<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the fiscal quarter ended September 28, 1997
Commission File Number 1 - 11263
EXIDE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 23-0552730
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1400 N. Woodward Ave., Bloomfield Hills, Michigan 48304
- ------------------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
(248) 258-0080
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(Registrant's telephone number, including area code)
Indicate by a check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
As of November 10, 1997, 21,325,863 shares of common stock were
outstanding.
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<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
- -------------------------------------
Item 1. Financial Statements (unaudited except for March 31, 1997
Consolidated Balance Sheet).
-- Condensed Consolidated Balance Sheets - -
September 28, 1997 and March 31, 1997.
-- Consolidated Statements of Operations - -
for the three and six months ended September 28, 1997
and for the three and six months ended September 29,
1996.
-- Consolidated Statements of Cash Flows - -
for the six months ended September 28, 1997 and
September 29,1996.
-- Notes to Condensed Consolidated Financial Statements - -
September 28, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
- ---------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Selected Financial Data
6 (a). Exhibits filed with this report.
Exhibit 11.1 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
SIGNATURE
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1
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per-share data)
<TABLE>
<CAPTION>
September 28, March 31,
1997 1997
(Unaudited)
------------- -----------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 31,878 $ 42,706
Receivables, net of allowance for doubtful
accounts of $39,115 and $38,486 518,451 569,683
Inventories 577,140 533,514
Prepaid expenses and other 22,086 21,889
Deferred income taxes 24,391 23,667
------------- ----------
Total current assets 1,173,946 1,191,459
------------- ----------
PROPERTY, PLANT AND EQUIPMENT 902,084 797,772
Less - Accumulated depreciation (313,571) (275,936)
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Total property, plant and
equipment, net 588,513 521,836
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OTHER ASSETS:
Goodwill, net 614,272 596,254
Investments in affiliates 24,826 24,016
Deferred financing costs, net 25,010 26,770
Deferred income taxes 37,743 40,306
Other 42,538 37,854
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744,389 725,200
------------- ----------
Total assets $ 2,506,848 $2,438,495
============= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Short-term borrowings $ 25,155 $ 16,123
Current maturities of long-term debt 31,885 37,488
Accounts payable, trade 229,721 236,889
Accrued expenses 331,683 270,519
------------- ----------
Total current liabilities 618,444 561,019
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LONG-TERM DEBT 1,250,318 1,236,071
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OTHER NONCURRENT LIABILITIES 279,933 250,547
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COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 20,189 19,448
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STOCKHOLDERS' EQUITY
Common stock, $.01 par value 60,000,000
shares authorized; 21,324,539
and 21,336,757 shares issued and
outstanding 213 213
Additional paid-in capital 489,684 489,427
Accumulated deficit (30,464) (21,569)
Notes receivable - stock award plan (1,609) (1,696)
Unearned compensation (419) (516)
Minimum pension liability adjustment (4,993) (4,993)
Cumulative translation adjustment (114,448) (89,456)
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Total stockholders' equity 337,964 371,410
------------- ----------
Total liabilities and
stockholders' equity $ 2,506,848 $2,438,495
============= ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except share and per-share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
------------------------------- --------------------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 552,389 $ 587,403 $ 1,042,754 $ 1,143,423
COST OF SALES 404,043 431,587 770,100 856,906
------------- ------------- ------------- -------------
Gross profit 148,346 155,816 272,654 286,517
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Selling, marketing and advertising 69,906 66,033 138,719 138,880
General and administrative 31,876 33,347 63,033 72,936
Goodwill amortization 4,283 4,786 8,401 9,338
------------- ------------- ------------- -------------
106,065 104,166 210,153 221,154
------------- ------------- ------------- -------------
Operating income 42,281 51,650 62,501 65,363
INTEREST EXPENSE 27,834 30,701 57,098 61,457
OTHER EXPENSE, net 1,426 953 3,677 593
------------- ------------- ------------- -------------
Income before income taxes,
minority interest and
extraordinary loss 13,021 19,996 1,726 3,313
INCOME TAX PROVISION 5,085 8,614 1,526 3,609
------------- ------------- ------------- -------------
Income (loss) before minority
interest and extraordinary loss 7,936 11,382 200 (296)
MINORITY INTEREST (218) (309) (509) (868)
------------- ------------- ------------- -------------
Income before extraordinary loss 8,154 11,691 709 572
EXTRAORDINARY LOSS RELATED TO EARLY
RETIREMENT OF DEBT, net of income tax
benefit of $768 for the three and six
months ended September 28, 1997 (1,445) -- (8,758) --
------------- ------------- ------------- -------------
Net income (loss) $ 6,709 $ 11,691 $ (8,049) $ 572
============= ============= ============= =============
NET INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Income before extraordinary loss $ 0.38 $ 0.56 $ 0.03 $ 0.03
Extraordinary loss (0.07) -- (0.41) --
------------- ------------- ------------- -------------
Net income (loss) $ 0.31 $ 0.56 $ (0.38) $ 0.03
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 21,680,806 20,831,086 21,463,753 20,827,766
============= ============= ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
3
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Six Months Ended
--------------------------------
September 28, September 29,
