C&D Technologies Announces Third Quarter Results
BLUE BELL, Pa., Dec. 6 -- C&D Technologies, Inc. (NYSE:CHP)
, a leading North American producer and marketer of electrical power storage and conversion systems used in telecommunications and industrial applications, today announced financial results for the fiscal 2008 third quarter ended October 31, 2007.
Results for the quarter and all comparative financial data included herein reflects the presentation of both the Power Electronics Division ("PED") and Motive Power Division ("Motive") as discontinued operations. With these changes C&D's continuing operations are now solely comprised of results from Standby Power
For the quarter, the Company reported a consolidated net loss of $9.3 million or $0.36 per diluted share, compared to a net loss of $17.8 million or $0.70 per diluted share in the prior year's third quarter. Net loss from continuing operations was $7.0 million or $0.27 per diluted share during the quarter, compared to $0.3 million or $0.01 per diluted share in the third quarter of fiscal 2007. Net loss from discontinued operations was $2.3 million or $0.09 per diluted share, compared to a net loss of $17.6 million or $0.69 per share in the third quarter of fiscal 2007.
Revenues were $91.3 million, an increase of 29.3% compared to $70.6 million in the prior year's third quarter and up approximately 10% from $82.8 million in our second quarter.
Dr. Jeffrey A. Graves, President and CEO said, "The fiscal third quarter saw the culmination of a number of important strategic actions and milestones. We sold our Power Electronics Division to Murata Manufacturing of Japan, we reached agreement to sell certain assets of the Motive Power Division to Crown Battery which will result in our exit from that business early in our fourth quarter, we made additional progress in our cost-cutting efforts, and most importantly, we completed the restructuring of all material customer contracts to include lead escalation clauses. With continued execution of our cost reduction initiatives, the flow through of our pricing actions, and the recent moderation of lead prices we look forward to returning C&D Technologies to profitability early in the next fiscal year. We are now laser-focused on the growing standby power market, where we have distinct competitive advantages including a strong brand, leading market share, loyal customers, and a reputation for innovation and product quality. We exit the third quarter with an improved balance sheet, strong revenue momentum in all of our key end markets, and significant cost reduction opportunities available to us in the Standby Power business. With these factors now aligned, we are very excited about the year ahead."
With record revenues of $91.3 million in the third quarter, the Standby Power division posted its fourth consecutive sequential revenue increase. In addition, book-to-bill ratios have been greater than 1.0 in 6 of the past 7 quarters, including the quarter just ended, supporting continuing revenue momentum. Revenue growth is being driven by enterprise data center construction, expansion of the cable TV fiber-to-the-home infrastructure, and strength in the utility end markets accompanying renewed investment in the electrical transmission network in North America. While sales to the telecommunications industry have been sluggish for most of this fiscal year, recent FCC regulations mandating eight (8) hours of battery backup time for data carriers are expected to drive incremental demand from telecommunications customers in future quarters
Standby Power's operating loss of $4.4 million was driven by increasing raw material prices, primarily lead, which reached record highs during the quarter, but has since softened significantly, as well as increased general and administrative cost allocations principally resulting from the divestiture of the Power Electronics and Motive Power divisions. In addition, one-time costs including severance and plant closure costs totaled $1.8 million during the quarter. Excluding these one-time costs, the operating loss would have been $2.6 million.
Dr. Graves concluded, "We continue to work hard from both a pricing and cost reduction perspective to accommodate the extreme volatility in lead costs. This quarter, lead costs net of hedging and pricing actions reduced profitability by over $10 million on a pretax basis compared to last year's third quarter. We expect to recover most, if not all of these unrecovered lead costs as our pricing actions catch up to this lead escalation during our fourth quarter and into the first quarter of next fiscal year. In addition, our cost reduction initiatives continue to track on or ahead of our previously communicated targets, even with the sale of our Motive Power unit which was previously included in our cost reduction estimates. We remain on track to deliver over $15 million of savings this year, and an incremental $15 million next year for a total of $30 million on an annualized basis. Importantly, with the completion of our recent divestiture activities, we have identified and taken actions in November to offset the reallocation of SG&A expenses to Standby Power which were potentially stranded following these divestitures, through further organizational changes, headcount eliminations and other incremental cost savings programs over and above our previously announced cost reduction initiative. Taken in total, the combined effects of our pricing actions, our cost reduction initiatives, and the launch of significant new products, which began as we exited the quarter, we look forward to continued improvements in our financial performance in the fourth quarter of this year, and an exciting year of growth and profitability in the new year to come."
