UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-11263

EXIDE TECHNOLOGIES

(Exact Name of Registrant as Specified in Its Charter)

Delaware		23-0552730
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)
13000 Deerfield Parkway,
Building 200
Milton, Georgia		30004
(Address of principal executive offices)		(Zip Code)

     Indicate by a 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 þ   No o

      Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o   No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No þ

     Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ   No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

     As of January 29, 2010, 75,586,417 shares of common stock were outstanding.

 

 

EXIDE TECHNOLOGIES AND SUBSIDIARIES
TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION			3
Item 1 FINANCIAL STATEMENTS			3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 2009 AND 2008			3
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2009 AND MARCH 31, 2009			4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 2009 AND 2008			5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			6
Item 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			20
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			32
Item 4 CONTROLS AND PROCEDURES			32
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS			34
Item 1A. RISK FACTORS			34
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			34
Item 3. DEFAULTS UPON SENIOR SECURITIES			34
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			34
Item 5. OTHER INFORMATION			34
Item 6. EXHIBITS			34
SIGNATURES			36
EX-4.1
EX-31.1
EX-31.2
EX-32

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per-share data)

		For the Three Months Ended								For the Nine Months Ended
		December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
NET SALES		$	746,472			$	782,602			$	1,971,141			$	2,668,050
COST OF SALES			588,274				620,587				1,576,353				2,174,671
Gross profit			158,198				162,015				394,788				493,379
EXPENSES:
Selling, marketing and advertising			65,312				72,483				194,431				231,009
General and administrative			44,699				42,341				133,998				133,001
Restructuring			9,324				7,783				55,421				19,661
Other expense (income), net			664				(429	)			(9,737	)			24,085
Interest expense, net			15,266				17,532				44,803				55,158
			135,265				139,710				418,916				462,914
Income (loss) before reorganization items and income taxes			22,933				22,305				(24,128	)			30,465
REORGANIZATON ITEMS, NET			388				409				1,262				1,344
INCOME TAX PROVISION			12,524				6,367				26,526				33,245
Net income (loss)			10,021				15,529				(51,916	)			(4,124	)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS			249				102				275				996
Net income (loss) attributable to Exide Technologies		$	9,772			$	15,427			$	(52,191	)		$	(5,120	)
EARNINGS (LOSS) PER SHARE
Basic		$	0.13			$	0.20			$	(0.69	)		$	(0.07	)
Diluted		$	0.12			$	0.20			$	(0.69	)		$	(0.07	)
WEIGHTED AVERAGE SHARES
Basic			76,028				75,589				75,923				75,474
Diluted			80,792				79,386				75,923				75,474

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per-share data)

		December 31, 2009				March 31, 2009
ASSETS
Current assets:
Cash and cash equivalents		$	103,509			$	69,505
Receivables, net of allowance for doubtful accounts of $33,167 and $28,855			511,421				497,841
Inventories			441,053				420,815
Prepaid expenses and other			15,854				17,427
Deferred financing costs, net			5,034				4,890
Deferred income taxes			29,195				33,005
Total current assets			1,106,066				1,043,483
Property, plant and equipment, net			604,816				586,261
Other assets:
Goodwill			4,384				4,022
Other intangibles, net			182,748				175,311
Investments in affiliates			2,207				2,048
Deferred financing costs, net			8,702				12,134
Deferred income taxes			41,348				51,272
Other			34,107				25,656
			273,496				270,443
Total assets		$	1,984,378			$	1,900,187
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings		$	9,528			$	6,977
Current maturities of long-term debt			4,881				5,048
Accounts payable			319,798				261,652
Accrued expenses			297,301				279,447
Warrants liability			605				1,143
Total current liabilities			632,113				554,267
Long-term debt			654,633				646,180
Noncurrent retirement obligations			210,486				197,403
Deferred income taxes			28,544				30,229
Other noncurrent liabilities			129,124				130,041
Total liabilities			1,654,900				1,558,120
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 1,000 shares authorized, 0 shares issued and outstanding			—				—
Common stock, $0.01 par value, 200,000 shares authorized, 75,586 and 75,499 shares issued and outstanding			756				755
Additional paid-in capital			1,117,720				1,111,001
Accumulated deficit			(839,472	)			(787,281	)
Accumulated other comprehensive income			34,066				1,752
Total stockholders’ equity attributable to Exide Technologies			313,070				326,227
Noncontrolling interests			16,408				15,840
Total stockholders’ equity			329,478				342,067
Total liabilities and stockholders’ equity		$	1,984,378			$	1,900,187

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

		For the Nine Months Ended
		December 31, 2009				December 31, 2008
Cash Flows From Operating Activities:
Net loss		$	(51,916	)		$	(4,124	)
Adjustments to reconcile net loss to net cash provided by operating activities—
Depreciation and amortization			67,357				73,761
Unrealized gain on warrants			(538	)			(6,591	)
Net loss on asset sales / impairments			8,474				1,820
Deferred income taxes			9,297				7,400
Provision for doubtful accounts			4,165				6,509
Non-cash stock compensation			8,371				3,844
Reorganization items, net			1,262				1,344
Amortization of deferred financing costs			3,760				3,833
Currency remeasurement (gain) loss			(17,158	)			33,572
Changes in assets and liabilities —
Receivables			14,793				122,733
Inventories			7,127				35,698
Prepaid expenses and other			2,620				(3,320	)
Payables			43,195				(118,778	)
Accrued expenses			(4,861	)			(6,703	)
Noncurrent liabilities			(3,969	)			(21,579	)
Other, net			(10,501	)			(8,941	)
Net cash provided by operating activities			81,478				120,478
Cash Flows From Investing Activities:
Capital expenditures			(58,556	)			(58,666	)
Proceeds from sales of assets, net			805				12,892
Net cash used in investing activities			(57,751	)			(45,774	)
Cash Flows From Financing Activities:
Increase in short-term borrowings			1,514				105
Decrease in borrowings under Senior Secured Credit Facility			(2,266	)			(2,255	)
Increase (decrease) in other debt			7,480				(6,618	)
Acquisition of noncontrolling interests in subsidiaries / other			(1,651	)			428
Net cash provided by (used in) financing activities			5,077				(8,340	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents			5,200				(8,498	)
Net Increase In Cash and Cash Equivalents			34,004				57,866
Cash and Cash Equivalents, Beginning of Period			69,505				90,547
Cash and Cash Equivalents, End of Period		$	103,509			$	148,413
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period —
Interest		$	27,754			$	41,080
Income taxes (net of refunds)		$	2,986			$	10,492

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
(Unaudited)

(1) BASIS OF PRESENTATION

     The Condensed Consolidated Financial Statements include the accounts of Exide Technologies (referred to together with its subsidiaries, unless the context requires otherwise, as “Exide” or the “Company”) and all of its majority-owned subsidiaries. These statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by generally accepted accounting principles (“GAAP”), or those disclosures normally made in the Company’s Annual Report on Form 10-K. Accordingly, the reader of this Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009 for further information.

     The financial information has been prepared in accordance with the Company’s customary accounting practices. In the Company’s opinion, the accompanying Condensed Consolidated Financial Statements include all adjustments of a normal recurring nature necessary for a fair statement of the results of operations and financial position for the periods presented.