1997 1996
--------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (8,049) $ 572
Adjustments to reconcile net income (loss)
to net cash provided by operating activities -
Depreciation and amortization 55,359 58,457
Extraordinary loss 8,758 --
Deferred income taxes 3,253 2,036
Original issue discount on notes 5,528 9,473
Provision for losses on accounts receivable 1,685 1,575
Minority interest (509) (868)
Changes in assets and liabilities excluding
effects of acquisitions -
Receivables 43,697 (53,891)
Inventories (29,306) 21,092
Prepaid expenses and other (662) 5,381
Payables and accrued expenses 27,764 (35,128)
Other, net 849 313
------------ ------------
Net cash provided by operating activities 108,367 9,012
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of certain businesses (32,920) (8,928)
Capital expenditures (42,589) (49,529)
Proceeds from sale of assets 2,058 15,923
------------ ------------
Net cash used in investing activities (73,451) (42,534)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 9,603 9,580
Borrowings under U.S. Credit Agreement 115,875 18,000
Borrowings under Former European Facilities Agreement -- 10,863
Repayment of European Facilities Agreement (93,032) --
Repayment of European term loans -- (3,254)
Repayment of Acquired Debt (64,644) --
Issuance of 9.125% Senior Notes 102,130 --
Retirement of 12.25% Senior Subordinated Notes (104,096) --
Decrease in other debt (2,429) (7,620)
Dividends paid (846) (836)
Debt issuance costs (6,980) (1,001)
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Net cash provided by (used in) financing activities (44,419) 25,732
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (1,325) (1,022)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (10,828) (8,812)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 42,706 47,259
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,878 $ 38,447
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for -
Interest (net of amount capitalized) $ 43,633 $ 46,061
Income taxes $ 1,765 $ 10,501
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 1997
(Amounts in thousands, except share and per-share data)
(Unaudited)
(1) BASIS OF PRESENTATION, ETC.
- --------------------------------
The condensed consolidated financial statements include the accounts of Exide
Corporation (the "Company") and all of its majority-owned subsidiaries. The
accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all of the disclosures
normally required by generally accepted accounting principles or those normally
made in the Company's annual Form 10-K filing. Accordingly, the reader of this
Form 10-Q may wish to refer to the Company's Form 10-K for the year ended March
31, 1997 for further information.
The financial information has been prepared in accordance with the Company's
customary accounting practices and has not been audited (except for Balance
Sheet information presented at March 31, 1997). In the opinion of management,
the accompanying condensed consolidated financial information reflects all
adjustments necessary to present fairly the results of operations and financial
position for the periods presented.
Fully diluted earnings (loss) per share on Income (loss) before extraordinary
loss and on Net income (loss) for the three and six months ended September 28,
1997 and the comparable period in fiscal 1997 were antidilutive.
During 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share," which specifies
the computation, presentation and disclosure requirements for earnings per share
("EPS") for public companies. This statement is effective for both interim and
annual periods ending after December 15, 1997. Adoption of this statement for
the Company will occur in the third fiscal quarter of fiscal 1998 and earlier
periods presented will be restated. The EPS as currently reported is essentially
the same as Basic EPS required by the standard. The newly required Diluted EPS
is not materially different than Basic EPS.
In the second quarter of 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The Company will be required to adopt these new standards
in fiscal 1999 and restate prior years presented. The Company has not determined
the effect of adopting these new pronouncements on the consolidated financial
statements.
Certain prior period amounts have been reclassified to conform to the current
period presentation.
5
<PAGE>
(2) ACQUISITIONS AND DIVESTITURES
- ----------------------------------
In July 1997, the Company acquired three related German producers and marketers
of starter, lighting and ignition ("SLI") batteries and Industrial batteries,
DETA Akkumulatorenwerk GmbH, MAREG Accumulatoren GmbH, and FRIWO SILBERKRAFT
GmbH (together "DETA") for approximately $34,000 plus assumed debt of
approximately $64,600. This acquisition was accounted for as a purchase. The
cost of the acquisition has been allocated on the basis of the estimated fair
value of the assets acquired and the liabilities assumed. This acquisition
resulted in goodwill of approximately $22,100.
In July 1996, the Company acquired the majority of the stock of Metalurgica De
Cubas S.L. ("Cubas"), a secondary lead smelter located near Madrid, Spain, for
approximately $7,500. In November 1996, the remaining stock was purchased for
approximately $3,200. The acquisition was accounted for as a purchase and the
results of Cubas' operations are included in the Company's consolidated
statement of operations effective July 1, 1996. The cost of the acquisition has
been allocated on the basis of the estimated fair value of the assets acquired
and the liabilities assumed. This acquisition resulted in goodwill of
approximately $7,300.
In June 1996, the Company sold certain assets related to its battery separator
division of Evanite Fiber Corporation ("Evanite") for $13,000 in cash. In
December 1996, the Company sold substantially all of the remaining net assets of
Evanite for approximately $23,000 (subject to final adjustments). The gain on
these transactions of approximately $8,300 was included in Other expense
(income), principally in the fiscal quarter ending December 29, 1996.
In April 1996, the Company acquired 14.4% of the remaining 15.6% minority
interest in a subsidiary of Sociedad Espanola del Acumulador Tudor, S.A.
