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, 2008
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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
(State or other jurisdiction
of
incorporation or organization)
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23-0552730
(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 o
Indicate by check mark whether the registrant is a large
accelerated filer, and accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Ruler
12b-2 of the
Exchange Act. (Check one):
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Large accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting
company)
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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 28, 2007
was $278,991,310
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 3, 2008,
75,296,301 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 September 9,
2008 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 2008 net sales of
approximately $3.7 billion. The Companys operations
in (a) the Americas and (b) Europe and Rest of World
(ROW) represented approximately 38.6% and 61.4%,
respectively, of fiscal 2008 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 2008
refers to the period beginning April 1, 2007 and ending
March 31, 2008, fiscal 2007 refers to the
period beginning April 1, 2006 and ending March 31,
2007, and fiscal 2006 refers to the period beginning
April 1, 2005 and ending March 31, 2006). 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 18 to the Consolidated Financial Statements
for financial information regarding these segments.
Transportation
The Companys 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 61.7% of
the Companys net sales in fiscal 2008. Within the
transportation segments, aftermarket sales and OEM sales
represented approximately 67.2% and 32.8% of net sales
respectively. The Companys principal batteries sold in the
transportation market are 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.
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
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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 manufacturing
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 three of the 10 top-selling vehicles
in the United States of America (U.S.) and five 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, Renault Nissan, Scania, Volvo
Trucks, 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. The company also has a
strong portfolio of OEM customers who receive products shipped
directly for use in cars, trucks, off-road vehicles, military
vehicles, agricultural and construction vehicles, boats, and
other applications.
With its six recycling centers, the Company is the largest
recycler of lead in North America. The Companys recycling
centers supply secondary lead that is present in greater than
98.2% of Exides Transportation and Industrial Energy
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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Exide NASCAR Extreme
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Officially licensed by NASCAR, 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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Exide NASCAR Select 84
Automotive Batteries
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Officially licensed by NASCAR, race-proven,
Stabl-Lok®
Insulation prevents short circuits 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®
and
Stowaway®
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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RoadForce and MegaCycle
AGM Batteries
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Advanced flat plate recombinant technology and construction
designed for high performance deep cycle use in commercial and
marine applications
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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
automotive parts and battery wholesalers, OEM dealer networks,
mass-merchandisers, auto-centers, service installers, and oil
companies. Wholesalers and OEM dealers have traditionally
represented the majority of this market, but hypermarkets chains
and automotive parts stores, most often integrated in European
or global buying groups, have become increasingly important.
Many automotive parts wholesalers are also increasingly
organized in European organizations active in purchasing and
merchandising programs. Battery wholesalers sell and distribute
batteries to a network of automotive parts retailers, service
stations, independent retailers, and garages throughout Europe.
In Europe, the Company has six major Company-owned brands:
Exide, which is promoted as a
pan-European
brand, and Tudor, Centra, Fulmen, Sonnak and Deta, which have
very strong country or regional recognition levels and market
shares. In the European markets, the Company offers
transportation batteries in four categories:
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Light Vehicle (LV)
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This category represents the majority of sales in Europe. LV
batteries are marketed in OE, OEM and aftermarket channels under
the Companys owned brands and/or private labels. The
primary technology used in these batteries is lead acid Exmet.
Most recently, Exide has been validated as supplier to BMW in
OEM with the AGM (Absorbed Glass Mat) technology. In the AM
channel, the Companys brands include high-end products
such as Exide X-Tra+, Tudor Tech-Tronic2, Centra Futura+, Fulmen
Prestige2, Deta Senator2, Sonnak Millenium3+, all of which
include the heat sealed double lid technology with the Exide
patented labyrinth system. In addition, the Companys core
brands include Exide Excell, Tudor Technica, Centra Plus, Fulmen
Formula Top, and Deta Power.
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Commercial Vehicle (CV)
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Similar to LV batteries, CV batteries are sold under company
owned brands and private labels. The CV category includes
traditional technologies like Hybrid-HD and Hybrid-SHD, supplied
to manufacturers like Iveco, Renault, Saab, CNH, and CLAAS, as
well as Gel and Semi-traction technologies.
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Motorcycle (MC)
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In the aftermarket channel, a European range of MC batteries was
launched in the forth quarter of fiscal 2008 under the Exide
Bike brand name. These batteries are targeted to popular sport
& leisure vehicles like motorcycles, quads, jet skis,
snowmobiles, and garden machines. This product line consists of
3 technologies - Conventional (Dry charged), Maintenance Free
(AGM with acid pack) and Factory Sealed (AGM ready for use) - in
order to provide all required features & benefits for these
diverse vehicles and applications.
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Marine Leisure (ML)
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Primarily branded under the Exide or Tudor brand names, ML
batteries are designed for private boats, commercial ships, and
many other special applications requiring deep cycling, extra
life or seasonal use. ML batteries are specially constructed to
satisfy the most demanding safety, life duration, and
reliability requirements, and are sold through all channels
including aftermarket, marine specialists, and by many of the
most prestigious boat manufacturers in Europe.
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Industrial
Energy
The Companys Industrial Energy segments supply both motive
power and network power applications. Industrial Energy
batteries represented 38.3% of the Companys net sales in
fiscal 2008. Within the Industrial Energy segments, Motive Power
sales and Network Power sales represented approximately 63.1%
and 36.9% of Industrial Energy net sales, respectively.
Motive power batteries are used in the material handling
industry for Class I, II and III electric
forklift trucks, and in other industries, including machinery in
the floor cleaning market, the powered wheelchair market, the
mining, locomotives market, and the electric road vehicles
market. The Company also offers a complete range of battery
chargers and related equipment for the operation and maintenance
of battery-powered vehicles.
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The Companys Motive Power product offerings range from
batteries composed of two-volt cells assembled in numerous
configurations and sizes to provide capacities ranging from 30
Ah to 1700 Ah, to bloc batteries ranging from 1.2 Ah to 280 Ah.
The battery technology for the motive power markets includes
flooded flat plate, tubular plate products, AGM, and gelled
electrolyte products. The Company pioneered the development of
valve-regulated lead acid batteries in both AGM and gel
constructions. These technologies provide advantages to users by
eliminating the need to add water, reducing maintenance
expenses, and providing a safer work environment.
The Companys motive power products also include systems
solutions such as intelligent chargers, fleet management
devices, and automatic watering systems. These ancillary devices
are designed to aid customers in improving their productivity
and asset utilization.
Network power batteries are used for
back-up
power applications to ensure continuous power supply in case of
a temporary power failure or outage. Network power batteries are
used to provide
back-up
power for use with telecommunications systems, computer
installations, hospitals, 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.
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 absorbed glass mat (AGM)
and gelled electrolyte. The AGM batteries are low maintenance,
offer a high energy density and are particularly suited for
high-rate applications. They are well-suited for
telecommunications installations and uninterruptible power
systems. The gelled electrolyte batteries are low maintenance
and offer 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 gelled electrolyte valve regulated battery
technologies and deliver among the highest energy and power
densities in their class.
Industrial
Energy Americas
Motive
Power
The Company distributes motive power products and services
through multiple channels. These include sales and service
locations owned by the Company which are augmented by a network
of independent manufacturers representatives. The Company
serves a wide range of customers including OEM suppliers of lift
trucks, large industrial companies, retail distribution,
warehousing, and manufacturing operations. The Companys
primary motive power customers in the Americas include Crown,
NACCO, Toyota, Jungheinrich, Wal-Mart, Target, and Kroger.
Network
Power
The Company distributes network power products and services
through sales and service locations owned by the Company that
are augmented by a network of independent manufacturers
representatives. The Companys primary network power
customers in the Americas include AT&T, Emerson Electric,
Verizon Wireless, and Nortel.
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 the 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 warehousing and manufacturing operations. Motive Power
batteries are also sold in complete packages, including
batteries,
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chargers and, increasingly through
on-site
service. The Companys major OEM motive power customers
include the KION Group and Jungheinrich.
Network
Power
The Company distributes network power products and services in
Europe and batteries and chargers in Australia and New Zealand
through in-house sales and service organizations in each
country. In Asia, products are distributed through independent
distributors. The Company utilizes distributors, agents, and
direct sales to export products from Europe and North America to
ROW. The Companys primary Network Power customers in
Europe and ROW include China Mobile, Deutsche Telecom, Alcatel,
Emerson Electric, Ericsson and Siemens.
Quality
The Company recognizes that product performance and quality are
critical to its success. The Companys Customer-focused
Excellence Lean Leadership (EXCELL) initiative and
Quality Management System (QMS) are both important
drivers of operational excellence and 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 Companys
supply chain. 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.
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 in the Companys efforts 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.
All of the Companys major production facilities are
approved under ISO/TS 16949
and/or ISO
9001 quality standards. The Company has also obtained ISO 14001
Environmental Health & Safety (EH&S)
certification at 22 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
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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 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 maintains licenses from others
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 Companys license with NASCAR will
expire on December 31, 2011. The Company also acts as
licensor under certain licenses. For example the National
Automotive Parts Association is licensed to use the EXIDE
SELECT ORBITAL mark on battery products.
The Company has generated a number of patents in the operation
of its business and currently owns all or a partial interest in
approximately
350-375
patents and applications for patents pending worldwide. Although
the Company believes its patents and patent applications
collectively are important to the Companys business, 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 11 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
49% 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 and ROW, the Company obtains a small
portion of its lead requirements through the operation of four
lead recycling plants. The majority of the Companys lead
requirements, however, are 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.
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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, they can influence market participants to
compete on price and other terms.
The Company also believes that it 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, in both
the transportation OEM and aftermarket channels, 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.
Industrial
Energy Segments
Motive
Power
The Company believes that it 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 Crown Battery, Inc., EnerSys, Inc. and East
Penn Manufacturing. In Asia, GS/Yuasa, Shinkobe, and EnerSys,
Inc. are the major competitors, with GS/Yuasa being the market
leader.
Quality, product performance, in-service reliability, delivery,
and price are important differentiators in the motive power
market. The Companys well-known brands, such as
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 the Company-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 11 to the Consolidated Financial
Statements.
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Employees
Total worldwide employment was approximately 13,027 at
March 31, 2008, compared to approximately 13,352 at
March 31, 2007.
Americas
As of March 31, 2008, the Company employed approximately
1,235 salaried employees and approximately 3,908 hourly
employees in the Americas, primarily in the
U.S. Approximately 45% of these salaried employees are
engaged in sales, service, marketing, and administration and
approximately 55% 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 148
of the Companys domestic employees expire in fiscal 2009,
and the remainder thereafter.
Europe
and ROW
As of March 31, 2008, the Company employed approximately
2,817 salaried employees and approximately 5,067 hourly
employees outside of the Americas, primarily in Europe.
Approximately 50% of these salaried employees are engaged in
sales, service, marketing, and administration and approximately
50% 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 2009.
Executive
Officers of the Registrant
Gordon A. Ulsh (62) 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 (54) 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 (61) President, Industrial Energy
Europe. Mr. Campbell joined the Company 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.
Bruce A. Cole (45) President, Transportation
Americas. Mr. Cole joined the Company in September 2000 in
connection with the Companys acquisition of GNB. He has
served in his current role since August 2007 and prior to that
was Vice President and General Manager, North American
Recycling. Mr. Cole joined GNB in 1989. He has served in a
variety of roles including VP, Manufacturing &
Engineering for Industrial Energy Americas and VP Global
Marketing Industrial Energy.
10
Phillip A. Damaska (53) Executive Vice President and
Chief Financial Officer. Mr. Damaska joined the Company in
January 2005 as Vice President, Finance, was appointed Vice
President and Corporate Controller in September, 2005, was named
Senior Vice President and Corporate Controller in March 2006,
and was named Executive Vice President and Chief Financial
Officer effective April 1, 2008. 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.
Barbara A. Hatcher (53) has been Executive
Vice President and General Counsel since May 2006 and had served
as Deputy General Counsel from April 2004 through April 2006.
Ms. Hatcher joined the Company in 2000 through its
acquisition of GNB Technologies, Inc., where she served as Vice
President & General Counsel.
George S. Jones, Jr. (55) 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.
Louis E. Martinez (42) Vice President, Corporate
Controller, and Chief Accounting Officer. Mr. Martinez was
appointed to this position in March 2008. Previously,
Mr. Martinez served as the Companys Assistant
Corporate Controller since joining the Company in May 2005.
Mr. Martinez served as Corporate Controller for Airgate
PCS, Inc., from March 2003 through May 2005. Mr. Martinez
has also served as Corporate Controller for Cotelligent, Inc.,
from March 2000 through February 2003 and as Director of
Finance & Controller for Aegis Communications Group
from 1996 through February 2000.
Edward J. OLeary (52) Chief Operating Officer.
Mr. OLeary joined the Company in June 2005 as
President, Transportation Americas, and was named Chief
Operating Officer in August 2007. 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. Prior to that, Mr. OLeary served as
Executive Vice President of Cooper Automotive, a division of
Cooper Industries, from 1995 to 1998, as well as spending
17 years at Tenneco Automotive.
Rodolphe Reverchon (49) 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.
Backlog
The Companys order backlog at March 31, 2008 was
approximately $42.6 million for Industrial Energy Americas
and $107.0 million for Industrial Energy Europe and ROW.
The Company expects to fill all of the March 31, 2008
backlogs during fiscal 2009. The Transportation backlog at
March 31, 2008 was not significant.
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
(www.sec.gov), 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 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
11
calling the SEC at
1-800-SEC-0330.
Additionally, the Companys Code of Ethics and Business
Conduct may be accessed within the Investor Relations section of
its website. Amendments and waivers of the Code of Ethics and
Business Conduct will also be disclosed within four business
days on the website. Information found in the Companys
website is neither part of this annual report on
Form 10-K
nor any other report filed with the SEC.
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 49% of the Companys
cost of goods sold. Average lead prices quoted on the London
Metal Exchange (LME) have risen dramatically,
increasing from $1,426 per metric ton for fiscal 2007 to $2,856
per metric ton for fiscal 2008. As of June 3, 2008, lead
prices quoted on the LME were $2,030 per metric ton. If the
Company is 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.
Fuel costs have also increased significantly in recent months.
Our results of operations could be adversely affected if we are
unable to pass along price increases to address higher fuel
costs related to the distribution of products from our
warehouses and distribution centers to our customers.
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 business, 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
business, financial position, results of operations, and cash
flows.
The Company has significant manufacturing operations in, and
exports to, several countries outside the
U.S. Approximately 61.4% of the Companys net sales
for fiscal 2008 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,
12
foreign currency depreciation against the U.S. Dollar would
result in a decrease in 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 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 business, financial position, results of operations,
and cash flows.
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 adversely affect 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
adversely affect the Companys business.
13
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 of 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 was disrupted, it would have a material
adverse affect on the Companys business.
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, or sport utility vehicles could have a material
adverse impact on the financial condition and results of
operations of the Companys Transportation segments. A weak
capital expenditure environment in the telecommunications,
uninterruptible power systems or electric industrial forklift
truck markets could have a material adverse effect on the
business, financial positions, and results of operations, and
cash flow of the Companys Industrial Energy segments.
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 volume, 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, financial position, results of operations, and cash
flow.
14
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 business, financial
position, results of operations, and cash flow.
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. 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, financial position, results of operations,
and cash flow.
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. 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
$6.0 million to $9.0 million and at the Sonalur,
Portugal facility in the amount of approximately
$2.0 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,
15
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 business,
financial position, results of operations, or cash
flows.
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
effect on the Companys financial condition, cash flows or
results of operations. The Company previously has 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 100 federally defined Superfund or state equivalent sites. At
45 of these sites, the Company has paid its share of liability.
While the Company believes it is probable its liability for most
of the remaining sites will be treated as disputed unsecured
claims under the Plan, there can be no assurance these matters
will be discharged. If the Companys liability is not
discharged at one or more sites, the government may be able to
file claims for additional response costs in the future, or to
order the Company to perform remedial work at such sites. In
addition, the EPA, in the course of negotiating this
pre-petition claim, had notified the Company of the possibility
of additional
clean-up
costs associated with Hamburg, Pennsylvania properties of
approximately $35.0 million. 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 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 business, financial position,
results of operations, or cash flows. See Note 11 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 business, financial position, results of
operations, or cash flows.
At March 31, 2008, there are approximately 200 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.
16
Work
stoppages or other labor issues at the Companys facilities
or its customers or suppliers facilities could
adversely affect the Companys business, financial
position, results of operations, or cash flows.
At March 31, 2008, approximately 22% of the Companys
hourly employees in the Americas 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 148 of the
Companys domestic employees expire in fiscal 2009, and the
remainder thereafter. In addition, contracts covering most of
the Companys union employees in Europe and ROW expire on
various dates through fiscal 2009. 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.
The
Companys substantial indebtedness could adversely affect
its financial condition.
The Company has a significant amount of indebtedness. As of
March 31, 2008, the Company had total indebtedness,
including capital leases, of approximately $716.2 million.
The Companys level of indebtedness could have significant
consequences. For example, it could:
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Limit the Companys ability to borrow money to fund its
working capital, capital expenditures, acquisitions and debt
service requirements;
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Limit the Companys flexibility in planning for, or
reacting to, changes in its business and future business
opportunities;
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Make the Company more vulnerable to a downturn in its business
or in the economy;
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Place the Company at a disadvantage relative to some of its
competitors, who may be less highly leveraged; and
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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.
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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 (the
Credit Agreement) 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 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:
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Incur additional indebtedness;
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Pay dividends or make distributions on the Companys
capital stock or certain other restricted payments or
investments;
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Purchase or redeem stock;
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Issue stock of the Companys subsidiaries;
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Make investments and extend credit;
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Engage in transactions with affiliates;
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Transfer and sell assets;
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Effect a consolidation or merger or sell, transfer, lease or
otherwise dispose of all or substantially all of the
Companys assets; and
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Create liens on the Companys assets to secure debt.
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In addition, the Credit Agreement requires the Company to repay
outstanding borrowings with portions of the proceeds the Company
receives from certain sales of property or assets and 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 Credit Agreement or the
indenture governing its senior secured notes could cause a
default under the Companys Credit Agreement and other debt
(including the notes), which would restrict the Companys
ability to borrow under its Credit Agreement, 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 Credit
Agreement.
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.
On April 15, 2002, the Petition Date, Exide
Technologies, together with certain of its subsidiaries (the
Debtors), filed voluntary petitions for
reorganization under Chapter 11 of the federal bankruptcy
laws (Bankruptcy Code or
Chapter 11) in the United States Bankruptcy
Court for the District of Delaware (Bankruptcy
Court). The Debtors continued to operate their businesses
and manage their properties as
debtors-in-possession
throughout the course of the bankruptcy case. The Debtors, along
with the Official Committee of Unsecured Creditors, filed a
Joint Plan of Reorganization (the Plan) with the
Bankruptcy Court on February 27, 2004 and, on
April 21, 2004, the Bankruptcy Court confirmed the Plan.
Pursuant 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.
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
18
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.
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 new common stock and warrants allocated to holders of
general unsecured claims on the effective date, including the
reserve established for disputed claims, would be fully
distributed so that the recovery rates for all allowed unsecured
claims would comply with the Plan without the need for any
redistribution or supplemental issuance of securities. If the
amount of general unsecured claims that is eventually allowed
exceeds the amount of claims anticipated in the setting of the
reserve, additional new 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 new 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, 2008, the Companys current and long-term
deferred tax assets were $36.8 million and
$51.2 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 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.
19
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, (viii) 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, (ix) general economic conditions,
(x) the ability to acquire goods and services
and/or
fulfill labor needs at budgeted costs, (xi) the
Companys reliance on a single supplier for its
polyethylene battery separators, (xii) the Companys
ability to successfully pass along increased material costs to
its customers, and (xiii) the loss of one or more of the
Companys major customers for its industrial or
transportation products.
The Company cautions each reader 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.
20
The chart below lists the locations of the Companys
principal facilities. All of the facilities are owned by the
Company 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, refer to Item 7
Managements Discussion and Analysis of Financial
Condition and Results of Operations, Liquidity and Capital
Resources. The leases for leased facilities generally expire at
various dates through 2016.
|
|
|
|
|
Location
|
|
|
|
Use
|
|
Americas:
|
|
|
|
|
Alpharetta, GA
|
|
(leased)
|
|
Executive Offices
|
Aurora, IL
|
|
(leased)
|
|
Executive Offices
|
Baton Rouge, LA
|
|
|
|
Secondary Lead Recycling
|
Bristol, TN
|
|
|
|
Transportation Battery Manufacturing and Distribution Center
|
Cannon Hollow, MO
|
|
|
|
Secondary Lead Recycling
|
Columbus, GA
|
|
|
|
Industrial Battery Manufacturing and Distribution Center
|
Florence, MS
|
|
(portions leased)
|
|
Distribution and Formation Center
|
Fort Erie, Canada
|
|
|
|
Distribution Center
|
Fort Smith, AR
|
|
(leased)
|
|
Industrial Battery Manufacturing and Distribution Center
|
Frisco, TX
|
|
|
|
Secondary Lead Recycling
|
Kansas City, KS
|
|
(portions leased)
|
|
Industrial Battery Manufacturing and Distribution Center
|
Lampeter, PA
|
|
|
|
Plastics Manufacturing
|
Manchester, IA
|
|
|
|
Transportation Battery Manufacturing and Distribution Center
|
Muncie, IN
|
|
|
|
Secondary Lead Recycling
|
Reading, PA
|
|
|
|
Secondary Lead Recycling and Polypropylene Reprocessing and
Distribution and Formation Center
|
Salina, KS
|
|
|
|
Transportation Battery Manufacturing and Distribution Center
|
Sumner, WA
|
|
(leased)
|
|
Distribution Center
|
Vernon, CA
|
|
|
|
Secondary Lead Recycling
|
|
|
|
|
|
Europe and ROW:
|
|
|
|
|
Adelaide, Australia
|
|
|
|
Transportation Battery Manufacturing and Distribution Center
|
Sydney, Australia
|
|
|
|
Industrial Battery Manufacturing and Distribution Center
|
Florival, Belgium
|
|
|
|
Distribution Center
|
Shanghai, China
|
|
(leased)
|
|
Executive Offices
|
Bolton, England
|
|
|
|
Industrial Battery Manufacturing
|
Trafford Park, England
|
|
(leased)
|
|
Charger Manufacturing
|
Auxerre, France
|
|
|
|
Transportation Battery Manufacturing
|
Gennevilliers, France
|
|
(leased)
|
|
Executive Offices
|
Lille, France
|
|
|
|
Industrial Battery Manufacturing
|
Peronne, France
|
|
|
|
Plastics Manufacturing
|
Bad Lauterberg, Germany
|
|
|
|
Industrial Battery Manufacturing and Warehouse
|
Budingen, Germany
|
|
|
|
Industrial Battery Manufacturing, Distribution Center and
Executive Offices
|
Vlaardingen, Holland
|
|
|
|
Distribution Center
|
Tamilnadu, India
|
|
(leased)
|
|
Industrial Battery Manufacturing and Distribution Center
|
Avelino, Italy
|
|
|
|
Plastics Manufacturing
|
Canonica dAdda, Italy
|
|
|
|
Plastics Manufacturing
|
Romano Di Lombardia, Italy
|
|
(leased)
|
|
Transportation Battery Manufacturing
|
Lower Hutt, New Zealand
|
|
(leased)
|
|
Distribution Center
|
Petone, New Zealand
|
|
|
|
Secondary Lead Recycling
|
Poznan, Poland
|
|
(leased)
|
|
Transportation Battery Manufacturing
|
Castanheira do Riatejo, Portugal
|
|
|
|
Industrial Battery Manufacturing
|
Azambuja, Portugal
|
|
|
|
Secondary Lead Recycling and Plastics Manufacturing
|
Azuqueca de Henares, Spain
|
|
|
|
Transportation Battery Manufacturing
|
San Esteban de Gomez, Spain
|
|
|
|
Secondary Lead Recycling
|
La Cartuja, Spain
|
|
|
|
Industrial Battery Manufacturing
|
Manzanares, Spain
|
|
|
|
Transportation Battery Manufacturing
|
Pontypool, Wales
|
|
(leased)
|
|
Distribution Center
|
In addition, the Company also leases sales and distribution
outlets in North America, Europe and Asia.
