EXIDE TECHNOLOGIES
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
March 31, 2007
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 1-11263
EXIDE TECHNOLOGIES
(Exact Name of Registrant as
Specified in Its Charter)
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Delaware
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23-0552730
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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13000 Deerfield Parkway,
Building 200
Alpharetta, Georgia
(Address of principal
executive offices)
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30004
(Zip
Code)
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(678) 566-9000
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
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Common Stock, $.01 par
value
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Warrants to subscribe for
Common Stock
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Indicate by check mark if the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the Registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of the Registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K þ
Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (check one):
Large Accelerated
Filer o Accelerated
Filer þ Non-Accelerated
Filer o
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
The aggregate market value of common stock held by
non-affiliates of the Registrant as of September 29, 2006
was $226,415,000
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
issuers classes of common stock, as of the latest
practicable date: As of June 8, 2007,
60,688,319 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrants
Annual Meeting of Stockholders to be held on August 22,
2007 is incorporated by reference in Part III to the extent
described therein.
EXIDE
TECHNOLOGIES
TABLE OF
CONTENTS
2
EXIDE
TECHNOLOGIES
PART I
Overview
and General Discussion of the Business
Exide Technologies is a Delaware corporation organized in 1966
to succeed to the business of a New Jersey corporation
founded in 1888. Exides principal executive offices are
located at 13000 Deerfield Parkway, Building 200, Alpharetta,
Georgia 30004.
The Company is one of the largest manufacturers of lead acid
batteries in the world, with fiscal 2007 net sales of
approximately $2.9 billion. The Companys operations
in (a) the Americas and (b) Europe and Rest of World
(ROW) represented approximately 41% and 59%,
respectively, of fiscal 2007 net sales. Exide manufactures
and supplies lead acid batteries for transportation and
industrial applications worldwide.
Unless otherwise indicated or unless the context otherwise
requires, references to any fiscal year refer to the
year ended March 31 of that year (e.g., fiscal
2007 refers to the period beginning April 1, 2006 and
ending March 31, 2007, fiscal 2006 refers to
the period beginning April 1, 2005 and ending
March 31, 2006, and fiscal 2005 refers to the
period beginning April 1, 2004 and ending March 31,
2005). Unless the context indicates otherwise, the
Company, Exide, we or
us refers to Exide Technologies and its subsidiaries.
Narrative
Description of Business
The Company is a global leader in stored electrical energy
solutions and one of the worlds largest manufacturers of
lead acid batteries used in transportation, motive power,
network power, and military applications. The Company reports
its financial results through four principal business segments:
Transportation Americas, Transportation Europe and ROW,
Industrial Energy Americas, and Industrial Energy Europe and
ROW. See Note 20 to the Consolidated Financial Statements
for financial information regarding these segments.
Transportation
Transportation batteries include ignition and lighting batteries
for cars, trucks, off-road vehicles, agricultural and
construction vehicles, motorcycles, recreational vehicles,
boats, and other applications. The market for transportation
batteries is divided between sales to aftermarket customers and
original equipment manufacturers (OEMs).
The Company is among the leading suppliers of transportation
batteries to the aftermarket and to the OEM market for a variety
of applications. Transportation batteries represented 60% of the
Companys net sales in fiscal 2007. Within the
transportation segments, aftermarket sales represented
approximately 76% of net sales and OEM sales represented 24%.
The Companys principal batteries sold in the
transportation market are primarily represented by the following
brands: Centra, DETA, Exide, Exide NASCAR Select, Exide
Select Orbital, Fulmen, Tudor, and private labels. The
Company also sells batteries for marine and recreational
vehicles, including the following products:
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Exide Select
Orbital Marine
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A battery that brings all the
advantages of the Companys patented spiral wound
technology to the marine market, maintains nearly a full charge
during the off-season, and can be quickly recharged. This
battery is also sealed, making it ideal for closed environments
(such as inside a boat hull).
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Nautilus Gold Dual
Purpose Stowaway Dual Purpose
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A combination battery, replacing
separate starting and deep cycle batteries in two-battery marine
and recreational vehicle systems.
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Nautilus Mega
Cycle
Stowaway Deep Cycle
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A high performance, dual terminal
battery.
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Stowaway
Nautilus
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A battery that employs technology
to satisfy the power requirements of large engines,
sophisticated electronics and on-board accessories.
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Stowaway
Powercycler
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A completely sealed, valve
regulated (VRLA) battery with absorptive glass mat
(AGM) technology and prismatic plates that offers
features and benefits similar to the Exide Select Orbital,
and was the first sealed, AGM battery introduced into the
marine battery market.
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Most of the Companys transportation batteries are vented,
maintenance-free lead acid batteries. However, the Exide
Select Orbital and Maxxima batteries have a patented
spiral wound technology and
state-of-the-art
recombinant design. The STR/STE batteries use
recombination technology to allow a lead acid battery to be
installed in the passenger compartment of a vehicle with
substantially reduced fluid loss and acid fumes under normal
operating conditions.
Aftermarket sales are driven by a number of factors, including
the number of vehicles in use, average battery life, average age
of vehicles, average miles driven, weather conditions, and
population growth. Aftermarket demand historically has been less
cyclical than OEM demand due to the three to five-year
replacement cycle. Some of the Companys major aftermarket
customers include Wal-Mart, NAPA, CSK Auto Inc., Tractor Supply,
Canadian Tire, ADI, and GAUI. In addition, the Company is also a
supplier of authorized replacement batteries for major
manufacturers including John Deere, Renault/Nissan and PACCAR.
OEM sales are driven in large part by new vehicle build rates,
which are driven by consumer demand for vehicles. The OEM market
is characterized by an increasing preference by OEMs for
suppliers with established global production capabilities that
can meet their needs as they expand internationally and increase
platform standardization across multiple markets. The Company
supplies batteries for four of the 10 top-selling vehicles in
the United States of America (U.S.) and three of the
10 top-selling vehicles in Europe. Select customers include
Ford, International Truck & Engine, Fiat, the PSA
group (Peugeot S.A./Citroën),
Case/New Holland,
BMW, John Deere, Volkswagen, and Toyota.
Transportation
Americas
In the Americas, the Company sells aftermarket transportation
products through various distribution channels, including mass
merchandisers, auto parts outlets, wholesale distributors, and
battery specialists, and sells OEM transportation products
through dealer networks. The Companys operations in the
U.S. and Canada include a network of 82 branches that sell and
distribute batteries and other products to the Companys
distributor channel network, battery specialists, national
account customers retail stores, and OEM dealers. In addition,
these branches collect spent batteries for the Companys
six recycling centers.
With its six recycling centers, the Company is the largest
recycler of lead in North America. The recycling centers of the
Company supply secondary lead that is present in greater than
98% of Exides Transportation and Industrial products
manufactured in North America as well as supplying lead to a
variety of external customers. These operations also recover and
recycle plastic materials that are used to produce new Exide
battery covers and cases. With a constant focus on environmental
compliance, safety, and technology, Exide is committed to being
a leader in the successful and responsible activity of recycling
lead and plastic to produce products that provide value to
consumers and industry.
In the Americas, the Companys transportation aftermarket
battery products include the following:
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Orbital®
Starting or Deep Cycle Batteries
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Advanced recombinant technology
and construction designed to withstand temperature extremes for
reliable performance.
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NASCAR
Extreme
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Cast AG9 Technology designed for
longer life performance in high temperature climates. Product
has been tested best in class in all climates.
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NASCAR Select 84
Automotive Batteries
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Race-proven,
Stabl-Lok®
Insulation prevents shorts and prolongs battery life. Also adds
a measure of protection against high underhood temperatures and
punishing vibration.
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Commercial
Batteries
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Batteries designed specifically
for heavy duty applications such as long haul, short haul,
stop-and-go, and off road.
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Lawn &
Garden/Garden Tractor/Utility Batteries
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Consistent, maintenance-free
starting power. Perfect for light duty, garden tractor, utility,
snow blower and snowmobile applications.
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Nautilus®
Marine Batteries
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Manual Starting, Marine/RV Dual
Purpose and Marine/Deep Cycle.
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Exide®
Ordnance Batteries
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Dry charged. Each plate is
electrically charged to suspend the stored energy for unusually
long periods; until ready for activation. A quick charge will
bring this battery to 100% readiness.
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Exide NASCAR
Select
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Officially licensed by NASCAR.
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Golf Car/Electric
Vehicle Batteries
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Thicker, 5% antimony plates ensure
slower discharge/recharge cycles, withstand high internal heat
and improve cycle life.
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Transportation
Europe and ROW
The Company sells aftermarket batteries primarily through
battery wholesalers, OEM dealer networks, hypermarkets, service
installers, purchasing groups in Europe, and oil companies.
Wholesalers and OEM dealers have traditionally represented the
majority of this market, but supermarket chains,
replacement-parts stores (represented by purchasing groups), and
hypermarkets have become increasingly important. Battery
wholesalers now sell and distribute batteries to a network of
automotive parts retailers, service stations, independent
retailers, and supermarkets throughout Europe.
In Europe, the Company has five major Company-owned brands:
Exide and Tudor, which are promoted as
pan-European brands, and DETA, Centra and Fulmen,
which have strong local recognition levels. In the European
market, the Company generally offers transportation batteries in
five categories:
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Basic Model
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Marketed under private label brand
names in France, Germany, and Spain, under the Basic name
in Italy, and various names in other markets.
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Upgrade Model
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Marketed under the Classic
mark, which carries a
24-month
warranty, and marketed under the Equipe name in France,
the Classic name in Germany, the Leader name in
Italy, the Tudor name in Spain, and various other names
in other markets.
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Premium Model
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Marketed under the Formula
name in France, the Millennium 3 name in Spain, the
Top Start Plus name in Germany, the Ultra name in
Italy, the Ultra brand in the United Kingdom, and under
various other names in other markets.
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STR/STE
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Approved for use by BMW and was
included in some models beginning with the 2000 model year.
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Maxxima
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The equivalent of the Exide
Select Orbital.
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Industrial
Energy
The Companys Industrial Energy segments supply both motive
power and network power applications. Industrial Energy
batteries represented 40% of the Companys net sales in
fiscal 2007. Within the Industrial Energy segments, Motive Power
sales represented approximately 60% of net Industrial sales
and Network Power sales represented approximately 40% of
net Industrial sales.
The motive power battery market is divided into the OEM market,
which is comprised of the manufacturers of electric vehicles,
and the replacement market, which includes large users of such
electric vehicles and original equipment dealer networks. The
Companys sales are split equally between OEMs and
aftermarket.
Motive power batteries are used in the materials handling
industry for forklift trucks and electric counter balance
trucks, pedestrian pallet trucks, low level order pickers,
turret trucks, tow tractors, reach trucks, and very narrow aisle
(VNA) trucks, and in other industries, including
machinery in the floor cleaning market, the powered wheelchair
market, mining locomotives, and electric road vehicles. The
Company also offers a complete range of battery chargers and
associated equipment for the operation and maintenance of
battery-powered vehicles. Motive power batteries have useful
lives lasting an average of five years.
The Companys motive power batteries are composed of 2-volt
cells assembled in numerous configurations and sizes to provide
capacities ranging from 30 Ah to 1500 Ah. Battery construction
for the motive power markets ranges from flooded flat plate and
tubular to recombinant AGM and gel. The Company pioneered the
development of recombinant valve regulated lead acid batteries
in both AGM and gel constructions. These batteries provide major
advantages to users by eliminating the need to add water or mix
the electrolyte in order to physically maintain the batteries,
and by providing flexibility in packaging and transport. The
Companys motive power products also include systems
solutions such as intelligent chargers, automatic watering
systems, and fleet management devices to meet a wide spectrum of
customer application requirements.
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Network power (also known as standby, stationary, or reserve)
batteries are used for
back-up
power applications to ensure continuous power supply in case of
main (primary) power failure or outage. Network power batteries
are used to provide
back-up
power for use with telecommunications systems, computer
installations, hospitals, process control, air traffic control,
security systems, utility, railway and military applications.
Telecommunications applications include central and local
switching systems, satellite stations, wireless base stations
and mobile switches, optical fiber repeating boxes, cable TV
transmission boxes, and radio transmission stations.
The Companys network power battery products are generally
sold principally to communications/data, end users, industrial,
and military and are used for
back-up
power applications. Network power batteries are designed to
offer service lives ranging from 5 to 20 years depending on
construction and application.
There are two primary network power lead acid battery
technologies: valve-regulated (VRLA, or sealed) and
vented (flooded). There are two types of VRLA
technologies AGM and gel. These technologies are
described as follows:
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Vented (flooded): |
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This technology is used in applications requiring high
reliability but with the ability to allow for regular
maintenance. The construction involves positive flat or tubular
positive plates. The transparent containers and accessible
internal construction features of these batteries allow end
users to check the batterys physical condition. |
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VRLA /AGM: |
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This technology utilizes an electrolyte immobilized in an
absorbent glass mat separator. This technology, offering higher
energy density than gel, is particularly well adapted to high
rate applications and is designed to offer up to a
20-year
service life, depending on environment and application. |
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VRLA gel: |
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This technology utilizes a gel electrolyte. VRLA batteries have
replaced other types of network power batteries because they can
enhance safety and reduce maintenance compared to vented
batteries and can be used in both vertical and horizontal
positions. The Sonnenschein gel technology offers the
advantages of high reliability and long life. The gel product
range offers a wide range of capabilities including heat
resistance, deep discharge resistance, long shelf life, and high
cyclic performance. |
The Companys dominant network power battery brands,
Absolyte and Sonnenschein, offer customers the
choice of AGM and gel valve regulated battery technologies and
deliver among the highest energy and power densities in their
class. Service and technical assistance are important to the
network power business. The Company often ships network power
batteries directly to equipment manufacturers and systems
integrators who include the Companys batteries in their
original equipment and distribute products to end users.
The Company offers a global product line that is marketed under
the following five brands associated with product type and
technology:
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Absolyte: |
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Large 2-volt cells, incorporating AGM technology, for long
duration (e.g. telecommunications) and short duration
applications. |
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Classic: |
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Primarily 2-volt and some multi-cell vented (or flooded)
products for a wide range of applications. |
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Marathon: |
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Single- and multi-cell AGM monobloc batteries for long duration
applications. |
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Sonnenschein: |
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Multi-cell monoblocs and 2-volt cells, incorporating gel
technology. |
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Sprinter: |
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Multi-cell AGM monobloc batteries for short duration, high
discharge rate applications |
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The Companys major network power battery customers for
telecommunications services include China Mobile, AT&T,
Deutsche Telecom, Singapore Telecom, Telecom Italia, Telefonica
of Spain, Verizon Wireless, and Vodafone. Major
telecommunications OEM customers include Alcatel, Emerson
Electric, Ericsson, Motorola, Nortel, Siemens, and Tyco. UPS
OEMs include Liebert and MGE. The Company is the sole
supplier to the U.S. Navy for submarine batteries. In
addition, the Company supplies batteries for military vehicles
(i.e. tanks and personnel carriers) to the German army, and
other armies. The Company promotes its products through
technical seminars, trade shows, and technical literature.
Industrial
Energy Americas
Motive
Power
Motive power products are sold primarily to independent lift
truck dealers or directly to national accounts or end users. The
Companys primary motive power customers in the Americas
include Crown, NACCO, Target, Toyota, and WalMart. Motive power
products and services are distributed in the Americas by sales
and service locations owned by the Company that are augmented by
a network of independent manufacturers representatives who
provide local service on their own behalf.
Network
Power
Network power products and services are distributed in the
Americas by sales and service locations owned by the Company
that are augmented by a network of independent
manufacturers representatives who provide local service on
their own behalf. The Companys primary network power
customers in the Americas include AT&T, Emerson Electric,
Nortel, and the U.S. Navy.
Industrial
Energy Europe and ROW
Motive
Power
The Company distributes motive power products and services in
Europe through in-house sales and service organizations in each
country and utilizes distributors and agents for export of
products from Europe to ROW. Motive power products in Europe are
also sold to a wide range of customers in the aftermarket,
ranging from large industrial companies and retail distributors
to small warehouse and manufacturing operations. Motive power
batteries are also sold in complete packages, including
batteries, chargers and, with a growing number of customers,
on-site
service. The Companys major OEM motive power customers
include the Linde Group (now owned by the KION Group), the
Jungheinrich Group, and Toyota.
Network
Power
The Company distributes network power products and services in
Europe through in-house sales and service organizations in each
country. In Australia and New Zealand, batteries and chargers
are distributed through in-house sales and service
organizations. In Asia, products are distributed through
independent distributors. The Company utilizes distributors,
agents, and direct sales for export of products from Europe and
North America to ROW.
Quality
The Company recognizes that product performance and quality are
critical to its success. Both the EXCELL (Exides
Customer-focused Excellence Lean Leadership) initiative and the
Companys Quality Management System are important drivers
of operational excellence, which results in improved levels of
quality, productivity, and delivery of goods and services to the
global transportation and industrial energy markets.
EXCELL
The Company implemented EXCELL to systematically reduce and
ultimately eliminate waste and to implement the concepts of
continuous flow and customer pull throughout the entire
Companys supply chain.
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The EXCELL framework follows lean production techniques and
process improvements, and is also designed to prioritize
improvement initiatives that drive quality improvement and
customer satisfaction while achieving all business objectives of
the Company. The Companys Take Charge! initiative, which
is an integral component of the EXCELL framework, is designed to
identify waste in the Companys manufacturing and
distribution processes, and to implement changes to enhance
productivity and throughput while reducing investment in
inventories.
Quality
Management System (QMS)
The Companys QMS was developed to streamline and
standardize the global quality systems so that key measurements
could be evaluated to drive best practices as it continues to
pursue improved EXCELL certifications across all facilities. The
QMS plays a major role as the Company strives to achieve
world-class product quality.
The Companys quality process begins in the design phase
with an in-depth understanding of customer and application
requirements. The Companys products are designed to the
required performance, industry, and customer quality standards
using design processes, tools, and materials to achieve
reliability and durability. The Companys commitment to
quality continues through the manufacturing process. The Company
has quality audit processes and standards in each of its
production and distribution facilities. The Companys
quality process extends throughout the entire product lifecycle
and operation in service.
Most of the Companys major production facilities are
approved under ISO 9000 or TS 16949 quality systems standards.
The Company has obtained ISO 14001 Environmental
Health & Safety (EH&S) certification
at eight of its manufacturing plants and also has received
quality certifications and awards from a number of OEM and
aftermarket customers.
Research
and Development
The Company is committed to developing new and technologically
advanced products, services, and systems that provide superior
performance and value to customers. To support this commitment,
the Company focuses on developing opportunities across its
global markets.
In addition the Company also operates a number of product and
process-development centers of excellence around the world.
These centers work cooperatively to define and improve the
Companys product design and production processes. By
leveraging this network, the Company is able to transfer
technologies, product and process knowledge among its various
operating facilities, thereby adapting best practices from
around the world for use throughout the Company.
In addition to in-house efforts, the Company continues to pursue
the formation of potential alliances and collaborative
partnerships to develop energy-management systems for automotive
electrical and electronic architectures for the global OEM
market. In addition, the Company has various development
activities targeted at the industrial and military markets.
Patents,
Trademarks and Licenses
The Company owns or has a license to use various trademarks that
are valuable to its business. The Company believes these
trademarks and licenses enhance the brand recognition of the
Companys products. The Company currently owns
approximately 300 trademarks and licenses from others the right
to use approximately 20 trademarks worldwide. For example, the
Company licenses the NASCAR mark from NASCAR, and the
Exide mark in the United Kingdom and Ireland from
Chloride Group Plc. The Company also acts as licensor under
certain licenses. For example, EnerSys, Inc. is licensed to use
the EXIDE mark on industrial battery products in certain
countries, subject to the outcome of the litigation discussed
below. The Companys license with NASCAR will expire on
December 31, 2011.
The Company has generated a number of patents in the operation
of its business and currently owns all or a partial interest in
approximately 375 patents and applications for patents pending
worldwide. Although the Company believes its patents and patent
applications collectively are important to the Companys
business,
8
and that technological innovation is important to the
Companys market competitiveness, currently no patent is
individually material to the operation of the business or the
Companys financial condition.
In March 2003, the Company brought legal proceedings in the
Bankruptcy Court to reject certain agreements relating to
EnerSys, Inc.s right to use the Exide
trademark on certain industrial battery products in the United
States and 80 foreign countries. In April 2006, the Court
granted the Companys request to reject those agreements.
EnerSys, Inc. has appealed this decision. For further
information regarding this matter, see Note 13 to the
Consolidated Financial Statements.
Manufacturing,
Raw Materials and Suppliers
Lead is the primary material used in the manufacture of the
Companys lead acid batteries, representing approximately
40% of the cost of goods produced. The Company obtains
substantially all of its North American lead requirements
through the operation of six secondary lead recycling plants,
which reclaim lead by recycling spent lead acid batteries. In
North America, spent batteries are obtained for recycling
primarily from the Companys customers, through the
Company-owned branch networks and from outside spent-battery
collectors. In Europe, lead requirements of battery
manufacturers, including the Company, are principally obtained
from third party suppliers.
The Company uses both polyethylene and AGM battery separators.
There are a number of suppliers from whom the Company purchases
AGM separators. Polyethylene separators are purchased solely
from one supplier, with supply agreements expiring in December
2009. The agreements restrict the Companys ability to
source separators from other suppliers unless there is a
technical benefit that the Companys sole supplier cannot
provide. In addition, the agreements provide for substantial
minimum annual purchase commitments. There is no second source
that could readily provide the volume of polyethylene separators
used by the Company. As a result, any major disruption in supply
from the Companys sole supplier would have a material
adverse impact on the Company.
Other key raw materials and components in the production of
batteries include lead oxide, acid, steel, plastics and
chemicals, which are generally available from multiple sources.
The Company has not experienced any material stoppage or
disruption in production as a result of unavailability, or
delays in the availability, of raw materials.
Competition
Transportation
Segments
The Americas and European transportation markets are highly
competitive. The manufacturers in these markets compete on
price, quality, technical innovation, service and warranty.
Well-recognized brand names are also important for aftermarket
customers who do not purchase private label batteries. Most
sales are made without long-term contracts.
In the Americas transportation aftermarket, the Company believes
it has the second largest market position. Other principal
competitors in this market are Johnson Controls, Inc. and East
Penn Manufacturing. Price competition in this market has been
severe in recent years. Competition is strongest in the auto
parts retail and mass merchandiser channels where large
customers use their buying power to negotiate lower prices.
The largest competitor in the Americas transportation OEM market
is Johnson Controls, Inc. Due to technical and production
qualification requirements, OEMs change battery suppliers less
frequently than aftermarket customers, but because of their
purchasing size, can influence market participants to compete on
price and other terms.
The Company also has the overall second largest market position
in Europe in transportation batteries. The Companys
largest competitor in the transportation markets is Johnson
Controls, Inc. The European battery markets, particularly in the
transportation OEM market, have experienced severe price
competition. In addition, the strength of the Euro in the
Companys European markets has resulted in competitive
pricing pressures from Asian imports, negatively impacting
average selling prices.
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Industrial
Energy Segments
Motive
Power
The Company is one of the major players in the global motive
power battery market. Competitors in Europe include EnerSys,
Inc., Hoppecke, BAE, and MIDAC. Competitors in the Americas
include EnerSys, Inc., C&D Technologies and East Penn
Manufacturing. In Asia, GS/Yuasa, Shinkobe, and EnerSys, Inc.
are the major competitors, with GS/Yuasa being the market
leader. The Company currently serves markets in countries such
as Brazil, China, and India on a limited basis through export
sales.
Quality, product performance, in-service reliability, delivery,
and price are important differentiators in the motive power
market. Well-known brands are also important and the
Companys Chloride Motive Power, DETA, GNB,
Sonnenschein, and Tudor are among the leading brands
in the world. In addition, the Company has developed a range of
low maintenance batteries (the Liberator series) that are
combined with a matched range of Exide-regulated or high
frequency chargers that work together to reduce customers
operating costs.
Network
Power
The Company is one of the major players in the global network
power battery market. The major competitor in Europe is EnerSys,
Inc. Competitors in the Americas include C&D Technologies,
EnerSys, Inc., and East Penn Manufacturing. In Asia, GS/Yuasa,
Shinkobe, and EnerSys, Inc. are the major competitors.
Quality, reliability, delivery, and price are important
differentiators in the network power market, along with
technical innovation and responsive service. Brand recognition
is also important, and the Companys Absolyte, Classic,
Marathon, Sonnenschein, and Sprinter are among the
leading brands in the world.
Environmental,
Health and Safety Matters
As a result of its manufacturing, distribution, and recycling
operations, the Company is subject to numerous federal, state,
and local environmental, occupational safety, and health laws
and regulations, as well as similar laws and regulations in
other countries in which the Company operates (collectively,
EH&S laws). For a discussion of the legal
proceedings relating to environmental, health and safety
matters, see Note 13 to the Consolidated Financial
Statements.
Employees
Total worldwide employment was approximately 13,862 at
March 31, 2007, compared to approximately 13,982 at
March 31, 2006.
Americas
As of March 31, 2007, the Company employed approximately
1,452 salaried employees and approximately 4,274 hourly
employees in the Americas, primarily in the
U.S. Approximately 59% of these salaried employees are
engaged in sales, service, marketing, and administration and
approximately 41% in manufacturing and engineering.
Approximately 22% of the Companys hourly employees in the
Americas are represented by unions. Relations with the unions
are generally good. Union contracts covering approximately 438
of the Companys domestic employees expire in fiscal 2008,
and the remainder thereafter.
Europe
and ROW
As of March 31, 2007, the Company employed approximately
2,897 salaried employees and approximately 5,239 hourly
employees outside of the Americas, primarily in Europe.
Approximately 67% of these salaried employees are engaged in
sales, service, marketing, and administration and approximately
33% in manufacturing and engineering. The Companys hourly
employees in Europe and ROW are generally represented by unions.
The Company meets regularly with the European Works Councils.
Relations with the unions are generally good. Contracts covering
most of the Companys union employees generally expire on
various dates through fiscal 2008.
10
Executive
Officers of the Registrant
Gordon A. Ulsh (61) President, Chief Executive
Officer and member of the Board of Directors. Mr. Ulsh was
appointed in to his current position in April 2005. From 2001
until March 2005, Mr. Ulsh was Chairman, President and CEO
of Texas-based FleetPride Inc., the nations largest
independent aftermarket distributor of heavy-duty truck parts.
Prior to joining FleetPride in 2001, Mr. Ulsh worked with
Ripplewood Equity Partners, providing analysis of automotive
industry segments for investment opportunities. Earlier, he
served as President and Chief Operating Officer of Federal-Mogul
Corporation in 1999 and as head of its Worldwide Aftermarket
Division in 1998. Prior to Federal-Mogul, he held a number of
leadership positions with Cooper Industries, including Executive
Vice President of its automotive products segment. Mr. Ulsh
joined Coopers Wagner Lighting business unit in 1984 as
Vice President of Operations, following 16 years in
manufacturing and engineering management at Ford Motor Company.
Mr. Ulsh is a director of OM Group, Inc.
Mitchell S. Bregman (53) President, Industrial
Energy Americas. Mr. Bregman joined Exide in September 2000
in connection with the Companys acquisition of GNB. He has
served in his current role since March 2003 and prior to that
was President Global Network Power. Mr. Bregman joined GNB
in 1979. He served for 12 years as a Vice President with
various responsibilities with GNB Industrial Power and nine
years with GNBs Transportation Division.
Joel Campbell (60) President, Industrial Energy
Europe. Mr. Campbell joined Exide in February 2006 as Vice
President & General Manager North American Recycling.
Between August 1999 and February 2006, Mr. Campbell was
retired. From 1998 to 1999, Mr. Campbell served as Senior
Vice President North American Aftermarket at
Tenneco. Mr. Campbell also previously served in several
executive positions at Cooper Industries from 1988 to 1998,
including President of Cooper Automotive. Mr. Campbell has
more than 30 years of management experience with various
manufacturing companies.
Francis M. Corby Jr. (63) Executive Vice President
and Chief Financial Officer. Mr. Corby joined the Company
in March 2006. Mr. Corby most recently served as Senior
Vice President and Chief Financial Officer at GST AutoLeather
from 2004 to 2005. Mr. Corby served as Executive Vice
President and Chief Financial Officer at Guide Corporation from
2001 through 2004. Mr. Corby served as Executive Vice
President at Frederick & Company from 2000 through
2001. From 1986 to 1999, Mr. Corby was the Chief Financial
Officer at Harnischfeger Industries, Inc., most recently with
the title of Executive Vice President for Finance and
Administration.
Philip A. Damaska (52) Senior Vice President and
Corporate Controller. Mr. Damaska joined the Company in
January 2005 as Vice President, Finance, was appointed Vice
President and Corporate Controller in September, 2005 and was
named Senior Vice President and Corporate Controller in March
2006. Prior to joining the Company, Mr. Damaska served in
numerous capacities with Freudenberg-NOK from 1996 through 2004,
most recently as President of Corteco, an automotive and
industrial seal supplier that is part of the partnerships
global group of companies.
George S. Jones, Jr. (54) Executive Vice
President Human Resources and Communications.
Mr. Jones joined the Company in July 2005. From 1974 to
2004, Mr. Jones served in several executive positions at
Cooper Industries, most recently as Vice President
Operations at the Lighting Division from 1997 to 2004.
Edward J. OLeary (51) President,
Transportation Americas since June 6, 2005. Prior to
joining the Company, Mr. OLeary served as
President The Americas at Oetiker Inc. From 2002 to
2004, Mr. OLeary served in a consulting capacity with
Jag Management Consultants. Mr. OLeary served as
Chief Executive Officer of iStarSystems from 2000 to 2002, and
served as Vice President Sales and Distribution The
Americas at Federal-Mogul Corp. from 1998 to 1999.
Rodolphe Reverchon (48) President, Transportation
Europe. Mr. Reverchon joined the Company in 2003 as Vice
President Operations Europe. From 1996 to 2003,
Mr. Reverchon served in a number of capacities at Bosch
Chassis & Systems as European Manufacturing Director,
Plant Manager and Manufacturing Quality Manager Europe.
11
Backlog
The Companys order backlog at March 31, 2007 was
approximately $34 million for Industrial Energy Americas
and $148 million for Industrial Energy Europe and ROW. The
Company expects to fill all of March 31, 2007 backlogs
during fiscal 2008. The Transportation backlog at March 31,
2007 was not significant.
Emergence
from Chapter 11 Bankruptcy Protection
On April 15, 2002, Exide Technologies, together with
certain of its U.S. subsidiaries, 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). On November 21, 2002, two additional
wholly-owned, non-operating subsidiaries of Exide filed
voluntary petitions for reorganization under Chapter 11 of
the Bankruptcy Code in the Bankruptcy Court. All of the cases
were jointly administered for procedural purposes before the
Bankruptcy Court under case number
02-11125KJC.
Exide Technologies and such subsidiaries (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.
The Debtors declared May 5, 2004 as the effective date of
the Plan, and substantially consummated the transactions
provided for in the Plan on such date (the Effective
Date).
The following is a summary of certain transactions which became
effective on the Effective Date pursuant to consummation of the
Plan.
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Except to the extent otherwise provided in the Plan, all notes,
instruments, certificates, and other documents evidencing
(i) the Companys 10% senior notes due 2005,
(ii) the Companys 2.9% convertible notes due 2005,
(iii) equity interests in the Debtors, including, but not
limited to, all issued, unissued, authorized or outstanding
shares or stock, together with any warrants, options or contract
rights to purchase or acquire such interests at any time, were
canceled, and the obligations of the Debtors thereunder or in
any way related thereto were discharged.
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The Company was authorized to issue (i) 25 million
shares of new common stock, par value $0.01 per share for
distribution in accordance with the Plan, and (ii) warrants
initially exercisable for 6.25 million shares of new common
stock (the Warrants). Pursuant to the terms of the
Plan, the common stock and Warrants are being distributed as
follows:
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Holders of pre-petition Senior Secured Global Credit facility
claims received, collectively, 22.5 million shares of new
common stock; and
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Holders of general unsecured claims received, collectively,
2.5 million shares of new common stock and Warrants to
purchase 6.25 million shares of new common stock at
$32.11 per share, adjusted to 6.6 million shares with
a exercise price of $30.31 per share based on the closing
of the $75 million rights offering and $50 million
private sale of common stock in September 2006. Approximately
13.4% of such new common stock and Warrants was reserved for
distribution for disputed claims under the Plans claim
reconciliation and allowance procedures.
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As claims are evaluated and processed, the Company will object
to some claims or portions thereof, and upward adjustments (to
the extent 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 inherently
difficult to make. With respect to environmental claims in
particular, there is an inherent difficulty in assessing the
Companys 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
12
reasonable basis to believe that it will ultimately be
responsible for only its 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 are 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 Companys 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
the Companys 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 of the
Plan, 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.
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Holders of administrative claims, claims derived from the
Companys $500 million secured super priority
debtor-in-possession
senior secured credit agreement and priority tax claims were
paid in full in cash pursuant to the terms of the Plan.
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Available
Information
The Company maintains a website on the Internet at
www.exide.com. The Company makes available free of charge
through its website, by way of a hyperlink to a third-party
Securities Exchange Commission (SEC) filing website,
its annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports electronically filed or
furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act of 1934. Such information is available as soon as
reasonably practicable after it is filed with the SEC. The SEC
website (www.sec.gov) contains reports, proxy and other
statements, and other information regarding issuers that file
electronically with the SEC. Also, the public may read and copy
any materials the Company files with the SEC at the SECs
Public Reference Room at 100 F Street, N.E.,
Washington D.C., 20549. Information on the operation of the
Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330.
Additionally, the Companys Code of Ethics may be accessed
within the Investor Relations section of its website. Amendments
and waivers of the Code of Ethics will also be disclosed within
four business days on the website. Information found in the
Exide website is neither part of this annual report on
Form 10-K
nor any other report filed with the SEC.
Item 1A. Risk
Factors
The
Company has experienced significant increases in raw material
prices, particularly lead, and further changes in the prices of
raw materials or in energy costs could have a material adverse
impact on the Company.
Lead is the primary material used in the manufacture of
batteries, representing approximately 40% of the Companys
cost of goods sold. Average lead prices quoted on the London
Metal Exchange (LME) have risen dramatically,
increasing from $1,041 per metric ton for fiscal 2006 to
$1,426 per metric ton for fiscal 2007. As of June 8,
2007, lead prices quoted on the LME were $2,255 per metric
ton. If the Company is
13
unable to increase the prices of its products proportionate to
the increase in raw material costs, the Companys gross
margins will decline. The Company cannot provide assurance that
it will be able to hedge its lead requirements at reasonable
costs or that the Company will be able to pass on these costs to
its customers. Increases in the Companys prices could also
cause customer demand for the Companys products to be
reduced and net sales to decline. The rising cost of lead
requires the Company to make significant investments in
inventory and accounts receivable, which reduces amounts of cash
available for other purposes, including making payments on its
notes and other indebtedness. The Company also consumes
significant amounts of polypropylene, steel and other materials
in its manufacturing process and incurs energy costs in
connection with manufacturing and shipping of its products. The
market prices of these materials are also subject to
fluctuation, which could further reduce the Companys
available cash.
The
Company remains subject to a preliminary SEC
inquiry.
The Enforcement Division of the SEC is conducting a preliminary
inquiry into statements the Company made during fiscal 2005
about its ability to comply with fiscal 2005 loan covenants and
the going concern qualification in the audit report in the
Companys annual report on
Form 10-K
for fiscal 2005, which the Company filed with the SEC in June
2005. This preliminary inquiry remains in process, and should it
result in a formal investigation, it could have a material
adverse effect on the Companys financial position, results
of operations and cash flows.
The
Company is subject to fluctuations in exchange rates and other
risks associated with its
non-U.S. operations
which could adversely affect the Companys results of
operations.
The Company has significant manufacturing operations in, and
exports to, several countries outside the
U.S. Approximately 59% of the Companys net sales for
fiscal 2007 were generated in Europe and ROW with the vast
majority generated in Europe in Euros and British Pounds.
Because such a significant portion of the Companys
operations are based overseas, the Company is exposed to foreign
currency risk, resulting in uncertainty as to future assets and
liability values, and results of operations that are denominated
in foreign currencies. The Company invoices foreign sales and
service transactions in local currencies, using actual exchange
rates during the period, and translates these revenues and
expenses into U.S. dollars at average monthly exchange
rates. Because a significant portion of the Companys net
sales and expenses are denominated in foreign currencies, the
depreciation of these foreign currencies in relation to the
U.S. dollar could adversely affect the Companys
reported net sales and operating margins. The Company translates
its
non-U.S. assets
and liabilities into U.S. dollars using current rates as of
the balance sheet date. Therefore, foreign currency depreciation
against the U.S. dollar would result in a decrease of the
Companys net investment in foreign subsidiaries.
In addition, foreign currency depreciation, particularly
depreciation of the Euro, would make it more expensive for the
Companys
non-U.S. subsidiaries
to purchase certain of the Companys raw material
commodities that are priced globally in U.S. dollars, such
as lead, which is quoted on the LME in U.S. dollars. The
Company does not engage in significant hedging of its foreign
currency exposure and cannot assure that it will be able to
hedge its foreign currency exposures at a reasonable cost.
There are other risks inherent in the Companys
non-U.S. operations,
including:
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Changes in local economic conditions, including disruption of
markets;
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Changes in laws and regulations, including changes in import,
export, labor and environmental laws;
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Exposure to possible expropriation or other government
actions; and
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Unsettled political conditions and possible terrorist attacks
against American interests.
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These and other factors may have a material adverse effect on
the Companys
non-U.S. operations
or on its results of operations and financial condition.
14
The
Companys liquidity is affected by the seasonality of its
business. Warm winters and cool summers adversely affect the
Company.
The Company sells a disproportionate share of its automotive
aftermarket batteries during the fall and early winter.
Resellers buy automotive batteries during these periods so they
will have sufficient inventory for cold weather periods. In
addition, many of the Companys industrial battery
customers in Europe do not place their battery orders until the
end of the calendar year. This seasonality increases the
Companys working capital requirements and makes it more
sensitive to fluctuations in the availability of liquidity.
Unusually cold winters or hot summers may accelerate battery
failure and increase demand for automotive replacement
batteries. Mild winters and cool summers may have the opposite
effect. As a result, if the Companys 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 Companys sales are adversely affected by the weather,
it cannot make offsetting cost reductions to protect the
Companys liquidity and gross margins in the short-term
because a large portion of the Companys manufacturing and
distribution costs are fixed.
Decreased
demand in the industries in which the Company operates may
adversely affect its business.
The Companys financial performance depends, in part, on
conditions in the automotive, material handling, and
telecommunications industries, which, in turn, are generally
dependent on the U.S. and global economies. As a result,
economic and other factors adversely affecting production by
OEMs and their customers spending could adversely impact
the Companys business. Relatively modest declines in
customer purchases from the Company could have a significant
adverse impact on its profitability because the Company has
substantial fixed production costs. If the Companys OEM
and large aftermarket customers reduce their inventory levels,
and reduce their orders, the Companys performance would be
significantly adversely impacted. In this environment, the
Company cannot predict future production rates or inventory
levels or the underlying economic factors. Continued uncertainty
and unexpected fluctuations may have a significant negative
impact on the Companys business.
The remaining portion of the Companys battery sales are of
aftermarket batteries. The factors influencing demand for
automotive replacement batteries include: (1) the number of
vehicles in use; (2) average battery life; (3) the
average age of vehicles and their operating environment;
(4) average miles driven, (5) weather conditions; and
(6) population growth and overall economic conditions. Any
significant adverse change in any one of these factors may have
a significant negative impact on the Companys business.
The
loss of the Companys sole supplier of polyethylene battery
separators would have a material adverse effect on the
Companys business.
The Company relies exclusively on a single supplier to fulfill
its needs for polyethylene battery separators a
critical component to many of the Companys products. There
is no second source that could readily provide the volume of
polyethylene separators used by the Company. As a result, any
major disruption in supply from this supplier would have a
material adverse impact on the Company. If the Company is not
able to maintain a good relationship with this supplier, or if
for reasons beyond the Companys control the
suppliers service were disrupted, the Companys
business may experience a significant negative impact.
Many
of the industries in which the Company operates are
cyclical.
The Companys operating results are affected by the general
cyclical pattern of the industries in which its major customer
groups operate. Any decline in the demand for new automobiles,
light trucks, and sport utility vehicles could have a material
adverse impact on the financial condition and results of
operations of the Companys Transportation divisions. A
weak capital expenditure environment in the telecommunications,
uninterruptible power systems and electric industrial forklift
truck markets could have a material adverse impact on the
financial condition and results of operations of the
Companys Industrial Energy divisions.
15
The
Company is subject to pricing pressure from its larger
customers.
The Company faces significant pricing pressures in all of its
business segments from its larger customers. Because of their
purchasing size, the Companys larger customers can
influence market participants to compete on price and other
terms. Such customers also use their buying power to negotiate
lower prices. If the Company is not able to offset pricing
reductions resulting from these pressures by improved operating
efficiencies and reduced expenditures, those price reductions
may have an adverse impact on the Companys business.
The
Company faces increasing competition and pricing pressure from
other companies in its industries, and if the Company is unable
to compete effectively with these competitors, the
Companys sales and profitability could be adversely
affected.
The Company competes with a number of major domestic and
international manufacturers and distributors of lead acid
batteries, as well as a large number of smaller, regional
competitors. Due to excess capacity in some sectors of its
industry and consolidation among industrial purchasers, the
Company has been subjected to continual and significant pricing
pressures. The North American, European and Asian lead-acid
battery markets are highly competitive. The manufacturers in
these markets compete on price, quality, technical innovation,
service, and warranty. In addition, the Company is experiencing
heightened competitive pricing pressure as Asian producers,
which are able to employ labor at significantly lower costs than
producers in the U.S. and Western Europe, expand their export
capacity and increase their marketing presence in the
Companys major markets.
If the
Company is not able to develop new products or improve upon its
existing products on a timely basis, the Companys business
and financial condition could be adversely
affected.
The Company believes that its future success depends, in part,
on the ability to develop, on a timely basis, new
technologically advanced products or improve on the
Companys existing products in innovative ways that meet or
exceed its competitors product offerings. Maintaining the
Companys market position will require continued investment
in research and development and sales and marketing. Industry
standards, customer expectations, or other products may emerge
that could render one or more of the Companys products
less desirable or obsolete. The Company may be unsuccessful in
making the technological advances necessary to develop new
products or improve its existing products to maintain its market
position. If any of these events occur, it could cause decreases
in sales and have an adverse effect on the Companys
business and financial condition.
The
Company may be adversely affected by the instability and
uncertainty in the world financial markets and the global
economy, including the effects of turmoil in the Middle
East.
Instability in the world financial markets and the global
economy, including (and as a result of) the turmoil in the
Middle East, may create uncertainty in the industries in which
the Company operates, and may adversely affect its business. In
addition, terrorist activities may cause unpredictable or
unfavorable economic conditions and could have a material
adverse impact on the Companys operating results and
financial condition.
The
Company may be unable to successfully implement its business
strategy, which could adversely affect its results of operations
and financial condition.
The Companys ability to achieve its business and financial
objectives is subject to a variety of factors, many of which are
beyond the Companys control. For example, the Company may
not be successful in increasing its manufacturing and
distribution efficiency through productivity, process
improvements and cost reduction initiatives. Further, the
Company may not be able to realize the benefits of these
improvements and initiatives within the time frames the Company
currently expects. In addition, the Company may not be
successful in increasing the Companys percentage of
captive arrangements and spent battery collections or in hedging
its lead requirements, leaving it exposed to fluctuations in the
price of lead. Additionally, the
16
Companys implementation of these strategies could be
delayed due to limited liquidity. Any failure to successfully
implement the Companys business strategy could adversely
affect results of operations and financial condition, and could
further impair the Companys ability to make certain
strategic capital expenditures and meet its restructuring
objectives.
The
Company is subject to costly regulation in relation to
environmental, health and safety matters, which could adversely
affect its business and results of operations.
In the manufacture of its products throughout the world, the
Company manufactures, distributes, recycles, and otherwise uses
large amounts of potentially hazardous materials, especially
lead and acid. As a result, the Company is subject to a
substantial number of costly regulations, including limits on
employee blood lead levels. In particular, the Company is
required to comply with increasingly stringent requirements of
federal, state, and local environmental, occupational health and
safety laws and regulations in the U.S. and other countries,
including those governing emissions to air, discharges to water,
noise and odor emissions; the generation, handling, storage,
transportation, treatment, and disposal of waste materials; and
the cleanup of contaminated properties and human health and
safety. Compliance with these laws and regulations results in
ongoing costs. The Company could also incur substantial costs,
including cleanup costs, fines, and civil or criminal sanctions,
third party property damage or personal injury claims, or costs
to upgrade or replace existing equipment, as a result of
violations of or liabilities under environmental laws or
non-compliance with environmental permits required at its
facilities. In addition, many of the Companys current and
former facilities are located on properties with histories of
industrial or commercial operations. Because some environmental
laws can impose liability for the entire cost of cleanup upon
any of the current or former owners or operators, regardless of
fault, the Company could become liable for the cost of
investigating or remediating contamination at these properties
if contamination requiring such activities is discovered in the
future. The Company may become obligated to pay material
remediation-related costs at its closed Tampa, Florida facility
in the amount of approximately $12.5 million to
$20.5 million, at the Columbus, Georgia facility in the
amount of approximately $6 million to $9 million and
at the Sonalur, Portugal facility in the amount of
$2 million to $4 million.
The Company cannot be certain that it has been, or will at all
times be, in complete compliance with all environmental
requirements, or that the Company will not incur additional
material costs or liabilities in connection with these
requirements in excess of amounts it has reserved. Private
parties, including current or former employees, could bring
personal injury or other claims against the Company due to the
presence of, or exposure to, hazardous substances used, stored
or disposed of by it, or contained in its products, especially
lead. Environmental requirements are complex and have tended to
become more stringent over time. These requirements or their
enforcement may change in the future in a manner that could have
a material adverse effect on the Companys business,
results of operations and financial condition. The Company has
made and will continue to make expenditures to comply with
environmental requirements. These requirements, responsibilities
and associated expenses and expenditures, if they continue to
increase, could have a material adverse effect on the
Companys business and results of operations. While the
Companys costs to defend and settle claims arising under
environmental laws in the past have not been material, the
Company cannot provide assurance that this will remain so in the
future.
The
Environmental Protection Agency (EPA) or state
environmental agencies could take the position that the Company
has liability under environmental laws that were not discharged
in bankruptcy. To the extent these authorities are successful in
disputing the pre-petition nature of these claims, the Company
could be required to perform remedial work that has not yet been
performed for alleged pre-petition contamination, which would
have a material adverse effect on the Companys financial
condition, cash flows or results of operations.
The EPA or state environmental agencies could take the position
that the Company has liability under environmental laws that
were not discharged in bankruptcy. To the extent these
authorities are successful in disputing the pre-petition nature
of these claims, the Company could be required to perform
remedial work that has not yet been performed for alleged
pre-petition contamination, which would have a material adverse
17
effect on the Companys financial condition, cash flows or
results of operations. The Company has previously been advised
by the 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 97 federally defined Superfund or state equivalent sites. At
45 of these sites, the Company has paid its share of liability
and believes that it is probable that its liability for most of
the remaining sites will be treated as disputed unsecured claims
under the Companys Plan. However, there can be no
assurance that these matters will be discharged. In addition,
the EPA, in the course of negotiating its pre-petition claim,
had notified the Company of the possibility of additional
clean-up
costs associated with Hamburg, Pennsylvania properties of
approximately $35 million. The EPA has provided cost
summaries for the past costs and an estimate of future costs
that approximate the amounts in its notification. To the extent
the EPA or other environmental authorities disputed the
pre-petition nature of these claims, the Company would intend to
resist any such effort to evade the bankruptcy laws
intended result, and believes there are substantial legal
defenses to be asserted in that case. However, there can be no
assurance that we would be successful in challenging any such
actions.
The
Company may be adversely affected by legal proceedings to which
the Company is, or may become, a party.
The Company and its subsidiaries are currently, and may in the
future become, subject to legal proceedings which could
adversely affect its results of operations, liquidity and
financial condition. See Note 13 to the Consolidated
Financial Statements.
The
cost of resolving the Companys pre-petition disputed
claims, including legal and other professional fees involved in
settling or litigating these matters, could have a material
adverse effect on its financial condition, cash flows and
results of operations.
At March 31, 2007, there are approximately 750 pre-petition
disputed unsecured claims on file in the bankruptcy case that
remain to be resolved through the Plans claims
reconciliation and allowance procedures. The Company established
a reserve of common stock and warrants to purchase common stock
for issuance to holders of these disputed unsecured claims as
the claims are allowed by the bankruptcy court. Although these
claims are generally resolved through the issuance of common
stock and warrants from the reserve rather than cash payments,
the process of resolving these claims through settlement or
litigation requires considerable Company resources, including
expenditures for legal and professional fees and the attention
of Company personnel. These costs could have a material adverse
effect on the Companys financial condition, cash flows and
results of operations.