     The Financial Accounting Standards Board (“FASB”) has issued Statement of Financial Accounting Standards (“SFAS”) No. 168 — The “FASB Accounting Standards Codification™” and the Hierarchy of Generally Accepted Accounting Principles. SFAS 168 establishes the FASB Accounting Standards Codification™ (“ASC”) as the single source of authoritative U.S. generally accepted accounting principles (GAAP). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The ASC supersedes all existing non-SEC accounting and reporting standards. GAAP is not intended to be changed as a result of the FASB’s Codification project, and the adoption of the ASC will have no impact on the Company’s reported results of operations, financial position, or cash flows.

     Certain amounts in the Condensed Consolidated Financial Statements as of March 31, 2009 and for the three and nine months ended December 31, 2008 have been adjusted to conform to the presentation of equivalent amounts in the current period which reflect the adoption of a new accounting standard related to the presentation of minority (noncontrolling) ownership interests in consolidated subsidiaries.

(2) STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

     The Company adopted a new accounting standard on April 1, 2009. This guidance, among other things, requires that minority ownership interests (noncontrolling interests) in consolidated subsidiaries be reflected as a component of total stockholders’ equity in the Company’s Condensed Consolidated Balance Sheets, and that earnings (losses) attributable to noncontrolling interests be shown separately from those attributable to the Company in its Condensed Consolidated Statements of Operations. The stockholders’ equity accounts for both the Company and noncontrolling interests consist of:

														Accumulated
						Additional								Other								Total
		Common				Paid-in				Accumulated				Comprehensive				Noncontrolling				Stockholders’
		Stock				Capital				Deficit				Income				Interests				Equity
		(In thousands)
Total Stockholders’ Equity at April 1, 2009		$	755			$	1,111,001			$	(787,281	)		$	1,752			$	15,840			$	342,067
Net loss			—				—				(52,191	)			—				275				(51,916	)
Defined benefit plans, net of tax			—				—				—				2,181				—				2,181
Translation adjustment			—				—				—				29,272				1,035				30,307
Unrealized gain on derivatives, net of tax			—				—				—				861				—				861
Increase in ownership of subsidiary			—				(1,652	)			—				—				(742	)			(2,394	)
Stock compensation / other			1				8,371				—				—				—				8,372
Total Stockholders’ Equity at December 31, 2009		$	756			$	1,117,720			$	(839,472	)		$	34,066			$	16,408			$	329,478

Total comprehensive income (loss) and its components are as follows:

		For the Three Months Ended								For the Nine Months Ended
		December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
		(In thousands)
Net income (loss)		$	10,021			$	15,529			$	(51,916	)		$	(4,124	)
Defined benefit plans			7				(7,513	)			2,181				(13,081	)
Cumulative translation adjustment			(1,835	)			(19,949	)			29,272				(58,523	)
Derivatives qualifying as hedges			441				(5,909	)			861				(2,900	)
Total comprehensive income (loss)		$	8,634			$	(17,842	)		$	(19,602	)		$	(78,628	)

Comprehensive income (loss) attributable to noncontrolling interests was not material for the three-month and nine-month periods ended December 31, 2009 and 2008.

(3) ACCOUNTING FOR DERIVATIVES

     The Company accounts for derivative instruments as assets or liabilities, based on measurements of their fair values. The Company does not enter into derivative contracts for trading or speculative purposes. Derivatives are used only to hedge the volatility arising from changes in the fair value of certain assets and liabilities that are subject to market risk, such as interest rates on debt instruments, foreign currency exchange rates, and certain commodities. If a derivative qualifies for hedge accounting, gains or losses in its fair value that offset changes in the fair value of the asset or liability being hedged (“effective” gains or losses) are reported in accumulated other comprehensive income, and subsequently recorded to earnings only as the related variability on the hedged transaction is recorded in earnings. If a derivative does not qualify for hedge accounting, changes in its fair value are reported in earnings immediately upon occurrence. Derivatives qualify for hedge accounting if they are designated as hedging instruments at their inception, and if they are highly effective in achieving fair value changes that offset the fair value changes of the assets or liabilities being hedged. Regardless of a derivative’s accounting qualification, changes in its fair value that are not offset by fair value changes in the asset or liability being hedged are considered ineffective, and are recognized in earnings immediately.

     In February 2008, the Company entered into an interest rate swap agreement to fix the variable component of interest on $200.0 million of its floating rate long-term obligations through February 27, 2011. The rate is fixed at 3.33% per annum through the remainder of the term of the agreement. The interest rate swap is designated as a cash-flow hedging instrument.

     In August 2008, the Company entered into a foreign currency forward contract in the notional amount of $62.8 million to mitigate the effect of foreign currency exchange rate fluctuations of a certain foreign subsidiary’s debt that is denominated in U.S. dollars. The forward contract and the indebtedness mature in May 2012. Because the Company has not designated this contract as a hedging instrument, changes in its fair value are recognized immediately in earnings.

     The following tables set forth information on the presentation of these derivative instruments in the Company’s Condensed Consolidated Financial Statements:

Balance

Fair Value As of

Sheet

December 31, 2009

March 31, 2009

(In thousands)

Asset Derivative:

Foreign Exchange Forward

Other noncurrent assets

$

792

$

4,962

Liability Derivatives:

Interest Rate Swap

Other noncurrent liabilities

6,237

7,461

		Statement of				For the Three Months Ended								For the Nine Months Ended
		Operations				December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
						(In thousands)
Foreign Currency Forward
(Gain) loss recorded in Statement of Operations		Other expense (income), net				$	(1,343	)		$	(1,355	)		$	4,170			$	(3,630	)
Interest Rate Swap
Realized loss recorded in Statement of Operations		Interest expense, net					1,526				926				4,536				1,584

Approximately $1.3 million is expected to be reclassified from other comprehensive income (“OCI”) to interest expense during the remainder of fiscal 2010.

(4) INTANGIBLE ASSETS AND GOODWILL

     Intangible Assets

Intangible assets consist of:

		Trademarks				Trademarks and
		and Tradenames				Tradenames
		(not subject to				(subject to				Customer
		amortization)				amortization)				relationships				Technology				Total
		(In thousands)
As of December 31, 2009:
Gross Amount		$	62,766			$	14,263			$	118,290			$	31,271			$	226,590
Accumulated Amortization			—				(6,383	)			(28,042	)			(9,417	)			(43,842	)
Net		$	62,766			$	7,880			$	90,248			$	21,854			$	182,748
As of March 31, 2009:
Gross Amount		$	58,134			$	13,223			$	109,690			$	28,544			$	209,591
Accumulated Amortization			—				(5,134	)			(22,569	)			(6,577	)			(34,280	)
Net		$	58,134			$	8,089			$	87,121			$	21,967			$	175,311

Amortization of intangible assets for the third quarter of fiscal 2010 and 2009 was $2.3 million and $1.9 million, respectively and for the first nine months of fiscal 2010 and 2009, $6.7 million and $5.8 million, respectively. Excluding the impact of any future acquisitions (if any), the Company anticipates annual amortization of intangible assets for each of the next five years to be approximately $8.0 million to $9.0 million. Intangible assets have been recorded at the legal entity level and are subject to foreign currency fluctuation.

     Goodwill

     In the fourth quarter of fiscal 2009, the Company purchased shares not previously owned in a majority-owned subsidiary. The purchase price of the additional shares amounted to approximately $4.9 million. Of this amount, approximately $4.2 million could not be attributed to the fair values of specific purchased tangible assets or identifiable intangible assets, and has been recorded as goodwill. The goodwill has been recorded in the Company’s Transportation Europe and ROW business segment, and will be

assessed at least annually for potential impairment.

