 2003. The adoption of SFAS No. 143 is not expected to have a
material effect on the Company's financial statements.
In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness to Others, an interpretation of
FASB Statements No. 5, 57 and 107 and a rescission of FASB
Interpretation No. 34. This Interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees issued.
The Interpretation also clarifies that a guarantor is required to
recognize, at inception of a guarantee, a liability for the fair
value of the obligation undertaken. The initial recognition and
measurement provisions of the Interpretation are applicable to
guarantees issued or modified after December 31, 2002. The Company
does not expect the adoption of FIN No. 45 to have a material effect
on the Company's financial statements.
In November 2002, the Emerging Issues Task Force (EITF) reached a
consensus on Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables. EITF Issue No. 00-21 provides guidance on how to
account for arrangements that involve the delivery or performance of
multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue
arrangements entered into in fiscal periods beginning after June 15,
2003. The Company does not expect the adoption of EITF No. 00-21 to
have a material effect on the Company's financial statements.
In January 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities, an interpretation of
ARB No. 51. This Interpretation addresses the consolidation by
business enterprises of variable interest entities as defined in the
Interpretation. The Interpretation applies immediately to variable
interests in variable interest entities created after January 31,
2003, and to variable interests in variable interest entities
obtained after January 31, 2003. For nonpublic enterprises, such as
the Company, with a variable interest in a variable interest entity
created before February 1, 2003, the Interpretation is applied to
the enterprise no later than the end of the first annual reporting
period ending after December 15, 2003. The application of this
Interpretation is not expected to have a material effect on the
Company's financial statements. The Interpretation requires certain
disclosures in financial statements issued after January 31, 2003 if
it is reasonably possible that the Company will consolidate or
disclose information about variable interest entities when the
Interpretation becomes effective. As of March 31, 2003, the Company
had no interest in an entity which would qualify as a variable
interest entity. As a result, the adoption of this interpretation
did not have an impact on the Company's financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity, which is effective for the Company beginning January 1,
2005. SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. The Company has not
determined the impact of SFAS No. 150 on its 2004 financial
statements.
F-8 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Financial Statements
March 31, 2003
(2) Related Party Transactions
For the year ended March 31, 2003, transactions with affiliated companies
included in the statement of operations were as follows:
Net sales:
MECA $ 1,520,850
Panasonic Canada Inc., a subsidiary of MEI 60,000
Expenses:
Royalty expense - MBI 34,970
Interest expense - Panasonic Finance, Inc. (PFI) 141,487
Due from affiliates of $23,631,379 as of March 31, 2003 represents the
following:
Due from MBI $ 81,251
Due from SBD 23,550,128
-----------
$23,631,379
===========
Amounts due from MBI represent payroll paid by the MSE Storage Battery
Production Line on behalf of MBI. Amounts due from SBD represents losses
of other production line funded by loans on the financial statements of
the MSE Storage Battery Production Line.
Short-term loans payable to affiliate represent amounts due under a
financing agreement with PFI to obtain working capital funds, as needed.
The effective interest rate was approximately 1.51% as of March 31, 2003.
There are no scheduled repayment terms for such borrowings.
Due to affiliates of $2,524,876 as of March 31, 2003 represents the
following:
Due to MECA $ 2,222,911
Due to PFI 100,936
Due to MBI 59,629
Due to SBD 141,400
-----------
$ 2,524,876
===========
Amounts due to MECA represents payables in connection with inventory
returns. Amounts due to PFI represents accrued interest on short-term
loans payable. Amounts due to MBI represents trade accounts payable for
purchases of parts. Amounts due to SBD primarily represent
reimbursement to SBD for payroll for employees paid directly by SBD.
F-9 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Financial Statements
March 31, 2003
The Company pays a royalty of 2.5% of the sales price of certain batteries
to MBI for the use of production technology.
(3) Income Taxes
Income tax expense for the year ended March 31, 2003 was $63,278, which
represents income taxes paid to Mexican government. Difference from the
amounts computed by applying the U.S. Federal income tax rate of 35% to
loss before income taxes was as a result of the following:
Computed "expected" income tax benefit $(5,571,564)
(Increase) reduction in income tax benefit resulting from:
State and local income taxes, net of Federal income
tax effect (639,282)
Foreign tax 63,278
Increase in valuation allowance for deferred income tax assets 6,210,846
-----------
$ 63,278
===========
The tax effects of temporary differences that give rise to deferred income
tax assets at March 31, 2003 are presented below.