Conference call:
C&D management will host a conference call to discuss these financial results on December 7, 2007 at 10 a.m. Eastern Standard Time. Those parties interested in participating in the conference call via telephone should dial 706-679-4521 and enter conference ID number 26919267. A telephone replay of the conference call will begin immediately following the call and will be available through December 21, 2007 at midnight Eastern Standard Time. To access the rebroadcast, please dial 800-642-1687 (706-645-9291 for international callers) and enter code 26919267. A webcast of the conference call will also be available at http://www.cdtechno.com/.
About C&D Technologies:
C&D Technologies, Inc. provides solutions and services for the switchgear and control (utility), telecommunications, and uninterruptible power supply (UPS) as well as emerging markets such as solar power. C&D Technologies engineers, manufactures, sells and services fully integrated reserve power systems for regulating and monitoring power flow and providing backup power in the event of primary power loss until the primary source can be restored. C&D Technologies is headquartered in Blue Bell, PA. For more information about C&D Technologies, visit http://www.cdtechno.com/.
Forward-looking Statements:
This press release may contain forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934), which are based on management's current expectations and are subject to uncertainties and changes in circumstances. Words and expressions reflecting something other than historical fact are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Factors that appear with the forward- looking statements, or in the company's Securities and Exchange Commission filings (including without limitation the company's annual report on Form 10-K for the fiscal year ended January 31, 2007, or the quarterly and current reports filed on Form 10-Q and Form 8-K thereafter), could cause the company's actual results to differ materially from those expressed in any forward- looking statements made herein.
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except par value)
(UNAUDITED)
Three months ended Nine months ended
October 31, October 31,
2007 2006 2007 2006
NET SALES $91,253 $70,589 $251,586 $210,457
COST OF SALES 85,403 59,276 222,939 175,670
GROSS PROFIT 5,850 11,313 28,647 34,787
OPERATING EXPENSES:
Selling, general and
administrative expenses 8,563 7,187 25,820 23,981
Research and development expenses 1,725 1,432 4,949 4,883
Gain on sale of Shanghai, China
plant - - (15,162) -
OPERATING (LOSS) INCOME FROM
CONTINUING OPERATIONS (4,438) 2,694 13,040 5,923
Interest expense, net 1,880 2,574 6,190 8,050
Other (income) expense, net (1,181) 258 (2,120) 975
(LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
AND MINORITY INTEREST (5,137) (138) 8,970 (3,102)
Income tax provision (benefit)
from continuing operations 2,186 163 1,281 (502)
(LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE MINORITY
INTEREST (7,323) (301) 7,689 (2,600)
Minority interest (330) (56) 3,672 (371)
(LOSS) INCOME FROM CONTINUING
OPERATIONS (6,993) (245) 4,017 (2,229)
LOSS FROM DISCONTINUED OPERATIONS
BEFORE INCOME TAXES (4,167) (17,158) (10,564) (22,707)
INCOME TAX (BENEFIT) PROVISION
FROM DISCONTINUED OPERATIONS (1,862) 412 1,703 3,502
LOSS FROM DISCONTINUED OPERATIONS (2,305) (17,570) (12,267) (26,209)
NET LOSS $(9,298) $(17,815) $(8,250) $(28,438)
Income (loss) per share:
Basic:
Net (loss) income from continuing
operations $(0.27) $(0.01) $0.16 $(0.09)
Net (loss) income from
discontinued operations $(0.09) $(0.69) $(0.48) $(1.02)
Net (loss) Income $(0.36) $(0.70) $(0.32) $(1.11)
Diluted:
Net (loss) income from continuing
operations $(0.27) $(0.01) $0.16 $(0.09)
Net (loss) income from
discontinued operations $(0.09) $(0.69) $(0.48) $(1.02)
Net (loss) income $(0.36) $(0.70) $(0.32) $(1.11)
Dividends per share $- $- $- $0.01375
Certain classifications to these statements have been reflected for the presentation of the Power Electronics Division and Motive Power Division as discontinued operations as well as the change in method of accounting for inventories.