(5) INVENTORIES

Inventories, valued using the first-in, first-out (“FIFO”) method, consist of:

		December 31, 2009				March 31, 2009
		(In thousands)
Raw materials		$	83,591			$	61,681
Work-in-process			91,754				87,986
Finished goods			265,708				271,148
		$	441,053			$	420,815

(6) OTHER ASSETS

Other assets consist of:

		December 31, 2009				March 31, 2009
		(In thousands)
Deposits (a)		$	19,377			$	9,265
Capitalized software, net			3,220				4,017
Loan to affiliate			1,005				1,005
Retirement plans			4,866				1,341
Financial instruments			792				4,962
Other			4,847				5,066
		$	34,107			$	25,656

(7) DEBT

     At December 31, 2009 and March 31, 2009, short-term borrowings of $9.5 million and $7.0 million, respectively, consisted of borrowings under various operating lines of credit and working capital facilities maintained by certain of the Company’s non-U.S. subsidiaries. Certain of these borrowings are collateralized by receivables, inventories and/or property. These borrowing facilities, which are typically for one-year renewable terms, generally bear interest at current local market rates plus up to one percent per annum. The weighted average interest rate on short-term borrowings was approximately 4.3% and 5.8% at December 31, 2009 and March 31, 2009, respectively.

     Total long-term debt consists of:

		December 31, 2009				March 31, 2009
		(In thousands)
Senior Secured Credit Facility		$	293,300			$	287,966
10.5% Senior Secured Notes due 2013			290,000				290,000
Floating Rate Convertible Senior Subordinated Notes due 2013			60,000				60,000
Other, including capital lease obligations and other loans at interest rates generally ranging up to 9% due in installments through 2015			16,214				13,262
Total			659,514				651,228
Less — current maturities			4,881				5,048
Total Long-Term Debt		$	654,633			$	646,180

Total debt at December 31, 2009 and March 31, 2009 was $669.0 million and $658.2 million, respectively.

(8) INTEREST EXPENSE, NET

     Interest income of $0.2 million and $0.5 million, respectfully, is included in interest expense, net for the three months ended December 31, 2009 and 2008, and $0.7 million and $2.2 million, respectively, for the nine months ended December 31, 2009 and 2008.

(9) OTHER EXPENSE (INCOME), NET

Other expense (income), net consist of:

		For the Three Months Ended								For the Nine Months Ended
		December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
		(In thousands)
Net loss on asset sales / impairments		$	2,300			$	686			$	8,474			$	1,820
Equity (income) loss			(555	)			256				(516	)			(1,171	)
Currency remeasurement (gain) loss (a)			(298	)			7,689				(17,158	)			33,572
Gain on revaluation of warrants (b)			(740	)			(7,062	)			(538	)			(6,591	)
Other			(43	)			(1,998	)			1				(3,545	)
		$	664			$	(429	)		$	(9,737	)		$	24,085

(10) EMPLOYEE BENEFITS

     The components of the Company’s net periodic pension and other post-retirement benefit costs are as follows:

		Pension Benefits
		For the Three Months Ended								For the Nine Months Ended
		December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
						(In thousands)
Components of net periodic benefit cost:
Service cost		$	1,138			$	1,030			$	2,289			$	3,345
Interest cost			10,676				9,218				26,148				28,779
Expected return on plan assets			(6,597	)			(7,549	)			(16,900	)			(23,394	)
Amortization of:
Prior service cost			4				5				8				16
Actuarial loss (gain)			235				(605	)			801				(1,988	)
Net periodic benefit cost		$	5,456			$	2,099			$	12,346			$	6,758

		Other Post-Retirement Benefits
		For the Three Months Ended								For the Nine Months Ended
		December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
						(In thousands)
Components of net periodic benefit cost:
Service cost		$	47			$	45			$	91			$	149
Interest cost			383				327				1,028				1,001
Amortization of:
Prior service cost			(96	)			(96	)			(288	)			(288	)
Actuarial loss			16				34				53				101
Net periodic benefit cost		$	350			$	310			$	884			$	963

     The estimated fiscal 2010 pension plan contributions are $14.9 million and other post-retirement contributions are $2.0 million. Payments aggregating $13.3 million were made during the nine month period ended December 31, 2009.

(11) COMMITMENTS AND CONTINGENCIES

Claims Reconciliation

     On April 15, 2002, the “Petition Date”, Exide Technologies, together with certain of its subsidiaries (the “Debtors”), filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws (“Bankruptcy Code” or “Chapter 11”) in the United States Bankruptcy Court for the District of Delaware (“Bankruptcy Court”). The Debtors continued to operate their businesses and manage their properties as debtors-in-possession throughout the course of the bankruptcy case. The Debtors, along with the Official Committee of Unsecured Creditors, filed a Joint Plan of Reorganization (the “Plan”) with the Bankruptcy Court on February 27, 2004 and, on April 21, 2004, the Bankruptcy Court confirmed the Plan.

     Under the Plan, holders of general unsecured claims were eligible to receive collectively 2.5 million shares of common stock and warrants to purchase up to approximately 6.7 million shares of common stock at $29.84 per share. Approximately 13.4% of such common stock and warrants were initially reserved for distribution for disputed claims. The Official Committee of Unsecured Creditors, in consultation with the Company, established such reserve to provide for a pro rata distribution of new common stock and warrants to holders of disputed claims as they become allowed. As claims are evaluated and processed, the Company will object to some claims or portions thereof, and upward adjustments (to the extent common stock and warrants not previously distributed remain) or downward adjustments to the reserve will be made pending or following adjudication of such objections. Predictions regarding the allowance and classification of claims are difficult to make. With respect to environmental claims in particular, it is difficult to assess the Company’s potential liability due to the large number of other potentially responsible parties. For example, a demand for the total cleanup costs of a landfill used by many entities may be asserted by the government using joint and several liability theories. Although the Company believes that there is a reasonable basis to believe that it will ultimately be responsible for only its proportional share of these remediation costs, there can be no assurance that the Company will prevail on these claims. In addition, the scope of remedial costs, or other environmental injuries, is highly variable and estimating these costs involves complex legal, scientific and technical judgments. Many of the claimants who have filed disputed claims, particularly environmental and personal injury claims, produce little or no proof of fault on which the Company can assess its potential liability.

Such claimants often either fail to specify a determinate amount of damages or provide little or no basis for the alleged damages. In some cases, the Company is still seeking additional information needed for a claims assessment and information that is unknown to the Company at the current time may significantly affect the Company’s assessment regarding the adequacy of the reserve amounts in the future.

     As general unsecured claims have been allowed in the Bankruptcy Court, the Company has distributed approximately one share of common stock per $383.00 in allowed claim amount and approximately one warrant per $153.00 in allowed claim amount. These rates were established based upon the assumption that the common stock and warrants allocated to holders of general unsecured claims on the effective date, including the reserve established for disputed claims, would be fully distributed so that the recovery rates for all allowed unsecured claims would comply with the Plan without the need for any redistribution or supplemental issuance of securities. If the amount of general unsecured claims that is eventually allowed exceeds the amount of claims anticipated in the setting of the reserve, additional common stock and warrants will be issued for the excess claim amounts at the same rates as used for the other general unsecured claims. If this were to occur, additional common stock would also be issued to the holders of pre-petition secured claims to maintain the ratio of their distribution in common stock at nine times the amount of common stock distributed for all unsecured claims.