21
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 11 to the Consolidated Financial Statements, which
is hereby incorporated herein by reference.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None.
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, 2008, the Company issued 1,015 shares
of common stock and warrants to purchase 2,546 shares of
common stock at a price of $29.84. 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
Companys warrants symbol was converted to
XIDE+ effective April 7, 2008. The high and low
sales price of the Companys common stock and warrants are
set forth below.
|
|
|
|
|
|
|
|
|
Common Stock
|
|
High
|
|
|
Low
|
|
|
Fiscal 2008:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
9.41
|
|
|
$
|
7.08
|
|
Second Quarter
|
|
$
|
9.48
|
|
|
$
|
6.42
|
|
Third Quarter
|
|
$
|
8.35
|
|
|
$
|
5.28
|
|
Fourth Quarter
|
|
$
|
13.47
|
|
|
$
|
6.47
|
|
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
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
High
|
|
|
Low
|
|
|
Fiscal 2008:
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
0.88
|
|
|
$
|
0.62
|
|
Second Quarter
|
|
$
|
0.88
|
|
|
$
|
0.57
|
|
Third Quarter
|
|
$
|
0.70
|
|
|
$
|
0.59
|
|
Fourth Quarter
|
|
$
|
1.23
|
|
|
$
|
0.61
|
|
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
|
|
22
The Company did not declare or pay dividends on its common stock
during fiscal years 2008 and 2007. Covenants in the 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 3, 2008, the Company had 75,296,301 shares
of its common stock and, 5,022,309 of its warrants outstanding,
with 4,042 and 5,299 holders of record, respectively.
Equity
Compensation Plan Information
As of March 31, 2008, 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, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
to be Issued upon
|
|
|
Weighted-Average
|
|
|
Number of Securities
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Remaining Available for
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Future Issuance under
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Equity Compensation Plans
|
|
|
Equity compensation plans approved by security holders
|
|
|
3,002,894
|
|
|
$
|
6.10
|
|
|
|
2,567,940
|
|
Equity compensation plans not approved by security holders
|
|
|
80,000
|
|
|
$
|
13.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,082,894
|
|
|
$
|
6.28
|
|
|
|
2,567,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 or
restricted stock units.
23
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company
|
|
|
Predecessor Company(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period
|
|
|
For the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 6, 2004
|
|
|
April 1, 2004
|
|
|
Fiscal Year
|
|
|
|
Fiscal Year Ended
|
|
|
to
|
|
|
to
|
|
|
Ended
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
March 31, 2005
|
|
|
May 5, 2004
|
|
|
2004
|
|
|
|
(In thousands except per share data)
|
|
|
Statement of Operations Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
3,696,671
|
|
|
$
|
2,939,785
|
|
|
$
|
2,819,876
|
|
|
$
|
2,476,259
|
|
|
$
|
214,607
|
|
|
$
|
2,500,493
|
|
Gross profit
|
|
|
593,190
|
|
|
|
472,776
|
|
|
|
406,831
|
|
|
|
377,502
|
|
|
|
35,470
|
|
|
|
509,325
|
|
Selling, marketing and advertising expenses
|
|
|
289,975
|
|
|
|
270,413
|
|
|
|
271,059
|
|
|
|
251,085
|
|
|
|
24,504
|
|
|
|
264,753
|
|
General and administrative expenses
|
|
|
176,607
|
|
|
|
173,128
|
|
|
|
190,993
|
|
|
|
150,871
|
|
|
|
17,940
|
|
|
|
161,271
|
|
Restructuring
|
|
|
10,507
|
|
|
|
24,483
|
|
|
|
21,714
|
|
|
|
42,479
|
|
|
|
602
|
|
|
|
52,708
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
388,524
|
|
|
|
|
|
|
|
|
|
Other (income) expense net
|
|
|
(39,069
|
)
|
|
|
9,636
|
|
|
|
3,684
|
|
|
|
(56,898
|
)
|
|
|
6,222
|
|
|
|
(40,724
|
)
|
Interest expense, net
|
|
|
85,517
|
|
|
|
90,020
|
|
|
|
69,464
|
|
|
|
42,636
|
|
|
|
8,870
|
|
|
|
99,027
|
|
Loss on early extinguishment of debt
|
|
|
21,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) before reorganization items, income tax, minority
interest and cumulative effect of change in accounting principle
|
|
|
48,311
|
|
|
|
(94,904
|
)
|
|
|
(150,083
|
)
|
|
|
(441,195
|
)
|
|
|
(22,668
|
)
|
|
|
(27,710
|
)
|
Reorganization items, net
|
|
|
3,822
|
|
|
|
4,310
|
|
|
|
6,158
|
|
|
|
11,527
|
|
|
|
18,434
|
|
|
|
67,042
|
|
Fresh start accounting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(228,371
|
)
|
|
|
|
|
Gain on discharge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,558,839
|
)
|
|
|
|
|
Minority interest
|
|
|
1,544
|
|
|
|
882
|
|
|
|
529
|
|
|
|
(18
|
)
|
|
|
26
|
|
|
|
467
|
|
Income tax provision (benefit)
|
|
|
10,886
|
|
|
|
5,783
|
|
|
|
15,962
|
|
|
|
14,219
|
|
|
|
(2,482
|
)
|
|
|
3,271
|
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
|
32,059
|
|
|
|
(105,879
|
)
|
|
|
(172,732
|
)
|
|
|
(466,923
|
)
|
|
|
1,748,564
|
|
|
|
(98,490
|
)
|
Cumulative effect of change in accounting principle(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,593
|
)
|
Net income (loss)
|
|
$
|
32,059
|
|
|
$
|
(105,879
|
)
|
|
$
|
(172,732
|
)
|
|
$
|
(466,923
|
)
|
|
$
|
1,748,564
|
|
|
$
|
(114,083
|
)
|
Basic net earnings (loss) per share(3)
|
|
$
|
0.47
|
|
|
$
|
(2.37
|
)
|
|
$
|
(6.72
|
)
|
|
$
|
(18.16
|
)
|
|
$
|
63.86
|
|
|
$
|
(4.17
|
)
|
Diluted net earnings (loss) per share(3)
|
|
$
|
0.46
|
|
|
$
|
(2.37
|
)
|
|
$
|
(6.72
|
)
|
|
$
|
(18.16
|
)
|
|
$
|
63.86
|
|
|
$
|
(4.17
|
)
|
Balance Sheet Data (at period end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital (deficit)(4)
|
|
$
|
674,783
|
|
|
$
|
486,866
|
|
|
$
|
431,570
|
|
|
$
|
(180,172
|
)
|
|
$
|
402,076
|
|
|
$
|
(270,394
|
)
|
Property, plant and equipment, net
|
|
|
649,526
|
|
|
|
649,015
|
|
|
|
685,842
|
|
|
|
799,763
|
|
|
|
826,900
|
|
|
|
543,124
|
|
Total assets
|
|
|
2,491,396
|
|
|
|
2,120,224
|
|
|
|
2,082,909
|
|
|
|
2,290,780
|
|
|
|
2,729,404
|
|
|
|
2,471,808
|
|
Total debt
|
|
|
716,195
|
|
|
|
684,454
|
|
|
|
701,004
|
|
|
|
653,758
|
|
|
|
547,549
|
|
|
|
1,847,656
|
|
Total stockholders equity (deficit)
|
|
|
544,338
|
|
|
|
330,523
|
|
|
|
224,739
|
|
|
|
427,259
|
|
|
|
888,391
|
|
|
|
(769,769
|
)
|
Other Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
1,080
|
|
|
$
|
1,177
|
|
|
$
|
(44,348
|
)
|
|
$
|
(9,691
|
)
|
|
$
|
(7,186
|
)
|
|
$
|
40,551
|
|
Investing activities
|
|
|
(49,797
|
)
|
|
|
(47,447
|
)
|
|
|
(32,817
|
)
|
|
|
(44,013
|
)
|
|
|
(4,352
|
)
|
|
|
(38,411
|
)
|
Financing activities
|
|
|
57,374
|
|
|
|
87,586
|
|
|
|
34,646
|
|
|
|
68,925
|
|
|
|
35,168
|
|
|
|
(9,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
56,854
|
|
|
|
51,932
|
|
|
|
58,133
|
|
|
|
69,114
|
|
|
|
7,152
|
|
|
|
65,128
|
|
24
|
|
|
(1) |
|
The emergence from Chapter 11 on May 6, 2004 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,
Financial Reporting by Entities in Reorganization under
the Bankruptcy Code.
(SOP 90-7). |
|
(2) |
|
The cumulative effect of change in accounting principle in
fiscal 2004 resulted from the adoption of SFAS 143 on
April 1, 2003. |
|
(3) |
|
Basic and diluted earnings (loss) per share for the fiscal year
ended March 31, 2007, 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 $91.7 million rights offering completed in
September 2007, and the $75.0 million rights offering and
$50.0 million private placement of common stock, both of
which were consummated in September 2006. |
|
(4) |
|
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, 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
|
External
Factors Which Affect the Companys Financial
Performance
Lead and other Raw Materials. Lead represents
approximately 49% 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 LME has increased
100.3% from $1,426 per metric ton for the fiscal year ended
March 31, 2007 to $2,856 per metric ton for the fiscal year
ended March 31, 2008. At June 3, 2008, the quoted
price on the LME was $2,030 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 price increases
or surcharges. To the extent the Company is unable to pass on
these higher energy costs to its customers, its financial
performance will be adversely impacted.
Competition. The global transportation and
industrial energy battery markets are highly competitive. In
recent years, competition has continued to intensify and has
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 certain of 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
2008, the exchange rate of the Euro to the U.S. Dollar has
increased 10.5% on average to $1.42 compared to $1.28 for fiscal
2007, and the exchange rate of the British Pound to the
U.S. Dollar has increased 6% on average to $2.01 compared
to $1.89 for fiscal 2007. At March 31, 2008, the Euro was
$1.58 or 18.2% higher as compared to $1.34 at March 31,
2007, and the British Pound was $1.99 or 0.8% higher as compared
to $1.97 at March 31, 2007.
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, 2008, approximately 61.4% of the Companys
net sales
25
were generated in Europe and ROW. Further, approximately 64.3%
of the Companys aggregate accounts receivable and
inventory as of March 31, 2008 were held by its European
subsidiaries.
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 a portion of its fourth fiscal quarters). Retailers
and distributors buy automotive batteries during these periods
so they will have sufficient inventory for cold weather periods.
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,
portions of which were hedged during late fiscal 2008. See
Notes 2 and 7 to the Consolidated Financial Statements.
Fiscal
2008 Highlights and Outlook
The Companys reported results continued to improve
throughout fiscal 2008, but were again impacted by increases in
the price of lead and other commodities that are primary
components in the manufacture of batteries, as well as 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 process 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 2008, the average cost of
spent-batteries has increased approximately 87% versus fiscal
2007. Therefore, the higher market price of lead with respect to
manufacturing in the Americas 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 rather than purchasing spent batteries in the secondary
market to help mitigate these risks.
In Europe, the Companys lead requirements are mainly
fulfilled by 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, 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, 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
26
prices of lead and other commodities. Both price escalators and
fuel surcharges are subject to the risk of customer acceptance.
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 intended to
result 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 the established Take Charge! initiative,
which is now installed in 23 of the Companys 28
manufacturing locations.
(iv) Continued review and rationalization of the various
brand offerings of products in its markets to gain efficiencies
in manufacturing and distribution, and better leverage its
marketing spending.
(v) Gain further product and process efficiencies with
implementation of the Global Procurement structure. This
initiative focuses on leveraging existing relationships and
creating an infrastructure for global search for products and
components.
Critical
Accounting Policies and Estimates
The 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 its 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
27
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 8 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 used 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 United Kingdom, France, Italy,
and Spain 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 the 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.
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 results in liability to the
Company, such liability could have a significant impact on the
Companys future results and liquidity.
28
Recently Issued Accounting Standards. See
Note 1 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, 2008 with those for the fiscal year ended
March 31, 2007, and a comparison of the Companys
results of operations for the fiscal year ended March 31,
2007 with those for the fiscal year ended March 31, 2006.
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.
Fiscal
Year Ended March 31, 2008 compared with Fiscal Year Ended
March 31, 2007
Net
Sales
Net sales were $3.70 billion for fiscal 2008 versus
$2.94 billion in fiscal 2007. Currency fluctuations
(primarily the strengthening of the Euro against the
U.S. Dollar) favorably impacted net sales in fiscal 2008 by
approximately $228.4 million. Excluding the currency
impact, net sales increased by approximately
$528.5 million, or 18%, primarily as a result of the impact
of favorable pricing actions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
Favorable/(Unfavorable)
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
2008
|
|
|
2007
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
1,126,388
|
|
|
$
|
930,334
|
|
|
$
|
196,054
|
|
|
$
|
|
|
|
$
|
196,054
|
|
Europe and ROW
|
|
|
1,156,007
|
|
|
|
832,219
|
|
|
|
323,788
|
|
|
|
117,330
|
|
|
|
206,458
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
301,562
|
|
|
|
270,479
|
|
|
|
31,083
|
|
|
|
|
|
|
|
31,083
|
|
Europe and ROW
|
|
|
1,112,714
|
|
|
|
906,753
|
|
|
|
205,961
|
|
|
|
111,025
|
|
|
|
94,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
3,696,671
|
|
|
$
|
2,939,785
|
|
|
$
|
756,886
|
|
|
$
|
228,355
|
|
|
$
|
528,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Americas net sales were $1.13 billion for
fiscal 2008 versus $930.3 million for fiscal 2007. Net
sales for fiscal 2008 were $196.1 million, or 21.1%, higher
than fiscal 2007 due to favorable pricing actions and increases
in unit volume, particularly in the aftermarket channel which
experienced a 6.3% increase, partially offset by a 10.0% decline
in the OEM channel. 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
increased costs, although there is typically a time lag between
implementation of changes and realization of the related
pricing. In cases where the Company has not been successful
passing on these costs, it has determined not to accept further
business from certain of these customers to avoid absorbing
these customer losses. Third-party lead sales revenues for
fiscal 2008 were approximately $32.7 million higher than
fiscal 2007.
Transportation Europe and ROW net sales were $1.16 billion
for fiscal 2008 versus $832.2 million for fiscal 2007. Net
sales in fiscal 2008, excluding the favorable impact of
$117.3 million in foreign currency translation, increased
by $206.5 million, or 24.8% compared to fiscal 2007. The
increase was primarily due to favorable pricing actions,
partially offset by an 7.9% reduction in overall unit sales.
Industrial Energy Americas net sales were $301.6 million
for fiscal 2008 versus $270.5 million for fiscal 2007. Net
sales in fiscal 2008 were $31.1 million, or 11.5%, higher
than fiscal 2007 due primarily to favorable pricing actions
implemented in both the network power and motive power markets
to help offset higher commodity costs.
29
Industrial Energy Europe and ROW net sales were
$1.11 billion for fiscal 2008 versus $906.8 million
for fiscal 2007. Net sales in fiscal 2008, excluding favorable
foreign currency translation of $111.0 million, increased
$94.9 million, or 10.5%, compared to fiscal 2007 due to
favorable pricing actions implemented in both the network power
and motive power markets, partially offset by reduced volumes in
the motive power market.
Gross
Profit
Gross profit was $593.2 million in fiscal 2008 versus
$472.8 million in fiscal 2007. Gross margin decreased
slightly to 16.0% of net sales in fiscal 2008 from 16.1% of net
sales in fiscal 2007. Foreign currency translation favorably
impacted gross profit in fiscal 2008 by approximately
$31.8 million. Gross profit was positively impacted by
higher average selling prices and cost reductions driven to a
significant 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 100.3% to $2,856 per metric ton in fiscal
2008 as compared to $1,426 per metric ton in fiscal 2007), and
increases in other commodity costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
For the Fiscal Year Ended
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
Favorable/(Unfavorable)
|
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Percent of
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
Total
|
|
|
Net Sales
|
|
|
Total
|
|
|
Net Sales
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
209,395
|
|
|
|
18.6
|
%
|
|
$
|
165,689
|
|
|
|
17.8
|
%
|
|
$
|
43,706
|
|
|
$
|
|
|
|
$
|
43,706
|
|
Europe and ROW
|
|
|
146,565
|
|
|
|
12.7
|
%
|
|
|
93,382
|
|
|
|
11.2
|
%
|
|
|
53,183
|
|
|
|
15,210
|
|
|
|
37,973
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
77,561
|
|
|
|
25.7
|
%
|
|
|
60,178
|
|
|
|
22.2
|
%
|
|
|
17,383
|
|
|
|
|
|
|
|
17,383
|
|
Europe and ROW
|
|
|
162,063
|
|
|
|
14.6
|
%
|
|
|
153,527
|
|
|
|
16.9
|
%
|
|
|
8,536
|
|
|
|
16,563
|
|
|
|
(8,027
|
)
|
Unallocated
|
|
|
(2,394
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,394
|
)
|
|
|
|
|
|
|
(2,394
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
593,190
|
|
|
|
16.0
|
%
|
|
$
|
472,776
|
|
|
|
16.1
|
%
|
|
$
|
120,414
|
|
|
$
|
31,773
|
|
|
$
|
88,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Americas gross profit was $209.4 million, or
18.6% of net sales, in fiscal 2008 versus $165.7 million,
or 17.8% of net sales, in fiscal 2007. The increase in gross
margin was primarily due to the impact of favorable pricing
actions and higher aftermarket volumes, partially offset by
higher raw material costs including lead, and an additional
$2.1 million for environmental remediation costs in the
second quarter of fiscal 2008.
Transportation Europe and ROW gross profit was
$146.6 million, or 12.7% of net sales, in fiscal 2008
versus $93.4 million, or 11.2% of net sales, in fiscal
2007. Foreign currency translation favorably impacted gross
profit during fiscal 2008 by approximately $15.2 million.
The remaining increase in gross profit was primarily due to the
favorable impact of pricing actions and higher OE volumes,
partially offset by lower volumes in the aftermarket channels.
Industrial Energy Americas gross profit was $77.6 million,
or 25.7% of net sales, in fiscal 2008 versus $60.2 million,
or 22.2% of net sales, in fiscal 2007. The increase in gross
profit was primarily due to favorable pricing actions in both
the network power and motive power markets, as well as increased
unit volumes in the network power market and ongoing cost
reduction initiatives, partially offset by higher commodity
costs.
Industrial Energy Europe and ROW gross profit was
$162.1 million, or 14.6% of net sales, in fiscal 2008
versus $153.5 million, or 16.9% of net sales, in fiscal
2007. Foreign currency translation favorably impacted gross
profit in fiscal 2008 by approximately $16.6 million. Gross
profit was negatively impacted by higher lead and other
commodity costs not fully recovered by higher average selling
prices, partially offset by manufacturing cost reductions
resulting from the installation of the Take Charge! Initiative
at the divisions manufacturing facilities.
30
Unallocated other gross profit consisted of an expense of
$2.4 million in fiscal 2008 for environmental remediation
costs for a previously closed facility. As this site was closed
many years ago, the costs have not been allocated to the current
business segments.
Expenses
Expenses were $544.9 million in fiscal 2008 versus
$567.7 million in fiscal 2007. Restructuring charges of
$10.5 million in fiscal 2008 and $24.5 million in
fiscal 2007 are included in these expenses. Excluding these
items, expenses were $534.4 million and $543.2 million
in fiscal 2008 and fiscal 2007, respectively. Foreign currencies
unfavorably impacted expenses by approximately
$32.1 million in fiscal 2008. The decrease in expenses was
impacted by the following:
i. interest, net, decreased $4.5 million principally
due to the favorable impact of lower interest rates under the
Credit Agreement, offset by higher borrowing required to fund
incremental working capital caused by significantly higher lead
costs;
ii. fiscal 2008 and fiscal 2007 expenses included currency
remeasurement gains of $40.8 million and
$11.6 million, respectively, included in Other (income)
expense, net;
iii. restructuring expenses decreased by
$14.0 million, to $10.5 million in fiscal 2008 from
$24.5 million in fiscal 2007. This change is due to an
overall decrease in the level of restructuring activities
throughout the Company in fiscal 2008;
iv. fiscal 2008 and fiscal 2007 expenses included a loss on
revaluation of warrants of $3.0 million and
$3.2 million, respectively, included in Other (income)
expense, net; and
v. fiscal 2008 and fiscal 2007 expenses included a (gain)
loss on sale/impairment of fixed assets of ($0.2) million
and $18.6 million, respectively, included in Other (income)
expense, net. The change partially resulted from an impairment
charge on assets (land and building) held for sale in Nanterre,
France and Shreveport, LA. in the U.S., recognized in fiscal
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
Favorable/(Unfavorable)
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
2008
|
|
|
2007
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
130,509
|
|
|
$
|
132,555
|
|
|
$
|
2,046
|
|
|
$
|
|
|
|
$
|
2,046
|
|
Europe and ROW
|
|
|
116,300
|
|
|
|
113,802
|
|
|
|
(2,498
|
)
|
|
|
(11,795
|
)
|
|
|
9,297
|
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
39,528
|
|
|
|
38,203
|
|
|
|
(1,325
|
)
|
|
|
|
|
|
|
(1,325
|
)
|
Europe and ROW
|
|
|
144,160
|
|
|
|
145,248
|
|
|
|
1,088
|
|
|
|
(13,991
|
)
|
|
|
15,079
|
|
Unallocated expenses
|
|
|
114,382
|
|
|
|
137,872
|
|
|
|
23,490
|
|
|
|
(6,316
|
)
|
|
|
29,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
544,879
|
|
|
$
|
567,680
|
|
|
$
|
22,801
|
|
|
$
|
(32,102
|
)
|
|
$
|
54,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation Americas expenses were $130.5 million in
fiscal 2008 versus $132.6 million in fiscal 2007. The
decrease in expenses was due to unusual prior year expenses,
which included $8.6 million in restructuring costs and a
$7.2 million of fixed asset impairment charges, both
related to the fiscal 2007 closure of the Shreveport, Louisiana
battery plant, partially offset by higher selling, general and
administrative expenses in fiscal 2008.