("Tudor") for $3,562.
(3) INVENTORIES
- ----------------
<TABLE>
<CAPTION>
September 28, March 31,
1997 1997
----------------- --------------
<S> <C> <C>
Raw materials $ 130,741 $ 117,038
Work-in-process 79,404 70,805
Finished goods 366,995 345,671
------------- --------------
$ 577,140 $ 533,514
============= ==============
</TABLE>
6
<PAGE>
At September 28, 1997 and March 31, 1997, inventories valued by the LIFO method
were approximately 28% and 33% of consolidated inventories, respectively. If all
inventories had been determined using the first-in, first-out method, such
inventories would have been $560,073 and $516,447 at September 28, 1997 and
March 31, 1997, respectively. The carrying amount of inventories on a LIFO basis
exceeds replacement cost. LIFO inventories reflect the fair value of inventories
as of August 31, 1989, when all of the outstanding common shares of the Company
were acquired in a leveraged buyout, as inventories subsequently produced cost
less to manufacture. The Company believes that no write-down of the carrying
amount of inventories to replacement cost is necessary, as no loss will be
realized upon their final sale.
(4) RECEIVABLES SALE AGREEMENT
- -------------------------------
In June 1997, certain of the Company's European subsidiaries established a
multicurrency receivables sale facility with a financial institution to sell
selected trade accounts of the Company, up to a maximum of $175,000. The net
proceeds from the sale of accounts receivable (approximately $102,000 at
September 28, 1997) were used to repay a portion of borrowings under the
European Facilities Agreement.
(5) SHORT-TERM BORROWINGS
- --------------------------
At September 28, 1997 and March 31, 1997, short-term borrowings consisted of
various operating lines of credit and working capital facilities maintained by
certain of the Company's non-U.S. subsidiaries. Some of these borrowings are
secured by receivables, inventories or property. These facilities, which are
typically for one year renewable terms, generally bear interest at the current
market rates plus up to 1%. As of September 28, 1997 and March 31, 1997, the
weighted average interest rate on these borrowings was 11.4% and 12.0%,
respectively.
7
<PAGE>
(6) LONG-TERM DEBT
- -------------------
Following is a summary of the Company's long-term debt at September 28, 1997
and March 31, 1997:
<TABLE>
<CAPTION>
September 28, March 31,
1997 1997
------------- -----------
<S> <C> <C>
U.S. Credit Agreement borrowings primarily at
LIBOR plus 2.5% at September 28, 1997
(8.7%), and March 31, 1997 (8.2%) $ 132,875 $ 17,000
9.125% Senior Notes, due April 15, 2004 99,480 --
10% Senior Notes, due April 15, 2005 300,000 300,000
10.75% Senior Notes, due December 15, 2002 150,000 150,000
12.25% Senior Subordinated Deferred Coupon
Debentures, due December 15, 2004 1,835 101,187
Convertible Senior Subordinated Notes,
due December 15, 2005 302,555 298,295
European Facilities Agreement, borrowings
primarily at LIBOR plus 2.0% (ranging from
4.8% to 9.1% at September 28, 1997 and
from 4.8% to 10.0% at March 31, 1997) 247,675 356,865
Other, primarily capital lease obligations at
interest rates ranging from 3.7% to 7.7%
due in installments through 2015 47,783 50,212
---------- ----------
1,282,203 1,273,559
Less - Current maturities 31,885 37,488
---------- ----------
$1,250,318 $1,236,071
========== ==========
</TABLE>
Borrowings under the European Facilities Agreement bear interest at local market
rates (comparable to LIBOR) plus a margin of 1.5% per annum (increased to 2.0%
in connection with the funding of the European Receivables Sale Agreement in
July 1997), reducing in 0.25% increments beginning after one year to 1.0% so
long as the European borrowing group, as defined, meets and maintains certain
interest coverage and leverage tests.
Borrowings under the European Facilities Agreement are supported by guarantees
of most of the Company's European subsidiaries and are secured by pledges of the
stock of the Company's Euro Exide, CEAc and Tudor subsidiaries. The European
Facilities Agreement contains a number of financial and other covenants
customary for such agreements including restrictions on new indebtedness, liens,
minimum net worth, leverage rates, acquisitions, and capital expenditures.
8
<PAGE>
On July 10, 1997, the European Facilities Agreement was amended to reduce the
maximum commitment to 1,718 million French francs (U.S. $290,000) from the
original 2,569 French francs (U.S. $434,000). The write-off of the related
unamortized deferred financing costs associated with this early retirement of
debt resulted in an extraordinary loss of $1,364 (net of income tax benefit of
$768).
In June 1997, the Company entered into a series of bond swap agreements for
$13,150 (principal amount) of its 10% Senior Notes. Under the agreements, the
Company pays LIBOR plus 1.75% to a counterparty and receives from the
counterparty the fixed coupon rate payments made by the Company. At the end of
the agreements, the counterparty is guaranteed repayment of its open market
purchase price of the Notes which exceeded face value by $653. This debt
modification was accounted for as an extinguishment of debt, and the related
write-off of unamortized deferred financing costs along with the premium paid by
the counterparty resulted in an extraordinary loss of $902. No income tax
benefit on the extraordinary loss was recognized.
