<PAGE>
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 December 29, 1996
Commission File Number 1 - 11263
EXIDE CORPORATION
----------------------------------------------------
(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)
(810) 258-0080
---------------------------------------------------------
(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
---- ----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
As of February 11, 1997, 20,969,174 shares of common stock were
outstanding.
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
- -------------------------------------
Item 1. Financial Statements (unaudited except for March 31, 1996
Consolidated Balance Sheet).
- Condensed Consolidated Balance Sheets --
December 29, 1996 and March 31, 1996.
- Condensed Consolidated Statements of Operations --
for the three and nine months ended December 29, 1996
and December 31, 1995.
- Consolidated Statements of Cash Flows --
for the nine months ended December 29, 1996 and
December 31, 1995.
- Notes to Condensed Consolidated Financial Statements --
December 29, 1996.
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
None
Item 6. Selected Financial Data
6 (a). Exhibits filed with this report.
Exhibit 11.1 - Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedules
SIGNATURE
- ---------
1
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EXIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per-share data)
<TABLE>
<CAPTION>
December 29, March 31,
1996 1996
------------ ----------
ASSETS
- ------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 39,921 $ 47,259
Receivables, net of allowance for doubtful
accounts of $42,573 and $45,350 681,032 600,329
Inventories 524,673 595,161
Prepaid expenses and other 22,584 28,612
Deferred income taxes 18,857 20,672
---------- -----------
Total current assets 1,287,067 1,292,033
---------- -----------
PROPERTY, PLANT AND EQUIPMENT 825,100 798,767
Less- Accumulated depreciation (278,547) (220,045)
---------- -----------
Total property, plant and equipment, net 546,553 578,722
---------- -----------
OTHER ASSETS:
Goodwill,net 646,194 673,045
Investments in affiliates 25,721 24,446
Deferred financing costs, net 29,502 33,412
Deferred income taxes 51,497 66,747
Other 32,240 43,024
---------- -----------
785,154 840,674
---------- -----------
Total assets $2,618,774 $ 2,711,429
========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Short-term borrowings $ 16,982 $ 8,310
Current maturities of long-term debt 30,023 30,477
Accounts payable, trade and other 246,804 279,225
Accrued expenses 314,695 369,598
---------- -----------
Total current liabilities 608,504 687,610
---------- -----------
LONG-TERM DEBT 1,308,203 1,301,238
---------- -----------
OTHER NONCURRENT LIABILITIES 237,405 254,531
---------- -----------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 20,777 28,650
---------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value 60,000,000
and 30,000,000 shares authorized;
20,901,148 and 20,893,693 shares
issued and outstanding 209 209
Additional paid-in capital 491,106 490,919
Accumulated deficit (10,597) (36,121)
Notes receivable-stock award plan (1,696) (1,696)
Unearned compensation (564) (710)
Minimum pension liability adjustment (5,956) (5,956)
Cumulative translation adjustment (28,617) (7,245)
---------- -----------
Total stockholders' equity 443,885 439,400
---------- -----------
Total liabilities and stockholders' equity $2,618,774 $ 2,711,429
========== ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
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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 Nine Months Ended
-------------------------------- -------------------------------
December 29, December 31, December 29, December 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 677,544 $ 719,929 $ 1,820,967 $ 1,781,156
COST OF SALES 508,839 535,559 1,369,083 1,362,134
----------- ----------- ----------- -----------
Gross profit 168,705 184,370 451,884 419,022
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling, marketing and advertising 68,052 77,465 212,932 197,903
General and administrative 34,656 38,439 107,592 108,196
----------- ----------- ----------- -----------
102,708 115,904 320,524 306,099
----------- ----------- ----------- -----------
Operating income 65,997 68,466 131,360 112,923
----------- ----------- ----------- -----------
OTHER (INCOME) EXPENSE:
Interest, net 30,794 34,463 92,251 89,779
Other, net (10,678) (1,736) (10,085) (7,787)
