-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qgwoe1iByt7hxoSq9tW4nB/uhqwTfatq2xoMU+a476vtv/E7565/jLhZKuT98VZP ejLhtpeTwG0fV0jQuCOx5w== 0000950109-97-005403.txt : 19970814 0000950109-97-005403.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950109-97-005403 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970629 FILED AS OF DATE: 19970813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXIDE CORP CENTRAL INDEX KEY: 0000813781 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 230552730 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11263 FILM NUMBER: 97659554 BUSINESS ADDRESS: STREET 1: 1400 N WOODLAND AVE CITY: BLOOMFIELD HILL STATE: MI ZIP: 48304 BUSINESS PHONE: 8102580080 10-Q 1 FORM 10-Q 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 June 29, 1997 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) (248) 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 August 11, 1997, 21,385,278 shares of common stock were outstanding. EXIDE CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS PART I. FINANCIAL INFORMATION - ---------------------------------- Item 1. Financial Statements (unaudited except for March 31, 1997 Consolidated Balance Sheet). -- Condensed Consolidated Balance Sheets - - June 29, 1997 and March 31, 1997. -- Condensed Consolidated Statements of Operations - - for the three months ended June 29, 1997 and June 30, 1996. -- Consolidated Statements of Cash Flows - - for the three months ended June 29, 1997 and June 30, 1996. -- Notes to Condensed Consolidated Financial Statements - - June 29, 1997. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION - ------------------------------ Item 4. Submission of Matters to a Vote of Security Holders 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 EXIDE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per-share data)
June 29, March 31, 1997 1997 (Unaudited) --------------- --------------- ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 27,780 $ 42,706 Receivables, net of allowance for doubtful accounts of $38,851 and $38,486 536,970 569,683 Inventories 562,718 533,514 Prepaid expenses and other 20,385 21,889 Deferred income taxes 26,797 23,667 --------------- --------------- Total current assets 1,174,650 1,191,459 --------------- --------------- PROPERTY, PLANT AND EQUIPMENT 796,973 797,772 Less - Accumulated depreciation (290,087) (275,936) --------------- --------------- Total property, plant and equipment, net 506,886 521,836 --------------- --------------- OTHER ASSETS: Goodwill, net 573,683 596,254 Investments in affiliates 23,895 24,016 Deferred financing costs, net 25,954 26,770 Deferred income taxes 39,656 40,306 Other 35,874 37,854 --------------- --------------- 699,062 725,200 --------------- --------------- Total assets $ 2,380,598 $ 2,438,495 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Short-term borrowings $ 19,691 $ 16,123 Current maturities of long-term debt 37,102 37,488 Accounts payable, trade 224,586 236,889 Accrued expenses 242,241 270,519 --------------- --------------- Total current liabilities 523,620 561,019 --------------- --------------- LONG-TERM DEBT 1,271,251 1,236,071 --------------- --------------- OTHER NONCURRENT LIABILITIES 235,481 250,547 --------------- --------------- COMMITMENTS AND CONTINGENCIES MINORITY INTEREST 18,282 19,448 --------------- --------------- STOCKHOLDERS' EQUITY Common stock, $.01 par value 60,000,000 shares authorized; 21,336,067 and 21,336,757 shares issued and outstanding 213 213 Additional paid-in capital 489,455 489,427 Accumulated deficit (36,746) (21,569) Notes receivable - stock award plan (1,675) (1,696) Unearned compensation (467) (516) Minimum pension liability adjustment (4,993) (4,993) Cumulative translation adjustment (113,823) (89,456) --------------- --------------- Total stockholders' equity 331,964 371,410 --------------- --------------- Total liabilities and stockholders' equity $ 2,380,598 $ 2,438,495 =============== ===============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 2 EXIDE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except share and per-share data)