     No claims were allowed during the fiscal quarter ended December 31, 2009, and therefore no distribution of stock and warrants were made for the period. Based on information available as of January 29, 2010, approximately 11.3% of common stock and warrants reserved for this purpose has been distributed. The Company also continues to resolve certain non-objected claims.

Private Party Lawsuits and other Legal Proceedings

     In 2003, the Company served notices to reject certain executory contracts with EnerSys, including a 1991 Trademark and Trade Name License Agreement (the “Trademark License”), pursuant to which the Company had licensed to EnerSys use of the “Exide” trademark on certain industrial battery products in the United States and 80 foreign countries. EnerSys objected to the rejection of certain of the executory contracts, including the Trademark License. In 2006, the Court granted the Company’s request to reject the contracts, and it ordered a two-year transition period, which has now expired. EnerSys appealed those rulings, and the appeal remains pending. Because the Bankruptcy Court authorized rejection of the Trademark License, as with other executory contracts at issue, EnerSys will have a pre-petition general unsecured claim relating to the alleged damages arising therefrom. The Company reserves the ability to consider payment in cash of some portion of any settlement or ultimate award on EnerSys’ claim of alleged rejection damages.

     In July 2001, Pacific Dunlop Holdings (US), Inc. (“PDH”) and several of its foreign affiliates under the various agreements through which Exide and its affiliates acquired GNB, filed a complaint in the Circuit Court for Cook County, Illinois alleging breach of contract, unjust enrichment and conversion against Exide and three of its foreign affiliates. The plaintiffs maintain they are entitled to approximately $17.0 million in cash assets acquired by the defendants through their acquisition of GNB. In December 2001, the Court denied the defendants’ motion to dismiss the complaint, without prejudice. The defendants filed an answer and counterclaim. In 2002, the Court authorized discovery to proceed as to all parties except the Company. In August 2002, the case was moved to the U.S. Bankruptcy Court for the Northern District of Illinois. In February 2003, the U.S. Bankruptcy Court for the Northern District of Illinois transferred the case to the U.S. Bankruptcy Court in Delaware. In November 2003, the Bankruptcy Court denied PDH’s motion to abstain or remand the case and issued an opinion holding that the Bankruptcy Court had jurisdiction over PDH’s claims and that liability, if any, would lie solely against Exide Technologies and not against any of its foreign affiliates. The Bankruptcy Court denied PDH’s motion to reconsider. In an order dated March 22, 2007, the U.S. District Court for the District of Delaware denied PDH’s appeal in its entirety, affirming the Orders of the Bankruptcy Court. PDH then appealed the matter to the United States Court of Appeals for the Third Circuit. On September 19, 2008, the Third Circuit vacated the prior orders of the Bankruptcy Court, remanding the matter with instructions that the Bankruptcy Court hear evidence before ruling whether Exide (as opposed to its non-debtor affiliates) would be solely liable, if any liability is found at all, under the GNB agreements.

     In December 2001, PDH filed a separate action in the Circuit Court for Cook County, Illinois seeking recovery of approximately $3.1 million for amounts allegedly owed by the Company under various agreements between the parties. The claim arises from letters of credit and other security allegedly provided by PDH for GNB’s performance of certain of GNB’s obligations to third parties that PDH claims the Company was obligated to replace. The Company’s answer contested the amounts claimed by PDH and the Company filed a counterclaim. Although this action has been consolidated with the Cook County suit concerning GNB’s cash assets, the claims relating to this action have been transferred to the U.S. Bankruptcy Court for the District of Delaware and are currently subject to a stay injunction by that court. The Company plans to vigorously defend itself and pursue its counterclaims.

     On July 1, 2005, the Company was informed by the Enforcement Division of the Securities and Exchange Commission (the “SEC”) that it commenced a preliminary inquiry into statements the Company made in fiscal 2005 regarding its ability to comply with fiscal 2005 loan covenants and the going concern modification in the audit report in the Company’s annual report on Form 10-K for fiscal 2005. The SEC noted that the inquiry should not be construed as an indication by the SEC or its staff that any violations

of law have occurred. The Company intends to fully cooperate with the inquiry and continues to do so.

Environmental Matters

     As a result of its multinational manufacturing, distribution and recycling operations, the Company is subject to numerous federal, state, and local environmental, occupational health, and safety laws and regulations, as well as similar laws and regulations in other countries in which the Company operates (collectively, “EH&S laws”).

     The Company is exposed to liabilities under such EH&S laws arising from its past handling, release, storage and disposal of materials now designated as hazardous substances and hazardous wastes. The Company previously has been advised by the U.S. Environmental Protection Agency (“EPA”) or state agencies that it is a “Potentially Responsible Party” under the Comprehensive Environmental Response, Compensation and Liability Act or similar state laws at 100 federally defined Superfund or state equivalent sites. At 45 of these sites, the Company has paid its share of liability. While the Company believes it is probable its liability for most of the remaining sites will be treated as disputed unsecured claims under the Plan, there can be no assurance these matters will be discharged. If the Company’s liability is not discharged at one or more sites, the government may be able to file claims for additional response costs in the future, or to order the Company to perform remedial work at such sites. In addition, the EPA, in the course of negotiating this pre-petition claim, had notified the Company of the possibility of additional clean-up costs associated with Hamburg, Pennsylvania properties of approximately $35.0 million, as described in more detail below. The EPA has provided summaries of past costs and an estimate of future costs that approximate the amounts in its notification; however, the Company disputes certain elements of the claimed past costs, has not received sufficient information supporting the estimated future costs, and is in negotiations with the EPA. To the extent the EPA or other environmental authorities dispute the pre-petition nature of these claims, the Company would intend to resist any such effort to evade the bankruptcy law’s intended result, and believes there are substantial legal defenses to be asserted in that case. However, there can be no assurance that the Company would be successful in challenging any such actions.

     The Company is also involved in the assessment and remediation of various other properties, including certain Company-owned or operated facilities. Such assessment and remedial work is being conducted pursuant to applicable EH&S laws with varying degrees of involvement by appropriate legal authorities. Where probable and reasonably estimable, the costs of such projects have been accrued by the Company, as discussed below. In addition, certain environmental matters concerning the Company are pending in various courts or with certain environmental regulatory agencies with respect to these currently or formerly owned or operating locations. While the ultimate outcome of the foregoing environmental matters is uncertain, after consultation with legal counsel, the Company does not believe the resolution of these matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

     On September 6, 2005, the U.S. Court of Appeals for the Third Circuit issued an opinion in U.S. v. General Battery/Exide (No. 03-3515) affirming the district court’s holding that the Company is liable, as a matter of federal common law of successor liability, for lead contamination at certain sites in the vicinity of Hamburg, Pennsylvania. This case involves several of the pre-petition environmental claims of the federal government for which the Company, as part of its Chapter 11 proceeding, had established a reserve of common stock and warrants. The amount of the government claims for these sites at the time reserves were established was approximately $14.0 million. On October 2, 2006, the United States Supreme Court denied review of the appellate decision, leaving Exide subject to a stipulated judgment for approximately $6.5 million, based on the ruling that Exide has successor liability for these EPA cost recovery claims. The judgment will be a general unsecured claim payable in common stock and warrants. Additionally, the EPA has asserted a general unsecured claim for costs related to other Hamburg, Pennsylvania sites. The current amount of the government’s claims for the aforementioned sites (including the stipulated judgment discussed above) is approximately $20.0 million. A reserve of common stock and warrants for the estimated value of all claims, including the aforementioned claims, was established as part of the Plan.

