UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File No. 1-9389
C&D TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3314599
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Union Meeting Road
Blue Bell, Pennsylvania 19422
(Address of principal executive office)
(Zip Code)
(215) 619-2700
(Registrant's telephone number, including area code)
_________________N/A_________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO ___
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). YES X NO ___
Number of shares of the Registrant's Common Stock outstanding on May 28,
2004: 25,305,962
C&D TECHNOLOGIES, INC.
AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets -
April 30, 2004 and January 31, 2004.................. 3
Consolidated Statements of Income - Three
Months Ended April 30, 2004 and 2003................. 5
Consolidated Statements of Cash Flows -
Three Months Ended April 30, 2004 and 2003........... 6
Consolidated Statements of Comprehensive Income -
Three Months Ended April 30, 2004 and 2003........... 7
Notes to Consolidated Financial Statements............ 8
Report of Independent Registered Public Accounting
Firm................................................. 16
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations... 17
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk............................... 23
Item 4 - Controls and Procedures.......................... 23
PART II. OTHER INFORMATION
Item 2 - Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities.................. 24
Item 4 - Submission of Matters to a Vote of Security
Holders......................................... 24
Item 5 - Other Information............................... 25
Item 6 - Exhibits and Reports on Form 8-K................. 25
SIGNATURES................................................... 26
EXHIBIT INDEX................................................ 27
2
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(UNAUDITED)
April 30, January 31,
2004 2004
---- ----
ASSETS
Current assets:
Cash and cash equivalents................... $ 10,597 $ 12,306
Accounts receivable, less allowance for
doubtful accounts of $1,386 and $1,476,
respectively........................... 52,250 49,838
Inventories................................. 49,059 47,175
Deferred income taxes....................... 10,234 10,356
Other current assets........................ 1,581 1,262
------- -------
Total current assets............. 123,721 120,937
Property, plant and equipment, net................ 102,725 104,799
Intangible and other assets, net.................. 39,046 39,799
Goodwill.......................................... 118,971 120,415
------- -------
Total assets..................... $384,463 $385,950
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................ 22,464 22,246
Accrued liabilities......................... 19,807 19,495
Income taxes................................ 3,122 3,791
Other current liabilities................... 9,680 11,400
------- -------
Total current liabilities........ 55,073 56,932
Deferred income taxes ............................ 17,476 17,369
Long-term debt.................................... 19,661 19,620
Other liabilities................................. 14,530 14,310
------- -------
Total liabilities................ 106,740 108,231
The accompanying notes are an integral part of these statements.
3
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(Dollars in thousands, except par value)
(UNAUDITED)
April 30, January 31,
2004 2004
---- ----
Commitments and contingencies
Minority interest................................. 8,066 8,186
Stockholders' equity:
Common stock, $.01 par value, 75,000,000
shares authorized; 28,631,414 and
28,605,747 shares issued, respectively.. 286 286
Additional paid-in capital.................. 70,964 70,619
Treasury stock, at cost, 3,262,115 and
3,196,508 shares, respectively.......... (45,566) (44,481)
Accumulated other comprehensive
income.................................. 2,469 3,259
Retained earnings........................... 241,504 239,850
------- -------
Total stockholders' equity....... 269,657 269,533
------- -------
Total liabilities and
stockholders' equity........... $384,463 $385,950
======= =======
The accompanying notes are an integral part of these statements.
4
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(UNAUDITED)
Three months ended
April 30,
2004 2003
---- ----
Net sales............................ $85,805 $77,368
Cost of sales........................ 69,264 60,376
------ ------
Gross profit..................... 16,541 16,992
Selling, general and
administrative expenses.......... 10,034 9,170
Research and development
expenses......................... 2,669 2,411
------ ------
Operating income................. 3,838 5,411
Interest expense, net................ 287 446
Other expense, net................... 560 270
------ ------
Income before income taxes and
minority interest............. 2,991 4,695
Provision for income taxes........... 1,107 1,737
------ ------
Net income before minority
interest...................... 1,884 2,958
Minority interest.................... (120) 136
------ ------
Net income....................... $ 2,004 $ 2,822
====== ======
Net income per share - basic......... $ .08 $ .11
====== ======
Net income per share - diluted....... $ .08 $ .11
====== ======
Dividends per share.................. $.01375 $.01375
====== ======
The accompanying notes are an integral part of these statements.
5
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(UNAUDITED)
Three months ended
April 30,
2004 2003*
---- ----
Cash flows provided (used) by operating activities:
Net income........................................... $ 2,004 $ 2,822
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest.............................. (120) 136
Depreciation and amortization.................. 5,517 5,812
Deferred income taxes.......................... - (39)
(Gain)loss on disposal of assets............... (15) 39
Changes in:
Accounts receivable...................... (2,623) (4,464)
Inventories.............................. (1,990) (1,124)
Other current assets..................... (331) (256)
Accounts payable......................... 470 3,061
Accrued liabilities...................... 371 (413)
Income taxes payable..................... (612) 3,723
Other current liabilities................ (1,718) (123)
Other liabilities........................ 219 (813)
Other long-term assets................... 252 465
Deferred income taxes.................... 225 (19)
Other, net..................................... 979 518
------- -------
Net cash provided by operating activities................ 2,628 9,325
------- -------
Cash flows provided (used) by investing activities:
Acquisition of property, plant and equipment......... (2,579) (1,009)
Proceeds from disposal of property, plant
and equipment..................................... 54 43
------- -------
Net cash used by investing activities.................... (2,525) (966)
------- -------
Cash flows provided (used) by financing activities:
Repayment of debt.................................... - (18,750)
Proceeds from new borrowings......................... - 9,350
Decrease in book overdrafts.......................... (486) (2,106)
Proceeds from issuance of common stock, net.......... 302 108
Purchase of treasury stock........................... (1,233) (1,510)
Payment of common stock dividends.................... (350) (353)
------- -------
Net cash used by financing activities.................... (1,767) (13,261)
------- -------
Effect of exchange rate changes on cash.................. (45) 37
------- -------
Decrease in cash and cash equivalents.................... (1,709) (4,865)
Cash and cash equivalents at beginning
of period............................................. 12,306 12,966
------- -------
Cash and cash equivalents at end of period............... $ 10,597 $ 8,101
======= =======
SCHEDULE OF NON CASH INVESTING
AND FINANCIAL ACTIVITIES
Increase (decrease) in property, plant, and
equipment acquisitions in
accounts payable...................................... $ 415 $ (317)
======= =======
* Reclassified for comparative purposes.