For the Three Months Ended ---------------------------------- June 29, June 30, 1997 1996 -------------- -------------- NET SALES $ 490,365 $ 556,020 COST OF SALES 366,057 425,319 -------------- -------------- Gross profit 124,308 130,701 -------------- -------------- OPERATING EXPENSES: Selling, marketing and advertising 68,813 72,847 General and administrative 31,157 39,589 Goodwill amortization 4,118 4,552 -------------- -------------- 104,088 116,988 -------------- -------------- Operating income 20,220 13,713 INTEREST EXPENSE 29,264 30,756 OTHER EXPENSE (INCOME), net 2,251 (360) -------------- -------------- Income (loss) before income taxes, minority interest and extraordinary loss (11,295) (16,683) INCOME TAX PROVISION (BENEFIT) (3,559) (5,005) -------------- -------------- Income (loss) before minority interest and extraordinary loss (7,736) (11,678) MINORITY INTEREST (291) (559) -------------- -------------- Income (loss) before extraordinary loss (7,445) (11,119) EXTRAORDINARY LOSS RELATED TO EARLY RETIREMENT OF DEBT, net of income tax benefit of $0 (7,313) - - -------------- -------------- Net income (loss) $ (14,758) $ (11,119) ============== ============== NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: Income (loss) before extraordinary loss $ (0.35) $ (0.53) Extraordinary loss (0.34) - - -------------- -------------- Net income (loss) $ (0.69) $ (0.53) ============== ============== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 21,246,700 20,824,419 ============== ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 3 EXIDE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)
For the Three Months Ended --------------------------------- June 29, June 30, 1997 1996 -------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (14,758) $ (11,119) Adjustments to reconcile net income (loss) to net cash used in operating activities - Depreciation and amortization 27,751 30,851 Extraordinary loss 7,313 - - Deferred income taxes 1,657 (2,607) Original issue discount on notes 3,308 4,643 Provision for losses on accounts receivable 1,701 1,800 Minority interest (291) (559) Changes in assets and liabilities excluding effects of acquisitions - Receivables 12,482 (12,676) Inventories (41,533) (3,536) Prepaid expenses and other 1,094 (602) Payables and accrued expenses (37,337) (41,030) Other, net (1,662) (12,552) -------------- ------------- Net cash used in operating activities (40,275) (47,387) -------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of certain businesses - - (3,562) Capital expenditures (17,176) (16,229) Proceeds from sale of assets 556 16,313 -------------- ------------- Net cash used in investing activities (16,620) (3,478) -------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in short-term borrowings 4,080 7,632 Borrowings under U.S. Credit Agreement 122,500 38,000 Borrowings under Former European Facilities Agreement - - 2,856 Repayment of European Facilities Agreement (73,218) - - Issuance of 9.125% Senior Notes 102,130 - - Retirement of 12.25% Senior Subordinated Notes (104,096) - - Decrease in other debt (3,619) (8,910) Dividends paid (419) (418) Debt issuance costs (4,167) (468) -------------- ------------- Net cash provided by financing activities 43,191 38,692 -------------- ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,222) (996) -------------- ------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (14,926) (13,169) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 42,706 47,259 -------------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 27,780 $ 34,090 ============== ============= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for - Interest (net of amount capitalized) $ 36,583 $ 37,917 Income taxes $ 1,514 $ 1,887
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 4 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 29, 1997 (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, 1997 for further information. The financial information has been prepared in accordance with the Company's customary accounting practices and has not been audited (except for Balance Sheet information presented at March 31, 1997). In the opinion of management, the accompanying condensed financial information reflects all adjustments necessary to present fairly the results of operations and financial position for the periods presented. Fully diluted earnings (loss) per share on Income (loss) before extraordinary loss and on Net income (loss) for the three months ended June 29, 1997 and the comparable period in fiscal 1997 were antidilutive. Certain prior year amounts have been reclassified to conform to the current year presentation. (2) ACQUISITIONS AND DIVESTITURES ---------------------------------- In July 1996, the Company acquired the majority of the stock of Metalurgica De Cubas S.L. ("Cubas"), a secondary lead smelter located near Madrid, Spain, for approximately $7,500. In November 1996, the remaining stock was purchased for approximately $3,200. The acquisition was accounted for as a purchase and the results of Cubas' operations are included in the Company's consolidated statement of