     In October 2004, the EPA, in the course of negotiating a comprehensive settlement of all its environmental claims against the Company, had notified the Company of the possibility of additional clean-up costs associated with other Hamburg, Pennsylvania properties of approximately $35.0 million. The EPA has provided cost summaries for past costs and an estimate of future costs that approximate the amounts in its notification; however, the Company disputes certain elements of the claimed past costs, has not received sufficient information supporting the estimated future costs, and is in negotiations with the EPA.

     As unsecured claims are allowed in the Bankruptcy Court, the Company is required to distribute common stock and warrants to the holders of such claims. To the extent the government is able to prove the Company is responsible for the alleged contamination at the other Hamburg, Pennsylvania properties and substantiate its estimated $35.0 million of additional clean-up costs discussed above, these claims would ultimately result in an inadequate reserve of common stock and warrants to the extent not offset by the reconciliation of all other claims for lower amounts than the aggregate reserve. The Company would still retain the right to perform and pay for such cleanup activities, which would preserve the existing reserved common stock and warrants. Except for the government’s cost recovery claim resolved by the U.S. v. General Battery/Exide case discussed above, it remains the Company’s position that it is not liable for the contamination of this area, and that any liability it may have derives from pre-petition events

which would be administered as a general, unsecured claim, and consequently no provisions have been recorded in connection therewith.

     The Company is conducting an investigation and risk assessment of lead exposure near its Reading recycling plant from past facility emissions and non-Company sources such as lead paint. In 2000, the Company entered into a Consent Order with the EPA to investigate and (as appropriate) remediate potential environmental impacts to properties in the vicinity of its Reading, Pennsylvania recycling plant. Since 2000, Exide has reached agreement with the EPA regarding the boundaries of a study area defining the area of potential impacts, and has sampled all properties but one (where the property owner denied access) within the study area. The EPA established a soil cleanup standard for developed residential properties within the study area and all developed residential properties exceeding that standard have now been remediated. No further sampling of developed residential properties within the study area is required. The Company continues to discuss with the EPA the appropriateness and scope of remediation of other types of properties in the study area including undeveloped residential, commercial, industrial, and recreational (public parks). Where such future remediation is probable and reasonably estimable, the Company has established reserves for such obligations.

     The Company received a number of notices of violation issued by the Pennsylvania Department of Environmental Protection (“PADEP”) for alleged violations of pollution control laws at its Reading, Pennsylvania recycling facility. In an effort to resolve these notices, the Company is negotiating a settlement agreement with PADEP that will likely include monetary sanctions of $0.225 million to PADEP.

     The Company has established reserves for on-site and off-site environmental remediation costs where such costs are probable and reasonably estimable and believes that such reserves are adequate. As of December 31, 2009 and March 31, 2009, the amount of such reserves on the Company’s Condensed Consolidated Balance Sheets was approximately $30.4 million and $33.8 million, respectively. Because environmental liabilities are not accrued until a liability is determined to be probable and reasonably estimable, not all potential future environmental liabilities have been included in the Company’s environmental reserves and, therefore, additional earnings charges are possible. Also, future findings or changes in estimates could have a material adverse effect on the recorded reserves and cash flows.

     The sites that currently have the largest reserves include the following:

Tampa, Florida

     The Tampa site is a former secondary lead recycling plant, lead oxide production facility, and sheet lead-rolling mill that operated from 1943 to 1989. Under a RCRA Part B Closure Permit and a Consent Decree with the State of Florida, Exide is required to investigate and remediate certain historic environmental impacts to the site. Cost estimates for remediation (closure and post-closure) are expected to range from $12.5 million to $20.5 million depending on final State of Florida requirements. The remediation activities are expected to occur over the course of several years.

Columbus, Georgia

     The Columbus site is a former secondary lead recycling plant that was mothballed in 1999, which is part of a larger facility that includes an operating lead acid battery manufacturing facility. Groundwater remediation activities began in 1988. Costs for supplemental investigations, remediation and site closure are currently estimated at $6.0 million to $9.0 million.

Guarantees

     At December 31, 2009, the Company had outstanding letters of credit with a face value of $49.6 million and surety bonds with a face value of $3.8 million. The majority of the letters of credit and surety bonds have been issued as collateral or financial assurance with respect to certain liabilities the Company has recorded including, but not limited to, environmental remediation obligations and self-insured workers’ compensation reserves. Failure of the Company to satisfy its obligations with respect to the primary obligations secured by the letters of credit or surety bonds could entitle the beneficiary of the related letter of credit or surety bond to demand payments pursuant to such instruments. The letters of credit generally have terms up to one year. Collateral held by the sureties in the form of letters of credit at December 31, 2009, pursuant to the terms of the agreement, totaled approximately $3.7 million.

     Certain of the Company’s European and Asia Pacific subsidiaries have issued bank guarantees as collateral or financial assurance in connection with environmental obligations, income tax claims and customer contract requirements. At December 31, 2009, bank guarantees with a face value of $16.1 million were outstanding.

Sales Returns and Allowances

     The Company provides for an allowance for product returns and/or allowances. Based upon its manufacturing re-work process, the Company believes that the majority of its product returns are not the result of product defects. The Company recognizes the estimated cost of product returns as a reduction of sales in the period in which the related revenue is recognized. The product return estimates are based upon historical trends and claims experience, and include assessment of the anticipated lag between the date of sale and claim/return date.

     Changes in the Company’s sales returns and allowances liability (in thousands) are as follows:

Balance at March 31, 2009		$	39,721
Accrual for sales returns and allowances provided			21,907
Settlements made (in cash or credit), and currency translation			(23,022	)
Balance at December 31, 2009		$	38,606

(12) INCOME TAXES

     The effective tax rates for the third quarter of fiscal 2010 and 2009 were impacted by the generation of income in tax-paying jurisdictions in certain countries in Europe, the U.S., Asia, and Canada, and the recognition of valuation allowances on tax benefits generated from losses in the United Kingdom, Italy, Spain, France, and Australia. The effective tax rate for the third quarter of fiscal 2010 and 2009 was also impacted by the recognition of $29.8 million and $23.8 million, respectively, of valuation allowances on current period tax benefits generated primarily in the United Kingdom, France, Spain, Italy, and Australia. During the first nine months of fiscal 2009, the Company established a full valuation allowance of $13.3 million on its net deductible temporary differences and loss carryforwards related to its Australian operations. In addition, the income tax provision for the first nine months of fiscal 2009 decreased as a result of the removal of $3.1 million in valuation allowances against net deferred tax assets generated from the Company’s Austrian and Mexican operations.

     The significant components of the Company’s effective tax rate are as follows:

		For the Three Months Ended								For the Nine Months Ended
		December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
						(In thousands)
Federal statutory rate			35.0	%			35.0	%			35.0	%			35.0	%
Change in valuation allowances			10.7	%			12.7	%			-141.0	%			106.8	%
Revaluation of warrants			-1.2	%			-11.3	%			0.7	%			-7.9	%
Rate differences on foreign subsidiaries			-15.2	%			-24.4	%			34.6	%			-40.5	%
Other, net			26.3	%			17.1	%			-33.8	%			20.8	%
Effective tax rate			55.6	%			29.1	%			-104.5	%			114.2	%

The table above is a condensed table and does not include all items normally included in Form 10-K. Items included in “other, net” are presented on a net basis and include certain items above 5%.