The accompanying notes are an integral part of these statements.
6
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
(UNAUDITED)
Three months ended
April 30,
2004 2003
---- ----
Net income............................................... $2,004 $2,822
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on derivative instruments... 183 (29)
Foreign currency translation adjustments............... (973) (874)
----- -----
Total comprehensive income............................... $1,214 $1,919
===== =====
The accompanying notes are an integral part of these statements.
7
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(UNAUDITED)
1. INTERIM STATEMENTS
The accompanying interim consolidated financial statements of C&D
Technologies, Inc. (together with its operating subsidiaries, the "Company")
should be read in conjunction with the consolidated financial statements and
notes thereto contained in the Company's Annual Report to Stockholders for the
fiscal year ended January 31, 2004. The January 31, 2004 amounts were derived
from the Company's audited financial statements. The consolidated financial
statements presented herein are unaudited but, in the opinion of management,
include all necessary adjustments (which comprise only normal recurring items)
required for a fair presentation of the consolidated financial position as of
April 30, 2004 and the related consolidated statements of income and
comprehensive income for the three-month periods ended April 30, 2004 and 2003
and the related consolidated statements of cash flows for the three-month
periods ended April 30, 2004 and 2003. However, interim results of operations
may not be indicative of results for the full fiscal year. The accompanying
interim consolidated financial statements of the Company have been prepared in
conformity with accounting principles generally accepted in the United States of
America.
2. NEW AND PROPOSED ACCOUNTING PRONOUNCEMENTS
In December 2003, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 104, "Revenue Recognition," which supersedes SAB
No. 101, "Revenue Recognition in Financial Statements." The adoption of SAB No.
104 did not have a material impact on the Company's consolidated results of
operations or financial position. SAB No. 104 primarily rescinds the accounting
guidance contained in SAB No. 101 related to multiple-element revenue
arrangements that was superseded as a result of the issuance of Emerging Issues
Task Force ("EITF") No. 00-21, "Revenue Arrangements with Multiple
Deliverables." While the wording of SAB No. 104 has changed to reflect the
issuance of EITF No. 00-21, the revenue recognition principles of SAB No. 101
remain largely unchanged by the issuance of SAB No. 104, which was effective
upon issuance.
In March 2004, the Financial Accounting Standards Board ("FASB") issued an
exposure document entitled "Share-Based Payment - an amendment of Statements No.
123 and 95 (Proposed Statement of Financial Accounting Standards)." The Proposed
Statement would eliminate the ability to account for share-based compensation
transactions using Accounting Principles Board ("APB") Opinion No.25,
"Accounting for Stock Issued to Employees" and generally require that such
transactions be accounted for using a fair-value-based method. This accounting
treatment, if approved, could result in significant compensation expense. The
Proposed Statement, if adopted, would be applied to public entities
prospectively for fiscal years beginning after December 15, 2004, as if all
share-based compensation awards granted, modified, or settled after December 15,
1994, had been accounted for using the fair-value method of accounting.
Retrospective application of the Proposed Statement is not permitted.
8
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
3. CASH AND CASH EQUIVALENTS
The Company's cash management program utilizes zero balance accounts.
Accordingly, all book overdraft balances have been reclassified to accounts
payable and amounted to $4,435 and $4,921 at April 30, 2004 and January 31,
2004, respectively.
4. INVENTORIES
Inventories consisted of the following:
April 30, January 31,
2004 2004
---- ----
Raw materials............................ $16,429 $17,961
Work-in-progress......................... 12,229 10,667
Finished goods........................... 20,401 18,547
------ ------
$49,059 $47,175
====== ======
5. INCOME TAXES
A reconciliation of the provision for income taxes from the statutory rate
to the effective rate is as follows:
Three months ended
April 30,
2004 2003
---- ----
U.S. statutory income tax....................... 35.0% 35.0%
State tax, net of federal income tax benefit.... 2.6 0.4
Tax effect of foreign operations................ (0.3) 0.5
Other........................................... (0.3) 1.1
---- ----
37.0% 37.0%
==== ====
6. NET INCOME PER COMMON SHARE
Net income per share - basic is based on the weighted average number of
shares of Common Stock outstanding. Net income per share - diluted reflects the
potential dilution that could occur if stock options were exercised. Weighted
average common shares and common shares - diluted were as follows:
Three months ended
April 30,
2004 2003
---- ----
Weighted average shares
of common stock
outstanding................................... 25,398,868 25,649,652
Assumed exercise of stock
options, net of shares
assumed reacquired............................ 186,257 110,794
---------- ----------
Weighted average common
shares - diluted.............................. 25,585,125 25,760,446
========== ==========
During the three months ended April 30, 2004 and 2003 there were 1,498,541
and 2,559,992 outstanding employee stock options, respectively, that are
out-of-the-money and therefore excluded from the calculation of the dilutive
effect of employee stock options.
9
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
7. CONTINGENT LIABILITIES
Legal:
In March 2003, the Company was sued in an action captioned United States of
America v. C&D Technologies, Inc., in the United States District Court for the
Southern District of Indiana, for alleged violations of the Clean Water Act by
virtue of alleged violations of permit effluent and pretreatment discharge
limits at our plant in Attica, Indiana. The complaint requests injunctive relief
and civil penalties of up to the amounts provided by statute.