operations effective July 1, 1996. The cost of the acquisition has been allocated on the basis of the estimated fair value of the assets acquired and the liabilities assumed. This acquisition resulted in goodwill of approximately $7,300. In 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. In June 1996, the Company sold certain assets related to its battery separator division of Evanite Fiber Corporation ("Evanite") for $13,000 in cash. In December 1996, the Company sold substantially all of the remaining net assets of Evanite for approximately $23,000 (subject to final adjustments). The gain on these transactions of approximately $8,300 was included in Other expense (income), principally in the fiscal quarter ending December 29, 1996. 5 (3) INVENTORIES ----------------
June 29, March 31, 1997 1997 -------------- ------------- Raw materials $ 107,323 $ 117,038 Work-in-process 72,439 70,805 Finished goods 382,956 345,671 -------------- ------------- $ 562,718 $ 533,514 ============== =============
At June 29, 1997 and March 31, 1997, inventories valued by the LIFO method were approximately 32% and 33% of consolidated inventories, respectively. If all inventories had been determined using the first-in, first-out method, such inventories would have been $545,651 and $516,447 at June 29, 1997 and March 31, 1997, respectively. The carrying amount of inventories on a LIFO basis exceeds replacement cost. LIFO inventories reflect the fair value of inventories as of August 31, 1989, when all of the outstanding common shares of the Company were acquired in a 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) RECEIVABLES SALE AGREEMENT ------------------------------- In June 1997, certain of the Company's European subsidiaries established a multicurrency receivables sale facility with a financial institution to sell selected trade accounts of the Company, up to a maximum of approximately U.S. $175,000. In July 1997, proceeds from the initial sale of $112,500 were used to repay a portion of borrowings under the European Facilities Agreement. (5) SHORT-TERM BORROWINGS -------------------------- At June 29, 1997 and March 31, 1997, short-term borrowings consisted of various operating lines of credit and working capital facilities maintained by certain of the Company's 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 June 29, 1997 and March 31, 1997, the weighted average interest rate on these borrowings was 12.71% and 12.0%, respectively. 6 (6) LONG-TERM DEBT --------------------- Following is a summary of the Company's long-term debt at June 29, 1997 and March 31, 1997:
June 29, March 31, 1997 1997 ------------ ------------ U.S. Credit Agreement borrowings primarily at LIBOR plus 2.5% at June 29, 1997 (8.7%), and at March 31, 1997 (8.2%) $ 139,500 $ 17,000 9.125% Senior Notes, due April 15, 2004 100,628 - - 10% Senior Notes, due April 15, 2005 300,000 300,000 10.75% Senior Notes, due December 15, 2002 150,000 150,000 12.25% Senior Subordinated Deferred Coupon Debentures, due December 15, 2004 1,781 101,187 Convertible Senior Subordinated Notes, due December 15, 2005 300,389 298,295 European Facilities Agreement, borrowings primarily at LIBOR plus 1.5% (ranging from 4.8% to 9.1% at June 29, 1997 and from 4.8% to 10.0% at March 31, 1997) 269,462 356,865 Other, primarily capital lease obligations at interest rates ranging from 3.7% to 11.2% due in installments through 2015 46,593 50,212 ------------ ------------ 1,308,353 1,273,559 Less - Current maturities 37,102 37,488 ------------ ------------ $ 1,271,251 $ 1,236,071 ============ ============
Borrowings under the European Facilities Agreement bear interest at local market rates (comparable to LIBOR) plus a margin of 1.5% per annum (increased to 2% in connection with the funding of the European Receivables Sale Agreement in July 1997), reducing in 0.25% increments beginning after one year to 1.0% so long as the European borrowing group, as defined, meets and maintains certain interest coverage and leverage tests. Borrowings under the European Facilities Agreement are supported by guarantees of most of the Company's European subsidiaries and are secured by pledges of the stock of the Company's Euro Exide, CEAc and Tudor subsidiaries. The European Facilities Agreement contains a number of financial and other covenants customary for such agreements including restrictions on new indebtedness, liens, minimum net worth, leverage rates, acquisitions, and capital expenditures. 