C&D Technologies Reports Fiscal 2010 Third Quarter Results

Third Quarter Revenues, Unit Volume, Margins and Earnings All Sequentially Improve Relative to Second Quarter


BLUE BELL, Pa., Dec. 8  /PRNewswire-FirstCall/ -- C&D Technologies, Inc. (NYSE:CHP), a leading North American producer and marketer of electrical power storage and conversion systems used in telecommunications, uninterrupted power supply systems, utility and other high reliability applications, today announced financial results for its fiscal 2010 third quarter ended October 31, 2009.

For the third fiscal quarter, the Company reported its second consecutive quarter of double-digit sequential revenue growth, with revenues of $91.2 million up, 10.7% from $82.4 million reported in this year's second fiscal quarter.  The sequential improvement in third fiscal quarter revenues was largely attributable to an approximately 5 percent growth in unit volume, principally driven by growth in Asia, as well as increased pricing due to higher commodity costs. Volumes in the third fiscal quarter were also up approximately 3 percent from the third fiscal quarter of last year, with commodity based price reductions correspondingly impacting revenues.  In the third fiscal quarter a year ago, revenues were $93.8 million.

The Company also reported continued sequential improvement in quarterly earnings, with net loss of $3.4 million or ($0.13) per diluted share for the third quarter of fiscal 2010, a significant improvement from a net loss of $5.6 million, or ($0.21) per diluted share, in this year's second fiscal quarter.   The rate of sequential improvement was partially impacted by lags in the recovery of rising lead costs, higher warranty experience during the quarter and costs associated with the ramp-up of operations in Asia.  In the comparable prior year third fiscal quarter, the Company reported a net loss of $146,000, or ($0.02) per diluted share.

Gross margins also continued their trend of steady sequential improvement, rising to 14.3% in the third fiscal quarter from 12.1% in the second fiscal quarter and 7.3% in the first fiscal quarter.  This trend reflects improved pricing, improved sales mix and higher volumes, offset by the higher cost of lead in the third fiscal quarter.

Dr. Jeffrey A. Graves, President and CEO, said, "In the third fiscal quarter, we continued to achieve volume growth and margin improvement, encouraging signs that the implementation of our strategy has fundamentally strengthened the business and provided us with a clear path to profitability.  Despite persistent economic challenges, we grew unit volumes both sequentially and in comparison to the year ago quarter, reflecting the success of our products in targeting new vertical and geographic markets.  In particular, the introduction of new products now manufactured in our China facility has led to significant and continued growth in our Asian business during the year.  For the second consecutive quarter, we managed to expand margins through mix optimization and cost management programs, despite the transient impact on margins from commodity price volatility.  We are confident that we are establishing a strong foundation from which we can leverage C&D's reputation for innovative technological leadership, reliability, and product quality into further strong growth and improved returns for our shareholders."

Dr. Graves continued, "Over the course of the current fiscal year, we have made significant progress building a stronger, more agile company despite the severe economic challenges to our end markets from weak overall global economic conditions.  With our investments in manufacturing expansion and new product development, we have achieved real growth and consistent margin expansion over the last few quarters, resulting in an improving bottom line.  All of these accomplishments highlight effective implementation of our strategy as we look to expand the value of the C&D franchise.  The trajectory and timing of an enhanced earnings improvement that was expected to accompany our progress was affected late in the third quarter by the time lag between rising lead costs and customer price adjustments. Based upon current stable market conditions and our accelerating new product sales throughout the world, we anticipate continuing improvements in our operating margins in our fiscal fourth quarter, and in the coming new year.   However, the rise in commodity costs, particularly lead prices that occurred in the late summer time frame, will continue to be a drag on margins in the fourth quarter.   Taking into account our typical pricing recovery cycle of three to six months, which is largely driven by contracted price adjustments with our largest customers, we now believe that it is more likely that our return to profitability will occur in the first quarter of our next fiscal year."

Dr. Graves concluded, "We are extremely confident that C&D is well positioned in the market to capitalize on the growing world-wide demand for standby power, and further that these energy storage needs are expected to greatly accelerate as the global economy recovers.  Through our continued focus on innovative new products, improved manufacturing efficiency and productivity, and world-leading customer service, we believe we can leverage this future demand growth into strong returns for our shareholders in the years ahead."

Conference call:

C&D management will host a conference call to discuss these financial results on December 9, 2009 at 9:30 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 45391977. A telephone replay of the conference call will begin immediately following the call and will be available through December 23, 2009 at midnight Eastern Standard Time. To access the rebroadcast, please dial 800-642-1687 (706-645-9291 for international callers) and enter code 45391977. 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' unique ability to offer complete systems, designed and produced to high technical standards, sets it apart from its competition. C&D Technologies is headquartered in Blue Bell, PA. For more information about C&D Technologies, visit http://www.cdtechno.com/.