Deferred income tax assets:
Inventory reserve $ 2,990,160
Accrued expenses not deductible until paid 178,773
Property, plant, and equipment - primarily impairment 2,471,704
Net operating loss carryforwards 29,312,535
-----------
Total gross deferred income tax assets 34,953,172
Less valuation allowance 34,953,172
-----------
Net deferred income tax assets $ --
===========
The valuation allowance for deferred income tax assets as of March 31,
2003 was $34,953,172. The net change in the valuation allowance for the
year ended March 31, 2003 was an increase of $6,210,846. In assessing the
realizability of deferred income tax assets, management considers whether
it is more likely than not that some portion or all of the deferred income
tax assets will not be realized. The ultimate realization of deferred
income tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred income
tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment. A net deferred income tax asset was
not recorded at March 31, 2003 due to the uncertainty of being able to
realize such amounts in the future.
F-10 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Financial Statements
March 31, 2003
As of March 31, 2003, MSE has net operating loss carryforwards for Federal
income tax purposes of approximately $77 million which are available to
offset future Federal taxable income, if any, through 2023.
(4) 401(k) Plan
The Company sponsors the Matsushita Battery Industrial Corporation of
America 401(k) Savings Plan (the Plan), which covers substantially all
employees of the Company and Matsushita-Ultra Tech Battery Corporation of
America, an affiliate, who have completed 1,000 hours of service and have
attained the age of 21 years as of January 1, April 1, July 1, or October
1 of any plan year.
The Plan allows employee contributions through payroll deductions of 1% to
15% of eligible compensation. The Company matches 100% of employee
contributions for the first 4% of eligible compensation. There were no
participants in the 401(k) plan attributable to the MSE Storage Battery
Production Line during the year ended March 31, 2003.
(5) Asset Impairment Charge and Restructuring Costs
During March 2003, the Company announced restructuring programs whereby
the Company closed the SBD operations. Restructuring costs are comprised
of long-lived asset impairments of $7,979,111 and severance costs of
$142,416. Of this amount, $50,485 was paid during the year ended March
31, 2003.
The restructuring programs discussed above required an impairment analysis
to be performed in accordance with SFAS No. 144. The estimated
undiscounted future cash flows generated by SBD's long-lived assets were
less than their carrying values. Management estimated fair market value
using third-party appraisals and recent sales and leasing transactions.
Long-lived asset impairments of $7,979,111 included write-offs of land,
building and improvements, machinery and equipment, furniture and
fixtures, and vehicles. The Company terminated certain employees in
connection with its restructuring programs as of March 31, 2003. The
charges for severance and other related exit costs were recorded in
accordance with SFAS No. 146, and were comprised of severance fees under
the labor law in Mexico and other exit costs at SBD attributable to the
MSE Storage Battery Production Line.
The Company also recorded inventory write-offs of $7,868,843 included in
cost of goods sold in the accompanying statement of operations to reduce
inventories to fair value.
F-11 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Financial Statements
March 31, 2003
(6) Warranty Costs
The Company offers a 5 or 10 year warranty to customers for all products.
The Company reimburses customers for costs to repair or replace batteries.
The Company did not incur any warranty costs during the year ended March
31, 2003.
Accrued warranty costs as of March 31, 2002 $ 704,560
Recovery of warranty expense (353,560)
-----------
Accrued warranty costs as of March 31, 2003 $ 351,000
===========
(7) Subsequent Events
The Company entered into an Asset Purchase Agreement (the Agreement) on
August 27, 2003 pursuant to which C&D Technologies, Inc. (C&D) agreed to
acquire certain of the assets related to the MSE Storage Battery
Production Line of the Company. Certain amounts in the accompanying
financial statements such as cash and cash equivalents, due from and due
to affiliates, inventories, other current assets and most liabilities are
not included in the assets purchased by C&D. The closing of the
transaction occurred on September 25, 2003.