7 On April 23, 1997, the Company issued 175 million Deutsche mark (U.S. $102.1 million) 9.125% Senior Notes due on April 15, 2004. The Company used the funds to repay indebtedness under the European Facilities Agreement. On May 7, 1997, the Company redeemed $108.1 million (face value) of its outstanding 12.25% Zero-Coupon Bonds for $104.1 million. The Company financed the tender offer through borrowings under the U.S. Credit Agreement, $50 million of which was from the new Tranche D variable rate term loan and the balance was financed with borrowings from the revolver. This redemption resulted in an extraordinary loss of $6,411 related to the write-off of unamortized deferred financing costs and the premium paid associated with the early extinguishment of substantially all of the 12.25% Senior Subordinated Deferred Coupon Debentures. No income tax benefit on the extraordinary loss was recognized. In June 1997, the Company entered into a series of bond swap agreements for $13,150 (principal amount) of its 10% Senior Notes. Under the agreements, the Company pays LIBOR plus 1.75% to a counterparty and receives from the counterparty the fixed coupon rate payments made by the Company. At the end of the agreements, the counterparty is guaranteed repayment of its open market purchase price of the Notes which exceeded face value by $653. This debt modification was accounted for as an extinguishment of debt, and the related write-off of unamortized deferred financing costs along with the premium paid by the counterparty resulted in an extraordinary loss of $902. No income tax benefit on the extraordinary loss was recognized. See Note 5 of the Notes to Consolidated Financial Statements included in the Company's March 31, 1997 Form 10-K for further information regarding the Company's long-term debt. (7) PROSPECTIVE ACCOUNTING CHANGE ---------------------------------- In fiscal 1998, the Company is required to adopt the provisions of SFAS No. 128, "Earnings per Share". SFAS No. 128 requires the disclosure of "basic" and "diluted" earnings per share. For the three months ended June 29, 1997 and June 30, 1996, basic earnings per share before extraordinary loss under SFAS No. 128 would be $(0.35) and $(0.53), respectively, and basic earnings per share (after extraordinary loss) would be $(0.69) and $(0.53), respectively. Diluted earnings per share is the same as basic earnings per share. (8) ENVIRONMENTAL MATTERS -------------------------- The Company, particularly as a result of its manufacturing and secondary lead smelting operations, is subject to numerous environmental laws and regulations and is exposed to liabilities and compliance costs arising from its past and current handling, processing, recycling, storing and disposing of hazardous substances and hazardous wastes. The Company's operations are also subject to occupational safety and health laws and regulations, particularly relating to the monitoring of employee health in North America and, to a lesser extent, in Europe. Except as disclosed in Note 13 of Notes to Consolidated Financial Statements included in the Company's March 31, 1997 Form 10-K or herein, the Company believes that it is in substantial compliance with all material environmental, health and safety requirements. 8 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 31 of these sites, the Company has either paid or is in the process of paying its share of liability. In most instances, the Company's obligations are not expected to be significant because its portion of any potential liability appears to be minor to insignificant in relation to the total liability of all PRPs that have been identified and are viable. The Company's share of the anticipated remediation costs associated with all of the Superfund sites where it has been named a PRP, based on the Company's estimated volumetric contribution to each site, is included in the environmental remediation reserves discussed below. Because the Company's liability under such statutes may, as a technical matter, be imposed on a joint and several basis, the Company's liability may not necessarily be based on volumetric allocations and could be greater than the Company's estimates. Management believes, however, that its PRP status at these Superfund sites will not have a material adverse affect on the Company's business or financial condition because, based on the Company's experience, it is reasonable to expect that the liability will be roughly proportionate to its volumetric contribution of waste to the sites. While the ultimate outcome of the various environmental matters is uncertain, after consultation with legal counsel, management does not believe the resolution of these matters will have a material adverse effect on the Company's business, cash