----------- ----------- ----------- -----------
20,116 32,727 82,166 81,992
----------- ----------- ----------- -----------
Income before income
taxes and minority
interest 45,881 35,739 49,194 30,931
INCOME TAX PROVISION 19,650 13,827 23,259 13,823
----------- ----------- ----------- -----------
Income before minority
interest 26,231 21,912 25,935 17,108
MINORITY INTEREST 26 (671) (842) (1,083)
----------- ----------- ----------- -----------
Income before extraordinary
loss 26,205 22,583 26,777 18,191
EXTRAORDINARY LOSS RELATED TO EARLY
RETIREMENT OF DEBT, net of income
tax benefit of $5,964 - - (9,588) - - (9,588)
----------- ----------- ----------- -----------
Net income $ 26,205 $ 12,995 $ 26,777 $ 8,603
=========== =========== =========== ===========
PRIMARY EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE (See Note 1):
Income before extraordinary loss $ 1.26 $ 1.10 $ 1.29 $ 0.90
Extraordinary loss - - (0.47) - - (0.47)
----------- ----------- ----------- -----------
Net income $ 1.26 $ 0.63 $ 1.29 $ 0.43
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 20,834,003 20,581,684 20,829,845 20,243,809
=========== =========== =========== ===========
</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 nine months ended
-----------------------------
December 29, December 31,
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26,777 $ 8,603
Adjustments to reconcile net income to net
cash provided by (used in) operating activities -
Depreciation and amortization 89,629 81,040
Extraordinary Loss - - 9,588
Gain on sale of business (8,624) - -
Deferred income taxes 15,250 1,325
Original issue discount on notes 14,347 7,442
Provision for losses on accounts receivable 842 4,937
Minority interest (842) (1,083)
Changes in assets and liabilities excluding
effects of acquisitions -
Receivables (103,370) (97,396)
Inventories 50,212 62,318
Prepaid expenses and other 4,785 (17,959)
Payables and accrued expenses (79,321) (84,340)
Other, net 6,717 (7,338)
------------ ------------
Net cash provided by (used in) operating activities 16,402 (32,863)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of certain businesses (12,391) (387,929)
Capital expenditures (66,956) (74,883)
Proceeds from sale of assets 37,734 4,036
------------ ------------
Net cash used in investing activities (41,613) (458,776)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings 9,045 (57,017)
Repayment of U.S. Credit Agreement borrowings - - (194,500)
Borrowings under U.S. Credit Agreement 10,000 39,000
Repayment of European term loans (4,280) (48,337)
Borrowings under European Facilities Agreement 17,713 (167,551)
Borrowings under Pan-European revolver - - 231,718
Borrowings under Pan-European term loans - - 198,008
Issuance of 10% Senior Notes - - 300,000
Issuance of senior subordinated discount convertible notes - - 250,577
Repayment of Guaranteed Unsecured Loan Notes - - (35,282)
Dividends paid (1,253) (1,209)
Increase (decrease) in other debt (10,310) (13,168)
Debt issuance costs (1,311) (18,594)
------------ ------------
Net cash provided by financing activities 19,604 483,645
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (1,731) (591)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (7,338) (8,585)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 47,259 63,361
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 39,921 $ 54,776
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for-
Interest (net of amount capitalized) $ 82,873 $ 80,904
Income taxes $ 12,957 $ 6,873
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 29, 1996
(Amounts in thousands, except share and per-share data)
(Unaudited)
(1) BASIS OF PRESENTATION
- ---------------------------
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, 1996 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, 1996). 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 per share for the nine months ended December 29, 1996
would have been $1.38 per share and therefore, would have been antidilutive.
However, due to the seasonal nature of the business, earnings for the third
quarter ($1.26 per share) would be $1.13 per share on a fully diluted basis.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
(2) ACQUISITIONS
- ------------------
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 preliminarily allocated on the basis of the estimated fair value of the
assets acquired and liabilities assumed. This acquisition resulted in goodwill
of approximately $7,300.