Work
stoppages or other labor issues at the Companys facilities
or its customers or suppliers facilities could
adversely affect the Companys operations.
At March 31, 2007, approximately 22% of the Companys
North American hourly employees and many of its
non-U.S. employees
were unionized. It is likely that a significant portion of the
Companys workforce will remain unionized for the
foreseeable future. It is also possible that the portion of the
Companys workforce that is unionized may increase in the
future. Contracts covering approximately 438 of the
Companys domestic employees will expire in fiscal 2008,
and the remainder thereafter. In addition, contracts covering
most of the Companys union employees in Europe and ROW
expire on various dates through fiscal 2008. Although the
Company believes that its relations with employees are generally
good, if conflicts develop between the Company and its
employees unions in connection with the renegotiation of
these contracts or otherwise, work stoppages or other labor
disputes could result. A work stoppage at one or more of the
Companys plants, or a material increase in its costs due
to unionization activities, may have a material adverse effect
on the Companys business. Work stoppages at the facilities
of the Companys customers or suppliers may also negatively
affect the Companys business. If any of the Companys
customers experience a material work stoppage, the customer may
halt or limit the purchase of the Companys products. This
could require the Company to shut down or significantly reduce
production at facilities relating to those products. Moreover,
if any of the Companys suppliers experience a work
stoppage, the Companys operations could be adversely
affected if an alternative source of supply is not readily
available.
18
The
Companys substantial indebtedness could adversely affect
its financial condition.
The Company has a significant amount of indebtedness. As of
March 31, 2007, the Company had total indebtedness,
including capital leases, of approximately $684.5 million.
The Companys level of indebtedness could have significant
consequences. For example, it could:
|
|
|
|
|
Limit the Companys ability to borrow money to fund its
working capital, capital expenditures, acquisitions and debt
service requirements;
|
|
|
|
Substantially increase the Companys vulnerability to
changes in interest rates, because a substantial portion of its
indebtedness bears interest at floating rates;
|
|
|
|
Limit the Companys flexibility in planning for, or
reacting to, changes in its business and future business
opportunities;
|
|
|
|
Make the Company more vulnerable to a downturn in its business
or in the economy;
|
|
|
|
Place the Company at a disadvantage to some of its competitors,
who may be less highly leveraged; and
|
|
|
|
Require a substantial portion of the Companys cash flow
from operations to be used for debt payments, thereby reducing
the availability of its cash flow to fund working capital,
capital expenditures, acquisitions and other general corporate
purposes.
|
One or a combination of these factors could adversely affect the
Companys financial condition. Subject to restrictions in
the indenture governing the Companys senior secured notes
and convertible notes and its senior secured credit facility,
the Company may incur additional indebtedness, which could
increase the risks associated with its already substantial
indebtedness.
Restrictive
covenants limit the Companys ability to operate its
business and to pursue its business strategies, and its failure
to comply with these covenants could result in an acceleration
of its indebtedness.
The Companys senior secured credit facility and the
indenture governing its senior secured notes contain covenants
that limit or restrict its ability to finance future operations
or capital needs, to respond to changing business and economic
conditions or to engage in other transactions or business
activities that may be important to its growth strategy or
otherwise important to the Company. The senior secured credit
agreement and the indenture governing the Companys senior
secured notes limit or restrict, among other things, the
Companys ability and the ability of its subsidiaries to:
|
|
|
|
|
Incur additional indebtedness;
|
|
|
|
Pay dividends or make distributions on the Companys
capital stock or certain other restricted payments or
investments;
|
|
|
|
Purchase or redeem stock;
|
|
|
|
Issue stock of the Companys subsidiaries;
|
|
|
|
Make investments and extend credit;
|
|
|
|
Engage in transactions with affiliates;
|
|
|
|
Transfer and sell assets;
|
|
|
|
Effect a consolidation or merger or sell, transfer, lease or
otherwise dispose of all or substantially all of the
Companys assets; and
|
|
|
|
Create liens on the Companys assets to secure debt.
|
In addition, the Companys senior secured credit facility
requires the Company to repay outstanding borrowings with
portions of the proceeds the Company receives from certain sales
of property or assets and
19
specified future debt offerings. The Companys ability to
comply with these provisions may be affected by events beyond
its control.
Any breach of the covenants in the Companys senior secured
credit agreement or the indenture governing its senior secured
notes could cause a default under the Companys senior
secured credit agreement and other debt (including the notes),
which would restrict the Companys ability to borrow under
its senior secured credit facility, thereby significantly
impacting the Companys liquidity. If there were an event
of default under any of the Companys debt instruments that
was not cured or waived, the holders of the defaulted debt could
cause all amounts outstanding with respect to the debt
instrument to be due and payable immediately. The Companys
assets and cash flow may not be sufficient to fully repay
borrowings under its outstanding debt instruments if accelerated
upon an event of default. If, as or when required, the Company
is unable to repay, refinance or restructure its indebtedness
under, or amend the covenants contained in, its senior secured
credit facility, the lenders under its senior secured credit
facility could institute foreclosure proceedings against the
assets securing borrowings under the senior secured credit
facility.
Holders
of the Companys common stock are subject to the risk of
dilution of their investment as the result of the issuance of
additional shares of common stock and warrants to purchase
common stock to holders of pre-petition claims to the extent the
reserve of common stock and warrants established to satisfy such
claims is insufficient.
Pursuant to the Companys 2004 Plan of Reorganization (the
Plan), the Company has established a reserve of
common stock and warrants to purchase common stock for issuance
to holders of unsecured pre-petition disputed claims. To the
extent this reserve is insufficient to satisfy these disputed
claims, the Company would be required to issue additional shares
of common stock and warrants, which would result in dilution to
holders of its common stock.
The Company agreed pursuant to the Plan to issue 25 million
shares of common stock and warrants initially exercisable for
6.25 million shares of common stock, distributed as follows:
|
|
|
|
|
holders of pre-petition secured claims were allocated
collectively 22.5 million shares of common stock; and
|
|
|
|
holders of general unsecured claims were allocated collectively
2.5 million shares of common stock and warrants to purchase
6.25 million shares of common stock at $32.11 per
share, and approximately 13.4% of such new common stock and
warrants were initially reserved for distribution for disputed
claims under the Plans claims reconciliation and allowance
procedures.
|
Under the claims reconciliation and allowance process set forth
in the Plan, the Official Committee of Unsecured Creditors, in
consultation with the Company, established a reserve to provide
for a pro rata distribution of 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 stock
and warrants not previously distributed remain) or downward
adjustments to the reserve will be made pending or following
adjudication of these objections. Predictions regarding the
allowance and classification of claims are inherently difficult
to make. With respect to environmental claims in particular,
there is inherent difficulty in assessing the Companys
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 in law to
believe that the Company will ultimately be responsible for only
its 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, are
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 and either
specify no 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 claims
assessment and information that is unknown to the Company at the
current time may significantly affect its assessment regarding
the adequacy of the reserve amounts in the future.
20
As general unsecured claims have been allowed in the bankruptcy
court, the Company has distributed common stock at a rate of
approximately one share 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
stock and warrants allocated to non-noteholder general unsecured
claims on the effective date of the Plan, 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
non-noteholder 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 non-noteholder 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.
The
Companys Ability to Recognize the Benefits of Deferred Tax
Assets is Dependent on Future Cash Flows and Taxable
Income
The Company recognizes the expected future tax benefit from
deferred tax assets when the tax benefit is considered to be
more likely than not of being realized. Otherwise, a valuation
allowance is applied against deferred tax assets. Assessing the
recoverability of deferred tax assets requires management to
make significant estimates related to expectations of future
taxable income. Estimates of future taxable income are based on
forecasted cash flows from operations and the application of
existing tax laws in each jurisdiction. To the extent that
future cash flows and taxable income differ significantly from
estimates, the ability of the Company to realize the deferred
tax assets could be impacted. Additionally, future changes in
tax laws could limit the Companys ability to obtain the
future tax benefits represented by its deferred tax assets. As
of March 31, 2007, the Companys current and long-term
deferred tax assets were $19 million and $67 million,
respectively.
CAUTIONARY
STATEMENT FOR PURPOSES OF THE SAFE HARBOR
PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except for historical information, this report may be deemed to
contain forward-looking statements. The Company
desires to avail itself of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 (the
Act) and is including this cautionary statement for
the express purpose of availing itself of the protection
afforded by the Act.
Examples of forward-looking statements include, but are not
limited to (a) projections of revenues, cost of raw
materials, income or loss, earnings or loss per share, capital
expenditures, growth prospects, dividends, the effect of
currency translations, capital structure, and other financial
items, (b) statements of plans and objectives of the
Company or its management or Board of Directors, including the
introduction of new products, or estimates or predictions of
actions by customers, suppliers, competitors or regulating
authorities, (c) statements of future economic performance,
and (d) statements of assumptions, such as the prevailing
weather conditions in the Companys market areas,
underlying other statements and statements about the Company or
its business.
Factors that could cause actual results to differ materially
from these forward looking statements include, but are not
limited to, the following general factors such as: (i) the
Companys ability to implement and fund based on current
liquidity business strategies and restructuring plans,
(ii) unseasonable weather (warm winters and cool summers)
which adversely affects demand for automotive and some
industrial batteries, (iii) the Companys substantial
debt and debt service requirements which may restrict the
Companys operational and financial flexibility, as well as
imposing significant interest and financing costs, (iv) the
litigation proceedings to which the Company is subject, the
results of which could have a material adverse effect on the
Company and its business, (v) the realization of the tax
benefits of the Companys net operating loss carry
forwards, which is dependent upon future taxable income,
(vi) the fact that lead, a major constituent in most of the
Companys products, experiences significant fluctuations in
market price and is a hazardous material that may give rise to
costly environmental and safety claims,
(vii) competitiveness of the battery markets in the
Americas and Europe,
21
(viii) the substantial management time and financial and
other resources needed for the Companys consolidation and
rationalization of acquired entities, (ix) risks involved
in foreign operations such as disruption of markets, changes in
import and export laws, currency restrictions, currency exchange
rate fluctuations and possible terrorist attacks against
U.S. interests, (x) the Companys exposure to
fluctuations in interest rates on its variable debt,
(xi) the Companys ability to maintain and generate
liquidity to meet its operating needs, (xii) general
economic conditions, (xiii) the ability to acquire goods
and services
and/or
fulfill labor needs at budgeted costs, (xiv) the
Companys reliance on a single supplier for its
polyethylene battery separators, (xv) the Companys
ability to successfully pass along increased material costs to
its customers, (xvi) the Companys ability to comply
with the provisions of Section 404 of the Sarbanes-Oxley
Act of 2002, and (xvii) the loss of one or more of the
Companys major customers for its industrial or
transportation products.
The Company cautions each reader of this Report to carefully
consider those factors hereinabove set forth. Such factors have,
in some instances, affected and in the future could affect the
ability of the Company to achieve its projected results and may
cause actual results to differ materially from those expressed
herein.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
The chart below lists the locations of the Companys
principal facilities. All of the facilities are owned unless
otherwise indicated. Most of the Companys significant
U.S. properties and some of its European properties secure
its financing arrangements. For a description of the financing
arrangements, see Liquidity and Capital Resources in
Item 7-
Managements Discussion and Analysis of Financial Condition
and Results of Operations. The leases for leased facilities
expire at various dates through 2015.
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
Square
|
|
|
|
Location
|
|
Footage
|
|
|
Use
|
|
Americas
|
|
|
|
|
|
|
Alpharetta, GA
|
|
|
83,600
|
(leased)
|
|
Executive Offices
|
Aurora, IL
|
|
|
43,200
|
(leased)
|
|
Executive Offices
|
Baton Rouge, LA
|
|
|
176,000
|
|
|
Secondary Lead Recycling
|
Bristol, TN
|
|
|
631,000
|
|
|
Transportation Battery
Manufacturing and Distribution Center
|
Cannon Hollow, MO
|
|
|
137,000
|
|
|
Secondary Lead Recycling
|
Columbus, GA
|
|
|
330,000
|
|
|
Industrial Transportation Battery
Manufacturing and Distribution Center
|
Florence, MS
|
|
|
113,000
|
|
|
Distribution and formation center
|
Florence, MS
|
|
|
95,700
|
(leased)
|
|
Distribution and formation center
|
Fort Erie, Canada
|
|
|
90,000
|
|
|
Distribution Center
|
Fort Smith, AR
|
|
|
224,000
|
(leased)
|
|
Industrial Transportation Battery
Manufacturing and Distribution Center
|
Frisco, TX
|
|
|
132,000
|
|
|
Secondary Lead Recycling
|
Kansas City, KS
|
|
|
140,000
|
|
|
Industrial Transportation Battery
Manufacturing
|
Kansas City, KS
|
|
|
93,800
|
(leased)
|
|
Distribution Center
|
Lampeter, PA
|
|
|
82,000
|
|
|
Transportation Battery Plastics
Manufacturing
|
Manchester, IA
|
|
|
286,000
|
|
|
Transportation Battery
Manufacturing Distribution Center
|
Muncie, IN
|
|
|
174,000
|
|
|
Secondary Lead Recycling
|
Reading, PA
|
|
|
125,000
|
|
|
Secondary Lead Recycling and
Polypropylene Reprocessing
|
Reading, PA
|
|
|
358,000
|
|
|
Distribution and Formation Center
|
Salina, KS
|
|
|
438,000
|
|
|
Transportation Battery
Manufacturing and Distribution Center
|
Sumner, WA
|
|
|
85,000
|
(leased)
|
|
Distribution Center
|
Vernon, CA
|
|
|
220,000
|
|
|
Secondary Lead Recycling
|
22
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
Square
|
|
|
|
Location
|
|
Footage
|
|
|
Use
|
|
Europe and ROW:
|
|
|
|
|
|
|
Adelaide, Australia
|
|
|
436,000
|
|
|
Transportation Battery
Manufacturing and Distribution Center
|
Sydney, Australia
|
|
|
700,000
|
|
|
Industrial Battery Manufacturing
and Distribution Center
|
Florival, Belgium
|
|
|
228,000
|
|
|
Transportation Distribution Center
and Offices
|
Bolton, England
|
|
|
274,000
|
|
|
Industrial Battery Manufacturing
|
Trafford Park, England
|
|
|
40,100
|
(leased )
|
|
Charger Manufacturing
|
Auxerre, France
|
|
|
341,000
|
|
|
Transportation Battery
Manufacturing
|
Gennevilliers, France
|
|
|
60,000
|
(leased )
|
|
Executive Offices
|
Lille, France
|
|
|
630,000
|
|
|
Industrial Battery Manufacturing
|
Peronne, France
|
|
|
106,000
|
|
|
Plastics Manufacturing
|
Bad Lauterberg, Germany
|
|
|
495,200
|
|
|
Manufacturing, Administrative and
Warehouse
|
|
|
|
|
|
|
Industrial Battery Manufacturing,
Distribution and
|
Budingen, Germany
|
|
|
233,000
|
|
|
Administration
|
Vlaardingen, Holland
|
|
|
118,000
|
|
|
Industrial Distribution Center and
Offices
|
Avelino, Italy
|
|
|
86,100
|
|
|
Plastics Manufacturing
|
Canonica dAdda, Italy
|
|
|
193,800
|
|
|
Plastics Manufacturing
|
Fumane di Valipolicella, Italy
|
|
|
66,600
|
|
|
Transportation Battery
Manufacturing
|
Romano Di Lombardia, Italy
|
|
|
312,200
|
(leased )
|
|
Transportation Battery
Manufacturing
|
Lower Hutt, New Zealand
|
|
|
90,000
|
|
|
Transportation Battery
Manufacturing
|
Petone, New Zealand
|
|
|
24,000
|
|
|
Secondary Lead Recycling
|
Poznan, Poland
|
|
|
660,800
|
(leased )
|
|
Transportation Battery
Manufacturing
|
Castanheira do Riatejo, Portugal
|
|
|
533,400
|
|
|
Industrial Battery Manufacturing
|
Azambuja, Portugal
|
|
|
39,700
|
|
|
Secondary Lead Recycling and
Plastics Manufacturing
|
Azuqueca de Henares, Spain
|
|
|
209,100
|
|
|
Transportation Battery
Manufacturing
|
San Esteban de Gomez, Spain
|
|
|
62,900
|
|
|
Secondary Lead Recycling
|
La Cartuja, Spain
|
|
|
385,000
|
|
|
Industrial Battery Manufacturing
|
Manzanares, Spain
|
|
|
465,000
|
|
|
Transportation Battery
Manufacturing
|
Pontypool, Wales
|
|
|
91,000
|
(leased )
|
|
Distribution Center
|
In addition, the Company also leases sales and distribution
outlets in North America, Europe and Asia.
The Company believes that its facilities are in good operating
condition, adequately maintained, and suitable to meet the
Companys present needs.
|
|
Item 3.
|
Legal
Proceedings
|
See Note 13 to the Consolidated Financial Statements, which
is hereby incorporated herein by reference.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None.
23
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Unregistered
Sales of Equity Securities and Use of Proceeds
On January 22, 2007, the Company issued 2,058 shares
of common stock and 5,178 warrants to purchase common stock at a
price of $30.31. The shares and warrants were issued pursuant to
the terms of the Plan of Reorganization and were exempt from the
registration requirements of the Securities Act of 1933 under
Section 1145 of the U.S. Bankruptcy Code.
Market
Data
Since May 6, 2004, the Companys common stock and
warrants have traded on The NASDAQ Global Market under the
symbol XIDE and XIDEW, respectively. The
high and low sales price of the Companys common stock and
warrants are set forth below.
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Fiscal 2007:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
4.80
|
|
|
$
|
2.76
|
|
Second Quarter
|
|
$
|
4.60
|
|
|
$
|
3.55
|
|
Third Quarter
|
|
$
|
4.80
|
|
|
$
|
3.57
|
|
Fourth Quarter
|
|
$
|
8.92
|
|
|
$
|
4.40
|
|
Fiscal 2006:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
13.34
|
|
|
$
|
4.32
|
|
Second Quarter
|
|
$
|
5.53
|
|
|
$
|
4.24
|
|
Third Quarter
|
|
$
|
5.11
|
|
|
$
|
3.45
|
|
Fourth Quarter
|
|
$
|
4.20
|
|
|
$
|
2.35
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
Fiscal 2007:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
0.35
|
|
|
$
|
0.19
|
|
Second Quarter
|
|
$
|
0.30
|
|
|
$
|
0.14
|
|
Third Quarter
|
|
$
|
0.50
|
|
|
$
|
0.14
|
|
Fourth Quarter
|
|
$
|
1.00
|
|
|
$
|
0.38
|
|
Fiscal 2006:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
1.85
|
|
|
$
|
0.37
|
|
Second Quarter
|
|
$
|
0.81
|
|
|
$
|
0.39
|
|
Third Quarter
|
|
$
|
0.54
|
|
|
$
|
0.26
|
|
Fourth Quarter
|
|
$
|
0.57
|
|
|
$
|
0.22
|
|
The Company did not declare or pay dividends on its common stock
during fiscal years 2007 and 2006. Covenants in the
Companys senior secured credit agreement restrict the
Companys ability to pay cash dividends on capital stock
and the Company presently does not intend to pay dividends on
its common stock.
As of June 8, 2007, the Company had 60,688,319 shares
of its common stock and, 4,952,323 of its warrants outstanding,
with 3,935 and 5,218 holders of record, respectively.
24
Equity
Compensation Plan Information
As of March 31, 2007, the Company maintained stock option
and incentive plans under which employees and non-employee
directors could be granted options to purchase shares of the
Companys common stock or awarded shares of common stock.
The following table contains information relating to such plans
as of March 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
Number of Securities
|
|
|
|
|
|
Remaining Available for
|
|
|
|
to be Issued Upon
|
|
|
Weighted-Average
|
|
|
Future Issuance Under
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Equity Compensation Plans
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
(Excluding Securities
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved
by security holders
|
|
|
3,073,000
|
|
|
$
|
6.07
|
|
|
|
2,479,000
|
|
Equity compensation plans not
approved by security holders
|
|
|
80,000
|
|
|
$
|
13.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,153,000
|
|
|
$
|
6.25
|
|
|
|
2,479,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of the total of 7.1 million shares of common stock
available for issuance under stock option and incentive plans
for employees and non-employee directors, no more than
1.9 million shares may be issued as restricted shares.
|
|
Item 6.
|
Selected
Financial Data
|
The following table sets forth selected financial data for the
Company. The reader should read this information in conjunction
with the Companys Consolidated Financial Statements and
Notes thereto and Managements Discussion and
Analysis of Financial Condition and Results of Operations
that appear elsewhere in this report. See Note 1 to the
Consolidated Financial Statements regarding the Predecessor
Company and the Successor Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
For the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 6, 2004
|
|
|
April 1, 2004
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
to
|
|
|
to
|
|
|
Fiscal Year Ended
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
2004
|
|
|
2003
|
|
|
|
(In thousands except per share data)
|
|
|
Statement of Operations
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,939,785
|
|
|
$
|
2,819,876
|
|
|
$
|
2,476,259
|
|
|
$
|
214,607
|
|
|
$
|
2,500,493
|
|
|
$
|
2,361,101
|
|
Gross profit
|
|
|
472,776
|
|
|
|
406,831
|
|
|
|
377,502
|
|
|
|
35,470
|
|
|
|
509,325
|
|
|
|
516,541
|
|
Selling, marketing and advertising
expenses
|
|
|
270,413
|
|
|
|
271,059
|
|
|
|
251,085
|
|
|
|
24,504
|
|
|
|
264,753
|
|
|
|
261,299
|
|
General and administrative expenses
|
|
|
173,128
|
|
|
|
190,993
|
|
|
|
150,871
|
|
|
|
17,940
|
|
|
|
161,271
|
|
|
|
175,177
|
|
Restructuring
|
|
|
24,483
|
|
|
|
21,714
|
|
|
|
42,479
|
|
|
|
602
|
|
|
|
52,708
|
|
|
|
25,658
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
388,524
|
|
|
|
|
|
|
|
|
|
|
|
37,000
|
|
Other (income) expense net
|
|
|
9,636
|
|
|
|
3,684
|
|
|
|
(56,898
|
)
|
|
|
6,222
|
|
|
|
(40,724
|
)
|
|
|
(11,035
|
)
|
Interest expense, net
|
|
|
90,020
|
|
|
|
69,464
|
|
|
|
42,636
|
|
|
|
8,870
|
|
|
|
99,027
|
|
|
|
105,788
|
|
Loss before reorganization items,
income tax, minority interest and cumulative effect of change in
accounting principle
|
|
|
(94,904
|
)
|
|
|
(150,083
|
)
|
|
|
(441,195
|
)
|
|
|
(22,668
|
)
|
|
|
(27,710
|
)
|
|
|
(77,346
|
)
|
Reorganization items, net
|
|
|
4,310
|
|
|
|
6,158
|
|
|
|
11,527
|
|
|
|
18,434
|
|
|
|
67,042
|
|
|
|
36,370
|
|
Fresh start accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(228,371
|
)
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
For the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 6, 2004
|
|
|
April 1, 2004
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
to
|
|
|
to
|
|
|
Fiscal Year Ended
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
2004
|
|
|
2003
|
|
|
|
(In thousands except per share data)
|
|
|
Gain on discharge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,558,839
|
)
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
882
|
|
|
|
529
|
|
|
|
(18
|
)
|
|
|
26
|
|
|
|
467
|
|
|
|
200
|
|
Income taxes
|
|
|
5,783
|
|
|
|
15,962
|
|
|
|
14,219
|
|
|
|
(2,482
|
)
|
|
|
3,271
|
|
|
|
26,969
|
|
Income (loss) before cumulative
effect of change in accounting principle
|
|
|
(105,879
|
)
|
|
|
(172,732
|
)
|
|
|
(466,923
|
)
|
|
|
1,748,564
|
|
|
|
(98,490
|
)
|
|
|
(140,885
|
)
|
Cumulative effect of change in
accounting principle(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,593
|
)
|
|
|
|
|
Net income (loss)
|
|
$
|
(105,879
|
)
|
|
$
|
(172,732
|
)
|
|
$
|
(466,923
|
)
|
|
$
|
1,748,564
|
|
|
$
|
(114,083
|
)
|
|
$
|
(140,885
|
)
|
Basic and diluted net income (loss)
per share(2)
|
|
$
|
(2.39
|
)
|
|
$
|
(6.75
|
)
|
|
$
|
(18.26
|
)
|
|
$
|
63.86
|
|
|
$
|
(4.17
|
)
|
|
$
|
(5.14
|
)
|
Balance Sheet Data (at period
end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital (deficit)(3)
|
|
$
|
486,866
|
|
|
$
|
431,570
|
|
|
$
|
(180,172
|
)
|
|
$
|
402,076
|
|
|
$
|
(270,394
|
)
|
|
$
|
(15,876
|
)
|
Property, plant and equipment, net
|
|
|
649,015
|
|
|
|
685,842
|
|
|
|
799,763
|
|
|
|
826,900
|
|
|
|
543,124
|
|
|
|
533,375
|
|
Total assets
|
|
|
2,120,224
|
|
|
|
2,082,909
|
|
|
|
2,290,780
|
|
|
|
2,729,404
|
|
|
|
2,471,808
|
|
|
|
2,372,691
|
|
Total debt
|
|
|
684,454
|
|
|
|
701,004
|
|
|
|
653,758
|
|
|
|
547,549
|
|
|
|
1,847,656
|
|
|
|
1,804,903
|
|
Total stockholders equity
(deficit)
|
|
|
330,523
|
|
|
|
224,739
|
|
|
|
427,259
|
|
|
|
888,391
|
|
|
|
(769,769
|
)
|
|
|
(695,369
|
)
|
Other Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
1,177
|
|
|
$
|
(44,348
|
)
|
|
$
|
(9,691
|
)
|
|
$
|
(7,186
|
)
|
|
$
|
40,551
|
|
|
$
|
(239,858
|
)
|
Investing activities
|
|
|
(47,447
|
)
|
|
|
(32,817
|
)
|
|
|
(44,013
|
)
|
|
|
(4,352
|
)
|
|
|
(38,411
|
)
|
|
|
(39,095
|
)
|
Financing activities
|
|
|
87,586
|
|
|
|
34,646
|
|
|
|
68,925
|
|
|
|
35,168
|
|
|
|
(9,667
|
)
|
|
|
278,882
|
|
Capital expenditures
|
|
|
51,932
|
|
|
|
58,133
|
|
|
|
69,114
|
|
|
|
7,152
|
|
|
|
65,128
|
|
|
|
45,878
|
|
|
|
|
(1) |
|
The cumulative effect of change in accounting principle in
fiscal 2004 resulted from the adoption of SFAS 143 on
April 1, 2003. |
|
(2) |
|
Loss per share for the fiscal year ended March 31, 2006 and
for the period May 6, 2004 through March 31, 2005,
respectively, have been restated to give effect to the stock
dividend for the $75 million rights offering and
$50 million private sale of equity; both of which were
consummated in September 2006. See Note 1 and 18 to the
Consolidated Financial Statements. |
|
(3) |
|
Working capital (deficit) is calculated as current assets less
current liabilities, which at March 31, 2005 reflects the
reclassification of certain long-term debt as current. At
March 31, 2003 and March 31, 2004, working capital
(deficit) excludes liabilities of the Debtors classified as
subject to compromise. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Important
Matters
The following discussion and analysis provide information that
management believes is relevant to an assessment and
understanding of the Companys consolidated results of
operation and financial condition. The discussion should be read
in conjunction with the Consolidated Financial Statements and
notes thereto contained in this annual report on
Form 10-K.
In particular, this discussion should be read in conjunction
with Note 1. Basis of Presentation which
describes the filing by Exide Technologies and certain of its
subsidiaries
26
of voluntary petitions for reorganization under Chapter 11
of the United States Bankruptcy Code on April 15, 2002 and
the financial restructuring associated with the Companys
emergence from Chapter 11, effective May 5, 2004.
After April 15, 2002, the Debtors operated their businesses
and managed their properties as
debtors-in-possession
throughout the course of the bankruptcy case. The Debtors, along
with the Official Committee of Unsecured Creditors filed the
Plan with the Bankruptcy Court on February 27, 2004 and, on
April 21, 2004, the Bankruptcy Court confirmed the Plan. As
of the Effective Date, the Debtors substantially consummated the
transactions provided for in the Plan. See Item 1.
Business Emergence from Chapter 11
Bankruptcy Protection, which contains a summary of certain
transactions that became effective on the Effective Date.
The Consolidated Financial Statements contained herein have been
prepared in accordance with Statement of Position
90-7,
Financial Reporting by Entities in Reorganization under
the Bankruptcy Code
(SOP 90-7).
Financial statements for periods subsequent to the
Companys emergence from Chapter 11 are not comparable
with those of prior periods.
External
Factors Which Affect the Companys Financial
Performance
Lead and other Raw Materials. Lead represents
approximately 40% of the Companys 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 Companys products to be reduced
and the Companys net sales and gross margins to decline.
The average price of lead as quoted on the London Metal Exchange
(LME) has increased 37% from $1,041 per metric ton
for the fiscal year ended March 31, 2006 to $1,426 per
metric ton for the fiscal year ended March 31, 2007. At
June 8, 2007, the quoted price on the LME was $2,255 per
metric ton. To the extent that lead prices continue to be
volatile and the Company is unable to 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 and
diesel fuel for distribution of its products. The Company seeks
to recoup these increased energy costs through surcharges. To
the extent the Company is unable to pass on these higher energy
costs to its customers, its financial performance is adversely
impacted.
Competition. The global transportation and
industrial energy battery markets are highly competitive. In
recent years, competition has continued to intensify and has
impacted the Companys 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 Companys markets and fluctuating lead
prices as well as low-priced Asian imports in the Companys
markets.
Exchange Rates. The Company is exposed to
foreign currency risk in most European countries, principally
from fluctuations in the Euro and British Pound. For fiscal
2007, the exchange rate of the Euro to the U.S. Dollar has
increased 5% on a weighted-average basis to $1.28 compared to
$1.22 for fiscal 2006, and the exchange rate of the British
Pound to the U.S. Dollar has increased 6% on a weighted
average basis to $1.89 compared to $1.79 for fiscal 2006. At
March 31, 2007, the Euro was $1.34 or 11% higher as
compared to $1.21 at March 31, 2006, and the British Pound
was $1.97 or 13% higher as compared to $1.74 at March 31,
2006.
The Company is also exposed, although to a lesser extent, to
foreign currency risk in Australia and the Pacific Rim.
Movements of 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. Movements in
European currencies impacted the Companys results for the
periods presented herein. For the fiscal year ended
March 31, 2007, approximately 59% of the Companys net
sales were generated in Europe and ROW. Further, approximately
64% of the Companys aggregate accounts receivable and
inventory as of March 31, 2007 were held by its European
subsidiaries.
27
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 Companys
financial results.
Seasonality and Weather. The Company sells a
disproportionate share of its transportation aftermarket
batteries during the fall and early winter (the Companys
third and portions of its fourth fiscal quarters). Retailers and
distributors buy automotive batteries during these periods so
they will have sufficient inventory for cold weather periods. In
addition, many of the Companys industrial battery
customers in Europe do not place their battery orders until the
end of the calendar year. The impact of seasonality on sales has
the effect of increasing the Companys 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 Companys 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 Companys 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 Companys manufacturing and
distribution costs are fixed.
Interest Rates. The Company is exposed to
fluctuations in interest rates on its variable rate debt. See
Note 9 to the Consolidated Financial Statements.
Fiscal
2007 Highlights and Outlook
The Companys reported results continued to be impacted in
fiscal 2007 by increases in the price of lead and other
commodity costs that are primary components in the manufacture
of batteries and increases in energy costs used in the
manufacturing and distribution of the Companys products.
In the Americas market, the Company obtains the vast majority of
its lead requirements from six Company-owned and operated
secondary lead recycling plants. These facilities reclaim lead
by recycling spent lead-acid batteries that are obtained for
recycling from the Companys customers and outside
spent-battery collectors. This 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 rise
in lead prices, however, the cost of spent batteries has also
increased. For fiscal 2007, the average cost of spent batteries
has increased approximately 18% versus fiscal 2006. Therefore,
the higher market price of lead with respect to North American
manufacturing continues to impact results. The Company continues
to take selective pricing actions and attempts to secure higher
captive spent battery return rates at lower cost than purchasing
cores in the secondary market to help mitigate these risks.
In Europe, the Companys lead requirements are mainly
obtained from third-party suppliers. Because of the
Companys exposure to lead market prices in Europe, and
based on historical price increases and volatility in lead
prices, the Company has implemented several measures to offset
higher lead prices including selective pricing actions, lead
price escalators, and long-term lead supply contracts. In
addition, the Company has automatic price escalators with many
OEM customers. The Company currently recycles a small portion of
its lead requirements in its European facilities.
The Company expects that these higher lead and other commodity
costs, which affect all business segments, will continue to put
pressure on the Companys financial performance. However,
the selective pricing actions, lead price escalators in some
contracts, long-term lead supply contracts, and fuel surcharges
are intended to help mitigate these risks. The implementation of
selective pricing actions and price escalators generally lags
the rise in market prices of lead and other commodities. Both
price escalators and fuel surcharges are subject to the risk of
customer acceptance.
28
In addition to managing the impact of higher lead and other
commodity costs on the Companys results, the key elements
of the Companys underlying business plans and continued
strategies are:
(i) Successful execution and completion of the
Companys ongoing restructuring plans, and organizational
realignment of divisional and corporate functions resulting in
further headcount reductions, principally in selling, general
and administrative functions globally.
(ii) Actions designed to improve the Companys
liquidity and operating cash flow through working capital
reduction plans, the sales of non-strategic assets and
businesses, streamlining cash management processes, implementing
plans to minimize the cash costs of the Companys
restructuring initiatives and closely managing capital
expenditures.
(iii) Continued factory and distribution productivity
improvements through its established Take Charge! initiative,
which is now installed in 10 of its 28 manufacturing locations,
including continuing a focused relationship with the principal
consultant. This year will see further integration with its
Excell initiative.
(iv) The Company will continue to review and rationalize
the various brand offerings of product in its markets to gain
efficiencies in manufacturing and distribution, and better
leverage of its marketing spending.
(v) The Company will gain further product and process
efficiencies with implementation of the announced Global
Procurement structure. This focuses on leveraging existing
relationships and creating an infrastructure for global search
for products and components.
Critical
Accounting Policies and Estimates
The Companys discussion and analysis of its financial
condition and results of operations are based upon the
Companys Consolidated Financial Statements, which have
been prepared in accordance with accounting principles generally
accepted in the U.S. The preparation of these 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 historical experience and on
various other assumptions that are believed 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 the following critical accounting policies
and estimates affect the preparation of its Consolidated
Financial Statements.
Inventory Reserves. The Company adjusts its
inventory carrying value to estimated market value (when below
historical cost basis) based upon assumptions of future demand
and market conditions. If actual market conditions are less
favorable than those projected by the Company, additional
inventory write-downs may be required.
Valuation of Long-lived Assets. The
Companys long-lived assets include property, plant and
equipment, and identified intangible assets. Long-lived assets
(other than indefinite lived intangible assets) are depreciated
and amortized over their estimated useful lives, and are
reviewed for impairment whenever changes in circumstances
indicate the carrying value may not be recoverable.
Indefinite-lived intangible assets are reviewed for impairment
on both an annual basis and whenever changes in circumstances
indicate that the carrying value may not be recoverable. The
fair value of indefinite-lived intangible assets are based upon
the Companys estimates of future cash flows and other
factors including discount rates to determine the fair value of
the respective assets. An erosion of future business results in
any of the Companys business units could create impairment
in the Companys long-lived assets and require a
significant write down in future periods.
Employee Benefit Plans. The Companys
pension plans and postretirement benefit plans are accounted for
under SFAS No. 158, Employers Accounting
for Defined Benefit Pension and Other Postretirement
Plans An Amendment of FASB Statements No. 87,
88, 106, and 132(R) (SFAS 158) using
actuarial
29
valuations required by SFAS No. 87,
Employers Accounting for Pensions
(SFAS 87) and SFAS No. 106,
Employers Accounting for Postretirement Benefits
Other Than Pensions (SFAS 106). The
Company considers accounting for employee benefit plans critical
because management is required to make significant subjective
judgments about a number of actuarial assumptions, including
discount rates, compensation growth, long-term return on plan
assets, retirement, turnover, health care cost trend rates and
mortality rates. Depending on the assumptions and estimates
used, the pension and postretirement benefit expense could vary
within a range of outcomes and have a material effect on
reported results. In addition, the assumptions can materially
affect accumulated benefit obligations and future cash funding.
For a detailed discussion of the Companys retirement
benefits, see Employee Benefit Plans herein and Note 10 to
the Consolidated Financial Statements.
Deferred Taxes. The Company records valuation
allowances to reduce its deferred tax assets to amounts that are
more likely than not to be realized. While the Company has
considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for
valuation allowances, if the Company were to determine that it
would be able to realize deferred tax assets in the future in
excess of the Companys net recorded amount, an adjustment
to the net deferred tax asset would increase income in the
period that such determination was made. Likewise, should the
Company determine that it would not be able to realize all or
part of its net deferred tax assets in the future, an adjustment
to the net deferred tax asset would decrease income in the
period such determination was made. The Company regularly
evaluates the need for valuation allowances against its deferred
tax assets, and currently has full valuation allowances recorded
for deferred tax assets in the U.S., the United Kingdom, France,
as well as in several other countries in Europe, and ROW.
Revenue Recognition. The Company records sales
when revenue is earned. Shipping terms are generally FOB
shipping point and revenue is recognized when product is shipped
to the customer. In limited cases, terms are FOB destination and
in these cases, revenue is recognized when product is delivered
to the customers delivery site. The Company records sales
net of discounts and estimated customer allowances and returns.
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.
Environmental Reserves. The Company is subject
to numerous environmental laws and regulations in all the
countries in which it operates. In addition, the Company can be
held liable for investigation and remediation of sites impacted
by its past operating activities. The Company maintains reserves
for the cost of addressing these liabilities once they are
determined to be both probable and reasonably estimable. These
estimates are determined through a combination of methods,
including outside estimates of likely expense and the
Companys historical experience in the management of these
matters.
Because environmental liabilities are not accrued until a
liability is determined to be probable and reasonably estimable
and there is a constructive obligation to remediate, not all
potential future environmental liabilities have been included in
the Companys environmental reserves and, therefore,
additional earnings charges are possible. Also, future findings
or changes in estimates could result in either an increase or
decrease in the reserves and have a significant impact on the
Companys liquidity and its results of operations.
Purchase Commitments. The Company has three
worldwide supply agreements expiring in December 2009 to
purchase its polyethylene battery separators. The supply
agreements were entered into in fiscal 2000 with Daramic, the
party that purchased the Companys battery separator
manufacturing operation, as a condition of the sale of those
operations. At the time of the sale, the agreements contained
minimum annual purchase commitments in excess of the
Companys requirements. Accordingly, the Company
established a reserve, and reduced the gain on sale of the
manufacturing operations, for commitments in excess of the
Companys requirements and for the contractual purchase
prices in excess of market. The Company currently
30
has a reserve for the incremental purchase requirements over the
remaining life of the agreement in excess of the Companys
projected requirements. Whenever there is a significant change
in the Companys unit volume outlook based on changes to
its business plan, this reserve will be adjusted.
Litigation. The Company has legal
contingencies that have a high degree of uncertainty. When a
contingency becomes probable and reasonably estimable, a reserve
is established. Numerous lawsuits have been filed against the
Company for which the liabilities are not considered probable
and/or
reasonably estimable. Consequently, no reserves have been
established for these matters. If future litigation or the
resolution of existing matters result in liability to the
Company, such liability could have a significant impact on the
Companys future results and liquidity.
Recently Issued Accounting Standards. See
Note 2 to the Consolidated Financial Statements for a
description of new accounting pronouncements and their impact to
the Company.
Results
of Operations
The Company reports its results as four business segments:
Transportation Americas, Transportation Europe and ROW,
Industrial Energy Americas, and Industrial Energy Europe and
ROW. The following discussions provide a comparison of the
Companys results of operations for the fiscal year ended
March 31, 2007 with its results of operations for the
fiscal year ended March 31, 2006, and the combined results
of its operations and those of the Predecessor Company on a
combined basis for the fiscal year ended March 31, 2005.
The combined results of operations for the fiscal year ended
March 31, 2005 include the Companys results of
operations for the period May 6, 2004 to March 31,
2005 combined with the results of operations of the Predecessor
Company for the period April 1, 2004 to May 5, 2004.
The combined financial information for the fiscal year ended
March 31, 2005 is merely additive and does not give pro
forma effect to the transactions provided for in the plan of
reorganization or the application of fresh-start accounting. As
a result of the reorganization and adoption of fresh- start
accounting, the Companys results of operations after
May 5, 2004 are not comparable to the results of operations
of the Predecessor Company for periods prior to May 6,
2004. The discussions with respect to the fiscal year ended
March 31, 2005 are provided for comparative purposes only,
but the value of such comparisons may be limited. The
information in this section should be read in conjunction with
the Consolidated Financial Statements and related notes thereto
appearing in Item 8 Financial Statements and
Supplementary Data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended March 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
For the Period
|
|
|
|
Successor Company
|
|
|
For the Fiscal
|
|
|
May 6,
|
|
|
April 1,
|
|
|
|
For the Fiscal Year Ended
|
|
|
Year Ended
|
|
|
2004 to
|
|
|
2004 to
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 5,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
NET SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
930,334
|
|
|
$
|
913,317
|
|
|
$
|
847,571
|
|
|
$
|
772,272
|
|
|
$
|
75,299
|
|
Europe & ROW
|
|
|
832,219
|
|
|
|
810,894
|
|
|
|
823,165
|
|
|
|
764,238
|
|
|
|
58,927
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
270,479
|
|
|
|
274,976
|
|
|
|
223,008
|
|
|
|
203,815
|
|
|
|
19,193
|
|
Europe & ROW
|
|
|
906,753
|
|
|
|
820,689
|
|
|
|
797,122
|
|
|
|
735,934
|
|
|
|
61,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
2,939,785
|
|
|
$
|
2,819,876
|
|
|
$
|
2,690,866
|
|
|
$
|
2,476,259
|
|
|
$
|
214,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended March 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
For the Period
|
|
|
|
Successor Company
|
|
|
For the Fiscal
|
|
|
May 6,
|
|
|
April 1,
|
|
|
|
For the Fiscal Year Ended
|
|
|
Year Ended
|
|
|
2004 to
|
|
|
2004 to
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 5,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
GROSS PROFIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
165,689
|
|
|
$
|
97,092
|
|
|
$
|
112,091
|
|
|
$
|
100,970
|
|
|
$
|
11,121
|
|
Europe & ROW
|
|
|
93,382
|
|
|
|
102,680
|
|
|
|
114,495
|
|
|
|
106,645
|
|
|
|
7,850
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
60,178
|
|
|
|
53,153
|
|
|
|
49,039
|
|
|
|
44,264
|
|
|
|
4,775
|
|
Europe & ROW
|
|
|
153,526
|
|
|
|
153,906
|
|
|
|
137,347
|
|
|
|
125,623
|
|
|
|
11,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
472,775
|
|
|
$
|
406,831
|
|
|
$
|
412,972
|
|
|
$
|
377,502
|
|
|
$
|
35,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
132,555
|
|
|
$
|
103,172
|
|
|
$
|
216,863
|
|
|
$
|
208,155
|
|
|
$
|
8,708
|
|
Europe & ROW
|
|
|
113,802
|
|
|
|
78,284
|
|
|
|
219,987
|
|
|
|
212,828
|
|
|
|
7,159
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
38,203
|
|
|
|
44,307
|
|
|
|
68,494
|
|
|
|
65,326
|
|
|
|
3,168
|
|
Europe & ROW
|
|
|
145,248
|
|
|
|
114,210
|
|
|
|
233,127
|
|
|
|
223,317
|
|
|
|
9,810
|
|
Unallocated expenses
|
|
|
137,871
|
|
|
|
216,941
|
|
|
|
138,364
|
|
|
|
109,071
|
|
|
|
29,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
567,679
|
|
|
$
|
556,914
|
|
|
$
|
876,835
|
|
|
$
|
818,697
|
|
|
$
|
58,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE
REORGANIZATION ITEMS, TAXES, AND MINORITY INTEREST
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
33,134
|
|
|
$
|
(6,080
|
)
|
|
$
|
(104,772
|
)
|
|
$
|
(107,185
|
)
|
|
$
|
2,413
|
|
Europe & ROW
|
|
|
(20,420
|
)
|
|
|
24,396
|
|
|
|
(105,492
|
)
|
|
|
(106,183
|
)
|
|
|
691
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
21,975
|
|
|
|
8,846
|
|
|
|
(19,455
|
)
|
|
|
(21,062
|
)
|
|
|
1,607
|
|
Europe & ROW
|
|
|
8,278
|
|
|
|
39,696
|
|
|
|
(95,780
|
)
|
|
|
(97,694
|
)
|
|
|
1,914
|
|
Unallocated expenses
|
|
|
(137,871
|
)
|
|
|
(216,941
|
)
|
|
|
(138,364
|
)
|
|
|
(109,071
|
)
|
|
|
(29,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
(94,904
|
)
|
|
$
|
(150,083
|
)
|
|
$
|
(463,863
|
)
|
|
$
|
(441,195
|
)
|
|
$
|
(22,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year Ended March 31, 2007 compared with Fiscal Year Ended
March 31, 2006
Overview
Net loss for fiscal 2007 was $105.9 million versus fiscal
2006 net loss of $172.7 million. Included in fiscal
2007 and fiscal 2006 net loss were gross profit of
$472.8 million and $406.8 million, general and
administrative expenses of $173.1 million and
$191.0 million, restructuring costs of $24.5 million
and $21.7 million, and reorganization items of
$4.3 million and $6.2 million, respectively. Included
in Other (income) expense were net currency remeasurement gains
(losses) of $11.6 million and ($11.3) million,
primarily related to U.S. dollar denominated debt in
Europe, for fiscal 2007 and 2006, respectively. Interest
32
expense, net, was $90 million and $69.5 million for
fiscal 2007 and 2006, respectively. Also, gains (losses) on
revaluation of warrants of ($3.2) million and
$9.1 million were recognized in fiscal 2007 and 2006,
respectively.
Net
Sales
Net sales were $2.9 billion for fiscal 2007 versus
$2.8 billion in fiscal 2006. Currency fluctuations
(primarily the strengthening of the Euro against the
U.S. dollar) favorably impacted net sales in fiscal 2007 by
approximately $87.7 million. Excluding the currency impact,
net sales increased by approximately $32.2 million, or
1.1%, as a result of stronger Industrial Energy demand in Europe
and ROW, and was partially offset by weaker Transportation
demand in both the Americas and Europe and ROW, and weaker
Industrial Energy demand in the Americas in the network power
product. Lower demand was more than offset by the impact of
favorable pricing actions in all of the Companys segments.
Much of the lower unit volumes in both Transportation segments
can be attributed to the Companys pricing strategy of
driving customer profitability to more appropriate levels or
severing relationships where reasonable profitability cannot be
achieved.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal
|
|
|
For the Fiscal
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Favorable/(Unfavorable)
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
2007
|
|
|
2006
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
930,334
|
|
|
$
|
913,317
|
|
|
$
|
17,017
|
|
|
$
|
|
|
|
$
|
17,017
|
|
Europe & ROW
|
|
|
832,219
|
|
|
|
810,894
|
|
|
|
21,325
|
|
|
|
42,281
|
|
|
|
(20,956
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,762,553
|
|
|
|
1,724,211
|
|
|
|
38,342
|
|
|
|
42,281
|
|
|
|
(3,939
|
)
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
270,479
|
|
|
|
274,976
|
|
|
|
(4,497
|
)
|
|
|
|
|
|
|
(4,497
|
)
|
Europe & ROW
|
|
|
906,753
|
|
|
|
820,689
|
|
|
|
86,064
|
|
|
|
45,382
|
|
|
|
40,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,177,232
|
|
|
|
1,095,665
|
|
|
|
81,567
|
|
|
|
45,382
|
|
|
|
36,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
2,939,785
|
|
|
$
|
2,819,876
|
|
|
$
|
119,909
|
|
|
$
|
87,663
|
|
|
$
|
32,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Americas net sales were $930.3 million for
fiscal 2007 versus $913.3 million for fiscal 2006. Net
sales for fiscal 2007 were $17 million or 1.9% higher than
fiscal 2006 due to higher pricing, which, in part, reflected the
pass-through of cost increases from lead, other materials, and
energy. Transportation Americas has experienced lower volumes in
original equipment and aftermarket sales, in part, as a result
of the Companys efforts to eliminate or wind down
unprofitable contracts and customers. Although the Company has
been focused on cost cutting efforts, it has also been
increasing its efforts to pass on commodity cost increases to
its customers. In many cases the Company has been successful in
passing on these costs, although there is typically a time lag
involved. In cases where the Company has not been successful
passing on these costs, it has determined that rather than
continue to absorb customer losses it would not accept further
business from certain of these customers. Third party lead sales
revenues for fiscal 2007 were approximately $22.4 million
higher than fiscal 2006 due to rising lead prices.