flows, financial condition or results of operations. The Company's policy is to accrue for environmental costs when it is probable that a liability has been incurred and the amount of such liability is reasonably estimable. While the Company believes its current estimates of future remediation costs are reasonable, future findings or changes in estimates could have a material effect on the recorded reserves. In fiscal 1997, the Company settled environmental impairment claims with several carriers in an amount aggregating $17,309. This settlement, which was reflected in cost of sales, offset certain legal costs that the Company incurred in fiscal 1997, as well as the elimination of $7,000 of legal fees deferred in fiscal 1996. Negotiations with the remaining insurance carriers are ongoing. The Company has established reserves for on-site and off-site environmental remediation costs and believes that such reserves are adequate. As of June 29, 1997, the amount of such reserves on the Company's balance sheet was $25,687. Of this amount, $24,043 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. 9 Europe ------ The Company is subject to numerous environmental, health and safety requirements and is exposed to differing degrees of liabilities and compliance costs arising from its past and current manufacturing and recycling activities in various European countries. The laws and regulations applicable to such activities differ from country to country and also substantially differ from U.S. laws and regulations. Certain facilities in France, Germany and Spain are not in compliance with certain limits contained in air and wastewater treatment discharge permits. In every case, the Company is working cooperatively with appropriate authorities to come into compliance. It is possible that the Company could be subject to fines or penalties with regard to these violations, although management believes any such fines / penalties will not be material. The cost to upgrade the facilities to attain compliance is not expected to be material. The violations are not expected to interfere with continued operations at the subject facilities. The Company expects that its European operations will continue to incur capital and operating expenses in order to maintain compliance with evolving environmental, health and safety requirements or more stringent enforcement of existing requirements in each country. 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. (9) COMMITMENTS AND CONTINGENCIES ---------------------------------- In August 1996, a Portland, Oregon jury found that the Company infringed a patent relating to a device for inserting battery plates into battery separators, and awarded damages of $5,000. Later, the Court, acting on the jury's verdict, entered a judgment against the Company for $5,456. On April 28, 1997, the Court denied the Company's post-trial motions relating to the judgment. On May 16, 1997, the Company filed its Notice of Appeal. On May 21, 1997, plaintiffs filed a cross appeal. The Company, following consultation with its independent patent counsel, intends to vigorously prosecute the appeal. Management and legal counsel remain confident that the jury verdict and the court's judgment relating to the patent asserted at trial will be reversed and that the cross appeal is without merit and, therefore, shall be rejected. The Company anticipates receiving a decision on the appeal some time during fiscal 1998. The Company is now or recently has been involved in several related lawsuits pending in state and federal courts in Alabama, North Carolina and South Carolina. These actions contain allegations that the Company sold old or used batteries as new batteries. One action that had been certified as a class action was later decertified by the Alabama Supreme Court and has now been dismissed. In another action, the judge directed a verdict in favor of the Company following presentation of the plaintiff's evidence. That case is now on appeal. On August 11, 1997, the Company's motion for summary judgment was granted on another one of these cases. The remaining actions seek compensatory and punitive damages and, in one case, injunctive relief. The Company disputes the material legal claims in these matters and intends to vigorously defend itself. 