On May 7, 1997, the Company redeemed $108,119 (face value) of its outstanding
12.25% Zero-Coupon Bonds for $104,095. The Company financed the tender offer
through borrowings under the U.S. Credit Agreement, $50,000 of which was from
the new Tranche D variable rate term loan and the balance from the revolver.
This redemption resulted in an extraordinary loss of $6,492 related to the
write-off of unamortized deferred financing costs and the premium paid
associated with the early extinguishment of substantially all of the 12.25%
Senior Subordinated Deferred Coupon Debentures. No income tax benefit on the
extraordinary loss was recognized.
On April 23, 1997, the Company issued 175 million Deutsche mark (U.S. $102,130)
9.125% Senior Notes due on April 15, 2004. The Company used the funds to repay
indebtedness under the European Facilities Agreement.
At September 28, 1997, the Company was in compliance with all covenants related
to its existing debt.
See Note 5 of the Notes to Consolidated Financial Statements included in the
Company's March 31, 1997 Form 10-K for further information regarding the
Company's long-term debt.
(7) ENVIRONMENTAL MATTERS
- --------------------------
The Company, particularly as a result of its manufacturing and secondary lead
smelting operations, is subject to numerous environmental laws and regulations
and is exposed to liabilities and compliance costs arising from its past and
current handling, processing, recycling, storing and disposing of hazardous
substances and hazardous wastes. The Company's operations are also subject to
occupational safety and health laws and regulations, particularly relating to
the monitoring of employee health in North America and, to a lesser extent, in
Europe. Except as disclosed in Note 13 of Notes to Consolidated Financial
Statements included in the Company's March 31, 1997 Form 10-K or herein, the
Company believes that it is in substantial compliance with all material
environmental, health and safety requirements.
9
<PAGE>
North America
- -------------
The Company has been advised by the U.S. Environmental Protection Agency ("EPA")
that it is a "Potentially Responsible Party" ("PRP") under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or similar
state laws at 56 federally defined Superfund or state equivalent sites. At 33 of
these sites, the Company has either paid or is in the process of paying its
share of liability. In most instances, the Company's obligations are not
expected to be significant because its portion of any potential liability
appears to be minor to insignificant in relation to the total liability of all
PRPs that have been identified and are viable. The Company's share of the
anticipated remediation costs associated with all of the Superfund sites where
it has been named a PRP, based on the Company's estimated volumetric
contribution to each site, is included in the environmental remediation reserves
discussed below.
Because the Company's liability under such statutes may, as a technical matter,
be imposed on a joint and several basis, the Company's liability may not
necessarily be based on volumetric allocations and could be greater than the
Company's estimates. Management believes, however, that its PRP status at these
Superfund sites will not have a material adverse affect on the Company's
business or financial condition because, based on the Company's experience, it
is reasonable to expect that the liability will be roughly proportionate to its
volumetric contribution of waste to the sites.
While the ultimate outcome of the various environmental matters is uncertain,
after consultation with legal counsel, management does not believe the
resolution of these matters will have a material adverse effect on the Company's
business, cash flows, financial condition or results of operations. The
Company's policy is to accrue for environmental costs when it is probable that a
liability has been incurred and the amount of such liability is reasonably
estimable. While the Company believes its current estimates of future
remediation costs are reasonable, future findings or changes in estimates could
have a material effect on the recorded reserves.
During the third and fourth quarters of fiscal 1997, the Company finalized the
settlement of environmental impairment claims with several insurance carriers in
an amount aggregating $17,309. This settlement, which was reflected in cost of
sales, offset certain legal costs that the Company incurred in fiscal 1997, as
well as the elimination of $7,000 of legal fees deferred in fiscal 1996.
The Company has reserves for on-site and off-site environmental remediation
costs and believes that such reserves are adequate. As of September 28, 1997,
the amount of such reserves on the Company's balance sheet was $35,921. Of this
amount, $34,288 was included in Other Noncurrent Liabilities. Because
environmental liabilities are not recorded until the liability is determined to
be probable and reasonably estimable, not all potential future environmental
liabilities have been included in the Company's environmental reserves and
future adjustments to the reserves are possible.
10
<PAGE>
Europe
- ------
The Company is subject to numerous environmental, health and safety requirements
and is exposed to differing degrees of liabilities and compliance costs arising
from its past and current manufacturing and recycling activities in various
European countries. The laws and regulations applicable to such activities
differ from country to country and also substantially differ from U.S. laws and
regulations.
Certain facilities in France, Germany and Spain are not in compliance with
certain limits contained in air and wastewater treatment discharge permits. In
every case, the Company is working cooperatively with appropriate authorities to
come into compliance. It is possible that the Company could be subject to fines
or penalties with regard to these violations, although management believes any
such fines / penalties will not be material. The cost to upgrade the facilities
to attain compliance is not expected to be material. The violations are not
expected to interfere with continued operations at the subject facilities.
The Company expects that its European operations will continue to incur capital
and operating expenses in order to maintain compliance with evolving
environmental, health and safety requirements or more stringent enforcement of
existing requirements in each country.
