<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL QUARTER ENDED JANUARY 2, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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)
645 PENN STREET, READING, PENNSYLVANIA 19601
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
(610) 378-0500
------------------------------------------------
(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 10, 2000, 21,421,659 SHARES OF COMMON STOCK WERE
OUTSTANDING.
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
- -------------------------------------
Item 1. Financial Statements (unaudited)
-- Condensed Consolidated Balance Sheets --
January 2, 2000 and March 31, 1999.
-- Consolidated Statements of Operations -- for the three
and nine month periods ended January 2, 2000 and
December 27, 1998.
-- Consolidated Statements of Cash Flows --
for the nine months ended January 2, 2000 and
December 27, 1998.
-- Notes to Condensed Consolidated Financial Statements --
January 2, 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
PART II. OTHER INFORMATION
- ---------------------------------
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.30 - Nonqualified Stock Option Agreement for
Robert A. Lutz
Exhibit 99 - Press Release dated February 3, 2000
(b) Reports on Form 8-K. None.
SIGNATURE
- ---------
2
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PART I. FINANCIAL INFORMATION
EXIDE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share and per-share data)
<TABLE>
<CAPTION>
January 2, March 31,
2000 1999
---------------------------- ----------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 37,078 $ 20,596
Receivables, net of allowance for doubtful
accounts of $58,575 and $54,111, respectively 452,184 388,665
Inventories 456,993 522,471
Prepaid expenses and other 17,396 20,541
Deferred income taxes 12,595 13,303
---------------------------- ----------------------------
Total current assets 976,246 965,576
---------------------------- ----------------------------
PROPERTY, PLANT AND EQUIPMENT 857,865 809,461
Less - Accumulated depreciation (368,983) (310,801)
---------------------------- ----------------------------
Total property, plant and equipment, net 488,882 498,660
---------------------------- ----------------------------
OTHER ASSETS:
Goodwill, net 524,228 566,173
Investments in affiliates 23,062 23,072
Deferred financing costs, net 14,619 16,967
Deferred income taxes 66,537 61,019
Other 33,448 36,374
---------------------------- ----------------------------
661,894 703,605
---------------------------- ----------------------------
Total assets $ 2,127,022 $ 2,167,841
=========================== ============================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 34,122 $ 20,881
Current maturities of long-term debt 33,593 30,439
Accounts payable 224,940 250,625
Accrued expenses 280,306 224,859
---------------------------- ----------------------------
Total current liabilities 572,961 526,804
---------------------------- ----------------------------
LONG-TERM DEBT 1,176,486 1,154,486
---------------------------- ----------------------------
OTHER NONCURRENT LIABILITIES 244,104 317,703
---------------------------- ----------------------------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 17,975 17,646
---------------------------- ----------------------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value 60,000,000
shares authorized; 21,409,864 and
21,359,495 shares issued and outstanding 214 213
Additional paid-in capital 490,356 490,147
Accumulated deficit (174,713) (164,712)
Notes receivable - stock award plan (769) (786)
Unearned compensation - (129)
Accumulated other comprehensive loss (199,592) (173,531)
---------------------------- ----------------------------
Total stockholders' equity 115,496 151,202
---------------------------- ----------------------------
Total liabilities and stockholders' equity $ 2,127,022 $ 2,167,841
============================ ===========================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except share and per-share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
----------------------------- -----------------------------
(Restated) (Restated)
January 2, December 27, January 2, December 27,
2000 1998 2000 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 618,528 $ 678,530 $ 1,693,677 $ 1,824,198
COST OF SALES BEFORE ASSET SALES 443,088 513,884 1,239,304 1,357,248
NET LOSS ON ASSET SALES 3,175 -- 3,175 --
------------- ------------- ------------- -------------
Cost of sales 446,263 513,884 1,242,479 1,357,248
Gross Profit 172,265 164,646 451,198 466,950
------------- ------------- ------------- -------------
OPERATING EXPENSES
Selling, marketing and advertising 83,246 88,819 237,975 247,364
General and administrative 33,916 54,266 98,800 127,450
Purchased research and development 14,262 -- 14,262 --
Goodwill amortization 4,138 6,526 12,663 15,374
------------- ------------- ------------- -------------
135,562 149,611 363,700 390,188
------------- ------------- ------------- -------------
Operating income 36,703 15,035 87,498 76,762
------------- ------------- ------------- -------------
INTEREST EXPENSE, net 27,081 29,747 79,059 83,202
OTHER EXPENSE, net 4,164 12,141 6,913 18,102
------------- ------------- ------------- -------------
Income (loss) before income taxes, minority
interest and extraordinary loss 5,458 (26,853) 1,526 (24,542)
INCOME TAX EXPENSE 8,354 18,477 8,897 23,644
------------- ------------- ------------- -------------
Loss before minority interest and
extraordinary loss (2,896) (45,330) (7,371) (48,186)
MINORITY INTEREST 747 (107) 1,348 (309)
------------- ------------- ------------- -------------
Loss before extraordinary loss (3,643) (45,223) (8,719) (47,877)
EXTRAORDINARY LOSS RELATED TO EARLY
RETIREMENT OF DEBT, net of income tax benefit of $0 -- -- -- (301)
------------- ------------- ------------- -------------
Net loss $ (3,643) $ (45,223) $ (8,719) $ (48,178)
============= ============= ============= =============
BASIC EARNINGS PER SHARE:
Loss before extraordinary loss $ (0.17) $ (2.13) $ (0.41) $ (2.26)
Extraordinary loss -- -- -- (0.01)
------------- ------------- ------------- -------------
Net loss $ (0.17) $ (2.13) $ (0.41) $ (2.27)
============= ============= ============= =============
DILUTED EARNINGS PER SHARE:
Loss before extraordinary loss $ (0.17) $ (2.13) $ (0.41) $ (2.26)
Extraordinary loss -- -- -- (0.01)
------------- ------------- ------------- -------------
Net loss $ (0.17) $ (2.13) $ (0.41) $ (2.27)
============= ============= ============= =============
WEIGHTED AVERAGE SHARES:
Basic 21,409,864 21,250,997 21,428,466 21,235,248
============= ============= ============= =============
Diluted 21,409,864 21,250,997 21,428,466 21,235,248
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------------
(Restated)
January 2, December 27,
2000 1998
---------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,719) $ (48,178)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities -
Depreciation and amortization 77,089 97,093
Extraordinary loss -- 301
Loss on asset sales 3,175 --
Purchased research & development 14,262 --
Deferred income taxes (2,272) 19,643
Original issue discount on notes 7,491 6,855
Provision for losses on accounts receivable 4,988 18,122
Provision for severance and patent infringement litigation 400 11,136
Provision for inventory loss -- 13,035
Minority interest 1,348 (309)
Net proceeds from sale of receivables 4,208 52,118
Changes in assets and liabilities excluding
effects of acquisitions and divestitures -
Receivables (97,272) (113,603)
Inventories 39,812 2,530
Prepaid expenses and other 1,316 (969)
Payables and accrued expenses (57,161) (30,683)
Other, net (14,771) (2,425)
---------- ----------
Net cash provided by (used in) operating activities (26,106) 24,666
========== ==========
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of certain businesses, net of cash acquired (2,700) (14,825)
Capital expenditures (44,766) (60,047)
Equipment purchases held for sale -- (10,435)
Proceeds from sale of assets 46,534 22,466
Insurance proceeds from fire damage 807 10,767
---------- ----------
Net cash used in investing activities (125) (52,074)
========== ==========
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings 14,774 6,186
Borrowings under Global Credit Facilities Agreement 504,751 448,367
Repayments under Global Credit Facilities Agreement (462,934) (427,488)
Decrease in other debt (10,496) (3,775)
Debt issuance costs (678) (2,627)
Dividends paid (1,281) (1,280)
---------- ----------
Net cash provided by financing activities 44,136 19,383
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (1,423) 1,494
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 16,482 (6,531)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 20,596 35,613
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,078 $ 29,082
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for -
Interest (net of amount capitalized) $ 80,618 $ 85,751
Income taxes $ 11,096 $ 4,114
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
EXIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 2, 2000
(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, 1999 for further information.