Transportation Europe and ROW expenses were $116.3 million
in fiscal 2008 versus $113.8 million in fiscal 2007.
Foreign currency translation unfavorably impacted expenses in
fiscal 2008 by approximately $11.8 million. Excluding the
impact of currency translation, expenses decreased by
$9.3 million due primarily to a $9.7 million fixed
asset impairment charge related to land and building held for
sale in France in fiscal 2007.
31
Industrial Energy Americas expenses were $39.5 million in
fiscal 2008 versus $38.2 million in fiscal 2007. The
increase in expenses was primarily due to costs related to the
closed Kankakee, Illinois manufacturing facility
Industrial Energy Europe and ROW expenses were
$144.2 million in fiscal 2008 versus $145.2 million in
fiscal 2007. Foreign currency translation unfavorably impacted
expenses in fiscal 2008 by approximately $14.0 million.
Excluding the impact of currency translation, expenses decreased
by $15.1 million primarily due to a reduction in
discretionary spending versus fiscal 2007, a $1.4 million
gain on asset sales, and $5.3 million lower restructuring
costs.
Unallocated expenses were $114.4 million in fiscal 2008
versus $137.9 million in fiscal 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
Favorable
|
|
|
|
2008
|
|
|
2007
|
|
|
(Unfavorable)
|
|
|
|
(In thousands)
|
|
|
Corporate expenses
|
|
$
|
47,333
|
|
|
$
|
58,083
|
|
|
$
|
10,750
|
|
Restructuring
|
|
|
504
|
|
|
|
337
|
|
|
|
(167
|
)
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency remeasurement gain
|
|
|
(41,443
|
)
|
|
|
(12,385
|
)
|
|
|
29,058
|
|
Loss on revaluation of warrants
|
|
|
2,975
|
|
|
|
3,234
|
|
|
|
259
|
|
Other
|
|
|
(1,846
|
)
|
|
|
(1,418
|
)
|
|
|
428
|
|
Interest expense, net
|
|
|
85,517
|
|
|
|
90,020
|
|
|
|
4,503
|
|
Loss on early extinguishment of debt
|
|
|
21,342
|
|
|
|
|
|
|
|
(21,342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
114,382
|
|
|
$
|
137,871
|
|
|
$
|
23,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The $41.4 million and $12.4 million of currency
remeasurement gains in fiscal 2008 and 2007 relate primarily to
the remeasurement of U.S. dollar-denominated borrowings
under the European tranche of its Credit Agreement and
Euro-denominated intercompany loans (receivable) in the U.S.A.
The $21.3 million loss on early extinguishment of debt
relates to the Companys May 2007 payoff of its prior
credit facility. Foreign currency translation unfavorably
impacted unallocated expenses by $6.3 million in fiscal
2008.
Reorganization
Items
Reorganization items represent amounts the Company continues to
incur as a result of the Companys prior Chapter 11
filing, from which the Company emerged successfully in May 2004.
Reorganization items for fiscal 2008 and 2007 were
$3.8 million and $4.3 million, respectively. These
expenses include professional fees, consisting primarily of
legal services.
Income
Taxes
The effective tax rate for fiscal 2008 and 2007 was impacted by
the generation of income in tax-paying jurisdictions,
principally in the U.S., 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 United
Kingdom, Italy, Spain, and France. The effective tax rate for
fiscal 2008 was impacted by the recognition of
$26.6 million of valuation allowances on current year tax
benefits generated primarily in the UK, France and Spain. In
addition, the income tax provision for fiscal 2008 increased
$16.7 million due to a reduction in the deferred tax assets
for Germany due to legislation enacted during the period which
reduced the Companys German subsidiaries marginal
tax rate from approximately 37% to approximately 28%. Finally,
the income tax provision for fiscal 2008 decreased as a result
of the removal of a $25.0 million valuation allowance
against net deferred tax assets generated from the
Companys U.S. operations. 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
32
addition, the effective tax rate for fiscal 2007 was impacted by
a settlement between the Companys Dutch subsidiary and
Dutch tax authorities, reducing by $3.8 million previously
paid taxes to the Netherlands.
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Pre-tax income (loss)
|
|
$
|
44,489
|
|
|
$
|
(99,214
|
)
|
Income tax provision
|
|
|
10,886
|
|
|
|
5,783
|
|
Effective tax rate
|
|
|
24.5
|
%
|
|
|
(5.8
|
)%
|
Fiscal
Year Ended March 31, 2007 compared with Fiscal Year Ended
March 31, 2006
Net
Sales
Net sales were $2.94 billion for fiscal 2007 versus
$2.82 billion in fiscal 2006. Foreign currency translation
(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 foreign currency
translation 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 volume in both Transportation
segments was attributed to the Companys pricing strategy
of driving customer profitability to more appropriate levels or
severing relationships where reasonable profitability could not
be achieved.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal 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 and ROW
|
|
|
832,219
|
|
|
|
810,894
|
|
|
|
21,325
|
|
|
|
42,281
|
|
|
|
(20,956
|
)
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
270,479
|
|
|
|
274,976
|
|
|
|
(4,497
|
)
|
|
|
|
|
|
|
(4,497
|
)
|
Europe and ROW
|
|
|
906,753
|
|
|
|
820,689
|
|
|
|
86,064
|
|
|
|
45,382
|
|
|
|
40,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $17.0 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 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. 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 in fiscal 2007 excluding the favorable impact of
$42.3 million in foreign currency translation reduced by
$21.0 million, or 2.6%, compared to fiscal 2006. 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 $275.0 million for fiscal 2006. Net
sales in fiscal 2007 were $4.5 million, or 1.6% lower than
fiscal 2006, 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.
Industrial Energy Europe and ROW net sales were
$906.8 million for fiscal 2007 versus $820.7 million
for fiscal 2006. Net sales in fiscal 2007, excluding favorable
foreign currency translation of $45.4 million,
33
increased $40.7 million, or 5.0%, compared to fiscal 2006
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. Foreign currency translation 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 significant 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 Ended
|
|
|
For the Fiscal Year 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 and ROW
|
|
|
93,382
|
|
|
|
11.2
|
%
|
|
|
102,680
|
|
|
|
12.7
|
%
|
|
|
(9,298
|
)
|
|
|
4,658
|
|
|
|
(13,956
|
)
|
Industrial Energy Americas
|
|
|
60,178
|
|
|
|
22.2
|
%
|
|
|
53,153
|
|
|
|
19.3
|
%
|
|
|
7,025
|
|
|
|
|
|
|
|
7,025
|
|
Europe and ROW
|
|
|
153,527
|
|
|
|
16.9
|
%
|
|
|
153,906
|
|
|
|
18.8
|
%
|
|
|
(379
|
)
|
|
|
7,279
|
|
|
|
(7,658
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
472,776
|
|
|
|
16.1
|
%
|
|
$
|
406,831
|
|
|
|
14.4
|
%
|
|
$
|
65,945
|
|
|
$
|
11,937
|
|
|
$
|
54,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
was primarily due to higher pricing with a better mix of higher
margin products and ongoing productivity initiatives, partially
offset by lower volumes in original equipment and aftermarket
channels, 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.
Foreign currency translation favorably impacted gross profit
during fiscal 2007 by approximately $4.7 million. The
decrease in gross profit before the favorable impact of currency
translation 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. Foreign currency translation positively impacted 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.
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. Foreign
34
currency translation 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 a 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
$8.0 million, respectively, included in Other (income)
expense, net. The primary driver of the increase resulted from
an impairment charge on assets (land and building) held for sale
in Nanterre, France and Shreveport, LA. in the U.S.; and
vi. fiscal 2006 general and administrative expenses
included $23.8 million for settlement of fines associated
with the previously disclosed U.S. Attorney matter, which
was recorded on a discounted basis as payments will occur over a
five-year period. This fine, which was part of a 2001 plea
agreement and subsequent sentencing in 2002, related to an
investigation of former officers of the Company prior to the
effective date.
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 expenses. 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 could 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 Year Ended
|
|
|
Favorable/(Unfavorable)
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
|
Currency
|
|
|
Non-Currency
|
|
|
|
2007
|
|
|
2006
|
|
|
Total
|
|
|
Related
|
|
|
Related
|
|
|
|
(In thousands)
|
|
|
Transportation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
132,555
|
|
|
$
|
103,172
|
|
|
$
|
(29,383
|
)
|
|
$
|
|
|
|
$
|
(29,383
|
)
|
Europe and ROW
|
|
|
113,802
|
|
|
|
78,284
|
|
|
|
(35,518
|
)
|
|
|
(5,590
|
)
|
|
|
(29,928
|
)
|
Industrial Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
|
38,203
|
|
|
|
44,307
|
|
|
|
6,104
|
|
|
|
|
|
|
|
6,104
|
|
Europe and ROW
|
|
|
145,248
|
|
|
|
114,210
|
|
|
|
(31,038
|
)
|
|
|
(6,978
|
)
|
|
|
(24,060
|
)
|
Unallocated expenses
|
|
|
137,872
|
|
|
|
216,941
|
|
|
|
79,069
|
|
|
|
(2,661
|
)
|
|
|
81,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
567,680
|
|
|
$
|
556,914
|
|
|
$
|
(10,766
|
)
|
|
$
|
(15,229
|
)
|
|
$
|
4,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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. Foreign
currency translation unfavorably impacted expenses in fiscal
2007 by approximately
35
$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. Foreign currency translation unfavorably impacted
expenses in fiscal 2007 by approximately $7.0 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, included shared service and corporate
expenses, interest expense, currency remeasurement losses
(gains), and gain on revaluation of warrants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
Favorable
|
|
|
|
2007
|
|
|
2006
|
|
|
(Unfavorable)
|
|
|
|
(In thousands)
|
|
|
Corporate expenses
|
|
$
|
58,083
|
|
|
$
|
149,816
|
|
|
$
|
91,733
|
|
Restructuring
|
|
|
337
|
|
|
|
3,930
|
|
|
|
3,593
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency remeasurement (gain) loss
|
|
|
(12,385
|
)
|
|
|
7,737
|
|
|
|
20,122
|
|
Loss (gain) on revaluation of warrants
|
|
|
3,234
|
|
|
|
(9,125
|
)
|
|
|
(12,359
|
)
|
Other
|
|
|
(1,418
|
)
|
|
|
(4,881
|
)
|
|
|
(3,463
|
)
|
Interest expense, net
|
|
|
90,020
|
|
|
|
69,464
|
|
|
|
(20,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
137,871
|
|
|
$
|
216,941
|
|
|
$
|
79,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated expenses 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.
Interest expense, net was $90.0 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.
Currency unfavorably impacted unallocated expenses in fiscal
2007 by approximately $2.7 million.
Reorganization
Items
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.
Income
Taxes
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 the
Companys Dutch subsidiary and Dutch tax authorities,
36
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.
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Pre-tax loss
|
|
$
|
99,214
|
|
|
$
|
156,241
|
|
Income tax provision
|
|
|
5,783
|
|
|
|
15,962
|
|
Effective tax rate
|
|
|
(5.8
|
)%
|
|
|
(10.2
|
)%
|
Liquidity
and Capital Resources
As of March 31, 2008, the Company had cash and cash
equivalents of $90.5 million and availability under the
Companys revolving loan facility of $136.4 million.
This compared to cash and cash equivalents of $76.2 million
and availability under the revolving loan facility of
$59.3 million as of March 31, 2007.
On May 15, 2007, the Company entered into the five-year
$495.0 million Credit Agreement that replaced the prior
senior secured credit facility. The Credit Agreement consists of
a $295.0 million term loan and a $200.0 million
asset-based revolving loan and matures in May 2012. The Credit
Agreement contains no financial maintenance covenants.
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
increase or decrease in accordance with a leverage-based pricing
grid. The revolving loan facility includes a letter of credit
sub-facility of $75.0 million and an accordion feature that
allows the Company to increase the facility size up to
$250.0 million if it can obtain commitments from existing
or new lenders for the incremental amount. The revolving loan
facility will mature in May 2012, but is prepayable at any time
at par.
Availability under the revolving loan facility is subject to a
borrowing base comprised of up to 85.0% of the Companys
eligible accounts receivable plus 85.0% 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 domestically 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
substantially all domestic subsidiaries of the Company and
certain foreign subsidiaries. These guaranteed 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, 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 $40.0 million. The Company is also 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 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 3.5% (provided that such rates may decrease by 0.25%
after December 31, 2007 if the Company achieves certain
corporate credit ratings). The term loan will mature in May
2012, but is prepayable at any time at par value, provided that
if a
37
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 101.0% 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, with the balance payable 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
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.
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.
In March 2005, the Company issued $290.0 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 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 $5.0 million
threshold) must be applied to offer to repurchase notes to the
extent such proceeds exceed $20.0 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 $60.0 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, 2008 and 2007 was 1.3% and 3.9%,
respectively. Interest is payable quarterly. The notes are
convertible into the Companys common stock at a conversion
rate of 61.6143 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.
38
At March 31, 2008, the Company was in compliance in all
material respects with covenants contained in the Credit
Agreement and indenture agreements that cover the
10.5% senior secured notes and floating rate convertible
subordinated notes.
At March 31, 2008, the Company had outstanding letters of
credit with a face value of $46.3 million and surety bonds
with a face value of $5.6 million. The majority of the
letters of credit and surety bonds have been issued as
collateral or financial assurance with respect to certain
liabilities that 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, 2008, pursuant to the terms of the agreement,
was $4.1 million.
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.
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 through rights
offerings, common stock issuance, and the sale of non-core
businesses and assets.
Cash flows provided by operating activities were
$1.1 million and $1.2 million in fiscal 2008 and
fiscal 2007 respectively. The operating cash flows in fiscal
2008 were primarily attributable to the generation of
$32.1 million of net income versus fiscal 2007s net
loss of $105.9 million, higher accounts payable resulting
from improved supplier terms, offset by increased accounts
receivable and inventories resulting from higher lead costs and
sales growth.
The Company generated $7.1 million and $4.5 million in
cash from the sale of non-core assets in fiscal 2008 and fiscal
2007, respectively. These sales principally relate to the sale
of surplus land and buildings.
Cash flows provided by financing activities were
$57.4 million and $87.6 million in fiscal 2008 and
fiscal 2007, respectively. Cash flows provided by financing
activities in both fiscal 2008 and 2007 relate primarily to net
proceeds from the Companys rights offerings in those
periods, partially offset in fiscal 2008 by financing costs
associated with the Companys senior secured credit
facility.
Total debt at March 31, 2008 was $716.2 million, as
compared to $684.5 million at March 31, 2007. See
Note 7 to the Consolidated Financial Statements for the
composition of such debt.
Going forward, the Companys principal sources of liquidity
will be cash on hand, cash from operations, and borrowings under
the revolving loan facility.
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 2009, including payment of remaining accrued
restructuring costs of approximately
39
$5.1 million as of March 31, 2008. For further
discussion see Note 12 to the Consolidated Financial
Statements.
Capital expenditures were $56.9 million and
$51.9 million in fiscal 2008 and fiscal 2007, respectively.
The Company plans to increase capital expenditures to
approximately $100.0 million in fiscal 2009.
Total pension and other post-retirement employer contributions
were approximately $58.9 million and $66.8 millions in
fiscal 2008 and fiscal 2007 respectively.
Employee
Benefit Plans
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, 2008, the Company had 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
decreased the present value of projected benefit obligations as
of March 31, 2008 and had the effect of decreasing pension
expense in fiscal 2009. Pension expense for the Companys
defined benefit pension and other post-retirement benefit plans
was $12.3 million in fiscal 2008 compared to
$18.7 million in fiscal 2007.
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 $4.3 million in
fiscal 2008. A one-percentage point increase in the weighted
average discount rate would decrease net periodic benefit cost
for defined benefit plans by approximately $1.9 million in
fiscal 2008. A one-percentage point decrease in the weighted
average discount rate would increase net periodic benefit cost
for defined benefit plans by approximately $2.8 million in
fiscal 2008.
As of March 31, 2008, actuarial gain for the Companys
defined benefit pension and other post-retirement benefit plans
were $58.3 million, compared to gains of $12.8 million
at March 31, 2007. The actuarial gains during the fiscal
year ended March 31, 2008 principally reflect increase in
discount rates in the UK, Germany, and the U.S. in 2008.
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
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
40
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 granting a temporary waiver of its minimum
funding requirements for its U.S. plans for calendar years
2003 and 2004, amounting to approximately $50.0 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, 2008, such temporarily waived amounts aggregated
approximately $18.9 million.
The Company expects its cumulative minimum future cash
contributions to its U.S. pension plans will total
approximately $60.0 million to $137.0 million from
fiscal 2009 to fiscal 2013, including $21.4 million in
fiscal 2009.
The Company expects that cumulative contributions to its non-US
pension plans will total approximately $104.4 million from
fiscal 2009 to fiscal 2013, including $20.4 million in
fiscal 2009. In addition, the Company expects that cumulative
contributions to its other post retirement benefit plans will
total approximately $10.7 million from fiscal 2009 to
fiscal 2013, including $2.2 million in fiscal 2009.
Financial
Instruments and Market Risk
From time to time, the Company has used forward contracts to
economically hedge certain commodity price 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 swap, forward
and option contracts to finance its operations and to hedge
interest rate, currency and certain commodity 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 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
$94.3 million and $45.2 million of foreign currency
trade accounts receivable as of March 31, 2008 and 2007,
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.
41
Contractual
Obligations and Commercial Commitments
The Companys contractual obligations and commercial
commitments at March 31, 2008 are summarized by fiscal year
in which the payments are due in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 and
|
|
|
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
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
|
|
|
3,060
|
|
|
|
2,984
|
|
|
|
2,984
|
|
|
|
2,985
|
|
|
|
294,382
|
|
|
|
|
|
|
|
306,395
|
|
Interest on long-term debt(a)
|
|
|
55,891
|
|
|
|
51,604
|
|
|
|
51,405
|
|
|
|
51,260
|
|
|
|
33,623
|
|
|
|
3,870
|
|
|
|
247,653
|
|
Short term borrowings
|
|
|
22,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,719
|
|
Other term loans
|
|
|
2,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,658
|
|
Capital leases(b)
|
|
|
8,438
|
|
|
|
9,906
|
|
|
|
5,913
|
|
|
|
5,769
|
|
|
|
3,571
|
|
|
|
4,141
|
|
|
|
37,738
|
|
Operating leases
|
|
|
31,621
|
|
|
|
21,325
|
|
|
|
14,099
|
|
|
|
9,973
|
|
|
|
6,681
|
|
|
|
8,888
|
|
|
|
92,587
|
|
Purchase Obligations(c)
|
|
|
30,018
|
|
|
|
33,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,885
|
|
Other non-current liabilities(d)
|
|
|
|
|
|
|
22,190
|
|
|
|
20,420
|
|
|
|
10,016
|
|
|
|
8,578
|
|
|
|
74,538
|
|
|
|
135,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
154,405
|
|
|
$
|
141,876
|
|
|
$
|
94,821
|
|
|
$
|
80,003
|
|
|
$
|
636,835
|
|
|
$
|
151,437
|
|
|
$
|
1,259,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Reflects the Companys scheduled interest payments and
assumes an interest rate of 1.3% on the floating rate
convertible senior subordinated notes, and 6.7% on the Credit
Agreement. |
|
(b) |
|
Capital leases reflect future minimum lease payments including
imputed interest charges. |
|
(c) |
|
Reflects the Companys projected annual minimum purchase
commitments, 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. |
|
(d) |
|
Other non-current liabilities include amounts on the
Consolidated Balance Sheet as of March 31, 2008 (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 item
(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 $60.0 million to $137.0 million
from fiscal 2009 to fiscal 2013, including $21.4 million in
fiscal 2009. The Company expects that cumulative contributions
to its
non-U.S.
pension plans will total approximately $104.4 million from
fiscal 2009 to fiscal 2013, including $20.4 million in
fiscal 2009. In addition, the Company expects that cumulative
contributions to its other post-retirement benefit plans will
total approximately $10.7 million from fiscal 2009 to
fiscal 2013, including $2.2 million in fiscal 2009. See
Note 8 to the Consolidated Financial Statements. |
|
(f) |
|
At March 31, 2008 the Company had outstanding letters of
credit of $46.3 million and surety bonds of
$5.6 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, 2008, bank guarantees with a
face value of $17.4 million were outstanding. |
42
|
|
|
(h) |
|
The Companys liability for unrecognized tax benefits of
$21.9 million, recorded in connection with the adoption of
FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes An Interpretation of
SFAS 109, is not included in the table above. Due
to the uncertainties related to these matters, the Company is
not able to make a reasonably reliable estimate as to the future
periods in which cash settlement with the related taxing
authorities will take place. See Note 10 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.
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, operating efficiencies, and pricing
actions.
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 11 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 the
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 1 and 2 to the Consolidated Financial Statements.