Environmental:
The Company is subject to extensive and evolving environmental laws and
regulations regarding the clean-up and protection of the environment, worker
health and safety and the protection of third parties. These laws and
regulations include, but are not limited to: (i) requirements relating to the
handling, storage, use and disposal of lead and other hazardous materials in
manufacturing processes and solid wastes; (ii) record keeping and periodic
reporting to governmental entities regarding the use and disposal of hazardous
materials; (iii) monitoring and permitting of air emissions and water discharge;
and (iv) monitoring worker exposure to hazardous substances in the workplace,
and protecting workers from impermissible exposure to hazardous substances,
including lead, used in our manufacturing process.
Notwithstanding the Company's efforts to maintain compliance with
applicable environmental requirements, if injury or damage to persons or the
environment arises from hazardous substances used, generated or disposed of in
the conduct of the Company's business (or that of a predecessor to the extent
the Company is not indemnified therefor), the Company may be held liable for
certain damages, the costs of investigation and remediation, and fines and
penalties, which could have a material adverse effect on the Company's business,
financial condition, or results of operations. However, under the terms of the
purchase agreement with Allied Corporation ("Allied") for the acquisition of the
Company (the "Acquisition Agreement"), Allied was obligated to indemnify the
Company for any liabilities of this type resulting from conditions existing at
January 28, 1986 that were not disclosed by Allied to the Company in the
schedules to the Acquisition Agreement. These obligations have since been
assumed by Allied's successor in interest, Honeywell ("Honeywell").
The Company, along with numerous other parties, has been requested to
provide information to the United States Environmental Protection Agency (the
"EPA") in connection with investigations of the source and extent of
contamination at three lead smelting facilities (the "Third Party Facilities")
to which the Company had made scrap lead shipments for reclamation prior to the
date of the acquisition.
The Company and four other potentially responsible parties ("PRPs") agreed
upon a cost sharing arrangement for the design and remediation phases of a
project related to one of the Third Party Facilities, the former NL Industries
site in Pedricktown, New Jersey, acting pursuant to a Consent Decree. The PRPs
identified and sued additional PRPs for contribution. In April 2002, one of the
original four PRPs, Exide Technologies ("Exide"), filed for relief under Chapter
11 of Title 11 of the United States Code. In August 2002, Exide notified the
PRPs that it would no longer be taking an active role in any further action at
the site and discontinued its financial participation. This resulted in a pro
rata increase in the liabilities of the other PRPs, including the Company. As a
result of the approval of its plan of reorganization for emergence from
bankruptcy on April 21, 2004, this liability will be discharged in exchange for
common stock of a value equal to a percentage of Exide's total liability, which
the Company does not expect to be material.
10
The Company also responded to requests for information from the EPA and the
state environmental agency with regard to another Third Party Facility, the
"Chicago Site," in October 1991.
In August 2002, the Company was notified of its involvement as a PRP at the
NL Atlanta, Northside Drive Superfund site. The Company is currently in
negotiations with the other PRPs with respect to this site regarding its share
of the allocated liability, which the Company expects to be de minimis.
The Company is also aware of the existence of contamination at its
Huguenot, New York facility, which is expected to require expenditures for
further investigation and remediation. The site is listed by the New York State
Department of Environmental Conservation ("NYSDEC") on its registry of inactive
hazardous waste disposal sites due to the presence of fluoride and other
contaminants in amounts that exceed state groundwater standards, and the agency
has issued a Record of Decision for the soil remediation portion of the site. A
final remediation plan for the ground water portion has not yet been finalized
with or approved by the State of New York. In February 2000, C&D filed suit
against the prior owner of the site, Avnet, Inc., which is ultimately expected
to bear some, as yet undetermined, share of the costs associated with
remediation of contamination in place at the time the Company acquired the
property. The parties are attempting to resolve the matter through mediation,
failing which C&D intends to aggressively pursue all available legal remedies.
Should the parties fail to reach a mediated settlement, and unless an
alternative resolution can be achieved, NYSDEC may conduct the remediation and
seek recovery from the parties.
The Company, together with Johnson Controls, Inc. ("JCI"), is conducting an
assessment and remediation of contamination at its Standby Power Division
facility in Milwaukee, Wisconsin. The majority of the on-site portion of this
project was completed as of October 2001. Under the purchase agreement with JCI,
the Company is responsible for (i) one-half of the cost of the on-site
assessment and remediation, with a maximum liability of $1,750, (ii) any
environmental liabilities at the facility that are not remediated as part of the
current project and (iii) environmental liabilities for any new claims made
after the fifth anniversary of the closing, i.e. March 2004, that arise from
migration from a pre-closing condition at the Milwaukee facility to locations
other than the Milwaukee facility, but specifically excluding liabilities
relating to pre-closing offsite disposal. JCI has retained all other
environmental liabilities, including off-site assessment and remediation. In
March 2004, the Company entered into an agreement with JCI to continue to share
responsibility as set forth in the original purchase agreement.
In January 1999, the Company received notification from the EPA of alleged
violations of permit effluent and pretreatment discharge limits at its plant in
Attica, Indiana. The Company submitted a compliance plan to the EPA in April
2002. The Company engaged in negotiations with both the EPA and Department of
Justice through March 2003 regarding a potential resolution of this matter. The
government filed suit against the Company in March 2003 for alleged violations
of the Clean Water Act. The complaint requests injunctive relief and civil
penalties of up to the amounts provided by statute. The Company anticipates that
the matter will result in a penalty assessment and compliance obligations. The
Company will continue to seek a negotiated or mediated resolution, failing which
it intends to vigorously defend the action.