In May 1995, the Company acquired 99.7% of the outstanding stock of Compagnie
Europeene d' Accumulateurs S.A. ("CEAc") for approximately $425,000 in cash
($553,500 less assumed debt of $131,900 plus interest from March 31, 1995 of
$3,400). Subsequent open market purchases of CEAc stock have increased the
ownership to 100%. The cost of the acquisition has been allocated on the basis
of the estimated fair value of the assets acquired and the liabilities assumed.
Included in the liabilities was $79,000 related to severance benefits to be paid
to certain employees who have been or will be terminated as a result of the
Company's European consolidation and targeted plant closings. Through December
29, 1996,
5
<PAGE>
$20,628 of severance benefits have been paid. Remaining expenditures are
expected to occur over the next several years as the Company is required to
comply with the European Union and other applicable regulations. In accordance
with Emerging Issues Task Force Issue No. 87-11 ("EITF 87-11"), in fiscal 1996
reserves of $12,000 were established for the expected 12-month operating losses
attributable to certain manufacturing and distribution facilities acquired that
have been identified for closure and sale. All of such reserves have been
utilized.
This acquisition was accounted for as a purchase and the results of CEAc's
operations are included in the Company's consolidated statement of operations
effective June 1, 1995. CEAc, which is headquartered in France, is one of the
largest SLI battery producers and the largest industrial battery manufacturer in
Europe, with operations primarily in France, Italy and Germany.
In January 1996, the Company acquired the remaining 25% minority interest in a
subsidiary of CEAc, in exchange for 350,000 shares of the Company's common stock
valued at $17,238. The holder of such shares will receive additional Exide
shares in March 1997 should they realize less than a predefined price upon sale
of such shares.
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.
On August 31, 1995, the Company acquired Schuylkill Holdings, Inc. ("SHI")
through a merger, and purchased all of SHI's stock options and subordinated
notes from various holders. The Company acquired the secured debt of SHI's
operating subsidiary, Schuylkill Metals Corporation, the owner of two lead
smelters from Heller Financial, Inc. The Company paid $2,000 in cash for SHI's
stock, options and notes; for the secured debt, it issued 593,210 shares of its
common stock valued at $31,000, paid $3,700 in cash and issued a contingent
note, the value of which will be based on market lead prices. Under the terms of
the purchase agreement, the Company is required to make additional payments to
Heller in fiscal 2000 if lead prices for the four-and- one-half year period
subsequent to the acquisition date reach defined levels. Based on the
significant increase in lead prices during fiscal 1996, in the fourth quarter of
fiscal 1996, the Company increased goodwill by $10,000. The purchase price was
allocated primarily to receivables, inventories and fixed assets and resulted in
$22,000 of goodwill.
The following summarized unaudited pro forma consolidated results of operations
for the nine months ended December 31, 1995 illustrate the estimated effects of
the CEAc and SHI acquisitions and the fiscal 1996 financing (see Note 6), as if
the transactions were consummated as of April 1, 1995.
Net sales $ 1,913,180
==========
Income before extraordinary item $ 11,981
==========
Net income $ 2,393
==========
6
<PAGE>
Pro forma earnings per common
and common equivalent share:
<TABLE>
<S> <C>
Income before extraordinary item $ 0.57
=========
Net income $ 0.11
=========
</TABLE>
Pro forma adjustments include only the effects of events directly attributable
to a transaction that are factually supportable and expected to have a
continuing impact. Pro forma adjustments reflecting anticipated "efficiencies"
in operations resulting from a transaction are not permitted and, therefore, are
not reflected herein. The above unaudited pro forma financial information is not
necessarily indicative of the results that would actually have been obtained if
the transactions had been effected on the date indicated or that may be obtained
in the future.