Each quarter, the Company reviews the need to report the future realization of tax benefits of deductible temporary differences or loss carryforwards on its financial statements. All available evidence is considered to determine whether a valuation allowance should be established against these future tax benefits. This review is performed on a jurisdiction by jurisdiction basis.

     The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal income tax examinations by tax authorities for years ended before March 31, 2008. With respect to state and local jurisdictions and countries outside of the United States, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for years ended before March 31, 2002. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that could result from these years.

     The Company’s unrecognized tax benefits decreased slightly from $70.5 million to $70.4 million during the first nine months of fiscal 2010 due primarily to the effects of foreign currency translation plus unrecognized tax benefits established during the period less unrecognized tax benefits released during the period through the expiration of statute of limitations and tax settlements. The amount, if recognized, that would affect the Company’s effective tax rate at December 31, 2009 is $34.6 million.

     The Company classifies interest and penalties on uncertain tax benefits as income tax expense. At December 31, 2009 and March 31, 2009, before any tax benefits, the Company had $4.8 million and $4.3 million, respectively, of accrued interest and penalties on unrecognized tax benefits.

     During the next twelve months, the Company expects the resolution of tax audits and expiration of statute of limitations for tax years in which the Company has recorded an uncertain tax benefit. These uncertain tax benefits, if recognized, would affect the Company’s effective tax rate by $3.7 million.

(13) RESTRUCTURING

     During the first nine months of fiscal 2010, the Company has continued to implement operational changes to streamline and rationalize its structure in an effort to simplify the organization and eliminate redundant and/or unnecessary costs. As part of these restructuring programs, the nature of the positions eliminated range from plant employees and clerical workers to operational and sales management.

     During the nine months ended December 31, 2009, the Company recognized restructuring charges of $55.4 million, representing $45.6 million for severance and $9.8 million for related closure costs. These charges primarily represent consolidation efforts in the Transportation America, Transportation Europe and Rest of World (“ROW”), and Industrial Europe and ROW segments for approximately 1,320 positions.

     Summarized restructuring reserve activity:

		Severance Costs				Closure Costs				Total
		(In thousands)
Balance at March 31, 2009		$	37,800			$	4,618			$	42,418
Restructuring Charges			45,636				9,785				55,421
Payments and Currency Translation			(53,677	)			(7,797	)			(61,474	)
Balance at December 31, 2009		$	29,759			$	6,606			$	36,365

     Remaining expenditures principally represent (i) severance and related benefits payable per employee agreements and/or regulatory requirements, (ii) lease commitments for certain closed facilities, branches and offices, as well as leases for excess and permanently idle equipment payable in accordance with contractual terms, and (iii) certain other closure costs including dismantlement and costs associated with removal obligations incurred in connection with the exit of facilities.

(14) EARNINGS (LOSS) PER SHARE

     The Company computes basic earnings (loss) per share by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net earnings (loss), after adding back the after-tax amount of interest recognized in the period associated with the Company’s Floating Rate Convertible Senior Subordinated Notes, by diluted weighted average shares outstanding. Potentially dilutive shares include the assumed exercise of stock options and the assumed vesting of restricted stock and stock unit awards (using the treasury stock method) as well as the assumed conversion of the convertible debt, if dilutive (using the if-converted method). Shares which are contingently issuable under the Company’s plan of reorganization have been included as outstanding common shares for purposes of calculating basic earnings (loss) per share. Basic and diluted earnings (loss) per share for the three and nine months ended December 31, 2009 and 2008 are summarized as follows:

		For the Three Months Ended								For the Nine Months Ended
		December 31, 2009				December 31, 2008				December 31, 2009				December 31, 2008
						(In thousands, except per share amounts)
Net income (loss) attributable to
Exide Technologies		$	9,772			$	15,427			$	(52,191	)		$	(5,120	)
Interest expense on Floating Rate
Convertible Senior Subordinated Notes			—				109				—				—
		$	9,772			$	15,536			$	(52,191	)		$	(5,120	)
Basic weighted average shares outstanding			76,028				75,589				75,923				75,474
Effect of dilutive securities:
Floating Rate Convertible Senior Subordinated Notes			3,697				3,697				—				—
Employee stock options			714				36				—				—
Employee restricted stock awards (non-vested)			353				64				—				—
			4,764				3,797				—				—
Diluted weighted average shares outstanding			80,792				79,386				75,923				75,474
Basic earnings (loss) per share:		$	0.13			$	0.20			$	(0.69	)		$	(0.07	)
Diluted earnings (loss) per share:		$	0.12			$	0.20			$	(0.69	)		$	(0.07	)

     For the three months ended December 31, 2009 and 2008, 1,725,818 and 2,293,031 stock options, respectively, were excluded from the diluted earnings per share calculation because their exercise prices were greater than the market price of the related common stock for the period, and their inclusion would be antidilutive. The remaining options were included in the treasury stock method calculation, and the resulting incremental shares were included in the calculation of diluted earnings per share. In addition, 6,725,444 warrants were outstanding for both periods, but were all excluded from the diluted earnings per share calculation because their exercise prices were greater than the market price of the related common stock for the period, and their inclusion would also be antidilutive. Due to a net loss for the nine month periods ended December 31, 2009 and 2008, certain potentially dilutive shares were excluded from the diluted loss per share calculation for those periods because their effect would be antidilutive:

		As of
		December 31, 2009				December 31, 2008
		(In thousands)
Shares associated with convertible debt (assumed conversion)			3,697				3,697
Employee stock options			3,933				3,548
Restricted stock awards			855				1,016
Warrants			6,725				6,725
Total shares excluded			15,210				14,986

(15) FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company uses available market information and appropriate methodologies to estimate the fair value of its financial instruments. Considerable judgment is required in interpreting market data to develop these estimates. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Certain of these financial instruments are with major financial institutions and expose the Company to market and credit risks and may at times be concentrated with certain counterparties or groups of counterparties. The creditworthiness of counterparties is continually reviewed, and full performance is currently anticipated.

     The Company’s cash and cash equivalents, accounts receivable, accounts payable, and short-term borrowings all have carrying amounts that are a reasonable estimate of their fair values. The carrying values and estimated fair values of the Company’s long-term obligations and other financial instruments are as follows:

		December 31, 2009								March 31, 2009
						Estimated Fair								Estimated Fair
		Carrying Value				Value				Carrying Value				Value
		(In thousands)
(Liability) Asset:
Senior Secured Credit Facility		$	(293,300	)		$	(270,048	)		$	(287,966	)		$	(195,817	)
Senior Secured Notes due 2013			(290,000	)			(293,625	)			(290,000	)			(174,000	)
Convertible Senior Subordinated Notes due 2013			(60,000	)			(41,250	)			(60,000	)			(17,475	)
Interest Rate Swap (a)			(6,237	)			(6,237	)			(7,461	)			(7,461	)
Foreign Currency Forward (a)			792				792				4,962				4,962

	•		Level 1		—		Observable inputs such as quoted prices in active markets for identical assets and liabilities;
	•		Level 2		—		Inputs other than quoted prices in active markets that are observable either directly or indirectly; and
	•		Level 3		—		Inputs from valuation techniques in which one or more key value drivers are not observable, and must be based on the reporting entity’s own assumptions.