10 The Company is involved in various other claims and litigation incidental to the conduct of its business. Based on consultation with legal counsel, management does not believe that any claims or litigation to which the Company is a party will have a material adverse effect on the Company's financial condition or results of operations. The Company has various purchase commitments for materials, supplies and other items incident to the ordinary course of business. In the aggregate, such commitments are not at prices significantly in excess of current market. (10) SUBSEQUENT EVENTS ---------------------- On July 30, 1997, the Company acquired three related German producers and marketers of SLI and industrial batteries, DETA Akkumulatorenwerk GmbH, MAREG Accumulatoren GmbH, and FRIWO SILBERKRAFT GmbH (together "DETA") for approximately $33,000 plus assumed debt of approximately $57,000. DETA, which competes in most western European countries and is the largest supplier of SLI batteries to BMW in Germany, had revenues in excess of Deutsche mark 300,000 (approximately U.S. $200,000) in calendar 1996. 11 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 June 29, 1997 compared with the three months ended June 30, 1996. Net sales decreased $65.7 million, or 11.8%, to $490.4 million in the first quarter of fiscal 1998 compared with fiscal 1997. The decrease was principally attributable to the impact of changes in foreign exchange rates ($37.1 million), the fiscal 1997 divestiture of Evanite ($11.3 million) and lower automotive and industrial sales volume partially offset by product mix. Industrial battery sales (included above) for the quarter ended June 29, 1997 were $152.8 million versus $169.2 million for the quarter ended June 30, 1996. Gross profit decreased $6.4 million while gross profit margin increased by 1.9 percentage points in the first quarter of fiscal 1998 versus the first quarter of fiscal 1997. The decrease in gross profit and related increase in the gross profit margin were principally attributable to the effect of changes in foreign exchange rates ($11.2 million), the absence of Evanite ($3.6 million) and lower sales volume (discussed above) offset by improved product mix, including the new NASCAR line, and manufacturing cost reductions related to the European rationalization / consolidation process. Operating expenses decreased $12.9 million, or 11.0% in the fiscal quarter ended June 29, 1997 versus the comparable period in fiscal 1997, primarily due to the impact of changes in foreign exchange rates ($9.4 million) and headcount reductions associated with the European rationalization / consolidation strategy. Operating income increased $6.5 million, or 47.5%, primarily as a result of the matters discussed above. Interest expense decreased $1.5 million, or 4.9% primarily due to the effect of changes in foreign exchange rates. 12 Other income/expense, net was $2.3 million expense for the fiscal quarter ended June 29, 1997 versus $0.4 million income for the comparable period in fiscal 1997. This $2.7 million change principally relates to a $1.0 million net currency loss in the first quarter of fiscal 1998 versus a $0.4 million net currency gain in the first quarter of fiscal 1997 and the inclusion of a $0.9 million gain on the sale of certain assets related to Evanite's battery separator product line in the first quarter of fiscal 1997. Net income (loss) decreased $3.6 million, primarily as a result of the matters discussed above, and the recognition of a $7.3 million extraordinary loss in fiscal 1998 related to the early retirement of debt (see Note 6 to the Company's Condensed Consolidated Financial Statements appearing elsewhere herein). Liquidity and Capital Resources The Company's liquidity requirements arise primarily from the funding of its seasonal working capital needs, obligations on its indebtedness and capital expenditures. In addition, the Company has paid cash dividends of $.02 per share on the common stock in each completed quarter following its initial public offering. Historically, the Company has met these liquidity requirements through cash flows generated from operating activities and with borrowed funds and the proceeds of sales of accounts receivable. The Company is party to a U.S. receivables purchase agreement under which the other party has committed (subject to certain exceptions) to purchase selected accounts receivable of the Company, up to a maximum commitment of $75.0 million. Effective July 10, 1997 the Company entered into a European receivables purchase agreement under which a financial institution has committed (subject to certain exceptions) to purchase selected accounts receivable of Exide's subsidiaries in France, Germany, Italy, Spain and the U.K., up to a maximum commitment of approximately $175 million. Due to the seasonal demands of the battery industry, the Company builds inventory in advance of the typically stronger selling periods