(3) INVENTORIES
- ----------------
Inventories as of December 29, 1996 and March 31, 1996, are as follows:
<TABLE>
<CAPTION>
December 29, March 31,
1996 1996
------------ -------------
<S> <C> <C>
Raw materials $ 112,971 $ 138,809
Work-in-process 76,044 94,340
Finished goods 335,658 362,012
------------ ------------
$ 524,673 $ 595,161
============ ============
</TABLE>
At December 29, 1996 and March 31,1996, inventories valued by the LIFO method
were approximately 31% and 29% of consolidated inventories, respectively. If all
inventories had been determined using the first-in, first-out method, such
inventories would have been $507,606 and $578,094 at December 29, 1996 and March
31, 1996, 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 leverage 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) SALE OF ASSETS
- -------------------
On June 28, 1996, the Company sold certain assets related to its battery
separator division of Evanite Fiber Corporation ("Evanite") for $13,000 in cash.
The gain on this transaction was not material.
On December 27, 1996, the Company sold substantially all of the remaining net
assets of Evanite for approximately $23,000 (subject to final adjustments) and
recorded a gain of approximately $8,600, which is included in Other Income in
the accompanying consolidated statement of operations.
7
<PAGE>
(5) SHORT-TERM BORROWINGS
- --------------------------
At December 29, 1996 and March 31, 1996, short-term borrowings consisted of
various operating lines of credit and working capital facilities maintained by
certain of the Company's foreign subsidiaries. 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 December 29, 1996 and March 31, 1996, the weighted average
interest rate on these borrowings was 10.5% and 10.9%, respectively.
(6) LONG-TERM DEBT
- -------------------
Following is a summary of the Company's long-term debt at December 29, 1996 and
March 31, 1996:
<TABLE>
<CAPTION>
December 29, March 31,
1996 1996
------------ ---------
<S> <C> <C>
U.S. Credit Agreement borrowings primarily at
LIBOR plus 2.5% at December 29, 1996
(8.1%) $ 10,000 $ --
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 98,163 89,856
2.90% Senior Subordinated Convertible Notes
due December 15, 2005 296,164 290,124
European Facilities Agreement, borrowings
primarily at LIBOR plus 1.5% (ranging from 4.9%
to 8.7% at December 29, 1996 and ranging from
5.6% to 10.9% at March 31, 1996) 433,694 436,940
European Term Loans at 8.1% at December 29,
1996 and at rates ranging from 7.6% to 10.1% at
March 31, 1996 7,741 12,021
Other, primarily capital lease obligations at
interest rates ranging from 4.8% to 11.2% due in
installments through 2005 42,464 52,774
------------ ---------
1,338,226 1,331,715
Less - Current maturities 30,023 30,477
------------ ---------
$ 1,308,203 $1,301,238
============ =========
</TABLE>
8
<PAGE>
In December 1995, the Company issued 2.90% Convertible Senior Subordinated Notes
due December 15, 2005, with a face amount of $397,900 discounted to $287,797,
after the underwriters' exercise of their overallotment option. These notes have
a coupon rate of 2.90% with a yield to maturity of 6.75%. The notes are
convertible into the Company's common stock at a conversion rate of 12.5473
shares per $1,000 principal amount at maturity, subject to adjustments in
certain events. The Company used the funds to repay indebtedness under the U.S.
Credit Agreement.
On November 30, 1995, the Company entered into a Pan-European, multicurrency,
multiborrower credit facility ("European Facilities Agreement"). The facility
contains a Tranche A term loan in the amount of 236,000 French francs (U.S.
$45,000), a Tranche B term loan in the amount of 930,000 French francs (U.S.
$178,000), and a revolving facility of 1,403,000 French francs (U.S. $268,000).
The Tranche A term loan matures on November 30, 2000 and the Tranche B term loan
matures on November 30, 2002. Both term loans require semiannual principal
payments throughout their terms. The revolving facility expires on September 30,
2002. Substantially all of the Company's European bank debt, including
indebtedness under the former European Facilities Agreement that was utilized to
finance a portion of the CEAc acquisition, was refinanced with this European
Facilities Agreement.
Borrowings under the European Facilities Agreement bear interest at local market
rates (comparable to LIBOR) plus a margin of 1.5% per annum, 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 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.