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 49% 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. In February 2008, the Company entered into
an interest rate swap agreement to fix the variable component of
interest on $200.0 million of its floating rate long-term
obligations at a rate of 3.45% per annum through
February 27, 2011. See Note 2 to the Consolidated
Financial Statements.
43
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, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year(s) Ended March 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 and
|
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
Beyond
|
|
|
10.5% Senior Secured Notes
|
|
$
|
290,000
|
|
|
$
|
290,000
|
|
|
$
|
290,000
|
|
|
$
|
290,000
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Fixed Interest Rate
|
|
|
10.5
|
%
|
|
|
10.5
|
%
|
|
|
10.5
|
%
|
|
|
10.5
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Floating Rate Convertible Senior Subordinated Notes
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
|
$
|
60,000
|
|
|
|
n/a
|
|
Variable Interest Rate(a)
|
|
|
1.3
|
%
|
|
|
1.3
|
%
|
|
|
1.3
|
%
|
|
|
1.3
|
%
|
|
|
1.3
|
%
|
|
|
n/a
|
|
Senior Secured Credit Facility
|
|
$
|
303,335
|
|
|
$
|
300,351
|
|
|
$
|
297,367
|
|
|
$
|
294,382
|
|
|
|
n/a
|
|
|
|
n/a
|
|
Variable Interest Rate(a)
|
|
|
6.7
|
%
|
|
|
6.7
|
%
|
|
|
6.7
|
%
|
|
|
6.7
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
(a) |
|
Variable components of interest rates based upon market rates at
March 31, 2008. See Note 7 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.
|
|
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
SEC 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.
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.
44
Management has completed its evaluation of the effectiveness of
the Companys internal control over financial reporting as
of March 31, 2008 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, 2008, the
Companys internal control over financial reporting was
effective.
The effectiveness of the Companys internal control over
financial reporting as of March 31, 2008 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 not been any changes in the Companys internal
control over financial reporting during the fiscal year ended
March 31, 2008 that have materially affected or are
reasonably likely to materially affect the Companys
internal control over financial reporting.
|
|
Item 9B.
|
Other
Information
|
None
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 September 9,
2008 (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.
45
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The information required by this item is incorporated by
reference to the Proxy Statement.
PART IV
|
|
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.
46
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 6, 2008.
Exide Technologies
|
|
|
|
By:
|
/s/ PHILLIP
A. DAMASKA
|
Phillip A. Damaska,
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 6, 2008.
|
|
|
|
|
|
|
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/ PHILLIP A. DAMASKA
Phillip
A. Damaska,
Executive Vice President and
Chief Financial Officer
(principal financial officer)
|
|
By:
|
|
/s/ JOSEPH V. LASH
Joseph
V. Lash,
Director
|
|
|
|
|
|
|
|
By:
|
|
/s/ LOUIS E. MARTINEZ
Louis
E. Martinez,
Vice President, Corporate Controller, and
Chief Accounting Officer
(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
|
|
|
|
|
47
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 Exhibit 2.1 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 to 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 to 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 to 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
|
.6
|
|
Amended and Restated Certificate of Incorporation, incorporated
by reference to Exhibit 3.1 to the Companys Report on
Form 10-Q
dated November 8, 2007.
|
|
4
|
.1
|
|
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
|
.2
|
|
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
|
.3
|
|
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.
|
|
4
|
.4
|
|
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
|
.5
|
|
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
|
.6
|
|
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
|
.7
|
|
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
|
.8
|
|
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.
|
48
|
|
|
|
|
|
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.
|
|
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
|
.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.
|
|
10
|
.41
|
|
Standby Purchase Agreement between Exide Technologies and
Tontine Capital Partners, L.P., and Legg Mason Investment Trust,
Inc., dated August 28, 2007, incorporated by reference to
Exhibit 10.1 to the Companys Report on
Form 8-K
dated August 28, 2007.
|
|
10
|
.42
|
|
Exide Technologies 2004 Stock Incentive Plan, as amended
and restated effective August 22, 2007, incorporated by
reference to Exhibit 10.1 to the Companys Report on
Form 10-Q
dated November 8, 2007.
|
|
10
|
.43
|
|
Amended and Restated Employment Agreement of Gordon A. Ulsh,
dated December 26, 2007, incorporated by reference to
Exhibit 10.1 to the Companys Report on
Form 8-K
dated December 28, 2007.
|
|
10
|
.44
|
|
Amended and Restated Employment Agreement of Gordon A. Ulsh,
dated January 31, 2008, incorporated by reference to
Exhibit 10.1 to the Companys Report on
Form 8-K
dated February 6, 2008.
|
|
10
|
.45
|
|
Amendment to Stock Option Award Agreement between Exide
Technologies and Gordon A. Ulsh, dated February 18, 2008,
incorporated by reference to Exhibit 10.1 to the
Companys Report on
Form 8-K
dated February 20, 2008.
|
49
|
|
|
|
|
|
10
|
.46
|
|
Amendment to Stock Option Award Agreement between Exide
Technologies and Francis M. Corby, Jr., dated February 18,
2008, incorporated by reference to Exhibit 10.2 to the
Companys Report on
Form 8-K
dated February 20, 2008.
|
|
10
|
.47
|
|
Amendment to Stock Option Award Agreement between Exide
Technologies and Edward J. OLeary, dated February 18,
2008, incorporated by reference to Exhibit 10.3 to the
Companys Report on
Form 8-K
dated February 20, 2008.
|
|
10
|
.48
|
|
Amendment to Stock Option Award Agreement between Exide
Technologies and Mitchell S. Bregman, dated February 18,
2008, incorporated by reference to Exhibit 10.4 to the
Companys Report on
Form 8-K
dated February 20, 2008.
|
|
10
|
.49
|
|
Amendment to Stock Option Award Agreement between Exide
Technologies and Phillip A. Damaska, dated February 18,
2008, incorporated by reference to Exhibit 10.5 to the
Companys Report on
Form 8-K
dated February 20, 2008.
|
|
10
|
.50
|
|
Consulting Services Agreement between Exide Technologies and
Francis M. Corby dated March 24, 2008.
|
|
10
|
.51
|
|
Form of Exide Technologies Employee Performance Unit Award
Agreement, incorporated by reference to Exhibit 10.2 to the
Companys report on
Form 8-K
dated December 1, 2005.
|
|
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 Phillip A. Damaska, 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. |
50
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
INDEX TO
FINANCIAL STATEMENTS
|
|
|
|
|
Exide Technologies and Subsidiaries
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
|
|
II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
|
|
|
F-40
|
|
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 7 to the Consolidated Financial Statements.
|
|
|
|
|
Exide Global Holding Netherlands C.V. and Subsidiaries
|
|
|
|
|
|
|
|
F-41
|
|
|
|
|
F-42
|
|
|
|
|
F-43
|
|
|
|
|
F-44
|
|
|
|
|
F-45
|
|
|
|
|
F-46
|
|
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Exide Technologies
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 at March 31, 2008 and 2007, and the
results of their operations and their cash flows for each of the
three years in the period ended March 31, 2008 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. Also in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of March 31, 2008,
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in Managements Report on
Internal Control Over Financial Reporting appearing under
Item 9A. Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and
on the Companys internal control over financial reporting
based on our integrated audits. We conducted our audits in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our
audits of the financial statements included 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. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
As discussed in Note 9 to the consolidated financial
statements, the Company changed the manner in which it accounts
for stock-based compensation effective April 1, 2006.
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 5, 2008
F-2
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per-share data)
|
|
|
NET SALES
|
|
$
|
3,696,671
|
|
|
$
|
2,939,785
|
|
|
$
|
2,819,876
|
|
COST OF SALES
|
|
|
3,103,481
|
|
|
|
2,467,009
|
|
|
|
2,413,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
593,190
|
|
|
|
472,776
|
|
|
|
406,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, marketing and advertising
|
|
|
289,975
|
|
|
|
270,413
|
|
|
|
271,059
|
|
General and administrative
|
|
|
176,607
|
|
|
|
173,128
|
|
|
|
190,993
|
|
Restructuring
|
|
|
10,507
|
|
|
|
24,483
|
|
|
|
21,714
|
|
Other (income) expense, net
|
|
|
(39,069
|
)
|
|
|
9,636
|
|
|
|
3,684
|
|
Interest expense, net
|
|
|
85,517
|
|
|
|
90,020
|
|
|
|
69,464
|
|
Loss on early extinguishment of debt
|
|
|
21,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
544,879
|
|
|
|
567,680
|
|
|
|
556,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before reorganization items, income taxes,
minority interest
|
|
|
48,311
|
|
|
|
(94,904
|
)
|
|
|
(150,083
|
)
|
REORGANIZATION ITEMS, NET
|
|
|
3,822
|
|
|
|
4,310
|
|
|
|
6,158
|
|
INCOME TAX PROVISION
|
|
|
10,886
|
|
|
|
5,783
|
|
|
|
15,962
|
|
MINORITY INTEREST
|
|
|
1,544
|
|
|
|
882
|
|
|
|
529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
32,059
|
|
|
$
|
(105,879
|
)
|
|
$
|
(172,732
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.47
|
|
|
$
|
(2.37
|
)
|
|
$
|
(6.72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.46
|
|
|
$
|
(2.37
|
)
|
|
$
|
(6.72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
68,306
|
|
|
|
44,604
|
|
|
|
25,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
69,284
|
|
|
|
44,604
|
|
|
|
25,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-3
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
90,547
|
|
|
$
|
76,211
|
|
Receivables, net of allowance for doubtful accounts of $33,630
and $28,624
|
|
|
782,944
|
|
|
|
639,115
|
|
Inventories
|
|
|
583,593
|
|
|
|
411,554
|
|
Prepaid expenses and other
|
|
|
17,829
|
|
|
|
20,224
|
|
Deferred financing costs, net
|
|
|
5,215
|
|
|
|
3,411
|
|
Deferred income taxes
|
|
|
36,853
|
|
|
|
19,030
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,516,981
|
|
|
|
1,169,545
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
649,526
|
|
|
|
649,015
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Other intangibles, net
|
|
|
206,283
|
|
|
|
191,762
|
|
Investments in affiliates
|
|
|
6,523
|
|
|
|
5,282
|
|
Deferred financing costs, net
|
|
|
18,071
|
|
|
|
12,908
|
|
Deferred income taxes
|
|
|
51,238
|
|
|
|
67,006
|
|
Other
|
|
|
42,774
|
|
|
|
24,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
324,889
|
|
|
|
301,664
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,491,396
|
|
|
$
|
2,120,224
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
22,719
|
|
|
$
|
13,951
|
|
Current maturities of long-term debt
|
|
|
9,875
|
|
|
|
3,996
|
|
Accounts payable
|
|
|
468,240
|
|
|
|
360,278
|
|
Accrued expenses
|
|
|
333,092
|
|
|
|
299,157
|
|
Warrants liability
|
|
|
8,272
|
|
|
|
5,297
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
842,198
|
|
|
|
682,679
|
|
Long-term debt
|
|
|
683,601
|
|
|
|
666,507
|
|
Noncurrent retirement obligations
|
|
|
212,438
|
|
|
|
263,290
|
|
Deferred income tax liability
|
|
|
44,407
|
|
|
|
41,232
|
|
Other noncurrent liabilities
|
|
|
145,642
|
|
|
|
121,433
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,928,286
|
|
|
|
1,775,141
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
18,772
|
|
|
|
14,560
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value, 1,000 shares
authorized, 0 shares issued and outstanding
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 200,000 and
100,000 shares authorized, 75,278 and 60,676 shares
issued and outstanding
|
|
|
753
|
|
|
|
607
|
|
Additional paid-in capital
|
|
|
1,104,939
|
|
|
|
1,008,481
|
|
Accumulated deficit
|
|
|
(717,662
|
)
|
|
|
(745,534
|
)
|
Accumulated other comprehensive income
|
|
|
156,308
|
|
|
|
66,969
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
544,338
|
|
|
|
330,523
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
2,491,396
|
|
|
$
|
2,120,224
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-4
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Defined
|
|
|
Derivatives
|
|
|
Cumulative
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Benefit
|
|
|
Qualifying as
|
|
|
Translation
|
|
|
Comprehensive
|
|
|
|
Stock
|
|
|
Capital
|
|
|
Deficit
|
|
|
Plans
|
|
|
Hedges
|
|
|
Adjustment
|
|
|
Income (Loss)
|
|
|
|
(In thousands)
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (loss)
|
|
|
|
|
|
|
|
|
|
|
32,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,059
|
|
Defined benefit plans, net of tax of $12,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,560
|
|
|
|
|
|
|
|
|
|
|
|
37,560
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,293
|
|
|
|
54,293
|
|
Unrealized loss on derivatives, net of tax of $925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,514
|
)
|
|
|
|
|
|
|
(2,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
121,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of the adoption of Fin 48
|
|
|
|
|
|
|
|
|
|
|
(4,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuance
|
|
|
146
|
|
|
|
90,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock compensation
|
|
|
|
|
|
|
5,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2008
|
|
$
|
753
|
|
|
$
|
1,104,939
|
|
|
$
|
(717,662
|
)
|
|
$
|
53,715
|
|
|
$
|
(2,514
|
)
|
|
$
|
105,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-5
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
32,059
|
|
|
$
|
(105,879
|
)
|
|
$
|
(172,732
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
101,161
|
|
|
|
121,016
|
|
|
|
122,429
|
|
Unrealized loss (gain) on warrants
|
|
|
2,975
|
|
|
|
3,234
|
|
|
|
(9,125
|
)
|
Net (gain) loss on asset sales / impairments
|
|
|
(237
|
)
|
|
|
18,622
|
|
|
|
8,044
|
|
Gain on insurance recoveries
|
|
|
|
|
|
|
|
|
|
|
(4,791
|
)
|
Deferred income taxes
|
|
|
(5,435
|
)
|
|
|
(6,350
|
)
|
|
|
(36
|
)
|
Provision for doubtful accounts
|
|
|
5,974
|
|
|
|
9,096
|
|
|
|
4,116
|
|
Non-cash stock compensation
|
|
|
5,465
|
|
|
|
2,449
|
|
|
|
501
|
|
Reorganization items, net
|
|
|
3,822
|
|
|
|
4,310
|
|
|
|
6,158
|
|
Insurance proceeds
|
|
|
|
|
|
|
|
|
|
|
11,144
|
|
Minority interest
|
|
|
1,544
|
|
|
|
882
|
|
|
|
529
|
|
Amortization of deferred financing costs
|
|
|
4,900
|
|
|
|
3,476
|
|
|
|
2,048
|
|
Loss on early extinguishment of debt
|
|
|
21,342
|
|
|
|
|
|
|
|
|
|
Currency (gain) loss
|
|
|
(40,782
|
)
|
|
|
(11,635
|
)
|
|
|
11,280
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(43,606
|
)
|
|
|
14,635
|
|
|
|
34,022
|
|
Inventories
|
|
|
(113,877
|
)
|
|
|
30,568
|
|
|
|
(34,703
|
)
|
Prepaid expenses and other
|
|
|
3,763
|
|
|
|
13,614
|
|
|
|
(8,997
|
)
|
Payables
|
|
|
58,596
|
|
|
|
(25,389
|
)
|
|
|
33,958
|
|
Accrued expenses
|
|
|
7,625
|
|
|
|
(16,149
|
)
|
|
|
(68,907
|
)
|
Noncurrent liabilities
|
|
|
(46,578
|
)
|
|
|
(53,258
|
)
|
|
|
27,500
|
|
Other, net
|
|
|
2,369
|
|
|
|
(2,065
|
)
|
|
|
(6,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
1,080
|
|
|
|
1,177
|
|
|
|
(44,348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(56,854
|
)
|
|
|
(51,932
|
)
|
|
|
(58,133
|
)
|
Proceeds from asset sales
|
|
|
7,057
|
|
|
|
4,485
|
|
|
|
25,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(49,797
|
)
|
|
|
(47,447
|
)
|
|
|
(32,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in short-term borrowings
|
|
|
4,699
|
|
|
|
1,123
|
|
|
|
10,347
|
|
(Decrease) increase in borrowings under Senior Credit Facility
|
|
|
(13,176
|
)
|
|
|
(27,948
|
)
|
|
|
29,026
|
|
Common stock issuance
|
|
|
91,139
|
|
|
|
117,747
|
|
|
|
|
|
Settlement of foreign currency swap
|
|
|
|
|
|
|
|
|
|
|
(12,084
|
)
|
Increase (decrease) in other debt
|
|
|
6,697
|
|
|
|
(2,504
|
)
|
|
|
15,667
|
|
Financing costs and other
|
|
|
(31,985
|
)
|
|
|
(832
|
)
|
|
|
(8,310
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
57,374
|
|
|
|
87,586
|
|
|
|
34,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
5,679
|
|
|
|
2,734
|
|
|
|
(2,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) In Cash and Cash Equivalents
|
|
|
14,336
|
|
|
|
44,050
|
|
|
|
(44,535
|
)
|
Cash and Cash Equivalents, Beginning of Period
|
|
|
76,211
|
|
|
|
32,161
|
|
|
|
76,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
90,547
|
|
|
$
|
76,211
|
|
|
$
|
32,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
75,234
|
|
|
$
|
78,579
|
|
|
$
|
57,447
|
|
Income taxes (net of refunds)
|
|
$
|
18,848
|
|
|
$
|
11,125
|
|
|
$
|
10,568
|
|
The accompanying notes are an integral part of these statements.
F-6
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
March 31,
2008
|
|
(1)
|
BASIS OF
PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
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. The Consolidated Financial Statements are prepared
in accordance with U.S. generally accepted accounting
principles.
Principles
of Consolidation
The Consolidated Financial Statements include the accounts of
Exide Technologies and all of its majority owned subsidiaries in
which it exercises control. 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, and Australia. The Companys
industrial batteries consist of motive power batteries, such as
those used in forklift trucks and other electric 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 (OEM).
The Company currently has four business segments: Transportation
Americas, Transportation Europe and Rest of World
(ROW), Industrial Energy Americas, and Industrial
Energy Europe and ROW. For a discussion of the Companys
segments, see Note 18.
Major
Customers and Concentration of Credit
The Company has a number of major end-user, retail and OEM, 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 ($40.8) million,
($11.6) million, and $11.3 million in fiscal 2008,
2007, and 2006, respectively.
F-7
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 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
for 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
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.
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, 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
F-8
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
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 an 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 they are incurred.
Net
Earnings (Loss) Per Share
The Company computes basic earnings (loss) per share in
accordance with SFAS 128, Earnings Per Share
by dividing net income (loss) by the weighted average number
of common shares outstanding during the period. Diluted earnings
(loss) per share is computed by dividing net income by diluted
weighted average shares outstanding. Potentially dilutive shares
include the assumed exercise of stock options and the assumed
vesting of restricted stock and stock unit awards (using the
treasury stock method) as well as the assumed conversion of the
Companys Floating Rate Convertible Senior Subordinated
Notes, if dilutive. The potential dilutive effect of the assumed
conversion of convertible debt is determined using the
if-converted method, and considers both the impact of
incremented common shares after an assumed conversion, and the
related addition to net income of the after-tax interest
recognized during the period on the convertible debt. Shares
which are contingently issuable under the Companys plan of
reorganization have been included as outstanding common shares
for purposes of calculating basic earnings (loss) per share.
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
F-9
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Recently
Issued Accounting Standards
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 GAAP, 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.
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). 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 effect of the change in
measurement year on the Companys financial statements is
currently being assessed, 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
pronouncement on its financial statements, but at this time, no
material effect is expected.
In December 2007, the FASB issued SFAS No. 160
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51
(SFAS 160). SFAS 160 amends Accounting
Research Bulletin 51 (ARB 51) to establish
accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a
subsidiary. It also amends certain of ARB 51s
consolidation procedures for consistency with the requirements
of FASB Statement No. 141 (revised 2007), Business
Combinations. This Statement is effective for fiscal
years beginning on or after December 15, 2008 (the
companys fiscal 2010) 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 March 2008, the FASB issued SFAS No. 161
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133 (SFAS 161).
SFAS 161 enhances required disclosures regarding
derivatives and hedging activities, including how an entity uses
derivative instruments, how derivatives and related hedged items
are accounted for under SFAS No. 133, and how
derivative instruments and related hedged items affect an
entitys financial position, financial performance, and
cash flows. This statement is effective for fiscal years and
interim periods beginning after November 15, 2008 (the
F-10
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Companys fourth quarter of fiscal 2009 and fiscal 2010).
The Company will assess the effect of this pronouncement on its
financial statements, but at this time, no material effect is
expected.
|
|
(2)
|
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, and requires balance sheet
recognition of all derivatives as assets or liabilities, based
on measurements of their fair values.
The Company does not enter into derivative contracts for trading
or speculative purposes. Derivatives are used only to hedge the
volatility arising from changes in the fair value of certain
assets and liabilities that are subject to market risk, such as
interest rates on debt instruments, foreign currency exchange
rates, and certain commodities. If a derivative qualifies for
hedge accounting, gains or losses in its fair value that offset
changes in the fair value of the asset or liability being hedged
(effective gains or losses) are reported in
accumulated other comprehensive income, and subsequently
recorded to earnings only as the related variability on the
hedged transaction is recorded in earnings. If a derivative does
not qualify for hedge accounting, changes in its fair value are
reported in earnings immediately upon occurrence. Derivatives
qualify for hedge accounting if they are designated as hedging
instruments at their inception, and if they are highly effective
in achieving fair value changes that offset the fair value
changes of the assets or liabilities being hedged. Regardless of
a derivatives accounting qualification, changes in its
fair value that are not offset by fair value changes in the
asset or liability being hedged are considered ineffective, and
are recognized in earnings immediately.
In February 2008, the Company entered into an interest rate swap
agreement to fix the variable component of interest on
$200.0 million of its floating rate long-term obligations
at a rate of 3.45% per annum through February 27, 2011. At
March 31, 2008, the fair value of the swap agreement, which
is based on quotes from active markets for instruments of this
type, amounted to a liability of $3.5 million. Of this
amount, $3.4 million was recorded as an unrealized loss in
accumulated other comprehensive income. The remaining amount of
$0.1 million, which includes amounts considered ineffective
as well as effective amounts related to the current period, was
recorded as an increase in interest expense. The Company expects
to reclassify approximately $1.2 million from accumulated
other comprehensive income to interest expense during fiscal
2009.
|
|
(3)
|
ACCOUNTING
FOR INTANGIBLE ASSETS
|
The Company completed its most recent annual impairment
assessment of intangible assets (as required under
SFAS 142) effective March 31, 2008, 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-11
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount
|
|
$
|
67,089
|
|
|
$
|
15,260
|
|
|
$
|
126,529
|
|
|
$
|
28,323
|
|
|
$
|
237,201
|
|
Accumulated Amortization
|
|
|
|
|
|
|
(4,720
|
)
|
|
|
(20,696
|
)
|
|
|
(5,502
|
)
|
|
|
(30,918
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
67,089
|
|
|
$
|
10,540
|
|
|
$
|
105,833
|
|
|
$
|
22,821
|
|
|
$
|
206,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2008 and 2007
was $7.4 million and $7.0 million, respectively.