(8) COMMITMENTS AND CONTINGENCIES
- ----------------------------------
In August 1996, a Portland, Oregon jury found that the Company infringed a
patent relating to a device for inserting battery plates into battery
separators, and awarded damages of $5,000. Later, the Court, acting on the
jury's verdict, entered a judgment against the Company for $5,456. On April 28,
1997, the Court denied the Company's post-trial motions relating to the
judgment. On May 16, 1997, the Company filed its Notice of Appeal. On May 21,
1997, plaintiffs filed a cross appeal. The Company is vigorously prosecuting the
appeal. Management and its independent patent counsel remain confident that the
jury verdict and the court's judgment relating to the patent asserted at trial
will be reversed and that the cross appeal is without merit and, therefore,
shall be rejected. The Company anticipates receiving a decision on the appeal
during fiscal 1998.
The Company is now or recently has been involved in several related lawsuits
pending in state and federal courts in Alabama, North Carolina and South
Carolina. These actions contain allegations that the Company sold old or used
batteries as new batteries. One action that had been certified as a class action
was later decertified by the Alabama Supreme Court and has now been dismissed.
In another action, the judge directed a verdict in favor of the Company
following presentation of the plaintiff's evidence. That case is now on appeal.
On August 11, 1997, the Company's motion for summary judgment was granted on
another one of these cases. The remaining actions seek compensatory and punitive
damages and, in one case, injunctive relief. The Company disputes the material
legal claims in these matters and intends to vigorously defend itself.
The Company is involved in various other claims and litigation incidental to the
conduct of its business. Based on consultation with legal counsel, management
does not believe that any claims or litigation to which the Company is a party
will have a material adverse effect on the Company's financial condition or
results of operations.
11
<PAGE>
The Company has various purchase commitments for materials, supplies and other
items incident to the ordinary course of business. In the aggregate, such
commitments are not at prices significantly in excess of current market.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
General
The Company through its European operations is exposed to foreign currency
risk in most Western European countries, principally France, Spain, Germany,
Italy and the U.K. The Company does not have material operations in countries
where economies can be classified as hyper-inflationary. Movements of
exchange rates vis-a-vis the U.S. dollar can result in both unrealized and
realized exchange gains or losses. In some circumstances, gains in one
currency may be offset by losses in another as all currencies may not move in
unison vis-a-vis the U.S. dollar. Because it is not possible to forecast
future movements in foreign exchange rates it is the policy of the Company to
reduce foreign currency risk by balancing net foreign currency positions where
possible.
Results of Operations
Three months ended September 28, 1997 compared with the three months ended
September 29, 1996.
Net sales decreased $35.0 million, or 6.0%, to $552.4 million in the second
quarter of fiscal 1998 compared with the second quarter of fiscal 1997. The
decrease was principally attributable to the impact of changes in foreign
exchange rates ($62.3 million), the fiscal 1997 divestiture of Evanite ($8.4
million), partially offset by the inclusion of DETA in fiscal 1998 ($21.7
million) and product mix. Industrial battery sales (included above) for the
quarter ended September 28, 1997 were $150.4 million versus $150.7 million for
the quarter ended September 29, 1996.
Gross profit decreased $7.5 million while gross profit margin increased by 0.4
percentage points in the second quarter of fiscal 1998 versus the second
quarter of fiscal 1997. The decrease in gross profit and related increase in
the gross profit margin were primarily attributable to the effect of changes
in foreign exchange rates ($19.9 million) and the absence of Evanite ($1.6
million) offset by the inclusion of DETA in fiscal 1998 ($6.6 million),
improved product mix, including the new NASCAR line, and manufacturing cost
reductions related to the European rationalization/consolidation process.
Operating expenses increased $1.9 million, or 1.8% in the second quarter ended
September 28, 1997 versus the comparable period in fiscal 1997, due to the
inclusion of DETA in fiscal 1998 ($3.9 million) and to advertising expenses
incurred for the roll out of the NASCAR line, partially offset by the impact
of changes in foreign exchange rates.
Operating income decreased $9.4 million, or 18.1%, primarily as a result of
the matters discussed above.
Interest expense decreased $2.9 million or 9.3%, primarily due to the effect
of changes in foreign exchange rates, partially offset by the inclusion of
DETA.
13
<PAGE>
Other income/expense, net was $1.4 million expense for the fiscal quarter
ended September 28, 1997 versus $1.0 million expense for the comparable period
in fiscal 1997. This $0.4 million change principally relates to fees
associated with the establishment of the asset securitization facility in
Europe ($1.0 million) and the loss on the European sale of accounts receivable
($1.5 million) offset by the favorable net currency transaction change (a $1.0
million net currency gain in the second quarter of fiscal 1998 versus a $1.7
million net currency transaction loss in the second quarter of fiscal 1997).
Net income decreased $5.0 million, primarily as a result of the matters
discussed above, and the recognition of a $1.4 million extraordinary loss (net
of income tax benefit of $0.8 million) in fiscal 1998 related to the early
retirement of debt (see Note 6 to the Company's Condensed Consolidated
Financial Statements appearing elsewhere herein).
Six months ended September 28, 1997 compared with the six months ended
September 29, 1996
Net sales decreased $100.7 million, or 8.8%, to $1,042.8 million in the first
six months of fiscal 1998 compared with the first six months of fiscal 1997.