In April 1995, the Company issued $300,000 in aggregate principal amount of 10%
Senior Notes, the net proceeds of which were used, along with borrowings under
the U.S. Credit Agreement, to finance the CEAc acquisition. The 10% Senior Notes
are redeemable at the option of the Company, in whole or in part, at any time on
or after April 15, 2000, initially at 105% of the principal amount, plus accrued
interest, declining to 100% of the principal amount, plus accrued interest on or
after April 15, 2002.
See Note 6 of the Notes to Consolidated Financial Statements included in the
Company's March 31, 1996 Form 10-K for further information regarding the
Company's long-term debt.
9
<PAGE>
(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, 1996 Form 10-K or herein, the
Company believes that it is in substantial compliance with all material
environmental, health and safety requirements.
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 54 federally defined Superfund or state equivalent sites. At 27 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 which 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, which share is 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
effect on the Company's business or financial condition because, based on the
Company's experience, it is reasonable to expect that 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.
10
<PAGE>
During December 1996, the Company settled an environmental impairment claim with
one of its insurers and received approximately $16,000 in cash. This settlement,
which was reflected in Cost of Sales, offset certain legal and other costs which
the Company incurred in fiscal 1997, as well as the elimination of $7,000 of
deferred legal fees incurred in fiscal 1996. The Company continues to be engaged
in litigation with certain of its other insurers relative to its right to
collect for environmental impairment.
The Company has established reserves for on-site and off-site environmental
remediation costs and believes that such reserves are adequate. As of December
29, 1996, the amount of such reserves on the Company's balance sheet was
$27,869. Of this total amount, $20,588 was included in "Other Noncurrent
Liabilities."
Because environmental liabilities are not accrued 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 therefore, additional earnings charges are possible.
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 subject violations are not
expected to interfere with continued operations in the subject facilities.
The Company expects that its European operations will continue to incur capital
and operating expenses in order to maintain compliance with the evolving
environmental, health and safety requirements or more stringent enforcement of
existing requirements in each country.
As a result of the Company's plans to consolidate its European manufacturing
operations, it is probable that certain environmental costs will be incurred. An
estimate of the probable liability has been included in the Tudor and CEAc
purchase price allocations.
11
<PAGE>
(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. The jury found that the Company's
alleged infringement was not intentional nor deliberate. The court entered its
final judgment on January 15, 1997 for damages and pre-judgment interest in the
amount of $5,456. The Company's counsel continues to believe that the jury
verdict was erroneous, and the Company has filed post-verdict motions for
judgment in favor of the Company as a matter of law, which are now pending
before the court. If necessary, an appeal will be vigorously pursued by the
Company. Counsel also believes that the patent at issue is not infringed, is
invalid and unenforceable and the Company's prospects for ultimately prevailing
are good. The Company plans to vigorously pursue all available options to
correct this situation. After consultation with legal counsel, management does
not believe the ultimate resolution of this matter will have a material adverse
effect on the Company's financial condition or results of operations.
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.
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
conduct of its business. Based on consultation with legal counsel, management
does not believe that any claims or litigation to which it is a party will have
a material adverse effect on the Company's financial condition or results of
operations.
The Company has various purchase commitments for materials, supplies and other
items incident to the ordinary conduct of business. In the aggregate, such
commitments are not at prices 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 December 29, 1996 compared with the three months ended
December 31, 1995.
Net sales decreased $42.4 million, or 5.9%, to $677.5 million in the third
quarter of fiscal 1997 compared with fiscal 1996. The decrease was principally
attributable to the impact of changes in foreign exchange rates ($25.0 million)
and lower automotive and industrial sales volume offset principally by price
increases. Industrial battery sales (included above) for the quarter ended
December 29, 1996 were $183.7 million versus $195.7 million for the quarter
ended December 31, 1995.
Gross profit decreased $15.7 million and gross profit margin decreased by 0.7
percentage points in the third quarter of fiscal 1997 versus the third quarter
of fiscal 1996. The decrease in gross profit and gross profit margin were
principally attributable to lower sales volume (discussed above), higher lead
costs and the effect of changes in foreign exchange rates offset by the benefits
associated with the European manufacturing rationalization / consolidation
process and higher selling prices both in North America and Europe.