The financial information has been prepared in accordance with the Company's
customary accounting practices and has not been audited. 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.
On February 3, 2000, the Company announced that, as a result of an extensive
internal investigation, it had uncovered a transaction that former management
authorized with a related party, improperly deferring a pre-fiscal 1998 charge
until fiscal 1998 and fiscal 1999. This resulted in an increase in earnings of
$696, or $0.03 per diluted share, for the third quarter of fiscal 1999 and
$1,812, or $0.08 per diluted share, for the first nine months of fiscal 1999 to
reverse the erroneous charge in costs of goods sold. The restated results are
reflected in the applicable amounts herein.
There is no difference between the weighted average basic and diluted shares in
the earnings per share calculations for the periods presented because the
effects of outstanding stock options, grants and convertible securities are
antidilutive.
Options to purchase approximately 5.2 million and 2.5 million shares at exercise
prices ranging from $10.125 to $29.50 and $16.625 to $29.50 were outstanding, on
average, during the third quarters of fiscal 2000 and fiscal 1999, respectively,
but were not included in the computation of diluted EPS because the options are
antidilutive. These options expire in the years 2000 to 2009 and 2000 to 2007,
respectively. The current year options include those granted under the 1999
Stock Incentive Plan. See Note 7.
6
<PAGE>
Total comprehensive loss and its components are as follows:
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
--------------------------------------------- ---------------------------------------------
January 2, December 27, January 2, December 27,
2000 1998 2000 1998
------------------ --------------------- ----------------- ----------------------
<S> <C> <C> <C> <C>
Net loss $ (3,643) $(45,223) $ (8,719) $(48,178)
Change in cumulative
translation adjustment (21,121) (1,380) (26,061) 33,827
------------------ --------------------- ----------------- ----------------------
Total comprehensive
loss $(24,764) $(46,603) $(34,780) $(14,351)
================== ===================== ================= ======================
</TABLE>
Certain prior period amounts have been reclassified to conform with current
period presentation.
(2) INVENTORIES
- ----- -----------
Inventories are comprised of:
<TABLE>
<CAPTION>
January 2, March 31,
2000 1999
--------------------- --------------------
<S> <C> <C>
Raw materials $121,820 $132,697
Work-in-process 73,048 74,549
Finished goods 262,125 315,225
--------------------- --------------------
$456,993 $522,471
===================== ====================
</TABLE>
At January 2, 2000 and March 31, 1999, inventories valued by the LIFO method
were approximately 28% and 30% of consolidated inventories, respectively. If
all inventories had been determined using the first-in, first-out method, such
inventories would have been $439,926 and $505,404 at January 2, 2000 and March
31, 1999, respectively.
(3) LONG-TERM DEBT
- --- --------------
As of January 2, 2000, the net fair value of the foreign currency and interest
rate protection agreements was $17,591. These agreements effectively convert
$175,000 debt into 788,756 French francs (U.S. $133,000) and 25,225.2 Pounds
sterling (U.S. $42,000) under the Global Credit Facility. The Company receives
LIBOR and pays PIBOR and pound sterling LIBOR.
(4) 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, releasing, 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. The Company devotes significant resources to attaining and
maintaining compliance with environmental and occupational health and safety
laws and
7
<PAGE>
regulations and does not currently believe that environmental, health or safety
compliance issues will have a material adverse effect on the Company's business
or financial condition. 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")
or state agencies that it is a "Potentially Responsible Party" ("PRP") under the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or similar state laws at 75 federally defined Superfund or state equivalent
sites. At 42 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 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 the liability will be roughly proportionate to its volumetric contribution
of waste to the sites.
Europe
The Company is subject to numerous environmental, health and safety requirements
and is exposed to differing degrees of liabilities, compliance costs, and
cleanup requirements arising from its past and current 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. The Company believes, based upon reports from its foreign
subsidiaries and/or independent qualified opinions, that it is in substantial
compliance with all material environmental, health and safety requirements in
each country.
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.
While the ultimate outcome of the foregoing environmental matters is uncertain,
after consultation with legal counsel, management does not believe the
resolution of these matters, individually or in the aggregate, will have a
material adverse effect on the Company's long-term 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.
8
<PAGE>
The Company has established reserves for on-site and off-site environmental
remediation costs and believes that such reserves are adequate. As of January
2, 2000, the amount of such reserves on the Company's consolidated balance sheet
was $39,555. Of this amount, $28,406 was included in other noncurrent
liabilities. Because environmental liabilities are not accrued until a liability
is determined to be probable and reasonably estimable, not all potential future
environmental liabilities have been included in the Company's environmental
reserves and, therefore, additional future earnings charges are possible.