Transportation Europe and ROW net sales were $832.2 million
for fiscal 2007 versus $810.9 million for fiscal 2006. Net
sales before the favorable impact of $42.3 million in net
foreign exchange rate fluctuations were lower by
$21 million or 2.6%. The decrease was primarily due to
lower aftermarket sales volumes only partially offset by higher
average selling prices.
Industrial Energy Americas net sales were $270.5 million
for fiscal 2007 versus $275 million for fiscal 2006. Net
sales were $4.5 million or 1.6% lower due primarily to the
softness in the network power markets, particularly in wireless
telecommunications and lower sales to the U.S. Navy, which
spiked in fiscal 2006 in advance of a change in technology,
offset partially by higher average selling prices related to
lead cost recovery and strong volume in the motive power markets.
33
Industrial Energy Europe and ROW net sales were
$906.8 million for fiscal 2007 versus $820.7 million
for fiscal 2006. Net sales, before a favorable currency impact
of $45.4 million, increased $40.7 million or 5% due to
higher average selling prices related to lead and other pricing
actions, and higher volumes in the network power markets, in
particular the telecommunications channel.
Gross
Profit
Gross profit was $472.8 million in fiscal 2007 versus
$406.8 million in fiscal 2006. Gross margin increased to
16.1% of net sales in fiscal 2007 from 14.4% of net sales in
fiscal 2006. Currency fluctuations positively impacted gross
profit in fiscal 2007 by approximately $11.9 million. Gross
profit was positively impacted by higher average selling prices
and cost reductions driven to a great degree by the
Companys continued execution of the Take Charge!
initiative and targeted capital spending. These improvements
were partially offset by higher lead costs (average LME prices
were up 36.9% to $1,426 per metric ton in fiscal 2007 as
compared to $1,041 per metric ton in fiscal 2006), and increases
in other commodity costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year
|
|
|
For the Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
Favorable/(Unfavorable)
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
Total
|
|
|
Net Sales
|
|
|
Total
|
|
|
Net Sales
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation Americas
|
|
$
|
165,689
|
|
|
|
17.8
|
%
|
|
$
|
97,092
|
|
|
|
10.6
|
%
|
|
$
|
68,597
|
|
|
$
|
|
|
|
$
|
68,597
|
|
Europe & ROW
|
|
|
93,382
|
|
|
|
11.2
|
%
|
|
|
102,680
|
|
|
|
12.7
|
%
|
|
|
(9,298
|
)
|
|
|
4,658
|
|
|
|
(13,956
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259,071
|
|
|
|
14.7
|
%
|
|
|
199,772
|
|
|
|
11.6
|
%
|
|
|
59,299
|
|
|
|
4,658
|
|
|
|
54,641
|
|
Industrial Energy Americas
|
|
|
60,178
|
|
|
|
22.2
|
%
|
|
|
53,153
|
|
|
|
19.3
|
%
|
|
|
7,025
|
|
|
|
|
|
|
|
7,025
|
|
Europe & ROW
|
|
|
153,526
|
|
|
|
16.9
|
%
|
|
|
153,906
|
|
|
|
18.8
|
%
|
|
|
(380
|
)
|
|
|
7,279
|
|
|
|
(7,659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213,704
|
|
|
|
18.2
|
%
|
|
|
207,059
|
|
|
|
18.9
|
%
|
|
|
6,645
|
|
|
|
7,279
|
|
|
|
(634
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
472,775
|
|
|
|
16.1
|
%
|
|
$
|
406,831
|
|
|
|
14.4
|
%
|
|
$
|
65,944
|
|
|
$
|
11,937
|
|
|
$
|
54,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Americas gross profit was $165.7 million or
17.8% of net sales in fiscal 2007 versus $97.1 million or
10.6% of net sales in fiscal 2006. The increase in gross margin
is primarily due to higher pricing with a better mix of higher
margin products and ongoing productivity initiatives, and is
partially offset by lower volumes in original equipment and
aftermarket sales, in part, as a result of efforts to
rationalize unprofitable customers.
Transportation Europe and ROW gross profit was
$93.4 million or 11.2% of net sales in fiscal 2007 versus
$102.7 million or 12.7% of net sales in fiscal 2006.
Currency favorably impacted gross profit during fiscal 2007 by
approximately $4.7 million. The decrease in gross profit
before the favorable impact of currency exchange was primarily
due to lower sales volumes in the aftermarket channel, a shift
to non-branded lower, margin product and higher lead and other
costs, only partially recovered through pricing actions.
Industrial Energy Americas gross profit was $60.2 million
or 22.2% of net sales in fiscal 2007 versus $53.2 million
or 19.3% of net sales in fiscal 2006. The increase in gross
profit was primarily due to higher average selling prices,
improved customer mix, and cost reductions, partially offset by
lower sales volumes to the U.S. Navy for submarine
batteries and network power markets, particularly for wireless
telecommunications, and higher lead and other commodity costs.
Industrial Energy Europe and ROW gross profit was
$153.5 million or 16.9% of net sales in fiscal 2007 versus
$153.9 million or 18.8% of net sales in fiscal 2006.
Currency positively impacted Industrial Energy Europe and ROW
gross profit in fiscal 2007 by approximately $7.3 million.
Gross profit was negatively impacted by higher lead and other
commodity costs, not fully recovered by higher average selling
prices.
34
Expenses
Expenses were $567.7 million in fiscal 2007 versus
$556.9 million in fiscal 2006. Included in expenses are
restructuring charges of $24.5 million in fiscal 2007 and
$21.7 million in fiscal 2006. Excluding these items,
expenses were $543.2 million and $535.2 million in
fiscal 2007 and fiscal 2006, respectively. Stronger foreign
currencies unfavorably impacted expenses by approximately
$15.2 million in fiscal 2007. The change in expenses was
impacted by the following:
i. fiscal 2006 included a gain on revaluation of foreign
currency forward contract of $1.1 million;
ii. interest, net, increased $20.6 million principally
due to higher interest rates and higher debt levels;
iii. fiscal 2007 and fiscal 2006 expenses included currency
remeasurement gain of $11.6 million and a loss of
$11.3 million, respectively, included in Other (income)
expense, net;
iv. fiscal 2007 and fiscal 2006 expenses included a (gain)
loss on revaluation of warrants of $3.2 million and
($9.1) million, respectively, included in Other (income)
expense, net;
v. fiscal 2007 and fiscal 2006 expenses included a loss on
sale/impairment of fixed assets of $18.6 million and
$8 million, respectively, included in Other (income)
expense, net. The primary driver of the increase resulted from
an impairment charge to assets (land and building) held for sale
in France; and
vi. fiscal 2006 general and administrative expenses
included $23.8 million for settlement of the
U.S. Attorney matter, which was recorded on a discounted
basis as payments will occur over a five year period. See
Note 13 to the Consolidated Financial Statements for
further discussion of the U.S. Attorney matter.
Commencing in fiscal 2007, the Company determined it to be more
appropriate to allocate certain costs to its segments, which
were previously reflected in unallocated corporate costs. These
costs include the Companys global Information Technology
organization, its Shared Services expenses including country
related finance organizations in Europe and ROW, its country
Human Resource organizations, and certain of its legal costs
which can be directly attributed to a business segment. This
change in reporting was made to better align the Companys
cost structure with the business segment responsible for driving
the cost. Fiscal 2006 costs were not restated to conform to this
change. Therefore, the results between the fiscal years may not
be comparable. The impact of this change in allocation is
included in the discussion of each segments expenses
below. Certain other corporate costs, including interest
expense, are not allocated or charged to the business segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal
|
|
|
For the Fiscal
|
|
|
Favorable/(Unfavorable)
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
132,555
|
|
|
$
|
103,172
|
|
|
$
|
(29,383
|
)
|
|
$
|
|
|
|
$
|
(29,383
|
)
|
Europe & ROW
|
|
|
113,802
|
|
|
|
78,284
|
|
|
|
(35,518
|
)
|
|
|
(5,590
|
)
|
|
|
(29,928
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
246,357
|
|
|
|
181,456
|
|
|
|
(64,901
|
)
|
|
|
(5,590
|
)
|
|
|
(59,311
|
)
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
38,203
|
|
|
|
44,307
|
|
|
|
6,104
|
|
|
|
|
|
|
|
6,104
|
|
Europe & ROW
|
|
|
145,248
|
|
|
|
114,210
|
|
|
|
(31,038
|
)
|
|
|
(6,978
|
)
|
|
|
(24,060
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
183,451
|
|
|
|
158,517
|
|
|
|
(24,934
|
)
|
|
|
(6,978
|
)
|
|
|
(17,956
|
)
|
Unallocated corporate expenses
|
|
|
137,871
|
|
|
|
216,941
|
|
|
|
79,070
|
|
|
|
(2,661
|
)
|
|
|
81,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
567,679
|
|
|
$
|
556,914
|
|
|
$
|
(10,765
|
)
|
|
$
|
(15,229
|
)
|
|
$
|
4,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Americas expenses were $132.6 million in
fiscal 2007 versus $103.2 million in fiscal 2006. The
increase in expenses was due to the allocation of
$14.8 million of previously unallocated corporate
35
costs in fiscal 2007 that were not allocated in fiscal 2006,
together with $8.6 million of restructuring costs and a
$7.2 million impairment of fixed assets, both of which
related to the fiscal 2007 closure of the Shreveport, Louisiana
battery plant.
Transportation Europe and ROW expenses were $113.8 million
in fiscal 2007 versus $78.3 million in fiscal 2006.
Currency unfavorably impacted expenses in fiscal 2007 by
approximately $5.6 million. The increase in expenses was
primarily due to the allocation of $22.7 million of
previously unallocated corporate costs in fiscal 2007 that were
not allocated in fiscal 2006 and a $9.7 million fixed asset
impairment charge related to land and building held for sale in
France.
Industrial Energy Americas expenses were $38.2 million in
fiscal 2007 versus $44.3 million in fiscal 2006. The
decrease in expenses was primarily due to restructuring costs of
$10.1 million in fiscal 2006 associated with the closure of
the Kankakee, Illinois facility and reduced selling, marketing,
and advertising expenses in fiscal 2007 and was offset by the
allocation of $4.7 million of previously unallocated
corporate costs in fiscal 2007 that were not allocated in fiscal
2006.
Industrial Energy Europe and ROW expenses were
$145.2 million in fiscal 2007 versus $114.2 million in
fiscal 2006. Currency unfavorably impacted expenses in fiscal
2007 by approximately $7 million. The increase in expenses
was primarily due to the allocation of $20.4 million of
previously unallocated corporate costs in fiscal 2007 that were
not allocated in fiscal 2006, offset by restructuring costs that
were reduced by $1.1 million in fiscal 2007.
Unallocated expenses, net, which include shared service and
corporate expenses, interest expense, currency remeasurement
losses (gains), and gain on revaluation of warrants, were
$137.9 million in fiscal 2007 versus $216.9 million in
fiscal 2006. This decrease was primarily due to the allocation
of approximately $62.6 million of costs to the business
segments for fiscal 2007 that were not allocated for fiscal
2006, the fiscal 2006 U.S. Attorney settlement for
$23.8 million, and the favorable impact of the
Companys fiscal 2007 cost reduction programs, consisting
primarily of headcount reductions. Expenses for fiscal 2006
included a gain on revaluation of foreign currency forward
contracts of $1.1 million. Expenses for fiscal 2007 and
2006 included (gains) losses on revaluation of warrants of
$3.2 million and ($9.1) million, respectively.
Expenses for fiscal 2007 and 2006 also included currency
remeasurement (gain) loss of ($11.6) million and
$11.3 million, respectively. Currency unfavorably impacted
unallocated expenses in fiscal 2007 by approximately
$2.7 million. Corporate expenses in fiscal 2007 and 2006
were $59.2 million and $146.4 million, respectively.
The decrease was due primarily to the change in corporate
expense allocation discussed above and lower general and
administrative cost resulting from the Companys continued
restructuring efforts and fiscal 2006 included
$23.8 million for the settlement of the U.S. Attorney
matter. Interest expense, net was $90 million in fiscal
2007 versus $69.5 million in fiscal 2006. The increase is
principally due to higher outstanding debt and higher interest
rates under the Companys senior secured credit facility.
Income
(loss) before reorganization items, income taxes, and minority
interest
The components affecting income (loss) before reorganization
items, income taxes, and minority interest are discussed above.
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
For the Fiscal Year Ended
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
Favorable/
|
|
|
|
Total
|
|
|
Net Sales
|
|
|
Total
|
|
|
Net Sales
|
|
|
(Unfavorable)
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
33,134
|
|
|
|
3.6
|
%
|
|
$
|
(6,080
|
)
|
|
|
(0.7
|
)%
|
|
$
|
39,214
|
|
Europe & ROW
|
|
|
(20,420
|
)
|
|
|
(2.5
|
)%
|
|
|
24,396
|
|
|
|
3.0
|
%
|
|
|
(44,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,714
|
|
|
|
0.7
|
%
|
|
|
18,316
|
|
|
|
1.1
|
%
|
|
|
(5,602
|
)
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
21,975
|
|
|
|
8.1
|
%
|
|
|
8,846
|
|
|
|
3.2
|
%
|
|
|
13,129
|
|
Europe & ROW
|
|
|
8,278
|
|
|
|
0.9
|
%
|
|
|
39,696
|
|
|
|
4.8
|
%
|
|
|
(31,418
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,253
|
|
|
|
2.6
|
%
|
|
|
48,542
|
|
|
|
4.4
|
%
|
|
|
(18,289
|
)
|
Other
|
|
|
(137,871
|
)
|
|
|
n/a
|
|
|
|
(216,941
|
)
|
|
|
n/a
|
|
|
|
79,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
(94,904
|
)
|
|
|
(3.2
|
)%
|
|
$
|
(150,083
|
)
|
|
|
(5.3
|
)%
|
|
$
|
55,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization
Items
Reorganization items represent amounts the Company continues to
incur as a result of the Chapter 11 filing. Reorganization
items for fiscal 2007 and 2006 were $4.3 million and
$6.2 million, respectively. These items primarily include
professional fees, consisting primarily of legal services, and
costs associated with D&O insurance coverage for the
directors and officers of the Predecessor Company.
Income
Taxes
In fiscal 2007, an income tax provision of $5.8 million was
recorded on pre-tax loss of $99.2 million. In fiscal 2006,
an income tax provision of $16 million was recorded on
pre-tax loss of $156.2 million. The effective tax rate was
(5.8%) and (10.2%) in fiscal 2007 and 2006, respectively. The
effective tax rate for fiscal 2007 and 2006 was impacted by the
generation of income in tax-paying jurisdictions, principally in
New Zealand, Canada and certain countries in Europe, with
limited or no offset on a consolidated basis as a result of
recognition of valuation allowances on tax benefits generated
from current period losses in the U.S., United Kingdom, Italy,
Spain, and France. The effective tax rate for fiscal 2007 was
impacted by the recognition of $46.5 million of valuation
allowances on current year tax benefits generated primarily in
the U.S., United Kingdom, France, Spain, and Italy. In addition,
the effective tax rate for fiscal 2007 was impacted by a
settlement between Exides Dutch subsidiary and Dutch tax
authorities, reducing by $3.8 million previously paid taxes
to the Netherlands. The effective tax rate for fiscal 2006 was
impacted by the recognition of $78.3 million of valuation
allowances on tax benefits generated primarily in the U.S.,
United Kingdom, France, Spain, and Italy. The effective tax rate
for fiscal 2006 was also impacted by the recognition of
$5.9 million in valuation allowances on tax benefits
generated from prior year losses and certain deductible
temporary differences in Spain based on the Companys
assessment that it is more likely than not that the related tax
benefits will now not be realized.
Fiscal
Year Ended March 31, 2006 compared with Fiscal Year Ended
March 31, 2005
Overview
Net loss for fiscal 2006 was $172.7 million versus fiscal
2005 net income of $1.3 billion. Included in fiscal
2006 consolidated net income were reorganization items of
$6.2 million, restructuring costs of $21.7 million,
and a charge of $23.8 million related to the resolution of
a U.S. Attorney matter. In addition, in Other (income)
expense net currency remeasurement losses of
($11.3) million and ($3.7) million, primarily related
to U.S. dollar denominated debt in Europe, were recognized
in fiscal 2006 and 2005, respectively. A gain (loss) on
revaluation of a foreign currency forward contract of
$1.1 million and ($13.2) million was recognized in
fiscal 2006 and 2005, respectively. Gains on revaluation of
warrants of $9.1 million and
37
$63.1 million were recognized in fiscal 2006 and 2005,
respectively. Included in fiscal 2005 consolidated net income
were a gain on discharge of liabilities subject to compromise of
$1.6 billion, a gain on Fresh Start reporting adjustments
of $228.4 million, and a non cash charge of
$388.5 million for goodwill impairment.
Net
Sales
Net sales were $2.8 billion for fiscal 2006 versus
$2.7 billion in fiscal 2005. Currency fluctuations
(primarily the weakening of the Euro against the
U.S. dollar) negatively impacted net sales in fiscal 2006
by approximately $53.2 million. Excluding the currency
impact, net sales increased by approximately $182.2 million
or 7% as a result of higher volumes, particularly in the
Americas, and higher average selling prices due to lead and
other related pricing actions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal
|
|
|
For the Fiscal
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Favorable/(Unfavorable)
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
2006
|
|
|
2005
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
913,317
|
|
|
$
|
847,571
|
|
|
$
|
65,746
|
|
|
$
|
|
|
|
$
|
65,746
|
|
Europe & ROW
|
|
|
810,894
|
|
|
|
823,165
|
|
|
|
(12,271
|
)
|
|
|
(27,721
|
)
|
|
|
15,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,724,211
|
|
|
|
1,670,736
|
|
|
|
53,475
|
|
|
|
(27,721
|
)
|
|
|
81,196
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
274,976
|
|
|
|
223,008
|
|
|
|
51,968
|
|
|
|
|
|
|
|
51,968
|
|
Europe & ROW
|
|
|
820,689
|
|
|
|
797,122
|
|
|
|
23,567
|
|
|
|
(25,511
|
)
|
|
|
49,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,095,665
|
|
|
|
1,020,130
|
|
|
|
75,535
|
|
|
|
(25,511
|
)
|
|
|
101,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
2,819,876
|
|
|
$
|
2,690,866
|
|
|
$
|
129,010
|
|
|
$
|
(53,232
|
)
|
|
$
|
182,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Americas net sales were $913.3 million for
fiscal 2006 versus $847.6 million for fiscal 2005. Third
party lead sales revenues for fiscal 2006 were approximately
$8.6 million higher than fiscal 2005 due to rising lead
prices. Net sales for fiscal 2006 were $65.7 million or
7.8% higher than fiscal 2005 due mainly to an increase in
aftermarket volumes in the U.S. and Mexico. The Company
also achieved higher average selling prices which, in part,
reflected the pass-through of cost increases from lead, other
materials, and energy. Price increases, however, have lagged
rising costs, resulting in an overall net reduction in margins.
Transportation Europe and ROW net sales were $810.9 million
for fiscal 2006 versus $823.2 million for fiscal 2005. Net
sales, before the unfavorable impact of $27.7 million in
net foreign exchange rate fluctuations, were higher by 1.8%
mainly due to higher OEM and OES sales. This increase was,
however, substantially offset by lower aftermarket sales.
Industrial Energy Americas net sales were $275 million for
fiscal 2006 versus $223 million for fiscal 2005. Net sales
were $52 million, or 23.3% higher due to strong volume
growth in both the motive power and network power markets,
particularly in the telecommunications market, and higher
average selling prices related to lead and other pricing actions.
Industrial Energy Europe and ROW net sales were
$820.7 million for fiscal 2006 versus $797.1 million
for fiscal 2005. Net sales, before an unfavorable currency
impact of $25.5 million, increased $49.1 million or
6.2% due to higher volumes in the material handling application
and telecommunication channels, as well as higher average
selling prices related to lead and other pricing actions. This
favorability was, however, partially offset by competitive
pricing pressures in both the original equipment and aftermarket
channels.
Gross
Profit
Gross profit was $406.8 million in fiscal 2006 versus $413
in fiscal 2005. Gross margin decreased to 14.4% in fiscal 2006
from 15.3% in fiscal 2005. Currency negatively impacted gross
profit in fiscal 2006 by approximately $8.4 million. Gross
profit in each of the Companys business segments was
negatively impacted
38
by higher lead costs (average LME prices were $1,041 dollars per
metric ton in fiscal 2006 versus $920 dollars per metric ton in
fiscal 2005), and were only partially recovered by higher
average selling prices.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
For the Fiscal Year Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006
|
|
|
March 31, 2005
|
|
|
Favorable/(Unfavorable)
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
Total
|
|
|
Net Sales
|
|
|
Total
|
|
|
Net Sales
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
97,092
|
|
|
|
10.6
|
%
|
|
$
|
112,091
|
|
|
|
13.2
|
%
|
|
$
|
(14,999
|
)
|
|
$
|
|
|
|
$
|
(14,999
|
)
|
Europe & ROW
|
|
|
102,680
|
|
|
|
12.7
|
%
|
|
|
114,495
|
|
|
|
13.9
|
%
|
|
|
(11,815
|
)
|
|
|
(3,683
|
)
|
|
|
(8,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
199,772
|
|
|
|
11.6
|
%
|
|
|
226,586
|
|
|
|
13.6
|
%
|
|
|
(26,814
|
)
|
|
|
(3,683
|
)
|
|
|
(23,131
|
)
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
53,153
|
|
|
|
19.3
|
%
|
|
|
49,039
|
|
|
|
22.0
|
%
|
|
|
4,114
|
|
|
|
|
|
|
|
4,114
|
|
Europe & ROW
|
|
|
153,906
|
|
|
|
18.8
|
%
|
|
|
137,347
|
|
|
|
17.2
|
%
|
|
|
16,559
|
|
|
|
(4,726
|
)
|
|
|
21,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,059
|
|
|
|
18.9
|
%
|
|
|
186,386
|
|
|
|
18.3
|
%
|
|
|
20,673
|
|
|
|
(4,726
|
)
|
|
|
25,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
406,831
|
|
|
|
14.4
|
%
|
|
$
|
412,972
|
|
|
|
15.3
|
%
|
|
$
|
(6,141
|
)
|
|
$
|
(8,409
|
)
|
|
$
|
2,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Americas gross profit was $97.1 million or
10.6% of net sales in fiscal 2006 versus $112.1 million or
13.2% of net sales in fiscal 2005. The decrease in gross margin
is primarily due to increases in costs for lead, other
materials, and energy. The Companys U.S. battery
recycling plants were adversely affected by a tight market for
spent batteries as well as increases in the cost of ancillary
materials used in the lead conversion process. The effect of
higher lead, other materials and energy costs was only partially
recovered by higher average selling prices. Additionally, a
favorable change in the allocation of lead costs between
Transportation Americas and Industrial Energy Americas partially
offset the negative impact of the lead increases to the segment
by approximately $6.3 million.
Transportation Europe and ROW gross profit was
$102.7 million or 12.7% of net sales in fiscal 2006 versus
$114.5 million or 13.9% of net sales in fiscal 2005.
Currency negatively impacted gross profit during fiscal 2006 by
approximately $3.7 million. The decrease in gross margin
was primarily due to lower sales volumes in the Aftermarket
channel combined with higher raw material costs, and was
partially offset by recoveries through pricing actions.
Additionally, benefits of increased efficiencies resulting from
the plant closure in Nanterre, France in fiscal 2005 and other
rationalization projects helped to mitigate the decrease in
gross margins versus fiscal 2005.
Industrial Energy Americas gross profit was $53.2 million
or 19.3% of net sales in fiscal 2006 versus $49 million, or
22% of net sales in fiscal 2005. The increase in gross profit
was primarily due to higher sales volumes, and was partially
offset by higher lead costs and other commodity costs not fully
recovered through price increases and an unfavorable change of
approximately $6.3 million in the allocation of lead costs
between Transportation Americas and Industrial Energy Americas.
Industrial Energy Europe and ROW gross profit was
$153.9 million or 18.8% of net sales in fiscal 2006 versus
$137.3 million or 17.2% of net sales in fiscal 2005.
Currency negatively impacted Industrial Energy Europe and ROW
gross profit in fiscal 2006 by approximately $4.7 million.
Gross profit was positively impacted by higher sales volume,
higher average selling prices, and the benefits of headcount and
other cost reduction programs, partially offset by higher lead
and other commodity costs.
Expenses
Expenses were $556.9 million in fiscal 2006 versus
$876.8 million in fiscal 2005. Included in expenses are
restructuring charges of $21.7 million in fiscal 2006 and
$43.1 million in fiscal 2005. Also included in fiscal 2005
expenses is a charge for goodwill impairment of
$388.5 million. Excluding these items, expenses were
$535.2 million and $445.2 million in fiscal 2006 and
fiscal 2005, respectively. Weaker foreign currencies
39
favorably impacted expenses by approximately $8 million in
fiscal 2006. The change in expenses was attributable to the
following matters:
i. fiscal 2006 and fiscal 2005 included a gain (loss) on
revaluation of foreign currency forward contract of
$1.1 million and ($13.2), respectively;
ii. interest, net increased $18 million principally
due to higher interest rates and higher debt levels;
iii. fiscal 2006 and fiscal 2005 expenses included currency
remeasurement losses of $11.3 million and
$3.7 million, respectively, included in Other (income)
expense, net;
iv. fiscal 2006 and fiscal 2005 expenses included a gain on
revaluation of warrants of $9.1 million and
$63.1 million, included in Other (income) expense, net;
v. fiscal 2006 and fiscal 2005 expenses included a loss on
sale of assets of $8 million and $7.6 million,
included in other (income) expense, net; and
vi. fiscal 2006 expenses included $23.8 million for
settlement of a U.S. Attorney matter, which was recorded on
a discounted basis as payments will occur over a five year
period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal
|
|
|
For the Fiscal
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
Favorable/(Unfavorable)
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
2006
|
|
|
2005
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
103,172
|
|
|
$
|
216,863
|
|
|
$
|
113,691
|
|
|
$
|
|
|
|
$
|
113,691
|
|
Europe & ROW
|
|
|
78,284
|
|
|
|
219,987
|
|
|
|
141,703
|
|
|
|
2,001
|
|
|
|
139,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181,456
|
|
|
|
436,850
|
|
|
|
255,394
|
|
|
|
2,001
|
|
|
|
253,393
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
44,307
|
|
|
|
68,494
|
|
|
|
24,187
|
|
|
|
|
|
|
|
24,187
|
|
Europe & ROW
|
|
|
114,210
|
|
|
|
233,127
|
|
|
|
118,917
|
|
|
|
3,423
|
|
|
|
115,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158,517
|
|
|
|
301,621
|
|
|
|
143,104
|
|
|
|
3,423
|
|
|
|
139,681
|
|
Unallocated corporate expenses
|
|
|
216,941
|
|
|
|
138,364
|
|
|
|
(78,577
|
)
|
|
|
2,616
|
|
|
|
(81,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
556,914
|
|
|
$
|
876,835
|
|
|
$
|
319,921
|
|
|
$
|
8,040
|
|
|
$
|
311,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Americas expenses were $103.2 million in
fiscal 2006 versus $216.9 million in fiscal 2005. Expenses
in fiscal 2005 were $94.8 million before a goodwill
impairment charge of $122.1 million. The increase in
expenses before goodwill impairment was due mainly to higher
branch operating costs, including diesel fuel.
Transportation Europe and ROW expenses were $78.3 million
in fiscal 2006 versus $220 million in fiscal 2005. Currency
fluctuations favorably impacted expenses in fiscal 2006 by
approximately $2 million. Expenses in fiscal 2005 were
$107.7 million before a goodwill impairment charge of
$112.2 million. The decrease in expenses before goodwill
impairment was primarily due to lower selling and marketing
costs, lower headcount, and a general reduction in other
administrative expenses.
Industrial Energy Americas expenses were $44.3 million in
fiscal 2006 versus $68.5 million in fiscal 2005. Expenses
in fiscal 2005 were $31.1 million before a goodwill
impairment charge of $37.4 million. The increase in
expenses before goodwill impairment was primarily due to
restructuring costs of $10.1 million associated with the
closure of the Kankakee, Illinois facility and increased
variable selling costs resulting from a significant increase in
net sales.
Industrial Energy Europe and ROW expenses were
$114.2 million in fiscal 2006 versus $233.1 million in
fiscal 2005. Currency favorably impacted expenses in fiscal 2006
by approximately $3.4 million. Expenses in fiscal 2005 were
$116.3 million before a goodwill impairment charge of
$116.8 million. The decrease in expenses before goodwill
impairment was primarily due to lower selling, marketing,
advertising, general and
40
administrative expenses achieved through targeted cost reduction
programs, partially offset by higher restructuring costs.
Unallocated expenses, net, which include shared service and
corporate expenses, interest expense, currency remeasurement
losses (gains), and gain on revaluation of warrants, were
$216.9 million in fiscal 2006 versus $138.4 million in
fiscal 2005. Expenses for fiscal 2006 and 2005 included a gain
(loss) on revaluation of foreign currency forward contracts of
$1.1 million and ($13.2) million, respectively.
Expenses for fiscal 2006 and 2005 expenses included gains on
revaluation of warrants of $9.1 million and
$63.1 million, respectively. Expenses for fiscal 2006 and
2005 included currency remeasurement losses of
$11.3 million and $3.7 million, respectively. Currency
favorably impacted unallocated expenses in fiscal 2006 by
approximately $2.6 million. Corporate expenses in fiscal
2006 and 2005 were $146.4 million and $133.1 million,
respectively. The increase was primarily due to
$23.8 million for the U.S. Attorney matter recorded in
fiscal 2006, and was partially offset by lower general and
administrative cost resulting from the Companys continued
restructuring efforts. Interest expense, net, was
$69.5 million in fiscal 2006 versus $51.5 million in
fiscal 2005. The increase is principally due to higher
outstanding debt and higher interest rates under the
Companys senior secured credit facility.
Income
(loss) before reorganization items, income taxes, and minority
interest
The components affecting Income (loss) before reorganization
items, income taxes, and minority interest are as discussed
above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
|
|
|
For the Fiscal Year Ended March 31, 2006
|
|
|
March 31, 2005
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
Favorable/
|
|
|
|
Total
|
|
|
Net Sales
|
|
|
Total
|
|
|
Net Sales
|
|
|
(Unfavorable)
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
(6,080
|
)
|
|
|
(0.7
|
)%
|
|
$
|
(104,772
|
)
|
|
|
(12.4
|
)%
|
|
$
|
98,692
|
|
Europe & ROW
|
|
|
24,396
|
|
|
|
3.0
|
%
|
|
|
(105,492
|
)
|
|
|
(12.8
|
)%
|
|
|
129,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,316
|
|
|
|
1.1
|
%
|
|
|
(210,264
|
)
|
|
|
(12.6
|
)%
|
|
|
228,580
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
8,846
|
|
|
|
3.2
|
%
|
|
|
(19,455
|
)
|
|
|
(8.7
|
)%
|
|
|
28,301
|
|
Europe & ROW
|
|
|
39,696
|
|
|
|
4.8
|
%
|
|
|
(95,780
|
)
|
|
|
(12.0
|
)%
|
|
|
135,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,542
|
|
|
|
4.4
|
%
|
|
|
(115,235
|
)
|
|
|
(11.3
|
)%
|
|
|
163,777
|
|
Other
|
|
|
(216,941
|
)
|
|
|
n/a
|
|
|
|
(138,364
|
)
|
|
|
n/a
|
|
|
|
(78,577
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
(150,083
|
)
|
|
|
(5.3
|
)%
|
|
$
|
(463,863
|
)
|
|
|
(17.2
|
)%
|
|
$
|
313,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reorganization
Items
Reorganization items represent amounts the Company incurred as a
result of the Chapter 11 filing. Reorganization items for
fiscal 2006 and 2005 were $6.2 million and
$30 million, respectively.
Gain on
discharge of liabilities subject to compromise
For fiscal 2005, the Company recognized a $1.6 billion gain
on discharge of liabilities subject to compromise and
recapitalization as a result of transactions contemplated by the
Plan.
Fresh
Start reporting adjustments
For fiscal year 2005 as a result of the Companys adoption
of Fresh Start reporting, upon consummation of the Plan on the
Effective Date, the Company recorded certain adjustments to
assets and liabilities to reflect their fair values. The Fresh
Start adjustments resulted in a gain of $228.4 million.
41
Income
Taxes
In fiscal 2006, an income tax provision of $16 million was
recorded on pre-tax income (loss) of ($156.2) million. In
fiscal 2005, an income tax provision of $11.7 million was
recorded on pre-tax income (loss) of $1.3 billion. The
effective tax rate was 10.2% and 0.9% in fiscal 2006 and 2005,
respectively. The effective tax rate for fiscal 2006 and 2005
was impacted by the generation of income in tax-paying
jurisdictions, principally certain countries in Europe,
Australia and Canada, with limited or no offset on a
consolidated basis as a result of recognition of valuation
allowances on tax benefits generated from current period losses
in the U.S., the United Kingdom and France. The effective tax
rate for fiscal 2006 was impacted by the recognition of
$78.3 million of valuation allowances on current year tax
benefits generated primarily in the U.S., United Kingdom,
France, and Italy. The effective tax rate for fiscal 2006 was
also impacted by the recognition of $5.9 million in
valuation allowances on tax benefits generated from prior year
losses and certain deductible temporary differences in Spain
based on the Companys assessment that it is more likely
than not that the related tax benefits will now not be realized.
The effective tax rate for fiscal 2005 was impacted by the gain
on discharge of liabilities subject to compromise of
$1.6 billion, which is exempt from tax in the U.S., the
non-taxable gain on Fresh Start reporting adjustments of
$228.4 million and the non-deductibility of the
$388.5 million goodwill impairment charge. The effective
tax rate in fiscal 2005 was also impacted by the recognition of
$41.4 million primarily in valuation allowances on tax
benefits generated from prior year losses and certain deductible
temporary differences in France and Italy based on the
Companys assessment that it is more likely than not that
the related tax benefits will now not be realized.
Liquidity
and Capital Resources
As of March 31, 2007, the Company had total liquidity of
$145.9 million consisting of cash and cash equivalents of
$76.2 million and availability under the Companys
revolving loan facility and other loan facilities of
$59.3 million and $10.4 million, respectively. This
compared to total liquidity position of $63.6 million at
March 31, 2006 consisting of cash and cash equivalents of
$32.2 million and availability under the Revolving Loan
Facility and other loan facilities of $29.7 million and
$1.7 million, respectively. On June 8, 2007, total
liquidity was approximately $171.5 million, consisting of
availability under the Companys new revolving term loan
facility of $135.9 million and an estimated
$35.6 million in cash and cash equivalents. It should be
noted that cash and cash equivalents fluctuate substantially on
a daily basis due in part to the timing of account receivable
collections, and mid-period balances are subject to the monthly
reconciliation process of the Companys numerous global
accounts.
Prior to May 15, 2007, the Company operated under a
$600 million senior secured credit agreement entered into
in May 2004, which included a $500 million Multi-Currency
Term Loan Facility and a $100 million Multi-Currency
Revolving Loan Facility including a letter of credit
sub-facility of up to $40 million.
On May 15, 2007, the Company entered into a new five-year
$495 million senior secured credit facility that replaced
the $600 million senior secured credit facility entered
into in May 2004. The new senior secured credit facility
consists of a $295 million term loan and a
$200 million asset-based revolving loan and matures in May
2012. Proceeds from the new senior secured credit facility were
used to repay amounts outstanding under the prior senior secured
credit facility. The new senior secured credit facility provides
increased liquidity and greater flexibility, contains no
financial maintenance covenants and is the Companys most
important source of liquidity outside of its cash flows from
operations.
Borrowings under the term loan in U.S. dollars bear
interest at a rate equal to LIBOR plus 3.25%, and borrowings
under the term loan in Euros bear interest at a rate equal to
LIBOR plus 3.50%; provided that such rates may decrease by 0.25%
after December 31, 2007 if the Company achieves certain
corporate ratings.
Borrowings under the revolving loan bear interest at a rate
equal to LIBOR plus 1.75%. The applicable spread on the
revolving loan is subject to change and may move up or down in
accordance with a leverage-based pricing grid. The revolving
loan includes a letter of credit sub-facility of
$75 million and an accordion feature that allows the
Company to increase the facility size up to $250 million if
it can obtain commitments from existing or new lenders for the
incremental amount. Availability under the revolving loan is
subject to a
42
borrowing base comprised of up to 85% of the Companys and
certain of its subsidiaries combined eligible accounts
receivable plus 85% of the net orderly liquidation value of
eligible North American inventory less, in each case, certain
limitations and reserves.
Borrowings of the Company and other domestic borrowers are
guaranteed by substantially all domestic subsidiaries of the
Company, and borrowings of Exide C.V. are guaranteed by the
Company, substantially all domestic subsidiaries of the Company
and certain foreign subsidiaries. These guarantee obligations
are secured by a lien on substantially all of the assets of such
respective borrowers and guarantors.
The senior secured credit facility contains customary terms and
conditions, including, without limitation, limitations on debt
(including a leverage or coverage based incurrence test),
limitations on mergers and acquisitions, limitations on
restricted payments, limitations on investments, limitations on
capital expenditures, limitations on asset sales with limited
exceptions, limitations on liens and limitations on transactions
with affiliates. A springing fixed charge financial covenant of
1.0:1.0 will be applicable to the revolving loan if the excess
availability under the revolving loan falls below
$40 million.
On September 18, 2006, the Company completed a
$75 million rights offering that it launched in August 2006
which allowed stockholders to purchase additional shares of
common stock. The Company distributed, at no charge to its
holders of common stock, non-transferable subscription rights to
purchase additional shares of the Companys common stock.
On September 18, 2006, the Company also completed a private
sale of $50 million of common stock. The Company generated
approximately $117.7 million from the rights offering and
sale of additional equity shares after deducting offering
expenses. For a complete discussion of the rights offering, see
Note 18 to the Consolidated Financial Statements.
In March 2005, the Company issued $290 million in aggregate
principal amount of 10.5% Senior Secured Notes due 2013.
Interest of $15.2 million is payable semi-annually on March
15 and September 15. The 10.5% Senior Secured Notes
are redeemable at the option of the Company, in whole or in
part, on or after March 15, 2009, initially at 105.25% of
the principal amount, plus accrued interest, declining to 100%
of the principal amount, plus accrued interest on or after
March 15, 2011. The 10.5% Senior Secured Notes are
redeemable at the option of the Company, in whole or in part,
subject to payment of a make whole premium, at any time prior to
March 15, 2009. In addition, until May 15, 2008, up to
35% of the 10.5% Senior Secured Notes are redeemable at the
option of the Company, using the net proceeds of one or more
qualified equity offerings. In the event of a change of control
or the sale of certain assets, the Company may be required to
offer to purchase the 10.5% Senior Secured Notes from the
note holders. Those notes are secured by a junior priority lien
on the assets of the U.S. parent company, including the
stock of its subsidiaries. The Indenture for these notes
contains financial covenants which limit the ability of the
Company and its subsidiaries to among other things incur debt,
grant liens, pay dividends, invest in non-subsidiaries, engage
in related party transactions and sell assets. Under the
Indenture, proceeds from asset sales (to the extent in excess of
a $5 million threshold) must be applied to offer to
repurchase notes to the extent such proceeds exceed
$20 million in the aggregate and are not applied within
365 days to retire senior secured credit agreement
borrowings or the Companys pension contribution
obligations that are secured by a first priority lien on the
Companys assets or to make investments or capital
expenditures.
Also, in March 2005, the Company issued Floating Rate
Convertible Senior Subordinated Notes due September 18,
2013, with an aggregate principal amount of $60 million.
These notes bear interest at a per annum rate equal to the
3-month
LIBOR, adjusted quarterly, minus a spread of 1.5%. The interest
rate at March 31, 2007 and 2006 was 3.9% and 3.4%,
respectively. Interest is payable quarterly. The notes are
convertible into the Companys common stock at a conversion
rate of 57.5705 shares per one thousand dollars principal
amount at maturity, subject to adjustments for any common stock
splits, dividends on the common stock, tender and exchange
offers by the Company for the common stock and third party
tender offers, and in the case of a change in control in which
10% or more of the consideration for the common stock is cash or
non-traded securities, the conversion rate increases, depending
on the value offered and timing of the transaction, to as much
as 70.2247 shares per one thousand dollars principal amount.
At March 31, 2007, the Company had outstanding letters of
credit with a face value of $40.7 million and surety bonds
with a face value of $4.5 million. The majority of the
letters of credit and surety bonds have
43
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 surety in the form of letters of credit
at March 31, 2007, pursuant to the terms of the agreement,
was $4.5 million.
At March 31, 2007, the Company was in compliance in all
material respects with covenants contained in the senior secured
credit agreement and indenture agreements that cover the Senior
Secured Notes and Floating Rate Convertible Senior Subordinated
Notes.
Risks and uncertainties could cause the Companys
performance to differ from managements estimates. As
discussed above under Factors Which Affect the
Companys Financial Performance Seasonality and
Weather, the Companys business is seasonal. During
the Companys first and second fiscal quarters, the Company
builds inventory in anticipation of increased sales in the
winter months. This inventory build increases the Companys
working capital needs. During these quarters, because working
capital needs are already high, unexpected costs or increases in
costs beyond predicted levels would place a strain on the
Companys liquidity and impact its ability to comply with
its financial covenants.
Sources
Of Cash
The Companys liquidity requirements have been met
historically through cash provided by operations, borrowed funds
and the proceeds of sales of accounts receivable. Additional
cash has been generated in recent years from the sale of
non-core businesses and assets.
The improvement in cash flow from operations is the result of a
reduction in net loss of approximately $66.9 million,
improved working capital management in the face of higher lead
costs, partially offset by higher pension and other contractual
payments.
The Company generated $4.5 million and $25.3 million
in cash from the sale of non-core assets in fiscal 2007 and
fiscal 2006, respectively. These sales principally relate to the
sale of surplus land and buildings.
Cash flows provided by financing activities were
$87.6 million and $34.6 million in fiscal 2007 and
fiscal 2006, respectively. Cash flows provided by financing
activities in fiscal 2007 relate primarily to net proceeds of
$117.7 million from the $75 million rights offering and
$50 million private equity sale, partially offset by debt
repayments.
Total debt at March 31, 2007 was $684.5 million, as
compared to $701 million at March 31, 2006. See
Note 9 to the Consolidated Financial Statements for the
composition of such debt.
Going forward, the Companys principal sources of liquidity
will be cash from operations, its new senior secured credit
facility, proceeds from sales of accounts receivable, and
proceeds from non-core asset sales. The new senior secured
credit agreement allows the Company to retain the first
$60 million from proceeds from sale of non-core assets.
Uses
Of Cash
The Companys liquidity needs arise primarily from the
funding of working capital needs, obligations on indebtedness
and capital expenditures. Because of the seasonality of the
Companys business, more cash has been typically generated
in the third and fourth fiscal quarters than the first and
second fiscal quarters. Greatest cash demands from operations
have historically occurred during the months of June through
October.
The Company anticipates that it will have ongoing liquidity
needs to support its operational restructuring programs during
fiscal 2008, including payment of remaining accrued
restructuring costs of approximately $5.7 million as of
March 31, 2007. The Companys ability to successfully
implement these restructuring strategies on a timely basis may
be impacted by its access to sources of liquidity. For further
discussion see Note 14 to the Consolidated Financial
Statements.
44
Capital expenditures were $51.9 million and
$58.1 million in fiscal 2007 and fiscal 2006, respectively.
Employee
Benefit Plans
Description
On September 29, 2006, the FASB issued
SFAS No. 158, which requires recognition of the
overfunded or underfunded status of pension and other
postretirement benefit plans on the balance sheet. Under
SFAS 158, gains and losses, prior service costs and
credits, and any remaining transition amounts under FASB
Statement No. 87, Employers Accounting for
Pensions (SFAS 87) and FASB Statement
No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions (SFAS 106)
that have not yet been recognized through net periodic benefit
costs will be recognized in accumulated other comprehensive
income (loss), net of tax effects, until they are amortized as a
component of net periodic cost. SFAS 158 does not change
how pensions and other postretirement benefits are accounted for
and reported in the income statement. Companies will continue to
follow the existing guidance in SFAS 87, FASB
Statement No. 88, Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits and SFAS 106.
SFAS 158 was effective for fiscal years ending after
December 15, 2006. The company adopted the balance sheet
recognition provisions of SFAS 158 at March 31, 2007.
SFAS 158 also requires that employers measure the benefit
obligation and plan assets as of the fiscal year end for fiscal
years ending after December 15, 2008. The company currently
uses a December 31 measurement date for its U.S. pension
and other postretirement benefit plans and a March 31
measurement date for its
non-U.S. plans.
The company intends to eliminate the early measurement date for
its U.S. plans in fiscal 2009.
The Company also has some defined contribution plans in North
America, Europe and ROW with related expense of
$6.8 million, $7 million, $5.3 million, and
$0.5 million, for fiscal 2007 and 2006, the period
May 6, 2004 to March 31, 2005, and the period
April 1, 2004 to May 5, 2005, respectively.
The Company provides certain health care and life insurance
benefits for a limited number of retirees. The Company accrues
the estimated cost of providing post-retirement benefits during
the employees applicable years of service.
Assets funded under both the North American and European defined
benefit plans consist primarily of equity and fixed income
securities. At March 31, 2007, the fair market value of
assets for the Companys defined benefit plans was
$408.9 million compared to $326.5 million at
March 31, 2006.
Accounting
And Significant Assumptions
The Company accounts for pension benefits using the accrual
method set forth in SFAS 87. The accrual method of
accounting for pensions involves the use of actuarial
assumptions concerning future events that impact estimates of
the amount and timing of benefit obligations and future benefit
payments.
Significant assumptions used in calculating the Companys
pension benefit obligations and related expense are the discount
rate, rate of compensation increase, and the expected long-term
rate of return on plan assets. The Company establishes these
underlying assumptions in consultation with its actuaries.
Depending on the assumptions used, pension obligations and
related expense could vary within a range of outcomes and have a
material effect on the Companys results, benefit
obligations, and cash funding requirements.
The discount rates used by the Company for determining benefit
obligations are generally based on high quality corporate bonds
and reflect the cash flows of the respective plans. The assumed
rates of compensation increases reflect estimates of the
projected change in compensation levels based on future
expectations, general price levels, productivity and historical
experience, among other factors. In evaluating the expected long
term rate of return on plan assets, the Company considers the
allocation of assets and the expected return on various asset
classes in the context of the long-term nature of pension
obligations.
At March 31, 2007, the Company had slightly increased the
discount rates used to value its pension benefit obligations to
reflect the increase in yields on high quality corporate bonds,
and increased the rate of compensation increases to reflect
current inflationary expectations. The aggregate effect of these
changes
45
decreased the present value of projected benefit obligations as
of March 31, 2007 and had the effect of decreasing pension
expense in fiscal 2008. In addition, the plan freeze in the
U.S. which ceased pension accruals for more than half the
year reduced the pension expense for fiscal 2007 by
$3.8 million. Pension expense for the Companys
defined benefit pension and other post-retirement benefit plans
was $18.7 million in fiscal 2007 compared to
$23.9 million in fiscal 2006.
A one-percentage point change in the weighted average expected
return on plan assets for defined benefit plans would change net
periodic benefit cost by approximately $3.6 million in
fiscal 2007. A one-percentage point increase in the weighted
average discount rate would decrease net periodic benefit cost
for defined benefit plans by approximately $2.8 million in
fiscal 2007. A one-percentage point decrease in the weighted
average discount rate would increase net periodic benefit cost
for defined benefit plans by approximately $5.5 million in
fiscal 2007.
As of March 31, 2007, actuarial gains for the
Companys defined benefit pension and other post-retirement
benefit plans were $12.8 million, compared to losses of
$17.2 million at March 31, 2006. The actuarial gains
during the fiscal year ended March 31, 2007 principally
reflect increases in discount rates in the UK and the
U.S. in 2007. SFAS 87 provides for delayed recognition
of such actuarial gains/losses, whereby these gains/losses, to
the extent they exceed 10% of the greater of the projected
benefit obligation or the market related value of plan assets
are amortized as a component of pension expense over a period
that approximates the average remaining service period of active
employees.