Forward-looking Statements:

This press release contains 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, 2009, 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, including but not limited to our ability to implement and fund business strategies based on current liquidity; our substantial debt and debt service requirements; litigation proceedings to which we are subject; our exposure to fluctuations in interest rates on our variable debt; the realization of the tax benefits of our net operating loss carry forwards; the fact that lead experiences significant fluctuations in market price; our ability to successfully pass along increased material costs to our customers; failure of our customers to renew supply agreements; competitiveness of the battery markets; political, economic and social changes, or acts of terrorism or war; successful collective bargaining with our unionized workforce; risks involved in our foreign operations; our ability to maintain and generate liquidity to meet our operating needs; our ability to achieve and maintain profitability, including improvements in quarterly earnings and gross margins; the possibility of additional impairment charges; our ability to acquire goods and services and/or fulfill labor needs at budgeted costs; economic conditions or market changes in certain market sectors in which we conduct business; uncertainty in financial markets; our ability to stay listed on a national securities exchange; our success or timing of new product development; impact of any changes in our management; changes in our product mix; success of productivity initiatives; costs of our compliance with environmental laws and regulations and resulting liabilities; and our ability to protect our proprietary intellectual property and technology. Any forward-looking statements should be considered in light of these factors. The Company undertakes no obligation to publicly release any forward-looking information to reflect anticipated or unanticipated events or circumstances after the date of this document.

                    C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Dollars in thousands, except per share data)
                                  (UNAUDITED)


                                       Three months
                                          ended            Nine months ended
                                       October 31,            October 31,
                                       -----------            -----------

                                      2009  2008(1)        2009   2008(1)
                                      ----    -----        ----    -----


  NET SALES                        $91,210   $93,822   $247,309   $280,083
  COST OF SALES                     78,200    77,645    218,951    236,767
                                    ------    ------    -------    -------

  GROSS PROFIT                      13,010    16,177     28,358     43,316
  OPERATING EXPENSES:
  Selling, general and
   administrative expenses          11,457    10,178     30,810     30,198
  Research and development
   expenses                          2,108     1,657      5,785      5,051
                                     -----     -----      -----      -----

  OPERATING (LOSS) INCOME             (555)    4,342     (8,237)     8,067
                                      ----     -----     ------      -----

  Interest expense, net              3,069     2,869      8,909      8,843
  Other (income) expense, net          (23)    1,208        (57)       910
                                       ---     -----        ---        ---

  (LOSS) INCOME BEFORE INCOME
   TAXES                            (3,601)      265    (17,089)    (1,686)
  Income tax provision (benefit)      (120)      490      2,052        502
                                      ----       ---      -----        ---

  NET LOSS                          (3,481)     (225)   (19,141)    (2,188)
  Net loss attributable to
   noncontrolling interests            (41)      (79)      (327)      (484)
                                       ---       ---       ----       ----

  NET LOSS ATTRIBUTABLE TO C&D
   TECHNOLOGIES, INC.              $(3,440)    $(146)  $(18,814)   $(1,704)
                                   -------     -----   --------    -------

  Loss per share attributable to
   C&D Technologies, Inc.:
  Basic:                            $(0.13)   $(0.01)    $(0.72)    $(0.07)
                                    ------    ------     ------     ------

  Diluted:                          $(0.13)   $(0.02)    $(0.72)    $(0.08)
                                    ------    ------     ------     ------






(1) Certain items have been adjusted on these statements to reflect changes as required to present retroactive adoption of new accounting standards, regarding accounting for non-controlling interests, accounting for convertible debt instruments that may be settled in cash upon conversion and restatement of prior quarterly information.

                    C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                   (Dollars in thousands, except par value)
                                  (UNAUDITED)


                                                   October 31,  January 31,
                                                        2009      2009(1)
                                                   -----------  ----------
  ASSETS
  Current assets:
    Cash and cash equivalents                         $1,920    $3,121
    Restricted cash                                      329       906
    Accounts receivable, less allowance for doubtful
     accounts of $864 and $775                        57,678    55,852
    Inventories                                       71,217    61,128
    Prepaid taxes                                        774       927
    Other current assets                               2,103     1,110
    Assets held for sale                                 500       500
                                                     -------   -------

      Total current assets                           134,521   123,544
  Property, plant and equipment, net                  87,657    85,055
  Deferred income taxes                                  626       626
  Intangible and other assets, net                    13,822    14,729
  Goodwill                                            59,964    59,961
                                                     -------   -------

      TOTAL ASSETS                                  $296,590  $283,915
                                                     -------   -------