Excluding the impact of future acquisitions (if any), the
Company anticipates annual amortization of intangible assets for
each of the next five years to average $7.4 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 2007 to fiscal 2008,
result only from foreign currency translation. No other activity
has occurred.
Inventories, valued using the
first-in,
first-out (FIFO) method, consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Raw materials
|
|
$
|
71,779
|
|
|
$
|
53,337
|
|
Work-in-process
|
|
|
115,840
|
|
|
|
89,339
|
|
Finished goods
|
|
|
395,974
|
|
|
|
268,878
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
583,593
|
|
|
$
|
411,554
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
PROPERTY,
PLANT AND EQUIPMENT
|
Property, plant and equipment consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
64,247
|
|
|
$
|
73,514
|
|
Buildings and improvements
|
|
|
251,871
|
|
|
|
232,397
|
|
Machinery and equipment
|
|
|
725,878
|
|
|
|
634,563
|
|
Construction in progress
|
|
|
17,624
|
|
|
|
26,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,059,620
|
|
|
|
966,779
|
|
Less Accumulated depreciation
|
|
|
410,094
|
|
|
|
317,764
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
649,526
|
|
|
$
|
649,015
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense was $92.3 million,
$108.7 million, and $110.0 million, for fiscal 2008,
2007 and 2006, respectively.
F-12
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other assets consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Deposits(a)
|
|
$
|
12,631
|
|
|
$
|
15,596
|
|
Capitalized software, net
|
|
|
3,711
|
|
|
|
2,495
|
|
Loan to affiliate
|
|
|
1,811
|
|
|
|
3,702
|
|
Retirement plans
|
|
|
17,391
|
|
|
|
879
|
|
Other
|
|
|
7,230
|
|
|
|
2,034
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42,774
|
|
|
$
|
24,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, 2008 and 2007, short-term borrowings of
$22.7 million and $14.0 million, respectively,
consisted of borrowings under 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 6.2% and 5.1% at March 31, 2008 and 2007,
respectively.
Total long-term debt at March 31, 2008 comprised the
following:
|
|
|
|
|
|
|
March 31, 2008
|
|
|
|
(In thousands)
|
|
|
Senior Secured Credit Facility
|
|
$
|
306,395
|
|
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
|
|
|
37,081
|
|
|
|
|
|
|
Total
|
|
|
693,476
|
|
Less-current maturities
|
|
|
9,875
|
|
|
|
|
|
|
Total Long-Term Debt
|
|
$
|
683,601
|
|
|
|
|
|
|
Total debt at March 31, 2008 was $716.2 million.
F-13
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
|
|
|
|
|
|
|
Total Long-Term Debt
|
|
$
|
666,507
|
|
|
|
|
|
|
Total debt at March 31, 2007 was $684.5 million.
On May 15, 2007, the Company entered into a
$495.0 million senior secured credit agreement
(Credit Agreement). The Credit Agreement consists of
a $200.0 million asset based revolving senior secured
credit facility (the Revolving Loan Facility) and a
$295.0 million senior secured term loan facility (the
Term Loan). The proceeds of the Credit Agreement
were used to fully pay off the Companys previous facility.
The Company recorded a loss on the early extinguishment of debt
of $21.3 million. The weighted average interest rate on the
Credit Agreement at March 31, 2008 and March 31, 2007
was 6.7% and 11.1% respectively. The Credit Agreement has no
financial maintenance covenants.
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
increase or decrease in accordance with a leverage-based pricing
grid. The Revolving Loan Facility includes a letter of credit
sub-facility of $75.0 million and an accordion feature that
allows the Company to increase the facility size up to
$250.0 million if it can obtain commitments from existing
or new lenders for the incremental amount. The Revolving Loan
Facility will mature in May 2012, but is prepayable at any time
at par.
Availability under the Revolving Loan Facility is subject to a
borrowing base comprised of up to 85.0% of the Companys
eligible accounts receivable plus 85.0% 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 domestically 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
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 $40.0 million. The Company is also required to pay an
unused line fee that varies based on usage of the Revolving Loan
Facility.
F-14
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The
Term Loan
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 3.5%; provided that such rates may decrease by 0.25%
after December 31, 2007 if the Company achieves certain
corporate credit ratings. The Term Loan will mature in May 2012,
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 101.0% 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, with the balance payable 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
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.
In March 2005, the Company issued $290.0 million in
aggregate principal amount of 10.5% senior secured notes
(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 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 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 $60.0 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 1.3% and 3.9% at
March 31, 2008 and 2007, 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.
F-15
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At March 31, 2008, 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, 2008 and
2007 was $392.2 million and $371.2 million,
respectively. As discussed in Note 2, in February 2008, the
Company entered into an interest rate swap agreement to fix the
variable interest component of $200.0 million of its
floating rate long-term obligations at a rate of 3.45% per annum
through February 27, 2011. None of the Companys
variable rate debt was hedged at March 31, 2007.
Annual principal payments required under long-term debt
obligations at March 31, 2008 are as follows:
|
|
|
|
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
3,060
|
|
2010
|
|
|
2,984
|
|
2011
|
|
|
2,984
|
|
2012
|
|
|
2,984
|
|
2013
|
|
|
584,383
|
|
2014 and beyond
|
|
|
60,000
|
|
|
|
|
|
|
Total
|
|
$
|
656,395
|
|
|
|
|
|
|
See note 11 for principal payments required under capital
lease obligations, which are not shown above
|
|
(8)
|
EMPLOYEE
BENEFIT PLANS AND POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
BENEFITS
|
In the U.S., the Company has a noncontributory defined benefit
pension plan that covers substantially all hourly and salaried
employees. During fiscal 2007, the Company froze 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
$11.3 million, $6.8 million, and $7.0 million,
for fiscal 2008, 2007 and 2006, respectively.
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.
F-16
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following tables set forth the plans funded status and
the amounts recognized in the Companys Consolidated
Financial Statements at March 31, 2008 and 2007:
Pension
Benefits:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
$
|
665,058
|
|
|
$
|
638,230
|
|
Service cost
|
|
|
5,401
|
|
|
|
9,164
|
|
Interest cost
|
|
|
36,310
|
|
|
|
33,949
|
|
Actuarial gain
|
|
|
(59,979
|
)
|
|
|
(19,758
|
)
|
Plan participants contributions
|
|
|
1,272
|
|
|
|
1,170
|
|
Benefits paid
|
|
|
(33,648
|
)
|
|
|
(33,398
|
)
|
Currency translation
|
|
|
32,059
|
|
|
|
34,939
|
|
Settlements and other
|
|
|
(3,300
|
)
|
|
|
762
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
643,173
|
|
|
$
|
665,058
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of period
|
|
$
|
408,882
|
|
|
$
|
326,480
|
|
Actual return on plan assets
|
|
|
15,933
|
|
|
|
30,924
|
|
Employer contributions
|
|
|
56,650
|
|
|
|
63,553
|
|
Plan participants contributions
|
|
|
1,272
|
|
|
|
1,170
|
|
Benefits paid
|
|
|
(33,648
|
)
|
|
|
(33,398
|
)
|
Currency translation
|
|
|
4,888
|
|
|
|
18,402
|
|
Settlements and other
|
|
|
(3,464
|
)
|
|
|
1,751
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
$
|
450,513
|
|
|
$
|
408,882
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded status:
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
643,173
|
|
|
$
|
665,058
|
|
Fair value of plan assets at end of period
|
|
|
450,513
|
|
|
|
408,882
|
|
Funded status
|
|
|
(192,660
|
)
|
|
|
(256,176
|
)
|
Contributions after measurement date
|
|
|
7,647
|
|
|
|
8,273
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of period
|
|
$
|
(185,013
|
)
|
|
$
|
(247,903
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in Statement of Financial Position:
|
|
|
|
|
|
|
|
|
Noncurrent other assets
|
|
$
|
17,390
|
|
|
$
|
880
|
|
Accrued expenses
|
|
|
(10,486
|
)
|
|
|
(9,468
|
)
|
Noncurrent retirement obligations
|
|
|
(191,917
|
)
|
|
|
(239,315
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of period
|
|
$
|
(185,013
|
)
|
|
$
|
(247,903
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive
(income) loss:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
289
|
|
|
$
|
264
|
|
Net actuarial (gain)
|
|
|
(62,107
|
)
|
|
|
(16,415
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized in accumulated other comprehensive
(income) loss:
|
|
$
|
(61,818
|
)
|
|
$
|
(16,151
|
)
|
|
|
|
|
|
|
|
|
|
F-17
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other
Post-Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
$
|
27,051
|
|
|
$
|
30,149
|
|
Service cost
|
|
|
203
|
|
|
|
167
|
|
Interest cost
|
|
|
1,420
|
|
|
|
1,487
|
|
Actuarial (gain) loss
|
|
|
20
|
|
|
|
(1,817
|
)
|
Plan participants contributions
|
|
|
141
|
|
|
|
166
|
|
Benefits paid
|
|
|
(2,384
|
)
|
|
|
(3,247
|
)
|
Plan amendments
|
|
|
(4,213
|
)
|
|
|
|
|
Currency translation
|
|
|
798
|
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
23,036
|
|
|
$
|
27,051
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of period
|
|
$
|
|
|
|
$
|
|
|
Employer contributions
|
|
|
2,243
|
|
|
|
3,081
|
|
Plan participants contributions
|
|
|
141
|
|
|
|
166
|
|
Benefits paid
|
|
|
(2,384
|
)
|
|
|
(3,247
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded status:
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
23,036
|
|
|
$
|
27,051
|
|
Fair value of plan assets at end of period
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(23,036
|
)
|
|
|
(27,051
|
)
|
Contributions after measurement date
|
|
|
320
|
|
|
|
547
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of period
|
|
$
|
(22,716
|
)
|
|
$
|
(26,504
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in statement of financial position:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
(2,195
|
)
|
|
$
|
(2,529
|
)
|
Noncurrent retirement obligations
|
|
|
(20,521
|
)
|
|
|
(23,975
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of period
|
|
$
|
(22,716
|
)
|
|
$
|
(26,504
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive
(income) loss:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
(4,213
|
)
|
|
$
|
|
|
Net actuarial loss
|
|
|
3,760
|
|
|
|
3,649
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized in accumulated other comprehensive
(income) loss:
|
|
$
|
(453
|
)
|
|
$
|
3,649
|
|
|
|
|
|
|
|
|
|
|
F-18
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Post-Retirement Benefits
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
Weighted-average assumptions as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.4
|
%
|
|
|
5.5
|
%
|
|
|
6.2
|
%
|
|
|
5.7
|
%
|
Rate of compensation increase
|
|
|
3.8
|
%
|
|
|
3.7
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Post-Retirement Benefits
|
|
|
|
FY 2009 Expense
|
|
|
FY 2008 Expense
|
|
|
FY 2009 Expense
|
|
|
FY 2008 Expense
|
|
|
Expense Assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.4
|
%
|
|
|
5.5
|
%
|
|
|
6.2
|
%
|
|
|
5.7
|
%
|
Expected return on plan assets
|
|
|
6.9
|
%
|
|
|
6.9
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Rate of compensation increase
|
|
|
3.8
|
%
|
|
|
3.7
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
For fiscal year 2008 pension benefit 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 9% and 10% increase in the per capita cost of
covered health care benefits was assumed for 2008 and 2007,
respectively. The rate was assumed to decrease gradually to 5.1%
over eight and seven years for 2008 and 2007, respectively, and
remain at that level thereafter.
The following tables set forth the plans expenses
recognized in the Companys Consolidated Financial
Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
5,401
|
|
|
$
|
9,164
|
|
|
$
|
10,638
|
|
Interest cost
|
|
|
36,310
|
|
|
|
33,949
|
|
|
|
32,552
|
|
Expected return on plan assets
|
|
|
(29,525
|
)
|
|
|
(24,923
|
)
|
|
|
(21,179
|
)
|
Amortization of: Prior service cost
|
|
|
21
|
|
|
|
19
|
|
|
|
|
|
Actuarial
(gain) loss
|
|
|
(1,515
|
)
|
|
|
(1,210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost(a)
|
|
$
|
10,692
|
|
|
$
|
16,999
|
|
|
$
|
22,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Excludes the impact of settlement net losses of
$0.6 million, in fiscal 2006 and curtailment net (gains) of
($0.8) million in fiscal 2006. |
|
(b) |
|
$2.8 million of income will be amortized from accumulated
other comprehensive (income) loss into net periodic benefit cost
in fiscal 2009 relating to the Companys pension plans. |
F-19
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement Benefits
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
203
|
|
|
$
|
167
|
|
|
$
|
101
|
|
Interest cost
|
|
|
1,420
|
|
|
|
1,487
|
|
|
|
1,573
|
|
Amortization of actuarial loss
|
|
|
19
|
|
|
|
84
|
|
|
|
208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
1,642
|
|
|
$
|
1,738
|
|
|
$
|
1,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
$0.2 million of expense will be amortized from accumulated
other comprehensive (income) loss into net periodic benefit cost
in fiscal 2009 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 $483.2 million, $476.7 million and
$273.6 million, respectively, as of March 31, 2008 and
$492.6 million, $484.2 million and
$241.1 million, respectively, as of March 31, 2007.
The accumulated benefit obligation for the Companys
pension plans was $609.3 million as of March 31, 2008.
Expected future benefit payments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-
|
|
|
|
|
|
|
Retirement
|
|
|
|
|
|
|
Gross Expected
|
|
Fiscal Year
|
|
Pension Benefits
|
|
|
Benefit Payments
|
|
|
|
(In thousands)
|
|
|
2009
|
|
|
39,374
|
|
|
|
2,195
|
|
2010
|
|
|
37,455
|
|
|
|
2,167
|
|
2011
|
|
|
37,714
|
|
|
|
2,202
|
|
2012
|
|
|
38,778
|
|
|
|
2,078
|
|
2013
|
|
|
40,276
|
|
|
|
2,024
|
|
2014 to 2018
|
|
|
222,187
|
|
|
|
9,655
|
|
The asset allocation for the Companys pension plans at
March 31, 2008, and the long-term target allocation, by
asset category, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
|
|
|
|
|
|
Allocation
|
|
|
Percentage of Plan Assets at Year End
|
|
Asset Category
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Equity securities
|
|
|
62
|
%
|
|
|
61
|
%
|
|
|
65
|
%
|
Fixed income securities
|
|
|
36
|
%
|
|
|
36
|
%
|
|
|
31
|
%
|
Real estate and other
|
|
|
1
|
%
|
|
|
1
|
%
|
|
|
1
|
%
|
Cash
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
F-20
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The estimated fiscal 2009 pension plan contributions are
$41.8 million and other post-retirement contributions are
$2.2 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 granting a temporary waiver of its minimum
funding requirements for its U.S. plans for calendar years
2003 and 2004, amounting to approximately $50.0 million.
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.
The Company expects its cumulative minimum future cash
contributions to its U.S. pension plans will total
approximately $60.0 million to $137.0 million from
fiscal 2009 to fiscal 2013, including $21.4 million in
fiscal 2009.
The Company expects that cumulative contributions to its non
U.S. pension plans will total approximately
$104.4 million from fiscal 2009 to fiscal 2013, including
$20.4 million in fiscal 2009. In addition, the Company
expects that cumulative contributions to its other post
retirement benefit plans will total approximately
$10.7 million from fiscal 2009 to fiscal 2013, including
$2.2 million in fiscal 2009.
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
|
|
$
|
192
|
|
|
$
|
157
|
|
Effect on the postretirement benefit obligation
|
|
$
|
2,273
|
|
|
$
|
1,920
|
|
|
|
(9)
|
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 permits the
granting of stock options, restricted stock, restricted stock
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 stock or
restricted stock 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. Restricted stock and
restricted stock units 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 receives stock options as well as restricted
stock and restricted stock units. These awards are generally
100% vested one year after the grant date, but restricted
F-21
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
stock units are generally not deliverable until the director has
completed his or her service on the board. 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.
Total compensation cost related to stock compensation plans was
$5.5 million and $2.5 million for fiscal 2008 and
2007, respectively. As of March 31, 2008, total
compensation cost related to non-vested awards not yet
recognized in the Companys Consolidated Financial
Statements was $10.6 million, which is expected to be
recognized over a weighted average period of 1.9 years.
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
|
|
|
March 31, 2008
|
|
March 31, 2007
|
|
March 31, 2006
|
|
Weighted average fair value
|
|
$3.99
|
|
$3.66
|
|
$2.42
|
Expected volatility
|
|
53% to 57%
|
|
64% to 77%
|
|
75%
|
Risk-free interest rates
|
|
4.4% to 5%
|
|
4.5% to 4.9%
|
|
4.1% to 4.7%
|
Expected term of options
|
|
5.5 to 6.5 years
|
|
5.5 to 6.5 years
|
|
10 years
|
The following is a summary of stock option activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Number of Stock
|
|
|
Weighted Average
|
|
|
Remaining
|
|
|
|
Options
|
|
|
Exercise Price
|
|
|
Contractual Life
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Shares under option:
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
77
|
|
|
$
|
7.39
|
|
|
|
|
|
Forfeited
|
|
|
(110
|
)
|
|
$
|
6.96
|
|
|
|
|
|
Exercised
|
|
|
(38
|
)
|
|
$
|
9.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2008
|
|
|
3,082
|
|
|
$
|
6.28
|
|
|
|
8.2 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and Exercisable at:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
1,521
|
|
|
$
|
7.10
|
|
|
|
7.9 years
|
|
March 31, 2007
|
|
|
482
|
|
|
$
|
9.53
|
|
|
|
8.2 years
|
|
March 31, 2006
|
|
|
114
|
|
|
$
|
15.67
|
|
|
|
8.6 years
|
|
F-22
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
earnings (loss) per share basis as provided by
SFAS No. 123, Accounting for Stock-Based
Compensation. The Company did not recognize
compensation expenses 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 loss and loss per share would
have been the pro forma amounts indicated below:
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2006
|
|
|
|
(In thousands, except
|
|
|
|
per share data)
|
|
|
Net loss as reported
|
|
$
|
(172,732
|
)
|
Less: total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax
effects
|
|
|
(819
|
)
|
|
|
|
|
|
Pro forma net loss
|
|
$
|
(173,551
|
)
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
|
|
|
As reported
|
|
$
|
(6.72
|
)
|
Pro forma
|
|
$
|
(6.75
|
)
|
Restricted
Stock Awards
During the fiscal years ended March 31, 2008, 2007, and
2006, 0.1 million, 1.1 million, and 0.5 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, 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Weighted-Average
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
|
(Thousands)
|
|
|
|
|
|
Outstanding (non-vested) at March 31, 2007
|
|
|
1,385
|
|
|
$
|
5.80
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
94
|
|
|
$
|
7.77
|
|
Vested
|
|
|
(369
|
)
|
|
$
|
5.36
|
|
Forfeited
|
|
|
(64
|
)
|
|
$
|
5.42
|
|
|
|
|
|
|
|
|
|
|
Outstanding (non-vested) at March 31, 2008
|
|
|
1,046
|
|
|
$
|
6.15
|
|
|
|
|
|
|
|
|
|
|
F-23
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 income/(loss) before income taxes and minority
interest, and the provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Income/(loss) before income taxes and minority interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
58,570
|
|
|
$
|
(30,210
|
)
|
|
$
|
(90,639
|
)
|
Foreign
|
|
|
(14,081
|
)
|
|
|
(69,004
|
)
|
|
|
(65,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
44,489
|
|
|
$
|
(99,214
|
)
|
|
$
|
(156,241
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
$
|
1,093
|
|
|
$
|
191
|
|
|
$
|
637
|
|
Foreign
|
|
|
15,228
|
|
|
|
11,942
|
|
|
|
15,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,321
|
|
|
|
12,133
|
|
|
|
15,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
|
(24,967
|
)
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
19,532
|
|
|
|
(6,350
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,435
|
)
|
|
|
(6,350
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision
|
|
$
|
10,886
|
|
|
$
|
5,783
|
|
|
$
|
15,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major differences between the federal statutory rate and the
effective tax rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Federal statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Loss on liquidation
|
|
|
|
|
|
|
|
|
|
|
(2.8
|
)
|
I/C debt forgiveness
|
|
|
|
|
|
|
|
|
|
|
20.0
|
|
Thin cap disallowance
|
|
|
0.5
|
|
|
|
(11.3
|
)
|
|
|
(2.5
|
)
|
Dividend income
|
|
|
1.9
|
|
|
|
(0.1
|
)
|
|
|
|
|
Change in tax rate
|
|
|
31.4
|
|
|
|
1.0
|
|
|
|
|
|
Increase in uncertain tax positions
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
Local tax provision
|
|
|
12.0
|
|
|
|
0.1
|
|
|
|
(0.7
|
)
|
Increase (decrease) in valuation allowances
|
|
|
(19.2
|
)
|
|
|
(46.9
|
)
|
|
|
(61.4
|
)
|
Revaluation of warrants
|
|
|
2.3
|
|
|
|
(1.1
|
)
|
|
|
2.0
|
|
Rate differences on foreign subsidiaries
|
|
|
(46.4
|
)
|
|
|
17.2
|
|
|
|
3.7
|
|
Refund of previously paid taxes
|
|
|
|
|
|
|
3.9
|
|
|
|
|
|
Other, net
|
|
|
4.5
|
|
|
|
(3.6
|
)
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
24.5
|
%
|
|
|
(5.8
|
)%
|
|
|
(10.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
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, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Operating loss and tax credit carry-forwards
|
|
$
|
273,726
|
|
|
$
|
321,939
|
|
Compensation reserves
|
|
|
39,288
|
|
|
|
64,632
|
|
Environmental reserves
|
|
|
12,504
|
|
|
|
12,856
|
|
Warranty
|
|
|
14,282
|
|
|
|
13,207
|
|
Purchase commitments
|
|
|
2,494
|
|
|
|
4,781
|
|
Other
|
|
|
22,001
|
|
|
|
42,576
|
|
Valuation allowance
|
|
|
(184,640
|
)
|
|
|
(321,001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
179,655
|
|
|
|
138,990
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(61,496
|
)
|
|
|
(37,625
|
)
|
Foreign Exchange
|
|
|
(21,635
|
)
|
|
|
(3,553
|
)
|
Intangible assets
|
|
|
(52,840
|
)
|
|
|
(53,008
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(135,971
|
)
|
|
|
(94,186
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
43,684
|
|
|
$
|
44,804
|
|
|
|
|
|
|
|
|
|
|
The net deferred income tax asset is classified in the
consolidated balance sheet as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Current asset
|
|
$
|
36,853
|
|
|
$
|
19,030
|
|
Noncurrent asset
|
|
|
51,238
|
|
|
|
67,006
|
|
Noncurrent liability
|
|
|
(44,407
|
)
|
|
|
(41,232
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43,684
|
|
|
$
|
44,804
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008 the Company has net operating loss
carry-forwards (NOLs) for U.S. and state income
tax purposes of $128.6 million. These loss carry-forwards
will expire in years 2009 through 2027. The Company determined
that a Sec. 382 ownership change occurred during the fiscal year
ending March 31, 2007 related to the September 2007 rights
offering (see Note 16). 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
approximate $5.0 million over the next nineteen years.