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(UNAUDITED)
October 31, January 31,
2007 2007
ASSETS
Current assets:
Cash and cash equivalents $31,631 $5,384
Accounts receivable, less allowance for
doubtful accounts of $1,102 and $1,203 67,765 55,397
Inventories 71,452 53,172
Deferred income taxes 196 134
Prepaid taxes 1,775 2,634
Other current assets 1,103 6,121
Assets held for sale 4,198 132,442
Total current assets 178,120 255,284
Property, plant and equipment, net 78,994 80,896
Deferred income taxes 642 531
Intangible and other assets, net 16,320 15,543
Goodwill 59,800 59,733
TOTAL ASSETS $333,876 $411,987
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $5,472 $1,286
Accounts payable 52,447 40,282
Book overdrafts 70 2,310
Accrued liabilities 17,320 13,708
Other current liabilities 8,941 28,983
Liabilities held for sale - 36,532
Total current liabilities 84,250 123,101
Deferred income taxes 10,387 9,155
Long-term debt 124,101 147,925
Other liabilities 31,728 28,591
Total liabilities 250,466 308,772
Minority interest 11,674 7,548
Stockholders' equity:
Common stock, $.01 par value, 75,000,000
shares authorized; 29,081,110 and
29,040,960 shares issued; 25,666,477
and 25,649,424 shares outstanding,
respectively 291 290
Additional paid-in capital 74,867 74,188
Treasury stock, at cost, 3,414,633 and
3,391,536 shares, respectively (47,244) (47,110)
Accumulated other comprehensive loss (31,783) (13,952)
Retained earnings 75,605 82,251
Total stockholders' equity 71,736 95,667
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $333,876 $411,987
Certain classifications to these statements have been reflected for the presentation of the Power Electronics Division and Motive Power Division as discontinued operations as well as the change in method of accounting for inventories.
C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except par value)
(UNAUDITED)
Nine months ended
October 31,
2007 2006
Cash flows from operating activities:
Net loss $(8,250) $(28,438)
Net loss from discontinued operations (12,267) (26,209)
Net income (loss) from continuing
operations 4,017 (2,229)
Adjustments to reconcile net income (loss)
from continuing operations to net cash
used in continuing operating activities:
Minority interest 3,672 (371)
Share-based compensation 444 197
Depreciation and amortization 8,315 9,023
Amortization of debt acquisition costs 1,208 889
Annual retainer to Board of Directors paid
by the issuance of common stock 236 224
Deferred income taxes 628 877
Gain on disposal of assets (15,295) (29)
Changes in assets and liabilities:
Accounts receivable (14,127) (7,563)
Inventories (18,146) 567
Other current assets 702 (509)
Accounts payable 9,977 (1,966)
Accrued liabilities 3,762 2,869
Income taxes 1,792 (510)
Other current liabilities 864 2,015
Funds provided to discontinued
operations (22,170) (21,380)
Other long-term assets 232 (5)
Other long-term liabilities 4,410 (544)
Other, net (2,356) 349
Net cash used in continuing operating
activities (31,835) (18,096)
Net cash (used in) provided by
discontinued operating activities (1,249) 4,963
Net cash used in operating activities (33,084) (13,133)
Cash flows from investing activities:
Proceeds from the divestiture of
businesses 85,700 -
Acquisition of property, plant and
equipment (7,071) (15,446)
Proceeds from disposal of property,
plant and equipment 2,248 38
Net cash provided by (used in)
continuing investing activities 80,877 (15,408)
Net cash used in discontinued investing
activities (298) (4,091)
Net cash provided by (used in) investing
activities 80,579 (19,499)
Cash flows from financing activities:
Repayment of debt, net (24,123) -
Proceeds from new borrowings 3,993 18,844
(Decrease) increase in book overdrafts (2,241) 3,063
Financing cost of long term debt (459) (701)
Proceeds from exercise of stock options - 1,210
Purchase of treasury stock (134) (122)
Common stock dividends paid - (352)
Net cash (used in) provided by
continuing financing activities (22,964) 21,942
Net cash used in discontinued financing
activities (5,212) (780)
Net cash (used in) provided by financing
activities (28,176) 21,162
Effect of exchange rate changes on cash and
cash equivalents 169 316
Increase (decrease) in cash and cash
equivalents from continuing operations 26,247 (11,246)
Cash and cash equivalents, beginning of
period 5,384 17,439
Cash and cash equivalents, end of period $31,631 $6,193
Certain classifications to these statements have been reflected for the presentation of the Power Electronics Division and Motive Power Division as discontinued operations as well as the change in method of accounting for inventories.