The following table represents our financial (liabilities) assets that are measured at fair value on a recurring basis, and the basis for that measurement:

						Quoted Price in				Significant
						Active Markets				Other				Significant
		Total				for				Observable				Unobservable
		Fair Value				Identical Assets				Inputs				Inputs
		Measurement				(Level 1)				(Level 2)				(Level 3)
		(In thousands)
December 31, 2009
Interest rate swap		$	(6,237	)			—			$	(6,237	)			—
Foreign currency forward			792				—				792				—
March 31, 2009:
Interest rate swap		$	(7,461	)			—			$	(7,461	)			—
Foreign currency forward			4,962				—				4,962				—

The fair value of the interest rate swap is based on observable prices as quoted for receiving the variable LIBOR rate, and paying fixed interest rates and, therefore, was classified as Level 2. The fair value of the foreign currency forward was based upon current quoted market prices and is classified as Level 2 based on the nature of the underlying market in which this derivative is traded. For additional discussion of the Company’s derivative instruments and hedging activities, see Note 3.

(16) SEGMENT INFORMATION

     The Company reports its results for four business segments: Transportation Americas, Transportation Europe and ROW, Industrial Energy Americas and Industrial Energy Europe and ROW. The Company is a global producer and recycler of lead-acid batteries, and its four business segments provide a comprehensive range of stored electrical energy products and services for transportation and industrial applications. The Company will continue to evaluate its reporting segments pending future organizational changes that may take place.

     Transportation markets include original-equipment (“OE”) and aftermarket automotive, heavy-duty truck, agricultural and marine applications, and new technologies for hybrid vehicles and automotive applications. Industrial markets include batteries for telecommunications systems, electric utilities, railroads, uninterruptible power supplies (“UPS”), lift trucks and other material handling equipment, and mining and other commercial vehicles.

     The Company’s four reportable segments are determined based upon the nature of the markets served and the geographic

regions in which they operate. The Company’s chief operating decision-maker monitors and manages the financial performance of these four business groups.

     Selected financial information concerning the Company’s reportable segments is as follows:

		For the Three Months Ended December 31, 2009
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
		(In thousands)
Net sales		$	238,784			$	248,556			$	56,758			$	202,374			$	—			$	746,472
Gross profit			56,678				48,639				14,806				38,075				—				158,198
Expenses (a)			29,978				28,727				9,923				43,129				23,508				135,265
Income (loss) before reorganization items and income taxes			26,700				19,912				4,883				(5,054	)			(23,508	)			22,933
(a) includes:
Restructuring expenses			1,234				2,266				45				5,524				255				9,324

		For the Three Months Ended December 31, 2008
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
		(In thousands)
Net sales		$	273,143			$	210,282			$	64,681			$	234,496			$	—			$	782,602
Gross profit			53,459				33,205				18,277				57,074				—				162,015
Expenses (a)			32,730				30,288				9,175				40,848				26,669				139,710
Income (loss) before reorganization items and income taxes			20,729				2,917				9,102				16,226				(26,669	)			22,305
(a) includes:
Restructuring expenses			255				2,895				40				4,328				265				7,783

		For the Nine Months Ended December 31, 2009
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
		(In thousands)
Net sales		$	694,349			$	577,449			$	173,252			$	526,091			$	—			$	1,971,141
Gross profit			146,683				97,428				41,128				109,549				—				394,788
Expenses (a)			92,494				96,741				30,518				139,280				59,883				418,916
Income (loss) before reorganization items and income taxes			54,189				687				10,610				(29,731	)			(59,883	)			(24,128	)
(a) includes:
Restructuring expenses			5,380				22,134				214				26,381				1,312				55,421

		For the Nine Months Ended December 31, 2008
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
		(In thousands)
Net sales		$	895,128			$	731,510			$	230,707			$	810,705			$	—			$	2,668,050
Gross profit			168,646				90,646				65,059				169,028				—				493,379
Expenses (a)			97,470				94,908				29,209				130,385				110,942				462,914
Income (loss) before reorganization items and income taxes			71,176				(4,262	)			35,850				38,643				(110,942	)			30,465
(a) includes:
Restructuring expenses			938				5,900				37				12,366				420				19,661

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion and analysis provide information which management believes is relevant to an assessment and understanding of the Company’s consolidated financial condition and results of operations. The discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto contained in this Report on Form 10-Q.

     Some of the statements contained in the following discussion of the Company’s financial condition and results of operations refer to future expectations or include other “forward-looking” information. Those statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by these statements. The forward-looking information is based on various factors and was derived from numerous assumptions. See “Cautionary Statement for Purposes of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995,” included in this Report on Form 10-Q for a discussion of factors to be considered when evaluating forward-looking information detailed below. These factors could cause our actual results to differ materially from the forward looking statements contained herein. For a discussion of certain legal contingencies, see Note 11 to the Condensed Consolidated Financial Statements.

Executive Overview

     The Company is a global producer and recycler of lead-acid batteries. The Company’s four business segments, Transportation Americas, Transportation Europe and Rest of World (“ROW”), Industrial Energy Americas, and Industrial Energy Europe and ROW provide a comprehensive range of stored electrical energy products and services for transportation and industrial applications.

     Transportation markets include Original Equipment (“OE”) and aftermarket automotive, heavy-duty truck, agricultural and marine applications, and new technologies for hybrid vehicles and automotive applications. Industrial markets include batteries for telecommunications systems, electric utilities, railroads, uninterruptible power supplies (“UPS”), lift trucks, mining, and other commercial vehicles.

     The Company’s four reportable segments are determined based upon the nature of the markets served and the geographic regions in which they operate. The Company’s chief operating decision-maker monitors and manages the financial performance of these four business groups.

Factors Which Affect the Company’s Financial Performance

     Lead and other Raw Materials. Lead represents approximately 45.3% of the Company’s cost of goods sold. The market price of lead fluctuates. Generally, when lead prices decrease, customers may seek disproportionate price reductions from the Company, and when lead prices increase, customers may resist price increases. Both of these situations may cause customer demand for the Company’s products to be reduced and the Company’s net sales and gross margins to decline. The average price of lead as quoted on the London Metals Exchange (“LME”) has increased 5.0% from $1,819 per metric ton for the nine months ended December 31, 2008 to $1,911 per metric ton for the nine months ended December 31, 2009. At January 29, 2010, the quoted price on the LME was $2,053 per metric ton. To the extent that lead prices continue to be volatile and the Company is unable to maintain existing pricing or pass higher material costs resulting from this volatility to its customers, its financial performance will be adversely impacted.

     Energy Costs. The Company relies on various sources of energy to support its manufacturing and distribution process, principally natural gas at its recycling facilities, electricity in its battery plants, and diesel fuel for distribution of its products. The Company seeks to recoup increased energy costs through price increases or surcharges. To the extent the Company is unable to pass on higher energy costs to its customers, its financial performance will be adversely impacted.

     Competition. The global transportation and industrial energy battery markets are highly competitive. In recent years, competition has continued to intensify and has affected the Company’s ability to pass along increased prices to keep pace with rising production costs. The effects of this competition have been exacerbated by excess capacity in certain of the Company’s markets, and fluctuating lead prices and low-priced Asian imports in certain of the Company’s markets.