At March 31, 2008, certain of the Companys foreign
subsidiaries have NOLs for income tax purposes of approximately
$952.5 million, of which approximately $176.5 million
expire in fiscal years 2009 through 2022. The remaining NOLs are
available for carry-forward indefinitely.
During the quarter ended March 31, 2008, the Company
determined that realization of its U.S. federal and state
loss carryforwards and deductible temporary differences had met
the more likely than not standard established in FASB Statement
No. 109 Accounting for Income Taxes.
Therefore, a previously recognized valuation allowance of
$25.0 million was released, reducing the Companys tax
expense.
F-25
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Valuation allowances have been recognized in certain foreign tax
jurisdictions to reduce the deferred tax assets for NOLs and
temporary differences for which it is more likely than not that
the related tax benefits will not be realized. In other
jurisdictions (primarily the U.S., Germany and Australia), the
Companys net deferred tax assets include NOLs 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, 2008, 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, 2008 and
2007, the Company had approximately $120.5 million and
$93.0 million, respectively, 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.
The Company or one of its subsidiaries files income tax returns
in the U.S. federal jurisdiction and various state and
foreign jurisdictions. The Company is no longer subject to
U.S. federal income tax examinations by tax authorities for
years ended before March 31, 2005.
With respect to state and local jurisdictions and countries
outside of the United States, with limited exceptions, the
Company and its subsidiaries are no longer subject to income tax
audits for years ended before March 31, 2002. Although the
outcome of tax audits is always uncertain, the Company believes
that adequate amounts of tax, interest and penalties have been
provided for any adjustments that could result from these years.
The Company adopted the provisions of FASB Interpretation
No. 48, Accounting for Uncertainty in Income
Taxes An Interpretation of SFAS 109,
(FIN 48) effective April 1, 2007.
FIN 48 clarifies the accounting for income taxes by
prescribing a minimum recognition threshold a tax position is
required to meet before being recognized in the financial
statements. FIN 48 also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition. As a result of
the implementation of FIN 48, the Company recognized a
$4.2 million increase in the liability for unrecognized tax
benefits and the related liability for interest and penalties.
This amount was accounted for entirely as an increase in the
April 1, 2007 balance of accumulated deficit.
The beginning and ending amount of unrecognized tax benefit
reconciles as follows:
|
|
|
|
|
Balance, April 1, 2007
|
|
$
|
63,150
|
|
Increases for tax positions taken during current period
|
|
|
10,659
|
|
Increases for currency fluctuation on tax positions
|
|
|
9,527
|
|
|
|
|
|
|
Balance March 31, 2008
|
|
$
|
83,336
|
|
|
|
|
|
|
The amount, if recognized, that would affect the Companys
effective tax rate at April 1, 2007, and March 31,
2008 is $22.7 million and $26.6 million, respectively.
Included in the balance of unrecognized tax benefits at
April 1, 2007 and March 31, 2008 are $3.0 million
and $7.3 million of tax benefits, respectively, that if
recognized, would result in a decrease to long term intangibles
recorded in fresh start accounting.
The Company classifies interest and penalties on uncertain tax
benefits as income tax expense. At April 1, 2007 and
March 31, 2008, before any tax benefits, the Company had
$3.1 million and $3.7 million , respectively, of
accrued interest and penalties on unrecognized tax benefits.
During the next twelve months, the Company does not expect the
resolution of any tax audits which could potentially reduce
unrecognized tax benefits by a material amount. However,
expiration of the statute of
F-26
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
limitations for a tax year in which the Company has recorded
uncertain tax benefits will occur in the next twelve months. The
removal of these uncertain tax benefits would affect the
Companys effective tax rate by $4.5 million.
|
|
(11)
|
COMMITMENTS
AND CONTINGENCIES
|
Claims
Reconciliation
On April 15, 2002, the Petition Date, Exide
Technologies, together with certain of its subsidiaries (the
Debtors), filed voluntary petitions for
reorganization under Chapter 11 of the federal bankruptcy
laws (Bankruptcy Code or
Chapter 11) in the United States Bankruptcy
Court for the District of Delaware (Bankruptcy
Court). The Debtors continued to operate their businesses
and manage their properties as
debtors-in-possession
throughout the course of the bankruptcy case. The Debtors, along
with the Official Committee of Unsecured Creditors, filed a
Joint Plan of Reorganization (the Plan) with the
Bankruptcy Court on February 27, 2004 and, on
April 21, 2004, the Bankruptcy Court confirmed the Plan.
Under the Plan, holders of general unsecured claims will receive
collectively 2.5 million shares of new common stock and
warrants to purchase up to approximately 6.7 million shares
of new common stock at $29.84 per share. Approximately 13.4% of
such new common stock and warrants were initially reserved for
distribution for disputed claims. The Official Committee of
Unsecured Creditors, in consultation with the Company,
established such reserve to provide for a pro rata distribution
of new common stock and warrants to holders of disputed claims
as they become allowed. As claims are evaluated and processed,
the Company will object to some claims or portions thereof, and
upward adjustments (to the extent new common stock and warrants
not previously distributed remain) or downward adjustments to
the reserve will be made pending or following adjudication of
such objections. Predictions regarding the allowance and
classification of claims are difficult to make. With respect to
environmental claims in particular, it is difficult to assess
the 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 proportional share of these remediation
costs, there can be no assurance that the Company will prevail
on these claims. In addition, the scope of remedial costs, or
other environmental injuries, is highly variable and estimating
these costs involves complex legal, scientific and technical
judgments. Many of the claimants who have filed disputed claims,
particularly environmental and personal injury claims, produce
little or no proof of fault on which the Company can assess its
potential liability. Such claimants often either fail to specify
a determinate amount of damages or provide little or no basis
for the alleged damages. In some cases, the Company is still
seeking additional information needed for a claims assessment
and information that is unknown to the Company at the current
time may significantly affect the 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 new common stock and warrants allocated to holders of
general unsecured claims on the effective date, including the
reserve established for disputed claims, would be fully
distributed so that the recovery rates for all allowed unsecured
claims would comply with the Plan without the need for any
redistribution or supplemental issuance of securities. If the
amount of general unsecured claims that is eventually allowed
exceeds the amount of claims anticipated in the setting of the
reserve, additional new 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 new 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.
F-27
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On April 20, 2008, the Company made its sixteenth
distribution of new common stock and warrants for disputed
general unsecured claims. Based on information available as of
June 3, 2008, approximately 11.2% of new common stock and
warrants reserved for this purpose has been distributed. The
Company also continues to resolve certain non-objected claims.
Private
Party Lawsuits and other Legal Proceedings
In 2003, the Company served notices to reject certain executory
contracts with EnerSys, including a 1991 Trademark and Trade
Name License Agreement (the Trademark License),
pursuant to which the Company had licensed to EnerSys use of the
Exide trademark on certain industrial battery
products in the United States and 80 foreign countries.
EnerSys objected to the rejection of certain of the executory
contracts, including the Trademark License. In 2006, the Court
granted the Companys request to reject the contracts , and
it ordered a two-year transition period. EnerSys appealed those
rulings. Because the Bankruptcy Court authorized rejection of
the Trademark License, as with other executory contracts at
issue, EnerSys will have a pre-petition general unsecured claim
relating to the alleged damages arising therefrom. The Company
reserves the ability to consider payment in cash of some portion
of any settlement or ultimate award on EnerSys claim of
alleged rejection damages.
In July 2001, Pacific Dunlop Holdings (US), Inc.
(PDH) and several of its foreign affiliates under
the various agreements through which Exide and its affiliates
acquired GNB, filed a complaint in the Circuit Court for Cook
County, Illinois alleging breach of contract, unjust enrichment
and conversion against Exide and three of its foreign
affiliates. The plaintiffs maintain they are entitled to
approximately $17.0 million in cash assets acquired by the
defendants through their acquisition of GNB. In December 2001,
the Court denied the defendants motion to dismiss the
complaint, without prejudice. The defendants filed an answer and
counterclaim. In, 2002, the Court authorized discovery to
proceed as to all parties except the Company. In August 2002,
the case was 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
the 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
Company was obligated to replace. The Companys answer
contested the amounts claimed by PDH and the Company filed a
counterclaim. Although this action has been consolidated with
the Cook County suit concerning 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
F-28
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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, but has been adjudged liable to indemnify the agency for
approximately $0.3 million in calendar 2007. 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 the Companys motions to dismiss.
Discovery in this litigation is proceeding and is expected to
continue throughout the remainder of 2008. No trial date has
been set in this matter.
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.
Environmental
Matters
As a result of its multinational manufacturing, distribution and
recycling operations, the Company is subject to numerous
federal, state, and local environmental, occupational health,
and safety laws and regulations, as well as similar laws and
regulations in other countries in which the Company operates
(collectively, EH&S laws).
The Company is exposed to liabilities under such EH&S laws
arising from its past handling, release, storage and disposal of
materials now designated as hazardous substances and hazardous
wastes. The Company previously has been advised by the
U.S. Environmental Protection Agency (EPA) or
state agencies that it is a Potentially Responsible
Party under the Comprehensive Environmental Response,
Compensation and Liability Act or similar state laws at 100
federally defined Superfund or state equivalent sites. At 45 of
these sites, the Company has paid its share of liability. While
the Company believes it is probable its liability for most of
the remaining sites will be treated as disputed unsecured claims
under the Plan, there can be no assurance these matters will be
discharged. If the Companys liability is not discharged at
one or more sites, the government may be able to file claims for
additional response costs in the future, or to order the Company
to perform remedial work at such sites. In addition, the EPA, in
the course of negotiating this pre-petition claim, had notified
the Company of the possibility of additional
clean-up
costs associated with Hamburg, Pennsylvania properties of
approximately $35.0 million, as described in more detail
below. The EPA has provided summaries of past costs and an
estimate of future costs that approximate the amounts in its
notification; however, the Company disputes certain elements of
the claimed past costs, has not received sufficient information
supporting the estimated future costs, and is in negotiations
with the EPA. To the extent
F-29
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
$14.0 million. On October 2, 2006, the United States
Supreme Court denied review of the appellate decision, leaving
Exide subject to a stipulated judgment for approximately
$6.5 million, based on the ruling that Exide has successor
liability for these EPA cost recovery claims. The judgment will
be a general unsecured claim payable in common stock and
warrants. Additionally, the EPA has asserted a general unsecured
claim for costs related to other Hamburg, Pennsylvania sites.
The current amount of the governments claims for the
aforementioned sites (including the stipulated judgment
discussed above) is approximately $20.0 million. A reserve
of new common stock and warrants for the estimated value of all
claims, including the aforementioned claims, was established as
part of the Plan.
In October 2004, the EPA, in the course of negotiating a
comprehensive settlement of all its environmental claims against
the Company, had notified the Company of the possibility of
additional
clean-up
costs associated with other Hamburg, Pennsylvania properties of
approximately $35.0 million. The EPA has provided cost
summaries for past costs and an estimate of future costs that
approximate the amounts in its notification; however, the
Company disputes certain elements of the claimed past costs, has
not received sufficient information supporting the estimated
future costs, and is in negotiations with the EPA.
As unsecured claims are allowed in the Bankruptcy Court, the
Company is required to distribute common stock and warrants to
the holders of such claims. To the extent the government is able
to prove the Company is responsible for the alleged
contamination at the other Hamburg, Pennsylvania properties and
substantiate its estimated $35.0 million of additional
clean-up
costs discussed above, these claims would ultimately result in
an inadequate reserve of new common stock and warrants to the
extent not offset by the reconciliation of all other claims for
lower amounts than the aggregate reserve. The Company would
still retain the right to perform and pay for such cleanup
activities, which would preserve the existing reserved new
common stock and warrants. 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
F-30
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 discussions 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 the extent of
additional cleanup which will occur, or the amount of any
cleanup 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, 2008 and
March 31, 2007, the amount of such reserves on the
Companys Consolidated Balance Sheets was approximately
$39.1 million and $34.7 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 at $6.0 million to
$9.0 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 $2.0 million.
Guarantees
At March 31, 2008, the Company had outstanding letters of
credit with a face value of $46.3 million and surety bonds
with a face value of $5.6 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,
2008, pursuant to the terms of the agreement, totaled
approximately $4.1 million.
F-31
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Certain of the Companys European subsidiaries have issued
bank guarantees as collateral or financial assurance in
connection with environmental obligations, income tax claims and
customer contract requirements. At March 31, 2008, bank
guarantees with a face value of $17.4 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 sales returns
and allowances liability follows (in thousands):
|
|
|
|
|
Balance at March 31, 2007
|
|
$
|
48,526
|
|
Accrual for sales returns and allowances
|
|
|
63,464
|
|
Settlements made (in cash or credit) and currency translation
|
|
|
(54,233
|
)
|
|
|
|
|
|
Balance at March 31, 2008
|
|
$
|
57,757
|
|
|
|
|
|
|
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, 2008, are:
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Operating
|
|
|
Capital
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
31,621
|
|
|
$
|
8,438
|
|
2010
|
|
|
21,325
|
|
|
|
9,906
|
|
2011
|
|
|
14,099
|
|
|
|
5,913
|
|
2012
|
|
|
9,973
|
|
|
|
5,769
|
|
2013
|
|
|
6,681
|
|
|
|
3,571
|
|
Thereafter
|
|
|
8,888
|
|
|
|
4,141
|
|
|
|
|
|
|
|
|
|
|
Total minimum payments
|
|
$
|
92,587
|
|
|
|
37,738
|
|
|
|
|
|
|
|
|
|
|
Less Interest on capital leases
|
|
|
|
|
|
|
6,230
|
|
|
|
|
|
|
|
|
|
|
Total principal payable on capital leases (included in Long-term
debt)
|
|
|
|
|
|
$
|
31,508
|
|
|
|
|
|
|
|
|
|
|
Rent expense amounted to $55.9 million, $55.6 million,
and $58.0 million, for the fiscal years ended
March 31, 2008, 2007, and 2006, respectively.
During fiscal 2008, 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-32
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During the year ended March 31, 2008, the Company
recognized restructuring charges of $10.5 million,
representing $4.5 million for severance and
$6.0 million for related closure costs. These charges
resulted from actions completed during fiscal 2008, which
related to continued consolidation efforts in Industrial Energy
Europe and ROW segment, corporate, and Transportation Europe and
ROW segment. Approximately 80 positions have been eliminated in
connection with the fiscal 2008 restructuring activities. The
following is a summary of restructuring reserve movements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closure
|
|
|
|
|
|
|
Severance
|
|
|
Costs
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
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
|
|
Charges
|
|
|
4,530
|
|
|
|
5,977
|
|
|
|
10,507
|
|
Payments and Currency Translation
|
|
|
(4,602
|
)
|
|
|
(6,498
|
)
|
|
|
(11,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2008
|
|
$
|
1,788
|
|
|
$
|
3,282
|
|
|
$
|
5,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2008
|
|
Costs
|
|
|
Costs
|
|
|
Totals
|
|
|
|
(In thousands)
|
|
|
Shreveport, LA (Transportation Americas)
|
|
$
|
20
|
|
|
$
|
1,515
|
|
|
$
|
1,535
|
|
Transportation Americas
|
|
|
|
|
|
|
651
|
|
|
|
651
|
|
Industrial Americas
|
|
|
|
|
|
|
1,116
|
|
|
|
1,116
|
|
Nanterre, France
|
|
|
316
|
|
|
|
1,230
|
|
|
|
1,546
|
|
Casalnuovo, Italy
|
|
|
|
|
|
|
850
|
|
|
|
850
|
|
Azuqueca, Alcobendas, & Manzanares, Spain
|
|
|
1,071
|
|
|
|
127
|
|
|
|
1,198
|
|
Headcount Reductions (Transportation Europe and ROW)
|
|
|
1,971
|
|
|
|
374
|
|
|
|
2,345
|
|
European Headcount Reductions (including Corporate)
|
|
|
184
|
|
|
|
130
|
|
|
|
314
|
|
Headcount Reductions (Industrial Energy Europe and ROW)
|
|
|
968
|
|
|
|
(16
|
)
|
|
|
952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,530
|
|
|
$
|
5,977
|
|
|
$
|
10,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13)
|
EARNINGS
(LOSS) PER SHARE
|
Basic and diluted earnings (loss) per share for the fiscal years
ended March 31, 2008, 2007, and 2006 are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Net income (loss)
|
|
$
|
32,059
|
|
|
$
|
(105,879
|
)
|
|
$
|
(172,732
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding
|
|
|
68,306
|
|
|
|
44,604
|
|
|
|
25,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options
|
|
|
678
|
|
|
|
|
|
|
|
|
|
Employee restricted stock awards (non-vested)
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
69,284
|
|
|
|
44,604
|
|
|
|
25,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
$
|
0.47
|
|
|
$
|
(2.37
|
)
|
|
$
|
(6.72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
$
|
0.46
|
|
|
$
|
(2.37
|
)
|
|
$
|
(6.72
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
For the fiscal year ended March 31, 2008, 451,227 stock
options and all 6,674,157 outstanding warrants were excluded
from the diluted earnings per share calculation because their
exercise prices were greater than the market price of the
related common stock for the period, and their inclusion would
be anti-dilutive. The dilutive impact of the remaining options
was included in the calculation of diluted earnings per share.
In addition, 3,641,465 shares associated with the assumed
conversion of convertible debt were excluded because their
effect would be antidilutive.
Due to net losses for the fiscal years ended March 31, 2007
and 2006, certain potentially dilutive shares associated with
convertible debt, employee stock options, restricted stock
(unvested), restricted stock unit awards, and warrants have been
excluded from the diluted loss per share calculation because
their effect would be anti-dilutive. As of March 31, 2007
and 2006, the total amount of outstanding securities which were
excluded from the net loss per share calculation consisted of
3,584,226 and 3,454,231 shares associated with convertible
debt (assuming conversion), 3,153,361 and
1,320,063 employee stock options, 1,268,100 and 424,006
restricted stock awards, and warrants to purchase 6,621,161 and
6,250,000 shares of common stock, respectively.
In connection with the closing of the $91.7 million rights
offering in September 2007, the Company issued a total of
14 million shares of its common stock. At the expiration of
the rights offering, the fair value of the Companys common
stock was greater than the rights offerings $6.55 per
share subscription price. Accordingly, basic and diluted loss
per share have been restated for the fiscal year ended
March 31, 2007, and 2006, to reflect stock dividends of
246,506 and 142,134 shares, respectively, of the
Companys common stock.
(14) INTEREST
EXPENSE, NET
Interest income of $1.8 million, $1.6 million, and
$1.0 million, is included in interest expense, net for the
fiscal years ended March 31, 2008, 2007 and 2006,
respectively.
|
|
(15)
|
OTHER
(INCOME) EXPENSE, NET
|
Other (income) expense, net consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Net (gain) loss on asset sales
|
|
$
|
(238
|
)
|
|
$
|
18,622
|
|
|
$
|
8,044
|
|
Equity income
|
|
|
(481
|
)
|
|
|
(1,256
|
)
|
|
|
(1,881
|
)
|
Currency (gain) loss
|
|
|
(40,782
|
)
|
|
|
(11,635
|
)
|
|
|
11,280
|
|
Loss on revaluation of foreign currency forward contract
|
|
|
|
|
|
|
|
|
|
|
(1,081
|
)
|
Loss (gain) on revaluation of warrants(a)
|
|
|
2,975
|
|
|
|
3,234
|
|
|
|
(9,125
|
)
|
Other
|
|
|
(543
|
)
|
|
|
671
|
|
|
|
(3,553
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(39,069
|
)
|
|
$
|
9,636
|
|
|
$
|
3,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The warrants entitle the holders to purchase up to approximately
6.7 million shares of new common stock at an exercise price
of $29.84 per share. The warrants are exercisable through
May 5, 2011. In accordance with Emerging Issues Task Force
abstract (EITF)
00-19 and
Statement of Financial Accounting Standards 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity, the
warrants have been marked-to-market based upon quoted market
prices. Future results of operations may be subject to
volatility from changes in the market value of such warrants. |
F-35
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On September 28, 2007, the Company completed a
$91.7 million rights offering that it had commenced on
August 28, 2007, allowing the Companys stockholders
to purchase additional shares of common stock. In connection
with the rights offering, the Company issued 14 million
shares of its common stock. Each stockholder received one
subscription right for each share of common stock it owned on
the record date of August 30, 2007. Each subscription right
included a basic subscription privilege entitling the
stockholder to purchase 0.22851 shares of common stock at
the cash price of $6.55 per full share, subject to adjustment to
eliminate fractional shares. Stockholders that fully exercised
their basic subscription privileges were also entitled to
exercise an over-subscription privilege to purchase one-half of
their pro rata share of the unsubscribed shares of the
Companys common stock at the same subscription price of
$6.55 per full share, subject to adjustment to eliminate
fractional shares.
|
|
(17)
|
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 amounts of these line of credit arrangements are a
reasonable estimate of their fair value.
|
|
|
|
Derivative instruments the carrying amount of the
Companys interest rate swap agreement is based on quotes
from active markets for instruments of this type, and 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, 2008
|
|
|
March 31, 2007
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
|
Senior Secured Credit Facility
|
|
$
|
309,514
|
|
|
$
|
275,467
|
|
|
$
|
297,263
|
|
|
$
|
310,640
|
|
Senior Secured Notes due 2013
|
|
|
290,000
|
|
|
|
271,150
|
|
|
|
290,000
|
|
|
|
297,800
|
|
Convertible Senior Subordinated Notes due 2013
|
|
|
60,000
|
|
|
|
55,440
|
|
|
|
60,000
|
|
|
|
51,882
|
|
F-36
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
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.