F-12 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Balance Sheets
June 30, 2003 and March 31, 2003
(unaudited)
Assets June 30, 2003 March 31, 2003
------------- --------------
Current assets:
Cash and cash equivalents $ 442,203 1,198,223
Due from affiliates (note 2) 22,259,182 23,631,379
Inventories (note 3) 964,620 790,173
Other current assets 2,000 24,868
------------- --------------
Total current assets 23,668,005 25,644,643
------------- --------------
Property, plant, and equipment:
Land 1,500,000 1,500,000
Buildings and improvements 1,390,797 1,390,797
------------- --------------
2,890,797 2,890,797
Less accumulated depreciation and amortization (21,731) --
------------- --------------
Net property, plant, and equipment 2,869,066 2,890,797
------------- --------------
$ 26,537,071 28,535,440
============= ==============
Liabilities and Production Line Deficit
Current liabilities:
Short-term loans payable to affiliate (note 2) $ 29,051,929 29,348,217
Due to affiliates (note 2) 241,131 2,524,876
Trade accounts payable and accrued expenses 505,148 219,716
Accrued warranty costs (note 5) 430,000 351,000
Accrued restructuring costs (note 4) 60,369 91,931
------------- --------------
Total current liabilities 30,288,577 32,535,740
------------- --------------
Production line deficit (3,751,506) (4,000,300)
------------- --------------
$ 26,537,071 28,535,440
============= ==============
See accompanying notes to unaudited financial statements.
F-13
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Statements of Operations
Three-month periods ended June 30, 2003 and 2002
(unaudited)
June 30, 2003 June 30, 2002
------------- -------------
Net sales (note 2) $ 2,317,258 1,835,017
Cost of goods sold 1,648,223 1,372,754
------------- -------------
Gross profit 669,035 462,263
Selling, general, and administrative expenses 222,780 209,530
Royalty expense (note 2) 54,958 45,503
Warranty expense (recovery) 79,000 (252,975)
------------- -------------
Operating income 312,297 460,205
------------- -------------
Other income (expense):
Interest expense (note 2) (77,327) (208,244)
Exchange gain (loss) on foreign currency transactions 13,824 (8,003)
------------- -------------
Total other income (expense) (63,503) (216,247)
------------- -------------
Income before income taxes 248,794 243,958
Income tax expense -- --
------------- -------------
Net income $ 248,794 243,958
============= =============
See accompanying notes to unaudited financial statements.
F-14
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Statements of Cash Flows
Three-month periods ended June 30, 2003 and 2002
(unaudited)
June 30, 2003 June 30, 2002
------------- -------------
Cash flows from operating activities:
Net income $ 248,794 243,958
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 21,731 377,452
Changes in operating assets and liabilities:
Due from affiliates 1,372,197 (1,327,863)
Inventories (174,447) (1,230,036)
Other current assets 22,868 (25,524)
Due to affiliates (2,283,745) (591,150)
Trade accounts payable and accrued expenses 285,432 177,188
Accrued warranty costs 79,000 (252,975)
Accrued restructuring costs (31,562) --
------------- -------------
Net cash used in operating activities (459,732) (2,628,950)
------------- -------------
Cash flows from financing activities:
(Repayments) advances under short-term loans payable to affiliate, net (296,288) 2,675,881
------------- -------------
Net cash (used in) provided by financing activities (296,288) 2,675,881
------------- -------------
Net (decrease) increase in cash and cash equivalents (756,020) 46,931
Cash and cash equivalents at beginning of period 1,198,223 230,902
------------- -------------
Cash and cash equivalents at end of period $ 442,203 277,833
============= =============
See accompanying notes to unaudited financial statements.
F-15 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Unaudited Financial Statements
June 30, 2003 and 2002
(unaudited)
(1) Description of Business and Summary of Significant Accounting Policies
(a) Basis of Presentation
In the opinion of management, the accompanying unaudited financial
statements include all adjustments, consisting only of normal
recurring items, necessary for their fair presentation in accordance
with generally accepted accounting principles in the United States
of America (GAAP) and have been prepared in accordance with GAAP for
interim financial information pursuant to the rules and regulations
of the Securities and Exchange Commission (SEC). Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted
pursuant to such rules and regulations. These unaudited financial
statements should be read in conjunction with the audited financial
statements included elsewhere in this filing.