     Exchange Rates. The Company is exposed to foreign currency risk in most European countries, principally from fluctuations in the Euro. For the first nine months of fiscal 2010, the exchange rate of the Euro to the U.S. Dollar has decreased 2.6% on average to $1.42 compared to $1.46 for the first nine months of fiscal 2009. At December 31, 2009, the exchange rate of the Euro to the U.S, Dollar was $1.43 or 7.5% higher as compared to $1.33 at March 31, 2009. Fluctuations in foreign currencies impacted the Company’s results for the periods presented herein. For the first nine months ended December 31, 2009, approximately 56.0% of the Company’s net sales were generated in Europe and ROW. Further, approximately 68.6% of the Company’s aggregate accounts receivable and inventory as of December 31, 2009 were held by its European subsidiaries.

     The Company is also exposed, although to a lesser extent, to foreign currency risk in the U.K., Poland, Australia, and various countries in the Pacific Rim. Fluctuations of foreign exchange rates against the U.S. Dollar can result in variations in the U.S. Dollar value of non-U.S. sales, expenses, assets, and liabilities. In some instances, gains in one currency may be offset by losses in another.

     Markets. The Company is subject to concentrations of customers and sales in a few geographic locations and is dependent on customers in certain industries, including the automotive, communications and data and material handling markets. Economic difficulties experienced in these markets and geographic locations impact the Company’s financial results. OE volumes in the transportation and motive power channels have been and continue to be depressed, reflecting current unfavorable global economic conditions. In addition, capital spending by major customers in the Company’s network power channels continues to be below historic levels.

     Seasonality and Weather. The Company sells a disproportionate share of its transportation aftermarket batteries during the fall and early winter (the Company’s third and a portion of its fourth fiscal quarters). Retailers and distributors buy automotive batteries during these periods so they will have sufficient inventory for cold weather periods. The impact of seasonality on sales has the effect of increasing the Company’s working capital requirements and also makes the Company more sensitive to fluctuations in the availability of liquidity.

     Unusually cold winters or hot summers may accelerate battery failure and increase demand for transportation replacement batteries. Mild winters and cool summers may have the opposite effect. As a result, if the Company’s sales are reduced by an unusually warm winter or cool summer, it is not possible for the Company to recover these sales in later periods. Further, if the Company’s sales are adversely affected by the weather, the Company cannot make offsetting cost reductions to protect its liquidity and gross margins in the short-term because a large portion of the Company’s manufacturing and distribution costs are fixed.

     Interest Rates. The Company is exposed to fluctuations in interest rates on its variable rate debt, portions of which were hedged during the nine months ended December 31, 2009. See Notes 3 and 7 to the Condensed Consolidated Financial Statements in this Report on Form 10-Q.

Third Quarter of Fiscal 2010 Highlights and Outlook

     The Company’s reported results continue to be impacted in fiscal 2010 by unfavorable global economic conditions, as well as fluctuations in the cost of materials and energy used in the manufacturing and distribution of the Company’s products.

     The Company recently received notice from Walmart that it has decided to utilize a single-source other than the Company as its supplier of automotive batteries for its U.S. retail operations. Walmart purchases currently represent a significant portion of the Company’s Transportation Americas sales. The Company believes the order phase-outs will continue into the third quarter of fiscal 2011. The Company is actively pursuing other sales opportunities in an effort to minimize the impact of this decision on future revenues.

     In the Americas, the Company obtains the vast majority of its lead requirements from five Company-owned and operated secondary lead recycling plants. These facilities reclaim lead by recycling spent lead-acid batteries, which are obtained for recycling from the Company’s customers and outside spent-battery collectors. Recycling helps the Company in the Americas control the cost of its principal raw material as compared to purchasing lead at prevailing market prices. Similar to the fluctuation in lead prices, however, the price of spent batteries has also fluctuated. The average price of spent batteries increased approximately 35.4% in the third quarter of fiscal 2010 versus the third quarter of fiscal 2009. The Company continues to take pricing actions and is attempting to secure higher captive spent battery return rates to help mitigate the risks associated with this price volatility.

     In Europe, the Company’s lead requirements are mainly fulfilled by third-party suppliers. Because of the Company’s exposure to volatile lead market prices in Europe, the Company has implemented several measures to offset changes in lead prices, including selective pricing actions and lead price escalators. The Company has automatic lead price escalators with virtually all OEM customers. The Company currently obtains a small portion of its lead requirements from recycling in its European facilities.

     The Company expects that volatility in lead and other commodity costs, which affect all business segments, will continue to affect the Company’s financial performance. However, selective pricing actions, lead price escalators in certain contracts and fuel surcharges are intended to help mitigate these risks. The implementation of selective pricing actions and price escalators generally lag the rise in market prices of lead and other commodities. Both lead price escalators and fuel surcharges may not be accepted by our customers, and if the price of lead decreases, our customers may seek disproportionate price reductions.

     In addition to managing the impact of fluctuation in lead and other commodity costs on the Company’s results, the key elements of the Company’s underlying business plans and continued strategies are:

(i) Successful execution and completion of the Company’s restructuring plan and organizational realignment of divisional and corporate functions intended to result in further targeted headcount reductions.

(ii) Actions designed to improve the Company’s liquidity and operating cash flow through working capital reduction plans, the sale of non-strategic assets and businesses, streamlining cash management processes, implementing plans to minimize the cash costs of the Company’s restructuring initiatives, and closely managing capital expenditures.

(iii) Continued factory and distribution productivity improvements through its established EXCELL program and Take Charge! initiative.

(iv) Continued review and rationalization of the various brand offerings of products in its markets to gain efficiencies in manufacturing and distribution, and better leverage the Company’s marketing spending.

(v) Increased research and development and engineering investments designed to develop enhanced lead-acid products as well as products utilizing alternative chemistries. In this regard, the Company continues to identify government funding opportunities to support near and long-term technological improvements in energy storage applications.

(vi) Gain further product and process efficiencies with implementation of the Global Procurement structure. This initiative focuses on leveraging existing relationships and creating an infrastructure for global search for products and components.

Critical Accounting Policies and Estimates

     The Company’s discussion and analysis of its financial condition and results of operations is based upon the Company’s Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these Condensed Consolidated Financial Statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates based on its historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     The Company believes that the critical accounting policies and estimates disclosed in Item 7—“Management’s Discussion and Analysis” in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009 affect the preparation of its Condensed Consolidated Financial Statements. The reader of this report should refer to Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009 for further information.

Results of Operations

Three months ended December 31, 2009 compared with three months ended December 31, 2008

     Net Sales

     Net sales were $746.5 million for the third quarter of fiscal 2010 versus $782.6 million in the third quarter of fiscal 2009. Foreign currency translation (primarily the Euro against the U.S. dollar) favorably impacted net sales in the third quarter of fiscal 2010 by approximately $57.4 million. Excluding the foreign currency translation impact, net sales decreased by approximately $93.5 million, or 11.9% primarily due to lower unit sales, partially offset by $8.9 million in lead related price increases.

										FAVORABLE / (UNFAVORABLE)
		For the Three Months Ended												Currency				Non-Currency
		December 31, 2009				December 31, 2008				TOTAL				Related				Related
		(In thousands)
Transportation
Americas		$	238,784			$	273,143			$	(34,359	)		$	—			$	(34,359	)
Europe & ROW			248,556				210,282				38,274				30,105				8,169
Industrial Energy
Americas			56,758				64,681				(7,923	)			—				(7,923	)
Europe & ROW			202,374				234,496				(32,122	)			27,251				(59,373	)
TOTAL		$	746,472			$	782,602			$	(36,130	)		$	57,356			$	(93,486	)