The decrease was principally attributable to the impact of changes in foreign
exchange rates ($97.6 million), the fiscal 1997 divestiture of Evanite ($19.7
million) offset by the inclusion of DETA in fiscal 1998 ($21.7 million) and
product mix. Industrial battery sales (included above) for the six months
ended September 28, 1997 were $303.2 million versus $320.0 million for the
first six months of fiscal 1997.
Gross profit decreased $13.9 million while gross profit margin increased by 1
percentage point in the first six months of fiscal 1998 versus the first six
months of fiscal 1997. The decrease in gross profit and the increase in gross
profit margin were principally attributable to the effect of changes in
foreign exchange rates ($30.5 million), the absence of Evanite ($4.6 million)
offset by the inclusion of DETA in fiscal 1998 ($6.6 million), improved
product mix, including the new NASCAR line, and manufacturing cost reductions
related to the European rationalization/consolidation process.
Operating expenses decreased $11.0 million, or 5.0% in the first six months of
fiscal 1998 versus the comparable period in fiscal 1997, primarily due to the
impact of changes in foreign exchange rates, headcount reductions associated
with the European rationalization/consolidation strategy offset by
advertising expenses incurred for the roll out of the NASCAR line and the
inclusion of DETA ($3.9 million).
Operating income decreased $2.9 million, or 4.4%, primarily as a result of the
matters discussed above.
Interest expense decreased $4.4 million, primarily due to the effect of
changes in foreign exchange rates, partially offset by the inclusion of DETA.
14
<PAGE>
Other income/expense, net was $3.7 million expense for the first six months
of fiscal 1998 versus $0.6 million expense for the comparable period in fiscal
1997. The $3.1 million change principally relates to the fees associated with
the establishment of the asset securitization facility in Europe ($1.0
million), the loss on the European sale of accounts receivable ($1.5 million),
the absence of the fiscal 1997 gain on the sale of certain assets related to
Evanite's battery separator product line ($0.7 million) offset by the absence
of the fiscal 1997 currency loss of $1.3 million.
Net income decreased $8.6 million, primarily as a result of the matters
discussed above, and the recognition of an $8.8 million extraordinary loss
(net of income tax benefit of $0.8 million) in the first six months of fiscal
1998 related to the early retirement of debt (see Note 6 to the Company's
Condensed Consolidated Financial Statements appearing elsewhere herein).
Liquidity and Capital Resources
The Company's liquidity requirements arise primarily from the funding of its
seasonal working capital needs, obligations on its indebtedness and capital
expenditures. In addition, the Company has paid cash dividends of $.02 per
share on the common stock in each completed quarter following its initial
public offering. Historically, the Company has met these liquidity
requirements through cash flows generated from operating activities and with
borrowed funds and the proceeds of sales of accounts receivable. During
fiscal 1998 and beyond the Company also expects to meet its liquidity
requirements in the same manner. The Company is party to a U.S. receivables
purchase agreement under which the other party has committed (subject to
certain exceptions) to purchase selected accounts receivable of the Company,
up to a maximum commitment of $75.0 million. Effective July 10, 1997 the
Company entered into a European receivables purchase agreement under which a
financial institution has committed (subject to certain exceptions) to
purchase selected accounts receivable of Exide's subsidiaries in France,
Germany, Italy, Spain and the U.K., up to a maximum commitment of $175
million. Due to the seasonal demands of the battery industry, the Company
builds inventory in advance of the typically stronger selling periods during
the fall and winter. The Company's greatest cash demands from operations
occur during the months of June through October.
15
<PAGE>
Funds provided by operations were $108.4 million and $9.0 million for the six
months ended September 28, 1997 and September 29, 1996, respectively. For the
six months ended September 28, 1997, $102.1 million was provided by sales of
European accounts receivable. See Note 4 to the Company's Condensed
Consolidated Financial Statements appearing elsewhere herein. Because of the
seasonality of the Company's business, more funds are typically generated in
its third and fourth fiscal quarters. In the next several years, the Company
will continue to complete the closure of various European plants which will
necessitate cash payments for severance, etc. While the Company believes that
a large portion of its cash requirements for its European plant consolidation
activities will be generated from operations, it has sufficient liquidity and
capital resources through its European Facilities Agreement and European
Receivables Purchase Agreement and also has sufficient borrowing availability
under its U.S. Credit Agreement.
The Company's capital expenditures were $42.6 million and $49.5 million in the
six months ended September 28, 1997 and September 29, 1996, respectively. The
U.S. Credit Agreement and the European Facilities Agreement restrict the
amount of capital expenditures which may be made by the Company and its
subsidiaries. The Company believes that it has sufficient resources for its
capital expenditure programs from operating cash flows and borrowing
availability under its existing credit agreements.
On April 23, 1997, the Company issued 175 million Deutsche mark (U.S. $102.1
million) 9.125% Senior Notes due on April 15, 2004. The Company used the
funds to repay indebtedness under the European Facilities Agreement.