(b) Basis of Presentation
The accompanying unaudited financial statements present the
financial position of the MSE Storage Battery Production Line of the
Company as of June 30, 2003 and March 31, 2003, and results of
operations and cash flows for the three month periods ended June 30,
2003 and 2002. As the production line had never been operated as a
separate business entity, the accompanying financial statements
include allocations prepared by the Company's management. The entire
balances of cash and cash equivalents, property, plant and
equipment, and short-term loans payable to affiliates, and certain
balances included in inventories, other current assets, due to
affiliates, trade accounts payable and accrued expenses in the
accompanying balance sheets reflect amounts for SBD since allocation
of these balances was not practical.
The accompanying statements of operations include the historical
revenues and all costs and expenses that are directly attributable
to the MSE Storage Battery Production Line and an allocation of
indirect expenses that relate to all production lines at SBD. Each
indirect cost and expense that relates to all production lines at
SBD was allocated between the MSE Storage Battery Production Line
and the other production lines based on either revenues, production
volume, number of production lines, or headcount. The Company's
management believes these allocations are reasonable. However, no
assurance can be given that such allocations will be indicative of
future results.
F-16 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Unaudited Financial Statements
June 30, 2003 and 2002
(unaudited)
(2) Related Party Transactions
For the three-month periods ended June 30, 2003 and 2002, transactions
with affiliated companies included in the statements of operations were as
follows:
June 30, 2003 June 30, 2002
------------- -------------
Net sales:
MECA $ 2,312,183 1,835,017
Panasonic Canada Inc., a subsidiary of MEI 5,075 --
Expenses:
Royalty expense - MBI 54,958 45,503
Interest expense - Panasonic Finance, Inc. (PFI) 77,327 208,244
Due from affiliates of $22,259,182 and $23,631,379 as of June 30, 2003 and
March 31, 2003 represents the following:
June 30, 2003 March 31, 2003
------------- --------------
Due from MECA $ 777,143 --
Due from MBI -- 81,251
Due from SBD 21,482,039 23,550,128
------------- --------------
$ 22,259,182 23,631,379
============= ==============
Amounts due from MECA represent trade accounts receivable from sales
transactions. Amounts due from MBI represent payroll paid by the MSE
Storage Battery Production Line on behalf of MBI. Amounts due from SBD
represents losses of other production lines funded by loans on the
financial statements of the MSE Storage Battery Production Line.
Short-term loans payable to affiliate represent amounts due under a
financing agreement with PFI to obtain working capital funds, as needed.
The effective interest rate was approximately 1.47% and 1.51% as of June
30, 2003 and March 31, 2003, respectively. There are no scheduled
repayment terms for such borrowings.
F-17 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Unaudited Financial Statements
June 30, 2003 and 2002
(unaudited)
Due to affiliates of $241,141 and $2,524,876 as of June 30, 2003 and March
31, 2003 represents the following:
June 30, 2003 March 31, 2003
------------- --------------
Due to MECA $ -- 2,222,911
Due to PFI 35,647 100,936
Due to MBI 121,866 59,629
Due to SBD 83,618 141,400
------------- --------------
$ 241,131 2,524,876
============= ==============
Amounts due to MECA represent payables in connection with inventory
returns. Amounts due to PFI represents accrued interest on short-term
loans payable to PFI. Amounts due to MBI primarily represent accrued
royalty to MBI and reimbursement for payroll for employees paid directly
by MBI. Additionally, amounts due to SBD also represents reimbursement to
SBD for payroll for employees paid directly by SBD.
The Company pays a royalty of 2.5% of the sales price of certain batteries
to MBI for the use of production technology.
(3) Inventories
Inventories as of June 30, 2003 and March 31, 2003 consisted of the
following:
June 30, 2003 March 31, 2003
------------- --------------
Raw material $ 123,533 --
Work-in-process 36,945 --
Finished goods 804,142 790,173
------------- --------------
$ 964,620 790,173
============= ==============
F-18 (Continued)
MSE STORAGE BATTERY PRODUCTION LINE OF
MATSUSHITA BATTERY INDUSTRIAL CORPORATION OF AMERICA
Notes to Unaudited Financial Statements
June 30, 2003 and 2002
(unaudited)
(4) Restructuring Costs
The Company terminated certain employees in connection with its
restructuring programs during the year ended March 31, 2003 and three
months ended June 30, 2003. The payments for severance and other related
exit costs, which were comprised of severance fees under the labor law in
Mexico and other exit costs attributable to the MSE Storage Battery
Production Line, were charged against accrued restructuring costs as
follows:
Accrued restructuring costs at March 31, 2003 $ 91,931
Payments during the period (31,562)
---------
Accrued restructuring costs at June 30, 2003 $ 60,369
=========
(5) Warranty Costs
The Company offers a 5 or 10 year warranty to customers for all products.