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.
Selected financial information concerning the Companys
reportable segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended March 31, 2008
|
|
|
|
Transportation
|
|
|
Industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
and
|
|
|
Other
|
|
|
|
|
|
|
Americas
|
|
|
ROW
|
|
|
Americas
|
|
|
ROW
|
|
|
(a)
|
|
|
Consolidated
|
|
|
|
(In thousands)
|
|
|
Net sales
|
|
$
|
1,126,388
|
|
|
$
|
1,156,007
|
|
|
$
|
301,562
|
|
|
$
|
1,112,714
|
|
|
$
|
|
|
|
$
|
3,696,671
|
|
Gross profit
|
|
|
209,395
|
|
|
|
146,565
|
|
|
|
77,561
|
|
|
|
162,063
|
|
|
|
(2,394
|
)
|
|
|
593,190
|
|
Income (loss) before reorganization items, income taxes, and
minority interest
|
|
|
78,886
|
|
|
|
30,265
|
|
|
|
38,033
|
|
|
|
17,903
|
|
|
|
(116,776
|
)
|
|
|
48,311
|
|
Depreciation and amortization
|
|
|
29,930
|
|
|
|
27,597
|
|
|
|
8,876
|
|
|
|
28,714
|
|
|
|
6,044
|
|
|
|
101,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended March 31, 2007
|
|
|
|
Transportation
|
|
|
Industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
and
|
|
|
Other
|
|
|
|
|
|
|
Americas
|
|
|
ROW
|
|
|
Americas
|
|
|
ROW
|
|
|
(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
|
|
|
|
153,527
|
|
|
|
|
|
|
|
472,776
|
|
Income (loss) before reorganization items, income taxes, and
minority interest
|
|
|
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
|
|
F-37
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended March 31, 2006
|
|
|
|
Transportation
|
|
|
Industrial
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
and
|
|
|
|
|
|
and
|
|
|
Other
|
|
|
|
|
|
|
Americas
|
|
|
ROW
|
|
|
Americas
|
|
|
ROW
|
|
|
(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
|
|
|
(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
|
|
|
|
|
(a) |
|
Other includes unallocated corporate expenses, interest expense,
currency remeasurement gain, and (gain) loss on revaluation of
warrants. In fiscal 2008, other also includes a
$21.3 million loss on early extinguishment of debt and
$2.4 million for environmental remediation costs for a
previously closed facility. |
Geographic information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from External Customers
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
1,527,222
|
|
|
$
|
1,296,833
|
|
|
$
|
1,103,453
|
|
France
|
|
|
324,747
|
|
|
|
224,219
|
|
|
|
204,839
|
|
Germany
|
|
|
509,967
|
|
|
|
376,142
|
|
|
|
348,435
|
|
UK
|
|
|
120,766
|
|
|
|
120,589
|
|
|
|
153,396
|
|
Italy
|
|
|
265,244
|
|
|
|
197,449
|
|
|
|
170,305
|
|
Spain
|
|
|
317,401
|
|
|
|
244,072
|
|
|
|
228,225
|
|
Poland
|
|
|
153,133
|
|
|
|
99,251
|
|
|
|
71,271
|
|
Other
|
|
|
478,191
|
|
|
|
381,230
|
|
|
|
539,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,696,671
|
|
|
$
|
2,939,785
|
|
|
$
|
2,819,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived Assets
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
United States
|
|
$
|
240,998
|
|
|
$
|
251,602
|
|
France
|
|
|
46,793
|
|
|
|
55,318
|
|
Germany
|
|
|
76,307
|
|
|
|
73,790
|
|
UK
|
|
|
29,573
|
|
|
|
36,596
|
|
Portugal
|
|
|
43,733
|
|
|
|
40,963
|
|
Italy
|
|
|
60,488
|
|
|
|
52,230
|
|
Spain
|
|
|
94,416
|
|
|
|
86,780
|
|
Poland
|
|
|
20,707
|
|
|
|
17,778
|
|
Other
|
|
|
36,511
|
|
|
|
33,958
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
649,526
|
|
|
$
|
649,015
|
|
|
|
|
|
|
|
|
|
|
F-38
EXIDE
TECHNOLOGIES AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(19)
|
SELECTED
QUARTERLY FINANCIAL DATA (Unaudited)
|
The following is a summary of the Companys quarterly
consolidated results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended March 31, 2008
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
(In thousands, except per share data)
|
|
|
Net sales
|
|
$
|
762,387
|
|
|
$
|
861,942
|
|
|
$
|
1,042,047
|
|
|
$
|
1,030,295
|
|
Gross profit
|
|
|
118,669
|
|
|
|
130,348
|
|
|
|
165,833
|
|
|
|
178,340
|
|
Net (loss) income
|
|
$
|
(35,682
|
)
|
|
$
|
(14,829
|
)
|
|
$
|
19,309
|
|
|
$
|
63,261
|
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.58
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
0.26
|
|
|
$
|
0.84
|
|
Diluted
|
|
$
|
(0.58
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
0.25
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended March 31, 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
|
)
|
F-39
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006
|
|
$
|
22,471
|
|
|
|
4,116
|
|
|
|
(3,378
|
)
|
|
|
(1,572
|
)
|
|
$
|
21,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
$
|
21,637
|
|
|
|
9,096
|
|
|
|
(4,023
|
)
|
|
|
1,914
|
|
|
$
|
28,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
$
|
28,624
|
|
|
|
5,974
|
|
|
|
(5,723
|
)
|
|
|
4,755
|
|
|
$
|
33,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Allowance on Deferred Tax Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006
|
|
$
|
597,500
|
|
|
|
48,905
|
|
|
|
(339,642
|
)
|
|
|
(6,045
|
)
|
|
$
|
300,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
$
|
300,718
|
|
|
|
38,949
|
|
|
|
(39,661
|
)
|
|
|
20,995
|
|
|
$
|
321,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
$
|
321,001
|
|
|
|
13,952
|
|
|
|
(69,651
|
)
|
|
|
(80,662
|
)
|
|
$
|
184,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Primarily the impact of foreign currency translation. |
F-40
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 Company) at March 31, 2008 and 2007, and
the results of their operations and cash flows for each of the
three years in the period ended March 31, 2008 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.
PricewaterhouseCoopers LLP
Atlanta, Georgia
June 5, 2008
F-41
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
NET SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net customer sales
|
|
$
|
2,311,652
|
|
|
$
|
1,776,894
|
|
|
$
|
1,672,430
|
|
Net affiliate sales
|
|
|
67,735
|
|
|
|
51,377
|
|
|
|
46,359
|
|
COST OF SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer sales
|
|
|
1,989,913
|
|
|
|
1,526,405
|
|
|
|
1,402,957
|
|
Affiliate sales
|
|
|
67,735
|
|
|
|
51,377
|
|
|
|
46,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
321,739
|
|
|
|
250,489
|
|
|
|
269,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, marketing and advertising
|
|
|
180,834
|
|
|
|
165,504
|
|
|
|
160,979
|
|
General and administrative
|
|
|
101,289
|
|
|
|
96,024
|
|
|
|
99,601
|
|
Restructuring
|
|
|
7,218
|
|
|
|
15,183
|
|
|
|
16,770
|
|
Other (income) expense, net
|
|
|
(14,359
|
)
|
|
|
5,749
|
|
|
|
(3,479
|
)
|
Interest expense, net
|
|
|
50,706
|
|
|
|
39,609
|
|
|
|
34,445
|
|
Loss on early extinguishment of debt
|
|
|
10,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
336,362
|
|
|
|
322,069
|
|
|
|
308,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before reorganization items, income taxes, and minority
interest
|
|
|
(14,623
|
)
|
|
|
(71,580
|
)
|
|
|
(38,843
|
)
|
DEBT FORGIVENESS ADJUSTMENTS
|
|
|
|
|
|
|
|
|
|
|
(6,702
|
)
|
INCOME TAX PROVISION
|
|
|
34,511
|
|
|
|
5,631
|
|
|
|
14,775
|
|
MINORITY INTEREST
|
|
|
1,544
|
|
|
|
882
|
|
|
|
529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(50,678
|
)
|
|
$
|
(78,093
|
)
|
|
$
|
(47,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-42
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
55,247
|
|
|
$
|
43,653
|
|
Receivables, net of allowance for doubtful accounts of $26,273
and $20,178, respectively
|
|
|
618,589
|
|
|
|
495,788
|
|
Receivables from affiliates
|
|
|
21,977
|
|
|
|
15,151
|
|
Inventories
|
|
|
383,205
|
|
|
|
258,078
|
|
Prepaid expenses and other
|
|
|
9,494
|
|
|
|
9,690
|
|
Deferred financing costs, net
|
|
|
1,940
|
|
|
|
1,077
|
|
Deferred income taxes
|
|
|
12,669
|
|
|
|
11,727
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,103,121
|
|
|
|
835,164
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
407,448
|
|
|
|
396,242
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Other intangibles, net
|
|
|
149,280
|
|
|
|
132,621
|
|
Investments in affiliates
|
|
|
3,736
|
|
|
|
1,605
|
|
Deferred financing costs, net
|
|
|
6,380
|
|
|
|
3,250
|
|
Deferred income taxes
|
|
|
49,563
|
|
|
|
68,806
|
|
Other
|
|
|
35,433
|
|
|
|
12,714
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
244,392
|
|
|
|
218,996
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,754,961
|
|
|
$
|
1,450,402
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
22,719
|
|
|
$
|
13,951
|
|
Current maturities of long-term debt
|
|
|
7,103
|
|
|
|
3,964
|
|
Accounts payable
|
|
|
343,028
|
|
|
|
262,201
|
|
Payables to affiliates
|
|
|
45,055
|
|
|
|
26,862
|
|
Accrued expenses
|
|
|
225,317
|
|
|
|
201,499
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
643,222
|
|
|
|
508,477
|
|
Long-term debt
|
|
|
199,427
|
|
|
|
186,360
|
|
Notes payable to affiliates
|
|
|
253,342
|
|
|
|
150,838
|
|
Noncurrent retirement obligations
|
|
|
160,350
|
|
|
|
161,288
|
|
Deferred income tax liability
|
|
|
31,100
|
|
|
|
28,668
|
|
Other noncurrent liabilities
|
|
|
54,811
|
|
|
|
29,205
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,342,252
|
|
|
|
1,064,836
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
18,772
|
|
|
|
14,560
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
Partners capital
|
|
|
739,692
|
|
|
|
739,692
|
|
Accumulated deficit
|
|
|
(501,042
|
)
|
|
|
(446,832
|
)
|
Accumulated other comprehensive income
|
|
|
155,287
|
|
|
|
78,146
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
393,937
|
|
|
|
371,006
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
1,754,961
|
|
|
$
|
1,450,402
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-43
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
|
|
|
Derivatives
|
|
|
Cumulative
|
|
|
|
|
|
|
Partners
|
|
|
Accumulated
|
|
|
Benefit
|
|
|
Qualifying as
|
|
|
Translation
|
|
|
Comprehensive
|
|
|
|
Capital
|
|
|
Deficit
|
|
|
Plans
|
|
|
Hedges
|
|
|
Adjustment
|
|
|
Income (Loss)
|
|
|
|
(In thousands)
|
|
|
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 loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(26,910
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2007
|
|
$
|
739,692
|
|
|
$
|
(446,832
|
)
|
|
$
|
25,263
|
|
|
$
|
|
|
|
$
|
52,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
(50,678
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(50,678
|
)
|
Defined benefit plans, net of tax of $5,619
|
|
|
|
|
|
|
|
|
|
|
27,959
|
|
|
|
|
|
|
|
|
|
|
|
27,959
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,250
|
|
|
|
50,250
|
|
Unrealized loss on derivatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,068
|
)
|
|
|
|
|
|
|
(1,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative effect of the adoption of Fin 48
|
|
|
|
|
|
|
(3,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2008
|
|
$
|
739,692
|
|
|
$
|
(501,042
|
)
|
|
$
|
53,222
|
|
|
$
|
(1,068
|
)
|
|
$
|
103,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these statements.
F-44
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
(In thousands)
|
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(50,678
|
)
|
|
$
|
(78,093
|
)
|
|
$
|
(47,445
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided
by operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
61,685
|
|
|
|
75,146
|
|
|
|
71,725
|
|
Debt forgiveness adjustments
|
|
|
|
|
|
|
|
|
|
|
(6,702
|
)
|
Net (gain) loss on asset sales / impairments
|
|
|
(2,966
|
)
|
|
|
10,707
|
|
|
|
(3,873
|
)
|
Gain on insurance recoveries
|
|
|
|
|
|
|
|
|
|
|
(4,791
|
)
|
Deferred income taxes
|
|
|
19,208
|
|
|
|
(6,137
|
)
|
|
|
(2,296
|
)
|
Provision for doubtful accounts
|
|
|
3,878
|
|
|
|
5,124
|
|
|
|
1,297
|
|
Insurance proceeds
|
|
|
|
|
|
|
|
|
|
|
11,144
|
|
Minority interest
|
|
|
1,544
|
|
|
|
882
|
|
|
|
529
|
|
Amortization of deferred financing costs
|
|
|
1,722
|
|
|
|
1,049
|
|
|
|
416
|
|
Loss on early extinguishment of debt
|
|
|
10,674
|
|
|
|
|
|
|
|
|
|
Currency (gain) loss
|
|
|
(9,478
|
)
|
|
|
(4,620
|
)
|
|
|
6,931
|
|
Changes in assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
(21,604
|
)
|
|
|
(6,401
|
)
|
|
|
49,023
|
|
Inventories
|
|
|
(68,169
|
)
|
|
|
23,216
|
|
|
|
(11,791
|
)
|
Prepaid expenses and other
|
|
|
1,467
|
|
|
|
9,357
|
|
|
|
(13,508
|
)
|
Payables
|
|
|
31,538
|
|
|
|
(21,438
|
)
|
|
|
5,862
|
|
Accrued expenses
|
|
|
1,242
|
|
|
|
(25,177
|
)
|
|
|
(34,146
|
)
|
Noncurrent liabilities
|
|
|
(8,325
|
)
|
|
|
(11,524
|
)
|
|
|
7,699
|
|
Other, net
|
|
|
(21,791
|
)
|
|
|
17,580
|
|
|
|
11,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(50,053
|
)
|
|
|
(10,329
|
)
|
|
|
41,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(27,567
|
)
|
|
|
(20,098
|
)
|
|
|
(34,257
|
)
|
Proceeds from asset sales
|
|
|
6,580
|
|
|
|
3,514
|
|
|
|
19,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(20,987
|
)
|
|
|
(16,584
|
)
|
|
|
(14,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in short-term borrowings
|
|
|
4,699
|
|
|
|
1,122
|
|
|
|
10,347
|
|
Notes payable to affiliates
|
|
|
101,025
|
|
|
|
51,579
|
|
|
|
(11,674
|
)
|
Decrease in borrowings under Senior Credit Facility
|
|
|
(12,055
|
)
|
|
|
(7,717
|
)
|
|
|
(11,819
|
)
|
Settlement of foreign currency swap
|
|
|
|
|
|
|
|
|
|
|
(12,084
|
)
|
Decrease in other debt
|
|
|
(1,192
|
)
|
|
|
(2,274
|
)
|
|
|
(3,857
|
)
|
Financing costs and other
|
|
|
(15,164
|
)
|
|
|
(239
|
)
|
|
|
(4,237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
77,313
|
|
|
|
42,471
|
|
|
|
(33,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
5,321
|
|
|
|
2,580
|
|
|
|
(1,949
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) In Cash and Cash Equivalents
|
|
|
11,594
|
|
|
|
18,138
|
|
|
|
(8,184
|
)
|
Cash and Cash Equivalents, Beginning of Period
|
|
|
43,653
|
|
|
|
25,515
|
|
|
|
33,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
55,247
|
|
|
$
|
43,653
|
|
|
$
|
25,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
43,651
|
|
|
$
|
33,647
|
|
|
$
|
24,987
|
|
Income taxes (net of refunds)
|
|
$
|
18,337
|
|
|
$
|
10,934
|
|
|
$
|
9,662
|
|
The accompanying notes are an integral part of these statements.
F-45
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
March 31,
2008
|
|
(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). The
Consolidated Financial Statements are prepared in conformity
with U.S. generally accepted accounting principles.
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 0.01%. 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.
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 to 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
EGHN. and all of its majority owned subsidiaries in which the
Company exercises control.
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 electric 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.
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
F-46
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 ($9.5) million, ($4.6) million, and
$6.9 million, in fiscal 2008, 2007 and 2006, 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.
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
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
F-47
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
maintenance and repairs are charged to expense as incurred.
Additions, improvements and major renewals are capitalized.
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, and identified intangible assets. Long-lived assets
(other than 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. 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
indefinite-lived intangible assets is 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 4 to the Consolidated
Financial Statements.
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.
F-48
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Advertising
The Company expenses advertising costs as they are incurred.
Use of
Estimates in the Preparation of Financial
Statements
The preparation of financial statements in conformity with 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 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
pronouncement on its financial statements, but at this time, no
material effect is expected.
In December 2007, the FASB issued SFAS No. 160
Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51
(SFAS 160). SFAS 160 amends ARB 51 to
establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. It also amends certain of ARB
51s consolidation procedures for consistency with the
requirements of FASB Statement No. 141 (revised 2007),
Business Combinations. This Statement is effective for fiscal
years beginning on or after December 15, 2008 (the
companys fiscal 2010). The Company will assess the effect
of this pronouncement on its financial statements, but at this
time, no material effect is expected.
In March 2008, the FASB issued SFAS No. 161
Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement
No. 133 (SFAS 161).
SFAS 161 enhances required disclosures regarding
derivatives and hedging activities, including how an entity uses
derivative instruments, how derivatives and related hedged items
are accounted for under SFAS No. 133, and how
derivative instruments and related hedged items affect an
entitys financial position, financial performance, and
cash flows. This statement is effective for fiscal years and
interim periods beginning after November 15, 2008 (the
Companys fourth quarter of fiscal 2009 and fiscal 2010).
The Company will assess the effect of this pronouncement on its
financial statements, but at this time, no material effect is
expected.
F-49
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, and requires balance sheet
recognition of all derivatives as assets or liabilities, based
on measurements of their fair values.
The Company does not enter into derivative contracts for trading
or speculative purposes. Derivatives are used only to hedge the
volatility arising from changes in the fair value of certain
assets and liabilities that are subject to market risk, such as
interest rates on debt instruments, foreign currency exchange
rates, and certain commodities. If a derivative qualifies for
hedge accounting, gains or losses in its fair value that offset
changes in the fair value of the asset or liability being hedged
(effective gains or losses) are reported in
accumulated other comprehensive income, and subsequently
recorded to earnings only as the related variability on the
hedged transaction is recorded in earnings. If a derivative does
not qualify for hedge accounting, changes in its fair value are
reported in earnings immediately upon occurrence. Derivatives
qualify for hedge accounting if they are designated as hedging
instruments at their inception, and if they are highly effective
in achieving fair value changes that offset the fair value
changes of the assets or liabilities being hedged. Regardless of
a derivatives accounting qualification, changes in its
fair value that are not offset by fair value changes in the
asset or liability being hedged are considered ineffective, and
are recognized in earnings immediately.
In February 2008, the Parent Company entered into an interest
rate swap agreement to fix the variable component of interest on
$61.2 million of EGHNs floating rate long-term
obligations at a rate of 3.45% per annum through
February 27, 2011. At March 31, 2008, the fair value
of the swap agreement, which is based on quotes from active
markets for instruments of this type, amounted to a liability of
$1.1 million, which was recorded as an unrealized loss in
other comprehensive income. The Company expects to reclassify
approximately $0.4 million from other comprehensive income
to interest expense during fiscal 2009.
|
|
(4)
|
ACCOUNTING
FOR INTANGIBLE ASSETS
|
The Company completed its most recent annual impairment
assessment of intangible assets (as required under
SFAS 142) effective March 31, 2008, 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.
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, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount
|
|
$
|
48,581
|
|
|
$
|
11,050
|
|
|
$
|
91,382
|
|
|
$
|
20,509
|
|
|
$
|
171,522
|
|
Accumulated Amortization
|
|
|
|
|
|
|
(3,418
|
)
|
|
|
(14,840
|
)
|
|
|
(3,984
|
)
|
|
|
(22,242
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
|
|
$
|
48,581
|
|
|
$
|
7,632
|
|
|
$
|
76,542
|
|
|
$
|
16,525
|
|
|
$
|
149,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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-50
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Aggregate annual amortization expense was $5.2 million,
$4.9 million, and $4.6 million, for the fiscal years
ended March 31, 2008, 2007, and 2006 respectively, and is
expected to amount to approximately $5.2 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 2007 to fiscal 2008, result only from foreign
currency translation. No other activity has occurred.
Inventories, valued using the
first-in,
first-out (FIFO) method, consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Raw materials
|
|
$
|
50,605
|
|
|
$
|
33,761
|
|
Work-in-process
|
|
|
75,833
|
|
|
|
50,191
|
|
Finished Goods
|
|
|
256,767
|
|
|
|
174,126
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
383,205
|
|
|
$
|
258,078
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
PROPERTY,
PLANT AND EQUIPMENT
|
Property, plant and equipment consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
39,534
|
|
|
$
|
48,803
|
|
Buildings and improvements
|
|
|
181,862
|
|
|
|
161,708
|
|
Machinery and equipment
|
|
|
429,421
|
|
|
|
373,219
|
|
Construction in progress
|
|
|
12,072
|
|
|
|
12,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
662,889
|
|
|
|
595,816
|
|
Less Accumulated depreciation
|
|
|
255,441
|
|
|
|
199,574
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
407,448
|
|
|
$
|
396,242
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense was $55.9 million, $69.6 million,
and $66.2 million, for fiscal 2008, 2007 and 2006,
respectively.