On May 7, 1997, the Company redeemed $108.1 million (face value) of its
outstanding 12.25% Zero-Coupon Bonds for $104.1 million. The Company financed
the tender offer through borrowings under the U.S. Credit Agreement, $50
million of which was from the new Tranche D variable rate term loan and the
balance was financed with borrowings from the revolver.
As of September 28, 1997, the Company had $143.5 million outstanding on its
U.S. Credit Agreement, including letters of credit, and $268.4 million was
outstanding under the European Facilities Agreement, including letters of
credit. Obligations under the U.S. Credit Agreement and the European
Facilities Agreement bear interest at fluctuating rates. Increases in
interest rates on such obligations could adversely affect the Company's
results of operations and financial condition. The Company has two interest
rate collar agreements which reduce the impact of changes in interest rates on
a portion of the Company's floating rate debt. The collar agreements
effectively limit the LIBOR base interest rate on $100.0 million of borrowings
under the U.S. Credit Agreement to no more than 8% through December 30, 1997.
If interest rates fall below certain levels, Exide is required to make
payments to the counterparties under the agreements. Additionally, the
Company entered into a series of bond swap agreements which effectively
converted $51.1 million (principal amount) of the 10% and 10.75% Senior Notes
into a variable LIBOR interest rate through April 15, 2000 and December 15,
1999, respectively. The Company has the right to terminate the $51.1 million
bond swap agreements at any time before maturity. See Note 6 to the Company's
Condensed Consolidated Financial Statements appearing elsewhere herein.
16
<PAGE>
On July 10, 1997 the Company received proceeds of $112.5 million pursuant to
its initial sale of receivables under the European Receivables Purchase
Agreement. The Company used the funds to repay indebtedness under the European
Facilities Agreement. Concurrent with the Receivables Purchase Agreement, on
July 10, 1997, the European Facilities Agreement was amended to reduce the
maximum commitment to 1,718 million French francs (U.S. $291 million) from the
original 2,569 million French francs (U.S. $435 million) and change the
variable interest rate on local market borrowings (comparable to LIBOR) to a
margin of 2% per annum.
On July 30, 1997, the Company acquired DETA for 60 million Deutsche mark (U.S.
$34.0 million), in addition to assuming debt of 117 million Deutsche mark
(approximately U.S. $64.6 million). The majority of such consideration was
financed through the European Facilities Agreement. See Notes 2 and 6 of the
Company's Condensed Consolidated Financial Statements appearing elsewhere
herein.
As of September 28, 1997, the Company had $56.4 million available under its
U.S. Credit Agreement and $55.3 million of borrowing availability under the
Company's European and Canadian Facilities Agreements.
As of September 28, 1997, the Company has significant NOL carryforwards in
Europe and in the United States which are available, subject to certain
restrictions, to offset future U.S. and European taxable income.
17
<PAGE>
PART II. OTHER INFORMATION
---------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual meeting of Stockholders held on August 12, 1997, the
stockholders elected eight directors, approved amendments to the Company's
1996 Non-Employee Directors Stock Plan, approved the Company's 1997 Stock
Option Plan and ratified the appointment of Arthur Andersen LLP as independent
auditors for fiscal 1998.
The results of the voting were as follows:
<TABLE>
<CAPTION>
For Director Granted Withheld
------------ ------- --------
<S> <C> <C>
Arthur M. Hawkins 17,994,399 178,322
Douglas N. Pearson 18,003,480 169,241
Alan E. Gauthier 16,598,882 1,573,839
Earl Dolive 17,914,703 258,018
Robert H. Irwin 17,991,223 181,498
Thomas J. Reilly, Jr. 17,995,280 177,441
Arthur R. Taylor 17,984,913 187,808
James T. Watson 18,002,450 170,271
</TABLE>
<TABLE>
<CAPTION>
Other proposals: For Against Abstain No Vote
- ---------------- --- ------- ------- -------
<S> <C> <C> <C> <C>
Approval of amendments to the
Company's 1996 Non-Employee
Directors Stock Plan 17,372,278 397,907 67,999 334,537
Approval of the Company's 1997
Stock Option Plan 11,317,012 3,590,359 72,025 3,193,325
Ratification of appointment of
Arthur Andersen LLP as
independent auditors 18,045,806 83,373 43,542 --
</TABLE>
18
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EXIDE CORPORATION
Date: November 12, 1997 By: /s/ Alan E. Gauthier
----------------- ------------------------------
Alan E. Gauthier
Executive Vice President,
Chief Financial Officer
(Authorized Signatory)
<PAGE>
Exhibit 11.1
(Page 1 of 2)
Exide Corporation and Subsidiaries
Computation of Per-Share Earnings
(Amounts in thousands except share and per-share data)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
----------------------------- -----------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Primary earnings per common share:
Income (loss) before extraordinary loss $ 8,154 $ 11,691 $ 709 $ 572
============= ============= ============= =============