(5) COMMITMENTS AND CONTINGENCIES
- --- -----------------------------
There have been no significant changes from the March 31, 1999 audited
consolidated financial statements other than the battery separator purchase
agreement disclosed in Note 7.
(6) SEGMENT REPORTING
- ---------------------
The Company operates on a geographic basis and has two main geographic-based
reportable segments, namely, the manufacture, distribution and sale of lead acid
batteries in North America and in Europe. Sales of lead acid batteries are made
both to the aftermarket and original equipment manufacturers. Intersegment
sales are not material. Selected financial information concerning the Company's
reportable segments are as follows:
<TABLE>
<CAPTION>
North Intercompany
America Europe Other (a) Eliminations Consolidated
--------------- --------------- -------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
For the three months
Ended January 2, 2000
- ----------------------------
Net sales to third parties $197,963 $ 414,896 $ 8,111 $ (2,442) $ 618,528
Net income/(loss) (11,857) 15,971 (7,757) -- (3,643)
For the three months
Ended December 27, 1998:
- ----------------------------
Net sales to third parties $213,999 $ 457,336 $ 13,014 $ (5,819) $ 678,530
Net income/(loss) (51,625) 12,399 (5,997) -- (45,223)
For the nine months
Ended January 2, 2000:
- ----------------------------
Net sales to third parties $596,582 $1,072,536 $ 33,697 $ (9,138) $1,693,677
Net income/(loss) (6,956) 10,396 (12,159) -- (8,719)
For the nine months
Ended December 27, 1998:
- ----------------------------
Net sales to third parties $630,521 $1,162,573 $ 41,282 $(10,178) $1,824,198
Net income/(loss) (56,956) 21,391 (12,613) -- (48,178)
</TABLE>
(a) Other includes primarily the operations of the Company's starter and
alternator, charger and accessories businesses.
9
<PAGE>
(7) OTHER
- --- -----
On September 27, 1999, the Company entered into an agreement to acquire a
controlling interest in Lion Compact Energy ("LCE"), a privately held company
conducting research in dual-graphite battery technology. This transaction was
accounted for using the purchase method. The Company paid $3,500 in cash upon
closing in December, 1999 and will pay $11,500, plus certain royalty fees, over
the next several years based upon the performance of LCE and its product
development. The $11,500 consideration in the form of notes payable has been
treated as a non-cash investing activity item in the consolidated statements of
cash flows. The Company has the option to reconvey its interest in LCE at any
time to the seller during this payment period. All payments made are non-
refundable.
In conjunction with the LCE acquisition, the Company recorded a $14,300 write-
off for purchased research and development costs. The purchased in-process
research and development had not yet reached technological feasibility and the
technology had no alternative future use as of the date of closing.
In 1999, the Company sold its battery separator operations for approximately
$50,000, consisting of $26,100 in cash proceeds and the remainder in future
sublease arrangements. Cash proceeds from the sale were used to reduce debt. As
part of the agreement, the Company has entered into a multi-year agreement to
purchase a major portion of its battery separator needs from the buyer. This
agreement includes minimum annual purchase level commitments. The Company
recorded a gain on this sale, net of amounts deferred related to the purchase
agreement, of $9,500.
The Company sold another non-core business in the third quarter of fiscal 2000
with cash proceeds of $6,000.
The Company recorded a net loss (pre-tax) related to asset divestitures of
$3,175 in cost of goods sold in the third quarter of fiscal 2000.
The Board of Directors adopted the 1999 Stock Incentive Plan effective August
11, 1999 under which certain employees of the Company are eligible to be granted
a total of 2,300,000 awards in the form of incentive stock options, nonqualified
stock options or restricted shares of common stock. Substantially all of the
2,300,000 stock options were granted in the second quarter of fiscal 2000 at the
fair market value on the date of grant. Certain of these options will vest
ratably over four years while the remainder will vest over nine years or
immediately upon the Company reaching certain performance measures.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Factors Which Affect Our Financial Performance:
Lead. Lead is the principal raw material used in the manufacture of batteries,
representing approximately one-third of our cost of goods sold. The market
price of lead fluctuates significantly. Generally, when lead prices decrease,
many of our customers seek disproportionate price reductions from us, and when
lead prices increase, customers tend to be more accepting of price increases.
Competition. The automotive battery market in North America and the automotive
and industrial battery markets in Europe are highly competitive. In recent
years, competition has increased and we have come under increasing pressure for
price reductions. Price
10
<PAGE>
competition in Europe has been particularly intense. This price competition has
been exacerbated by an environment of low-priced Asian imports, excess capacity
and declining lead prices.
Exchange Rates. We are exposed to foreign currency risk in most European
countries, principally Germany, France, United Kingdom, Spain, and Italy.
Movements of exchange rates against the U.S. dollar can result in variations in
the U.S. dollar value of our non-US sales. In some instances gains in one
currency may be offset by losses in another.
Weather. Unusually cold winters or hot summers accelerate battery failure and
increase demand for automotive replacement batteries.
RESULTS OF OPERATIONS
- ---------------------
Three months ended January 2, 2000 compared with the three months ended December
- --------------------------------------------------------------------------------
27, 1998.
- ---------
Net sales decreased 8.8% ($60 million) to $618.5 million in the third quarter of
fiscal 2000 from $678.5 million in the third quarter of fiscal 1999.
Approximately 7% of the 8.8% decrease resulted from the strengthening of the
U.S. dollar versus European currencies. Also contributing to this decrease was a
decline in automotive volume in North America and continued pricing erosion in
Europe. In addition, the fiscal year 1999 third quarter included significant low
margin sales to Sears. Industrial battery sales for the third quarter of fiscal
2000 were $193.7 million versus $195.2 million in the third quarter of fiscal
1999.
Gross profit increased 4.6% ($7.7 million) in the third quarter of fiscal 2000
compared to the same period in the prior year. Weakening European currencies
versus the U.S. dollar negatively impacted gross profit by approximately 9%.
Contributing to the gross profit increase were non-recurring charges of $21.8
million that were recorded in fiscal 1999 that were partially offset by a net
charge of $3.2 million related to the divestiture of non-core businesses in
fiscal 2000. The gross profit margin was 27.9% in the third quarter of fiscal
2000 compared to 24.3% in the third quarter of fiscal 1999. Improvement in
North America occurred due to the elimination of certain low margin business
(primarily Sears) and higher margins associated with better product and customer
mix. The gross profit margin was unfavorably impacted by weaker European
automotive pricing and a more demand driven manufacturing/production schedule
which adversely impacted overhead absorption.