The Company accrues reserves for liabilities in the Company's consolidated
financial statements and periodically reevaluates the reserved amounts for these
liabilities in view of the most current information available in accordance with
SFAS No. 5, "Accounting for Contingencies." As of April 30, 2004, accrued
environmental reserves totaled $2,583, consisting of $2,256 in other current
liabilities and $327 in other liabilities. Based on currently available
information, management of the Company believes that appropriate reserves have
been established with respect to the foregoing contingent liabilities and that
they are not expected to have a material adverse effect on the Company's
business, financial condition or results of operations.
11
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
8. OPERATIONS BY INDUSTRY SEGMENT
Effective February 1, 2004, the Company combined the Dynasty and Powercom
divisions into the newly created Standby Power Division. The results of the
prior year have been reclassified for comparative purposes.
The Company has the following three reportable business segments:
The Standby Power Division manufactures and markets integrated reserve
power systems and components for the standby power market, which includes
telecommunications, uninterruptible power supplies, cable and utilities.
Integrated reserve power systems monitor and regulate electric power flow and
provide backup power in the event of a primary power loss or interruption. The
Standby Power Division also produces the individual components of these systems,
including reserve batteries, power rectifiers, system monitors, power boards and
chargers. Major applications of these products include wireless and wireline
telephone infrastructure, CATV signal powering, corporate data center powering
and computer network backup for use during power outages.
The Power Electronics Division manufactures and markets custom, standard
and modified-standard electronic power supply systems, including DC to DC
converters, for large original equipment manufacturers ("OEMs") of
telecommunications and networking equipment, as well as office and industrial
equipment.
The Motive Power Division manufactures complete systems and individual
components (including power electronics and batteries) to power, monitor, charge
and test the batteries used in electric industrial vehicles, including fork-lift
trucks, automated guided vehicles and airline ground support equipment. These
products are marketed to end users in a broad array of industries, dealers of
fork-lift trucks and other material handling vehicles, and, to a lesser extent,
OEMs.
Summarized financial information related to the Company's business segments
for the three months ended April 30, 2004 and 2003 is shown below:
Standby Power Motive
Power Electronics Power
Division Division Division Consolidated
-------- ----------- -------- ------------
Three months ended April 30, 2004:
Net sales................................ $60,890 $11,173 $13,742 $85,805
Operating income (loss).................. $ 5,392 $ 291 $ (1,845) $ 3,838
Three months ended April 30, 2003:
Net sales................................ $55,452 $ 9,036 $12,880 $77,368
Operating income (loss).................. $ 7,549 $ (594) $(1,544) $ 5,411
12
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
9. DERIVATIVE INSTRUMENTS
The following table includes the Company's interest rate swap as of April
30, 2004 and January 31, 2004. This interest rate swap is designated as a cash
flow hedge and, therefore, changes in its fair value, net of tax, are recorded
in accumulated other comprehensive income.
Fixed Variable Fair Fair
Interest Interest Value Value
Notional Origination Maturity Rate Rate At At
Amount Date Date Paid Received 4/30/04 1/31/04
- -------- ----------- -------- -------- -------- -------- -------
$20,000 04/11/01 04/11/06 5.56% LIBOR $(1,182) $(1,486)
------ ------
$(1,182) $(1,486)
====== ======
The Company does not invest in derivative securities for speculative
purposes, but does enter into hedging arrangements in order to reduce its
exposure to fluctuations in interest rates as well as to fluctuations in
exchange rates. The Company applies hedge accounting in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," whereby the Company designates
each derivative as a hedge of (i) the fair value of a recognized asset or
liability or of an unrecognized firm commitment ("fair value" hedge); or (ii)
the variability of anticipated cash flows of a forecasted transaction or the
cash flows to be received or paid related to a recognized asset or liability
("cash flow" hedge). From time to time, however, the Company may enter into
derivatives that economically hedge certain of its risks, even though hedge
accounting is not allowed by SFAS No. 133 or is not applied by the Company. In
these cases, there generally exists a natural hedging relationship in which
changes in fair value of the derivative, that are recognized currently in
earnings, act as an economic offset to changes in the fair value of the
underlying hedged item(s). The Company did not apply hedge accounting to
currency forward contracts with a combined fair value of $445 and $(923) as of
April 30, 2004 and January 31, 2004. Changes in the fair value of these currency
forward contracts are recorded in other expense, net.
13
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
10. STOCK-BASED COMPENSATION PLANS
Under ABP No. 25, if the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
As the exercise price of all options granted under the Company's stock
option plans was equal to the market price of the underlying common stock on the
grant date, no stock-based employee compensation cost is recognized in net
income. The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation" as amended, to options
granted under the stock option plans. For purposes of this pro-forma disclosure,
the estimated value of the options is amortized ratably to expense over the
options' vesting periods. Because the estimated value is determined as of the
date of grant, the actual value ultimately realized by the employee may be
significantly different.
Three months ended
April 30,
2004 2003
---- ----
Net income - as reported................................ $2,004 $2,822
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects............ 915 1,018
----- -----
Net income - pro forma.................................. $1,089 $1,804
===== =====
Net income per common share - basic - as reported....... $ 0.08 $ 0.11
Net income per common share - basic - pro forma......... $ 0.04 $ 0.07
Net income per common share - diluted - as reported..... $ 0.08 $ 0.11
Net income per common share - diluted - pro forma....... $ 0.04 $ 0.07
Weighted average fair value of options
granted during the period............................. $ 8.46 $ 7.80
SFAS No. 123 requires the use of option pricing models that were not
developed for use in valuing employee stock options. The Black-Scholes
option-pricing model was developed for use in estimating the fair value of
short-lived exchange traded options that have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions, including the option's expected life and the
price volatility of the underlying stock. Because changes in the subjective
input assumptions can materially affect the fair value estimate, in the opinion
of management, the existing models do not necessarily provide a reliable single
measure of the fair value of employee stock options.