Plan
Funding Requirements
Cash contributions to the Companys pension plans are
generally made in accordance with minimum regulatory
requirements. The Companys U.S. plans are currently
significantly under-funded. Based on current assumptions and
regulatory requirements including the Pension Protection Act of
2006, which requires full funding of underfunded defined benefit
plans in the U.S. over a specific period, the
Companys minimum future cash contribution requirements for
its U.S. plans are expected to remain relatively high for
the next few fiscal years. On November 17, 2004, the
Company received written notification of a tentative
determination from the Internal Revenue Service
(IRS) granting a temporary waiver of its minimum
funding requirements for its U.S. plans for calendar years
2003 and 2004, amounting to approximately $50 million net,
under Section 412(d) of the Internal Revenue Code, subject
to providing a lien satisfactory to the Pension Benefit Guaranty
Corporation (PBGC). On June 10, 2005, the
Company reached agreement with the PBGC on a second priority
lien on domestic personal property, including stock of its
U.S. and direct foreign subsidiaries to secure the unfunded
liability. The temporary waiver provides for deferral of the
Companys minimum contributions for those years to be paid
over a subsequent five-year period through 2010. At
March 31, 2007 such temporarily waived amounts aggregated
approximately $29.4 million.
Based upon the temporary waiver and sensitivity to varying
economic scenarios, the Company expects its cumulative minimum
future cash contributions to its U.S. pension plans will
total approximately $70 million to $125 million from
fiscal 2008 to fiscal 2012, including $35 million in fiscal
2008.
The Company expects that cumulative contributions to its non
U.S. pension plans will total approximately
$93.2 million from fiscal 2008 to fiscal 2012, including
$18.1 million in fiscal 2008. In addition, the Company
expects that cumulative contributions to its other
post-retirement benefit plans will total approximately
$13 million from fiscal 2008 to fiscal 2012, including
$2.5 million in fiscal 2008.
Financial
Instruments and Market Risk
From time to time, the Company has used forward contracts to
economically hedge certain commodity exposures, including lead.
The forward contracts are entered into for periods consistent
with related underlying exposures and do not constitute
positions independent of those exposures. The Company expects
that it may increase the use of financial instruments, including
fixed and variable rate debt as well as swaps, forward and
option contracts to finance its operations and to hedge interest
rate, currency and certain lead purchasing requirements in the
future. The swap, forward, and option contracts would be entered
into for periods consistent with related underlying exposures
and would not constitute positions independent of those
46
exposures. The Company has not entered into, and does not intend
to enter into, contracts for speculative purposes nor be a party
to any leveraged instruments.
The Companys ability to utilize financial instruments may
be restricted because of tightening,
and/or
elimination of unsecured credit availability with
counter-parties. If the Company is unable to utilize such
instruments, the Company may be exposed to greater risk with
respect to its ability to manage exposures to fluctuations in
foreign currencies, interest rates, and lead prices.
Accounts
Receivable Factoring Arrangements
In the ordinary course of business, the Company utilizes
accounts receivable factoring arrangements in countries where
programs of this type are typical. Under these arrangements, the
Company may sell certain of its trade accounts receivable to
financial institutions. The arrangements in virtually all cases
do not contain recourse provisions against the Company for its
customers failure to pay. The Company sold approximately
$45.2 million and $41 million of foreign currency
trade accounts receivable as of March 31, 2007 and 2006,
respectively. Changes in the level of receivables sold from year
to year are included in the change in accounts receivable within
cash flow from operations.
Pursuant to its new $495 million senior secured credit
facility, the Company has the ability to expand utilization of
these arrangements to as much as 70 million. See
Note 22 to the Consolidated Financial Statements.
Contractual
Obligations and Commercial Commitments
The Companys contractual obligations and commercial
commitments at March 31, 2007 are summarized by fiscal year
in which the payments are due in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 and
|
|
|
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Beyond
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
10.5% Senior Secured Notes
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
290,000
|
|
|
$
|
290,000
|
|
Floating Rate Convertible Senior
Subordinated Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
60,000
|
|
Senior Secured Credit Facility(h)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
297,263
|
|
|
|
|
|
|
|
|
|
|
|
297,263
|
|
Interest on long-term debt(a)(h)
|
|
|
64,798
|
|
|
|
64,798
|
|
|
|
64,798
|
|
|
|
36,276
|
|
|
|
32,766
|
|
|
|
31,438
|
|
|
|
294,874
|
|
Short term borrowings
|
|
|
13,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,951
|
|
Other term loans
|
|
|
4,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,586
|
|
Capital leases(b)
|
|
|
4,478
|
|
|
|
3,680
|
|
|
|
5,138
|
|
|
|
1,860
|
|
|
|
1,804
|
|
|
|
5,226
|
|
|
|
22,186
|
|
Operating leases
|
|
|
21,456
|
|
|
|
16,534
|
|
|
|
9,965
|
|
|
|
6,052
|
|
|
|
4,373
|
|
|
|
11,774
|
|
|
|
70,154
|
|
Purchase Obligations(c)
|
|
|
37,500
|
|
|
|
35,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,218
|
|
Other non-current liabilities(d)
|
|
|
|
|
|
|
20,662
|
|
|
|
16,745
|
|
|
|
17,610
|
|
|
|
7,983
|
|
|
|
46,175
|
|
|
|
109,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
146,769
|
|
|
$
|
141,392
|
|
|
$
|
96,646
|
|
|
$
|
359,061
|
|
|
$
|
46,926
|
|
|
$
|
444,613
|
|
|
$
|
1,235,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Reflects the Companys scheduled interest payments and
assumes an interest rate of 10.5% on the Senior Secured Notes,
3.9% on the Floating Rate Convertible Senior Subordinated Notes,
and 11.1% on the Senior Secured Credit Facility. |
|
(b) |
|
Capital leases reflect future minimum lease payments including
imputed interest charges. |
|
(c) |
|
Reflects the Companys projected annual minimum purchase
commitment, including penalties under the supply agreements
entered into as a result of the sale of the Companys
separator business; amounts may vary based on actual purchases.
See Note 17 to the Consolidated Financial Statements. |
47
|
|
|
(d) |
|
Other non-current liabilities include amounts on the
Consolidated Balance Sheet as of March 31, 2007 (amounts
that have been discounted are reflected as such on the table
above). These amounts do not include the supply agreement
penalty, which is reflected in purchase obligations. See
footnote (c) above. |
|
(e) |
|
Pension and other post-retirement benefit obligations are not
included in the table above. The Company expects its cumulative
minimum future cash contributions to its U.S. pension plans will
total approximately $70 million to $125 million from
fiscal 2008 to fiscal 2012, including $35 million in fiscal
2008. The Company expects that cumulative contributions to its
non U.S. pension plans will total approximately
$93.2 million from fiscal 2008 to fiscal 2012, including
$18.1 million in fiscal 2008. In addition, the Company
expects that cumulative contributions to its other
post-retirement benefit plans will total approximately
$13 million from fiscal 2008 to fiscal 2012, including
$2.5 million in fiscal 2008. See Note 10 to the
Consolidated Financial Statements. |
|
(f) |
|
At March 31, 2007 the Company had outstanding letters of
credit of $40.7 million and surety bonds of
$4.5 million. |
|
(g) |
|
Certain of the Companys European subsidiaries have bank
guarantees outstanding, which have been issued as collateral or
financial assurance in connection with environmental
obligations, income tax claims and customer contract
requirements. At March 31, 2007, bank guarantees with a
face value of $19.1 million were outstanding. |
|
(h) |
|
As a result of completing a refinancing of the senior secured
credit facility, on May 15, 2007, the maturity has been
extended to beyond 2012. In addition, the new facility, which
consists of a $295 million term loan and a
$200 million asset based revolving loan facility, provides
for lower interest rates (LIBOR + 1.75% on the revolver and
LIBOR + 3.25% and + 3.50% for the U.S. dollar and Euro term loan
borrowings, respectively) than the current LIBOR + 6.25% on the
former facility. Accordingly, interest on long-term debt will be
favorably impacted assuming a constant LIBOR rate. See
Note 22 to the Consolidated Financial Statements. |
Trading
Activities
The Company does not have any trading activity that involves
non-exchange traded contracts accounted for at fair value.
Related
Parties
None
Effects
of Inflation
Inflation has not had a material impact on the Companys
operations during the past three years. The Company generally
has been able to partially offset the effects of inflation with
cost-reduction programs and operating efficiencies.
Future
Environmental Developments
As a result of its multinational manufacturing, distribution and
recycling operations, the Company is subject to numerous
federal, state, and local environmental, occupational safety,
and health laws and regulations, and similar laws and
regulations in other countries in which the Company operates.
For a discussion of the legal proceedings relating to
environmental matters, see Note 13 to the Consolidated
Financial Statements.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risks
|
The Company is exposed to market risks from changes in foreign
currency exchange rates, certain commodity prices and interest
rates. The Company does not enter into contracts without an
intent to mitigate a particular risk, nor is it a party to any
leveraged instruments. A discussion of the Companys
accounting policies for derivative instruments is provided in
Notes 2 and 4 to the Consolidated Financial Statements.
48
Foreign
Currency Exchange Rate Risk
The Company is exposed to foreign currency risk related to
uncertainties to which future earnings or assets and liability
values are exposed due to operating cash flows and various
financial instruments that are denominated in foreign
currencies. More specifically, the Company is exposed to foreign
currency risk in most European countries, principally Germany,
France, the United Kingdom, Spain, and Italy. It is also
exposed, although to a lesser extent, to foreign currency risk
in Australia and the Pacific Rim. Movements of exchange rates
against the U.S. dollar can result in variations in the
U.S. dollar value of
non-U.S. sales.
In some instances, gains in one currency may be offset by losses
in another.
Commodity
Price Risk
Lead is the primary material used in the manufacture of
batteries, representing approximately 40% of the Companys
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.
Interest
Rate Risk
The Company is exposed to interest rate risk on its variable
rate long-term debt. The Company has on occasion entered into
certain interest rate swap agreements to hedge exposure to
interest costs associated with long-term debt. Interest rate
swaps involve the exchange of floating rate interest payments to
effectively convert floating rate debt into fixed rate debt. No
such swaps were outstanding at March 31, 2007.
The following table presents the expected outstanding debt
balances and related interest rates, excluding capital lease
obligations and lines of credit, under the terms of the
Companys borrowing arrangements in effect at
March 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year(s) Ended March 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 and
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
Beyond
|
|
|
|
(In thousands)
|
|
|
10.5% Senior Secured Notes
|
|
$
|
290,000
|
|
|
$
|
290,000
|
|
|
$
|
290,000
|
|
|
$
|
290,000
|
|
|
$
|
290,000
|
|
|
$
|
|
|
Fixed Interest Rate
|
|
|
10.5
|
%
|
|
|
10.5
|
%
|
|
|
10.5
|
%
|
|
|
10.5
|
%
|
|
|
10.5
|
%
|
|
|
n/a
|
|
Floating Rate Convertible Senior
Subordinated Notes
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
|
$
|
|
|
Variable Interest Rate(a)
|
|
|
3.9
|
%
|
|
|
3.9
|
%
|
|
|
3.9
|
%
|
|
|
3.9
|
%
|
|
|
3.9
|
%
|
|
|
n/a
|
|
Senior Secured Credit Facility(b)
|
|
$
|
297,263
|
|
|
$
|
297,263
|
|
|
$
|
297,263
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Variable Interest Rate(a)(b)
|
|
|
11.1
|
%
|
|
|
11.1
|
%
|
|
|
11.1
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
(a) |
|
Variable components of interest rates based upon market rates at
March 31, 2007. See Note 9 to the Consolidated
Financial Statements. |
|
(b) |
|
Refinanced on May 15, 2007. See Note 22 to the
Consolidated Financial Statements. |
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
See Index to Financial Statements at
page F-1.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
49
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
The Company maintains disclosure controls and
procedures, as such term is defined in
Rules 13a-15(e)
and
15d-15(e) of
the Securities Exchange Act of 1934 (the Exchange
Act), that are designed to ensure that information
required to be disclosed by the Company in reports that it files
or submits under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in
Securities and Exchange Commission rules and forms, and that
such information is accumulated and communicated to the
Companys management, including the Companys chief
executive officer and chief financial officer, as appropriate,
to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, the Company
carried out an evaluation, under the supervision and with the
participation of senior management, including the chief
executive officer and the chief financial officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act
Rules 13a-15(b)
and
15d-15(b).
Based upon, and as of the date of this evaluation, the chief
executive officer and the chief financial officer concluded that
the Companys disclosure controls and procedures were
effective.
The certifications of our principal executive officer and
principal financial officer required in accordance with
Section 302 of the Sarbanes-Oxley Act of 2002 are attached
as exhibits to this annual report on
Form 10-K.
The disclosures set forth in this Item 9A contain
information concerning the evaluation of the Companys
disclosure controls and procedures, internal control over
financial reporting and changes in internal control over
financial reporting referred to in those certifications. Those
certifications should be read in conjunction with this
Item 9A for a more complete understanding of the matters
covered by the certifications.
Managements
Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
The Companys internal control over financial reporting is
a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. Because of its
inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management has completed its evaluation of the effectiveness of
the Companys internal control over financial reporting as
of March 31, 2007 based on the criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on our assessment and on those
criteria, we determined that, as of March 31, 2007, the
Companys internal control over financial reporting was
effective.
Managements assessment of the effectiveness of the
Companys internal control over financial reporting as of
March 31, 2007 has been audited by PricewaterhouseCoopers
LLP, an independent registered public accounting firm, as stated
in their report which is included herein.
Changes
in Internal Control Over Financial Reporting
There have been no changes in the Companys internal
control over financial reporting during the quarter ended
March 31, 2007 that have materially affected or are
reasonably likely to materially affect the Companys
internal control over financial reporting.
|
|
Item 9B.
|
Other
Information
|
None
50
PART III
|
|
Item 10.
|
Directors
and Executive Officers, and Corporate Governance
|
Information concerning the Board of Directors of the Company,
the members of the Companys Audit Committee, the
Companys Audit Committee financial expert and the
Companys Code of Ethics is incorporated by reference to
the Companys Proxy Statement for the Annual Meeting of
Stockholders currently scheduled to be held on August 22,
2007 (the Proxy Statement).
Section 16(a)
Beneficial Ownership Reporting Compliance
Information concerning compliance with Section 16(a) of the
Securities Exchange Act of 1934 is incorporated by reference to
the Proxy Statement.
Director
Independence
The information required by this item is incorporated by
reference to the Proxy Statement.
Audit
Committee Financial Expert
The information required by this item is incorporated by
reference to the Proxy Statement.
Code of
Ethics
The information required by this item is incorporated by
reference to the Proxy Statement.
|
|
Item 11.
|
Executive
Compensation
|
The information required by this item is incorporated by
reference to the Proxy Statement.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information required by this item is incorporated by
reference to the Proxy Statement.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information required by this item is incorporated by
reference to the Proxy Statement.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this item is incorporated by
reference to the Proxy Statement.
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
(a) Index to Financial Statements
See Index to Consolidated Financial Statements at
page F-1.
(b) Exhibits Required by Item 601 of
Regulation S-K
See Index to Exhibits.
(c) Financial Statement Schedules
See Index to Consolidated Financial Statements at
page F-1.
51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on June 11, 2007.
Exide Technologies
|
|
|
|
By:
|
/s/ FRANCIS
M. CORBY JR.
|
Francis M. Corby Jr.
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities
stated, in each case, on June 11, 2007.
|
|
|
|
|
By: /s/ GORDON
A. ULSH
Gordon
A. Ulsh,
President and Chief Executive Officer (principal executive
officer)
|
|
By: /s/ PAUL
W. JENNINGS
Paul
W. Jennings,
Director
|
|
|
|
By: /s/ FRANCIS
M. CORBY
JR.
Francis
M. Corby Jr.,
Executive Vice President and Chief Financial Officer (principal
financial officer)
|
|
By: /s/ JOSEPH
V. LASH
Joseph
V. Lash,
Director
|
|
|
|
By: /s/ PHILLIP
A. DAMASKA
Phillip
A. Damaska,
Senior Vice President and Corporate Controller (principal
accounting officer)
|
|
By: /s/ JOHN
P. REILLY
John
P. Reilly,
Chairman of the Board of Directors
|
|
|
|
By: /s/ HERBERT
F. ASPBURY
Herbert
F. Aspbury,
Director
|
|
By: /s/ MICHAEL
P. RESSNER
Michael
P. Ressner,
Director
|
|
|
|
By: /s/ MICHAEL
R.
DAPPOLONIA
Michael
R. DAppolonia,
Director
|
|
By: /s/ CARROLL
R. WETZEL
Carroll
R. Wetzel,
Director
|
|
|
|
By: /s/ DAVID
S. FERGUSON
David
S. Ferguson,
Director
|
|
|
52
INDEX TO
EXHIBITS
|
|
|
|
|
|
2
|
.1
|
|
Joint Plan of Reorganization of
the Official Committee of Unsecured Creditors and the Debtors,
dated March 11, 2004, incorporated by reference to the
Companys Current Report on
Form 8-K
filed on May 6, 2004.
|
|
2
|
.2
|
|
Amended Technical Amendment to
Joint Plan of Reorganization of the Official Committee of
Unsecured Creditors and the Debtors, dated April 21, 2004,
incorporated by reference to Exhibit 2.2 of the
Companys Current Report on
Form 8-K,
dated May 6, 2004.
|
|
2
|
.3
|
|
Order confirming the Joint Plan of
Reorganization of the Official Committee of Unsecured Creditors
and the Debtors entered April 21, 2004, incorporated by
reference to Exhibit 2.3 of the Companys Current
Report on
Form 8-K,
dated May 6, 2004.
|
|
3
|
.1
|
|
Amended and Restated Certificate
of Incorporation of the Company, incorporated by reference to
Exhibit 1 of the Companys
Form 8-A
dated May 6, 2004.
|
|
3
|
.2
|
|
Amended and Restated Bylaws of the
Company, effective April 28, 2005, incorporated by
reference to Exhibit 3.2 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended March 31, 2006.
|
|
3
|
.3
|
|
Amendments to Amended and Restated
Certificate of Incorporation of the Company, incorporated by
reference to Exhibit of the Companys
Form 8-K
dated September 2, 2005.
|
|
3
|
.4
|
|
Amendments to Amended and Restated
Certificate of Incorporation of the Company, incorporated by
reference to Exhibit 3.1 of the Companys Report on
Form 10-Q
dated November 9, 2006.
|
|
4
|
.1
|
|
Credit and Guarantee Agreement
dated as of May 5, 2004 by and among the Company, Exide
Global Holding Netherlands C.V., the Lenders from time to time
partly thereto, Credit Suisse First Boston and Fleet Securities
Inc., Syndication Agents, Deutsche Bank AG New York Branch, as
Administration Agent, Credit Suisse First Boston, as Book
Running Manager, and Deutshe Bank Securities Inc, as Sole Lead
Arranger and Book Running Manager, incorporated by reference to
Exhibit 10.1 of the Companys Current Report on
Form 8-K
dated May 7, 2004.
|
|
4
|
.2
|
|
Warrant Agreement dated as of
May 5, 2004 by and between the Company and American Stock
Transfer Trust Company, incorporated by reference to
Exhibit 3 to the Companys on
Form 8-A
dated May 6, 2004.
|
|
4
|
.3
|
|
First Amendment and Waiver to
Credit Agreement, dated as of November 10, 2004, among the
Company, Exide Global Holding Netherlands C.V., a limited
partnership organized under the laws of The Netherlands, the
Lenders from time to time party hereto and Deutsche Bank AG New
York Branch, as Administrative Agent, incorporated by reference
to the Companys Report on
Form 10-Q
dated November 15, 2004.
|
|
4
|
.4
|
|
Second Amendment and Waiver to
Credit Agreement, dated as of February 14, 2005, among the
Company, Exide Global Holding Netherlands C.V., a limited
partnership organized under the laws of the Netherlands, the
Lenders from time to time party hereto and Deutsche Bank AG New
York Branch, as Administrative Agent, incorporated by reference
to the Companys Report on
Form 10-Q
dated February 14, 2005.
|
|
4
|
.5
|
|
Third Amendment and Waiver to
Credit Agreement, dated as of February 24, 2005, among the
Company, Exide Global Holding Netherlands C.V., a limited
partnership organized under the laws of the Netherlands, the
Lenders from time to time party hereto and Deutsche Bank AG New
York Branch, as Administrative Agent, incorporated by reference
to the Companys Report on
Form 8-K
dated February 28, 2005.
|
|
4
|
.6
|
|
Indenture dated as of
March 18, 2005 by and between the Company and SunTrust Bank
relating to the
101/2% Senior
Secured Notes due 2013, incorporated by reference to
Exhibit 10.1 to the Companys Report on
Form 8-K
dated March 24, 2005.
|
|
4
|
.7
|
|
Indenture dated as of
March 18, 2005 by and between the Company and SunTrust Bank
relating to the Floating Rate Convertible Senior Subordinated
Notes due 2013, incorporated by reference to Exhibit 10.2
to the Companys Report on
Form 8-K
dated March 24, 2005.
|
53
|
|
|
|
|
|
4
|
.8
|
|
Fourth Amendment and Waiver to
Credit Agreement, dated as of June 13, 2005, among the
Company, Exide Global Holding Netherlands C.V., a limited
partnership organized under the laws of the Netherlands, the
Lenders from time to time party hereto and Deutsche Bank AG New
York Branch, as Administrative Agent, incorporated by reference
to Exhibit 99.1 to the Companys Report on
Form 8-K
dated June 15, 2005.
|
|
4
|
.9
|
|
Copy of Intercreditor Agreement
dated as of March 18, 2005 reflecting changes from First
Amendment to Intercreditor Agreement dated as of June 10,
2005 among the Company, the administrative agent under the
senior secured credit facility, the trustee for the
Companys two series of notes and the Pension Benefit
Guaranty Corporation, incorporated by reference to
Exhibit 99.4 to the Companys Report on
Form 8-K
dated June 15, 2005.
|
|
4
|
.10
|
|
Fifth Amendment and Waiver to
Credit Agreement, dated as of June 29, 2005, among the
Company, Exide Global Holding Netherlands C.V., a limited
partnership organized under the laws of the Netherlands, the
Lenders from time to time party hereto and Deutsche Bank AG New
York Branch, as Administrative Agent, incorporated by reference
to Exhibit 99.2 to the Companys Report on
Form 8-K
dated June 30, 2005.
|
|
4
|
.11
|
|
Sixth Amendment and Waiver to
Credit Agreement, dated as of January 25, 2006, among the
Company, Exide Global Holding Netherlands C.V., a limited
partnership organized under the laws of the Netherlands, the
Lenders from time to time party hereto and Deutsche Bank AG New
York Branch, as Administrative Agent, incorporated by reference
to Exhibit 99.1 to the Companys Report on
Form 8-K
dated February 1, 2006.
|
|
4
|
.12
|
|
Seventh Amendment and Waiver to
Credit Agreement, dated as of March 10, 2006, among the
Company, Exide Global Holding Netherlands C.V., a limited
partnership organized under the laws of the Netherlands, the
Lenders from time to time party hereto and Deutsche Bank AG New
York Branch, as Administrative Agent, incorporated by reference
to Exhibit 10.1 to the Companys Report on
Form 8-K
dated March 15, 2006.
|
|
4
|
.13
|
|
Security Agreement between the
Company and the Pension Benefit Guaranty Corporation dated as of
June 10, 2005, incorporated by reference to
Exhibit 99.2 to the Companys Report on
Form 8-K
dated June 15, 2005.
|
|
4
|
.14
|
|
Pledge Agreement between the
Company and the Pension Benefit Guaranty Corporation dated as of
June 10, 2005, incorporated by reference to
Exhibit 99.3 to the Companys Report on
Form 8-K
dated June 15, 2005.
|
|
4
|
.15
|
|
Credit Agreement, dated as of
May 15, 2007 among Exide Technologies, certain of the
Companys subsidiaries, Exide Global Holding Netherlands
C.V., various financial institutions named therein, and Deutsche
Bank AG New York Branch as Administrative Agent, incorporated by
reference to Exhibit 10.1 to the Companys Report on
Form 8-K
dated May 15, 2007.
|
|
4
|
.16
|
|
Registration Rights Agreement
dated September 18, 2006, between Exide Technologies,
Tontine Capital Partners, L.P., Tontine Partners, L.P., Tontine
Overseas Associates, L.L.C., Tontine Capital Overseas Master
Fund, L.P., Arklow Capital, LLC and Legg Mason Investment Trust,
Inc., incorporated by reference to Exhibit 10.1 to the
Companys Report on
Form 8-K
dated September 19, 2006.
|
|
10
|
.21
|
|
North American Supply Agreement
dated December 15, 1999 between Daramic, Inc. and the
Company (certain confidential portions have been omitted and
filed separately with the SEC pursuant to a request for
confidential treatment), incorporated by reference to
Exhibit 10.22 to the Companys Annual Report on
Form 10-K
for the fiscal year ended March 31, 2002.
|
|
10
|
.22
|
|
Automotive and Industrial Supply
Contract dated July 31, 2001 between Daramic, Inc. and the
Company (certain confidential portions have been omitted and
filed separately with the SEC pursuant to a request for
confidential treatment), incorporated by reference to
Exhibit 10.23 to the Companys Annual Report on
Form 10-K
for the fiscal year ended March 31, 2002.
|
|
10
|
.23
|
|
Golf Cart Separator Supply
Contract dated July 31, 2001 between Daramic, Inc. and the
Company (certain confidential portions have been omitted and
filed separately with the SEC pursuant to a request for
confidential treatment), incorporated by reference to
Exhibit 10.24 to the Companys Annual Report on
Form 10-K
for the fiscal year ended March 31, 2002.
|
54
|
|
|
|
|
|
10
|
.24
|
|
Amendment to Supply Contracts
dated July 31, 2001 between Daramic, Inc. and the Company
(certain confidential portions have been omitted and filed
separately with the SEC pursuant to a request for confidential
treatment), incorporated by reference to Exhibit 10.25 to
the Companys Annual Report on
Form 10-K
for the fiscal year ended March 31, 2002.
|
|
10
|
.25
|
|
Amendment No. 2 to Supply
Contracts dated July 11, 2002 between Daramic, Inc. and the
Company (certain confidential portions have been omitted and
filed separately with the SEC pursuant to a request for
confidential treatment), incorporated by reference to
Exhibit 10.26 to the Companys Annual Report on
Form 10-K
for the fiscal year ended March 31, 2002.
|
|
10
|
.27
|
|
Exide Technologies 2004
Stock Incentive Plan, incorporated by reference to
Exhibit 10.1 to the Companys Report on
Form 8-K
dated October 19, 2005.
|
|
10
|
.28
|
|
Employment Agreement, dated as of
March 2, 2005, by and between the Company and Gordon A.
Ulsh, incorporated by reference to Exhibit 10.1 to the
Companys Report on
Form 8-K
dated October 12, 2004.
|
|
10
|
.29
|
|
Employment Agreement, dated as of
February 16, 2006, by and between the Company and Francis
M. Corby, Jr., incorporated by reference to Exhibit 10.1 to
the Companys Report on
Form 8-K
dated February 16, 2006.
|
|
10
|
.30
|
|
Form of Indemnity Agreement, dated
February 27, 2006, incorporated by reference to
Exhibit 10.1 to the Companys Report on
Form 8-K
dated March 2, 2006.
|
|
10
|
.33
|
|
Compromise Agreement between CMP
Batteries Limited (a subsidiary of Exide Technologies) and Neil
Bright, incorporated by reference to Exhibit 99.1 to the
Companys Report on
Form 8-K
dated November 6, 2006.
|
|
10
|
.34
|
|
2007 Short Term Incentive Plan
adopted by the Board of Directors on June 28, 2006,
incorporated by reference to Exhibit 10.3 to the
Companys Report on
Form 10-Q
dated November 9, 2006.
|
|
10
|
.35
|
|
Exide Technologies 2004
Stock Incentive Plan, as amended, incorporated by reference to
Exhibit 10.1 to the Companys Report on
Form 8-K
dated December 22, 2006.
|
|
10
|
.36
|
|
Form of Restricted Stock Unit
Award Agreement, incorporated by reference to Exhibit 10.1
to the Companys Report on
Form 8-K
dated March 27, 2007.
|
|
10
|
.37
|
|
Form of Exide Technologies
Employee Restricted Stock Award Agreement, incorporated by
reference to Exhibit 10.1 to the Companys Report on Form
8-K dated October 20, 2004.
|
|
10
|
.38
|
|
Form of Exide Technologies
Employee Stock Option Award Agreement, incorporated by reference
to Exhibit 10.2 to the Companys Report on Form 8-K dated
October 20, 2004.
|
|
10
|
.39
|
|
Form of Non-Employee Director
Stock Option Agreement, incorporated by reference to Exhibit
10.4 to the Companys Report on Form 8-K dated October 20,
2004.
|
|
10
|
.40
|
|
Form of Non-Employee Director
Stock Option Agreement, incorporated by reference to Exhibit
10.5 to the Companys Report on Form 8-K dated October 20,
2004.
|
|
14
|
.1
|
|
Amended Code of Ethics and
Business Conduct, effective March 28, 2006, incorporated by
reference to Exhibit 10.32 to the Companys Annual
Report on
Form 10-K
for the fiscal year ended March 31, 2006.
|
|
*21
|
|
|
Subsidiaries of the Company.
|
|
*23
|
.1
|
|
Consent of Independent Registered
Public Accounting Firm.
|
|
*31
|
.1
|
|
Certification of Gordon A. Ulsh,
President and Chief Executive Officer, pursuant to
Section 302 of Sarbanes-Oxley Act of 2002.
|
|
*31
|
.2
|
|
Certification of Francis M. Corby,
Jr., Executive Vice President and Chief Financial Officer,
pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
|
|
*32
|
.1
|
|
Certifications pursuant to
Section 906 of Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Filed with this Report. |
|
|
|
|
|
Management contract or compensatory plan or arrangement. |
55
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
INDEX TO
FINANCIAL STATEMENTS
Exide
Technologies and Subsidiaries
|
|
|
|
|
F-2
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
|
|
|
F-8
|
|
|
F-9
|
|
|
F-50
|
All other schedules are omitted because they are not applicable,
not required, or the information required to be set forth
therein is included in the Consolidated Financial Statements or
in the Notes thereto.
Other
Financial Statements of Certain Exide Technologies
Subsidiaries
The following financial statements for certain of Exide
Technologies wholly owned subsidiaries are included
pursuant to
Regulation S-X
Rule 3-16,
Financial Statements of Affiliates Whose Securities
Collateralize an Issue Registered or Being Registered. See
Note 9 to the Consolidated Financial Statements.
Exide
Global Holding Netherlands C.V. and Subsidiaries
|
|
|
|
|
F-51
|
|
|
F-53
|
|
|
F-54
|
|
|
F-55
|
|
|
F-56
|
|
|
F-57
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Exide Technologies:
We have completed integrated audits of Exide Technologies
consolidated financial statements and of its internal control
over financial reporting as of March 31, 2007, in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Our opinions, based on our
audits, are presented below.
Consolidated
financial statements and financial statement schedule
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of operations,
stockholders equity and cash flows present fairly, in all
material respects, the financial position of Exide Technologies
and its subsidiaries (Successor Company) at March 31, 2007
and 2006, and the results of their operations and their cash
flows for each of the two years in the period ended
March 31, 2007 and for the period of May 6, 2004 to
March 31, 2005 in conformity with accounting principles
generally accepted in the United States of America. In addition,
in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects,
the information set forth therein when read in conjunction with
the related consolidated financial statements. These financial
statements and financial statement schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with
the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit of financial statements includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As discussed in Note 10 to the consolidated financial
statements, the Company changed the manner in which it accounts
for defined benefit and postretirement plans effective
March 31, 2007.
As discussed in Note 11 to the consolidated financial
statements, the Company changed the manner in which it accounts
for stock-based compensation effective April 1, 2006.
Internal
control over financial reporting
Also, in our opinion, managements assessment, included in
Managements Report on Internal Control Over Financial
Reporting appearing under Item 9A, that the Company
maintained effective internal control over financial reporting
as of March 31, 2007 based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects,
based on those criteria. Furthermore, in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of March 31, 2007,
based on criteria established in Internal Control
Integrated Framework issued by the COSO. The Companys
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express opinions on managements
assessment and on the effectiveness of the Companys
internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting
in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over
financial reporting was maintained in all material respects. An
audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and
evaluating the design and operating effectiveness of internal
F-2
control, and performing such other procedures as we consider
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Atlanta, Georgia
June 11, 2007
F-3
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Exide Technologies:
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statement of operations,
stockholders equity and cash flow, present fairly, in all
material respects, the financial position of Exide Technologies
and its subsidiaries (Predecessor Company) and the results of
their operations and their cash flows for the period from
April 1, 2004 to May 5, 2004 and for the fiscal year
in the period ended March 31, 2004 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the accompanying index present fairly, in all
material respects, the information set forth therein when read
in conjunction with the related consolidated financial
statements. These financial statements and financial statement
schedules are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the Consolidated Financial
Statements, on April 15, 2002, Exide Technologies, together
with certain of its U.S. subsidiaries (Debtors) filed
voluntary petitions for reorganization under Chapter 11 of
the federal bankruptcy laws in the United States Court for the
District of Delaware. The Debtors Joint Plan of
Reorganization was confirmed by the Bankruptcy Court on
April 21, 2004 and the Debtors declared May 5, 2004 as
the effective date of the Plan as it had substantially
consummated the transactions provided for in the Plan on such
date. For accounting purposes the Company also recognized its
emergence from bankruptcy as of May 5, 2004. In connection
with its emergence from bankruptcy, the Company adopted Fresh
Start reporting as of May 5, 2004.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
June 28, 2005
F-4
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
For the Fiscal Year Ended
|
|
|
May 6, 2004
|
|
|
April 1, 2004
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
to
|
|
|
to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
|
(In thousands, except per-share data)
|
|
|
NET SALES
|
|
$
|
2,939,785
|
|
|
$
|
2,819,876
|
|
|
$
|
2,476,259
|
|
|
$
|
214,607
|
|
COST OF SALES
|
|
|
2,467,009
|
|
|
|
2,413,045
|
|
|
|
2,098,757
|
|
|
|
179,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
472,776
|
|
|
|
406,831
|
|
|
|
377,502
|
|
|
|
35,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, marketing and advertising
|
|
|
270,413
|
|
|
|
271,059
|
|
|
|
251,085
|
|
|
|
24,504
|
|
General and administrative
|
|
|
173,128
|
|
|
|
190,993
|
|
|
|
150,871
|
|
|
|
17,940
|
|
Restructuring
|
|
|
24,483
|
|
|
|
21,714
|
|
|
|
42,479
|
|
|
|
602
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
388,524
|
|
|
|
|
|
Other (income) expense, net
|
|
|
9,636
|
|
|
|
3,684
|
|
|
|
(56,898
|
)
|
|
|
6,222
|
|
Interest expense, net
|
|
|
90,020
|
|
|
|
69,464
|
|
|
|
42,636
|
|
|
|
8,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
567,680
|
|
|
|
556,914
|
|
|
|
818,697
|
|
|
|
58,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before reorganization items,
income taxes, minority interest
|
|
|
(94,904
|
)
|
|
|
(150,083
|
)
|
|
|
(441,195
|
)
|
|
|
(22,668
|
)
|
REORGANIZATION ITEMS, NET
|
|
|
4,310
|
|
|
|
6,158
|
|
|
|
11,527
|
|
|
|
18,434
|
|
FRESH START ACCOUNTING
ADJUSTMENTS, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(228,371
|
)
|
GAIN ON DISCHARGE OF LIABILITIES
SUBJECT TO COMPROMISE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,558,839
|
)
|
INCOME TAX PROVISION (BENEFIT)
|
|
|
5,783
|
|
|
|
15,962
|
|
|
|
14,219
|
|
|
|
(2,482
|
)
|
MINORITY INTEREST
|
|
|
882
|
|
|
|
529
|
|
|
|
(18
|
)
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(105,879
|
)
|
|
|
(172,732
|
)
|
|
|
(466,923
|
)
|
|
|
1,748,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
(2.39
|
)
|
|
$
|
(6.75
|
)
|
|
$
|
(18.26
|
)
|
|
$
|
63.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
44,358
|
|
|
|
25,576
|
|
|
|
25,576
|
|
|
|
27,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-5
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except
|
|
|
|
per-share data)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
76,211
|
|
|
$
|
32,161
|
|
Receivables, net of allowance for
doubtful accounts of $28,624 and $21,637
|
|
|
639,115
|
|
|
|
617,677
|
|
Inventories
|
|
|
411,554
|
|
|
|
414,943
|
|
Prepaid expenses and other
|
|
|
20,224
|
|
|
|
30,804
|
|
Deferred financing costs, net
|
|
|
3,411
|
|
|
|
3,169
|
|
Deferred income taxes
|
|
|
19,030
|
|
|
|
11,066
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,169,545
|
|
|
|
1,109,820
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
649,015
|
|
|
|
685,842
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Other intangibles, net
|
|
|
191,762
|
|
|
|
186,820
|
|
Investments in affiliates
|
|
|
5,282
|
|
|
|
4,783
|
|
Deferred financing costs, net
|
|
|
12,908
|
|
|
|
15,196
|
|
Deferred income taxes
|
|
|
67,006
|
|
|
|
56,358
|
|
Other
|
|
|
24,706
|
|
|
|
24,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
301,664
|
|
|
|
287,247
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,120,224
|
|
|
$
|
2,082,909
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
13,951
|
|
|
$
|
11,375
|
|
Current maturities of long-term
debt
|
|
|
3,996
|
|
|
|
5,643
|
|
Accounts payable
|
|
|
360,278
|
|
|
|
360,538
|
|
Accrued expenses
|
|
|
299,157
|
|
|
|
298,631
|
|
Warrants liability
|
|
|
5,297
|
|
|
|
2,063
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
682,679
|
|
|
|
678,250
|
|
Long-term debt
|
|
|
666,507
|
|
|
|
683,986
|
|
Noncurrent retirement obligations
|
|
|
263,290
|
|
|
|
333,248
|
|
Deferred income tax liability
|
|
|
41,232
|
|
|
|
33,590
|
|
Other noncurrent liabilities
|
|
|
121,433
|
|
|
|
116,430
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,775,141
|
|
|
|
1,845,504
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
14,560
|
|
|
|
12,666
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS
EQUITY
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par
value, 1,000 shares authorized, 0 shares issued and
outstanding
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par
value, 100,000 and 61,500 shares authorized, 60,676 and
24,546 shares issued and outstanding
|
|
|
607
|
|
|
|
245
|
|
Additional paid-in capital
|
|
|
1,008,481
|
|
|
|
888,647
|
|
Accumulated deficit
|
|
|
(745,534
|
)
|
|
|
(639,655
|
)
|
Accumulated other comprehensive
income (loss)
|
|
|
66,969
|
|
|
|
(24,498
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
330,523
|
|
|
|
224,739
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
2,120,224
|
|
|
$
|
2,082,909
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-6
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Receivable-
|
|
|
|
|
|
Pension
|
|
|
Cummulative
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Stock
|
|
|
Accumulated
|
|
|
Liability,
|
|
|
Transalation
|
|
|
Comprehensive
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Award Plan
|
|
|
Deficit
|
|
|
Net of Tax
|
|
|
Adjustment
|
|
|
Income (Loss)
|
|
|
|
(In thousands)
|
|
|
Balance at March 31, 2004
(Predecessor Company)
|
|
$
|
274
|
|
|
$
|
570,589
|
|
|
$
|
(665
|
)
|
|
$
|
(1,046,087
|
)
|
|
$
|
(155,898
|
)
|
|
$
|
(137,982
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,748,564
|
|
|
|
|
|
|
|
|
|
|
$
|
1,748,564
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,591
|
)
|
|
|
(7,591
|
)
|
Cancellation of Predecessor Company
common stock
|
|
|
(274
|
)
|
|
|
(570,589
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh Start elimination of equity
account balances
|
|
|
|
|
|
|
|
|
|
|
665
|
|
|
|
(702,477
|
)
|
|
|
155,898
|
|
|
|
145,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,740,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 5, 2004
(Predecessor Company)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Successor Company
common stock
|
|
|
234
|
|
|
|
888,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 5, 2004
|
|
$
|
234
|
|
|
$
|
888,157
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(466,923
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(466,923
|
)
|
Minimum pension liability
adjustment, net of tax of $1,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,350
|
)
|
|
|
|
|
|
|
(24,350
|
)
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,141
|
|
|
|
30,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(461,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2005
|
|
$
|
234
|
|
|
$
|
888,157
|
|
|
$
|
|
|
|
$
|
(466,923
|
)
|
|
$
|
(24,350
|
)
|
|
$
|
30,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(172,732
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(172,732
|
)
|
Minimum pension liability
adjustment, net of tax of $315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,026
|
)
|
|
|
|
|
|
|
(6,026
|
)
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,263
|
)
|
|
|
(24,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(203,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuance
|
|
|
11
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock issuance
|
|
|
|
|
|
|
501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2006
|
|
$
|
245
|
|
|
$
|
888,647
|
|
|
$
|
|
|
|
$
|
(639,655
|
)
|
|
$
|
(30,376
|
)
|
|
$
|
5,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(105,879
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(105,879
|
)
|
Minimum pension liability
adjustment, net of tax of $1,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,289
|
|
|
|
|
|
|
|
22,289
|
|
Increase from initial adoption of
SFAS 158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,242
|
|
|
|
|
|
|
|
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,936
|
|
|
|
44,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(38,654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuance
|
|
|
362
|
|
|
|
117,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
|
|
|
|
|
|
|
2,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2007
|
|
$
|
607
|
|
|
$
|
1,008,481
|
|
|
$
|
|
|
|
$
|
(745,534
|
)
|
|
$
|
16,155
|
|
|
$
|
50,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-7
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
Successor Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
For the Fiscal Year Ended
|
|
|
May 6, 2004
|
|
|
April 1, 2004
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
to
|
|
|
to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Cash Flows From Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(105,879
|
)
|
|
$
|
(172,732
|
)
|
|
$
|
(466,923
|
)
|
|
$
|
1,748,564
|
|
Adjustments to reconcile net income
(loss) to net cash (used in) provided by operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
121,016
|
|
|
|
122,429
|
|
|
|
108,752
|
|
|
|
7,848
|
|
Gain on discharge of liabilities
subject to compromise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,558,839
|
)
|
Fresh start accounting adjustments,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(228,371
|
)
|
Unrealized loss (gain) on Warrants
|
|
|
3,234
|
|
|
|
(9,125
|
)
|
|
|
(63,112
|
)
|
|
|
|
|
Net loss on asset sales /
impairments
|
|
|
18,622
|
|
|
|
8,044
|
|
|
|
7,649
|
|
|
|
|
|
Gain on insurance recoveries
|
|
|
|
|
|
|
(4,791
|
)
|
|
|
(13,645
|
)
|
|
|
|
|
Deferred income taxes
|
|
|
(6,350
|
)
|
|
|
(36
|
)
|
|
|
6,551
|
|
|
|
(3,179
|
)
|
Provision for doubtful accounts
|
|
|
9,096
|
|
|
|
4,116
|
|
|
|
1,973
|
|
|
|
473
|
|
Non-cash stock compensation
|
|
|
2,449
|
|
|
|
501
|
|
|
|
|
|
|
|
|
|
Reorganization items, net
|
|
|
4,310
|
|
|
|
6,158
|
|
|
|
11,527
|
|
|
|
18,434
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
388,524
|
|
|
|
|
|
Insurance proceeds
|
|
|
|
|
|
|
11,144
|
|
|
|
7,290
|
|
|
|
|
|
Minority interest
|
|
|
882
|
|
|
|
529
|
|
|
|
(18
|
)
|
|
|
26
|
|
Amortization of deferred financing
costs
|
|
|
3,476
|
|
|
|
2,048
|
|
|
|
|
|
|
|
1,251
|
|
Changes in assets and liabilities
excluding effects of Fresh Start accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
14,635
|
|
|
|
34,022
|
|
|
|
(31,777
|
)
|
|
|
45,924
|
|
Inventories
|
|
|
30,568
|
|
|
|
(34,703
|
)
|
|
|
38,826
|
|
|
|
(10,873
|
)
|
Prepaid expenses and other
|
|
|
13,614
|
|
|
|
(8,997
|
)
|
|
|
(108
|
)
|
|
|
286
|
|
Payables
|
|
|
(25,389
|
)
|
|
|
33,958
|
|
|
|
41,120
|
|
|
|
(20,967
|
)
|
Accrued expenses
|
|
|
(16,149
|
)
|
|
|
(68,907
|
)
|
|
|
(32,932
|
)
|
|
|
(20,564
|
)
|
Noncurrent liabilities
|
|
|
(53,258
|
)
|
|
|
27,500
|
|
|
|
(4,454
|
)
|
|
|
(294
|
)
|
Other, net
|
|
|
(13,700
|
)
|
|
|
4,494
|
|
|
|
(8,934
|
)
|
|
|
13,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
|
1,177
|
|
|
|
(44,348
|
)
|
|
|
(9,691
|
)
|
|
|
(7,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(51,932
|
)
|
|
|
(58,133
|
)
|
|
|
(69,114
|
)
|
|
|
(7,152
|
)
|
Proceeds from sales of assets
|
|
|
4,485
|
|
|
|
25,316
|
|
|
|
25,101
|
|
|
|
2,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(47,447
|
)
|
|
|
(32,817
|
)
|
|
|
(44,013
|
)
|
|
|
(4,352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in short-term
borrowings
|
|
|
1,123
|
|
|
|
10,347
|
|
|
|
(11,588
|
)
|
|
|
2,425
|
|
Repayments under 9.125% Senior
Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(110,082
|
)
|
Borrowings under Replacement DIP
Credit Facility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,258
|
|
Repayments under Replacement DIP
Credit Facility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(452,875
|
)
|
Borrowings under Senior Secured
Credit Facility
|
|
|
|
|
|
|
46,250
|
|
|
|
|
|
|
|
500,000
|
|
Repayments under Senior Secured
Credit Facility
|
|
|
(27,948
|
)
|
|
|
(17,224
|
)
|
|
|
(250,000
|
)
|
|
|
|
|
Borrowings under Senior Secured
Notes
|
|
|
|
|
|
|
|
|
|
|
290,000
|
|
|
|
|
|
Borrowings under Convertible Senior
Subordinated Notes
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
|
|
Common stock issuance
|
|
|
117,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of foreign currency swap
|
|
|
|
|
|
|
(12,084
|
)
|
|
|
|
|
|
|
|
|
Increase/Decrease in other debt
|
|
|
(2,504
|
)
|
|
|
15,667
|
|
|
|
(5,967
|
)
|
|
|
(2,412
|
)
|
Financing costs and other
|
|
|
(832
|
)
|
|
|
(8,310
|
)
|
|
|
(13,520
|
)
|
|
|
(23,146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
|
|
87,586
|
|
|
|
34,646
|
|
|
|
68,925
|
|
|
|
35,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on
Cash and Cash Equivalents
|
|
|
2,734
|
|
|
|
(2,016
|
)
|
|
|
1,879
|
|
|
|
(1,447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) In Cash and
Cash Equivalents
|
|
|
44,050
|
|
|
|
(44,535
|
)
|
|
|
17,100
|
|
|
|
22,183
|
|
Cash and Cash Equivalents,
Beginning of Period
|
|
|
32,161
|
|
|
|
76,696
|
|
|
|
59,596
|
|
|
|
37,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of
Period
|
|
$
|
76,211
|
|
|
$
|
32,161
|
|
|
$
|
76,696
|
|
|
$
|
59,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures Of Cash
Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period
for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
73,434
|
|
|
$
|
54,923
|
|
|
$
|
32,991
|
|
|
$
|
13,765
|
|
Income taxes (net of refunds)
|
|
$
|
11,125
|
|
|
$
|
10,568
|
|
|
$
|
10,580
|
|
|
$
|
1,139
|
|
The accompanying notes are an integral part of these statements.
F-8
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
March 31, 2007
|
|
(1)
|
BASIS OF
PRESENTATION
|
The Consolidated Financial Statements include the accounts of
Exide Technologies (referred together with its subsidiaries,
unless the context requires otherwise, as Exide or
the Company) and all of its majority-owned
subsidiaries.
On April 15, 2002, the Petition Date, Exide
Technologies, together with certain of its
U.S. subsidiaries, 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). On November 21, 2002, two additional wholly
owned, non-operating subsidiaries of Exide filed voluntary
petitions for reorganization under Chapter 11 in the
Bankruptcy Court. All of the cases were jointly administered for
procedural purposes before the Bankruptcy Court under case
number
02-11125KJC.
Exide Technologies and such subsidiaries (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.
The Debtors declared May 5, 2004 as the effective date of
the Plan, and substantially consummated the transactions
provided for in the Plan on such date (the Effective
Date). For accounting purposes the Company also recognized
the emergence as of May 5, 2004, as this was the date upon
which the material conditions related to emergence, most
significantly the finalization of the Companys exit
financing, were resolved.
The emergence from Chapter 11 resulted in a new reporting
entity (the Successor Company) and adoption of Fresh
Start reporting and reporting in accordance with Statement of
Position
90-7
(SOP 90-7),
Financial Reporting by Entities in Reorganization under
the Bankruptcy Code. Fresh Start reporting required the
Company to allocate the reorganization value to its assets based
upon their estimated fair values in accordance with Statement of
Financial Accounting Standards (SFAS) No. 141,
Business Combinations (SFAS 141).