Operating expenses decreased 9.4% ($14.0 million) to $135.6 million in the third
quarter of fiscal 2000 from $149.6 million in the third quarter of fiscal 1999.
Weaker European currencies accounted for approximately 6% of this 9.4% decrease.
A $14.3 million non-recurring write-off of in-process research and development
costs related to the acquisition of a controlling interest in LCE in the third
quarter of fiscal 2000 was offset by non-recurring charges of $17.5 million that
were recorded in the third quarter of fiscal 1999. The remainder of the decrease
was due to general operating efficiencies achieved in Europe in the current
year, partially offset by increased selling, general and administrative costs in
North America.
Operating income increased $21.7 million as a result of improvement in North
American average selling price, improvement in the European industrial business,
continued European manufacturing efficiencies as well as the other matters
discussed above.
Interest expense decreased $2.7 million to $27.1 million from $29.8 million as a
result of a lower level of borrowings in the third quarter of fiscal 2000 along
with weaker European currencies.
11
<PAGE>
Other expense, net was $4.2 million in the third quarter of fiscal 2000 versus
$12.2 million in the third quarter of fiscal 1999. The decrease of $8.0 million
related primarily to a $6.0 million charge for an amendment fee for an interest-
rate swap agreement that was recorded in the third quarter of fiscal 1999. In
addition, $1.6 million of currency transaction losses were recorded in the third
quarter of fiscal 2000 versus $2.9 million recorded in the same period of fiscal
1999.
The Company recorded income tax expense of $8.4 million on income before income
taxes and minority interest of $5.5 million for the third quarter of fiscal 2000
compared to income tax expense of $18.5 million on a loss before income taxes,
minority interest and extraordinary loss of $(26.9 million) for the third
quarter of fiscal 1999. The difference between the federal statutory rate and
the effective rate is primarily due to certain nondeductible goodwill,
nondeductible in-process research and development write-offs in the current
year, differences in rates on foreign subsidiaries and losses in certain tax
jurisdictions not benefited, including the U.S. in the prior year.
The net loss decreased primarily as a result of the items discussed above.
Nine months ended January 2, 2000 compared with the nine months ended December
- ------------------------------------------------------------------------------
27, 1998.
- ---------
Net sales decreased 7.2% ($130.5 million) to $1,693.6 million for the first nine
months of fiscal 2000 from $1,824.1 million for the same period last year.
Approximately 5% of the 7.2% decrease resulted from the strengthening of the
U.S. dollar versus European currencies. Also contributing was a decline in
automotive volume in North America and continued pricing erosion in Europe. In
addition, the first nine months of fiscal year 1999 included significant low
margin sales to Sears. Industrial battery sales for the first nine months of
fiscal 2000 were $531.1 million versus $552.2 million in the first nine months
of fiscal 1999.
Gross profit decreased 3.4% ($15.8 million) for the first nine months of fiscal
2000 compared to the same period in the prior year. Weakening European
currencies versus the U.S. dollar accounted for a decrease of approximately 5%.
Mitigating the foreign currency effects were non-recurring charges of $21.8
million recorded in fiscal 1999 that were partially offset by a net charge of
$3.2 million related to the divestiture of non-core businesses in fiscal 2000.
The gross profit margin increased to 26.6% in the first three quarters of fiscal
2000 from 25.6% for the same period in fiscal 1999. The increase in gross profit
related to an improvement in North America due to the elimination of certain low
margin business (primarily Sears) and higher margins associated with better
product and customer mix. Offsetting this was weaker European automotive
pricing and a more demand driven manufacturing/production schedule which
adversely impacted overhead absorption.
Operating expenses decreased 6.8% ($26.4 million) to $363.7 million for the
first nine months of fiscal 2000 from $390.1 million for the first nine months
of fiscal 1999. Weaker European currencies accounted for approximately 4% of
this 6.8% decrease. A $14.3 million non-recurring write-off of in-process
research and development costs related to the acquisition of a controlling
interest in Lion Compact Energy in fiscal 2000 was offset by non-recurring
charges of $22.2 million that were recorded in fiscal 1999. The remainder of
the decrease was due to general operating efficiencies achieved in the current
year.
Operating income increased $10.7 million as a result of the matters discussed
above.
Interest expense decreased $4.1 million to $79.1 million from $83.2 million as a
result of a lower level of borrowings for the first three quarters of fiscal
2000 along with weaker
12
<PAGE>
European currencies.
Other expense, net was $6.9 million for the first three quarters of fiscal 2000
versus $18.1 million in the first three quarters of fiscal 1999. The decrease
of $11.2 million related to lower net currency transaction losses, a $6.0
million amendment fee for an interest swap agreement that was recorded in fiscal
1999, and insurance proceeds recorded in fiscal 2000 related to a fire.
The Company recorded income tax expense of $8.9 million on income before income
taxes and minority interest of $1.5 million for the first nine months of fiscal
2000 compared to income tax expense of $23.6 million on a loss before income
taxes, minority interest and extraordinary loss of $(24.5 million) for the first
nine months of fiscal 1999. The difference between the federal statutory rate
and the effective rate is primarily due to certain nondeductible goodwill,
nondeductible in-process research and development write-offs in the current
year, differences in rates on foreign subsidiaries and losses in certain tax
jurisdictions not benefited, including the U.S. in the prior year.
The net loss decreased primarily as a result of the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's liquidity requirements arise primarily from the funding of
seasonal working capital needs, obligations on its indebtedness and capital
expenditures. Historically, the Company has met these liquidity requirements
through operating cash flows, with borrowed funds and with the proceeds of sales
of accounts receivable. During the rest of fiscal 2000 and beyond, the Company
expects to meet its liquidity requirements in the same manner. The Company has
also realized cash proceeds in fiscal 2000, and will realize additional cash
proceeds through fiscal 2001 from the sale of other non-core businesses.
Because of the seasonality of the Company's business, more funds are typically
generated in its third and fourth fiscal quarters. The Company's greatest cash
demands from operations occur during the months of June through October.
The Company is party to a U.S. receivables purchase agreement and a European
receivables purchase agreement under which the other parties have committed
(subject to certain exceptions) to purchase selected accounts receivable of the
Company, up to a maximum commitment of $75.0 million and $175.0 million,
respectively.