14
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share data)
(UNAUDITED)
11. WARRANTY
The Company provides for estimated product warranty expenses when the
related products are sold. Because warranty estimates are forecasts that are
based on the best available information, primarily historical claims experience,
claims costs may differ from amounts provided. An analysis of changes in the
liability for product warranties follows:
Three months ended
April 30,
2004 2003
---- ----
Balance at beginning of period........................ $ 9,759 $10,599
Current period provisions ............................ 1,479 899
Expenditures ......................................... (1,585) (2,237)
------ ------
Balance at end of period. ............................ $ 9,653 $ 9,261
====== ======
12. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Effective January 31, 2004, the Company adopted SFAS No. 132 (revised
2003), "Employers' Disclosures about Pensions and Other Postretirement
Benefits." This standard requires the disclosure of the components of net
periodic benefit cost recognized during interim periods.
Pension Benefits Postretirement Benefits
---------------- -----------------------
Three Months ended Three months ended
April 30, April 30,
------------------ -----------------------
2004 2003 2004 2003
- --------------------------- ---- ---- ---- ----
Service Cost $ 475 $ 378 $ 53 $ 43
Interest Cost 970 956 63 63
Expected return on plan assets (1,213) (1,031) - -
Amortization of prior service cost 5 5 30 29
Recognized actuarial loss/(gain) 371 352 3 (1)
----- ----- --- ---
Net periodic benefit cost $ 608 $ 660 $149 $134
===== ===== === ===
Assuming that the actual return on plan assets is consistent with the
expected rate of 8.5% in fiscal 2005, and that interest rates remain constant,
the Company would not be required to make any contributions to its pension plans
for fiscal 2005. The Company expects to make a discretionary contribution of
approximately $250 to one of its pension plans. The Company also expects to make
contributions totaling approximately $215 to the two Company sponsored
postretirement benefit plans.
13. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
With respect to the unaudited financial information of the Company for the
three-month periods ended April 30, 2004 and 2003, the Company's Independent
Registered Public Accounting Firm, in their report dated May 24, 2004, appearing
herein, state that they did not audit and they do not express an opinion on the
unaudited financial information. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the limited nature
of the review procedures applied. The Independent Registered Public Accounting
Firm is not subject to the liability provisions of Section 11 of the Securities
Act of 1933 for their report on the unaudited financial information because that
report is not a "report" within the meaning of Sections 7 and 11 of the Act.
15
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of C&D Technologies, Inc.:
We have reviewed the accompanying consolidated balance sheet of C&D
Technologies, Inc. and its subsidiaries (the "Company") as of April 30, 2004,
and the related consolidated statements of income and comprehensive income for
each of the three-month periods ended April 30, 2004 and 2003, and the
consolidated statement of cash flows for the three month periods ended April 30,
2004 and 2003. These interim financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with the standards of the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated interim financial statements for
them to be in conformity with accounting principles generally accepted in the
United States of America.
We previously audited in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet as of January 31, 2004, and the related consolidated statements of income,
stockholders' equity, comprehensive income, and of cash flows for the year then
ended (not presented herein), and in our report dated March 12, 2004 we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying consolidated balance
sheet as of January 31, 2004, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been derived.
/s/ PricewaterhouseCoopers LLP
May 24, 2004
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
Item 2.
Within the following discussion, unless otherwise stated, "quarter" and
"three-month period", refer to the first quarter of fiscal 2005. All comparisons
are with the corresponding period in the prior year, unless otherwise stated.
Net sales for the first quarter of fiscal 2005 increased $8,437 or 11% to
$85,805 from $77,368 in the first quarter of fiscal 2004. This increase resulted
primarily from improved customer demand for products of all three divisions.
Sales by the Standby Power Division increased $5,438, or 10%, primarily due to
increased sales to the UPS and cable market. This revenue growth was partially
offset by continued weakness in the telecommunications market. Sales of new
products from our recently acquired Reynosa, Mexico facility totaled
approximately $1,400 in the quarter, up from approximately $500 in the fourth
quarter of fiscal 2004. Sales of the Power Electronics Division increased
$2,137, or 24%, mainly due to higher DC to DC converter sales. New product
introductions and improvement in the division's end markets continue to have a
positive impact on sales growth. Motive Power divisional sales increased $862,
or 7% primarily due to higher sales of both batteries and chargers.
Gross profit for the first quarter of fiscal 2005 decreased $451 or 3% to
$16,541 from $16,992 in the prior year, resulting in a decrease in gross margin
from 22.0% to 19.3%. Gross profit declined in the Standby Power and Motive Power
divisions, primarily as a result of a more than 15 cents per pound increase in
our cost of lead. Gross profit in the Power Electronics Division increased
primarily due to increased sales and the continued benefits of relocating
certain Mexican manufacturing activities to our Guangzhou, China facility, which
benefits from lower manufacturing costs.
Selling, general and administrative expenses for the first quarter of
fiscal 2005 increased $864 or 9%. This increase was primarily due to $580 of
higher warranty expense, $299 of due diligence costs, higher payroll related
costs of $220, partially offset by lower variable selling costs of $308.
Research and development expenses for the first quarter of fiscal 2005
increased $258 or 11%. As a percentage of sales, research and development
expenses were 3.1% of sales in both the first quarters of fiscal 2005 and fiscal
2004.
Operating income for the first quarter of fiscal 2005 decreased $1,573 or
29% to $3,838 from $5,411 in the comparable quarter of the prior year. This
decrease was the result of lower operating income generated by the Standby Power
Division, coupled with a higher operating loss in the Motive Power Division,
partially offset by operating income generated by the Power Electronics Division
in the three-month period ended April 30, 2004 versus an operating loss in the
three-month period ended April 30, 2003.
17
Interest expense, net, decreased $159 in the first quarter of fiscal 2005,
primarily due to lower average debt balances outstanding during the quarter,
partially offset by a higher effective interest rate.