The Company reimburses customers for costs to repair or replace batteries.
The Company did not incur any warranty costs during the three-month period
ended June 30, 2003.
Accrued warranty costs at March 31, 2003 $ 351,000
Warranty expense during the period 79,000
---------
Accrued warranty costs at June 30, 2003 $ 430,000
=========
(6) Subsequent Events
The Company entered into an Asset Purchase Agreement (the Agreement) on
August 27, 2003 pursuant to which C&D Technologies, Inc. (C&D) agreed to
acquire certain of the assets related to the MSE Storage Battery
Production Line of the Company. Certain amounts in the accompanying
financial statements such as cash and cash equivalents, due from and due
to affiliates, inventories, other current assets and most liabilities are
not included in the assets purchased by C&D. The closing of the
transaction occurred on September 25, 2003.
F-19
(b) Pro Forma Financial Information
C&D Technologies, Inc.
Unaudited Pro Forma Financial Information
(dollars in thousands, except per share data)
- --------------------------------------------------------------------------------
1. UNAUDITED PRO FORMA FINANCIAL INFORMATION - INTRODUCTION
The following unaudited pro forma condensed financial statements combine
the historical financial information of C&D Technologies, Inc. and subsidiaries
("C&D") and the MSE Storage Battery Production Line of Matsushita Battery
Industrial Corporation of America ("MSE"). All significant intercompany balances
and transactions have been eliminated.
These pro forma statements illustrate the effect of the acquisition of MSE
on the financial position and results of operations of C&D. The acquisition of
MSE was completed on September 25, 2003. The unaudited pro forma condensed
balance sheet as of July 31, 2003 is based upon the unaudited historical balance
sheets of C&D as of July 31, 2003 and the unaudited historical balance sheet of
MSE as of June 30, 2003 and assumes the acquisition took place on July 31, 2003.
The unaudited pro forma statement of income for the year ended January
31, 2003 is based on the audited historical statement of income of C&D for the
year ended January 31, 2003 and the audited historical statement of
operations of MSE for the year ended March 31, 2003.The statement is presented
as though the acquisition occurred on February 1, 2002. The unaudited pro forma
statement of income for the six months ended July 31, 2003 is based on the
unaudited historical statement of income of C&D for the six months ended July
31, 2003 and the unaudited historical statement of operations of MSE for the
three months ended June 30, 2003 which reflects the six months of activity as
MSE was substantially idled. The statement is presented as though the
acquisition occurred on February 1, 2003. The unaudited pro forma condensed
financial statements do not purport to be indicative of the financial position
or results of operations of C&D that would have actually occurred had the
acquisition been completed on February 1, 2002, or which may occur in the
future.
The acquisition will be accounted for by the purchase method of
accounting. Under purchase accounting the tangible and intangible assets and
liabilities of MSE are recorded based upon their respective fair values as of
the effective time of the acquisition based upon valuations, which are not as
yet complete. A preliminary allocation of the purchase price has been made to
major categories of assets and liabilities in the accompanying pro forma
statements based on available information and is subject to change. The actual
allocations of purchase price and the resulting effect on income from operations
may differ from the unaudited pro forma amounts included herein. The pro forma
adjustments are described in the accompanying notes and represent C&D's
preliminary determination of purchase accounting adjustments based upon
available information and certain assumptions that C&D believes are reasonable.
The accompanying unaudited pro forma statements should be read in connection
with the separate historical financial statements and notes thereto of C&D and
MSE. The unaudited pro forma condensed financial statements do not reflect any
future benefits associated with integrating MSE with C&D.
P-1
C&D Technologies, Inc.