Cash used in operating activities was $26.1 million in the nine months ended
January 2, 2000 compared to cash provided by operating activities of $24.7
million in the nine months ended December 27, 1998. This change relates
primarily to cash payments made in the first nine months of fiscal 2000 related
to one-time charges recorded in fiscal 1999, lower receivables sales and the
timing of certain vendor payments.
The Company's capital expenditures were $44.8 million and $60.0 million in the
nine months ended January 2, 2000 and December 27, 1998, respectively. The
Global Credit Facility restricts the amount of capital expenditures which may be
made by the Company and its subsidiaries. However, the Company believes that it
has sufficient resources for its capital expenditure programs from operating
cash flows and borrowing availability under its existing Global Credit Facility.
As of January 2, 2000, the Company had $104.2 million available on
13
<PAGE>
its Global Credit Facility, including letters of credit.
Obligations under the Global Credit Facility 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 Global Credit
Facility is secured by guarantees of the European subsidiaries and certain fixed
assets, inventory and receivables.
The Company has an interest rate collar agreement which reduces the impact of
changes in interest rates on a portion of the Company's floating rate debt. The
collar agreement effectively limits the PIBOR based interest rate on 593.1
million French francs (U.S. $100 million) of borrowings to no more than 6.6% and
no less than 3.5% through December 23, 2000. The Company has two currency and
interest rate swap agreements which effectively convert $175 million of
borrowings under the Global Credit Facility into 788.8 million French francs
(U.S. $133 million) and 25.2 million British pound sterling (U.S. $42 million).
The Company receives LIBOR and pays PIBOR and pound sterling LIBOR.
In November 1999, the Company sold its battery separator operations for
approximately $50 million, consisting of $26.1 million in cash proceeds and the
remainder in future sublease arrangements. Cash proceeds from sales of non-core
businesses, including the battery separator operations, and certain fixed assets
aggregated $46.5 million in the first nine months of fiscal 2000. Cash proceeds
from the sales were used primarily to reduce debt.
As of January 2, 2000, the Company has significant net operating loss
carryforwards in Europe and in the United States which are available, subject to
certain restrictions, to offset future U.S. and European taxable income.
YEAR 2000 ISSUE
- ---------------
We successfully achieved Year 2000 compliance during the third quarter of fiscal
2000. We are not aware of any open matters, however, we continue to monitor Year
2000 compliance internally and with our vendors. Costs for Year 2000
remediations were approximately $4.3 million, which is consistent with prior
period estimates. These costs were expensed as incurred with the exception of
capitalizable replacement hardware.
CONVERSION TO THE EURO CURRENCY
- -------------------------------
On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and a common currency,
the Euro. We conduct significant business in these member countries. The
transition period for the introduction of the Euro is between January 1, 1999
and June 30, 2002. We have addressed the issues involved with the introduction
of the Euro and continue to address related issues with its ongoing
implementation. The more important issues facing us include:
. Converting information technology systems,
. Reassessing currency risk,
14
<PAGE>
. Negotiating and amending contracts, and
. Processing tax and accounting records.
Based upon progress to date, we believe that use of the Euro has not and will
not have a significant impact on the manner in which we conduct our business
affairs and process our business and accounting records. Accordingly,
conversion to the Euro has not and is not expected to have a material effect on
our financial condition or results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
There have been no significant changes to the quantitative and qualitative
market risks in the current year. See Form 10-K for the fiscal year ended
March 31, 1999 for this information.
15
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE
SAFE HARBOR PROVISION OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information, this report may be deemed to contain
"forward-looking" statements. The Company desires to avail itself of the Safe
Harbor provisions of the Private Securities Litigation Reform Act of 1995 (the
"Act") and is including this cautionary statement for the express purpose of
availing itself of the protection afforded by the Act.
Examples of forward-looking statements include, but are not limited to (a)
projections of revenues, cost of raw materials, income or loss, earnings or loss
per share, capital expenditures, growth prospects, dividends, the effect of
currency translations, capital structure and other financial items, (b)
statements of plans of and objectives of the Company or its management or Board
of Directors, including the introduction of new products, or estimates or
predictions of actions by customers, suppliers, competitors or regulating
authorities, (c) statements of future economic performance and (d) statements of
assumptions, such as the prevailing weather conditions in the Company's market
areas, underlying other statements and statements about the Company or its
business.
The Company's core business, the design, manufacture and sale of lead acid
batteries, and the Company's structure involves risk and uncertainty. Important
factors that could affect the Company's results include, but are not limited to
(i) unseasonable weather (warm winters and cool summers) which adversely affects
demand for automotive and some industrial batteries, (ii) the Company's
substantial debt and debt service requirements which restrict the Company's
operational and financial flexibility, as well as imposing significant interest
and financing costs, (iii) the Company is subject to a number of litigation
proceedings, the results of which could have a material adverse effect on the
Company and its business, (iv) the Company's assets include the tax benefits of
net operating loss carry forwards, realization of which are dependent upon
future taxable income and implementation of certain tax planning strategies, (v)
lead, which experiences significant fluctuations in market price and which, as a
hazardous material, may give rise to costly environmental and safety claims, can
affect the Company's results because it is a major constituent in most of the
Company's products, (vi) the battery markets in North America and Europe are
very competitive and, as a result, it is often difficult to maintain margins,
(vii) the Company's consolidation and rationalization of acquired European
entities requires substantial management time and financial and other resources
and is not without risk, and (viii) foreign operations involve risks such as
disruption of markets, changes in import and export laws, currency restrictions
and currency exchange rate fluctuations. Therefore, the Company cautions each
reader of this report to carefully consider those factors here-in-above set
forth, because such factors have, in some instances, affected and in the future
could affect, the ability of the Company to achieve its projected results and
may cause actual results to differ materially from those expressed herein.
16
<PAGE>
PART II. OTHER INFORMATION
- ---------------------------------
Item 1. Legal Proceedings.
Exide is now or recently has been involved in several lawsuits pending in state
and federal courts in Alabama, California, Mississippi, Pennsylvania, South
Carolina, Tennessee and Texas, some of which were brought as purported class
actions. These actions allege that Exide sold old or used batteries as new
batteries, sold defective and mislabeled batteries and improperly credited
customer accounts and seek compensatory and punitive damages and, in one case,
injunctive relief. The following lawsuits of this type are currently pending:
Exide v. East Alabama Auto Parts Anniston, Inc., Circuit Court for Calhoun
County, Alabama, Dynamic Enterprises v. Exide, United States District Court for
the Eastern District of Texas, Martin v. Exide, United States District Court for
the District of South Carolina, Mathis Battery Company, et al. v. Exide,
Chancery Court for Weakley County, Tennessee, Gamma Group, et al. v. Exide,
United States District Court for the Eastern District of Pennsylvania, Mills v.