In connection with the development of the Plan the Company was
primarily responsible for the valuation and directed its
financial advisors to prepare a valuation analysis of its
business. Management considered a number of factors, including
valuations or appraisals, when estimating the fair values of the
Companys assets and liabilities. Each liability existing
at the Plan confirmation date, other than deferred taxes, was
stated at present values of amounts to be paid determined at
appropriate current interest rates. Adoption of Fresh Start
reporting has resulted in material adjustments to the historical
carrying value of the Companys assets and liabilities.
The accompanying Consolidated Financial Statements of the
Company prior to emergence from Chapter 11 (the
Predecessor Company) have also been prepared in
accordance with
SOP 90-7.
Revenues, expenses, realized gains and losses and provision for
losses resulting from the reorganization are reported separately
as Reorganization items, net in the consolidated statements of
operations.
Since the Companys emergence from bankruptcy resulted in a
new reporting entity as of the Effective Date, the Consolidated
Financial Statements for periods subsequent to May 5, 2004
are not comparable with those of prior periods. All financial
information as of and for periods prior to May 6, 2004 is
presented as pertaining to the Predecessor Company, while all
financial information after that date is presented as pertaining
to the Successor Company. The Consolidated Statements of
Operations reflect the results of the reorganization and Fresh
Start adjustments in accordance with
SOP 90-7
in the period April 1, 2004 to May 5, 2004 as
Predecessor Company information.
F-9
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(2)
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Principles
of Consolidation
The Consolidated Financial Statements include the accounts of
Exide Technologies and all of its majority owned subsidiaries in
which the Company exercises control (collectively the
Company). Investments in affiliates of less than a
20% interest are accounted for by the cost method. Investments
in 20% to 50% owned companies are accounted for by the equity
method. All significant intercompany transactions have been
eliminated.
Nature
of Operations
The Company is one of the largest manufacturers and marketers of
lead acid batteries in the world. The Company manufactures
industrial and automotive batteries in North America, Europe,
the Middle East, India, Australia and New Zealand. The
Companys industrial batteries consist of motive power
batteries, such as those used in forklift trucks and other
electronic vehicles, and network power batteries used for
back-up
power applications, such as those used for telecommunication
systems. The Company markets its automotive batteries to a broad
range of retailers and distributors of replacement batteries and
automotive original equipment manufacturers.
The Company currently has four business segments, Transportation
Americas, Transportation Europe and ROW, Industrial Energy
Americas, Industrial Energy Europe and ROW. For a discussion of
the Companys segments, see Note 20.
Major
Customers and Concentration of Credit
The Company has a number of major end-user, retail and original
equipment manufacturer customers, both in North America and
Europe. No single customer accounted for more than 10% of
consolidated net sales during any of the fiscal years presented.
The Company does not believe a material part of its business is
dependent upon a single customer, the loss of which would have a
material long-term impact on the business of the Company.
However, the loss of one or more of the Companys largest
customers would most likely have a negative short-term impact on
the Companys results of operations.
Foreign
Currency Translation
The functional currencies of the Companys foreign
subsidiaries are primarily the respective local currencies.
Assets and liabilities of the Companys foreign
subsidiaries and affiliates are translated into
U.S. dollars at the year-end exchange rate, and revenues
and expenses are translated at average monthly exchange rates.
Translation gains and losses are recorded as a component of
accumulated other comprehensive income (loss) within
stockholders equity. Foreign currency gains and losses
from certain intercompany transactions meeting the permanently
advanced criteria of SFAS No. 52 Foreign
Currency Translation are also recorded as a component of
accumulated other comprehensive income (loss). All other foreign
currency gains and losses are included in other (income)
expense, net. The Company recognized net foreign currency
(gains) losses of ($11.6) million, $11.3 million,
($2.6) million, and $6.3 million, in fiscal 2007 and
2006, the period May 6, 2004 to March 31, 2005, and
the period April 1, 2004 to May 5, 2004, respectively.
Cash
Equivalents
Cash equivalents consist of highly liquid instruments with
maturities at the time of acquisition of three months or less.
Cash equivalents are stated at cost, which approximates fair
value, because of the short-term maturity of these instruments.
F-10
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Allowance
for Doubtful Accounts
The Company maintains allowances for doubtful accounts for
estimated probable losses resulting from the inability of the
Companys customers to make required payments. The Company
continues to assess the adequacy of the reserves for doubtful
accounts based on the financial condition of the Companys
customers and other external factors that may impact
collectibility. The majority of the Companys accounts
receivable are due from trade customers. Credit is extended
based on an evaluation of the Companys customers
financial condition and generally, collateral is not required.
Payment terms vary and accounts receivable are stated in the
Consolidated Financial Statements at amounts due from customers
net of an allowance for doubtful accounts. Accounts outstanding
longer than the payment terms are considered past due. The
Company considers a number of factors in determining the
allowance for doubtful accounts, including the length of time
trade accounts receivable are past due, the customers
current ability to pay their obligations to the Company, the
Companys previous loss history, and the condition of the
general economy and the industry as a whole. The Company writes
off accounts receivable when they become uncollectible.
Inventories
Inventories, which consist of material, labor and overhead, are
stated at the lower of cost or market using the
first-in,
first-out (FIFO) method. The Company writes down its
inventory to estimated market value (when below historical cost)
based on assumptions of future demand and market conditions.
Property,
Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
73,514
|
|
|
$
|
72,709
|
|
Buildings and improvements
|
|
|
232,397
|
|
|
|
232,512
|
|
Machinery and equipment
|
|
|
634,563
|
|
|
|
555,565
|
|
Construction in progress
|
|
|
26,305
|
|
|
|
34,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
966,779
|
|
|
|
894,952
|
|
Less Accumulated
depreciation
|
|
|
317,764
|
|
|
|
209,110
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
649,015
|
|
|
$
|
685,842
|
|
|
|
|
|
|
|
|
|
|
Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets. The range of original
estimated useful lives is: buildings and improvements,
25-40 years;
machinery and equipment,
3-14 years.
Cost and accumulated depreciation for property retired or
disposed of are removed from the accounts, and any gain or loss
on disposal is credited or charged to earnings. Expenditures for
maintenance and repairs are charged to expense as incurred.
Additions, improvements and major renewals are capitalized.
Depreciation expense was $108.7 million, $110 million,
$99.1 million, and $7.7 million, for fiscal 2007 and
2006, the period May 6, 2004 to March 31, 2005, and
the period April 1, 2004 to May 5, 2004, respectively.
Capitalized
Software Costs
The Company capitalizes the cost of computer software acquired
or developed for internal use, in accordance with
SOP 98-1
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use. The capitalized costs are
amortized over the estimated useful life of the software,
ranging from 3 to 5 years, on a straight-line basis.
F-11
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred
Financing Costs
Deferred financing costs are amortized to interest expense over
the life of the related debt.
Valuation
of Long-Lived Assets
The Companys long-lived assets include property, plant and
equipment, and identified intangible assets. Long-lived assets
(other than indefinite lived intangible assets) are depreciated
and amortized over their estimated useful lives, and are
reviewed for impairment whenever changes in circumstances
indicate the carrying value may not be recoverable.
Indefinite-lived intangible assets, which consist of trademarks
and tradenames, are reviewed for impairment on both an annual
basis and whenever changes in circumstances indicate the
carrying value may not be recoverable. If these assets or their
related assumptions change in the future, the Company may be
required to record impairment charges.
Hedging
Activities
In accordance with SFAS 133, Accounting for
Derivative Instruments and Hedging Activities, as amended
and interpreted, the Company reports all derivative financial
instruments on the balance sheet at their fair values. For
derivative instruments designated as cash flow hedges, the
effective portion of any hedge is reported in Accumulated Other
Comprehensive Income (loss) until it is cleared to earnings
during the same period in which the hedged item affects
earnings. The ineffective portion of all hedges is recognized in
current period earnings. The Company uses no derivative
instruments designated as fair value hedges. In the Consolidated
Statement of Cash Flows, the Company reports the cash flows
resulting from its hedging activities in the same category as
the related item that is being hedged.
The Company has entered into foreign exchange rate agreements to
hedge exposure to the currency fluctuation of certain
transactions denominated in a currency other than the applicable
local currency.
The Company has historically entered into forward purchase and
put option agreements to economically hedge the cost of
externally purchased commodities including lead.
Counterparties to foreign exchange and commodity and option
agreements are major financial institutions. The Company
believes the risk of incurring losses related to credit risk
with these counterparties is remote.
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.
Income
Taxes
The Company accounts for income taxes under the provisions of
SFAS 109 Accounting for Income Taxes, which
requires the use of the liability method in accounting for
deferred taxes. If it is more likely than not that some portion,
or all, of a deferred tax asset will not be realized, a
valuation allowance is recognized.
Revenue
Recognition
The Company records sales when revenue is earned. Shipping terms
are generally FOB shipping point and revenue is recognized when
product is shipped to the customer. In limited cases, terms are
FOB destination and in these cases, revenue is recognized when
product is delivered to the customers delivery site.
F-12
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Accounting
for Shipping and Handling Costs
The Company records shipping and handling costs incurred in cost
of sales and records shipping and handling costs billed to
customers in net sales.
Advertising
The Company expenses advertising costs as incurred.
Net
Income (Loss) Per Share
Basic net income (loss) per share is computed using the weighted
average number of common shares outstanding for the period,
while diluted net income (loss) per share is computed assuming
conversion of all dilutive securities. Shares which are
contingently issuable under the Plan have been included as
outstanding common shares for purposes of calculating net income
(loss) per share.
Due to net losses for the fiscal years ended March 31, 2007
and 2006 and the period May 6, 2004 to March 31, 2005,
454,338, 39,218, and 621 shares of securities issuable in
connection with stock option plans, restricted stock (unvested)
and restricted stock unit plans have been excluded from the
diluted loss per share calculation because their effect would be
anti-dilutive. For the period April 1, 2004 to May 5,
2004, 5,211,000 shares of securities were excluded from the
computation of diluted earnings per share because the exercise
prices of the related options and warrants were greater than the
average market price of the common shares, and would have had an
anti-dilutive effect for that period.
As a result of the consummation of the $75 million rights
offering and the private sale of $50 million of common
stock (see Note 18), the Company issued a total of
35,712,570 shares of its common stock. Upon consummation of
the rights offering, the fair value of the Companys common
stock was more than the rights offerings $3.50 per
share subscription price. Accordingly, basic and diluted loss
per common share have been restated for the fiscal years ended
March 31, 2006, and the period May 6, 2004 to
March 31, 2005, to reflect a stock dividend of
576,122 shares of the Companys common stock.
Use of
Estimates in the Preparation of Financial
Statements
The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP)
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Recently
Issued Accounting Standards
In February 2006, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 155
Accounting for Certain Hybrid Financial
Instruments an amendment of FASB Statements
No. 133 and 140 (SFAS 155).
SFAS 155 allows financial instruments that have embedded
derivatives to be accounted for as a whole, eliminating the need
to separate the derivative from its host, if the holder elects
to account for the whole instrument on a fair value basis. This
new accounting standard is effective April 1, 2007. The
adoption of SFAS 155 is not expected to have an impact on
the Companys financial statements.
In March 2006, the FASB issued SFAS No. 156,
Accounting for Servicing of Financial Assets
an amendment of FASB Statement No. 140
(SFAS 156). SFAS 156 requires that
all separately recognized servicing rights be initially measured
at fair value, if practicable. In addition, this Statement
permits an entity to choose between two measurement methods
(amortization method or fair value measurement method) for each
class of separately recognized servicing assets and liabilities.
This new accounting standard is effective
F-13
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
April 1, 2007. The adoption of SFAS 156 is not
expected to have an impact on the Companys financial
statements.
In July 2006, the FASB issued FIN 48 Accounting For
Uncertainty In Income Taxes an Interpretation of
FASB Statement 109 (FIN 48).
FIN 48 which clarifies the accounting for uncertain tax
positions. FIN 48 requires that the Company recognize the
impact of a tax position in the Companys financial
statement if that position is more likely than not of being
sustained on audit based on the technical merits of the
position. As required by FIN 48, the Company will adopt
this new accounting standard effective April 1, 2007. The
Company is currently evaluating the impact of FIN 48 on its
consolidated financial statements but is not yet in a position
to make this determination.
In September 2006, the FASB issued SFAS No. 157
Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about
fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value
measurements, the FASB having previously concluded in those
accounting pronouncements that fair value is the relevant
measurement attribute. Accordingly, SFAS 157 does not
require any new fair value measurements. However, for some
entities, the application of SFAS 157 will change current
practice. SFAS 157 is effective for fiscal years beginning
after November 15, 2007 (the Companys fiscal 2009),
and interim periods within those years. The Company will assess
the effect of this pronouncement on its financial statements,
but at this time, no material effect is expected.
In February 2007, the FASB issued SFAS No. 159
The Fair Value Option for Financial Assets and
Financial Liabilities, Including an Amendment of FASB Statement
No. 115 (SFAS 159).
SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting
provisions. SFAS 159 is expected to expand the use of fair
value measurement, which is consistent with the FASBs
long-term measurement objectives for accounting for financial
instruments. SFAS 159 is effective for fiscal years
beginning after November 15, 2007 (the Companys
fiscal 2009). The Company will assess the effect of this
pronouncements on its financial statements, but at this time, no
material effect is expected.
In connection with the consummation of the Plan, the Company
issued Warrants entitling the holders to purchase up to
6.25 million shares of new common stock at an exercise
price of $32.11 per share (the number of Warrants issuable
being subject to adjustments allowed for by the claims
reconciliation and allowance process set forth in the Plan.) The
Company has accounted for the Warrants in accordance with
Emerging Issues Task Force (EITF) Issue
No. 00-19
Accounting for Derivative Financial Instruments Indexed to
and Potentially Settled in a Companys Own Stock
(EITF 00-19)
and SFAS No. 150 Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities
and Equity (SFAS 150). Because the
Warrant Agreement provides for a cash settlement upon a change
in control under certain specified conditions, the Warrants have
been accounted for and classified as a liability in the
Consolidated Balance Sheets.
Upon the adoption of Fresh Start reporting, on the Effective
Date, May 5, 2004, the Warrants were ascribed a fair value
of approximately $74.3 million, reflecting the underlying
enterprise value of the Company underlying the Plan. The fair
value of the Warrants was determined using a Black Scholes Model
with an assumed volatility of 40%, a risk free rate of 3%, fair
value of common shares and exercise price of $32.11 and a
dividend yield of 0%. As no active market existed when the
Warrants were initially valued, the Company believed a Black
Scholes Model, which is widely accepted in valuing warrants and
call options, was the appropriate valuation model to use as no
active market existed for the warrants at the date of emergence.
Subsequent to the Companys emergence from bankruptcy, the
Warrants began to trade on The NASDAQ
F-14
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Global Market under the ticker XIDEW. Subsequent to
the Warrants becoming actively traded, the Warrants were
measured using market prices as quoted market prices are the
best indicator of fair value. In accordance with the provisions
of the Warrant Agreement, and as a result of the completed
$75 million rights offering and private sale of
$50 million of common stock on September 18, 2006, an
additional 371,164 warrants became issuable and the exercise
price of the warrants was adjusted to $30.31 per share.
The Warrants are exercisable through May 5, 2011. The
exercise price, the number of shares purchasable upon the
exercise of each Warrant and the number of Warrants outstanding
are subject to adjustment from time to time upon occurrence of
certain events described in the Warrant Agreement. In accordance
with
EITF 00-19
and SFAS 150, the Warrants have been
marked-to-market
based upon quoted market prices. This
mark-to-market
resulted in recognition of unrealized loss (gain) of
$3.2 million, ($9.1) million and ($63.1) million
for fiscal 2007, fiscal 2006, and the period May 6, 2004 to
March 31, 2005, which is reported in Other (income)
expense, net in the Consolidated Statements of Operations.
Future results of operations may be subject to volatility from
changes in the market value of such Warrants.
|
|
(4)
|
ACCOUNTING
FOR DERIVATIVES
|
The Company accounts for derivative instruments and hedging
activities in accordance with SFAS 133 Accounting for
Derivative Instruments and Hedging Activities, as amended
by SFAS 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities and
SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities
(collectively, SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS 133 requires that
all derivatives be recognized as either assets or liabilities at
fair value. The Company does not enter into derivative contracts
for trading purposes. Derivatives are used only to hedge the
volatility arising from movements in a portion of the cost of
lead purchases as well as hedging certain interest rates and
foreign currency exchange rates. Changes in the fair value of
cash flow hedges for which the hedged item affects earnings
immediately (foreign currency transaction hedges and interest
rate hedges), ineffective portions of changes in the fair value
of cash flow hedges and fair value changes on certain
derivatives that, despite being utilized to effectively manage
the above mentioned activities, do not qualify for hedge
accounting, are recognized in earnings immediately. The change
in fair value of cash flow hedges for which the hedged item
affects earnings immediately, related to hedge ineffectiveness
and of derivatives not qualifying for hedge accounting, and for
the fiscal year ending March 31, 2006 the net gain was
$7.4 million, of which a gain of $1.1 million was
recognized in other (income) expense and a gain of
$6.3 million was recognized in cost of sales. For the
period May 6, 2004 to March 31, 2005, the net loss was
$7.1 million, of which a loss of $13.2 million was
recognized in other (income) expense and a gain of
$6 million was recognized in cost of sales. The Company did
not enter into any derivative contracts during fiscal 2007.
There were derivative contracts outstanding at March 31,
2006 of $2.8 million.
F-15
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Reorganization items represent amounts the Company incurred as a
result of the Chapter 11 process and are presented
separately in the consolidated statements of operations. The
following have been incurred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
For the Fiscal Year Ended
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
|
(In thousands)
|
|
|
Professional fees
|
|
$
|
2,939
|
|
|
$
|
4,051
|
|
|
$
|
9,817
|
|
|
$
|
18,515
|
|
Other
|
|
|
1,371
|
|
|
|
2,107
|
|
|
|
1,710
|
|
|
|
(81
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reorganization items, net
|
|
|
4,310
|
|
|
|
6,158
|
|
|
|
11,527
|
|
|
|
18,434
|
|
Gain on settlement of liabilities
subject to compromise and recapitalization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,558,839
|
)
|
Fresh Start accounting adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(228,371
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on reorganization items
|
|
$
|
4,310
|
|
|
$
|
6,158
|
|
|
$
|
11,527
|
|
|
$
|
(1,768,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash paid for reorganization items during fiscal 2007 and
2006, the period May 6, 2004 to March 31, 2005, and
the period April 1, 2004 to May 5, 2005 was
$4.6 million, $11.6 million, $41.3 million, and
$6.1 million, respectively.
The following provides additional information relating to the
above reorganization items:
Professional
fees
Professional fees include financial, legal and valuation
services directly associated with the reorganization process,
including fees incurred related to asset sales, success fees
payable to the Companys advisors related to emergence from
Chapter 11 and fees for the ongoing claims reconciliation
process. Professional fees for the period April 1, 2004 to
May 5, 2004 include success fees of $12.5 million
payable to the Companys advisors upon emergence from
Chapter 11.
Other
Other primarily represents the Predecessor Company directors and
officers D&O insurance coverage.
|
|
(6)
|
ACCOUNTING
FOR INTANGIBLE ASSETS AND GOODWILL
|
Intangible
Assets
The Company completed its most recent annual impairment
assessment of intangible assets (as required under
SFAS 142) effective March 31, 2007, utilizing its
business plan as the basis for development of cash flows and an
estimate of fair values. No adjustment of carrying values was
deemed necessary.
F-16
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Intangible assets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and
|
|
|
Trademarks and
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames (Not
|
|
|
Tradenames (Subject
|
|
|
Customer
|
|
|
|
|
|
|
|
|
|
Subject to Amortization)
|
|
|
to Amortization)
|
|
|
Relationships
|
|
|
Technology
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
As of March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount
|
|
$
|
56,331
|
|
|
$
|
12,813
|
|
|
$
|
106,594
|
|
|
$
|
23,781
|
|
|
$
|
199,519
|
|
Accumulated Amortization
|
|
|
|
|
|
|
(1,939
|
)
|
|
|
(8,499
|
)
|
|
|
(2,261
|
)
|
|
|
(12,699
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
56,331
|
|
|
$
|
10,874
|
|
|
$
|
98,095
|
|
|
$
|
21,520
|
|
|
$
|
186,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount
|
|
$
|
60,056
|
|
|
$
|
13,660
|
|
|
$
|
113,361
|
|
|
$
|
25,354
|
|
|
$
|
212,431
|
|
Accumulated Amortization
|
|
|
|
|
|
|
(3,147
|
)
|
|
|
(13,855
|
)
|
|
|
(3,667
|
)
|
|
|
(20,669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
60,056
|
|
|
$
|
10,513
|
|
|
$
|
99,506
|
|
|
$
|
21,687
|
|
|
$
|
191,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets for fiscal year 2007 and 2006
was $7 million and $6.7 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 average $7 million.
Intangible assets have been recorded at the proper legal entity
and are subject to foreign currency fluctuations. The change in
the gross amounts, shown above, from fiscal 2006 to fiscal 2007,
result only from foreign currency translation. No other activity
has occurred.
Goodwill
The Companys emergence from bankruptcy on May 6, 2004
resulted in the Successor Company and adoption of Fresh Start
reporting and reporting in accordance with
SOP 90-7.
Fresh Start reporting required the Company to allocate the
reorganization value to its assets based upon their estimated
fair values in accordance with SFAS No. 141.
The fair values of the assets as determined by Fresh Start
reporting were based on estimates of future cash flows. The
estimated enterprise value of the Company of $1.5 billion
which served as the basis for the Plan approved by the
Bankruptcy Court, was used to determine the reorganization
value, which was estimated at $2.7 billion. The portion of
reorganization value which could not be attributed to specific
tangible or identified intangible assets was
$388.5 million. The determination of fair values of assets
and liabilities is subject to significant estimation and
assumptions. The enterprise value that served as the basis for
determining the reorganization value was calculated using the
discounted cash flow method. The cash flows, taken from the
Companys Plan of Reorganization, were projected over five
years, utilizing discount rates of 9% to 11%, respectively, for
the transportation and industrial businesses in order to reflect
the inherent risks of each business. The enterprise value was
based on an assumed tax rate of 0% in the U.S. in years 1
through 3 (in consideration of the Companys NOL tax
position), and 38% in the remaining years. For Europe and ROW, a
tax rate of 25% was assumed for all periods reflected.
The Company completed its annual impairment assessment of
goodwill effective December 31, 2004, utilizing its
five-year business plan as the basis for development of
discounted cash flows and an estimate of fair values. The
Companys impairment assessment also considered the market
value of the Companys securities as of December 31,
2004. As a result of the comparison of the book carrying values
of its reporting units, including goodwill, against these
estimated fair values, the Company determined that goodwill was
fully impaired and wrote down the entire $388.5 million
balance of goodwill in fiscal 2005.
F-17
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventories, valued using the
first-in,
first-out (FIFO) method, consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Raw materials
|
|
$
|
53,337
|
|
|
$
|
64,248
|
|
Work-in-process
|
|
|
89,339
|
|
|
|
79,923
|
|
Finished Goods
|
|
|
268,878
|
|
|
|
270,772
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
411,554
|
|
|
$
|
414,943
|
|
|
|
|
|
|
|
|
|
|
Other assets consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Deposits(a)
|
|
$
|
15,596
|
|
|
$
|
10,317
|
|
Capitalized software, net
|
|
|
2,495
|
|
|
|
6,524
|
|
Loan to affiliate
|
|
|
3,702
|
|
|
|
3,563
|
|
Other
|
|
|
2,913
|
|
|
|
3,686
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,706
|
|
|
$
|
24,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Deposits principally represent amounts held by the beneficiaries
as cash collateral for the Companys contingent obligations
with respect to certain environmental matters, workers
compensation insurance and operating lease commitments. |
At March 31, 2007 and 2006, short-term borrowings of
$14 million and $11.4 million, respectively, consisted
of various operating lines of credit and working capital
facilities maintained by certain of the Companys
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 5.1% and 3.6% at March 31, 2007 and 2006,
respectively.
Total long-term debt at March 31, 2007 comprised the
following:
|
|
|
|
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Senior Secured Credit Facility
|
|
$
|
297,263
|
|
10.5% Senior Secured Notes
due 2013
|
|
|
290,000
|
|
Floating Rate Convertible Senior
Subordinated Notes due 2013
|
|
|
60,000
|
|
Other, including capital lease
obligations and other loans at interest rates generally ranging
up to 11.0% due in installments through 2015
|
|
|
23,240
|
|
|
|
|
|
|
Total
|
|
|
670,503
|
|
Less-current maturities
|
|
|
3,996
|
|
|
|
|
|
|
|
|
$
|
666,507
|
|
|
|
|
|
|
Total debt at March 31, 2007 was $684.5 million.
F-18
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Total long-term debt at March 31, 2006 comprised the
following:
|
|
|
|
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Senior Secured Credit Facility
|
|
$
|
316,277
|
|
10.5% Senior Secured Notes
due 2013
|
|
|
290,000
|
|
Floating Rate Convertible Senior
Subordinated Notes due 2013
|
|
|
60,000
|
|
Other, including capital lease
obligations and other loans at interest rates generally ranging
up to 11.0% due in installments through 2015
|
|
|
23,352
|
|
|
|
|
|
|
Total
|
|
|
689,629
|
|
Less-current maturities
|
|
|
5,643
|
|
|
|
|
|
|
|
|
$
|
683,986
|
|
|
|
|
|
|
Total debt at March 31, 2006 was $701 million.
On May 5, 2004, the Company entered into a
$600 million Senior Secured Credit Agreement (the
Credit Agreement) which included a $500 million
Multi-Currency Term Loan Facility and a $100 million
Multi-Currency Revolving Loan Facility including a letter of
credit sub-facility of up to $40 million. The Revolving
Loan Facility matures on May 5, 2009, while the Term Loan
Facility matures on May 5, 2010. The Term Loan Facility and
the Revolving Loan Facility bear interest at LIBOR plus 6.25%
per annum. Credit Agreement borrowings are guaranteed by
substantially all of the subsidiaries of the Company and are
collateralized by substantially all of the assets of the Company
and the subsidiary guarantors. Availability under the Revolving
Loan Facility and other loan facilities was $59.3 million
and $10.4 million as of March 31, 2007. At
March 31, 2007 and 2006, weighted average interest on the
Credit Agreement was 11.1% and 10.6%, respectively.
The Credit Agreement required the Company to comply with
financial covenants, including a minimum consolidated earnings
before interest, taxes, depreciation, amortization and
restructuring (Adjusted EBITDA) covenant and a
leverage ratio of consolidated debt to adjusted EBITDA for the
relevant periods. The Credit Agreement also contained other
customary covenants, including reporting covenants and covenants
that restrict the Companys ability to incur indebtedness,
create or incur liens, sell or dispose of assets, make
investments, pay dividends, change the nature of the
Companys business or enter into related party transactions.
On May 15, 2007, the Company retired the Credit Agreement
described above, and entered into a new $495 million senior
secured credit facility consisting of a $200 million asset
based revolving senior secured credit facility and a
$295 million term loan facility. See Note 22 for a
complete discussion of the terms and provisions of the new
senior secured credit facility.
In March 2005, the Company issued $290 million in aggregate
principal amount of 10.5% Senior Secured Notes due 2013.
Interest of $15.2 million is payable semi-annually on March
15 and September 15. The 10.5% Senior Secured Notes
are redeemable at the option of the Company, in whole or in
part, on or after March 15, 2009, initially at 105.25% of
the principal amount, plus accrued interest, declining to 100%
of the principal amount, plus accrued interest on or after
March 15, 2011. The 10.5% Senior Secured Notes are
redeemable at the option of the Company, in whole or in part,
subject to payment of a make whole premium, at any time prior to
March 15, 2009. In addition, until May 15, 2008, up to
35% of the 10.5% Senior Secured Notes are redeemable at the
option of the Company, using the net proceeds of one or more
qualified equity offerings. In the event of a change of control
or the sale of certain assets, the Company may be required to
offer to purchase the 10.5% Senior Secured Notes from the
note holders. Those notes are secured by a junior priority lien
on the assets of the U.S. parent company, including the
stock of its subsidiaries. The indenture for these notes
contains financial covenants which limit or restrict the ability
of the Company and its subsidiaries
F-19
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to among other things incur debt, grant liens, pay dividends,
invest in non-subsidiaries, engage in related party transactions
and sell assets.
Also, in March 2005, the Company issued Floating Rate
Convertible Senior Subordinated Notes due September 18,
2013, with an aggregate principal amount of $60 million.
These notes bear interest at a per annum rate equal to the
3-month
LIBOR, adjusted quarterly, minus a spread of 1.5%. The weighted
average interest on these notes was 3.9% and 3.4% at
March 31, 2007 and 2006, respectively. Interest is payable
quarterly. The notes are convertible into the Companys
common stock at a conversion rate of 57.5705 shares per one
thousand dollars principal amount at maturity, subject to
adjustments for any common stock splits, dividends on the common
stock, tender and exchange offers by the Company for the common
stock and third party tender offers, and in the case of a change
in control in which 10% or more of the consideration for the
common stock is cash or non-traded securities, the conversion
rate increases, depending on the value offered and timing of the
transaction, to as much as 70.2247 shares per one thousand
dollars principal amount.
At March 31, 2007, the Company was in compliance in all
material respects with covenants contained in the Credit
Agreement and Indenture agreements that cover the Senior Secured
Notes and Floating Rate Convertible Senior Subordinated Notes.
The Companys variable rate debt at March 31, 2007 and
2006 was $371.2 million and $387.7 million,
respectively, none of which was hedged.
Annual principal payments required under long-term debt
obligations at March 31, 2007 are as follows:
|
|
|
|
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
2008
|
|
$
|
|
|
2009
|
|
|
|
|
2010
|
|
|
|
|
2011
|
|
|
297,263
|
|
2012
|
|
|
|
|
2013 and beyond
|
|
|
350,000
|
|
|
|
|
|
|
Total
|
|
$
|
647,263
|
|
|
|
|
|
|
|
|
(10)
|
EMPLOYEE
BENEFIT PLANS AND POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
BENEFITS
|
On September 29, 2006, the FASB issued
SFAS No. 158, Employers Accounting for
Defined Benefit Pension and other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106 and 132(R)
(SFAS 158). SFAS 158 requires recognition
of the overfunded or underfunded status of pension and other
postretirement benefit plans on the balance sheet. Under
SFAS 158, gains and losses, prior service costs and
credits, and any remaining transition amounts under FASB
Statement No. 87, Employers Accounting for
Pensions (SFAS 87) and FASB Statement
No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions (SFAS 106)
that have not yet been recognized through net periodic benefit
costs will be recognized in accumulated other comprehensive
income (loss), net of tax effects, until they are amortized as a
component of net periodic cost. SFAS 158 does not change
how pensions and other postretirement benefits are accounted for
and reported in the income statement. Companies will continue to
follow the existing guidance in SFAS 87, FASB
Statement No. 88, Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits and SFAS 106.
SFAS 158 was effective for fiscal years
F-20
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
ending after December 15, 2006. The company adopted the
balance sheet recognition provisions of SFAS 158 at
March 31, 2007. The incremental effect of adopting
SFAS 158 is summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Application
|
|
|
|
|
|
After Application
|
|
|
|
of SFAS 158
|
|
|
Adjustments
|
|
|
of SFAS 158
|
|
|
Prepaid expenses and other
|
|
$
|
678
|
|
|
$
|
202
|
|
|
$
|
880
|
|
Deferred income taxes
|
|
|
2,665
|
|
|
|
988
|
|
|
|
3,653
|
|
Accrued expenses and noncurrent
retirement obligations
|
|
|
(298,339
|
)
|
|
|
23,052
|
|
|
|
(275,287
|
)
|
Accumulated deficit
|
|
|
286,909
|
|
|
|
|
|
|
|
286,909
|
|
Accumulated other comprehensive
(income) loss
|
|
|
8,087
|
|
|
|
(24,242
|
)
|
|
|
(16,155
|
)
|
SFAS 158 also requires that employers measure the benefit
obligation and plan assets as of the fiscal year end for fiscal
years ending after December 15, 2008. The company currently
uses a December 31 measurement date for its U.S. pension
and other postretirement benefit plans and a March 31
measurement date for its
non-U.S. plans.
The company intends to eliminate the early measurement date for
its U.S plans in fiscal 2009.
The Company has a noncontributory defined benefit pension plan
that covered substantially all hourly and salaried employees.
During fiscal 2007, the Company announced a freeze to the
benefit accruals for all salaried and non-union hourly
employees. Also, as certain collective bargaining agreements
expired, freezes were negotiated for the union employees covered
by these agreements. Some of the union employees continue to
accrue benefits under the plan due to future expiration dates on
certain collective bargaining agreements.
In Europe and ROW, the Company sponsors several defined benefit
plans that cover substantially all employees who are not covered
by statutory plans. For defined benefit plans, charges to
expense are based upon underlying assumptions established by the
Company in consultation with its actuaries. In most cases, the
defined benefit plans are not funded.
The Company also has defined contribution plans in North
America, Europe, and ROW with related expense of
$6.8 million, $7 million, $5.3 million, and
$0.5 million, for fiscal 2007 and 2006, the period
May 6, 2004 to March 31, 2005, and the period
April 1, 2004 to May 5, 2005, respectively.
F-21
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company provides certain retiree health care and life
insurance benefits for a limited number of employees. The
Company accrues the estimated cost of providing post-retirement
benefits during the employees applicable years of service.
The following tables set forth the plans funded status and
the amounts recognized in the Companys Consolidated
Financial Statements at March 31, 2007 and 2006:
Pension
Benefits:
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Change in benefit
obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of
period
|
|
$
|
638,230
|
|
|
$
|
650,318
|
|
Service cost
|
|
|
9,164
|
|
|
|
10,638
|
|
Interest cost
|
|
|
33,949
|
|
|
|
32,552
|
|
Actuarial (gain) loss
|
|
|
(19,758
|
)
|
|
|
2,408
|
|
Plan participants
contributions
|
|
|
1,170
|
|
|
|
1,218
|
|
Benefits paid
|
|
|
(33,398
|
)
|
|
|
(30,003
|
)
|
Plan amendments
|
|
|
|
|
|
|
258
|
|
Currency translation
|
|
|
34,939
|
|
|
|
(22,698
|
)
|
Settlements and other
|
|
|
762
|
|
|
|
(6,461
|
)
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
665,058
|
|
|
$
|
638,230
|
|
|
|
|
|
|
|
|
|
|
Change in plan
assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of period
|
|
$
|
326,480
|
|
|
$
|
295,298
|
|
Actual return on plan assets
|
|
|
30,924
|
|
|
|
36,136
|
|
Employer contributions
|
|
|
63,553
|
|
|
|
41,082
|
|
Plan participants
contributions
|
|
|
1,170
|
|
|
|
1,218
|
|
Benefits paid
|
|
|
(33,398
|
)
|
|
|
(30,003
|
)
|
Currency translation
|
|
|
18,402
|
|
|
|
(10,129
|
)
|
Settlements and other
|
|
|
1,751
|
|
|
|
(7,122
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end
of period
|
|
$
|
408,882
|
|
|
$
|
326,480
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded
status:
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
665,058
|
|
|
$
|
638,230
|
|
Fair value of plan assets at end
of period
|
|
|
408,882
|
|
|
|
326,480
|
|
Funded status
|
|
|
(256,176
|
)
|
|
|
(311,750
|
)
|
Prior service cost
|
|
|
see note
|
(a)
|
|
|
258
|
|
Unrecognized actuarial loss
|
|
|
see note
|
(a)
|
|
|
11,654
|
|
Contributions after measurement
date
|
|
|
8,273
|
|
|
|
7,908
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of
period
|
|
$
|
(247,903
|
)
|
|
$
|
(291,930
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in Statement
of Financial Position:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other
|
|
|
see note
|
(a)
|
|
$
|
332
|
|
Noncurrent other assets
|
|
|
880
|
|
|
|
see note
|
(a)
|
Accrued expenses
|
|
|
(9,468
|
)
|
|
|
(12,093
|
)
|
Noncurrent retirement obligations
|
|
|
(239,315
|
)
|
|
|
(312,677
|
)
|
F-22
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Intangible asset
|
|
|
see note
|
(a)
|
|
|
258
|
|
Accumulated other comprehensive
(income) loss
|
|
|
see note
|
(a)
|
|
|
32,250
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of
period
|
|
$
|
(247,903
|
)
|
|
$
|
(291,930
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in
accumulated other comprehensive (income) loss:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
264
|
|
|
|
see note
|
(a)
|
Net actuarial (gain)
|
|
|
(16,415
|
)
|
|
|
see note
|
(a)
|
|
|
|
|
|
|
|
|
|
Net amount recognized in
accumulated other comprehensive (income) loss:
|
|
$
|
(16,151
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded pension cost
|
|
$
|
(264,054
|
)
|
|
$
|
(291,930
|
)
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement
Benefits:
|
|
|
|
|
|
|
|
|
Change in benefit
obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of
period
|
|
$
|
30,149
|
|
|
$
|
24,684
|
|
Service cost
|
|
|
167
|
|
|
|
101
|
|
Interest cost
|
|
|
1,487
|
|
|
|
1,573
|
|
Actuarial (gain) loss
|
|
|
(1,817
|
)
|
|
|
6,509
|
|
Plan participants
contributions
|
|
|
166
|
|
|
|
195
|
|
Benefits paid
|
|
|
(3,247
|
)
|
|
|
(3,023
|
)
|
Currency translation
|
|
|
146
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
27,051
|
|
|
$
|
30,148
|
|
|
|
|
|
|
|
|
|
|
Change in plan
assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of period
|
|
$
|
|
|
|
$
|
|
|
Employer contributions
|
|
|
3,081
|
|
|
|
2,828
|
|
Plan participants
contributions
|
|
|
166
|
|
|
|
195
|
|
Benefits paid
|
|
|
(3,247
|
)
|
|
|
(3,023
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end
of period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded
status:
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
27,051
|
|
|
$
|
30,148
|
|
Fair value of plan assets at end
of period
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(27,051
|
)
|
|
|
(30,148
|
)
|
Unrecognized actuarial loss
|
|
|
see note
|
(a)
|
|
|
5,532
|
|
Contributions after measurement
date
|
|
|
547
|
|
|
|
505
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of
period
|
|
$
|
(26,504
|
)
|
|
$
|
(24,111
|
)
|
|
|
|
|
|
|
|
|
|
F-23
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Amounts recognized in statement
of financial position:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
(2,529
|
)
|
|
$
|
(3,539
|
)
|
Noncurrent retirement obligations
|
|
|
(23,975
|
)
|
|
|
(20,572
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of
period
|
|
$
|
(26,504
|
)
|
|
$
|
(24,111
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in
accumulated other comprehensive (income) loss:
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
3,649
|
|
|
|
see note
|
(a)
|
|
|
|
|
|
|
|
|
|
Net amount recognized in
accumulated other comprehensive (income) loss:
|
|
$
|
3,649
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded postretirement benefit
cost
|
|
$
|
(22,855
|
)
|
|
$
|
(24,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amounts above for fiscal year 2007 include the effect of
adopting SFAS 158. Fiscal year 2006 amounts have not been
restated. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Other Post-Retirement
|
|
|
|
Benefits
|
|
|
Benefits
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Weighted-average assumptions as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.5
|
%
|
|
|
5.2
|
%
|
|
|
5.7
|
%
|
|
|
5.4
|
%
|
Rate of compensation increase
|
|
|
3.7
|
%
|
|
|
3.7
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Expense Assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement
|
|
|
|
Pension Benefits
|
|
|
Benefits
|
|
|
|
FY 2008
|
|
|
FY 2007
|
|
|
FY 2008
|
|
|
FY 2007
|
|
|
|
Expense
|
|
|
Expense
|
|
|
Expense
|
|
|
Expense
|
|
|
Weighted-average assumptions for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.5
|
%
|
|
|
5.2
|
%
|
|
|
5.7
|
%
|
|
|
5.4
|
%
|
Expected return on plan assets
|
|
|
6.9
|
%
|
|
|
6.9
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Rate of compensation increase
|
|
|
3.7
|
%
|
|
|
3.7
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
For fiscal year 2007 expense, the Company assumed an expected
weighted average return on plan assets of 6.9%. In developing
this rate assumption, the Company evaluated input from third
party pension plan asset managers, including their review of
asset class return expectations and long-term inflation
assumptions.
For other post-retirement benefit measurement purposes, an
annual rate of 10% and 9.7% increase in the per capita cost of
covered health care benefits was assumed for 2007 and 2006,
respectively. The rate was assumed to decrease gradually to 5%
over eight and seven years for 2007 and 2006, respectively, and
remain at that level thereafter.
F-24
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following tables set forth the plans expense
recognized in the Companys Consolidated Financial
Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 05, 2004
|
|
|
|
(In thousands)
|
|
|
Components of net periodic benefit
cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
9,164
|
|
|
$
|
10,638
|
|
|
$
|
9,596
|
|
|
$
|
856
|
|
Interest cost
|
|
|
33,949
|
|
|
|
32,552
|
|
|
|
31,586
|
|
|
|
2,798
|
|
Expected return on plan assets
|
|
|
(24,923
|
)
|
|
|
(21,179
|
)
|
|
|
(19,406
|
)
|
|
|
(1,640
|
)
|
Amortization of: Prior service cost
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Actuarial (gain) loss
|
|
|
(1,210
|
)
|
|
|
|
|
|
|
|
|
|
|
836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost(a)
|
|
$
|
16,999
|
|
|
$
|
22,011
|
|
|
$
|
21,776
|
|
|
$
|
2,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Excludes the impact of settlement net losses of
$0.6 million, and $0.2 million in fiscal 2006 and in
the period from May 6, 2004 to March 31, 2005,
respectively and curtailment net (gains) of ($0.8) million
and ($0.6) million in fiscal 2006 and in the period from
May 6, 2004 to March 31, 2005, respectively. |
|
(b) |
|
$1.4 million of income will be amortized from accumulated
other comprehensive (income) loss into net periodic benefit cost
in fiscal 2008 relating to the Companys pension plans. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement Benefits
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 05, 2004
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Components of net periodic benefit
cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
167
|
|
|
$
|
101
|
|
|
$
|
82
|
|
|
$
|
6
|
|
|
|
|
|
Interest cost
|
|
|
1,487
|
|
|
|
1,573
|
|
|
|
1,222
|
|
|
|
147
|
|
|
|
|
|
Amortization of: Transition
obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
Prior service cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52
|
)
|
|
|
|
|
Actuarial loss
|
|
|
84
|
|
|
|
208
|
|
|
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
1,738
|
|
|
$
|
1,882
|
|
|
$
|
1,304
|
|
|
$
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
$0.1 million of expense will be amortized from accumulated
other comprehensive (income) loss into net periodic benefit cost
in fiscal 2008 relating to the Companys other post
retirement benefit plans. |
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for the pension plans
with accumulated benefit obligations in excess of plan assets
were $492.6 million, $484.2 million and
$241.1 million, respectively, as of March 31, 2007 and
$488.6 million, $480 million, and $189.8 million,
respectively, as of March 31, 2006.
F-25
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The accumulated benefit obligation for the Companys
pension plans was $626.7 million as of March 31, 2007.
Expected future benefit payments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Other
|
|
|
|
|
|
|
Post-Retirement
|
|
|
Post-Retirement
|
|
|
|
|
|
|
Gross Expected
|
|
|
Expected Medicare
|
|
Fiscal Year
|
|
Pension Benefits
|
|
|
Benefit Payments
|
|
|
Subsidy Payments
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
2008
|
|
$
|
33,356
|
|
|
|
2,729
|
|
|
$
|
200
|
|
2009
|
|
|
33,939
|
|
|
|
2,748
|
|
|
|
200
|
|
2010
|
|
|
34,202
|
|
|
|
2,663
|
|
|
|
200
|
|
2011
|
|
|
34,724
|
|
|
|
2,488
|
|
|
|
200
|
|
2012
|
|
|
36,266
|
|
|
|
2,402
|
|
|
|
200
|
|
2013 to 2017
|
|
|
198,425
|
|
|
|
11,988
|
|
|
|
1,200
|
|
The asset allocation for the Companys pension plans at
March 31, 2007, and the long term target allocation, by
asset category, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
|
|
|
|
|
|
Allocation
|
|
|
Percentage of Plan Assets at Year End
|
|
Asset Category
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Equity securities
|
|
|
66
|
%
|
|
|
65
|
%
|
|
|
71
|
%
|
Fixed income securities
|
|
|
33
|
%
|
|
|
31
|
%
|
|
|
26
|
%
|
Real estate and other
|
|
|
0
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
Cash
|
|
|
1
|
%
|
|
|
3
|
%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company invests in a diversified portfolio of investments
consisting almost entirely of equity and fixed income
securities. The equity portfolio includes direct and indirect
interests in both U.S. and global equity securities, both
in developed and emerging market companies. The fixed income
portfolio is primarily U.S. and global high-quality bond
funds.
The estimated fiscal 2008 pension plan contributions are
$53.1 million and other post-retirement contributions are
$2.5 million.
Cash contributions to the Companys pension plans are
generally made in accordance with minimum regulatory
requirements. The Companys U.S. plans are currently
significantly under-funded. Based on current assumptions and
regulatory requirements, the Companys minimum future cash
contribution requirements for its U.S. plans are expected
to remain relatively high for the next few fiscal years. On
November 17, 2004, the Company received written
notification of a tentative determination from the Internal
Revenue Service (IRS) granting a temporary waiver of
its minimum funding requirements for its U.S. plans for
calendar years 2003 and 2004, amounting to approximately
$50 million, net, under Section 412(d) of the Internal
Revenue Code, subject to providing a lien satisfactory to the
Pension Benefit Guaranty Corporation (PBGC). On
June 10, 2005, the Company reached agreement with the PBGC
on a second priority lien on domestic personal property,
including stock of its U.S. and direct foreign subsidiaries
to secure the unfunded liability. The temporary waiver provides
for deferral of the Companys minimum contributions for
those years to be paid over a subsequent five-year period
through 2010.
Based upon the temporary waiver and sensitivity to varying
economic scenarios, the Company expects its cumulative minimum
future cash contributions to its U.S. pension plans will
total approximately $70 million to $125 million from
fiscal 2008 to fiscal 2012, including $35 million in fiscal
2008.
F-26
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company expects that cumulative contributions to its non
U.S. pension plans will total approximately
$93.2 million from fiscal 2008 to fiscal 2012, including
$18.1 million in fiscal 2008. In addition, the Company
expects that cumulative contributions to its other
post-retirement benefit plans will total approximately
$13 million from fiscal 2008 to fiscal 2012, including
$2.5 million in fiscal 2008.
Assumed health care cost trend rates have a significant effect
on the amounts reported for other post-retirement benefits. A
one-percentage-point change in assumed health care cost trend
rates would have the following effects:
|
|
|
|
|
|
|
|
|
|
|
One Percentage-
|
|
One Percentage-
|
|
|
Point Increase
|
|
Point Decrease
|
|
Effect on total of service and
interest cost components
|
|
$
|
189
|
|
|
$
|
156
|
|
Effect on the postretirement
benefit obligation
|
|
$
|
2,589
|
|
|
$
|
2,211
|
|
|
|
(11)
|
STOCK
BASED COMPENSATION PLANS
|
Effective April 1, 2006, the Company adopted SFAS 123R
Share-Based Payment (SFAS 123R)
using the modified prospective transition method. SFAS 123R
requires that the cost resulting from all share-based payment
transactions be recognized in the financial statements.
SFAS 123R also establishes fair value as the measurement
method in accounting for share-based payments. This method
requires the Company to expense the remaining unrecognized
portion of unvested awards outstanding at the effective date and
any awards granted or modified after the effective date, but
does not require restatement of prior periods. The fair values
of stock awards are determined using an estimated expected life.
The Company recognizes compensation expense on a straight-line
basis over the period the award is earned by the employee.
On August 30, 2005, the stockholders approved the 2004
Stock Incentive Plan (the 2004 Plan) to provide
incentives and awards to employees and directors of the Company
as well as certain consultants. Under the Plan, all employees
are eligible to receive awards. The 2004 Plan, as amended,
permits the granting of stock options, restricted shares,
restricted share units, and performance awards. The maximum
number of shares that the Company may issue is 7.1 million
for all awards, but not more than 1.9 million shares as
restricted shares or restricted share units.
Under the terms of the 2004 Plan, stock options are generally
subject to a three-year vesting schedule, and generally expire
10 years from the option grant date. Shares of restricted
stock are generally subject to a five-year vesting schedule. In
addition, as part of their annual compensation, each
non-employee member of the Companys Board of Directors
received stock options and restricted stock. These awards are
generally 100% vested one year after the grant date. The vesting
schedules for the awards are subject to certain change in
control provisions, including full vesting if an employee is
terminated within 12 months of a change in control. The per
share exercise price for the stock options is calculated based
on a 10-day
trailing average closing price of the Companys common
stock as listed on The NASDAQ Global Market immediately prior to
the award date.