Income tax expense for the first quarter of fiscal 2005 decreased $630 from
the comparable period of the prior year as the result of lower income before
income taxes. The effective tax rate consists of statutory rates adjusted for
the tax impacts of foreign operations. The effective tax rate for both the first
quarter of fiscal 2005 and fiscal 2004 was 37.0%.
Minority interest reflects the 33% ownership interest in the joint venture
battery business located in Shanghai, China that is not owned by C&D. The joint
venture had a net loss in the first quarter of fiscal 2005 versus net income in
the first quarter of fiscal 2004.
As a result of the above, for the first quarter of fiscal 2005, net income
decreased $818 or 29% to $2,004 or $0.08 per share - basic and $0.08 per share -
diluted.
Future Outlook
During the second quarter of fiscal 2005, we will continue the transition
of our Standby Power HD line and our Motive Power V-Line operations to Reynosa,
Mexico. We expect these moves to be complete in the third quarter. During the
second and third quarters of fiscal 2005, we expect to record $2,000 to $2,500
of integration charges, for rigging and transporting equipment as well as
severance. In addition, there may be asset impairment charges related to our
Huguenot, New York and/or Leola, Pennsylvania facilities, although we cannot
with certainty predict the magnitude or timing of such outcomes.
Our manufacturing migration included last year's Reynosa, Mexico plant
acquisition and we will be relocating our Shanghai, China Standby battery
manufacturing facility to a new location pending the conclusion of negotiations
with the Chinese government. These moves are expected to provide important
platforms for international growth. Additionally, in Europe, we have expanded
our sales presence, primarily concentrating on the UPS market.
For the second quarter of fiscal year 2005, we expect to generate diluted
earnings per share of between $0.10 to $0.15 per share, which includes a portion
of the previously announced integration costs. This assumes the cost of lead
does not increase further above the average experienced during the first quarter
of fiscal 2005, as to which there can be no assurance. This estimate does not
include any provision for potential asset impairments.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
(Dollars in thousands, except per share data)
Liquidity and Capital Resources
Net cash provided by operating activities decreased $6,697 or 72% to $2,628
for the three-month period ended April 30, 2004 compared to $9,325 in the same
period of the prior year. This decrease in net cash provided by operating
activities was primarily due to: (i) a decrease in income taxes payable in the
three months ended April 30, 2004 versus an increase in the three months ended
April 30, 2003 (primarily due to the receipt of income tax refunds of
approximately $2,300 in the first three months of fiscal 2004); (ii) a smaller
increase in accounts payable in the three-month period ending April 30, 2004
versus the comparable period of the prior year; (iii) a larger decrease in other
current liabilities; (iv) a larger increase in inventory; and (v) lower net
income in the first quarter of fiscal 2005 as compared to the first quarter of
fiscal 2004. These changes, resulting in lower net cash provided by operating
activities, were partially offset by (i) a smaller increase in accounts
receivable in the three months ended April 30, 2004 as compared to the three
months ended April 30, 2003; and (ii) an increase in other liabilities in the
three-month period ending April 30, 2004 versus a decrease in the comparable
period of the prior year.
Net cash used by investing activities increased $1,559 or 161% to $2,525 in
first quarter of fiscal 2005 compared to $966 in the first quarter of fiscal
2004, primarily due to higher capital spending. Capital spending totaled $2,579
in the first three months of fiscal year 2005 as compared to $1,009 in the
comparable period of the prior year, with the majority of the spending taking
place at our manufacturing facilities in Attica, Indiana; Reynosa, Mexico; and
Milwaukee, Wisconsin.
Net cash used by financing activities decreased $11,494 or 87% to $1,767 in
the first three months of in fiscal 2005 compared to $13,261 in the prior year.
In the first quarter of fiscal 2004, there were repayments of debt in the amount
of $18,750 and proceeds from new borrowings in the amount of $9,350.
Additionally, book overdrafts decreased $2,106 in the first three months of the
prior year as compared to a $486 decrease in the comparable period of the
current year.
Our credit agreement contains restrictive covenants that require C&D to
maintain minimum ratios such as fixed charge coverage and leverage ratios as
well as minimum consolidated net worth. We were in compliance with our loan
agreement covenants at April 30, 2004. The availability under this agreement is
expected to be sufficient to meet our ongoing cash needs for working capital
requirements, debt service and capital expenditures. Capital expenditures during
fiscal 2004 were incurred to fund cost reduction programs, normal maintenance
and regulatory compliance. Fiscal 2005 capital expenditures are expected to be
approximately $10,000 to $15,000 primarily to fund investment in our Reynosa,
Mexico, as well as cost reduction programs, normal maintenance and regulatory
compliance, primarily in Attica, Indiana and Milwaukee, Wisconsin.
We intend to continue making prudent purchases of our stock, paying down
debt and selectively pursuing complementary acquisitions. Strategic acquisition
opportunities will be expected to enhance our long-term competitive position and
growth prospects and may require external financing. We cannot assure, however,
that we will close on any such acquisitions.
Our bank loan agreement permits dividends to be paid on our Common Stock as
long as there is no default under that agreement. Subject to that restriction
and the provisions of Delaware law, our Board of Directors currently intends to
continue paying dividends. We cannot assure you that we will continue to do so
since future dividends will depend on our earnings, financial condition and
other factors.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
(Dollars in thousands, except per share data)
NEW AND PROPOSED ACCOUNTING PRONOUNCEMENTS
See footnote number 2.
FORWARD-LOOKING STATEMENTS
Statements and information contained in this Quarterly Report on Form 10-Q
that are not historical facts are "forward-looking" statements made pursuant to
the safe-harbor provisions of the Private Securities Litigation Act of 1995.