Exide, United States District Court in the Central District of California and
Lush, et al. v. Exide, United States District Court in the Southern District of
Mississippi. On limited occasions before 1996, certain managers at the Company
permitted batteries that had been installed to be returned and resold as new.
Some of the other acts complained of in these cases may also have occurred. The
Company's defense of these cases (and of similar cases which it has defended in
the past) therefore rests primarily on the low incidence of any such occurrence,
the Company's warranty program addressing any problem caused by any such
occurrence, and the consequent lack of damage to any plaintiff. The Dynamic,
Martin and Mathis cases are purported class actions, none of which has yet been
certified by the courts. Class certification hearings in these cases are
expected to begin in mid-2000. We cannot assure you that we will be successful
in the defense of these claims or that additional claims will not be brought.
On May 3, 1999, we went to trial in the case of Exide v. East Alabama Auto Parts
Anniston, Inc., Circuit Court of Calhoun County, Alabama. The case involved our
breach of contract claim against East Alabama to collect an outstanding
receivable of $13,000 and their breach of contract and fraud counterclaims,
alleging that Exide sold them defective batteries. The jury returned a verdict
for Exide on its breach of contract claim, for Exide on the East Alabama's
breach of contract counterclaim and for East Alabama on its fraud counterclaim.
The jury awarded zero compensatory damages and $1.5 million punitive damages.
The judge declared a mistrial due to the inconsistency between the compensatory
damages verdict and the punitive damages awarded. In early November 1999, the
Attorney General of Alabama was permitted, over the Company's objection, to
intervene in this case with a new complaint alleging that the Company has caused
used batteries to be sold as new to consumers in Alabama from 1993 until the
present. The new complaint seeks injunctive relief and damages. Exide filed a
writ of mandamus with the Alabama Supreme Court seeking to overturn the decision
allowing the Alabama Attorney General to intervene. In early January 2000 the
Alabama Supreme Court stayed the case and ordered the presiding judge, the
Alabama Attorney General, and East Alabama Auto Parts to file a response to
Exide's petition by January 18, 2000 and Exide to reply by January 25, 2000.
The parties have briefed the issue and await ruling from the Alabama Supreme
Court.
17
<PAGE>
In December 1999, the Mississippi Attorney General issued a subpoena to Exide.
The Attorney General is investigating the sale of alleged defective and used
batteries, alleged mislabeling of batteries, alleged improper crediting of
customer accounts and alleged misleading investor information. The Company is
actively cooperating with the Mississippi Attorney General.
As previously reported, Exide has brought certain issues to the attention of the
Securities and Exchange Commission and is voluntarily responding to the
Commission's follow-up inquiries.
On September 17, 1999, Exide sued Sears, Roebuck and Co. in the Circuit Court of
Cook County, Illinois seeking damages for breach of contract in an amount not
less than $15 million. On November 12, 1999, Sears filed a counterclaim against
Exide and a claim against a former Sears purchasing employee alleging inducement
to breach his fiduciary duty to Sears, common law fraud, aiding and abetting and
conspiracy. On December 17, 1999, Exide responded to Sears' counterclaim and
filed a third-party complaint against former Chief Executive Officer Arthur
Hawkins, former Chief Financial Officer Alan Gauthier, and former Executive Vice
President Douglas Pearson.
We are currently involved in litigation with certain former members of senior
management over their separation agreements. This case, Arthur M. Hawkins v.
Exide, U.S. District Court for the Eastern District of Michigan, involves claims
by Mr. Hawkins to enforce his separation agreement with Exide and a counterclaim
by Exide seeking a declaration that the separation agreement is void and a
return of all consideration paid thereunder. Messrs. Gauthier and Pearson have
filed actions, Gauthier v. Exide and Pearson v. Exide, respectively, in the U.S.
District Court for the Eastern District of Pennsylvania alleging breach of
contract. Exide has filed counterclaims against Messrs. Gauthier and Pearson
asserting fraud, breach of fiduciary duty, misappropriation of corporate assets
and civil conspiracy.
Exide is now involved in several lawsuits pending in state and federal courts in
South Carolina and Pennsylvania. These actions allege that Exide and its
predecessors allowed hazardous materials used in the battery manufacturing
process to be released from certain of its facilities, allegedly resulting in
personal injury and/or property damage. Byars v. Exide, currently pending in
the United States District Court, District of South Carolina, is a lawsuit of
this type. In addition, the following lawsuits of this type are currently
pending in the Circuit Court for Greenville County, South Carolina: Joshua
Lollis v. Exide; Buchanan v. Exide; Agnew v. Exide; Patrick Miller v. Exide;
Kelly v. Exide; Amanda Thompson v. Exide; Jonathan Talley v. Exide; Smith v.
Exide; Lakeisha Talley v. Exide; Brandon Dodd v. Exide; Prince v. Exide; Andriae
Dodd v. Exide; Dominic Thompson v. Exide; Snoddy v. Exide; Antoine Dodd v.
Exide; Roshanda Talley v. Exide; Fielder v. Exide; Rice v. Exide; Logan Lollis
v. Exide and Dallis Miller v. Exide. Finally, the following lawsuits of this
type are currently pending in the Court of Common Pleas for Berks County,
Pennsylvania: Grillo v. Exide; Blume v. Exide; Esterly v. Exide and Saylor v.
Exide. The Company believes that most, if not all of these claims are without
merit, and intends to defend itself vigorously. Nevertheless, we cannot assure
you that we will be successful in the defense of these claims, or that
additional claims will not be brought.
We are also involved in various other claims and litigation incidental to the
conduct of our business. For a discussion of environmental issues relating to
our business, see Note 4
18
<PAGE>
to our Condensed Consolidated Financial Statements.
Item 2. Changes in Securities and Use of Proceeds. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 10.30 - Nonqualified Stock Option Agreement for Robert A
Lutz.
Exhibit 99 - Press Release dated February 3, 2000.
(b) Reports on Form 8-K. None.