Operating expenses decreased $13.2 million, or 11.4% in the fiscal quarter ended
December 29, 1996 versus the comparable period in fiscal 1996, primarily due to
the closure of certain facilities in Europe associated with the European
rationalization / consolidation strategy, the impact of changes in foreign
exchange rates and restructuring actions taken last year in North America.
13
<PAGE>
Operating income decreased $2.5 million, or 3.6%, primarily as a result of the
matters discussed above.
Interest expense decreased $3.7 million, or 10.6%, primarily due to lower
European interest rates.
Other income / expense, net was $10.7 million income for the fiscal quarter
ended December 29, 1996 versus $1.7 million income for the comparable period in
fiscal 1996. This $9.0 million change principally relates to a $8.6 million gain
on the sale of Evanite, a $3.6 million currency gain in fiscal 1997 (versus a
$1.6 million currency gain in fiscal 1996) and a $0.5 million higher loss on the
sales of receivables (due to a larger facility arrangement).
Net income increased $13.2 million, primarily as a result of the matters
discussed above, and the recognition of a $9.6 million extraordinary loss in
fiscal 1996 related to the early retirement of debt.
Nine months ended December 29, 1996 compared with the nine months ended December
31, 1995.
Net sales increased $39.8 million, or 2.2%, to $1,821.0 million in the first
nine months of fiscal 1997 compared with fiscal 1996. The increase was
principally attributable to the inclusion of CEAc for the entire nine months of
fiscal 1997, as compared to only seven months in fiscal 1996 ($103.0 million)
offset by the impact of changes in foreign exchange rates ($55.0 million).
Industrial battery sales (included above) for the nine months ended December 29,
1996 were $508.1 million versus $453.8 million for the nine months ended
December 31, 1995. This increase is also primarily attributed to the inclusion
of CEAc for the entire nine months of fiscal 1997. See Note 2 to the Company's
condensed consolidated financial statements appearing elsewhere herein.
Gross profit increased $32.9 million and gross profit margin increased by 1.3
percentage points in the first nine months of fiscal 1997 versus the first nine
months of fiscal 1996. The increases in gross profit and gross profit margin
were principally the result of the inclusion of CEAc for the entire nine months
of fiscal 1997 ($29.0 million), cost reductions generated by the European
manufacturing rationalization / consolidation process, and North American and
European selling price increases, offset by the impact of foreign exchange rates
($16.0 million) and higher lead costs ($11.0 million).
Operating expenses increased $14.4 million, or 4.7% in the nine months ended
December 29, 1996 versus the comparable period in fiscal 1996, primarily due to
the inclusion of CEAc for the entire nine months of fiscal 1997 ($37.0 million),
the impact of foreign exchange rates ($12.0 million), the closure of certain
facilities in Europe associated with the European consolidation strategy and
restructuring actions in North America.
14
<PAGE>
Operating income increased $18.4 million, or 16.3%, primarily as a result of the
matters discussed above.
Interest expense increased $2.5 million, or 2.8%, primarily as result of the
interest cost attributable to the financing of the CEAc acquisition and the
incremental expense related to the inclusion of CEAc for the entire nine months
of fiscal 1997, offset by lower European interest rates and borrowing levels
associated with reduced working capital levels related to the rationalization /
consolidation process.
Other income / expense, net was $10.1 million income for the nine months ended
December 29, 1996 versus $7.8 million income for the comparable period in fiscal
1996. This $2.3 million change principally relates to the $8.6 million gain on
the sale of Evanite, a $2.3 million currency gain in fiscal 1997 (versus a $9.5
million currency gain in fiscal 1996), a $1.7 million higher loss on the sales
of receivables (due to a larger facility arrangement), offset by the absence of
a $2.5 million loss associated with certain European subsidiaries which were
formerly accounted for under the equity method (which are now fully
consolidated).