Unaudited Pro Forma Financial Information
(dollars in thousands, except per share data)
- ---------------------------------------------------------------------------
2. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JULY 31, 2003
C&D MSE
Technologies, Storage Pro Forma
Inc. (j) Battery (k) Adjustments Total
------------- ------------- ------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,769 $ 442 $ (442) (a)(1) $ 6,769
Accounts receivable, net 48,593 -- -- 48,593
Due from affiliates -- 22,259 (22,259) (a)(2) --
Inventories 46,144 965 (903) (a)(3) 46,206
Deferred income taxes 8,107 -- -- 8,107
Other current assets 910 2 847 (a)(4) 1,759
------------- ------------- ------------- -------------
Total current assets 110,523 23,668 (22,757) 111,434
Property, plant and equipment, net 102,975 2,869 6,990 (a)(5) 112,834
Intangible and other assets, net 36,917 -- 4,014 (a)(6) 40,931
Goodwill 113,904 -- -- 113,904
------------- ------------- ------------- -------------
Total assets $ 364,319 $ 26,537 $ (11,753) $ 379,103
============= ============= ============= =============
(Continued)
P-2
C&D Technologies, Inc.
Unaudited Pro Forma Financial Information
(dollars in thousands, except per share data)
- ---------------------------------------------------------------------------
2. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JULY 31, 2003
(continued)
C&D MSE
Technologies, Storage Pro Forma
Inc. (j) Battery (k) Adjustments Total
------------- ------------ ------------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 22,500 $ -- $ 11,984 (b) $ 34,484
Accounts payable 19,079 505 (505) (a)(7) 19,079
Due to affiliates -- 29,293 (29,293) (a)(8) --
Accrued liabilities 19,075 -- -- 19,075
Income taxes 1,641 -- -- 1,641
Other current liabilities 6,142 491 (491) (a)(9) 6,142
--------- --------- --------- ---------
Total current liabilities 68,437 30,289 (18,305) 80,421
Deferred income taxes 11,513 -- -- 11,513
Other liabilities 15,494 -- 2,800 (a)(10) 18,294
Commitments and contingencies
--------- --------- --------- ---------
Total liabilities 95,444 30,289 (15,505) 110,228
Minority interest 8,190 -- -- 8,190
Stockholders' equity:
Common stock 285 -- -- 285
Additional paid-in capital 69,635 -- -- 69,635
Treasury stock (41,590) -- -- (41,590)
Accumulated other comprehensive Income 292 -- -- 292
Retained earnings 232,063 -- -- 232,063
Production Line Deficit -- (3,752) 3,752 (c) --
--------- --------- --------- ---------
Total stockholders' equity 260,685 (3,752) 3,752 260,685
--------- --------- --------- ---------
Total liabilities and stockholders'
equity $ 364,319 $ 26,537 $ (11,753) $ 379,103
========= ========= ========= =========
See notes to unaudited pro forma condensed combined financial statements.
P-3
C&D Technologies, Inc.
Unaudited Pro Forma Financial Information
(dollars in thousands, except per share data)
- ---------------------------------------------------------------------------
3. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE FISCAL
YEAR ENDED JANUARY 31, 2003
C&D MSE
Technologies, Storage Pro Forma
Inc. (l) Battery (m) Adjustments Total
------------- ------------- ------------- -------------
Net sales $ 335,745 $ 1,581 $ -- $ 337,326
Cost of sales 257,046 9,268 (839) (d) 265,475
------------- ------------- ------------- -------------
Gross profit (loss) 78,699 (7,687) 839 71,851
Selling, general and administrative expenses 35,136 280 -- 35,416
Royalty expense -- 35 386 (e) 421
Research and development expense 9,509 -- -- 9,509
Recovery of warranty expense -- (354) 354 (f) --
Asset impairment charge and restructuring costs -- 8,122 -- (g) 8,122
------------- ------------- ------------- -------------
Operating income (loss) 34,054 (15,770) 99 18,383
Interest expense, net 3,800 141 170 (h) 4,111
Other expense, net 1,457 7 -- 1,464
------------- ------------- ------------- -------------
Income (loss) before income taxes
and minority interest 28,797 (15,918) (71) 12,808
Provision for income taxes 9,414 64 (5,290) (i) 4,188
Minority interest 91 -- -- 91
------------- ------------- ------------- -------------
Net income (loss) $ 19,292 $ (15,982) $ 5,219 $ 8,529
============= ============= ============= =============
Net income per common share - basic $ 0.75 $ 0.33
Weighted average shares of common
stock outstanding 25,818,024 25,818,024
Net income per common share - diluted $ 0.74 $ 0.33
Weighted average common shares - diluted 26,025,179 26,025,179
See notes to unaudited pro forma condensed combined financial statements.