19
<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 16, 2000 By: /s/ James M. Diasio
-------------------------------- ---------------------------
James M. Diasio
Executive Vice President
and Chief Financial Officer
20
<PAGE>
EXIDE CORPORATION
AMENDED AND RESTATED
NONQUALIFIED STOCK OPTION AGREEMENT
This Amended and Restated Nonqualified Stock Option Agreement (this
"Agreement"), is made as of January 11, 2000 by Exide Corporation, a Delaware
corporation (the "Company"), in favor of Robert A. Lutz (the "Optionee"). This
Agreement amends and restates the Nonqualified Stock Option Agreement, made as
of November 10, 1998, made by the Company in favor of the Optionee.
As a material inducement to Optionee's agreement to become employed by the
Company, on November 10, 1998 (the "Grant Date") the Company granted to the
Optionee an option (the "Option") to acquire 1,800,000 shares of the Company's
common stock, par value $.01 per share (the "Option Shares").
Although the Option was not granted pursuant to a stock option plan, the
Option was originally subject to the administrative provisions of the Company's
1993 Long-Term Incentive Plan. However, following the adoption of the Company's
1999 Stock Incentive Plan (the "Plan"), the Compensation Committee of the Board
of Directors, at a meeting held January 11, 2000 determined that it would be
desirable for the Option to be subject to the administrative provisions of the
Plan and accordingly approved this Agreement. Certain terms used herein are
defined in paragraph 7 below.
The parties hereto hereby agree as follows:
1. Option. Subject to the terms and conditions set forth herein and
------
in the Plan, the Optionee has been granted an Option to purchase the Option
Shares at a price per share of $10.13 (the "Exercise Price"), payable upon
exercise as set forth in Section 7(c) of the Plan. The Option shall expire at
the close of business on the tenth anniversary of the Grant Date (the
"Expiration Date"), subject to earlier expiration as provided in Section 7(b)(2)
of the Plan. The Exercise Price and the number and kind of shares of the
Company's Common Stock or other property for which the Option may be exercised
shall be subject to adjustment as provided in Section 9 of the Plan. The Option
is not intended to qualify as an "incentive stock option" within the meaning of
Section 422 of the Code.
2. Exercisability/Vesting.
----------------------
(a) Normal Vesting. The Option granted hereunder may be exercised
--------------
only to the extent it has become vested. The Option shall vest in three equal
installments on each of the first three anniversaries of the Grant Date for so
long as the Optionee is an officer or employee of the Company and shall become
fully vested on the third anniversary of the Grant Date.
1
<PAGE>
(b) Vesting Under Certain Circumstances. Notwithstanding paragraph
-----------------------------------
2(a) above, under certain circumstances the vesting rules in Section 7(b)(2) of
the Plan shall apply.
3. Procedure for Exercise. Subject to the terms of this Agreement
----------------------
and the Plan, the Optionee may exercise all or any portion of the Option by
delivering written notice to the Company in the form attached hereto as Exhibit
-------
A together with payment of the Exercise Price in accordance with the provisions
- -
of Section 7(c) of the Plan. The Option may not be exercised for a fraction of
an Option Share.
4. Conformity with Plan. The Option is not granted pursuant to a
--------------------
stock option plan, however, the Option is intended to conform in all respects
with, and is subject to the administrative provisions of, the Plan (which is
incorporated herein by reference). Inconsistencies between this Agreement and
the Plan shall be resolved in accordance with the terms of the Plan.
5. Rights of Optionee. Nothing in this Agreement shall interfere
------------------
with or limit in any way the right of the Company to terminate the Optionee's
employment at any time (with or without cause), nor confer upon the Optionee any
right to continue in the employ of the Company for any period of time or to
continue his or her present (or any other) rate of compensation.
6. Withholding of Taxes. Withholding of taxes in connection with
--------------------
the exercise of the Option shall occur in accordance with Section 13 of the
Plan.
7. Certain Definitions. For the purposes of this Agreement, the
-------------------
following terms shall have the meanings set forth below:
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
any successor statute.
"Common Stock" shall mean the Company's common stock, par value $.01
------------
per share.
"Company" shall mean Exide Corporation, a Delaware corporation, and
-------
(except to the extent the context requires otherwise) any subsidiary corporation
of the Company as such term is defined in Section 424(f) of the Code.
"Option Shares" shall mean (i) all shares of Common Stock issued or
-------------
issuable upon the exercise of the Option and (ii) all shares of Common Stock
issued with respect to the Common Stock referred to in clause (i) above by way
of stock dividend or stock split or in connection with any conversion, merger,
consolidation or recapitalization or other reorganization affecting the Common
Stock.
* * * * *
2
<PAGE>
SIGNATURE PAGE TO AMENDED AND RESTATED STOCK OPTION AGREEMENT
IN WITNESS WHEREOF, the Company has executed this Agreement as of January
11, 2000.
Optionee: Robert A. Lutz
Number of Option Shares: 1,800,000
Exercise Price: $10.13 per share
Grant Date: November 10, 1998
Normal Vesting: 600,000 Option Shares on November 10, 1999
600,000 Option Shares on November 10, 2000
600,000 Option Shares on November 10, 2001
EXIDE CORPORATION
By:________________________
Alan C. Johnson
President and COO
OPTIONEE
Robert A. Lutz
3
<PAGE>
EXHIBIT A
FORM OF LETTER TO BE USED TO EXERCISE STOCK OPTION
___________
Date
Exide Corporation
645 Penn Street
Reading, Pennsylvania 19601
I wish to exercise the stock option granted on November 10, 1998 and
evidenced by an Amended and Restated Nonqualified Stock Option Agreement, dated
as of January 11, 2000 (the "Agreement"), to acquire __________ shares of Common
Stock of Exide Corporation, at an exercise price of $10.13 per share. In
accordance with the provisions of paragraph 1 of the Agreement, I wish to make
payment of the exercise price (please check all that apply):
[ ] in cash
[ ] by delivery of a promissory note
[ ] by delivery of shares of Common Stock held by me
[ ] by simultaneous sale through a broker of Option Shares
Please issue a certificate for these shares in the following name:
______________________________
Name
______________________________
Address
______________________________
Very truly yours,
____________________________
Signature
____________________________
Typed or Printed Name
____________________________
Social Security Number
4
<PAGE>
EXIDE CORPORATION
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement, is made effective as of November
10, 1998, by Exide Corporation, a Delaware corporation (the "Company"), in favor
of Robert A. Lutz (the "Optionee").