Total compensation cost related to stock compensation plans was
$2.5 million and $0.5 million for fiscal 2007 and
2006, respectively. The Company did not incur stock compensation
cost in the period May 6, 2004 to March 31, 2005, or
the period April 1, 2004 to May 5, 2004. As of
March 31, 2007, total compensation cost related to
non-vested awards not yet recognized in the Companys
Consolidated Financial Statements was $15.7 million, which
is expected to be recognized over a weighted average period of
2.9 years.
F-27
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Stock
Option Awards
The fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model. Expected
volatility is calculated based on the historical volatility of
the Companys stock. The risk free interest rate is based
on the U.S. Treasury yield for a term equal to the expected
life of the options at the time of grant. The following table
includes information about the weighted-average fair values of
options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
Weighted average fair value
|
|
$
|
3.66
|
|
|
$
|
2.42
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Expected volatility
|
|
|
64% to 77
|
%
|
|
|
75
|
%
|
|
|
n/a
|
|
|
|
120
|
%
|
Risk-free interest rates
|
|
|
4.5% to 4.9
|
%
|
|
|
4.1% to 4.7
|
%
|
|
|
n/a
|
|
|
|
4.6% to 4.9
|
%
|
Expected term of options
|
|
|
5.5 to 6.5 years
|
|
|
|
10 years
|
|
|
|
n/a
|
|
|
|
5.0 years
|
|
Summary of stock option activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
|
Stock Options
|
|
|
Exercise Price
|
|
|
Contractual Life
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Shares under option:
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2004
|
|
|
3,925
|
|
|
$
|
10.63
|
|
|
|
|
|
Granted
|
|
|
521
|
|
|
$
|
15.73
|
|
|
|
|
|
Forfeited
|
|
|
(35
|
)
|
|
$
|
15.82
|
|
|
|
|
|
Cancelled
|
|
|
(3,925
|
)
|
|
$
|
10.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2005
|
|
|
486
|
|
|
$
|
15.72
|
|
|
|
9.6 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,059
|
|
|
$
|
6.63
|
|
|
|
|
|
Forfeited
|
|
|
(225
|
)
|
|
$
|
13.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2006
|
|
|
1,320
|
|
|
$
|
8.83
|
|
|
|
9.3 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,140
|
|
|
$
|
4.89
|
|
|
|
|
|
Forfeited
|
|
|
(307
|
)
|
|
$
|
7.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2007
|
|
|
3,153
|
|
|
$
|
6.25
|
|
|
|
9.2 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and Exercisable at:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
482
|
|
|
$
|
9.53
|
|
|
|
8.2 years
|
|
March 31, 2006
|
|
|
114
|
|
|
$
|
15.67
|
|
|
|
8.6 years
|
|
March 31, 2005
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
F-28
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Prior to April 1, 2006, the Company accounted for its
stock-based compensation plans under APB Opinion No. 25,
Accounting for Stock Issued to Employees, which only
required the Company to disclose the pro forma effects of stock
option plans on a net income (loss) and net earnings (loss) per
share basis as provided by SFAS No. 123,
Accounting for Stock-Based Compensation. The Company
did not recognize compensation expense in fiscal periods ended
prior to April 1, 2006 with respect to options that had an
exercise price equal to the fair market value of the
Companys common stock on the date of the grant. Had stock
option related compensation expense for these periods been
recognized in the Consolidated Financial Statements based on
fair value at the grant date, the Companys net income
(loss) and net income (loss) per share would have been the pro
forma amounts indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
For the Period
|
|
|
|
Year Ended
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 5,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share data)
|
|
|
Net income (loss) as reported:
|
|
$
|
(172,732
|
)
|
|
$
|
(466,923
|
)
|
|
$
|
1,748,564
|
|
Less: total stock-based employee
compensation expense determined under fair value based method
for all awards, net of related tax effects
|
|
|
(819
|
)
|
|
|
|
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss)
|
|
$
|
(173,551
|
)
|
|
$
|
(466,923
|
)
|
|
$
|
1,748,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income
(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
(6.75
|
)
|
|
$
|
(18.26
|
)
|
|
$
|
63.86
|
|
Pro forma
|
|
$
|
(6.79
|
)
|
|
$
|
(18.26
|
)
|
|
$
|
63.85
|
|
Restricted
Stock Awards
During the fiscal years ended March 31, 2007 and 2006, and
the period from May 6, 2004 to March 31, 2005,
1.1 million, 0.5 million and 0.1 million shares
of restricted stock and or restricted stock units, respectively,
were approved to be granted to certain eligible employees.
Restricted stock transactions during the fiscal year ended
March 31, 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Weighted-Average
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
|
|
|
Outstanding (non-vested) at
March 31, 2006
|
|
|
424
|
|
|
$
|
4.10
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,143
|
|
|
$
|
6.14
|
|
Vested
|
|
|
(226
|
)
|
|
$
|
4.05
|
|
Forfeited
|
|
|
(73
|
)
|
|
$
|
3.88
|
|
|
|
|
|
|
|
|
|
|
Outstanding (non-vested) at
March 31, 2007
|
|
|
1,268
|
|
|
$
|
7.85
|
|
|
|
|
|
|
|
|
|
|
F-29
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The provision for income taxes includes federal, state and
foreign taxes currently payable and those deferred because of
net operating losses and temporary differences between the
financial statement and tax bases of assets and liabilities. The
components of the provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
191
|
|
|
$
|
637
|
|
|
$
|
|
|
|
$
|
|
|
Foreign
|
|
|
11,942
|
|
|
|
15,361
|
|
|
|
7,668
|
|
|
|
697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,133
|
|
|
|
15,998
|
|
|
|
7,668
|
|
|
|
697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
(6,350
|
)
|
|
|
(36
|
)
|
|
|
6,551
|
|
|
|
(3,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,350
|
)
|
|
|
(36
|
)
|
|
|
6,551
|
|
|
|
(3,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision (benefit)
|
|
$
|
5,783
|
|
|
$
|
15,962
|
|
|
$
|
14,219
|
|
|
$
|
(2,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major differences between the federal statutory rate and the
effective tax rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
Federal statutory rate
|
|
|
(35.0
|
)%
|
|
|
(35.0
|
)%
|
|
|
(35.0
|
)%
|
|
|
(35.0
|
)%
|
Loss on Liquidation
|
|
|
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
I/C Debt Forgiveness
|
|
|
|
|
|
|
(20.0
|
)
|
|
|
|
|
|
|
|
|
Thin Cap Disallowance
|
|
|
11.3
|
|
|
|
2.5
|
|
|
|
|
|
|
|
2.1
|
|
Nondeductible goodwill
impairment/amortization
|
|
|
|
|
|
|
|
|
|
|
30.1
|
|
|
|
|
|
Fresh start accounting adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.6
|
|
Discharge of liabilities subject
to compromise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2
|
|
Tax losses not benefited
|
|
|
|
|
|
|
|
|
|
|
(9.9
|
)
|
|
|
0.2
|
|
Increase (decrease) in valuation
allowances
|
|
|
46.9
|
|
|
|
61.4
|
|
|
|
9.2
|
|
|
|
|
|
Revaluation of Warrants
|
|
|
1.1
|
|
|
|
(2.0
|
)
|
|
|
(4.9
|
)
|
|
|
|
|
Rate differences on foreign
subsidiaries
|
|
|
(17.2
|
)
|
|
|
(3.7
|
)
|
|
|
7.1
|
|
|
|
(0.2
|
)
|
Intercompany stock sales
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
|
|
|
Refund of previously paid taxes
|
|
|
(3.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
2.6
|
|
|
|
4.2
|
|
|
|
3.3
|
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
5.8
|
%
|
|
|
10.2
|
%
|
|
|
3.1
|
%
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a summary of the significant components of the
Companys deferred tax assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Operating loss and tax credit
carry-forwards
|
|
$
|
321,939
|
|
|
$
|
298,312
|
|
Compensation reserves
|
|
|
64,632
|
|
|
|
80,659
|
|
Environmental reserves
|
|
|
12,856
|
|
|
|
12,797
|
|
Warranty
|
|
|
13,207
|
|
|
|
11,434
|
|
Purchase commitments
|
|
|
4,781
|
|
|
|
7,160
|
|
Other
|
|
|
39,023
|
|
|
|
32,412
|
|
Valuation allowance
|
|
|
(321,001
|
)
|
|
|
(300,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
135,437
|
|
|
|
142,056
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(37,625
|
)
|
|
|
(46,849
|
)
|
Intangible assets
|
|
|
(53,008
|
)
|
|
|
(61,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(90,633
|
)
|
|
|
(108,222
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
44,804
|
|
|
$
|
33,834
|
|
|
|
|
|
|
|
|
|
|
The net deferred income tax asset is classified in the
consolidated balance sheet as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Current asset
|
|
$
|
19,030
|
|
|
$
|
11,066
|
|
Noncurrent asset
|
|
|
67,006
|
|
|
|
56,358
|
|
Noncurrent liability
|
|
|
(41,232
|
)
|
|
|
(33,590
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
44,804
|
|
|
$
|
33,834
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2007 the Company has net operating loss
carry-forwards (NOLs) for U.S. and state income
tax purposes of $399 million. These loss carry-forwards
will expire in years 2024 through 2027. The Company has
determined that a Sec. 382 ownership change occurred during the
fiscal year ending March 31, 2007. See Note 18. IRC
Sec. 382 places annual limits on the amount of the
Companys U.S. and state NOLs that may be used to
offset future taxable income. The Company has calculated its
annual Sec. 382 limitation on U.S. and state losses
incurred prior to September 15, 2006 to range between
$5 million and $8 million over the next twenty years.
Had a Sec. 382 ownership change not occurred during the year,
the Company would have had U.S. and state NOLs available of
$1.5 billion.
At March 31, 2007, certain of the Companys foreign
subsidiaries have net operating loss carry-forwards for income
tax purposes of approximately $888 million, of which
approximately $151 million expire in fiscal years 2007
through 2022. The remaining losses are available for
carry-forward indefinitely.
A full valuation allowance has been provided on Exide
Technologies (the U.S. parent company) and all of its
U.S. subsidiaries. Additionally, valuation allowances have
been recognized in certain foreign tax jurisdictions, to reduce
the deferred tax assets for net operating loss carry-forwards
and temporary differences for which it is more likely than not
that the related tax benefits will not be realized. In other
jurisdictions (primarily Germany and Australia), the
Companys net deferred tax assets include net operating
loss carry-
F-31
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
forwards and temporary differences which management believes are
realizable through a combination of forecasted future taxable
income and anticipated tax planning strategies. The Company has
implemented certain tax planning strategies in prior years to
utilize a portion of such deferred tax assets. Failure to
achieve forecasted future taxable income might affect the
ultimate realization of any remaining deferred tax assets.
As of March 31, 2007, the Company had not provided for
withholding or U.S. Federal income taxes on current year
undistributed earnings of certain other foreign subsidiaries
since such earnings are expected to be reinvested indefinitely
or be substantially offset by available foreign tax credits and
operating loss carry forwards. As of March 31, 2007, the
Company had approximately $93 million of undistributed
earnings in its foreign subsidiaries. It is not practicable to
determine the amount of unrecognized deferred U.S. income
tax liability on these unremitted earnings.
|
|
(13)
|
COMMITMENTS
AND CONTINGENCIES
|
Claims
Reconciliation
Holders of general unsecured claims will receive collectively
2.5 million shares of new common stock and Warrants to
purchase 6.25 million shares of new common stock at $32.11
per share, adjusted to 6.6 million shares with a exercise
price of $30.31 per share based on the closing of the
$75 million rights offering and $50 million private
sale of common stock in September 2006. Approximately 13.4% of
such new common stock and Warrants were initially reserved for
distribution for disputed claims under the Plans claims
reconciliation and allowance procedures. 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 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 inherently difficult to make. With
respect to environmental claims in particular, there is an
inherent difficulty in assessing the Companys 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 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, are 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 Companys 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 of the Company 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 of the Plan,
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-
F-32
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
On April 20 2007, the Company made its 12th distribution of
new common stock and warrants for disputed general unsecured
claims. Based on information available as of June 8, 2007,
approximately 8.5% of new stock and warrants reserved for this
purpose have been distributed. The Company also continues to
resolve certain non-objected claims.
Historical
Federal Plea Agreement
In 2001, the Company reached a plea agreement with the
U.S. Attorney for the Southern District of Illinois
resolving an investigation into a scheme by former officers and
certain corporate entities involving fraudulent representations
and promises in connection with the distribution, sale and
marketing of automotive batteries between 1994 and 1997. The
Company agreed to pay a fine of $27.5 million over five
years, five-years probation and to cooperate with the
U.S. Attorney in its prosecution of the former officers.
The Company was sentenced pursuant to the terms of the plea
agreement in February 2002. Generally, failure to comply with
the provisions of the plea agreement, including the obligation
to pay the fine, would permit the U.S. Government to reopen
the case against the Company.
On April 15, 2002, the Company filed for protection under
Chapter 11 of the Bankruptcy Code. Later in 2002, the
U.S. Attorneys Office for the Southern District of
Illinois filed a claim as a general unsecured creditor of the
Companys subsidiary, Exide Illinois, Inc. for
$27.9 million. The Company did not pay any installments of
the criminal fine before or during its bankruptcy proceedings,
nor did it pay any installments of the criminal fine after the
Company emerged from bankruptcy in May 2004. As previously
reported, if the U.S. Government were to assert that the
obligation to pay the fine was not discharged under the Plan of
Reorganization, the Company could be required to pay it.
In December 2004, the U.S. Attorneys Office requested
additional information regarding whether the Company adequately
disclosed its financial condition at the time the plea agreement
and the associated fine were approved by the U.S. District
Court. The Company supplied correspondence and other materials
responsive to this request.
On November 18, 2005 the U.S. Attorneys Office
filed a motion in the District Court for a hearing to make
inquiry of the Companys failure to comply with the
Courts judgment and terms of probation, principally
through failure to pay the fine, and a motion to show cause why
the Company should not be held in contempt. In its motion, the
U.S. Attorneys Office asserted that Exide Illinois
was in default from its nonpayment of the criminal fine and was
in violation of the terms of probation. The U.S. Attorney
also asserted that bankruptcy does not discharge criminal fines,
and that the Company did not adequately disclose its financial
condition at the time the plea agreement and associated fines
were approved by the District Court.
On May 31, 2006, the District Court approved a Joint
Agreement and Proposed Joint Resolution of Issues Raised in the
Governments Motion Filed on November 18, 2005
regarding the payment of criminal fine. The District Court
entered an order consistent with the Joint Agreement and
Proposed Joint Resolution, and modified the Companys
schedule to pay the $27.5 million fine through quarterly
payments over the next five years, ending in 2011.
Under the order, Exide Technologies was required provide
security in a form acceptable to the court and to the government
by February 26, 2007 for its guarantee of any remaining
unpaid portion of the fine, but could petition the court prior
thereto if the Company believed its financial viability would be
jeopardized by providing such security. The courts order
reflects that the Company is not obligated to pay interest on
outstanding amounts of unpaid fine if the Company is current on
all installment payments, and allows for penalties and interest
to be imposed if the Company does not comply with the modified
fine payment schedule. On January 25, 2007, the Court
entered an order which provided, in part, that Exide is excused
from
F-33
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the requirement to provide adequate security to the United
States before the expiration of its term of probation for the
remaining unpaid fine amount.
Pre-Petition
Litigation Settlements
The Company previously disclosed in its most recent Report on
Form 10-K
for fiscal 2006 tentative settlements with various plaintiffs
who alleged personal injury
and/or
property damage from the release of hazardous materials used in
the battery manufacturing process prior to the Companys
filing for Chapter 11 bankruptcy protection. The Company
has finalized a settlement of these claims, as well as claims
they could have asserted against third parties who may have had
claims of indemnification against the Company on a pre-petition
or post-petition basis. The claims will be paid in new common
stock and Warrants to be paid out of the reserve established
under the claims reconciliation process. The terms of the
settlement are still subject to approval of appropriate state
courts.
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
Companys request to reject the contracts which EnerSys
appealed. Unless the appeal is successful, EnerSys will likely
lose all rights to use the Exide trademark over time
and the Company will have greater flexibility in its ability to
use that mark for industrial battery products. 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 2006, the Bankruptcy Court ordered a two year
transition period and denied Enersys motion for a stay.
Enersys has appealed that order.
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 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 Exide. In August 2002, the case
was removed 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 PDHs motion to abstain or
remand the case and issued an opinion holding that the
Bankruptcy Court had jurisdiction over PDHs claims and
that liability, if any, would lie solely against Exide
Technologies and not against any of its foreign affiliates. The
Bankruptcy Court denied PDHs motion to reconsider. In an
order dated March 22, 2007, the U.S. District Court
for the District of Delaware denied PDHs appeal in its
entirety, affirming the Orders of the Bankruptcy Court. PDH has
noticed its appeal of this Order to the United States Court of
Appeals for the Third Circuit
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
Exide under various agreements between the parties. The claim
arises from letters of credit and other security allegedly
provided by PDH for GNBs performance of certain of
GNBs obligations to third parties that PDH claims Exide
was obligated to
F-34
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
replace. Exides answer contested the amounts claimed by
PDH and Exide filed a counterclaim. Although this action has
been consolidated with the Cook County suit concerning
GNBs 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.
From 1957 to 1982, CEAC, the Companys principal French
subsidiary, operated a plant using crocidolite asbestos fibers
in the formation of battery cases, which, once formed,
encapsulated the fibers. Approximately 1,500 employees
worked in the plant over the period. Since 1982, the French
governmental agency responsible for worker illness claims
received 64 employee claims alleging asbestos-related
illnesses. For some of those claims, CEAC is obligated to and
has indemnified the agency in accordance with French law for
approximately $0.4 million in calendar 2004. In addition,
CEAC has been adjudged liable to indemnify the agency for
approximately $0.1 million during the same period for the
dependents of four such claimants. The Company was not required
to indemnify or make any payments in calendar years 2005 and
2006. Although the Company cannot predict the number or size of
any future claims, the Company does not believe resolution of
the current or any future claims, individually or in the
aggregate, will have a material adverse effect on the
Companys financial condition, cash flows or results of
operations.
In June 2005 two former stockholders, Aviva Partners LLC and
Robert Jarman filed purported class action lawsuits against the
Company and certain of its current and former officers alleging
violations of certain federal securities laws in the United
States District Court for the District of New Jersey purportedly
on behalf of those who purchased the Companys stock
between November 16, 2004 and May 17, 2005. The
complaints allege that the named officers violated
Sections 10(b) and 20(a) of the Securities Exchange Act and
SEC
Rule 10b-5
in connection with certain allegedly false and misleading public
statements made during this period by the Company and its
officers. The complaints did not specify an amount of damages
sought. The Company denies the allegations in the complaints and
intends to vigorously pursue its defense.
United States District Judge Mary L. Cooper consolidated the
Aviva Partners and Jarman cases under the Aviva Partners v.
Exide Technologies, Inc. caption. In 2006 Plaintiffs filed their
consolidated amended complaint in which they reiterated the
claims described above but purported to state a claim on behalf
of those who purchased the Companys stock between
May 5, 2004 and May 17, 2005. On March 13, 2007,
the Court denied Defendants motions to dismiss. Discovery
in this litigation is proceeding and is expected to continue
throughout the remainder of 2007 and 2008. No trial date has
been set in this matter.
In October 2005, Murray Capital Management, Inc., filed suit
against the Company, certain of its current and former officers
and Deutsche Bank Securities, Inc in the U.S. District
Court for the Southern District of New York alleging that the
defendants violated Sections 10(b) and 20(a) of the
Securities Exchange Act and SEC
Rule 10b-5,
and related state laws, in connection with certain allegedly
false and misleading public statements made by the Company and
its officers. While Murrays claims are largely duplicative
of those set out in the Aviva and Jarman complaints, Murray also
claims that false and misleading statements were made in
connection with the Companys March 2005 issuance of
convertible notes and concurrent issuance of senior notes. The
complaint does not specify the amount of damages sought in the
suit. The Company is indemnifying Deutsche Bank pursuant to the
Purchase Agreement under which the notes were issued. The Court
granted the Companys motion to dismiss the complaint and
permitted the plaintiff to file an amended complaint, which it
did. Defendants moved to dismiss the amended complaint. The
Court subsequently granted Deutsche Banks motion to
dismiss but denied the Companys motion and ordered that
discovery proceed in connection with Plaintiffs claims
against the Company and certain of its current and former
officers. Discovery is proceeding and is expected to continue
throughout the remainder of 2007 and the first half of 2008. No
trial date has been set in this matter.
In August 2006 a shareholder derivative complaint was filed in
the District Court for the District of New Jersey by Marilyn
Richardson against certain current and former officers and
directors. The suit alleges that
F-35
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
named parties breached their fiduciary duties to the Company by,
among other things, making statements between November, 2004 and
July, 2005 which plaintiffs claim were false and misleading and
by allegedly failing to implement adequate internal controls and
means of supervision at the Company. The suit seeks an
unspecified amount of damages from the named parties and
modifications to the Companys corporate governance
policies. The allegations in the complaint are similar to the
Aviva Partners and Jarman shareholder class action suits
described above. The individual defendants intend to vigorously
defend the suit. Individual defendants have moved to dismiss the
shareholder derivative complaint. In addition, the Company, on
whose behalf these claims purport to be brought, has moved to
dismiss the shareholder derivative complaint on the grounds that
the derivative plaintiff did not file the claims in accordance
with applicable laws governing the filing of derivative suits.
In November 2006, the Company received a letter addressed to its
directors from a law firm representing investment funds or
accounts managed by Stanfield Capital Partners LLC
(Stanfield). According to the letter, Stanfield
holds major positions in the Companys convertible notes
and also holds positions in the Companys senior notes and
its Credit Agreement debt. Such letter stated, among other
things, that Stanfield believed the Company was in default under
the Credit Agreement and the note indentures because the
$27.5 million fine described above under Historical
Federal Plea Agreement constituted a judgment in excess of
the judgment amounts permitted under such indentures. The letter
also said that Stanfield believed there were breaches of the
Companys disclosure obligations in connection with the
March 2005 note issuances relating to the 2001 criminal fine,
the status and value of certain product inventories and
statements as to likely fiscal 2005 results. The Company has
discussed these allegations with Stanfield. The Company believes
that all such assertions are without merit.
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 Companys
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.
The Companys Norwegian subsidiary, Exide Sonnak AS, has
received notice of claims for property damage in the approximate
amount of $5.6 million allegedly as the result of a
warehouse fire occurring on or about July 8, 2005 in
Trondheim, Norway due to an alleged malfunctioning battery
charger allegedly manufactured by the Company. The Company and
its counsel are evaluating those claims. The Company currently
believes that any potential liability would be covered by
applicable insurance, subject to the relevant deductible.
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, including limits on employee
blood lead levels, 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 (CERCLA) or similar
state laws at 97 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
Companys liability is not discharged at one or more
F-36
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 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 laws 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 Companys 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 courts 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 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 governments claims for the
aforementioned sites (including the stipulated judgment
discussed above) is approximately $20 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 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 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
F-37
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
pay for such cleanup activities, which would preserve the
existing reserved common stock and warrants discussed in
Note 3. Except for the governments cost recovery
claim resolved by the U.S. v. General Battery/Exide case
discussed above, it remains the Companys 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.
This is being performed under a Consent Order with the EPA. The
Company has previously removed soil from properties with the
highest soil lead content, and is in negotiations and
proceedings with the EPA to resolve differences regarding the
need for, and extent of, further actions by the Company.
Alternatives have been reviewed and appropriate reserve
estimates made. At this time the Company cannot determine from
available information whether additional cleanup will occur and,
if so, the extent of any cleanup and costs that may finally be
incurred.
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 March 31, 2007 and 2006, the
amount of such reserves on the Companys Consolidated
Balance Sheets were approximately $34.7 million and
$36.7 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
Companys 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) 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 from $6 million to
$9 million.
Azambuja
(SONALUR) Portugal
The Azambuja (SONALUR) facility is an active secondary lead
recycling plant. Materials from past operations present at the
site are stored in above-ground concrete containment vessels and
in underground storage deposits. The Company finalized the
process of obtaining site characterization data to evaluate
remediation alternatives agreeable to local authorities. Costs
for remediation are currently estimated at $2 million to
$4 million.
F-38
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Guarantees
At March 31, 2007, the Company had outstanding letters of
credit with a face value of $40.7 million and surety bonds
with a face value of $4.5 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 surety in the form of letters of credit at March 31,
2007, pursuant to the terms of the agreement, was
$4.5 million.
Certain of the Companys European subsidiaries have bank
guarantees outstanding, which have been issued as collateral or
financial assurance in connection with environmental
obligations, income tax claims and customer contract
requirements. At March 31, 2007, bank guarantees with a
face value of $19.1 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.
A reconciliation of changes in the Companys consolidated
sales returns and allowances liability follows (in thousands):
|
|
|
|
|
Balance at March 31, 2006
|
|
$
|
45,618
|
|
Accrual for sales returns and
allowances
|
|
|
50,438
|
|
Settlements made (in cash or
credit) and currency translation
|
|
|
(47,530
|
)
|
|
|
|
|
|
Balance at March 31, 2007
|
|
$
|
48,526
|
|
|
|
|
|
|
F-39
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Leases
Future minimum lease payments under operating and capital leases
that have initial or remaining noncancelable lease terms in
excess of one year at March 31, 2007, are:
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Operating
|
|
|
Capital
|
|
|
|
(In thousands)
|
|
|
2008
|
|
$
|
21,456
|
|
|
$
|
4,478
|
|
2009
|
|
|
16,534
|
|
|
|
3,680
|
|
2010
|
|
|
9,965
|
|
|
|
5,138
|
|
2011
|
|
|
6,052
|
|
|
|
1,860
|
|
2012
|
|
|
4,373
|
|
|
|
1,804
|
|
Thereafter
|
|
|
11,774
|
|
|
|
5,226
|
|
|
|
|
|
|
|
|
|
|
Total minimum payments
|
|
$
|
70,154
|
|
|
|
22,186
|
|
|
|
|
|
|
|
|
|
|
Less Interest on
capital leases
|
|
|
|
|
|
|
3,530
|
|
|
|
|
|
|
|
|
|
|
Total principal payable on capital
leases (included in Long-term debt)
|
|
|
|
|
|
$
|
18,656
|
|
|
|
|
|
|
|
|
|
|
Rent expense amounted to $55.6 million, $58 million,
$51.1 million, and $5.5 million, for the fiscal years
ended March 31, 2007 and 2006, the period May 6, 2004
to March 31, 2005, and the period April 1, 2004 to
May 5, 2004, respectively.
The Company has various purchase commitments for materials,
supplies and other items incident to the ordinary course of
business. See Note 17 for discussion of the battery
separator agreement entered into as part of the Companys
sale of these operations.
During fiscal 2007, 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.
F-40
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During the year ended March 31, 2007, the Company
recognized restructuring charges of $24.5 million,
representing $15.1 million for severance and
$9.4 million for related closure costs. These charges
resulted from actions completed during fiscal 2007, which
related to Closure of the North American Transportation site of
Shreveport, to continued consolidation efforts in the Industrial
Energy Europe and ROW segment, closure costs for the
Companys Casalnuovo, Italy industrial facility, corporate
severance, and headcount reductions in the Transportation Europe
and ROW segment. Approximately 438 positions have been
eliminated in connection with the fiscal 2007 restructuring
activities. The following is a summary of restructuring reserve
movements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closure
|
|
|
|
|
|
|
Severance
|
|
|
Costs
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Balance, March 31, 2004
|
|
$
|
29,574
|
|
|
$
|
12,925
|
|
|
$
|
42,499
|
|
Charges
|
|
|
190
|
|
|
|
394
|
|
|
|
584
|
|
Payments and currency translation
|
|
|
(4,900
|
)
|
|
|
(1,556
|
)
|
|
|
(6,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 5, 2004
|
|
|
24,864
|
|
|
|
11,763
|
|
|
|
36,627
|
|
Charges
|
|
|
32,066
|
|
|
|
6,413
|
|
|
|
38,479
|
|
Payments and currency translation
|
|
|
(31,071
|
)
|
|
|
(9,039
|
)
|
|
|
(40,110
|
)
|
Reclassification
|
|
|
1,159
|
|
|
|
|
|
|
|
1,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2005
|
|
|
27,018
|
|
|
|
9,137
|
|
|
|
36,155
|
|
Charges
|
|
|
14,392
|
|
|
|
7,322
|
|
|
|
21,714
|
|
Payments and Currency Translation
|
|
|
(34,637
|
)
|
|
|
(13,434
|
)
|
|
|
(48,071
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2006
|
|
|
6,773
|
|
|
|
3,025
|
|
|
|
9,798
|
|
Charges
|
|
|
15,056
|
|
|
|
9,427
|
|
|
|
24,483
|
|
Payments and Currency Translation
|
|
|
(19,969
|
)
|
|
|
(8,649
|
)
|
|
|
(28,618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2007
|
|
$
|
1,860
|
|
|
$
|
3,803
|
|
|
$
|
5,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining expenditures principally represent a) severance
and related benefits payable per employee agreements over
periods up to three years
and/or
regulatory requirements; b) 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, over periods up to five years; and
c) certain other closure costs including dismantlement and
costs associated with removal obligations incurred in connection
with the exit of facilities.
F-41
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following tables provide additional detail of specific
restructuring actions taken during each of the fiscal periods
covered in the table above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure
|
|
|
|
|
Fiscal 2007
|
|
Costs
|
|
|
Costs
|
|
|
Totals
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
U.S. Headcount Reductions
(including Corporate)
|
|
$
|
44
|
|
|
$
|
7
|
|
|
$
|
51
|
|
Closure of Shreveport, LA
(Transportation Americas)
|
|
|
3,992
|
|
|
|
4,592
|
|
|
|
8,584
|
|
Industrial Americas
|
|
|
(214
|
)
|
|
|
877
|
|
|
|
663
|
|
Nanterre, France
|
|
|
758
|
|
|
|
122
|
|
|
|
880
|
|
Casalnuovo, Italy
|
|
|
36
|
|
|
|
1,687
|
|
|
|
1,723
|
|
Headcount Reductions
(Transportation Europe and ROW)
|
|
|
5,383
|
|
|
|
1,367
|
|
|
|
6,750
|
|
European Headcount Reductions
(including Corporate)
|
|
|
416
|
|
|
|
19
|
|
|
|
435
|
|
Headcount Reductions (Industrial
Energy Europe and ROW)
|
|
|
4,641
|
|
|
|
756
|
|
|
|
5,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,056
|
|
|
$
|
9,427
|
|
|
$
|
24,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure
|
|
|
|
|
Fiscal 2006
|
|
Costs
|
|
|
Costs
|
|
|
Totals
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
U.S. Headcount Reductions
(including Corporate)
|
|
$
|
1,930
|
|
|
$
|
216
|
|
|
$
|
2,146
|
|
Nanterre, France
|
|
|
234
|
|
|
|
2,711
|
|
|
|
2,945
|
|
Closure of Kankakee, IL
(Industrial Americas)
|
|
|
1,228
|
|
|
|
1,570
|
|
|
|
2,798
|
|
Casalnuovo, Italy
|
|
|
2,004
|
|
|
|
2,670
|
|
|
|
4,674
|
|
Headcount Reductions
(Transportation Europe and ROW)
|
|
|
2,953
|
|
|
|
317
|
|
|
|
3,270
|
|
European Headcount Reductions
(including Corporate)
|
|
|
3,135
|
|
|
|
|
|
|
|
3,135
|
|
Headcount Reductions (Industrial
Energy Europe and ROW)
|
|
|
2,908
|
|
|
|
(162
|
)
|
|
|
2,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,392
|
|
|
$
|
7,322
|
|
|
$
|
21,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure
|
|
|
|
|
Period May 6, 2004 to March 31, 2005
|
|
Costs
|
|
|
Costs
|
|
|
Totals
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
U.S. Headcount Reductions
(including Corporate)
|
|
$
|
3,200
|
|
|
$
|
|
|
|
$
|
3,200
|
|
Closure of Nanterre, France
|
|
|
15,475
|
|
|
|
1,518
|
|
|
|
16,993
|
|
Closure of Weiden, Germany
|
|
|
323
|
|
|
|
606
|
|
|
|
929
|
|
Transportation Americas
|
|
|
3,000
|
|
|
|
494
|
|
|
|
3,494
|
|
Closure of Casalnuovo, Italy
|
|
|
529
|
|
|
|
2,696
|
|
|
|
3,225
|
|
Headcount Reductions
(Transportation Europe and ROW)
|
|
|
6,011
|
|
|
|
1,034
|
|
|
|
7,045
|
|
European Headcount Reductions
(including Corporate)
|
|
|
1,356
|
|
|
|
112
|
|
|
|
1,468
|
|
Headcount Reductions (Industrial
Energy Europe and ROW)
|
|
|
2,172
|
|
|
|
(47
|
)
|
|
|
2,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
32,066
|
|
|
$
|
6,413
|
|
|
$
|
38,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure
|
|
|
|
|
Period April 1, 2004 to May 5, 2004
|
|
Costs
|
|
|
Costs
|
|
|
Totals
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Transportation Americas
|
|
$
|
|
|
|
$
|
65
|
|
|
$
|
65
|
|
Casalnuovo, Italy
|
|
|
|
|
|
|
143
|
|
|
|
143
|
|
Headcount Reductions
(Transportation Europe and ROW)
|
|
|
152
|
|
|
|
180
|
|
|
|
332
|
|
European Headcount Reductions
(including Corporate)
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
Headcount Reductions (Industrial
Energy Europe and ROW)
|
|
|
26
|
|
|
|
6
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
190
|
|
|
$
|
394
|
|
|
$
|
584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15)
|
INTEREST
EXPENSE, NET
|
Interest income of $1.6 million, $1 million,
$2 million, and $0.02 million is included in interest
expense, net for the fiscal years ended March 31, 2007 and
2006, the period May 6, 2004 to March 31, 2005, and
the period April 1, 2004 to May 5, 2005, respectively.
Interest income earned as a result of assumed excess cash
balances due to the Chapter 11 filing was recorded in
Reorganization items, net in the Consolidated Statements of
Operations for the period April 1, 2004 to May 5,
2004. See Note 5.
As of the Petition Date, the Company ceased accruing interest on
certain unsecured pre-petition debt classified as Liabilities
subject to compromise in the Consolidated Balance Sheets in
accordance with
SOP 90-7.
Interest was accrued on certain pre-petition debt to the extent
that the Company believed it was probable of being deemed an
allowed claim by the Bankruptcy Court. Interest at the stated
contractual amount on pre-petition debt that was not charged to
results of operations for the period April 1, 2004 to
May 5, 2004 was approximately $3.3 million.
|
|
(16)
|
OTHER
(INCOME) EXPENSE, NET
|
Other (income) expense, net consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
Fiscal Year Ended
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
|
(In thousands)
|
|
|
Net loss on asset sales
|
|
|
18,622
|
|
|
|
8,044
|
|
|
|
7,649
|
|
|
|
|
|
Equity income
|
|
|
(1,256
|
)
|
|
|
(1,881
|
)
|
|
|
(2,160
|
)
|
|
|
(164
|
)
|
Currency (gain) loss
|
|
|
(11,635
|
)
|
|
|
11,280
|
|
|
|
(2,580
|
)
|
|
|
6,283
|
|
(Gain) loss on revaluation of
foreign currency forward contract
|
|
|
|
|
|
|
(1,081
|
)
|
|
|
13,165
|
|
|
|
|
|
Loss (gain) on revaluation of
warrants
|
|
|
3,234
|
|
|
|
(9,125
|
)
|
|
|
(63,112
|
)
|
|
|
|
|
Other(a)
|
|
|
671
|
|
|
|
(3,553
|
)
|
|
|
(9,860
|
)
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,636
|
|
|
$
|
3,684
|
|
|
$
|
(56,898
|
)
|
|
$
|
6,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
On September 24, 2004, the Company experienced a fire at
one of its facilities in Europe. While damage to the facility
was contained, the Company has experienced disruption to certain
of its business operations and activities while the Company
restored production capacity and diverted production to
alternative sites. During fiscal 2005, the Company recognized
$13.6 million of insurance recoveries; $10.8 million
in other income, and $2.8 million in cost of sales. This
represents partial reimbursement for both business interruption
and replacement of property damaged by the fire. In fiscal 2006,
the Company recognized the |
F-43
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
remaining $4.8 million (included in Other above) of total
insurance recoveries of $18.4 million related to this
incident. |
|
|
(17)
|
PURCHASE
COMMITMENTS
|
The Companys primary purchase obligation relates to an
arrangement with its sole supplier of polyethylene battery
separators. The Company sold its separator manufacturing
operations in fiscal 2000 for approximately $47 million,
including $26.1 million in cash proceeds, to an unrelated
party, Daramic, Inc. (Daramic or the
Buyer). In connection with the sale, the Company
entered into a ten-year supply agreement with Daramic that
includes minimum annual purchase commitments and penalty
payments if such minimum annual purchase commitments are not
met. The agreement also required adjustment for the minimum
annual purchase commitments if the Company acquired any
customers of Daramic during the term of the agreement. The
Company recorded a gain on this sale of $9.5 million and
established a liability for estimated purchase commitment
shortfall penalties of $8.5 million based on anticipated
future purchases from Daramic.
As a result of acquiring GNB, which was a customer of Daramic,
the Company renegotiated the supply agreement. Under the
renegotiated terms and based on the Companys estimates of
its purchases from the Buyer given the Companys plan to
integrate GNB, the Company recorded a charge of $29 million
to cost of sales in fiscal 2001.
Based on development of its five-year business plan, in fiscal
2002, the Company revised its unit volume outlook. This revision
increased its expected liability related to purchase commitment
shortfall penalties to a total of $53.4 million for the
then remaining eight years of this supply agreement. This
resulted in recognition of an additional charge to cost of sales
of $15.5 million in fiscal 2002. At March 31, 2007,
the remaining estimated liability was $12.3 million.
The Company uses both polyethylene and absorbed glass microfibre
(AGM) separators. There are a number of suppliers
from whom the Company purchases AGM separators. Polyethylene
separators are purchased solely from Daramic, with supply
agreements expiring in December 2009. The agreements restrict
the Companys ability to source separators from other
suppliers unless there is a technical benefit that Daramic
cannot provide. In addition, the agreements provide for
substantial minimum annual purchase commitments. There is no
second source that could readily provide the volume of
polyethylene separators used by the Company. As a result, any
major disruption in supply from Daramic would have an adverse
impact on the Company
|
|
(18)
|
RIGHTS
OFFERING AND PRIVATE SALE OF COMMON STOCK
|
On September 18, 2006, the Company completed the
$75 million rights offering that it launched in August 2006
which allowed stockholders to purchase additional shares of
common stock. The Company distributed, at no charge to its
holders of common stock, non-transferable subscription rights to
purchase additional shares of the Companys common stock.
Each holder received 0.85753 of a subscription right for each
share of common stock owned at the close of business on
August 23, 2006, subject to adjustments to eliminate
fractional rights. On September 18, 2006, the Company also
completed a private sale of $50 million of common stock.
The subscription price for each share of common stock purchased
in the rights offering, including shares purchased in the
private placement by certain investors, was $3.50 per share. The
per share price was equal to a 20% discount to the average
closing price of the Companys common stock for the
30 trading day period ended July 6, 2006.
In completing the rights offering and private sale of common
stock, the Company issued an additional 35,712,570 shares
of its common stock, including 10,927,015 shares subscribed
for by public shareholders (not including certain investors) and
24,785,555 shares issued to certain investors in a private
placement directly
F-44
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
from the Company. The shares issued to certain investors that
were existing shareholders prior to the rights offering
represented the number of shares of the Companys common
stock that such investors would otherwise have been entitled to
purchase pursuant to its basic subscription privilege in the
rights offering. The Company incurred approximately
$7.3 million of expenses in connection with the rights
offering and private sale of common stock.
The Company determined that an Internal Revenue Code
Section 382 (Sec. 382) ownership change
occurred during the quarter ending September 30, 2006 as a
result of the Companys rights offering and private sale of
common stock. Sec. 382 places annual limits on the amount of the
Companys U.S. net operating loss carry forwards
(NOLs) that may be used to offset taxable income.
The annual limit has been determined to be $4.4 million. A
full valuation allowance continues to be provided on the
remaining U.S. NOLs.
|
|
(19)
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
The estimated fair value of financial instruments has been
determined by the Company using available market information and
appropriate methodologies; however, 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 anticipated.
The methods and assumptions used to estimate the fair value of
each class of financial instruments are set forth below:
|
|
|
|
|
Cash and cash equivalents, accounts receivable and accounts
payable the carrying amounts of these items are a
reasonable estimate of their fair values.
|
|
|
|
Long-term receivables the carrying amounts of these
items are a reasonable estimate of their fair value.
|
|
|
|
Short-term borrowings Borrowings under miscellaneous
line of credit arrangements have variable rates that reflect
currently available terms and conditions for similar debt. The
carrying amount of these line of credit arrangements is a
reasonable estimate of its fair value.
|
|
|
|
Long-term debt Borrowings by foreign subsidiaries
have variable rates that reflect currently available terms and
conditions for similar debt.
|
The carrying values and estimated fair values of these
obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
|
|
|
Estimated Fair
|
|
|
|
|
|
Estimated Fair
|
|
|
|
Carrying Value
|
|
|
Value
|
|
|
Carrying Value
|
|
|
Value
|
|
|
|
(In thousands)
|
|
|
Senior Secured Credit Facility
|
|
$
|
297,263
|
|
|
$
|
310,640
|
|
|
$
|
316,277
|
|
|
$
|
319,440
|
|
Senior Secured Notes due 2013
|
|
|
290,000
|
|
|
|
297,800
|
|
|
|
290,000
|
|
|
|
218,950
|
|
Convertible Senior Subordinated
Notes due 2013
|
|
|
60,000
|
|
|
|
51,882
|
|
|
|
60,000
|
|
|
|
30,000
|
|
The Company reports its results in four business segments
Transportation Americas, Transportation Europe and ROW,
Industrial Energy Americas and Industrial Energy Europe and ROW.
The Company will continue to evaluate its reporting segments
pending future organizational changes that may take place.
F-45
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company is a global producer and recycler of lead-acid
batteries. The Companys four business segments provide a
comprehensive range of stored electrical energy products and
services for transportation and industrial applications.
Transportation markets include original-equipment and
aftermarket automotive, heavy-duty truck, agricultural and
marine applications, and new technologies for hybrid vehicles
and 42-volt automotive applications. Industrial markets include
batteries for telecommunications systems, fuel-cell load
leveling, electric utilities, railroads, uninterruptible power
supply (UPS), lift trucks, mining and other commercial vehicles.
The Companys four reportable segments are determined based
upon the nature of the markets served and the geographic regions
in which they operate. The Companys chief operating
decision-maker monitors and manages the financial performance of
these four business groups. Costs of shared services and other
corporate costs are not allocated or charged to the business
groups.
Certain asset information required to be disclosed is not
reflected below as it is not allocated by segment nor utilized
by management in the Companys operations.
Selected financial information concerning the Companys
reportable segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2007
|
|
|
|
Transportation
|
|
|
Industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
ROW
|
|
|
Americas
|
|
|
ROW
|
|
|
Other(a)
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net sales
|
|
$
|
930,334
|
|
|
$
|
832,219
|
|
|
$
|
270,479
|
|
|
$
|
906,753
|
|
|
$
|
|
|
|
$
|
2,939,785
|
|
Gross profit
|
|
|
165,689
|
|
|
|
93,382
|
|
|
|
60,178
|
|
|
|
153,526
|
|
|
|
|
|
|
|
472,775
|
|
Income (loss) before
reorganization items, income taxes, and minority interest(b)
|
|
|
33,134
|
|
|
|
(20,420
|
)
|
|
|
21,975
|
|
|
|
8,278
|
|
|
|
(137,871
|
)
|
|
|
(94,904
|
)
|
Depreciation and amortization
|
|
|
30,727
|
|
|
|
32,895
|
|
|
|
10,102
|
|
|
|
35,962
|
|
|
|
11,330
|
|
|
|
121,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006
|
|
|
|
Transportation
|
|
|
Industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
ROW
|
|
|
Americas
|
|
|
ROW
|
|
|
Other(a)
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net sales
|
|
$
|
913,317
|
|
|
$
|
810,894
|
|
|
$
|
274,976
|
|
|
$
|
820,689
|
|
|
$
|
|
|
|
$
|
2,819,876
|
|
Gross profit
|
|
|
97,092
|
|
|
|
102,680
|
|
|
|
53,153
|
|
|
|
153,906
|
|
|
|
|
|
|
|
406,831
|
|
Income (loss) before
reorganization items, income taxes, and minority interest(b)
|
|
|
(6,080
|
)
|
|
|
24,396
|
|
|
|
8,846
|
|
|
|
39,696
|
|
|
|
(216,941
|
)
|
|
|
(150,083
|
)
|
Depreciation and amortization
|
|
|
29,720
|
|
|
|
31,567
|
|
|
|
10,869
|
|
|
|
33,107
|
|
|
|
17,166
|
|
|
|
122,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period May 6, 2004 to March 31, 2005
|
|
|
|
Transportation
|
|
|
Industrial
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
ROW
|
|
|
Americas
|
|
|
ROW
|
|
|
Other(a)
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net sales
|
|
$
|
772,272
|
|
|
$
|
764,238
|
|
|
$
|
203,815
|
|
|
$
|
735,934
|
|
|
$
|
|
|
|
$
|
2,476,259
|
|
Gross profit
|
|
|
100,970
|
|
|
|
106,645
|
|
|
|
44,264
|
|
|
|
125,623
|
|
|
|
|
|
|
|
377,502
|
|
Income (loss) before
reorganization items, income taxes, and minority interest
|
|
|
(107,185
|
)
|
|
|
(106,183
|
)
|
|
|
(21,062
|
)
|
|
|
(97,694
|
)
|
|
|
(109,071
|
)
|
|
|
(441,195
|
)
|
Depreciation and amortization
|
|
|
24,634
|
|
|
|
30,469
|
|
|
|
9,576
|
|
|
|
31,335
|
|
|
|
12,738
|
|
|
|
108,752
|
|
F-46
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period April 1, 2004 to May 5, 2004
|
|
|
|
Transportation
|
|
|
Industrial
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
and
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
ROW
|
|
|
Americas
|
|
|
ROW
|
|
|
Other(a)
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net sales
|
|
$
|
75,299
|
|
|
$
|
58,927
|
|
|
$
|
19,193
|
|
|
$
|
61,188
|
|
|
$
|
|
|
|
$
|
214,607
|
|
Gross profit
|
|
|
11,121
|
|
|
|
7,850
|
|
|
|
4,775
|
|
|
|
11,724
|
|
|
|
|
|
|
|
35,470
|
|
Income (loss) before
reorganization items, income taxes, and minority interest
|
|
|
2,413
|
|
|
|
691
|
|
|
|
1,607
|
|
|
|
1,914
|
|
|
|
(29,293
|
)
|
|
|
(22,668
|
)
|
Depreciation and amortization
|
|
|
1,904
|
|
|
|
1,817
|
|
|
|
1,052
|
|
|
|
2,223
|
|
|
|
852
|
|
|
|
7,848
|
|
|
|
|
(a) |
|
Other includes unallocated corporate expenses, interest expense,
foreign, currency remeasurement loss (gain) and loss on
revaluation of warrants. |
|
(b) |
|
Commencing in fiscal 2007, the Company determined it to be more
appropriate to allocate certain costs to its segments, which
were previously reflected in Other as unallocated
corporate costs. These costs include the Companys global
Information Technology organization, its Shared Services
expenses including country related finance organizations in
Europe and ROW, its country Human Resource organizations, and
certain of its legal costs which can be directly attributed to a
business segment. This change in reporting was made to better
align the Companys cost structure with the business
segment responsible for driving the cost. This change resulted
in an allocation of corporate costs to the reportable segments
of $62.6 million for fiscal 2007, including
$14.8 million to Transportation Americas,
$22.7 million to Transportation Europe and ROW,
$4.7 million to Industrial Energy Americas, and
$20.4 million to Industrial Energy Europe and ROW. Prior
period costs were not restated to conform to this change.