P-4
C&D Technologies, Inc.
Unaudited Pro Forma Financial Information
(dollars in thousands, except per share data)
- ---------------------------------------------------------------------------
4. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE SIX
MONTHS ENDED JULY 31, 2003
C&D MSE
Technologies, Storage Pro Forma
Inc. (j) Battery (k) Adjustments Total
------------- ------------- ------------- -------------
Net sales $ 158,732 $ 2,317 $ -- $ 161,049
Cost of sales 122,662 1,648 313 (n) 124,623
------------- ------------- ------------- -------------
Gross profit 36,070 669 (313) 36,426
Selling, general and administrative expenses 19,694 223 -- 19,917
Royalty expense -- 55 186 (e) 241
Research and development expense 4,746 -- -- 4,746
Warranty expense -- 79 -- 79
------------- ------------- ------------- -------------
Operating income (loss) 11,630 312 (499) 11,443
Interest expense, net 748 77 79 (o) 904
Other expense, net 582 (14) -- 568
------------- ------------- ------------- -------------
Income (loss) before income taxes
and minority interest 10,300 249 (578) 9,971
Provision for income taxes 3,811 -- (122) (i) 3,689
Minority interest 87 -- -- 87
------------- ------------- ------------- -------------
Net income (loss) $ 6,402 $ 249 $ (456) $ 6,195
============= ============= ============= =============
Net income per common share - basic $ 0.25 $ 0.24
Weighted average shares of common
stock outstanding 25,601,418 25,601,418
Net income per common share - diluted $ 0.25 $ 0.24
Weighted average common shares - diluted 25,707,495 25,707,495
See notes to unaudited pro forma condensed combined financial statements.
P-5
C&D Technologies, Inc.
Unaudited Pro Forma Financial Information
(dollars in thousands, except per share data)
- -------------------------------------------------------------------------------
5. NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(a) The estimated purchase price and preliminary adjustments to historical
book value of MSE as a result of the acquisition are as follows:
Purchase price $ 11,087
Acquisition fees and expenses 897
--------
Total purchase price $ 11,984*
========
* Certain assets and liabilities were excluded or retained per the Asset
Purchase Agreement dated September 25, 2003, (the "Asset Purchase
Agreement") The following reconciles MSE's production line deficit to the
book value of the net assets acquired:
Production line deficit $ (3,752)
Cash and cash equivalents (1) (442)
Due from affiliates (2) (22,259)
Inventories (3) (903)
Other current assets (4) 847
Property, plant and equipment, net (5) 6,990
Intangible and other assets, net (6) 4,014
Accounts payable (7) 505
Due to affiliates (8) 29,293
Other current liabilities (9) 491
Other long-term liabilities (10) (2,800)
--------
Net assets acquired $ 11,984
========
(1) Cash and cash equivalents of $442 were not included in the
Asset Purchase Agreement.
(2) Amounts due from affiliates of $22,259 were not included in
the Asset Purchase Agreement.
P-6
5. NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (continued)
(3) The Asset Purchase Agreement did not include any finished
goods inventory. Only raw materials in the amount of $62 were
purchased.
(4) Of the $2 in other current assets, only miscellaneous
production supplies in the amount of $7 were acquired. A
receivable of $842 in Mexican value added tax paid to the
seller is recoverable from the Mexican Government. Therefore,
the pro forma adjustment for other current assets is $847 (-2
+$7 + $842).
(5) The $6,990 pro forma adjustment represents the increase in the
property, plant and equipment to the purchase price including
the allocation of the acquisition costs.
(6) In addition to the purchase of assets, the acquisition
included a Technology License Agreement ("License Agreement").
This License Agreement included the payment of an initial
royalty in the amount of $3,700 payable in two installments
(see note (a)(10) below). The intellectual property is being
amortized over 10 years. The intangible and other assets
include the estimated fair value of the License Agreement and
other assets.
(7) Accounts payable of $505 were not included in the Asset
Purchase Agreement.
(8) Amounts due to affiliates of $29,293 were not included in the
Asset Purchase Agreement.
(9) Other current liabilities of $491 were not included in the
Asset Purchase Agreement.
(10) The License Agreement included an initial royalty of $3,700
payable in two installments. The first installment of $900 was
paid upon closing of the transaction on September 25, 2003.