Net income increased $18.2 million, primarily as a result of the matters
discussed above and the recognition of a $9.6 million extraordinary loss in
fiscal 1996 related to the early retirement of debt.
15
<PAGE>
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 $0.02 per
share on the common stock in each completed quarter following its public
offering.
Historically, the Company has met these liquidity requirements through cash flow
generated from operating activities and with borrowed funds and the proceeds of
sales of accounts receivable. 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. 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 July through November.
Funds provided by operations were $16.4 million for the nine months ended
December 29, 1996 and funds used were $32.9 million for the nine months ended
December 31, 1995, respectively. 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 substantial borrowing capacity under its U.S. Credit
Agreement and its European Facilities Agreement.
The Company's capital expenditures were $67.0 million and $74.9 million in the
nine months ended December 29, 1996 and December 31, 1995, 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 these restrictions will not impede the Company's
capital spending plans and that it has sufficient resources for its capital
expenditure programs from operating cash flows and borrowing availability under
its existing credit agreements.
As of December 29, 1996, the Company had utilized $20.1 million of its U.S.
Credit Agreement (including $10.1 million for letters of credit), and $443.7
million was outstanding under the European Facilities Agreement, including
letters of credit.
16
<PAGE>
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 and an
interest rate swap agreement 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 and European Facilities Agreements to no more than 8%
through December 30, 1997. If interest rates fall below certain levels, the
Company is required to make payments to the counterparties under the agreements.
The Company also has an interest rate swap agreement which effectively fixes
LIBOR interest rates on $50 million at 6.2% through May 16,1997. See Note 6 to
the Company's condensed consolidated financial statements appearing elsewhere
herein.
As of December 29, 1996, the Company had $128.3 million available under its U.S.
Credit Agreement. Effective September 30, 1996 under terms of the U.S. Credit
Agreement, the maximum capacity was reduced to $150 million subject to certain
limitations based on eligible receivables and inventory. As of December 29,
1996, the Company's European and Canadian operations had borrowing availability
of approximately $50.0 million. See Note 6 to the Company's condensed
consolidated financial statements appearing elsewhere herein.
As of December 29, 1996, the Company has significant NOL carryforwards in Europe
and in the United States which are available, subject to certain restrictions,
to offset future European and U.S. taxable income.
17
<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: February 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 nine months ended
----------------------------- -----------------------------
December 29, December 31 December 29, December 31
1996 1995 1996 1995
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Primary earnings per common share:
Income before extraordinary loss $ 26,205 $ 22,583 $ 26,777 $ 18,191
============== ============= =============== =============
Net income applicable to common stock $ 26,205 $ 12,995 $ 26,777 $ 8,603
============== ============= =============== =============
Shares and equivalents outstanding-
Base shares after ECA exchange 8,388,338 8,388,338 8,388,338 8,388,338
Common stock equivalents-
Stock award grants, assuming exercised at
the average market price 707,219 782,610 705,961 783,124
Stock award grants exercised 10,822 -- 10,822 --
Stock options, assuming exercised at
the average market price -- 41,377 -- 31,156
IPO shares (average shares outstanding throughout the year) 4,600,000 4,600,000 4,600,000 4,600,000
Secondary offering shares (average shares outstanding
throughout the year) 1,000,000 1,000,000 1,000,000 1,000,000
12/94 stock offering (average shares outstanding throughout
the year) 5,175,000 5,175,000 5,175,000 5,175,000
Shares issued to acquire Schuykill Holdings, Inc. (average