Therefore, the results between the periods may not be comparable. |
Geographic information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from External Customers
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
Fiscal Year Ended
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
1,296,833
|
|
|
$
|
1,103,453
|
|
|
$
|
907,813
|
|
|
$
|
88,950
|
|
France
|
|
|
224,219
|
|
|
|
204,839
|
|
|
|
197,195
|
|
|
|
14,644
|
|
Germany
|
|
|
376,142
|
|
|
|
348,435
|
|
|
|
329,147
|
|
|
|
25,143
|
|
UK
|
|
|
120,589
|
|
|
|
153,396
|
|
|
|
139,500
|
|
|
|
12,097
|
|
Italy
|
|
|
197,449
|
|
|
|
170,305
|
|
|
|
170,463
|
|
|
|
11,375
|
|
Spain
|
|
|
244,072
|
|
|
|
228,225
|
|
|
|
213,957
|
|
|
|
16,954
|
|
Other
|
|
|
480,481
|
|
|
|
611,223
|
|
|
|
518,184
|
|
|
|
45,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,939,785
|
|
|
$
|
2,819,876
|
|
|
$
|
2,476,259
|
|
|
$
|
214,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Long-Lived Assets
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
251,602
|
|
|
$
|
267,356
|
|
France
|
|
|
55,318
|
|
|
|
65,529
|
|
Germany
|
|
|
73,790
|
|
|
|
77,189
|
|
UK
|
|
|
36,596
|
|
|
|
37,637
|
|
Portugal
|
|
|
40,963
|
|
|
|
42,346
|
|
Italy
|
|
|
52,230
|
|
|
|
54,165
|
|
Spain
|
|
|
86,780
|
|
|
|
89,705
|
|
Other
|
|
|
51,736
|
|
|
|
51,915
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
649,015
|
|
|
$
|
685,842
|
|
|
|
|
|
|
|
|
|
|
|
|
(21)
|
SELECTED
QUARTERLY FINANCIAL DATA (Unaudited)
|
The following is a summary of the Companys quarterly
consolidated results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2007
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
(In thousands, except per share data)
|
|
|
Net sales
|
|
$
|
683,190
|
|
|
$
|
680,299
|
|
|
$
|
769,743
|
|
|
$
|
806,553
|
|
Gross profit
|
|
|
109,679
|
|
|
|
105,402
|
|
|
|
129,705
|
|
|
|
127,990
|
|
Net loss
|
|
$
|
(37,896
|
)
|
|
$
|
(35,109
|
)
|
|
$
|
(11,244
|
)
|
|
$
|
(21,630
|
)
|
Basic and diluted loss per share
|
|
$
|
(1.51
|
)
|
|
$
|
(1.16
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
(In thousands, except per share data)
|
|
|
Net sales
|
|
$
|
669,332
|
|
|
$
|
686,485
|
|
|
$
|
733,442
|
|
|
$
|
730,617
|
|
Gross profit
|
|
|
102,216
|
|
|
|
103,898
|
|
|
|
118,833
|
|
|
|
81,884
|
|
Net loss
|
|
$
|
(35,709
|
)
|
|
$
|
(33,023
|
)
|
|
$
|
(27,658
|
)
|
|
$
|
(76,342
|
)
|
Basic and diluted loss per share
|
|
$
|
(1.40
|
)
|
|
$
|
(1.29
|
)
|
|
$
|
(1.08
|
)
|
|
$
|
(2.98
|
)
|
On May 15, 2007, the Company, certain of the Companys
domestic subsidiaries (the Exide
U.S. Subsidiaries), Exide Global Holding Netherlands
C.V. (Exide C.V. and, together with the Company and
the Exide U.S. Subsidiaries, the Borrowers),
various lending institutions described in the senior secured
credit agreement and Deutsche Bank AG New York Branch , as
administrative agent (DB and, together with such
other lending institutions, the Lenders), entered
into a $495 million senior secured credit agreement. The
senior secured credit agreement consists of a $200 million
asset based revolving senior secured credit facility (the
Revolving Loan Facility) and a $295 million
senior secured term loan facility (the Term Loan).
The
Revolving Loan
Borrowings under the Revolving Loan Facility bear interest at a
rate equal to LIBOR plus 1.75%. The applicable spread on the
Revolving Loan Facility will be subject to change and may move
up or down in accordance with a leverage-based pricing grid. The
Revolving Loan Facility includes a letter of credit sub-facility
of $75 million and an accordion feature that allows the
Company to increase the facility size up to
F-48
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$250 million if it can obtain commitments from existing or
new lenders for the incremental amount. The Revolving Loan
Facility will mature in five years, but is prepayable at any
time at par.
Availability under the Revolving Loan Facility is subject to a
borrowing base comprised of up to 85% of the Companys and
certain of its subsidiaries combined eligible accounts
receivable plus 85% of the net orderly liquidation value of
eligible North American inventory less, in each case, certain
limitations and reserves. Revolving loans made to the Company
and other domestic borrowers under the Revolving Loan Facility
are guaranteed by substantially all domestic subsidiaries of the
Company, and revolving loans made to Exide C.V. under the
Revolving Loan Facility are guaranteed by the Company,
substantially all domestic subsidiaries of the Company and
certain foreign subsidiaries. These guarantee obligations are
secured by a lien on substantially all of the assets of such
respective Borrowers and guarantors, including, subject to
certain exceptions, in the case of security provided by the
domestic subsidiaries, a first priority lien in current assets
and a second priority lien in fixed assets.
The Revolving Loan Facility contains customary terms and
conditions, including, without limitation, limitations on liens,
indebtedness, implementation of cash dominion and control
agreements, and other typical covenants. A springing fixed
charge financial covenant of 1.0:1.0 will be triggered if the
excess availability under the Revolving Loan Facility falls
below $40 million. The Company will also be required to pay
an unused line fee that varies based on usage of the Revolving
Loan Facility.
The
Term Loan
Borrowings under the Term Loan in U.S. dollars will bear
interest at a rate equal to LIBOR plus 3.25%, and borrowings
under the Term Loan in Euros will bear interest at a rate equal
to LIBOR plus 3.50%; provided that such rates may decrease by
0.25% after December 31, 2007 if the Company achieves
certain corporate ratings. The Term Loan will mature in five
years, but is prepayable at any time at par value, provided that
if a change in control or similar event occurs within the first
year, the Company must offer to prepay the Term Loan at a price
equal to 101% of par.
The Term Loan will amortize as follows 0.25% of the
initial principal balance of the Term Loan will be due and
payable on a quarterly basis for the first
43/4 years,
with a balloon payment due at maturity. Mandatory prepayment by
the Company may be required under the Term Loan as a result of
excess cash flow, asset sales and casualty events, in each case,
subject to certain exceptions.
The portion of the Term Loan made to the Company is guaranteed
by substantially all domestic subsidiaries of the Company, and
the portion of the Term Loan made to Exide C.V. is guaranteed by
the Company, substantially all domestic subsidiaries of the
Company and certain foreign subsidiaries. These obligations are
secured by a lien on substantially all of the assets of such
respective Borrowers and guarantors, including, subject to
certain exceptions, in the case of security provided by the
domestic subsidiaries, a first priority lien in fixed assets and
a second priority lien in current assets.
The Term Loan contains customary terms and conditions,
including, without limitation, (1) limitations on debt
(including a leverage or coverage based incurrence test),
(2) limitations on mergers and acquisitions,
(3) limitations on restricted payments,
(4) limitations on investments, (5) limitations on
capital expenditures, (6) limitations on asset sales with
limited exceptions, (7) limitations on liens and
(8) limitations on transactions with affiliates. The Term
Loan has no financial maintenance covenants.
F-49
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
Valuation
and Qualifying Accounts and Reserves
Schedule II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Additions
|
|
|
Deductions/
|
|
|
|
|
|
Balance
|
|
|
|
Beginning
|
|
|
Charged to
|
|
|
Charge-
|
|
|
|
|
|
at End
|
|
|
|
of Period
|
|
|
Expense
|
|
|
Offs
|
|
|
Other(1)
|
|
|
of Period
|
|
|
|
(In thousands)
|
|
|
Allowance for Doubtful Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period April 1, 2004 to
May 5, 2004
|
|
$
|
24,433
|
|
|
|
473
|
|
|
|
(189
|
)
|
|
|
(516
|
)
|
|
$
|
24,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period May 6, 2004 to
March 31, 2005
|
|
$
|
24,201
|
|
|
|
1,973
|
|
|
|
(4,041
|
)
|
|
|
338
|
|
|
$
|
22,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
2006
|
|
$
|
22,471
|
|
|
|
4,116
|
|
|
|
(3,378
|
)
|
|
|
(1,572
|
)
|
|
$
|
21,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
2007
|
|
$
|
21,637
|
|
|
|
9,096
|
|
|
|
(4,023
|
)
|
|
|
1,914
|
|
|
$
|
28,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance on Deferred
Tax Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period April 1, 2004 to
May 5, 2004
|
|
$
|
537,159
|
|
|
|
15,547
|
|
|
|
(4,096
|
)
|
|
|
(2,700
|
)
|
|
$
|
545,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period May 6, 2004 to
March 31, 2005
|
|
$
|
545,910
|
|
|
|
90,515
|
|
|
|
(45,058
|
)
|
|
|
6,133
|
|
|
$
|
597,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
2006
|
|
$
|
597,500
|
|
|
|
48,905
|
|
|
|
(339,642
|
)
|
|
|
(6,045
|
)
|
|
$
|
300,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
2007
|
|
$
|
300,718
|
|
|
|
38,949
|
|
|
|
(39,661
|
)
|
|
|
20,995
|
|
|
$
|
321,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily the impact of foreign currency translation. |
F-50
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners and Board of Directors of
Exide Global Holdings Netherlands C.V.
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of operations, equity and
cash flows present fairly, in all material respects, the
financial position of Exide Global Holdings Netherlands C.V., a
wholly-owned subsidiary of Exide Technologies, and its
subsidiaries (the Successor Company or Company) at
March 31, 2007 and 2006, and the results of their
operations and cash flows for each of the two years in the
period ended March 31, 2007, and for the period from
May 6, 2004 to March 31, 2005 in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial
statements, on April 15, 2002, Exide, together with certain
of its U.S. subsidiaries (Debtors), filed voluntary
petitions for reorganization under Chapter 11 of the
federal bankruptcy laws in the United States Court for the
District of Delaware. The Debtors Joint Plan of
Reorganization was confirmed by the Bankruptcy Court on
April 21, 2004 and the Debtors declared May 5, 2004 as
the effective date of the Plan as it had substantially
consummated the transactions provided for in the Plan on such
date. Confirmation of the plan resulted in the discharge of
substantially all claims against Exide that arose before
April 15, 2002 and terminated all rights and interests of
equity security holders as provided for in the plan. For
accounting purposes, the Company also recognized Exides
emergence from bankruptcy as of May 5, 2004.
As discussed in Note 9 to the consolidated financial
statements, the Company changed the manner in which it accounts
for defined benefit and postretirement plans effective
March 31, 2007.
PricewaterhouseCoopers LLP
Atlanta, Georgia
June 11, 2007
F-51
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners and Board of Directors of
Exide Global Holdings Netherlands C.V.
In our opinion, the accompanying consolidated statements of
operations, equity and cash flows present fairly, in all
material respects, the results of operations and cash flows of
Exide Global Holdings Netherlands C.V., a wholly-owned
subsidiary of Exide Technologies (Exide), and its subsidiaries,
Exide Holding Europe SAS and Exide Holding Asia Pte. Limited,
(Predecessor Company or Company) for the period from
April 1, 2004 to May 5, 2004 in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Companys management. Our responsibility is to express
an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial
statements, on April 15, 2002, Exide, together with certain
of its U.S. subsidiaries (Debtors), filed voluntary
petitions for reorganization under Chapter 11 of the
federal bankruptcy laws in the United States Court for the
District of Delaware. The Debtors Joint Plan of
Reorganization was confirmed by the Bankruptcy Court on
April 21, 2004 and the Debtors declared May 5, 2004 as
the effective date of the Plan as it had substantially
consummated the transactions provided for in the Plan on such
date. Confirmation of the plan resulted in the discharge of
substantially all claims against Exide that arose before
April 15, 2002 and terminated all rights and interests of
equity security holders as provided for in the plan. For
accounting purposes, the Company also recognized Exides
emergence from bankruptcy as of May 5, 2004.
As discussed in Note 1 to the consolidated financial
statements, on April 14, 2004, the Predecessor Company was
formed by the contribution of ownership of Exide Holding Europe
SAS and Exide Holding Asia Pte. Limited and their subsidiaries
by Exide Technologies to the Predecessor Company. For reporting
purposes, the consolidated financial statements of Exide Holding
Europe SAS and Exide Holding Asia Pte Limited and their
subsidiaries have been presented for periods through
April 14, 2004.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
October 6, 2006
F-52
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
Successor Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
|
|
|
|
|
|
May 6, 2004
|
|
|
April 1, 2004
|
|
|
|
For the Fiscal Year Ended
|
|
|
to
|
|
|
to
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
|
(In thousands)
|
|
|
NET SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net customer sales
|
|
$
|
1,776,894
|
|
|
$
|
1,672,430
|
|
|
$
|
1,543,081
|
|
|
$
|
123,699
|
|
Net affiliate sales
|
|
|
51,377
|
|
|
|
46,359
|
|
|
|
42,231
|
|
|
|
3,385
|
|
COST OF SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer sales
|
|
|
1,526,405
|
|
|
|
1,402,957
|
|
|
|
1,294,861
|
|
|
|
103,159
|
|
Affiliate sales
|
|
|
51,377
|
|
|
|
46,359
|
|
|
|
42,723
|
|
|
|
3,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
250,489
|
|
|
|
269,473
|
|
|
|
247,728
|
|
|
|
20,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, marketing and advertising
|
|
|
165,504
|
|
|
|
160,979
|
|
|
|
156,529
|
|
|
|
15,022
|
|
General and administrative
|
|
|
96,024
|
|
|
|
99,601
|
|
|
|
99,584
|
|
|
|
10,694
|
|
Restructuring
|
|
|
15,183
|
|
|
|
16,770
|
|
|
|
36,301
|
|
|
|
537
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
222,816
|
|
|
|
|
|
Other (income) expense, net
|
|
|
5,749
|
|
|
|
(3,479
|
)
|
|
|
2,208
|
|
|
|
4,888
|
|
Interest expense, net
|
|
|
39,609
|
|
|
|
34,445
|
|
|
|
33,406
|
|
|
|
3,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
322,069
|
|
|
|
308,316
|
|
|
|
550,844
|
|
|
|
35,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before reorganization items,
income taxes, and minority interest
|
|
|
(71,580
|
)
|
|
|
(38,843
|
)
|
|
|
(303,116
|
)
|
|
|
(14,521
|
)
|
REORGANIZATION ITEMS, NET
|
|
|
|
|
|
|
|
|
|
|
3,887
|
|
|
|
|
|
FRESH START ACCOUNTING
ADJUSTMENTS, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(176,638
|
)
|
DEBT FORGIVENESS ADJUSTMENTS
|
|
|
|
|
|
|
(6,702
|
)
|
|
|
|
|
|
|
(46,755
|
)
|
INCOME TAX PROVISION (BENEFIT)
|
|
|
5,631
|
|
|
|
14,775
|
|
|
|
14,309
|
|
|
|
(2,482
|
)
|
MINORITY INTEREST
|
|
|
882
|
|
|
|
529
|
|
|
|
(18
|
)
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(78,093
|
)
|
|
$
|
(47,445
|
)
|
|
$
|
(321,294
|
)
|
|
$
|
211,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-53
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
43,653
|
|
|
$
|
25,515
|
|
Receivables, net of allowance for
doubtful accounts of $20,178 and $14,148, respectively
|
|
|
495,788
|
|
|
|
449,368
|
|
Receivables from affiliates
|
|
|
15,151
|
|
|
|
22,425
|
|
Inventories
|
|
|
258,078
|
|
|
|
254,351
|
|
Prepaid expenses and other
|
|
|
9,690
|
|
|
|
16,328
|
|
Deferred financing costs, net
|
|
|
1,077
|
|
|
|
909
|
|
Deferred income taxes
|
|
|
11,727
|
|
|
|
9,557
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
835,164
|
|
|
|
778,453
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
396,242
|
|
|
|
417,085
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Other intangibles, net
|
|
|
132,621
|
|
|
|
125,399
|
|
Investments in affiliates
|
|
|
1,605
|
|
|
|
1,316
|
|
Deferred financing costs, net
|
|
|
3,250
|
|
|
|
3,705
|
|
Deferred income taxes
|
|
|
68,806
|
|
|
|
56,358
|
|
Other
|
|
|
12,714
|
|
|
|
8,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
218,996
|
|
|
|
195,395
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,450,402
|
|
|
$
|
1,390,933
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
13,951
|
|
|
$
|
11,375
|
|
Current maturities of long-term
debt
|
|
|
3,964
|
|
|
|
5,360
|
|
Accounts payable
|
|
|
262,201
|
|
|
|
258,513
|
|
Payables to affiliates
|
|
|
26,862
|
|
|
|
29,724
|
|
Accrued expenses
|
|
|
201,499
|
|
|
|
190,880
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
508,477
|
|
|
|
495,852
|
|
Long-term debt
|
|
|
186,360
|
|
|
|
183,625
|
|
Notes payable to affiliates
|
|
|
150,838
|
|
|
|
94,138
|
|
Noncurrent retirement obligations
|
|
|
161,288
|
|
|
|
186,533
|
|
Deferred income tax liability
|
|
|
28,668
|
|
|
|
24,808
|
|
Other noncurrent liabilities
|
|
|
29,205
|
|
|
|
23,507
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,064,836
|
|
|
|
1,008,463
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
14,560
|
|
|
|
12,666
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Partners capital
|
|
|
739,692
|
|
|
|
739,692
|
|
Accumulated deficit
|
|
|
(446,832
|
)
|
|
|
(368,739
|
)
|
Accumulated other comprehensive
income (loss)
|
|
|
78,146
|
|
|
|
(1,149
|
)
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
371,006
|
|
|
|
369,804
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
1,450,402
|
|
|
$
|
1,390,933
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-54
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exide
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive
|
|
|
|
|
|
|
Exide
|
|
|
Holding
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss)
|
|
|
|
|
|
|
Holding
|
|
|
Asia Pte
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
|
|
|
|
|
|
|
|
|
|
Europe SAS
|
|
|
Limited
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Pension
|
|
|
Cumulative
|
|
|
|
|
|
|
Common
|
|
|
Common
|
|
|
Partners
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Liability,
|
|
|
Translation
|
|
|
Comprehensive
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Capital
|
|
|
Deficit
|
|
|
Net of Tax
|
|
|
Adjustment
|
|
|
Income (Loss)
|
|
|
|
(In thousands)
|
|
|
Balance at March 31, 2004
(Predecessor Company)
|
|
$
|
83,332
|
|
|
$
|
18,015
|
|
|
$
|
|
|
|
$
|
394,347
|
|
|
$
|
(100,752
|
)
|
|
$
|
(29,306
|
)
|
|
$
|
(140,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211,328
|
|
|
|
|
|
|
|
|
|
|
$
|
211,328
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,833
|
)
|
|
|
(5,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
205,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of Predecessor Company
common stock
|
|
|
(83,332
|
)
|
|
|
(18,015
|
)
|
|
|
606,270
|
|
|
|
(394,347
|
)
|
|
|
(110,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 5, 2004
(Predecessor Company)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
606,270
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(29,306
|
)
|
|
$
|
(146,435
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh Start elimination of equity
account balances
|
|
|
|
|
|
|
|
|
|
|
(241,503
|
)
|
|
|
|
|
|
|
|
|
|
|
29,306
|
|
|
|
146,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 5, 2004
|
|
$
|
|
|
|
$
|
|
|
|
$
|
364,767
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(321,294
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(321,294
|
)
|
Minimum pension liability
adjustment, net of tax of $1,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,814
|
)
|
|
|
|
|
|
|
(3,814
|
)
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,826
|
|
|
|
19,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(305,282
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Successor Company
common stock
|
|
|
|
|
|
|
|
|
|
|
374,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2005
|
|
$
|
|
|
|
$
|
|
|
|
$
|
739,692
|
|
|
$
|
|
|
|
$
|
(321,294
|
)
|
|
$
|
(3,814
|
)
|
|
$
|
19,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,445
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(47,445
|
)
|
Minimum pension liability
adjustment, net of tax of $315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,349
|
)
|
|
|
|
|
|
|
(2,349
|
)
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,812
|
)
|
|
|
(14,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(64,606
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2006
|
|
$
|
|
|
|
$
|
|
|
|
$
|
739,692
|
|
|
$
|
|
|
|
$
|
(368,739
|
)
|
|
$
|
(6,163
|
)
|
|
$
|
5,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(78,093
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(78,093
|
)
|
Minimum pension liability
adjustment, net of tax of $1,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,314
|
|
|
|
|
|
|
|
3,314
|
|
Increase in accumulated other
comprehensive income (loss) to reflect the adoption of
FAS 158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,112
|
|
|
|
|
|
|
|
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,869
|
|
|
|
47,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(26,910
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2007
|
|
$
|
|
|
|
$
|
|
|
|
$
|
739,692
|
|
|
$
|
|
|
|
$
|
(446,832
|
)
|
|
$
|
25,263
|
|
|
$
|
52,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-55
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor
|
|
|
|
Successor Company
|
|
|
Company
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
|
For the Fiscal Year Ended
|
|
|
May 6, 2004
|
|
|
April 1, 2004
|
|
|
|
|
|
|
March 31,
|
|
|
to
|
|
|
to
|
|
|
|
March 31, 2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
|
(In thousands)
|
|
|
Cash Flows from Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(78,093
|
)
|
|
$
|
(47,445
|
)
|
|
$
|
(321,294
|
)
|
|
$
|
211,328
|
|
Adjustments to reconcile net income
(loss) to net cash provided by (used in) operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
75,146
|
|
|
|
71,725
|
|
|
|
67,713
|
|
|
|
4,784
|
|
Debt forgiveness adjustments
|
|
|
|
|
|
|
(6,702
|
)
|
|
|
|
|
|
|
(46,755
|
)
|
Fresh start accounting adjustments,
net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(176,638
|
)
|
Net loss (gain) on asset
sales/impairments
|
|
|
10,707
|
|
|
|
(3,873
|
)
|
|
|
5,254
|
|
|
|
|
|
Gain on insurance recoveries
|
|
|
|
|
|
|
(4,791
|
)
|
|
|
(13,645
|
)
|
|
|
|
|
Deferred income taxes
|
|
|
(6,137
|
)
|
|
|
(2,296
|
)
|
|
|
6,704
|
|
|
|
(3,179
|
)
|
Provision for doubtful accounts
|
|
|
5,124
|
|
|
|
1,297
|
|
|
|
790
|
|
|
|
131
|
|
Reorganization items, net
|
|
|
|
|
|
|
|
|
|
|
3,887
|
|
|
|
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
222,816
|
|
|
|
|
|
Insurance proceeds
|
|
|
|
|
|
|
11,144
|
|
|
|
7,290
|
|
|
|
|
|
Minority interest
|
|
|
882
|
|
|
|
529
|
|
|
|
(18
|
)
|
|
|
26
|
|
Amortization of deferred financing
costs
|
|
|
1,049
|
|
|
|
416
|
|
|
|
|
|
|
|
1,251
|
|
Changes in assets and liabilities
excluding effects of Fresh Start accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(6,401
|
)
|
|
|
49,023
|
|
|
|
(33,524
|
)
|
|
|
45,572
|
|
Inventories
|
|
|
23,216
|
|
|
|
(11,791
|
)
|
|
|
38,836
|
|
|
|
(5,226
|
)
|
Prepaid expenses and other
|
|
|
9,357
|
|
|
|
(13,508
|
)
|
|
|
16,940
|
|
|
|
(3,211
|
)
|
Payables
|
|
|
(21,438
|
)
|
|
|
5,862
|
|
|
|
20,398
|
|
|
|
(29,794
|
)
|
Accrued expenses
|
|
|
(25,177
|
)
|
|
|
(34,146
|
)
|
|
|
(2,190
|
)
|
|
|
(21,859
|
)
|
Noncurrent liabilities
|
|
|
(11,524
|
)
|
|
|
7,699
|
|
|
|
(12,990
|
)
|
|
|
77
|
|
Other, net
|
|
|
12,960
|
|
|
|
18,322
|
|
|
|
16,750
|
|
|
|
12,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
|
|
(10,329
|
)
|
|
|
41,465
|
|
|
|
23,717
|
|
|
|
(11,212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(20,098
|
)
|
|
|
(34,257
|
)
|
|
|
(40,842
|
)
|
|
|
(3,640
|
)
|
Proceeds from sales of assets
|
|
|
3,514
|
|
|
|
19,881
|
|
|
|
24,281
|
|
|
|
2,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(16,584
|
)
|
|
|
(14,376
|
)
|
|
|
(16,561
|
)
|
|
|
(840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in short-term
borrowings
|
|
|
1,122
|
|
|
|
10,347
|
|
|
|
(11,588
|
)
|
|
|
2,425
|
|
Repayments under 9.125% Senior
Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(110,082
|
)
|
Notes payable to affiliates
|
|
|
51,579
|
|
|
|
(11,674
|
)
|
|
|
39,768
|
|
|
|
(188,377
|
)
|
Borrowings under Senior Secured
Credit Facility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327,500
|
|
Repayments under Senior Secured
Credit Facility
|
|
|
(7,717
|
)
|
|
|
(11,819
|
)
|
|
|
(167,016
|
)
|
|
|
|
|
Settlement of foreign currency swap
|
|
|
|
|
|
|
(12,084
|
)
|
|
|
|
|
|
|
|
|
Decrease in other debt
|
|
|
(2,274
|
)
|
|
|
(3,857
|
)
|
|
|
(5,595
|
)
|
|
|
(2,412
|
)
|
Financing costs and other
|
|
|
(239
|
)
|
|
|
(4,237
|
)
|
|
|
(1,839
|
)
|
|
|
(14,672
|
)
|
Common stock issuance
|
|
|
|
|
|
|
|
|
|
|
140,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
42,471
|
|
|
|
(33,324
|
)
|
|
|
(5,713
|
)
|
|
|
14,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on
Cash and Cash Equivalents
|
|
|
2,580
|
|
|
|
(1,949
|
)
|
|
|
2,239
|
|
|
|
(730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) In Cash and
Cash Equivalents
|
|
|
18,138
|
|
|
|
(8,184
|
)
|
|
|
3,682
|
|
|
|
1,600
|
|
Cash and Cash Equivalents,
Beginning of Period
|
|
|
25,515
|
|
|
|
33,699
|
|
|
|
30,017
|
|
|
|
28,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of
Period
|
|
$
|
43,653
|
|
|
$
|
25,515
|
|
|
$
|
33,699
|
|
|
$
|
30,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash
Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period
for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
17,808
|
|
|
$
|
12,814
|
|
|
$
|
19,512
|
|
|
$
|
12,313
|
|
Income taxes (net of refunds)
|
|
$
|
10,934
|
|
|
$
|
9,662
|
|
|
$
|
10,580
|
|
|
$
|
1,139
|
|
Supplemental Disclosures of
Non-cash Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions of previous
debt forgiven
|
|
$
|
|
|
|
$
|
|
|
|
$
|
234,368
|
|
|
$
|
|
|
The accompanying notes are an integral part of these statements.
F-56
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
March 31,
2007
|
|
(1)
|
BASIS OF
PRESENTATION
|
The Consolidated Financial Statements include the accounts of
Exide Global Holding Netherlands C.V. (referred together with
its subsidiaries, unless the context requires otherwise, as
EGHN or the Company) and all of its
majority-owned subsidiaries. The Company is a partnership that
is ultimately wholly owned by Exide Technologies (referred to as
Exide or the Parent Company.)
EGHN was formed on April 14, 2004 as a limited partnership
under the laws of the Netherlands with the General Partner,
Exide Technologies, owning 99.99% and the Limited Partner, EH
International, LLC (a limited liability company, wholly owned by
Exide Technologies), owning .01%. EGHN was formed by
Exides contribution of its ownership interest in its then
wholly owned subsidiaries Exide Holding Europe S.A. (referred to
as EHE) and Exide Holding Asia Pte Limited (referred
to as EHA) and its interest in a participating loan
due from EHE totaling $148.4 million, including accrued
interest of $25.5 million. Subsequently, Exide made
additional contributions of $234.6 million in July 2004 and
$140.6 million in March 2005, which the Company used
to repay a portion of its senior secured credit facility. As the
Company was the successor to substantially all of the business
of EHE and EHA and the Companys own operations are
insignificant relative to the operations contributed, the
consolidated financial statements for all periods prior to the
date of formation of the Company include the consolidated
financial results and position of EHE and EHA, accounted for as
a merger of entities under common control.
On April 15, 2002, Exide together with certain of its
U.S. subsidiaries, 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). On November 21, 2002, two additional wholly
owned, non-operating subsidiaries of Exide filed voluntary
petitions for reorganization under Chapter 11 in the
Bankruptcy Court. All of the cases were jointly administered for
procedural purposes before the Bankruptcy Court under case
number
02-11125KJC.
Exide and such subsidiaries (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.
The Debtors declared May 5, 2004 as the effective date of
the Plan, and substantially consummated the transactions
provided for in the Plan on such date (the Effective
Date). For accounting purposes the Company also recognized
the emergence as of May 5, 2004, as this was the date upon
which the material conditions related to emergence, most
significantly the finalization of the Companys and the
Parent Companys exit financing, were resolved.
The emergence from Chapter 11 resulted in adoption of Fresh
Start accounting and reporting in accordance with Statement of
Position
90-7
(SOP 90-7),
Financial Reporting by Entities in Reorganization under
the Bankruptcy Code. Although EGHN was not in
reorganization under Chapter 11, Fresh Start accounting was
adopted for all subsidiaries of Exide for U.S. generally
accepted accounting principles (GAAP) reporting
purposes. Accordingly, these financial statements reflect the
adoption of Fresh Start accounting as of the Effective Date.
Fresh Start accounting required the Parent Company to allocate
the reorganization value to its assets based upon their
estimated fair values in accordance with Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations (SFAS 141).
In connection with the development of the Plan the Parent
Company was primarily responsible for the valuation and directed
its financial advisors to prepare a valuation analysis of its
business. Management considered a number of factors, including
valuations or appraisals, when estimating the fair values of the
Parent Companys assets and liabilities. Each liability
existing at the Plan confirmation date, other than deferred
taxes, was stated at present values of amounts to be paid
determined at appropriate current interest rates. Adoption of
Fresh Start
F-57
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
accounting has resulted in material adjustments to the
historical carrying value of the Companys assets and
liabilities. The excess of the reorganization value over the
fair value of specific tangible and identified intangible net
assets was allocated to goodwill. A portion of the
reorganization value and goodwill was allocated to EGHN based on
the estimated future cash flows of EGHNs businesses
relative to those of the Parent Company, as contained in the
Plan.
On the date of the Parent Companys emergence from
bankruptcy, the third party holders of the Parent Companys
senior secured credit facility exchanged their interest in the
Parent Companys debt for shares of the Parent
Companys new common stock. Pursuant to the plan of
reorganization, the Parent Company assumed the Companys
debt under the Senior Secured credit facility in exchange for an
intercompany loan. The Parent Company then discharged without
recourse $46.8 million of the Companys loan, which
the Company recorded as debt forgiveness. The Parent Company
also became the holder of $234.4 million of the
Companys debt, which was subsequently contributed to the
Company.
Since the Company adopted Fresh Start reporting as of the
Effective Date, the consolidated financial statements for
periods subsequent to May 5, 2004 are not comparable with
those of prior periods. All financial information as of and for
periods prior to May 6, 2004 is presented as pertaining to
the Predecessor Company, while all financial
information after that date is presented as pertaining to the
Successor Company. The consolidated statements of
operations reflect the results of the reorganization and Fresh
Start adjustments in accordance with
SOP 90-7
in the period April 1, 2004 to May 5, 2004 as
Predecessor Company information.
The accompanying Consolidated Financial Statements of the
Predecessor Company prior to emergence from Chapter 11 have
also been prepared in accordance with
SOP 90-7.
Accordingly, revenues, expenses, realized gains and losses and
provision for losses resulting from the reorganization are
reported separately as Reorganization items, net, in the
consolidated statements of operations.
Certain amounts of the Parent Companys corporate expenses,
including insurance, centralized legal, accounting, information
technology services, treasury, internal audit and other
consulting and professional fees, have been allocated to EGHN on
a basis that the Parent Company considers to be a reasonable
reflection of the utilization of services provided or the
benefit received by EGHN. These services are charged to the
Company in the form of a fee.
|
|
(2)
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Principles
of Consolidation and Combination
The Consolidated Financial Statements include the accounts of
Exide Global Holding Netherlands C.V. and all of its majority
owned subsidiaries in which the Company exercises control
(collectively, the Company). As the Company was
formed on April 14, 2004, the consolidated financial
statements for all periods prior to that date include the
consolidated accounts of Exide Holding Europe SAS and Exide
Holding Asia Pte Limited.
Investments in affiliates of less than a 20% interest are
accounted for by the cost method. Investments in 20% to 50%
owned companies are accounted for by the equity method. All
significant intercompany transactions have been eliminated.
Transactions between the Company and other Exide entities have
been identified in the consolidated financial statements as
transactions among related parties.
Nature
of Operations
The Company manufactures and markets industrial and automotive
batteries in Europe, the Middle East, India, Canada, Australia
and New Zealand. The Companys industrial batteries consist
of motive power batteries, such as those used in forklift trucks
and other electronic vehicles, and network power batteries used
F-58
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
for back-up
power applications, such as those used for telecommunication
systems. The Company markets its automotive batteries to a broad
range of retailers and distributors of replacement batteries and
automotive original equipment manufacturers.
Major
Customers and Concentration of Credit
The Company has a number of major end-user, retail and original
equipment manufacturer customers. No single customer accounted
for more than 10% of consolidated net sales during any of the
fiscal years presented. The Company does not believe a material
part of its business is dependent upon a single customer, the
loss of which would have a material long-term impact on the
business of the Company. However, the loss of one or more of the
Companys largest customers would most likely have a
negative short-term impact on the Companys results of
operations.
Foreign
Currency Translation
The functional currencies of the Companys foreign
subsidiaries are primarily the respective local currencies.
Assets and liabilities of the Companys subsidiaries and
affiliates are translated into U.S. dollars at the year-end
exchange rate, and revenues and expenses are translated at
average monthly exchange rates. Translation gains and losses are
recorded as a component of accumulated other comprehensive
income (loss) within partnership capital or stockholders
equity. Foreign currency gains and losses from certain
intercompany transactions meeting the permanently advanced
criteria of Statement of Financial Accounting Standards
(SFAS) No. 52 Foreign Currency
Translation are also recorded as a component of
accumulated other comprehensive income (loss). All other foreign
currency gains and losses are included in other (income)
expense, net. The Company recognized net foreign currency
(gains) losses of ($4.6) million, $6.9 million,
($6.2) million, and $4.9 million in fiscal 2007 and
2006, the period May 6, 2004 to March 31, 2005, and
the period April 1, 2004 to May 5, 2004, respectively.
Cash
Equivalents
Cash equivalents consist of highly liquid instruments with
maturities at the time of acquisition of three months or less.
Cash equivalents are stated at cost, which approximates fair
value, because of the short-term maturity of these instruments.
Allowance
for Doubtful Accounts
The Company maintains allowances for doubtful accounts for
estimated probable losses resulting from the inability of the
Companys customers to make required payments. The Company
continues to assess the adequacy of the reserves for doubtful
accounts based on the financial condition of the Companys
customers and other external factors that may impact
collectibility. The majority of the Companys accounts
receivable is due from trade customers. Credit is extended based
on an evaluation of the Companys customers financial
condition and generally, collateral is not required. Payment
terms vary and accounts receivable are stated in the
consolidated financial statements at amounts due from customers
net of an allowance for doubtful accounts. Accounts outstanding
longer than the payment terms are considered past due. The
Company considers a number of factors in determining the
allowance for doubtful accounts, including the length of time
trade accounts receivable are past due, the customers
current ability to pay their obligations to the Company, the
Companys previous loss history, and the condition of the
general economy and the industry as a whole. The Company writes
off accounts receivable when they become uncollectible.
F-59
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventories
Inventories, which consist of material, labor and overhead, are
stated at the lower of cost or market using the
first-in,
first-out (FIFO) method. The Company writes down its
inventory to estimated market value based on assumptions of
future demand and market conditions.
Property,
Plant and Equipment
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
48,803
|
|
|
$
|
47,999
|
|
Buildings and improvements
|
|
|
161,708
|
|
|
|
157,733
|
|
Machinery and equipment
|
|
|
373,219
|
|
|
|
316,107
|
|
Construction in progress
|
|
|
12,086
|
|
|
|
25,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
595,816
|
|
|
|
547,070
|
|
Less Accumulated
depreciation
|
|
|
199,574
|
|
|
|
129,985
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
396,242
|
|
|
$
|
417,085
|
|
|
|
|
|
|
|
|
|
|
Depreciation is provided on a straight-line basis over the
estimated useful lives of the assets. The range of original
estimated useful lives is as follows: buildings and
improvements,
25-40 years;
machinery and equipment, 3-14 years.
Cost and accumulated depreciation for property retired or
disposed of are removed from the accounts, and any gain or loss
on disposal is credited or charged to earnings. Expenditures for
maintenance and repairs are charged to expense as incurred.
Additions, improvements and major renewals are capitalized.
Depreciation expense was $69.6 million, $66.2 million,
$63.8 million, and $4.4 million, for fiscal 2007 and
2006, the period May 6, 2004 to March 31, 2005
(Successor Company), and the period April 1, 2004 to
May 5, 2004, respectively.
Capitalized
Software Costs
The Company capitalizes the cost of computer software acquired
or developed for internal use, in accordance with
SOP 98-1
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use. The capitalized costs are
amortized over the estimated useful life of the software,
ranging from 3 to 5 years, on a straight-line basis.
Deferred
Financing Costs
Deferred financing costs are amortized to interest expense over
the life of the related debt.
Valuation
of Long-Lived Assets
The Companys long-lived assets include property, plant and
equipment, goodwill and identified intangible assets. Long-lived
assets (other than goodwill and indefinite lived intangible
assets) are depreciated over their estimated useful lives, and
are reviewed for impairment whenever changes in circumstances
indicate the carrying value may not be recoverable. Goodwill and
indefinite-lived intangible assets are reviewed for impairment
on both an annual basis and whenever changes in circumstances
indicate the carrying value may not be recoverable. The fair
value of goodwill and indefinite-lived intangible assets are
based upon the Companys estimates of future cash flows and
other factors including discount rates to determine the fair
value of the respective assets. If these assets or their related
assumptions change in the future, the Company may be required to
record impairment charges. See Note 5.
F-60
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Hedging
Activities
In accordance with SFAS 133, Accounting for
Derivative Instruments and Hedging Activities, as amended
and interpreted, the Parent Company reports all derivative
financial instruments on the balance sheet at their fair values.
For derivative instruments designated as cash flow hedges, the
effective portion of any hedge is reported in accumulated other
comprehensive income (loss) until it is cleared to earnings
during the same period in which the hedged item affects
earnings. The ineffective portion of all hedges is recognized in
current period earnings. The Parent Company uses no derivative
instruments designated as fair value hedges. In the Consolidated
Statement of Cash Flows, the Company reports the cash flows
resulting from its hedging activities in the same category as
the related item that is being hedged.
The Parent Company enters into foreign exchange rate agreements
to hedge exposure to the currency fluctuation of certain
transactions denominated in a currency other than the applicable
local currency.
The Parent Company also enters into forward purchase and put
option agreements to economically hedge the cost of certain
commodities. Exide charges EGHN for costs related to hedges
entered into by the Parent Company on behalf of EGHN.
Counterparties to foreign exchange and commodity and option
agreements are major financial institutions. The Parent Company
believes the risk of incurring losses related to credit risk is
remote.
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.
Income
Taxes
The Company accounts for income taxes under the provisions of
SFAS 109 Accounting for Income Taxes, which
requires the use of the liability method in accounting for
deferred taxes. If it is more likely than not that some portion,
or all, of a deferred tax asset will not be realized, a
valuation allowance is recognized.
Revenue
Recognition
The Company records sales when revenue is earned. Shipping terms
are generally FOB shipping point and revenue is recognized when
product is shipped to the customer. In limited cases, terms are
FOB destination and in these cases, revenue is recognized when
product is delivered to the customers delivery site.
Accounting
for Shipping and Handling Costs
The Company records shipping and handling costs incurred in cost
of sales and records shipping and handling costs billed to
customers in net sales.
Advertising
The Company expenses advertising costs as incurred.
F-61
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Use of
Estimates in the Preparation of Financial
Statements
The preparation of financial statements in conformity with
generally accepted accounting principles (GAAP)
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
Recently
Issued Accounting Standards
In February 2006, the FASB issued Statement of Financial
Accounting Standards No. 155 (SFAS 155),
Accounting for Certain Hybrid Financial
Instruments an amendment of FASB Statements
No. 133 and 140. SFAS 155 allows financial
instruments that have embedded derivatives to be accounted for
as a whole, eliminating the need to separate the derivative from
its host, if the holder elects to account for the whole
instrument on a fair value basis. This new accounting standard
is effective April 1, 2007. The adoption of SFAS 155
is not expected to have an impact on the Companys
financial statements.
In March 2006, the FASB issued SFAS No. 156,
Accounting for Servicing of Financial Assets
an amendment of FASB Statement No. 140
(SFAS 156). SFAS 156 requires that
all separately recognized servicing rights be initially measured
at fair value, if practicable. In addition, this Statement
permits an entity to choose between two measurement methods
(amortization method or fair value measurement method) for each
class of separately recognized servicing assets and liabilities.
This new accounting standard is effective April 1, 2007.
The adoption of SFAS 156 is not expected to have an impact
on the Companys financial statements.
In July 2006, the FASB issued FIN 48 Accounting For
Uncertainty In Income Taxes an Interpretation of
FASB Statement 109 (FIN 48). FIN 48
which clarifies the accounting for uncertain tax positions.
FIN 48 requires that the Company recognize the impact of a
tax position in the Companys financial statement if that
position is more likely than not of being sustained on audit
based on the technical merits of the position. As required by
FIN 48, the Company will adopt this new accounting standard
effective April 1, 2007. The Company is currently
evaluating the impact of FIN 48 on its consolidated
financial statements but is not yet in a position to make this
determination.
In September 2006, the FASB issued SFAS No. 157
Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about
fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value
measurements, the FASB having previously concluded in those
accounting pronouncements that fair value is the relevant
measurement attribute. Accordingly, SFAS 157 does not
require any new fair value measurements. However, for some
entities, the application of SFAS 157 will change current
practice. SFAS 157 is effective for fiscal years beginning
after November 15, 2007 (the Companys fiscal 2009),
and interim periods within those years. The Company will assess
the effect of this pronouncement on its financial statements,
but at this time, no material effect is expected.
In February 2007, the FASB issued SFAS No. 159
The Fair Value Option for Financial Assets and
Financial Liabilities, Including an Amendment of FASB Statement
No. 115 (SFAS 159).
SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting
provisions. SFAS 159 is expected to expand the use of fair
value measurement, which is consistent with the FASBs
long-term measurement objectives for accounting for financial
instruments. SFAS 159 is effective for fiscal years
beginning after November 15, 2007 (the Companys
fiscal 2009). The Company will assess the effect of this
pronouncements on its financial statements, but at this time, no
material effect is expected.
F-62
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(3)
|
ACCOUNTING
FOR DERIVATIVES
|
The Company accounts for derivative instruments and hedging
activities in accordance with SFAS 133 Accounting for
Derivative Instruments and Hedging Activities, as amended
by SFAS 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities and
SFAS 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities (collectively,
SFAS 133). SFAS 133 establishes accounting
and reporting standards for derivative instruments and hedging
activities. SFAS 133 requires that all derivatives be
recognized as either assets or liabilities at fair value. The
Company does not enter into derivative contracts for trading
purposes. Derivatives are used only to hedge the volatility
arising from movements in a portion of the cost of commodity
purchases as well as hedging certain interest rates and foreign
currency exchange rates. Changes in the fair value of cash flow
hedges for which the hedged item affects earnings immediately
(foreign currency transaction hedges and interest rate hedges),
ineffective portions of changes in the fair value of cash flow
hedges and fair value changes on certain derivatives that,
despite being utilized to effectively manage the above mentioned
activities, do not qualify for hedge accounting, are recognized
in earnings immediately. The change in fair value of cash flow
hedges for which the hedged item affects earnings immediately,
related to hedge ineffectiveness and of derivatives not
qualifying for hedge accounting, and for the fiscal year ended
March 31, 2006 resulted in a net gain of $7.4 million,
of which a gain of $1.1 million was recognized in other
(income) expense and a gain of $6.3 million was recognized
in cost of sales. For the period May 6, 2004 to
March 31, 2005 was a net loss of $7.1 million, of
which a loss of $13.2 million was recognized in other
(income) expense and a gain of $6 million was recognized in
cost of sales. At March 31, 2006, a net liability of
$2.8 million was recorded for outstanding derivative
contracts.
Reorganization items represent amounts the Company incurred as a
result of the Parent Companys Chapter 11 process and
are presented separately in the consolidated statements of
operations. During the period May 6, 2004 to March 31,
2005, the Company incurred $3.9 million for reorganization
costs.
|
|
(5)
|
ACCOUNTING
FOR GOODWILL AND INTANGIBLES
|
Intangible
Assets
The Company completed its most recent annual impairment
assessment of intangible assets (as required under
SFAS 142) effective March 31, 2006, utilizing its
updated five-year business plan as the basis for development of
cash flows and an estimate of fair values. As a result of the
comparison of the book carrying values of its reporting units
against these estimated fair values, no adjustment of carrying
values was deemed necessary. Intangible assets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and
|
|
|
Trademarks and
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradenames
|
|
|
Tradenames
|
|
|
|
|
|
|
|
|
|
|
|
|
(Not Subject to
|
|
|
(Subject to
|
|
|
Customer
|
|
|
|
|
|
|
|
|
|
Amortization)
|
|
|
Amortization)
|
|
|
Relationships
|
|
|
Technology
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
As of March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount
|
|
$
|
37,846
|
|
|
$
|
8,608
|
|
|
$
|
71,450
|
|
|
$
|
15,977
|
|
|
$
|
133,881
|
|
Accumulated Amortization
|
|
|
|
|
|
|
(1,303
|
)
|
|
|
(5,660
|
)
|
|
|
(1,519
|
)
|
|
|
(8,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
37,846
|
|
|
$
|
7,305
|
|
|
$
|
65,790
|
|
|
$
|
14,458
|
|
|
$
|
125,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount
|
|
$
|
41,577
|
|
|
$
|
9,457
|
|
|
$
|
78,268
|
|
|
$
|
17,553
|
|
|
$
|
146,855
|
|
Accumulated Amortization
|
|
|
|
|
|
|
(2,178
|
)
|
|
|
(9,517
|
)
|
|
|
(2,539
|
)
|
|
|
(14,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
41,577
|
|
|
$
|
7,279
|
|
|
$
|
68,751
|
|
|
$
|
15,014
|
|
|
$
|
132,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-63
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Aggregate annual amortization expense was $4.9 million,
$4.6 million, and $3.9 million, for the fiscal year
ended March 31, 2007 and 2006, and the period May 6,
2004 to March 31, 2005, respectively, and is expected to
amount to approximately $4.9 million for each of the next
five fiscal years. Intangible assets have been recorded at the
proper legal entity and are subject to foreign currency
fluctuations. The change in the gross amounts, shown above, from
fiscal 2006 to fiscal 2007, result only from foreign currency
translation. No other activity has occurred.
Goodwill
The fair values of the assets as determined by Fresh Start
reporting were based on estimates of future cash flows. The
estimated enterprise value of Exide of $1.5 billion which
served as the basis for the Plan approved by the Bankruptcy
Court, was used to determine Exides reorganization value,
which was estimated at $2.7 billion. A portion of the
reorganization value and goodwill was allocated to EGHN based on
the estimated future cash flows of EGHNs businesses
relative to those of Exide, as contained in the Plan. The
portion of reorganization value which could not be attributed to
EGHNs specific tangible or identified intangible assets
was $222.8 million. In accordance with
SFAS No. 142 (SFAS 142),
Goodwill and Other Intangible Assets, this amount
was reported as Goodwill in the consolidated balance sheet as of
the Effective Date. Liabilities as of the Effective Date were
stated at the present values of amounts to be paid. The
determination of fair values of assets and liabilities is
subject to significant estimation and assumptions. The
enterprise value that served as the basis for determining the
reorganization value was calculated using the discounted cash
flow method. The cash flows, taken from Exides Plan of
Reorganization, were projected over five years, utilizing
discount rates of 9% to 11%, respectively, for Exides
transportation and industrial businesses in order to reflect the
inherent risks of each business. The enterprise value was based
on an assumed tax rate of 0% in the U.S. in years 1 through
3 (in consideration of Exides NOL tax position), and 38%
in the remaining years. For Europe and Rest of World, a tax rate
of 25% was assumed for all periods reflected.
The Company completed its annual impairment assessment of
goodwill effective December 31, 2004, utilizing its
five-year business plan as the basis for development of
discounted cash flows and an estimate of fair values. As a
result of the comparison of the book carrying values of its
reporting units, including goodwill, against these estimated
fair values, the Company determined that goodwill was fully
impaired and a write-down of the entire $222.8 million
balance of goodwill was recorded in fiscal 2005.