Forward-looking statements may be identified by their use of words like "plans,"
"expects," "will," "anticipates," "intends," "may," "projects," "estimates,"
"believes" or other words of similar meaning. All statements that address
expectations or projections about the future, including, but not limited to,
statements about our strategy for growth, goals, trends, product development,
market position, market conditions, expenditures, sales and financial results,
are forward-looking statements. Forward-looking statements are based on certain
assumptions and expectations of future events and involve a number of risks and
uncertainties. We cannot guarantee that these assumptions and expectations are
accurate or will occur. We caution readers not to place undue reliance on these
forward-looking statements. These statements speak only as of the date of this
Quarterly Report on Form 10-Q, and we undertake no obligation to update or
revise these statements to reflect events or circumstances occurring after the
date of this Quarterly Report on Form 10-Q.
o We operate worldwide and derive a portion of our revenue from sales outside
the United States. Changes in the laws or policies of governmental and
quasi-governmental agencies, as well as social and economic conditions, in
the countries in which we operate (including the United States) could
affect our business and our results of operations. In addition, economic
factors (including inflation and fluctuations in interest rates and foreign
currency exchange rates) and competitive factors (such as price competition
and business combinations of competitors) or a decline in industry sales or
cancelled or delayed orders due to economic weakness or changes in economic
conditions, either in the United States and other countries in which we
conduct business could affect our results of operations.
o Terrorist acts or acts of war, whether in the United States or abroad,
could cause damage or disruption to our operations, our suppliers, channels
to market or customers, or could cause costs to increase, or create
political or economic instability, any of which could have a material
adverse effect on our business.
o Our results of operations could be adversely affected by conditions in the
domestic and global economies or the markets in which we conduct business,
such as telecommunications, UPS, CATV, switchgear and control and material
handling.
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
o Our ability to grow earnings could be affected by increases in the cost of
raw materials, particularly lead, the primary constituent of our battery
products, or other product parts or components. We may not be able to fully
offset the effects of higher costs of raw materials through price increases
or productivity improvements. A significant increase in the price of one or
more raw materials, parts or components could have a material adverse
effect on our operations.
o Our ability to meet customer demand depends, in part, on our ability to
obtain timely and adequate supply and delivery of raw materials, including
lead, which is the primary constituent of our battery products or other
product parts or components from our suppliers and internal manufacturing
capacity. Although we work closely with both our internal and external
suppliers (and, as to the continuing availability of lead, our industry
associations) to avoid encountering unavailability or shortages, there can
be no assurance that we will not encounter them in the future. The
cessation, reduction or interruption of supply of raw materials (including
lead), product parts or components, could have a material adverse effect on
our operations.
o Our growth objectives are largely dependent on our ability to renew our
pipeline of new products and to bring these products to market. This
ability may be adversely affected by difficulties or delays in product
development, such as the inability to: introduce viable new products;
successfully complete research and development projects or integrate
purchased or licensed technology; obtain adequate intellectual property
protection; or gain market acceptance of the new products. Our growth could
also be affected by new competitive products and technologies.
o As part of our strategy for growth, we have made and may continue to make
acquisitions, and in the future, may make divestitures and form strategic
alliances. There can be no assurance that these will be completed or
beneficial to us.
o We have undertaken and may continue to undertake productivity initiatives,
including re-organizations to improve performance or generate cost savings.
In addition, we may from time to time relocate or consolidate one or more
of our operations. There can be no assurance that any planned performance
improvements or cost savings from such activities will be realized or that
delays or other interruptions in production or delivery of products will
not occur as the result of any relocation or consolidation. A relocation or
consolidation could also cause asset impairments. Further, there can be no
assurance that any of these initiatives will be completed or beneficial to
us.
o Our facilities are subject to a broad array of environmental laws and
regulations. The costs of complying with complex environmental laws and
regulations, as well as participation in voluntary programs, are
significant and will continue to be so for the foreseeable future. We are
also subject to potentially significant fines and penalties for
non-compliance with applicable laws and regulations. Our accruals for such
costs and liabilities may not be adequate since the estimates on which the
accruals are based depend on a number of factors including, but not limited
to, the nature of the problem, the complexity of the issues, the nature of
the remedy, the outcome of discussions with regulatory agencies and/or the
government or third parties and, as applicable, other PRPs at multiparty
sites, the number and financial viability of other PRPs and risks
associated with litigation.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
o We are exposed to the credit risk of our customers, including risk of
insolvency and bankruptcy. Although we have programs in place to monitor
and mitigate the associated risk, there can be no assurance that such
programs will be effective in reducing our credit risks or risks associated
with potential bankruptcy of our customers.
o Our business, results of operations and financial condition could be
affected by significant pending and future litigation or claims adverse to
us. These could potentially include, but are not limited to, the following:
product liability, contract, employment-related, labor relations, personal
or property damage or stockholder claims and claims arising from any injury
or damage to persons, property or the environment from hazardous substances
used, generated or disposed of in the conduct of our business (or that of a
predecessor to the extent we are not indemnified for those liabilities).
o Our performance depends on our ability to attract and retain qualified
personnel. We cannot assure that we will be able to continue to attract or
retain qualified personnel.
o Our bank loan agreement permits dividends to be paid on our Common Stock as
long as there is no default under that agreement. Subject to that
restriction and the provisions of Delaware law, our Board of Directors
currently intends to continue paying dividends. We cannot assure you that
we will continue to do so since future dividends will depend on our
earnings, financial condition and other factors.
o Our overall profitability may not meet expectations if our products,
customers or geographic mix are substantially different than anticipated.
Our profit margins vary among products, customers and geographic markets.
Consequently, if our mix of any of these is substantially different from
what is anticipated in any particular period, our earnings could be lower
than anticipated.
o In spite of having a disaster recovery plan in place, infrastructure
failures could have a material adverse effect on our business. We are
highly dependent on our systems infrastructure in order to achieve our
business objectives. If we experience a problem that impairs our
infrastructure, such as a power outage, computer virus, intentional
disruption of information technology systems by a third party, equipment
failure or telephone system failure, the resulting disruptions could impede
our ability to book or process orders, manufacture and ship products in a
timely manner or otherwise carry on our business in the ordinary course.