As a material inducement to Optionee's agreement to become employed by the
Company, on November 10, 1998 the Company granted to the Optionee an option (the
"Option") to acquire 1,800,000 shares of the Company's common stock, par value
$.01 per share, at an exercise price of $10.13 per share. Although not granted
pursuant to a stock option plan, the Option is subject to the administrative
provisions of the Company's 1993 Long-Term Incentive Plan.
IN WITNESS WHEREOF, the Company has executed this Agreement effective as of
November 10, 1998.
EXIDE CORPORATION
By:__________________
Alan C. Johnson
President and COO
5
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JAN-02-2000
<CASH> 37,078
<SECURITIES> 0
<RECEIVABLES> 510,759
<ALLOWANCES> 58,575
<INVENTORY> 456,993
<CURRENT-ASSETS> 976,246
<PP&E> 857,865
<DEPRECIATION> 368,983
<TOTAL-ASSETS> 2,127,022
<CURRENT-LIABILITIES> 572,961
<BONDS> 1,176,486
0
0
<COMMON> 214
<OTHER-SE> 115,282
<TOTAL-LIABILITY-AND-EQUITY> 2,127,022
<SALES> 1,693,677
<TOTAL-REVENUES> 1,693,667
<CGS> 1,242,479
<TOTAL-COSTS> 1,242,479
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,988
<INTEREST-EXPENSE> 79,059
<INCOME-PRETAX> 1,526
<INCOME-TAX> 8,897
<INCOME-CONTINUING> (8,719)
<DISCONTINUED> 0
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<NET-INCOME> (8,719)
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<PAGE>
PRESS RELEASE
EXIDE CORPORATION
FOR IMMEDIATE RELEASE INVESTOR CONTACT:
- --------------------- -------------------------
Bruce Boyle: 610-378-0872
MEDIA CONTACT:
-------------------------
Mike Geylin: 212-315-0039
EXIDE ANNOUNCES RESULTS
-----------------------
FOR ITS THIRD FISCAL QUARTER
----------------------------
READING, PA - FEBRUARY 3, 2000 - Exide Corporation (NYSE:EX), the global
leader in the lead-acid battery business, today reported results for its third
fiscal quarter, ended January 2, 2000.
Excluding non-recurring charges related to acquisitions or divestitures in
the quarter, it was the company's second consecutive profitable quarter under
new management and its most profitable quarter in two years.
Net income for the quarter, excluding non-recurring items, was $12.6
million, or $.59 per diluted share, as compared to net income, excluding non-
recurring items, of $2.5 million, or $.12 per diluted share in the same quarter
last year. The results of last year's third quarter were adversely affected by
the company's inability to benefit from U.S. tax losses in that quarter.
The company also announced that as a result of a recently completed
extensive internal investigation, it has uncovered a transaction that former
management authorized with a related party, improperly deferring a pre-fiscal
1998 charge until fiscal 1998 and 1999. Therefore, the company will restate
earnings for fiscal year 1999. This will result in an increase in earnings of
$0.7 million, or $.03 per diluted share for the third quarter of fiscal 1999 and
$1.8 million, or $.08 per diluted share, for the first nine months of fiscal
1999 to reverse the erroneous charge. This restatement will be reflected in the
company's third quarter 2000 Form10-Q due on February 16, 2000. The company is
also examining certain other transactions for interim periods prior to fiscal
1999. The
Page 1
<PAGE>
quarterly impact, if any, of these other transactions will not affect annual
results. This examination is expected to be completed within 60 days.
The third fiscal quarter ended January 2, 2000 was affected by non-
recurring items including a $14.3 million write-off of in-process research and
development costs related to the acquisition of a controlling interest in Lion
Compact Energy in December 1999 and a net charge of $3.2 million related to the
divestiture of non-core businesses.
James M. Diasio, Chief Financial Officer at Exide Corporation, said, "We
are satisfied with these results, particularly in a quarter when North American
automotive revenues were significantly off due to unusually warm weather over
the three-month period and overall results were negatively influenced by a
strong dollar versus European currencies."
The company also announced that as a result of decreased demand for
automotive batteries in North America, it will lay off 58 workers at its
manufacturing operation in Reading, PA. on February 4, 2000.
Revenues for the quarter were $618.5 million, as compared to revenues of
$678.5 million for the third fiscal quarter last year.
Including non-recurring items, the company recorded a loss of ($3.6)
million, or ($.17) per diluted share for the third fiscal quarter, as compared
to a restated net loss of ($45.2) million, or ($2.13) per diluted share for the
same quarter last year.
Excluding non-recurring items, net income for the nine months ended January
2, 2000 was $7.5 million, or $.35 per diluted share, as compared to net income
of $4.4 million, or $.21 per diluted share for the first nine months of the last
fiscal year. The results of last year's first nine months were also adversely
affected by the company's inability to benefit from U.S. tax losses.
Revenues for the nine months ended January 2, 2000 were $1.7 billion, as
compared to $1.8 billion in the first nine months of the prior fiscal year.
Robert A. Lutz, Chairman and Chief Executive Officer at Exide, said, "We
continued to make significant progress during the third quarter. We were
particularly encouraged by improved performance in Europe, especially in our
standby battery business."
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In other previously announced news during the quarter the company:
. Completed the acquisition of a controlling interest in Lion Compact Energy, a
privately held company conducting research in dual-graphite battery
technology.
. Reached an agreement with Tractor Supply Company to supply 275,000 batteries
annually.
. Reached an agreement to sell its battery separator operations in Corydon, IN
for approximately $26 million in cash.
. Completed the sale of its Speed Clip accessories business, receiving
approximately $6 million in cash.
The company will conduct an analyst call to discuss third quarter earnings on
February 4, 2000 at 11 AM eastern standard time. The call is available to
investors in a listen-only format on the internet at www.streetfusion.com. The
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call will be repeated on webcast from February 4, 2000 at 1 PM until February
12, 2000 at 1:45 AM at the same internet address.
Exide Corporation, with annual revenues of approximately $2.4 billion and
operations in 19 countries, is the world's largest manufacturer of automotive
and industrial lead-acid batteries. Further information about Exide's businesses
and products is available at www.exideworld.com.
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Certain statements in this press release may constitute forward-looking
statements as defined by the Securities Litigation Reform Act of 1995. As such,
they involve known and unknown risks, uncertainties and other factors which may
cause the actual results of the Company to be materially different from any
results expressed or implied by such forward-looking statements. These are
enumerated in further detail in the Company's Form 10-K.
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