Net income (loss) applicable to common stock $ 6,709 $ 11,691 $ (8,049) $ 572
============= ============= ============= =============
Shares and equivalents outstanding-
Base shares after ECA exchange 8,388,347 8,388,347 8,388,347 8,388,347
Common stock equivalents--
Stock award grants, assuming exercised at
the average market price 673,776 707,083 673,634 705,332
Stock award grants exercised 20,097 10,822 20,097 10,822
Stock options, assuming exercised at
the average market price 418,125 - - 209,063 - -
IPO shares 4,600,000 4,600,000 4,600,000 4,600,000
Secondary offering shares 1,000,000 1,000,000 1,000,000 1,000,000
12/94 stock offering 5,175,000 5,175,000 5,175,000 5,175,000
Shares issued to acquire Schuylkill Holdings, Inc. 593,210 593,210 593,210 593,210
Shares issued to acquire remaining interest in CEAc subsidiary 350,000 350,000 350,000 350,000
Additional shares issued to acquire remaining interest in CEAc
subsidiary 366,009 - - 366,009 - -
Shares issued to acquire a sales branch operation 66,667 - - 66,667 - -
Shares issued under Employee Stock Purchase Plan (average shares
outstanding throughout the year) 14,547 5,849 13,461 4,667
Shares issued under Stock Award Plan 15,029 775 8,265 388
------------- ------------- ------------- -------------
Weighted average of common shares outstanding and equivalents 21,680,807 20,831,086 21,463,753 20,827,766
============= ============= ============= =============
Primary earnings (loss) per common share before extraordinary loss $ 0.38 $ 0.56 $ 0.03 $ 0.03
============= ============= ============= =============
Primary earnings (loss) per common share $ 0.31 $ 0.56 $ (0.38) $ 0.03
============= ============= ============= =============
</TABLE>
<PAGE>
Exhibit 11.1
(Page 2 of 2)
Exide Corporation and Subsidiaries
Computation of Per-Share Earnings
(Amounts in thousands except share and per-share data)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
----------------------------- ----------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Fully diluted earnings per common share:
Income (loss) before extraordinary loss $ 8,154 $ 11,691 $ 709 $ 572
Elimination of interest expense on convertible senior
subordinated notes, net of income tax benefit 3,072 2,987 6,088 5,940
------------- ------------- ------------- -------------
Adjusted income (loss) before extraordinary loss $ 11,226 $ 14,678 $ 6,797 $ 6,512
============= ============= ============= =============
Net income (loss) applicable to common stock $ 6,709 $ 11,691 $ (8,049) $ 572
Elimination of interest expense on convertible senior subordinated
notes, net of income tax benefit 3,072 2,987 6,088 5,940
------------- ------------- ------------- -------------
Adjusted net income (loss) applicable to common stock $ 9,781 $ 14,678 $ (1,961) $ 6,512
============= ============= ============= =============
Shares and equivalents outstanding-
Base shares after ECA exchange 8,388,347 8,388,347 8,388,347 8,388,347
Common stock equivalents--
Stock award grants, assuming exercised at
the average market price 673,776 707,083 673,634 705,332
Stock award grants exercised 20,097 10,822 20,097 10,822
Stock options, assuming exercised at
the average market price 418,125 - - 209,063 - -
IPO shares 4,600,000 4,600,000 4,600,000 4,600,000
Secondary offering shares 1,000,000 1,000,000 1,000,000 1,000,000
12/94 stock offering 5,175,000 5,175,000 5,175,000 5,175,000
Shares issued to acquire Schuylkill Holdings, Inc. 593,210 593,210 593,210 593,210
Shares issued to acquire remaining interest in CEAc subsidiary 350,000 350,000 350,000 350,000
Additional shares issued to acquire remaining interest in CEAc
subsidiary 366,009 - - 366,009 - -
Shares issued to acquire a sales branch operation 66,667 - - 66,667 - -
Shares issued under Employee Stock Purchase Plan (average shares
outstanding throughout the year) 14,547 5,849 13,461 4,667
Shares issued under Stock Award Plan 15,029 775 8,265 388
Convertible shares 4,992,571 4,992,571 4,992,571 4,992,571
------------- ------------- ------------- -------------
Weighted average of common shares outstanding and equivalents 26,673,378 25,823,657 26,456,324 25,820,337
============= ============= ============= =============
Fully diluted earnings per common share before extraordinary loss $ N.A. $ N.A. $ N.A. $ N.A.
============= ============= ============= =============
Fully diluted earnings per common share $ N.A. $ N.A. $ N.A. $ N.A.
============= ============= ============= =============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-28-1997
<CASH> 31,878
<SECURITIES> 0
<RECEIVABLES> 557,566
<ALLOWANCES> 39,115
<INVENTORY> 577,140
<CURRENT-ASSETS> 1,173,946
<PP&E> 902,084
<DEPRECIATION> 313,571
<TOTAL-ASSETS> 2,506,848
<CURRENT-LIABILITIES> 618,444
<BONDS> 1,250,318
0
0
<COMMON> 213
<OTHER-SE> 337,751
<TOTAL-LIABILITY-AND-EQUITY> 2,506,848
<SALES> 1,042,754
<TOTAL-REVENUES> 1,042,754
<CGS> 770,100
<TOTAL-COSTS> 770,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,685
<INTEREST-EXPENSE> 57,098
<INCOME-PRETAX> 1,726
<INCOME-TAX> 1,526
<INCOME-CONTINUING> 709
<DISCONTINUED> 0
<EXTRAORDINARY> 8,758
<CHANGES> 0
<NET-INCOME> (8,049)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