Inventories, valued using the
first-in,
first-out (FIFO) method, consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Raw materials
|
|
$
|
33,761
|
|
|
$
|
38,022
|
|
Work-in-process
|
|
|
50,191
|
|
|
|
46,028
|
|
Finished Goods
|
|
|
174,126
|
|
|
|
170,301
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
258,078
|
|
|
$
|
254,351
|
|
|
|
|
|
|
|
|
|
|
F-64
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other assets consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Capitalized software, net
|
|
|
1,603
|
|
|
|
1,369
|
|
Loan to affiliate
|
|
|
3,702
|
|
|
|
3,563
|
|
Other
|
|
|
7,409
|
|
|
|
3,685
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,714
|
|
|
$
|
8,617
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2007 and 2006, short-term borrowings of
$14 million and $11.4 million, respectively, consisted
of various operating lines of credit and working capital
facilities maintained by certain of the Companys
subsidiaries. Certain of these borrowings are secured 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. As of
March 31, 2007 and 2006, the weighted average interest rate
on these borrowings was 5.1% and 3.6%, respectively.
Total long-term debt at March 31, 2007 comprised the
following:
|
|
|
|
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Senior Secured Credit Facility
|
|
$
|
167,116
|
|
Other, including capital lease
obligations and other loans at interest rates generally ranging
up to 11.0% due in installments through 2015
|
|
|
23,208
|
|
|
|
|
|
|
Total
|
|
|
190,324
|
|
Less-current maturities
|
|
|
3,964
|
|
|
|
|
|
|
|
|
$
|
186,360
|
|
|
|
|
|
|
Total debt at March 31, 2007 was $204.3 million.
Total long-term debt at March 31, 2006 comprised the
following:
|
|
|
|
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Senior Secured Global Credit
Facility Borrowings primarily at LIBOR plus 4.75% to
5.25%
|
|
$
|
165,917
|
|
Other, including capital lease
obligations and other loans at interest rates generally ranging
from up to 11.0% due in installments through 2015(1)
|
|
|
23,068
|
|
|
|
|
|
|
Total
|
|
|
188,985
|
|
Less current maturities
|
|
|
5,360
|
|
|
|
|
|
|
|
|
$
|
183,625
|
|
|
|
|
|
|
Total debt at March 31, 2006 was $200.4 million.
On May 5, 2004, the Parent Company and the Company entered
into a $600 million Senior Secured Credit Agreement (the
Credit Agreement) which included a $500 million
Multi-Currency Term Loan Facility and a $100 million
Multi-Currency Revolving Loan Facility including a letter of
credit sub-facility of up to $40 million. The Credit
Agreement is the Companys most important source of
liquidity outside of its cash
F-65
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
flows from operations. The Revolving Loan Facility matures on
May 5, 2009, while the Term Loan Facility matures on
May 5, 2010. The Term Loan Facility and the Revolving Loan
Facility bear interest at LIBOR plus 6.25% per annum. The
interest rate at March 31, 2007 and 2006 was 10.2% and
10.6%, respectively. Credit Agreement borrowings are guaranteed
by substantially all of the subsidiaries of the Parent Company
and are collateralized by substantially all of the assets of the
Parent Company and the subsidiary guarantors. Availability for
Exide under the Revolving Loan Facility and other loan
facilities was $59.3 million and $10.4 million,
respectively as of March 31, 2007. At March 31, 2007
and 2006, weighted average interest on the Credit Agreement was
10.2% and 10.6%, respectively.
The Credit Agreement requires Exide to comply with financial
covenants, including an Adjusted EBITDA covenant for the
relevant periods. The Credit Agreement also contains other
customary covenants, including reporting covenants and covenants
that restrict Exides ability to incur indebtedness, create
or incur liens, sell or dispose of assets, make investments, pay
dividends, change the nature of Exides business or enter
into related party transactions.
In March 2005, the Parent Company issued $290 million in
aggregate principal amount of 10.5% Senior Secured Notes
due 2013. Interest of $15.2 million is payable
semi-annually on March 15 and September 15. The
10.5% Senior Secured Notes are redeemable at the option of
the Parent Company, in whole or in part, on or after
March 15, 2009, initially at 105.25% of the principal
amount, plus accrued interest, declining to 100% of the
principal amount, plus accrued interest on or after
March 15, 2011. The 10.5% Senior Secured Notes are
redeemable at the option of the Parent Company, in whole or in
part, subject to payment of a make whole premium, at any time
prior to March 15, 2009. In addition, until May 15,
2008, up to 35% of the 10.5% Senior Secured Notes are
redeemable at the option of the Parent Company, using the net
proceeds of one or more qualified equity offerings. In the event
of a change of control or the sale of certain assets, the Parent
Company may be required to offer to purchase the
10.5% Senior Secured Notes from the note holders. Those
notes are secured by a junior priority lien on the assets of the
U.S. Parent Company, including the stock of its
subsidiaries. The indenture for these notes contains financial
covenants which limit the ability of the Parent Company and its
subsidiaries to among other things incur debt, grant liens, pay
dividends, invest in non-subsidiaries, engage in related party
transactions and sell assets.
Also, in March 2005, the Parent Company issued Floating Rate
Convertible Senior Subordinated Notes due September 18,
2013, with an aggregate principal amount of $60 million.
These notes bear interest at a per annum rate equal to the
3-month
LIBOR, adjusted quarterly, minus a spread of 1.5%. The weighted
average interest on these notes was 3.4% and 1.5% at
March 31, 2006 and 2005, respectively. Interest is payable
quarterly. The notes are convertible into the Parent
Companys common stock at a conversion rate of
57.5705 shares per one thousand dollars principal amount at
maturity, subject to adjustments for any common stock splits,
dividends on the common stock, tender and exchange offers by the
Parent Company for the common stock and third party tender
offers, and in the case of a change in control in which 10% or
more of the consideration for the common stock is cash or
non-traded securities, the conversion rate increases, depending
on the value offered and timing of the transaction, to as much
as 70.2247 shares per one thousand dollars principal amount.
The Companys variable rate debt at March 31, 2007 and
March 31, 2006 was $181.1 million and
$177.3 million, respectively, none of which was hedged.
F-66
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Annual principal payments required under long-term debt
obligations at March 31, 2007 are as follows:
|
|
|
|
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
2008
|
|
$
|
|
|
2009
|
|
|
|
|
2010
|
|
|
|
|
2011
|
|
|
167,116
|
|
2012
|
|
|
|
|
2013 and beyond
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
167,116
|
|
|
|
|
|
|
|
|
(9)
|
EMPLOYEE
BENEFIT PLANS AND POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
BENEFITS
|
On September 29, 2006, the FASB issued
SFAS No. 158, Employers Accounting for
Defined Benefit Pension and other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106 and 132(R)
(SFAS 158). SFAS 158 requires recognition
of the overfunded or underfunded status of pension and other
postretirement benefit plans on the balance sheet. Under
SFAS 158, gains and losses, prior service costs and
credits, and any remaining transition amounts under FASB
Statement No. 87, Employers Accounting for
Pensions (SFAS 87) and FASB Statement
No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions (SFAS 106)
that have not yet been recognized through net periodic benefit
costs will be recognized in accumulated other comprehensive
income (loss), net of tax effects, until they are amortized as a
component of net periodic cost. SFAS 158 does not change
how pensions and other postretirement benefits are accounted for
and reported in the income statement. Companies will continue to
follow the existing guidance in SFAS 87, FASB
Statement No. 88, Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits and SFAS 106.
SFAS 158 was effective for fiscal years ending after
December 15, 2006. The company adopted the balance sheet
recognition provisions of SFAS 158 at March 31, 2007.
The incremental effect of adopting SFAS 158 is summarized
below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Application
|
|
|
|
|
|
After Application
|
|
|
|
of SFAS 158
|
|
|
Adjustments
|
|
|
of SFAS 158
|
|
|
Prepaid expenses and other
|
|
$
|
678
|
|
|
$
|
202
|
|
|
$
|
880
|
|
Deferred income taxes
|
|
|
2,665
|
|
|
|
988
|
|
|
|
3,653
|
|
Accrued expenses and noncurrent
retirement obligations
|
|
|
(198,007
|
)
|
|
|
26,922
|
|
|
|
(171,085
|
)
|
Accumulated deficit
|
|
|
191,815
|
|
|
|
|
|
|
|
191,815
|
|
Accumulated other comprehensive
(income) loss
|
|
|
2,849
|
|
|
|
(28,112
|
)
|
|
|
(25,263
|
)
|
European subsidiaries of the Company sponsor several defined
benefit plans that cover substantially all employees who are not
covered by statutory plans. For defined benefit plans, charges
to expense are based upon underlying assumptions established by
the Company in consultation with its actuaries. In most cases,
the defined benefit plans are not funded. The Company has
noncontributory defined benefit pension plans covering
substantially all hourly and salaried employees in Canada. Plans
covering hourly employees provide pension benefits of stated
amounts for each year of credited service. The Company has
numerous defined contribution plans with related expense of
$5.4 million, $5.3 million, $4.9 million, and
$.5 million, in fiscal 2007 and 2006, the period
May 6, 2004 to March 31, 2005, and the period
April 1, 2004 to May 5, 2005, respectively.
F-67
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company provides certain health care and life insurance
benefits for a limited number of retired employees. The Company
accrues the estimated cost of providing postretirement benefits
during the employees applicable years of service.
The following table sets forth the plans funded status and
the amounts recognized in the Companys Consolidated
Financial Statements at March 31, 2007 and 2006:
Pension
Benefits:
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Change in benefit
obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of
period
|
|
$
|
304,820
|
|
|
$
|
319,822
|
|
Service cost
|
|
|
5,741
|
|
|
|
4,956
|
|
Interest cost
|
|
|
15,207
|
|
|
|
15,008
|
|
Actuarial (gain) loss
|
|
|
(8,297
|
)
|
|
|
4,547
|
|
Plan participants
contributions
|
|
|
1,170
|
|
|
|
1,218
|
|
Benefits paid
|
|
|
(14,539
|
)
|
|
|
(11,830
|
)
|
Plan amendments
|
|
|
|
|
|
|
259
|
|
Currency translation
|
|
|
34,939
|
|
|
|
(22,699
|
)
|
Settlements and other
|
|
|
1,797
|
|
|
|
(6,461
|
)
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
340,838
|
|
|
$
|
304,820
|
|
|
|
|
|
|
|
|
|
|
Change in plan
assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of period
|
|
$
|
142,933
|
|
|
$
|
126,424
|
|
Actual return on plan assets
|
|
|
8,699
|
|
|
|
29,153
|
|
Employer contributions
|
|
|
17,384
|
|
|
|
15,219
|
|
Plan participants
contributions
|
|
|
1,170
|
|
|
|
1,218
|
|
Benefits paid
|
|
|
(14,539
|
)
|
|
|
(11,830
|
)
|
Currency translation
|
|
|
18,402
|
|
|
|
(10,129
|
)
|
Settlements and other
|
|
|
1,750
|
|
|
|
(7,122
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end
of period
|
|
$
|
175,799
|
|
|
$
|
142,933
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded
status:
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
340,838
|
|
|
$
|
304,820
|
|
Fair value of plan assets at end
of period
|
|
|
175,799
|
|
|
|
142,933
|
|
Funded status
|
|
|
(165,039
|
)
|
|
|
(161,887
|
)
|
Prior service cost
|
|
|
see note
|
(a)
|
|
|
258
|
|
Unrecognized actuarial gain
|
|
|
see note
|
(a)
|
|
|
(14,548
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of
period
|
|
$
|
(165,039
|
)
|
|
$
|
(176,177
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in Statement
of Financial Position:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other
|
|
|
see note(a
|
)
|
|
$
|
332
|
|
Noncurrent other assets
|
|
|
880
|
|
|
|
see note
|
(a)
|
Accrued expenses
|
|
|
(9,468
|
)
|
|
|
(2,360
|
)
|
Noncurrent retirement obligations
|
|
|
(156,451
|
)
|
|
|
(182,444
|
)
|
Intangible asset
|
|
|
see note
|
(a)
|
|
|
258
|
|
Accumulated other comprehensive
(income) loss
|
|
|
see note
|
(a)
|
|
|
8,037
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of
period
|
|
$
|
(165,039
|
)
|
|
$
|
(176,177
|
)
|
|
|
|
|
|
|
|
|
|
F-68
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Amounts recognized in
accumulated other comprehensive (income) loss:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
264
|
|
|
|
see note
|
(a)
|
Net (gain)
|
|
|
(22,704
|
)
|
|
|
see note
|
(a)
|
|
|
|
|
|
|
|
|
|
Net amount recognized in
accumulated other comprehensive (income) loss:
|
|
$
|
(22,440
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded pension cost
|
|
$
|
(187,479
|
)
|
|
$
|
(176,177
|
)
|
|
|
|
|
|
|
|
|
|
Other
Post-Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Change in benefit
obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of
period
|
|
$
|
4,814
|
|
|
$
|
4,250
|
|
Service cost
|
|
|
167
|
|
|
|
101
|
|
Interest cost
|
|
|
257
|
|
|
|
243
|
|
Actuarial (gain) loss
|
|
|
152
|
|
|
|
416
|
|
Benefits paid
|
|
|
(370
|
)
|
|
|
(306
|
)
|
Currency translation
|
|
|
146
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
5,166
|
|
|
$
|
4,814
|
|
|
|
|
|
|
|
|
|
|
Change in plan
assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at
beginning of period
|
|
$
|
|
|
|
$
|
|
|
Employer contributions
|
|
|
370
|
|
|
|
306
|
|
Benefits paid
|
|
|
(370
|
)
|
|
|
(306
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end
of period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded
status:
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
5,166
|
|
|
$
|
4,814
|
|
Fair value of plan assets at end
of period
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(5,166
|
)
|
|
|
(4,814
|
)
|
Unrecognized actuarial loss
|
|
|
see note(a
|
)
|
|
|
672
|
|
Contributions after measurement
date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of
period
|
|
$
|
(5,166
|
)
|
|
$
|
(4,142
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in statement
of financial position:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
(329
|
)
|
|
$
|
(54
|
)
|
Noncurrent retirement obligations
|
|
|
(4,837
|
)
|
|
|
(4,088
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of
period
|
|
$
|
(5,166
|
)
|
|
$
|
(4,142
|
)
|
|
|
|
|
|
|
|
|
|
F-69
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Amounts recognized in
accumulated other comprehensive (income) loss:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
|
|
|
|
see note
|
(a)
|
Net loss
|
|
|
830
|
|
|
|
see note
|
(a)
|
|
|
|
|
|
|
|
|
|
Net amount recognized in
accumulated other comprehensive (income) loss:
|
|
$
|
830
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded postretirement benefit
cost
|
|
$
|
(4,336
|
)
|
|
$
|
(4,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Amounts above for fiscal year 2007 include the effect of
adopting SFAS 158. Fiscal year 2006 amounts have not been
restated. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Post-Retirement Benefits
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
Weighted-average assumptions as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.0
|
%
|
|
|
4.8
|
%
|
|
|
5.4
|
|
|
|
5.3
|
%
|
Rate of compensation increase
|
|
|
3.4
|
%
|
|
|
3.3
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Expense
Assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Post-Retirement Benefits
|
|
|
|
FY 2008
|
|
|
FY 2007
|
|
|
FY 2008
|
|
|
FY 2007
|
|
|
|
Expense
|
|
|
Expense
|
|
|
Expense
|
|
|
Expense
|
|
|
Weighted-average assumptions for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
5.0
|
%
|
|
|
4.8
|
%
|
|
|
5.4
|
%
|
|
|
5.3
|
%
|
Expected return on plan assets
|
|
|
6.5
|
%
|
|
|
6.5
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Rate of compensation increase
|
|
|
3.4
|
%
|
|
|
3.3
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
For fiscal year 2007 expense, the Company assumed an expected
weighted average return on plan assets of 6.5%. In developing
this rate assumption, the Company evaluated input from third
party pension plan asset managers, including their review of
asset class return expectations and long-term inflation
assumptions.
For other post-retirement benefit measurement purposes, an 8%
and 8.2% annual rate of increase in the per capita cost of
covered health care benefits was assumed for 2007 and 2006,
respectively. The rate was assumed to decrease gradually to 5.0%
over eight and seven years for 2007 and 2006, and remain at that
level thereafter.
F-70
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following tables set forth the plans expense
recognized in the Companys Consolidated Financial
Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 05, 2004
|
|
|
|
(In thousands)
|
|
|
Components of net periodic benefit
cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
5,741
|
|
|
$
|
4,956
|
|
|
$
|
4,987
|
|
|
$
|
442
|
|
Interest cost
|
|
|
15,207
|
|
|
|
15,008
|
|
|
|
15,185
|
|
|
|
1,327
|
|
Expected return on plan assets
|
|
|
(10,114
|
)
|
|
|
(8,297
|
)
|
|
|
(7,802
|
)
|
|
|
(683
|
)
|
Amortization of: Prior service cost
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Actuarial (gain)/loss
|
|
|
(1,211
|
)
|
|
|
|
|
|
|
|
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (a)
|
|
$
|
9,642
|
|
|
$
|
11,667
|
|
|
$
|
12,370
|
|
|
$
|
1,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Excludes the impact of settlement net losses of $.6 million
and $.2 million in fiscal 2006, in the period from
May 6, 2004 to March 31, 2005, respectively, and
curtailment net gains of $.8 million, and $.6 million
in fiscal 2006, in the period from May 6, 2004 to
March 31, 2005, respectively. |
$1.4 million of income will be amortized from accumulated
other comprehensive income (loss) into net periodic benefit cost
in fiscal 2008 relating to the Companys pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement Benefits
|
|
|
|
Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 05, 2004
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Components of net periodic benefit
cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
167
|
|
|
$
|
101
|
|
|
$
|
82
|
|
|
$
|
7
|
|
Interest cost
|
|
|
257
|
|
|
|
243
|
|
|
|
202
|
|
|
|
16
|
|
Amortization of: Transition
obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Actuarial (gain)/loss
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
436
|
|
|
$
|
344
|
|
|
$
|
284
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.1 of expense will be amortized from accumulated other
comprehensive income into net periodic benefit cost in fiscal
2008 relating to the Companys other post retirement
benefit plans.
The measurement dates for the Companys Pension and Other
Post-Employment benefit plans were March 31, 2007 and
March 31, 2006.
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for the pension plans
with accumulated benefit obligations in excess of plan assets
were $168.4 million, $161.1 million and
$8 million, respectively, as of March 31, 2007 and
$155.2 million, $148.5 million and $6.2 million,
respectively, as of March 31, 2006.
F-71
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The accumulated benefit obligation for the Companys
pension plans was $303.6 million as of March 31, 2007.
Expected future benefit payments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-
|
|
|
|
|
|
|
Retirement
|
|
|
|
Pension
|
|
|
Gross Expected
|
|
Fiscal Year
|
|
Benefits
|
|
|
Benefit Payments
|
|
|
|
(In thousands)
|
|
|
2008
|
|
$
|
15,362
|
|
|
$
|
329
|
|
2009
|
|
|
16,057
|
|
|
|
348
|
|
2010
|
|
|
16,338
|
|
|
|
363
|
|
2011
|
|
|
16,519
|
|
|
|
388
|
|
2012
|
|
|
17,468
|
|
|
|
402
|
|
2013 to 2017
|
|
|
93,961
|
|
|
|
2,188
|
|
The asset allocation for the Companys pension plans at
March 31, 2007 and 2006, and the target allocation for
2008, by asset category, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
|
|
|
Allocation
|
|
|
Percentage of Plan Assets at Year End
|
|
Asset Category
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Equity securities
|
|
|
67
|
%
|
|
|
66
|
%
|
|
|
81
|
%
|
Fixed income securities
|
|
|
31
|
%
|
|
|
26
|
%
|
|
|
12
|
%
|
Real estate and other
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
3
|
%
|
Cash
|
|
|
1
|
%
|
|
|
6
|
%
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company invests in a diversified portfolio of investments
consisting almost entirely of equity and fixed income
securities. The equity portfolio includes direct and indirect
interests in equity securities, both in developed and emerging
market companies. The fixed income portfolio is primarily
high-quality bond funds.
The estimated fiscal 2008 pension plan contributions are
$18.1 million and postretirement contributions are
$.3 million.
Cash contributions to the Companys pension plans are
generally made in accordance with minimum regulatory
requirements.
Assumed health care cost trend rates have a significant effect
on the amounts reported for other post-retirement benefits. A
one-percentage-point change in assumed health care cost trend
rates would have the following effects:
|
|
|
|
|
|
|
|
|
|
|
One Percentage-
|
|
|
One Percentage-
|
|
|
|
Point Increase
|
|
|
Point Decrease
|
|
|
Effect on total of service and
interest cost components
|
|
$
|
98
|
|
|
$
|
76
|
|
Effect on the postretirement
benefit obligation
|
|
$
|
901
|
|
|
$
|
716
|
|
F-72
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The provision for income taxes includes local, federal, and
foreign taxes currently payable and those deferred because of
net operating losses and temporary differences between the
financial statement and tax bases of assets and liabilities. The
components of the provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netherlands
|
|
$
|
(849
|
)
|
|
$
|
1,340
|
|
|
$
|
2,883
|
|
|
$
|
120
|
|
Foreign
|
|
|
12,617
|
|
|
|
15,731
|
|
|
|
4,722
|
|
|
|
577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,768
|
|
|
|
17,071
|
|
|
|
7,605
|
|
|
|
697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netherlands
|
|
|
3,506
|
|
|
|
368
|
|
|
|
(2,194
|
)
|
|
|
|
|
Foreign
|
|
|
(9,643
|
)
|
|
|
(2,664
|
)
|
|
|
8,898
|
|
|
|
(3,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,137
|
)
|
|
|
(2,296
|
)
|
|
|
6,704
|
|
|
|
(3,179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision (benefit)
|
|
$
|
5,631
|
|
|
$
|
14,775
|
|
|
$
|
14,309
|
|
|
$
|
(2,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major differences between the Netherlands federal statutory rate
and the effective tax rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
Netherlands statutory rate
|
|
|
(30.0
|
)%
|
|
|
(31.5
|
)%
|
|
|
(34.5
|
)%
|
|
|
(34.5
|
)%
|
Loss on liquidation
|
|
|
|
|
|
|
11.7
|
|
|
|
|
|
|
|
|
|
Intercompany debt forgiveness
|
|
|
|
|
|
|
(89.6
|
)
|
|
|
|
|
|
|
|
|
Thin cap allowance
|
|
|
13.5
|
|
|
|
10.5
|
|
|
|
|
|
|
|
|
|
Nondeductible goodwill
impairment/amortization
|
|
|
|
|
|
|
|
|
|
|
25.2
|
|
|
|
|
|
Fresh start accounting adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.2
|
|
Discharge of liabilities subject
to compromise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.7
|
|
Tax losses not benefited
|
|
|
|
|
|
|
|
|
|
|
2.9
|
|
|
|
|
|
Increase (decrease) in valuation
allowances
|
|
|
44.8
|
|
|
|
155.4
|
|
|
|
13.2
|
|
|
|
|
|
Rate differences on foreign
subsidiaries
|
|
|
(18.0
|
)
|
|
|
(29.5
|
)
|
|
|
(9.7
|
)
|
|
|
4.7
|
|
Intercompany stock sales
|
|
|
|
|
|
|
|
|
|
|
4.6
|
|
|
|
|
|
Refund of previously paid taxes
|
|
|
(5.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
|
3.0
|
|
|
|
17.1
|
|
|
|
2.9
|
|
|
|
(5.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
7.9
|
%
|
|
|
44.1
|
%
|
|
|
4.6
|
%
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-73
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a summary of the significant components of the
Companys deferred tax assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Operating loss and tax credit
carry-forwards
|
|
$
|
263,290
|
|
|
$
|
220,058
|
|
Compensation reserves
|
|
|
8,025
|
|
|
|
21,329
|
|
Warranty
|
|
|
3,327
|
|
|
|
2,944
|
|
Asset and other realization
reserves
|
|
|
2,110
|
|
|
|
4,940
|
|
Other
|
|
|
25,878
|
|
|
|
5,531
|
|
Valuation allowance
|
|
|
(207,483
|
)
|
|
|
(157,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
95,147
|
|
|
|
97,237
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(13,046
|
)
|
|
|
(18,691
|
)
|
Intangible assets
|
|
|
(30,236
|
)
|
|
|
(37,439
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,282
|
)
|
|
|
(56,130
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
51,865
|
|
|
$
|
41,107
|
|
|
|
|
|
|
|
|
|
|
The net deferred income tax asset is classified in the
consolidated balance sheet as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Current asset
|
|
$
|
11,727
|
|
|
$
|
9,557
|
|
Noncurrent asset
|
|
|
68,806
|
|
|
|
56,358
|
|
Noncurrent liability
|
|
|
(28,668
|
)
|
|
|
(24,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
51,865
|
|
|
$
|
41,107
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2007, certain of the Parent Companys
subsidiaries have net operating loss carry-forwards for income
tax purposes of approximately $876 million, of which
approximately $139 million expire in fiscal years 2007
through 2022. The remaining losses are available for
carry-forward indefinitely.
Valuation allowances have been recognized in certain tax
jurisdictions, to reduce the deferred tax assets for net
operating loss carry-forwards and temporary differences for
which it is more likely than not that the related tax benefits
will not be realized. In other jurisdictions, the Companys
net deferred tax assets include net operating loss
carry-forwards and temporary differences which management
believes are realizable through a combination of forecasted
future taxable income and anticipated tax planning strategies.
The majority of the net deferred tax assets are derived in
Germany where there is no expiration on the utilization of net
operating loss carry-forwards. The Company has implemented
certain tax planning strategies in prior years to utilize a
portion of such deferred tax assets. Failure to achieve
forecasted future taxable income might affect the ultimate
realization of any remaining deferred tax assets.
F-74
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(11)
|
COMMITMENTS
AND CONTINGENCIES
|
Private
Party Lawsuits and other Legal Proceedings
In July 2001, Pacific Dunlop Holdings (US), Inc.
(PDH) and several of its foreign affiliates under
the various agreements through which the Parent Company 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 the Parent Company and three
of its foreign affiliates. The plaintiffs maintain they are
entitled to approximately $17 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 to re-filing the same
motion after discovery proceeds. The defendants filed an answer
and counterclaim. On July 8, 2002, the Court authorized
discovery to proceed as to all parties except Exide. In August
2002, the case was removed to the U.S. Bankruptcy Court for
the Northern District of Illinois and in October 2002, the
parties presented oral arguments, in the case of PDH, to remand
the case to Illinois state court and, in the case of Exide, to
transfer the case to the U.S. Bankruptcy Court for the
District of Delaware. 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 PDHs motion to abstain or
remand the case and issued an opinion holding that the
Bankruptcy Court had jurisdiction over PDHs claims and
that liability, if any, would lie solely against the Parent
Company and not against any of its foreign affiliates. The
Bankruptcy Court denied PDHs motion to reconsider. In an
order dated March 22, 2007, the U.S. District Court
for the District of Delaware denied PDHs appeal in its
entirety, affirming the orders of the Bankruptcy Court. PDH has
noticed the appeal of this order to the United States Court of
Appeals for the Third Circuit.
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 Parent Company under various agreements between the parties.
The claim arises from letters of credit and other security
allegedly provided by PDH for GNBs performance of certain
of GNBs obligations to third parties that PDH claims the
Parent Company was obligated to replace. The Parent
Companys answer contested the amounts claimed by PDH and
the Parent Company filed a counterclaim. Although this action
has been consolidated with the Cook County suit concerning
GNBs 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 Parent Company plans to vigorously
defend itself and pursue its counterclaims.
From 1957 to 1982, CEAC, the Companys principal French
subsidiary, operated a plant using crocidolite asbestos fibers
in the formation of battery cases, which, once formed,
encapsulated the fibers. Approximately 1,500 employees
worked in the plant over the period. Since 1982, the French
governmental agency responsible for worker illness claims
received 64 employee claims alleging asbestos-related
illnesses. For some of those claims, CEAC is obligated to and
has indemnified the agency in accordance with French law for
approximately $0.4 million in calendar 2004. In addition,
CEAC has been adjudged liable to indemnify the agency for
approximately $0.1 million during the same period for the
dependents of four such claimants. The Company was not required
to indemnify or make any payments in calendar years 2005 and
2006. Although the Company cannot predict the number or size of
any future claims, the Company does not believe resolution of
the current or any future claims, individually or in the
aggregate, will have a material adverse effect on the
Companys financial condition, cash flows or results of
operations.
The Companys Norwegian subsidiary, Exide Sonnak AS, has
received notice of claims for property damage in the approximate
amount of $5.6 million allegedly as the result of a
warehouse fire occurring on or about July 8, 2005 in
Trondheim, Norway due to an alleged malfunctioning battery
charger allegedly manufactured by the Company. The Company and
its counsel are evaluating those claims. The Company currently
believes that any potential liability would be covered by
applicable insurance, subject to any deductible.
F-75
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company is involved in various other claims and litigation
incidental to the conduct of its business. Based on consultation
with legal counsel, the Company does not believe that any such
claims or litigation to which the Company is a party, either
individually or in the aggregate, will have a material adverse
effect on the Companys financial condition, cash flows or
results of operations.
Environmental
Matters
As a result of its manufacturing, distribution and recycling
operations, the Company is subject to numerous federal and local
environmental, occupational health and safety laws and
regulations, including limits on employee blood lead levels, as
well as similar laws and regulations in the 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
hazardous substances and hazardous wastes.
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 Companys financial
condition, cash flows or results of operations.
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 March 31, 2007 and 2006, the
amount of such reserves on the Companys consolidated
balance sheet was approximately $7.1 million and
$8.1 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
Companys environmental reserves and, therefore, additional
earnings charges are possible. Also, future findings or changes
in estimates could have a material effect on the recorded
reserves and cash flows.
The site that currently has the largest reserves is the
following:
Azambuja
(SONALUR) Portugal
The Azambuja (SONALUR) facility is an active secondary lead
smelter. Materials from past operations present at the site are
stored in above-ground concrete containment vessels and in
underground storage deposits. The Company finalized the process
of obtaining site characterization data to evaluate remediation
alternatives agreeable to local authorities. Costs for
remediation are currently estimated at $2 million to
$4 million.
Legislation has recently been proposed in the European Union
which would ban lead in batteries, but with broad categories of
exemptions which apply to all or nearly all of the
Companys products. It is possible that such legislation,
if finalized, will impose further duties on the Company for the
reclamation of lead from spent batteries.
F-76
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Guarantees
At March 31, 2007, the Company had outstanding letters of
credit with a face value of $40.7 million and surety bonds
with a face value of $4.5 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 surety in the form of letters of credit at March 31,
2007, pursuant to the terms of the agreement, was
$4.5 million.
Certain of the Companys European subsidiaries have bank
guarantees outstanding, which have been issued as collateral or
financial assurance in connection with environmental
obligations, income tax claims and customer contract
requirements. At March 31, 2007, bank guarantees with a
face value of $19.1 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. Many returns are in fact
subsequently sold as seconds at a reduced price. 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.
A reconciliation of changes in the Companys sales returns
and allowances liability follows (in thousands):
|
|
|
|
|
Balance at March 31, 2006
|
|
$
|
23,793
|
|
Accrual for sales returns and
allowances
|
|
|
21,025
|
|
Settlements made (in cash or
credit) and currency translation
|
|
|
(22,050
|
)
|
|
|
|
|
|
Balance at March 31, 2007
|
|
$
|
22,768
|
|
|
|
|
|
|
F-77
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Leases
Future minimum lease payments under operating and capital leases
that have initial or remaining noncancelable lease terms in
excess of one year at March 31, 2007, are:
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Operating
|
|
|
Capital
|
|
|
|
(In thousands)
|
|
|
2008
|
|
$
|
13,179
|
|
|
$
|
4,445
|
|
2009
|
|
|
8,763
|
|
|
|
3,680
|
|
2010
|
|
|
5,347
|
|
|
|
5,138
|
|
2011
|
|
|
3,313
|
|
|
|
1,860
|
|
2012
|
|
|
1,971
|
|
|
|
1,803
|
|
Thereafter
|
|
|
4,412
|
|
|
|
5,226
|
|
|
|
|
|
|
|
|
|
|
Total minimum payments
|
|
$
|
36,985
|
|
|
|
22,152
|
|
|
|
|
|
|
|
|
|
|
Less Interest on
capital leases
|
|
|
|
|
|
|
3,530
|
|
|
|
|
|
|
|
|
|
|
Total principal payable on capital
leases (included in Long-term debt)
|
|
|
|
|
|
$
|
18,622
|
|
|
|
|
|
|
|
|
|
|
Rent expense amounted to $26.5 million, $23.6 million,
$23.7 million, and $2.5 million for the fiscal years
ended March 31, 2007 and 2006, the period May 6, 2004
to March 31, 2005, and the period April 1, 2004 to
May 5, 2004, respectively.
The Company has various purchase commitments for materials,
supplies and other items incident to the ordinary course of
business.
During fiscal 2007, 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.
F-78
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During the year ended March 31, 2007, the Company
recognized restructuring and impairment charges of
$15.2 million, representing $11.2 million for
severance and $4 million for related closure costs. These
charges resulted from actions completed during fiscal 2007,
which related to consolidation efforts in the Industrial Energy
Europe and ROW segment, closure costs for the Companys
Casalnuovo, Italy industrial facility, corporate severance, and
headcount reductions in the Transportation Europe and ROW
segment,. Approximately 241 positions have been eliminated in
connection with the fiscal 2007 restructuring activities. The
following is a summary of restructuring reserve movements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure Costs
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Balance, March 31, 2004
|
|
$
|
30,002
|
|
|
$
|
11,512
|
|
|
$
|
41,514
|
|
Charges
|
|
|
190
|
|
|
|
329
|
|
|
|
519
|
|
Payments and currency translation
|
|
|
(4,741
|
)
|
|
|
(1,502
|
)
|
|
|
(6,243
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 5, 2004
|
|
|
25,451
|
|
|
|
10,339
|
|
|
|
35,790
|
|
Charges
|
|
|
26,382
|
|
|
|
5,919
|
|
|
|
32,301
|
|
Payments and currency translation
|
|
|
(28,752
|
)
|
|
|
(8,555
|
)
|
|
|
(37,307
|
)
|
Reclassification
|
|
|
1,159
|
|
|
|
|
|
|
|
1,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2005
|
|
|
24,240
|
|
|
|
7,703
|
|
|
|
31,943
|
|
Charges
|
|
|
11,234
|
|
|
|
5,536
|
|
|
|
16,770
|
|
Payments and currency translation
|
|
|
(30,419
|
)
|
|
|
(10,260
|
)
|
|
|
(40,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2006
|
|
|
5,055
|
|
|
|
2,979
|
|
|
|
8,034
|
|
Charges
|
|
|
11,234
|
|
|
|
3,949
|
|
|
|
15,183
|
|
Payments and currency translation
|
|
|
(14,695
|
)
|
|
|
(3,034
|
)
|
|
|
(17,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2007
|
|
$
|
1,594
|
|
|
$
|
3,894
|
|
|
$
|
5,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining expenditures principally represent a) severance
and related benefits payable, per employee agreements over
periods up to three years
and/or
regulatory requirements; b) 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, over periods up to five years; and
c) certain other closure costs including dismantlement and
costs associated with removal obligations incurred in connection
with the exit of facilities.
The following tables provide additional detail of specific
restructuring actions taken during each of the fiscal periods
covered in the table above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure
|
|
|
|
|
Fiscal 2007
|
|
Costs
|
|
|
Costs
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Nanterre, France
|
|
$
|
758
|
|
|
$
|
122
|
|
|
$
|
880
|
|
Casalnuovo, Italy
|
|
|
36
|
|
|
|
1,687
|
|
|
|
1,723
|
|
Headcount Reductions
(Transportation Europe and ROW)
|
|
|
5,383
|
|
|
|
1,365
|
|
|
|
6,748
|
|
European Headcount Reductions
(including Corporate)
|
|
|
416
|
|
|
|
19
|
|
|
|
435
|
|
Headcount Reductions (Industrial
Energy Europe and ROW)
|
|
|
4,641
|
|
|
|
756
|
|
|
|
5,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,234
|
|
|
$
|
3,949
|
|
|
$
|
15,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-79
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure
|
|
|
|
|
Fiscal 2006
|
|
Costs
|
|
|
Costs
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Nanterre, France
|
|
$
|
234
|
|
|
$
|
2,711
|
|
|
$
|
2,945
|
|
Casalnuovo, Italy
|
|
|
2,004
|
|
|
|
2,670
|
|
|
|
4,674
|
|
Headcount Reductions
(Transportation Europe and ROW)
|
|
|
2,953
|
|
|
|
317
|
|
|
|
3,270
|
|
European Headcount Reductions
(including Corporate)
|
|
|
3,135
|
|
|
|
|
|
|
|
3,135
|
|
Headcount Reductions (Industrial
Energy Europe and ROW)
|
|
|
2,908
|
|
|
|
(162
|
)
|
|
|
2,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,234
|
|
|
$
|
5,536
|
|
|
|
16,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure
|
|
|
|
|
Period May 6, 2004 to March 31, 2005
|
|
Costs
|
|
|
Costs
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Closure of Nanterre, France
|
|
$
|
15,475
|
|
|
$
|
1,518
|
|
|
$
|
16,993
|
|
Closure of Weiden, Germany
|
|
|
323
|
|
|
|
606
|
|
|
|
929
|
|
Closure of Maple, Ontario Plant
|
|
|
516
|
|
|
|
|
|
|
|
516
|
|
Closure of Casalnuovo, Italy
|
|
|
529
|
|
|
|
2,696
|
|
|
|
3,225
|
|
Headcount Reductions
(Transportation Europe and ROW)
|
|
|
6,011
|
|
|
|
1,034
|
|
|
|
7,045
|
|
European Headcount Reductions
(including Corporate)
|
|
|
1,356
|
|
|
|
112
|
|
|
|
1,468
|
|
Headcount Reductions (Industrial
Energy Europe and ROW)
|
|
|
2,172
|
|
|
|
(47
|
)
|
|
|
2,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
26,382
|
|
|
$
|
5,919
|
|
|
$
|
32,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure
|
|
|
|
|
Period April 1, 2004 to May 5, 2004
|
|
Costs
|
|
|
Costs
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Closure of Casalnuovo, Italy
|
|
$
|
|
|
|
$
|
143
|
|
|
$
|
143
|
|
Headcount Reductions
(Transportation Europe and ROW)
|
|
|
152
|
|
|
|
180
|
|
|
|
332
|
|
European Headcount Reductions
(including Corporate)
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
Headcount Reductions (Industrial
Energy Europe and ROW)
|
|
|
26
|
|
|
|
6
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
190
|
|
|
$
|
329
|
|
|
$
|
519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13)
|
INTEREST
EXPENSE, NET
|
Interest income of $1.1 million, $1 million,
$1.8 million, and $.1 million is included in Interest
expense, net for the fiscal years ended March 31, 2007 and
2006, the period May 6, 2004 to March 31, 2005, and
the period April 1, 2004 to May 5, 2004, respectively.
These amounts include interest income from affiliates. See
Note 16.
F-80
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(14)
|
OTHER
(INCOME) EXPENSE, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
For the Period
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
May 6, 2004 to
|
|
|
April 1, 2004 to
|
|
|
|
2007
|
|
|
2006
|
|
|
May 5, 2005
|
|
|
May 5, 2004
|
|
|
|
(In thousands)
|
|
|
Net loss (gain) on asset sales
|
|
$
|
10,707
|
|
|
$
|
(3,873
|
)
|
|
$
|
5,254
|
|
|
$
|
|
|
Equity income
|
|
|
(1,002
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency loss (gain)
|
|
|
(4,620
|
)
|
|
|
6,931
|
|
|
|
(6,239
|
)
|
|
|
4,877
|
|
Loss on revaluation of foreign
currency forward contract
|
|
|
|
|
|
|
(1,081
|
)
|
|
|
13,165
|
|
|
|
|
|
Other(a)
|
|
|
664
|
|
|
|
(5,456
|
)
|
|
|
(9,972
|
)
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,749
|
|
|
$
|
(3,479
|
)
|
|
$
|
2,208
|
|
|
$
|
4,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
On September 24, 2004, the Company experienced a fire at
one of its facilities in Europe. While damage to the facility
was contained, the Company has experienced disruption to certain
of its business operations and activities while the Company
restored production capacity and diverted production to
alternative sites. During fiscal 2005, the Company recognized
$13.6 million of insurance recoveries; $10.8 million
included above in other and $2.8 million in cost of sales.
This represents partial reimbursement for both business
interruption and replacement of property damaged by the fire. In
fiscal 2006, the Company recognized the remaining
$4.8 million (included in Other above) of total insurance
recoveries of $18.4 million related to this incident. |
|
|
(15)
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
The estimated fair value of financial instruments has been
determined by the Company using available market information and
appropriate methodologies; however, 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 anticipated.
The methods and assumptions used to estimate the fair value of
each class of financial instruments are set forth below:
|
|
|
|
|
Cash and cash equivalents, accounts receivable and accounts
payable the carrying amounts of these items are a
reasonable estimate of their fair values.
|
|
|
|
Long-term receivables the carrying amounts of these
items are a reasonable estimate of their fair value.
|
|
|
|
Short-term borrowings Borrowings under miscellaneous
line of credit arrangements have variable rates that reflect
currently available terms and conditions for similar debt. The
carrying amount of these line of credit arrangements is a
reasonable estimate of its fair value.
|
|
|
|
Long-term debt Borrowings by foreign subsidiaries
have variable rates that reflect currently available terms and
conditions for similar debt.
|
F-81
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The carrying values and estimated fair values of these
obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
|
|
|
Estimated Fair
|
|
|
|
|
|
Estimated Fair
|
|
|
|
Carrying Value
|
|
|
Value
|
|
|
Carrying Value
|
|
|
Value
|
|
|
|
(In thousands)
|
|
|
Senior Secured Credit Facility
|
|
$
|
167,116
|
|
|
$
|
174,636
|
|
|
$
|
165,917
|
|
|
$
|
167,576
|
|
|
|
(16)
|
RELATED
PARTY TRANSACTIONS
|
The Parent Company charges EGHN certain fees. These costs are
classified in the Consolidated Statements of Operations as
General and administrative expenses. The cost of these functions
and services has been directly charged to EGHN using a method
that the Parent Companys management believes is
reasonable. Because of the relationship between the Company and
the Parent Company, it is possible that the terms and costs of
the services provided are not the same as those that would
result from transactions among wholly unrelated parties. Fees
charged during the year ended March 31, 2007 and 2006, the
period May 6, 2004 to March 31, 2005, and the period
April 1, 2004 to May 5, 2004, were $6 million,
$12 million, $11 million, and $1 million,
respectively.
The Parent Company enters into certain lead forward purchase and
put option agreements to economically hedge the cost of
externally purchased lead. While these agreements are entered
into by the Parent Company, they are utilized to economically
hedge a portion of the lead requirements for EGHN and its
subsidiaries. Gains or losses on these commodity contracts are
charged by the Parent Company to EGHN. These gains, which are
included in Cost of Sales, were $6.3 million and
$6 million for the year ended March 31, 2006, and the
period May 6, 2004 to March 31, 2005.
Current intercompany balances represent commercial trading
activities and other transactions in the normal course of
business between EGHN and other Parent Company affiliates. Sales
to Parent Company affiliates are at prices that approximate the
cost of the products sold. Purchases from Parent Company
affiliates during the years ended March 31, 2007 and 2006,
the period May 6, 2004 to March 31, 2005, and the
period April 1, 2004 to May 5, 2004, were
$26.9 million, $29.7 million, $53.2 million, and
$4 million, respectively. Purchases from Parent Company
affiliates are at prices that include a profit margin over and
above the cost of the products purchased.
Long-term intercompany balances represent financing activities
between EGHN and other Parent Company affiliates. The Parent
Company charges interest to EGHN based on the actual interest
cost on intercompany indebtedness. At March 31, 2007 and
March 31, 2006, the Company had notes payables to
affiliates of $150.8 million and $94.1 million,
respectively. Notes payable to affiliates include a Euro
denominated participating loan of $150.8 million, granted
in fiscal 1996 by Exide International, Inc., a wholly owned
subsidiary of the Parent Company, as of March 31, 2004. The
loan which was repayable on December 22, 2093, bore
interest at a variable rate, approximately 5.6% as of
March 31, 2004. As described in Note 1, the Parent
Company contributed the loan totaling $148.4 million to
EGHN in April 2004. Interest expense related to intercompany
financing arrangements and included in Interest expense, net in
the Consolidated Statements of Operations for the years ended
March 31, 2007 and 2006, the period May 6, 2004 to
March 31, 2005, and the period April 1, 2004 to
May 5, 2004, was $12.9 million, $10.2 million,
$8.1 million, and $1.6 million, respectively.
On May 15, 2007, the Parent Company, certain of the Parent
Companys domestic subsidiaries (the Exide
U.S. Subsidiaries), Exide Global Holding Netherlands
C.V. (Exide C.V. and, together with the Parent
Company and the Exide U.S. Subsidiaries, the
Borrowers), various lending institutions described
in the senior secured credit agreement and Deutsche Bank AG New
York Branch , as administrative agent (DB
F-82
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and, together with such other lending institutions, the
Lenders), entered into a $495 million senior
secured credit agreement. The senior secured credit agreement
consists of a $200 million asset based revolving senior
secured credit facility (the Revolving Loan
Facility) and a $295 million senior secured term loan
facility (the Term Loan).
The
Revolving Loan
Borrowings under the Revolving Loan Facility bear interest at a
rate equal to LIBOR plus 1.75%. The applicable spread on the
Revolving Loan Facility will be subject to change and may move
up or down in accordance with a leverage-based pricing grid. The
Revolving Loan Facility includes a letter of credit sub-facility
of $75 million and an accordion feature that allows Exide
to increase the facility size up to $250 million if it can
obtain commitments from existing or new lenders for the
incremental amount. The Revolving Loan Facility will mature in
five years, but is prepayable at any time at par.
Availability under the Revolving Loan Facility is subject to a
borrowing base comprised of up to 85% of Exide and certain of
its subsidiaries combined eligible accounts receivable
plus 85% of the net orderly liquidation value of eligible North
American inventory less, in each case, certain limitations and
reserves. Revolving loans made to Exide and other domestic
borrowers under the Revolving Loan Facility are guaranteed by
substantially all domestic subsidiaries of Exide, and revolving
loans made to Exide C.V. under the Revolving Loan Facility are
guaranteed by Exide, substantially all domestic subsidiaries of
Exide and certain foreign subsidiaries. These guarantee
obligations are secured by a lien on substantially all of the
assets of such respective Borrowers and guarantors, including,
subject to certain exceptions, in the case of security provided
by the domestic subsidiaries, a first priority lien in current
assets and a second priority lien in fixed assets.
The Revolving Loan Facility contains customary terms and
conditions, including, without limitation, limitations on liens,
indebtedness, implementation of cash dominion and control
agreements, and other typical covenants. A springing fixed
charge financial covenant of 1.0:1.0 will be triggered if the
excess availability under the Revolving Loan Facility falls
below $40 million. Exide will also be required to pay an
unused line fee that varies based on usage of the Revolving Loan
Facility.
The
Term Loan
Borrowings under the Term Loan in U.S. dollars will bear
interest at a rate equal to LIBOR plus 3.25%, and borrowings
under the Term Loan in Euros will bear interest at a rate equal
to LIBOR plus 3.50%; provided that such rates may decrease by
0.25% after December 31, 2007 if Exide achieves certain
corporate ratings. The Term Loan will mature in five years, but
is prepayable at any time at par value, provided that if a
change in control or similar event occurs within the first year,
Exide must offer to prepay the Term Loan at a price equal to
101% of par.
The Term Loan will amortize as follows 0.25% of the
initial principal balance of the Term Loan will be due and
payable on a quarterly basis for the first
43/4 years,
with a balloon payment due at maturity. Mandatory prepayment by
Exide may be required under the Term Loan as a result of excess
cash flow, asset sales and casualty events, in each case,
subject to certain exceptions.
F-83
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The portion of the Term Loan made to Exide is guaranteed by
substantially all domestic subsidiaries of Exide, and the
portion of the Term Loan made to Exide C.V. is guaranteed by
Exide, substantially all domestic subsidiaries of Exide and
certain foreign subsidiaries. These obligations are secured by a
lien on substantially all of the assets of such respective
Borrowers and guarantors, including, subject to certain
exceptions, in the case of security provided by the domestic
subsidiaries, a first priority lien in fixed assets and a second
priority lien in current assets.
The Term Loan contains customary terms and conditions,
including, without limitation, (1) limitations on debt
(including a leverage or coverage based incurrence test),
(2) limitations on mergers and acquisitions,
(3) limitations on restricted payments,
(4) limitations on investments, (5) limitations on
capital expenditures, (6) limitations on asset sales with
limited exceptions, (7) limitations on liens and
(8) limitations on transactions with affiliates. The Term
Loan has no financial maintenance covenants.
F-84