The second installment of $2,800 is due within 10 days after
the first anniversary of the closure of the transaction. The
liability for the second installment is included as a pro
forma adjustment to other long-term liabilities.
(b) The following reflects the estimated sources and uses of funds for the
acquisition assuming the acquisition occurred as of January 1, 2003:
Sources of funds:
Revolving loan $ 11,984
Use of funds:
Cash consideration for MSE $ 11,087
Acquisition fees and expenses
(capitalized acquisition costs) 897
--------
$ 11,984
========
P-7
5. NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (continued)
(c) Elimination of MSE's production line deficit.
(d) MSE's cost of sales included an inventory write-off of $7,869 in the
year ended March 31, 2003 to reduce inventories to fair value. This one
time operating expense was not eliminated from these pro forma financial
statements.
MSE historically depreciated the historical cost of its property, plant
and equipment over lives ranging from three to 20 years. That resulted in
annual depreciation expense of $1,509. Upon the consummation of the
acquisition by C&D, the fair value of property, plant and
equipment acquired is estimated to be approximately $9,859. This amount is
being depreciated over C&D's estimate of the remaining economic
life of the assets; i.e., 20 years for buildings and 3 to ten years for
equipment. Depreciation of the property, plant and equipment at the
estimated fair value will result in annual depreciation expense of
approximately $670. The estimated pro forma depreciation adjustment is
$839 ($1,509 less $670).
(e) Represents amortization of the estimated fair value of the License
Agreement over ten years plus the ongoing royalty in the amount of 2% of
sales.
(f) In the fiscal year ended March 31, 2003, MSE recorded a recovery of
warranty expense previously accrued in the amount of $354. The Asset
Purchase Agreement did not include any warranty liabilities and,
therefore, this recovery was eliminated.
(g) In the fiscal year ended March 31, 2003, MSE recorded a charge of
$8,122 mostly comprised of an impairment write-off of long-lived asset
impairments. This one time operating expense was not eliminated from these
pro forma financial statements. As part of the acquisition, all long-lived
assets were valued at their estimated fair value.
(h) The transaction was financed by C&D's existing revolving credit
facility. This pro forma adjustment reflects additional interest expense
incurred by C&D, assuming that the MSE acquisition and associated
borrowing occurred on February 1, 2002. The weighted average interest rate
for fiscal year 2003 was 2.60%. The interest expense for the acquisition
related borrowing would have been $311 per year ($11,984 x 2.60%). Since
no other interest bearing debt was acquired as part of the acquisition the
pro forma adjustment is $170, which consists of $311 in acquisition
related interest less the $141 in interest expense on the MSE financial
statements.
(i) The income tax effects of the pro forma adjustments assume an
effective income tax rate of 32.7% for the fiscal year ended January 31,
2003 and 37.0% for the six months ended July 31, 2003.
(j) Information is from the C&D Technologies, Inc., July 31, 2003 Form
10-Q.
(k) Information is from the MSE Storage Battery Production Line of
Matsushita Battery Industrial Corporation of America June 30, 2003
financial statements, which are included in this Form 8-K/A.
(l) Information is from the C&D Technologies, Inc., January 31, 2003 Form
10-K.
(m) Information is from the MSE Storage Battery Production Line of
Matsushita Battery Industrial Corporation of America March 31, 2003
financial statements, which are included in this Form 8-K/A.
P-8
5. NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (continued)
(n) Depreciation of the property, plant and equipment at the estimated
fair value will result in depreciation expense of approximately $335 per
six-month period. The estimated pro forma depreciation adjustment is $313
($335 less MSE depreciation of $22).
(o) The interest expense for the acquisition related borrowing would have
been $156 for the six month period ended July 31, 2003 ($11,984 x 2.60% x
1/2). Since no other interest bearing debt was acquired as part of the
acquisition the pro forma adjustment is $79, which consists of $156 in
acquisition related interest less the $77 in interest expense on the MSE
financial statements.
P-9
(c) Exhibit
23.1 Independent Auditors' Consent (filed herewith)
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 hereunto duly authorized.
C&D TECHNOLOGIES, INC.
By: /s/ Stephen E. Markert, Jr.
---------------------------------
Stephen E. Markert, Jr.,
Vice President - Finance
and Chief Financial Officer
Date: December 9, 2003
Exhibit Index
23.1 Independent Auditors' Consent