during the fall and winter. The Company's greatest cash demands from operations occur during the months of June through October. During fiscal 1998 and beyond the Company also expects to meet its liquidity requirements in the same manner. Funds used in operations were $(40.3) million and $(47.4) million for the three months ended June 29, 1997 and June 30, 1996, 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 liquidity and capital resources through its European Facilities Agreement and European Receivables Purchase Agreement and also has substantial borrowing availability under its U.S. Credit Agreement. The Company's capital expenditures were $17.2 million and $16.2 million in the three months ended June 29, 1997 and June 30, 1996, respectively. The U.S. Credit Agreement and the European Facilities Agreement restrict the amount of capital expenditures which may be made by the Company and its subsidiaries. The Company believes that it has sufficient resources for its capital expenditure programs from operating cash flows and borrowing availability under its existing credit agreements. 13 On April 23, 1997, the Company issued 175 million Deutsche mark (U.S. $102.1 million) 9.125% Senior Notes due on April 15, 2004. The Company used the funds to repay indebtedness under the European Facilities Agreement. On May 7, 1997, the Company redeemed $108.1 million (face value) of its outstanding 12.25% Zero-Coupon Bonds for $104.1 million. The Company financed the tender offer through borrowings under the U.S. Credit Agreement, $50 million of which was from the new Tranche D variable rate term loan and the balance was financed with borrowings from the revolver. As of June 29, 1997, the Company had $150.6 million outstanding on its U.S. Credit Agreement, including letters of credit, and $278.6 million was outstanding under the European Facilities Agreement, including letters of credit. Obligations under the U.S. Credit Agreement and the European Facilities Agreement bear interest at fluctuating rates. Increases in interest rates on such obligations could adversely affect the Company's results of operations and financial condition. The Company has two interest rate collar agreements which reduce the impact of changes in interest rates on a portion of the Company's floating rate debt. The collar agreements effectively limit the LIBOR base interest rate on $100.0 million of borrowings under the U.S. Credit Agreement to no more than 8% through December 30, 1997. If interest rates fall below certain levels, Exide is required to make payments to the counterparties under the agreements. Additionally, the Company entered into a series of bond swap agreements which effectively converted $51.1 million (principal amount) of the 10% and 10.75% Senior Notes into a variable LIBOR interest rate through April 15, 2000 and December 15, 1999, respectively. The Company has the right to terminate the $51.1 million bond swap agreements at any time before maturity. See Note 6 to the Company's Condensed Consolidated Financial Statements appearing elsewhere herein. On July 10, 1997 the Company received proceeds of $112.5 million pursuant to its initial sale of receivables under the European Receivables Purchase Agreement. The Company used the funds to repay indebtedness under the European Facilities Agreement. Concurrent with the Receivables Purchase Agreement, on July 10, 1997, the European Facilities Agreement was amended to reduce the maximum commitment to 1,718 million French francs (U.S. $290 million) from the original 2,569 million French francs (U.S. $434 million) and change the variable interest rate on local market borrowings (comparable to LIBOR) to a margin of 2% per annum. On July 30, 1997, the Company acquired DETA for 60 million Deutsche mark (U.S. $33.0 million), in addition to assuming debt of 105 million Deutsche mark (approximately U.S. $57.0 million). The majority of such consideration was financed through the European Facilities Agreement. See Note 10 of the Company's Condensed Consolidated Financial Statements appearing elsewhere herein. As of June 29, 1997, the Company had $49.1 million available under its U.S. Credit Agreement and, after consideration of the July transactions above, $42.8 million of borrowing availability under the Company's European and Canadian Facilities Agreements. In July and August 1997, the Company entered into certain foreign exchange forward contracts with a notional value of $30.4 million in various European currencies to hedge foreign currency transaction exposures. 14 The Company believes it has adequate reserves for offsite and onsite environmental remediation costs. As of June 29, 1997, the Company has significant NOL carryforwards in Europe and in the United States which may be available, subject to certain restrictions, to offset future U.S. and European taxable income. 15 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: August 13, 1997 By: /s/ Alan E. Gauthier ------------------- ----------------------------- Alan E. Gauthier Executive Vice President, Chief Financial Officer (Authorized Signatory) 16 EX-11.1 2 EXIDE COMPUTATION OF PER-SHARE EARNINGS 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)