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
    Short-term debt                                   $8,819    $5,881
    Accounts payable                                  45,430    32,396
    Accrued liabilities                               15,737    13,018
    Deferred income taxes                              1,492     1,492
    Other current liabilities                          3,895     8,267
                                                     -------   -------

      Total current liabilities                       75,373    61,054
  Deferred income taxes                               12,504    10,972
  Long-term debt                                     117,456   107,637
  Other liabilities                                   39,403    39,349
                                                     -------   -------

      Total liabilities                              244,736   219,012

  Stockholders' equity:
    Common stock, $.01 par value, 75,000,000 shares
     authorized; 29,228,213 and 29,162,101 shares
     issued and 26,302,775 and 26,266,755 outstanding
     at October 31, 2009 and January 31, 2009,
     respectively                                        292       292
    Additional paid-in capital                        96,697    95,724
    Treasury stock, at cost, 2,925,438 and 2,895,346
     shares, respectively                            (40,091)  (40,035)
    Accumulated other comprehensive loss             (40,574)  (45,733)
    Retained earnings                                 24,390    43,204
                                                     -------   -------

      Total stockholders' equity attributable to C&D
       Technologies, Inc.                             40,714    53,452
    Noncontrolling interest                           11,140    11,451
                                                     -------   -------

      Total stockholders' equity                      51,854    64,903
                                                     -------   -------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $296,590  $283,915
                                                     -------   -------




(1) Certain items have been adjusted on these statements to reflect changes as required to present retroactive adoption of new accounting standards, regarding accounting for non-controlling interests, accounting for convertible debt instruments that may be settled in cash upon conversion and restatement of prior quarterly information.

                 C&D TECHNOLOGIES, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (Dollars in thousands)
                             (UNAUDITED)

                                                         Nine months ended
                                                            October 31,
                                                         -----------------
                                                           2009   2008(1)
                                                         ------- ---------

  Cash flows from operating activities:
    Net loss                                           $(19,141)   $(2,188)
    Adjustments to reconcile net loss to net cash (used
     in) provided by operating activities:
    Share-based compensation                                949        704
    Depreciation and amortization                         8,694      8,468
    Amortization of debt acquisition and discount costs   3,600      3,443
    Annual retainer to Board of Directors paid by the
     issuance of common stock                                24        190
    Deferred income taxes                                 1,535        (17)
    Changes in assets and liabilities:
      Accounts receivable                                  (856)    (3,160)
      Inventories                                        (9,631)    16,300
      Other current assets                                 (780)      (668)
      Other long-term assets                               (112)        82
      Accounts payable                                   11,536    (11,126)
      Accrued liabilities                                 2,387        463
      Book overdraft                                      1,205          -
      Income taxes payable                                  491       (697)
      Other current liabilities                          (2,437)    (1,231)
      Other liabilities                                   2,057       (518)
      Other, net                                          1,378      3,248
                                                         ------     ------

  Net cash provided by continuing operating activities      899     13,293
  Net cash used in discontinued operating activities     (1,656)    (3,790)
                                                         ------     ------

      Net cash (used in) provided by operating activities  (757)     9,503
                                                         ------     ------

  Cash flows from investing activities:
    Acquisition of property, plant and equipment        (10,302)   (12,017)
    Proceeds from disposal of property, plant and
     equipment                                               18        484
    Change in restricted cash, net                          577      2,283
                                                         ------     ------

      Net cash used in investing activities              (9,707)    (9,250)
                                                         ------     ------

  Cash flows from financing activities:
    Borrowings on line of credit facility                82,750     62,223
    Repayments on line of credit facility               (76,546)   (62,223)
    Repayment of debt                                       (83)         -
    Proceeds from new borrowings                          3,072          -
    Proceeds from the exercise of stock options               -        247
    Purchase of treasury stock                              (56)      (115)
    Other                                                     -         54
                                                         ------     ------

      Net cash provided by financing activities           9,137        186
                                                         ------     ------

  Effect of exchange rate changes on cash and cash
   equivalents                                              126        (92)
                                                         ------     ------

  (Decrease) increase in cash and cash equivalents       (1,201)       347
  Cash and cash equivalents, beginning of period          3,121      6,536
                                                         ------     ------

  Cash and cash equivalents, end of period               $1,920     $6,883
                                                         ------     ------




(1) Certain items have been adjusted on these statements to reflect changes as required to present retroactive adoption of new accounting standards, regarding accounting for non-controlling interests, accounting for convertible debt instruments that may be settled in cash upon conversion and restatement of prior quarterly information. 

DATASOURCE: C&D Technologies, Inc.



CONTACT:  Shareholders: Ian J. Harvie of C&D, [phone], or Joe

Hassett of Gregory FCA, for C&D, [phone]



Web Site:  http://www.cdtechno.com/ 

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