shares outstanding throughout the year) 593,210 593,210 593,210 265,327
Shares issued to acquire remaining interest in CEAc subsidiary
(average shares outstanding throughout the year) 350,000 -- 350,000 --
Shares issued under Employee Stock Purchase Plan (average
shares outstanding throughout the year) 7,914 149 5,756 49
Shares issued under Stock Award Plan (average
shares outstanding throughout the year) 1,500 1,000 758 815
-------------- ------------- -------------- -------------
Weighted average of common shares outstanding and equivalents 20,834,003 20,581,684 20,829,845 20,243,809
============== ============= ============== =============
Primary earnings per common share before extraordinary loss $ 1.26 $ 1.10 $ 1.29 $ 0.90
============== ============= ============== =============
Primary earnings per common share $ 1.26 $ 0.63 $ 1.29 $ 0.43
============== ============= ============== =============
</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 nine months ended
----------------------------- -----------------------------
December 29, December 31, December 29, December 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
Fully diluted earnings per common share:
<S> <C> <C> <C> <C>
Income before extraordinary loss $ 26,205 $ 22,583 $ 26,777 $ 18,191
Elimination of Interest expense on convertible
senior subordinated notes, net of income
tax benefit 2,996 479 8,936 479
------------ ------------ ------------ ------------
Adjusted income before extraordinary loss $ 29,201 $ 23,062 $ 35,713 $ 18,670
============ ============ ============ ============
Net income applicable to common stock $ 26,205 $ 12,995 $ 26,777 $ 8,603
Elimination of Interest expense on convertible
senior subordinated notes, net of income
tax benefit 2,996 479 8,936 479
------------ ------------ ------------ ------------
Adjusted net income applicable to common stock $ 29,201 $ 13,474 $ 35,713 $ 9,082
============ ============ ============ ============
Shares and equivalents outstanding --
Base shares after ECA exchange 8,388,338 8,388,338 8,388,338 8,388,338
Common stock equivalents --
Stock award grants, assuming exercised at
the average market price 707,219 782,610 705,961 783,124
Stock award grants exercised 10,822 -- 10,822 --
Stock options, assuming exercised at the
average market price -- 41,377 -- 31,156
IPO shares (average shares outstanding
throughout the year) 4,600,000 4,600,000 4,600,000 4,600,000
Secondary offering shares (average shares
outstanding throughout the year) 1,000,000 1,000,000 1,000,000 1,000,000
12/94 stock offering (average shares
outstanding through out the year) 5,175,000 5,175,000 5,175,000 5,175,000
Shares issued to acquire Schuylkill
Holdings, Inc. (average shares
outstanding throughout the year) 593,210 593,210 593,210 265,327
Shares issued to acquire remaining
Interest in CEAs subsidiary (average
shares outstanding throughout the year) 350,000 -- 350,000 --
Shares issued under Employee Stock Purchase
Plan (average shares outstanding
throughout the year) 7,914 149 5,756 49
Shares issued under Stock Award Plan (average
shares outstanding throughout the year) 1,500 1,000 758 815
Convertible shares (assumed average shares
outstanding throughout the year) 4,992,571 811,024 4,992,571 268,375
------------ ------------ ------------ ------------
Weighted average of common shares outstanding
and equivalents 25,826,574 21,392,708 25,822,416 20,512,184
============ ============ ============ ============
Primary earnings per common share before
extraordinary loss $ 1.13 $ 1.08 $ 1.38 $ 0.91
------------ ------------ ------------ ------------
Primary earnings per common share $ 1.13 $ 0.63 $ 1.38 $ 0.44
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-29-1996
<CASH> 39,921
<SECURITIES> 0
<RECEIVABLES> 723,605
<ALLOWANCES> 42,573
<INVENTORY> 524,673
<CURRENT-ASSETS> 1,287,067
<PP&E> 825,100
<DEPRECIATION> 278,547
<TOTAL-ASSETS> 2,618,774
<CURRENT-LIABILITIES> 608,504
<BONDS> 1,308,203
0
0
<COMMON> 209
<OTHER-SE> 443,676
<TOTAL-LIABILITY-AND-EQUITY> 2,618,774
<SALES> 1,820,967
<TOTAL-REVENUES> 1,802,967
<CGS> 1,369,083
<TOTAL-COSTS> 1,369,083
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 842
<INTEREST-EXPENSE> 92,251
<INCOME-PRETAX> 49,194
<INCOME-TAX> 23,259
<INCOME-CONTINUING> 26,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,777
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 0
</TABLE>