For the three months ended ================================ June 29, June 30, 1997 1996 -------------- -------------- Primary earnings per common share: Income (loss) before extraordinary loss $ (7,445) $ (11,119) ============== ============== Net income (loss) applicable to common stock $ (14,758) $ (11,119) ============== ============== Shares and equivalents outstanding- Base shares after ECA exchange 8,388,347 8,388,347 Common stock equivalents-- Stock award grants, assuming exercised at the average market price 673,491 703,581 Stock award grants exercised 20,097 10,822 Stock options, assuming exercised at the average market price -- -- IPO shares 4,600,000 4,600,000 Secondary offering shares 1,000,000 1,000,000 12/94 stock offering 5,175,000 5,175,000 Shares issued to acquire Schuylkill Holdings, Inc. 593,210 593,210 Shares issued to acquire remaining interest in CEAc subsidiary 350,000 350,000 Additional shares issued to acquire remaining interest in CEAc subsidiary 366,009 -- Shares issued to acquire a sales branch operation 66,667 -- Shares issued under Employee Stock Purchase Plan (average shares outstanding throughout the year) 12,379 3,459 Shares issued under Stock Award Plan 1,500 -- -------------- -------------- Weighted average of common shares outstanding and equivalents 21,246,700 20,824,419 ============== ============== Primary earnings (loss) per common share before extraordinary loss $ (0.35) $ (0.53) ============== ============== Primary earnings (loss) per common share $ (0.69) $ (0.53) ============== ==============
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)
For the three months ended ======================================= June 29, June 30, 1997 1996 ------------------ ------------------ Fully diluted earnings per common share: Income (loss) before extraordinary loss $ (7,445) $ (11,119) Elimination of interest expense on convertible senior subordinated notes, net of income tax benefit 3,016 2,928 ------------------ ------------------ Adjusted income (loss) before extraordinary loss $ (4,429) $ (8,191) ================== ================== Net income (loss) applicable to common stock $ (14,758) $ (11,119) Elimination of interest expense on convertible senior subordinated notes, net of income tax benefit 3,016 2,928 ------------------ ------------------ Adjusted net income (loss) applicable to common stock $ (11,742) $ (8,191) ================== ================== Shares and equivalents outstanding- Base shares after ECA exchange 8,388,347 8,388,347 Common stock equivalents-- Stock award grants, assuming exercised at the average market price 673,491 703,581 Stock award grants exercised 20,097 10,822 Stock options, assuming exercised at the average market price -- -- IPO shares 4,600,000 4,600,000 Secondary offering shares 1,000,000 1,000,000 12/94 stock offering 5,175,000 5,175,000 Shares issued to acquire Schuylkill Holdings, Inc. 593,210 593,210 Shares issued to acquire remaining interest in CEAc subsidiary 350,000 350,000 Additional shares issued to acquire remaining interest in CEAc subsidiary 366,009 -- Shares issued to acquire a sales branch operation 66,667 -- Shares issued under Employee Stock Purchase Plan (average shares outstanding throughout the year) 12,379 3,459 Shares issued under Stock Award Plan 1,500 -- Convertible shares 4,992,571 4,992,571 ------------------ ------------------ Weighted average of common shares outstanding and equivalents 26,239,271 25,816,990 ================== ================== Fully diluted earnings per common share before extraordinary loss $ N.A. $ N.A. ================== ================== Fully diluted earnings per common share $ N.A. $ N.A. ================== ==================
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS MAR-31-1998 JUN-29-1997 27,780 0 575,821 38,851 562,718 1,174,650 796,973 290,087 2,380,598 523,620 1,271,251 0 0 213 331,751 2,380,598 490,365 490,365 366,057 366,057 0 1,701 29,264 (11,295) (3,559) (7,445) 0 7,313 0 (14,758) (0.69) (0.69)
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