Other assets consist of:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Capitalized software, net
|
|
$
|
2,860
|
|
|
$
|
1,603
|
|
Loan to affiliate
|
|
|
1,811
|
|
|
|
3,702
|
|
Retirement plans
|
|
|
17,391
|
|
|
|
879
|
|
Other
|
|
|
13,371
|
|
|
|
6,530
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35,433
|
|
|
$
|
12,714
|
|
|
|
|
|
|
|
|
|
|
F-51
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At March 31, 2008 and 2007, short-term borrowings of
$22.7 million, and $14.0 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, 2008 and 2007, the weighted average interest rate
on these borrowings was 6.2%, and 5.1% respectively.
Total long-term debt at March 31, 2008 comprised the
following:
|
|
|
|
|
|
|
March 31, 2008
|
|
|
|
(In thousands)
|
|
|
Senior Secured Credit Facility
|
|
$
|
178,670
|
|
Other, including capital lease obligations and other loans at
interest rates generally ranging up to 11.0% due in installments
through 2015
|
|
|
27,860
|
|
|
|
|
|
|
Total
|
|
|
206,530
|
|
Less-current maturities
|
|
|
7,103
|
|
|
|
|
|
|
|
|
$
|
199,427
|
|
|
|
|
|
|
Total debt at March 31, 2008 was $229.2 million.
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.
On May 15, 2007, the Parent Company and the Company entered
into a $495.0 million senior secured credit facility
(Credit Agreement) consisting of a
$200.0 million asset based revolving senior secured credit
facility (Revolving Loan Facility) and a
$295.0 million Term Loan (Term Loan). The
proceeds of the Credit Agreement were used to fully pay off the
Companys previous facility. The Company recorded a loss on
the early extinguishment of debt of $10.7 million.
Availability for Exide under the Revolving Loan Facility and
other loan facilities was $136.4 million and
$7.5 million, respectively as of March 31, 2008. At
March 31, 2008 and 2007, weighted average interest on the
Credit Agreement was 6.7% and 11.1%, respectively.
The Companys variable rate debt at March 31, 2008 and
March 31, 2007 was $201.4 million and
$181.1 million, respectively. As discussed in Note 3,
in February 2008, the Parent Company entered into an interest
rate swap agreement to fix the variable interest component of
$61.2 million of EGHNs floating rate long-term
obligations at a rate of 3.45% per annum through
February 27, 2011. None of the Companys variable rate
debt was hedged at March 31, 2007.
F-52
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, 2008 are as follows:
|
|
|
|
|
|
|
Amount
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
1,759
|
|
2010
|
|
|
1,685
|
|
2011
|
|
|
1,685
|
|
2012
|
|
|
1,685
|
|
2013
|
|
|
171,856
|
|
2014 and beyond
|
|
|
n/a
|
|
|
|
|
|
|
Total
|
|
$
|
178,670
|
|
|
|
|
|
|
|
|
|
(a) |
|
See note 11 for principal payments required under capital
lease obligations. |
|
|
(9)
|
EMPLOYEE
BENEFIT PLANS AND POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE
BENEFITS
|
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
$6.7 million, $5.4 million, and $5.3 million in
fiscal 2008, 2007, and 2006, respectively.
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.
F-53
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the plans funded status and
the amounts recognized in the Companys Consolidated
Financial Statements at March 31, 2008 and 2007:
Pension
Benefits:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
$
|
340,838
|
|
|
$
|
304,820
|
|
Service cost
|
|
|
4,845
|
|
|
|
5,741
|
|
Interest cost
|
|
|
17,482
|
|
|
|
15,207
|
|
Actuarial (gain) loss
|
|
|
(45,519
|
)
|
|
|
(8,297
|
)
|
Plan participants contributions
|
|
|
1,272
|
|
|
|
1,170
|
|
Benefits paid
|
|
|
(15,459
|
)
|
|
|
(14,539
|
)
|
Currency translation
|
|
|
32,059
|
|
|
|
34,939
|
|
Settlements and other
|
|
|
(3,300
|
)
|
|
|
1,797
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
332,218
|
|
|
$
|
340,838
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of period
|
|
$
|
175,799
|
|
|
$
|
142,933
|
|
Actual return on plan assets
|
|
|
1,078
|
|
|
|
8,699
|
|
Employer contributions
|
|
|
19,958
|
|
|
|
17,384
|
|
Plan participants contributions
|
|
|
1,272
|
|
|
|
1,170
|
|
Benefits paid
|
|
|
(15,459
|
)
|
|
|
(14,539
|
)
|
Currency translation
|
|
|
4,888
|
|
|
|
18,402
|
|
Settlements and other
|
|
|
(3,464
|
)
|
|
|
1,750
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
$
|
184,072
|
|
|
$
|
175,799
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded status:
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
332,218
|
|
|
$
|
340,838
|
|
Fair value of plan assets at end of period
|
|
|
184,072
|
|
|
|
175,799
|
|
Funded status
|
|
|
(148,146
|
)
|
|
|
(165,039
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of period
|
|
$
|
(148,146
|
)
|
|
$
|
(165,039
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in Statement of Financial Position:
|
|
|
|
|
|
|
|
|
Noncurrent other assets
|
|
$
|
17,390
|
|
|
$
|
880
|
|
Accrued expenses
|
|
|
(10,486
|
)
|
|
|
(9,468
|
)
|
Noncurrent retirement obligations
|
|
|
(155,050
|
)
|
|
|
(156,451
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of period
|
|
$
|
(148,146
|
)
|
|
$
|
(165,039
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive
(income) loss:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
289
|
|
|
$
|
264
|
|
Net (gain)
|
|
|
(56,728
|
)
|
|
|
(22,704
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized in accumulated other comprehensive
(income) loss:
|
|
$
|
(56,439
|
)
|
|
$
|
(22,440
|
)
|
|
|
|
|
|
|
|
|
|
F-54
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other
Post-Retirement Benefits:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of period
|
|
$
|
5,166
|
|
|
$
|
4,814
|
|
Service cost
|
|
|
203
|
|
|
|
167
|
|
Interest cost
|
|
|
304
|
|
|
|
257
|
|
Actuarial (gain) loss
|
|
|
(335
|
)
|
|
|
152
|
|
Benefits paid
|
|
|
(364
|
)
|
|
|
(370
|
)
|
Currency translation
|
|
|
798
|
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
5,772
|
|
|
$
|
5,166
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of period
|
|
$
|
|
|
|
$
|
|
|
Employer contributions
|
|
|
364
|
|
|
|
370
|
|
Benefits paid
|
|
|
(364
|
)
|
|
|
(370
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funded status:
|
|
|
|
|
|
|
|
|
Benefit obligation at end of period
|
|
$
|
5,772
|
|
|
$
|
5,166
|
|
Fair value of plan assets at end of period
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(5,772
|
)
|
|
|
(5,166
|
)
|
Contributions after measurement date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of period
|
|
$
|
(5,772
|
)
|
|
$
|
(5,166
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in statement of financial position:
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
(391
|
)
|
|
$
|
(329
|
)
|
Noncurrent retirement obligations
|
|
|
(5,381
|
)
|
|
|
(4,837
|
)
|
|
|
|
|
|
|
|
|
|
Net amount recognized at end of period
|
|
$
|
(5,772
|
)
|
|
$
|
(5,166
|
)
|
|
|
|
|
|
|
|
|
|
Amounts recognized in accumulated other comprehensive
(income) loss:
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
|
|
|
$
|
|
|
Net loss
|
|
|
585
|
|
|
|
830
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized in accumulated other comprehensive
(income) loss:
|
|
$
|
585
|
|
|
$
|
830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Post-Retirement Benefits
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
Weighted-average assumptions as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.3
|
%
|
|
|
5.0
|
%
|
|
|
6.2
|
%
|
|
|
5.4
|
%
|
Rate of compensation increase
|
|
|
3.6
|
%
|
|
|
3.4
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
F-55
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Expense
Assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Post-Retirement Benefits
|
|
|
|
FY 2009 Expense
|
|
|
FY 2008 Expense
|
|
|
FY 2009 Expense
|
|
|
FY 2008 Expense
|
|
|
Weighted-average assumptions for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
6.3
|
%
|
|
|
5.0
|
%
|
|
|
6.2
|
%
|
|
|
5.4
|
%
|
Expected return on plan assets
|
|
|
6.5
|
%
|
|
|
6.5
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
Rate of compensation increase
|
|
|
3.6
|
%
|
|
|
3.4
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
For fiscal year 2008 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, a 7.6%
and 8% annual rate of increase in the per capita cost of covered
health care benefits was assumed for 2008 and 2007,
respectively. The rate was assumed to decrease gradually to 5.4%
over eight and seven years for 2008 and 2007, and remain at that
level thereafter.
The following tables set forth the plans expense
recognized in the Companys Consolidated Financial
Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
4,845
|
|
|
$
|
5,741
|
|
|
$
|
4,956
|
|
Interest cost
|
|
|
17,482
|
|
|
|
15,207
|
|
|
|
15,008
|
|
Expected return on plan assets
|
|
|
(11,877
|
)
|
|
|
(10,114
|
)
|
|
|
(8,297
|
)
|
Amortization of: Prior service cost
|
|
|
21
|
|
|
|
19
|
|
|
|
|
|
Actuarial gain
|
|
|
(1,515
|
)
|
|
|
(1,211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost(a)
|
|
$
|
8,956
|
|
|
$
|
9,642
|
|
|
$
|
11,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Excludes the impact of settlement net losses of
$0.1 million in fiscal 2008 and $0.6 million in fiscal
2006, and curtailment net losses of $0.2 million in fiscal
2008 and gains of $0.8 million, in fiscal 2006. |
$2.8 million of income will be amortized from accumulated
other comprehensive income (loss) into net periodic benefit cost
in fiscal 2009 relating to the Companys pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement Benefits
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
203
|
|
|
$
|
167
|
|
|
$
|
101
|
|
Interest cost
|
|
|
304
|
|
|
|
257
|
|
|
|
243
|
|
Amortization of actuarial loss
|
|
|
19
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
526
|
|
|
$
|
436
|
|
|
$
|
344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The measurement dates for the Companys pension and other
post-employment benefit plans were March 31, 2008 and
March 31, 2007.
F-56
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 $172.3 million, $166.0 million and
$7.1 million, respectively, as of March 31, 2008 and
$168.4 million, $161.1 million and $8.0 million,
respectively, as of March 31, 2007.
The accumulated benefit obligation for the Companys
pension plans was $298.6 million as of March 31, 2008.
Expected future benefit payments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-
|
|
|
|
|
|
|
Retirement
|
|
|
|
|
|
|
Gross Expected
|
|
Fiscal Year
|
|
Pension Benefits
|
|
|
Benefit Payments
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
18,682
|
|
|
$
|
392
|
|
2010
|
|
|
18,607
|
|
|
|
410
|
|
2011
|
|
|
18,799
|
|
|
|
438
|
|
2012
|
|
|
19,243
|
|
|
|
455
|
|
2013
|
|
|
20,149
|
|
|
|
468
|
|
2014 to 2018
|
|
|
112,439
|
|
|
|
2,538
|
|
The asset allocation for the Companys pension plans at
March 31, 2008 and 2007, and the target allocation for
2009, by asset category, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
Percentage of Plan Assets
|
|
|
|
Allocation
|
|
|
at Year End
|
|
Asset Category
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Equity securities
|
|
|
58
|
%
|
|
|
58
|
%
|
|
|
66
|
%
|
Fixed income securities
|
|
|
39
|
%
|
|
|
36
|
%
|
|
|
26
|
%
|
Real estate and other
|
|
|
1
|
%
|
|
|
2
|
%
|
|
|
2
|
%
|
Cash
|
|
|
2
|
%
|
|
|
4
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
U.S. and global high-quality bond funds.
The estimated fiscal 2009 pension plan contributions are
$20.4 million and other postretirement contributions are
$0.4 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
|
|
$
|
117
|
|
|
$
|
89
|
|
Effect on the postretirement benefit obligation
|
|
$
|
1,055
|
|
|
$
|
836
|
|
F-57
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
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Income/(loss) before income taxes and minority interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
Netherlands
|
|
$
|
58,386
|
|
|
$
|
59,840
|
|
|
$
|
31,719
|
|
Foreign
|
|
|
(73,009
|
)
|
|
|
(131,421
|
)
|
|
|
(65,366
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(14,623
|
)
|
|
$
|
(71,581
|
)
|
|
$
|
(33,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Netherlands
|
|
$
|
759
|
|
|
$
|
(849
|
)
|
|
$
|
1,340
|
|
Foreign
|
|
|
14,544
|
|
|
|
12,617
|
|
|
|
15,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,303
|
|
|
|
11,768
|
|
|
|
17,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Netherlands
|
|
|
1,530
|
|
|
|
3,506
|
|
|
|
368
|
|
Foreign
|
|
|
17,678
|
|
|
|
(9,643
|
)
|
|
|
(2,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,208
|
|
|
|
(6,137
|
)
|
|
|
(2,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision (benefit)
|
|
$
|
34,511
|
|
|
$
|
5,631
|
|
|
$
|
14,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major differences between the Netherlands federal statutory rate
and the effective tax rate are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Netherlands statutory rate
|
|
|
25.5
|
%
|
|
|
30.0
|
%
|
|
|
31.5
|
%
|
Loss on liquidation
|
|
|
|
|
|
|
|
|
|
|
(11.7
|
)
|
Intercompany debt forgiveness
|
|
|
|
|
|
|
|
|
|
|
89.6
|
|
Thin cap disallowance
|
|
|
(1.1
|
)
|
|
|
(13.5
|
)
|
|
|
(10.5
|
)
|
Change in Equity Investment
|
|
|
1.9
|
|
|
|
(0.2
|
)
|
|
|
(2.3
|
)
|
Deferred Tax Reconciliation
|
|
|
(9.2
|
)
|
|
|
(2.7
|
)
|
|
|
34.1
|
|
Change in Tax Rate
|
|
|
(95.8
|
)
|
|
|
1.3
|
|
|
|
|
|
Increase in Uncertain Tax Positions
|
|
|
(4.2
|
)
|
|
|
|
|
|
|
|
|
Increase (decrease) in valuation allowances
|
|
|
(265.9
|
)
|
|
|
(44.8
|
)
|
|
|
(155.4
|
)
|
Rate differences on foreign subsidiaries
|
|
|
128.5
|
|
|
|
18.0
|
|
|
|
29.5
|
|
Local Tax Provision
|
|
|
(19.4
|
)
|
|
|
0.1
|
|
|
|
(3.4
|
)
|
Refund of previously paid taxes
|
|
|
|
|
|
|
5.4
|
|
|
|
|
|
Other, net
|
|
|
1.2
|
|
|
|
(1.5
|
)
|
|
|
(45.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
(238.5
|
)%
|
|
|
(7.9
|
)%
|
|
|
(44.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-58
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, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Operating loss and tax credit carry-forwards
|
|
$
|
240,041
|
|
|
$
|
263,290
|
|
Compensation reserves
|
|
|
9,442
|
|
|
|
8,025
|
|
Warranty
|
|
|
3,685
|
|
|
|
3,327
|
|
Asset and other realization reserves
|
|
|
754
|
|
|
|
2,110
|
|
Other
|
|
|
7,983
|
|
|
|
26,353
|
|
Valuation allowance
|
|
|
(182,989
|
)
|
|
|
(207,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
78,916
|
|
|
|
95,622
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(13,462
|
)
|
|
|
(13,046
|
)
|
Foreign Exchange
|
|
|
(3,592
|
)
|
|
|
(475
|
)
|
Intangible assets
|
|
|
(30,730
|
)
|
|
|
(30,236
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,784
|
)
|
|
|
(43,757
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
31,132
|
|
|
$
|
51,865
|
|
|
|
|
|
|
|
|
|
|
The net deferred income tax asset is classified in the
consolidated balance sheet as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
|
(In thousands)
|
|
|
Current asset
|
|
$
|
12,669
|
|
|
$
|
11,727
|
|
Noncurrent asset
|
|
|
49,563
|
|
|
|
68,806
|
|
Noncurrent liability
|
|
|
(31,100
|
)
|
|
|
(28,668
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
31,132
|
|
|
$
|
51,865
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2008, certain of the Parent Companys
subsidiaries have net operating loss carry-forwards for income
tax purposes of approximately $944.7 million, of which
approximately $168.7 million expire in fiscal years 2009
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.
|
|
(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 Exide and its affiliates
acquired GNB, filed a complaint in the Circuit Court for
F-59
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Cook County, Illinois alleging breach of contract, unjust
enrichment and conversion against Exide and three of its foreign
affiliates. The plaintiffs maintain they are entitled to
approximately $17.0 million in cash assets acquired by the
defendants through their acquisition of GNB. In December 2001,
the Court denied the defendants motion to dismiss the
complaint, without prejudice. The defendants filed an answer and
counterclaim. In 2002 the Court authorized discovery to proceed
as to all parties except 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, which
PDH then appealed to the United States District Court for the
District of Delaware. 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 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 has not been
required to indemnify or make any payments subsequent to
calendar year 2004. In 2007, CEAC has been adjudged to indemnify
the agency for approximately $0.3 million. No payment has
yet been made to the agency. 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 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, 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
F-60
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
facilities. 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, 2008 and 2007, the
amount of such reserves on the Companys consolidated
balance sheet was approximately $9.0 million and
$7.1 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
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 $2.0 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.
Guarantees
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, 2008, bank guarantees with a
face value of $17.4 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, 2007
|
|
$
|
22,768
|
|
Accrual for sales returns and allowances
|
|
|
31,302
|
|
Settlements made (in cash or credit) and currency translation
|
|
|
(24,962
|
)
|
|
|
|
|
|
Balance at March 31, 2008
|
|
$
|
29,108
|
|
|
|
|
|
|
F-61
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, 2008, are:
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Operating
|
|
|
Capital
|
|
|
|
(In thousands)
|
|
|
2009
|
|
$
|
18,971
|
|
|
$
|
6,261
|
|
2010
|
|
|
14,152
|
|
|
|
7,733
|
|
2011
|
|
|
9,530
|
|
|
|
3,748
|
|
2012
|
|
|
6,273
|
|
|
|
3,604
|
|
2013
|
|
|
4,328
|
|
|
|
2,411
|
|
Thereafter
|
|
|
3,430
|
|
|
|
4,141
|
|
|
|
|
|
|
|
|
|
|
Total minimum payments
|
|
$
|
56,684
|
|
|
|
27,898
|
|
|
|
|
|
|
|
|
|
|
Less Interest on capital leases
|
|
|
|
|
|
|
4,518
|
|
|
|
|
|
|
|
|
|
|
Total principal payable on capital leases (included in Long-term
debt)
|
|
|
|
|
|
$
|
23,380
|
|
|
|
|
|
|
|
|
|
|
Rent expense amounted to $29.9 million, $26.5 million,
and $23.6 million, for the fiscal years ended
March 31, 2008, 2007 and 2006, respectively.
During fiscal 2008, the Company has continued to implement
operational changes to streamline and rationalize its structure
in an effort to simplify the organization and eliminate
redundant and or unnecessary costs. As part of these
restructuring programs, the nature of the positions eliminated
range from plant employees and clerical workers to operational
and sales management.
During the year ended March 31, 2008, the Company
recognized restructuring and impairment charges of
$7.2 million, representing $4.5 million for severance
and $2.7 million for related closure costs. These charges
resulted from actions completed during fiscal 2008, which
related to consolidation efforts in the Industrial Energy Europe
and ROW segment, closure costs for the Companys Nanterre,
France transportation facility, severance costs for the
Companys Spain transportation facility, corporate
severance, and headcount reductions in the Transportation Europe
and ROW segment,. Approximately 80 positions have been
eliminated in connection with the fiscal 2008 restructuring
activities. The following is a summary of restructuring reserve
movements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
|
|
|
Closure Costs
|
|
|
Total
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
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
|
|
Charges
|
|
|
4,522
|
|
|
|
2,696
|
|
|
|
7,218
|
|
Payments and currency translation
|
|
|
(4,562
|
)
|
|
|
(3,356
|
)
|
|
|
(7,918
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2008
|
|
$
|
1,554
|
|
|
$
|
3,234
|
|
|
$
|
4,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-62
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
|
|
(13)
|
INTEREST
EXPENSE, NET
|
Interest income of $1.4 million, $1.1 million, and
$1.0 million, is included in Interest expense, net for the
fiscal years ended March 31, 2008, 2007 and 2006,
respectively. These amounts include interest income from
affiliates. See Note 16 to the Consolidated Financial
Statements.
|
|
(14)
|
OTHER
(INCOME) EXPENSE, NET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended
|
|
|
|
March 31, 2008
|
|
|
March 31, 2007
|
|
|
March 31, 2006
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Net loss (gain) on asset sales
|
|
$
|
(2,966
|
)
|
|
$
|
10,707
|
|
|
$
|
(3,873
|
)
|
Equity loss
|
|
|
(1,372
|
)
|
|
|
(1,002
|
)
|
|
|
|
|
Currency loss (gain)
|
|
|
(9,478
|
)
|
|
|
(4,620
|
)
|
|
|
6,931
|
|
Loss on revaluation of foreign currency forward contract
|
|
|
|
|
|
|
|
|
|
|
(1,081
|
)
|
Other
|
|
|
(543
|
)
|
|
|
664
|
|
|
|
(5,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(14,359
|
)
|
|
$
|
5,749
|
|
|
$
|
(3,479
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
F-63
EXIDE
GLOBAL HOLDING NETHERLANDS C.V. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Derivative instruments the carrying amount of the
Companys interest rate swap agreement is based on quotes
from active markets for instruments of this type, and 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, 2008
|
|
|
March 31, 2007
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
Estimated
|
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Senior Secured Credit Facility
|
|
$
|
180,489
|
|
|
$
|
160,635
|
|
|
$
|
167,116
|
|
|
$
|
174,636
|
|
|
|
(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 fiscal year ended March 31, 2008, 2007
and 2006 were $6.4 million, $6.0 million, and
$12.0 million, respectively.
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 fiscal years ended March 31, 2008,
2007 and 2006 were $45.1 million, $26.9 million, and
$29.7 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, 2008 and
March 31, 2007, the Company had notes payables to
affiliates of $253.3 million, and $150.8 million,
respectively. 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, 2008, 2007 and 2006 was $19.4 million,
$12.9 million, and $10.2 million, respectively.
F-64