Any such events could cause us to lose significant customers or revenue and
could require us to incur significant expense to eliminate these problems
and address related security concerns.
The foregoing list of important factors is not all-inclusive, or
necessarily in order of importance.
22
Item 3. Quantitative and Qualitative Disclosure About Market Risk
We are exposed to various market risks. The primary financial risks include
fluctuations in interest rates and changes in currency exchange rates. We manage
these risks by using derivative instruments. We do not invest in derivative
securities for speculative purposes, but do enter into hedging arrangements in
order to reduce our exposure to fluctuations in interest rates as well as to
fluctuations in exchange rates. Our financial instruments subject to interest
rate risk consist of debt instruments and interest rate swap contracts. The debt
instruments are subject to variable rate interest, and therefore the market
value is not sensitive to interest rate movements. Interest rate swap contracts
are used to manage our exposure to fluctuations in interest rates on our
underlying variable rate debt instruments (see footnote number 9). Additional
disclosure regarding our various market risks are set forth in our fiscal 2004
Form 10-K filed with the Securities and Exchange Commission.
Item 4. Disclosure Controls and Procedures:
Our management, with the participation of our Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of the end of the period covered by this
report. Based on such evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period, our
disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by us in the reports that we file or submit under the Exchange Act.
Internal Control over Financial Reporting:
There have not been any changes in our internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
23
PART II. OTHER INFORMATION
Item 2. Change in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities
Issuer Purchases of Equity Securities:
Maximum Number
(or Approximate
Total Number of Dollar Value) of
Total Number Shares Purchased as Shares that May Yet
of Shares Average Price Part of Publicly Announced Be Purchased Under the
Period Purchased Paid per Share Plans or Programs Plans or Programs
-------- ------------- --------------- ---------------------------- -------------------------
February 1 - February 29, 2004 10,230 $20.00 10,000 292,800
March 1 - March 31, 2004 20,440 $15.82 20,000 272,800
April 1 - April 30, 2004 35,939 $16.18 35,800 237,000
------ ------
Total 66,609 65,800
====== ======
Our share repurchase program was approved by our Board of Directors and
publicly announced on July 24, 2002. The program authorizes the repurchase of up
to 1 million of our common stock from time to time, directly or through brokers
or agents, and has no expiration date. Of the total shares purchased, 65,800
were purchased pursuant to the July 24, 2002 repurchase program and 809 were
purchased through deferred compensation plans.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders of C&D on May 26, 2004 the
stockholders voted on two proposals: the election of eight directors for
one-year terms and a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as independent auditors for C&D for the fiscal year
ended January 31, 2005.
Proposal 1 - Election of Directors
Nominee Votes For Votes Withheld
------- --------- --------------
William Harral, III 23,511,727 10,748
Wade H. Roberts, Jr. 23,504,048 18,427
Kevin P. Dowd 23,510,451 12,024
Robert I. Harries 23,511,451 11,024
Pamela S. Lewis 23,511,951 10,524
George MacKenzie 23,511,623 10,852
John A. H. Shober 23,509,823 12,652
Stanley W. Silverman 23,510,550 11,925
Proposal 2 - Ratification of the appointment of PricewaterhouseCoopers LLP
as independent auditors for the fiscal year ending January 31, 2005.
For Against Abstain
----- -------- ---------
23,487,918 32,068 2,489
24
Item 5. Other Information.
On May 27, 2004 C&D acquired Celab Limited for approximately $12 million,
net of approximately $3 million in acquired cash. Celab Limited, with prior year
sales of approximately $10 million, is a provider of power conversion products,
primarily sold into military and CATV applications predominately in the United
Kingdom.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Third Amendment to our Pension Plan for Salaried Employees dated
March 19, 2004 (incorporated by reference to Exhibit 10.11 to
C&D's Annual Report on Form 10-K for the fiscal year ended
January 31, 2004).
10.2 Supplemental Executive Retirement Plan compiled as of February
27, 2004 to reflect all amendments (incorporated by reference to
Exhibit 10.12 to C&D's Annual Report on Form 10-K for the fiscal
year ended January 31, 2004).
10.3 C&D Technologies, Inc. Management Incentive Bonus Plan Policy
(filed herewith).
15 Awareness Letter of Independent Registered Public Accounting Firm
(filed herewith).
31.1 Rule 13a-14(a)/15d-14(a) Certification of the President and Chief
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
31.2 Rule 13a-14(a)/15d-14(a) Certification of the Vice President and
Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed herewith).
32.1 Section 1350 Certification of the President and Chief Executive
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(filed herewith).
32.2 Section 1350 Certification of the Vice President and Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
(b) Reports on Form 8-K
1. On March 16 2004, C&D furnished a report on Form 8-K, Item 12
relating to its March 15, 2004 Press Release.
25
SIGNATURES
- -------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
C&D TECHNOLOGIES, INC.
June 9, 2004 BY: /s/ Wade H. Roberts, Jr.
---------------------------------
Wade H. Roberts, Jr.
President, Chief Executive
Officer and Director
(Principal Executive Officer)
June 9, 2004 BY: /s/ Stephen E. Markert, Jr.
----------------------------------
Stephen E. Markert, Jr.
Vice President Finance
(Principal Financial and
Accounting Officer)
26
EXHIBIT INDEX
10.3 C&D Technologies, Inc. Management Incentive Bonus Plan Policy.
15 Awareness Letter of Independent Registered Public Accounting Firm.
31.1 Rule 13a-14(a)/15d-14(a) Certification of the President and Chief
Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
31.2 Rule 13a-14(a)/15d-14(a) Certification of the Vice President and
Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Section 1350 Certification of the President and Chief Executive
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Section 1350 Certification of the Vice President and Chief
Financial Officer pursuant to Section 906 of the Sarbanes- Oxley
Act of 2002.
27