-----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, EIxV+/xDrn1Fq7UEOA4PUG/zd6CmaIBBxAYF0kEgW1v0EwlAqeYgwukBxMSR31XE hMtVhS41T7JaEWWtEmrRTw== /in/edgar/work/20000629/0001036050-00-001218/0001036050-00-001218.txt : 20000920 0001036050-00-001218.hdr.sgml : 20000920 ACCESSION NUMBER: 0001036050-00-001218 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXIDE CORP CENTRAL INDEX KEY: 0000813781 STANDARD INDUSTRIAL CLASSIFICATION: [3690 ] IRS NUMBER: 230552730 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11263 FILM NUMBER: 664607 BUSINESS ADDRESS: STREET 1: 1400 N WOODLAND AVE CITY: BLOOMFIELD HILL STATE: MI ZIP: 48304 BUSINESS PHONE: 2482580080 10-K 1 0001.txt FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ________________ FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2000 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ 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 No.) 645 Penn Street Reading, Pennsylvania 19601 Telephone: (610) 378-0500 (Address, including zip code, and telephone number, including area code, of Registrant's Principal Executive Offices) Securities registered pursuant to Section 12(b) of the Act: Title of each Class Name of Each Exchange on Which Registered ------------------- ----------------------------------------- Common Stock, $.01 par value New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None. Indicate by 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [_]. The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 23, 2000 was approximately $172,568,000. There were 21,403,831 outstanding shares of the Registrant's common stock as of June 23, 2000. (DOCUMENTS INCORPORATED BY REFERENCE) Portions of the Proxy Statement relating to the Annual Meeting of Stockholders to be held August 11, 2000, are incorporated into Part III of this report. EXIDE CORPORATION PART I Item 1. Business (a) General Discussion of Business Exide is a Delaware corporation organized in 1966 to succeed to the business of a New Jersey corporation founded in 1888. Our principal executive offices are located at 645 Penn Street, Reading, Pennsylvania 19601 and our telephone number is (610) 378-0500. We are the largest producer of lead acid batteries in the world, with fiscal 2000 net sales of approximately $2.2 billion. Through acquisitions, including GNB Technologies, Inc. discussed below, and internal growth, we hope to become the world leader in electric energy storage solutions. We manufacture automotive batteries in North America and automotive and industrial batteries in Europe. We market our automotive batteries to a broad range of retailers and distributors of replacement batteries and automotive original equipment manufacturers. Our industrial batteries consist of traction batteries, such as those for use in forklift trucks and other electric vehicles, and standby batteries used for back-up power applications, such as those for telecommunications systems. Prior to 1994, we operated primarily in North America. As a result of an acquisition program, we have become the largest battery manufacturer in Europe. Our European and North American operations represented 64% and 36%, respectively, of our fiscal 2000 net sales. Our customers include NAPA, DaimlerChrysler, CSK, Kmart, The Pep Boys, and John Deere International in the North American market and Volkswagen, Fiat, PSA, Renault, Telefonica and the Linde Group in the European market. Beginning in April 2000, we reorganized into the following six global business units to better serve our customers worldwide: . Transportation: Original Equipment . Transportation: Aftermarket . Motive Power . Standby . Military . Emerging Technologies Robert A. Lutz, Chairman and Chief Executive Officer, leads our new Office of the Chairman, which includes Craig H. Muhlhauser, our newly appointed President and Chief Operating Officer, and Kevin R. Morano, our newly appointed Executive Vice President and Chief Financial Officer. Mr. Lutz was most recently the Vice Chairman, President and Chief Operating Officer of Chrysler Corporation. Pending Acquisition of GNB On May 9, 2000, we announced an agreement to acquire global battery maker GNB Technologies, Inc. ("GNB") from Pacific Dunlop Limited. Headquartered in Atlanta, Georgia with sales of approximately $1 billion annually, GNB is a leading U.S. and Pacific Rim manufacturer of both automotive and industrial batteries. GNB has operations in the U.S., Australia, New Zealand, Canada, Europe, Japan, South Asia, China, India and the Middle East. GNB produces automotive batteries under the Champion, Stowaway and National brands, among others, and is a major supplier to automotive manufacturers in North America and Australia. GNB also supplies 1 industrial batteries in North America, including those used in both motive and standby-power applications. The acquisition, for consideration of approximately $368 million (including $333 million in cash and four million Exide common shares) plus the assumption of liabilities, cleared U.S. antitrust review in June 2000 and is expected to close in fiscal 2001, subject to financing and other foreign regulatory approvals and settlement of certain non-compete agreements. (2) Financial Information About Segments During fiscal 2000, we were primarily engaged in one industry segment, namely, the manufacture, distribution and sale of lead acid batteries within North America and Europe. See Note 16 to the Company's Consolidated Financial Statements appearing elsewhere herein. (3) Narrative Description of Business Exide is the largest producer of lead acid batteries in the world, with fiscal 2000 net sales of approximately $2.2 billion. We manufacture automotive batteries in North America and automotive and industrial batteries in Europe. Beginning in fiscal 2001, we began a strategic focus to address existing and potential customer needs on a global basis with the creation of six global business units: . Transportation: Original Equipment . Transportation: Aftermarket . Motive Power . Standby . Military . Emerging Technologies Transportation: Original Equipment and Aftermarket Transportation batteries include batteries for cars, trucks, off-road vehicles, agricultural and construction vehicles, motorcycles, recreational vehicles, boats, and other similar applications. Transportation batteries represented approximately 64% of our net sales for fiscal 2000. We believe we have the most complete and technologically innovative line of transportation batteries in the North American and European markets. We market our products under various trademarks including Exide, Willard, Tudor, DETA, Centra, Fulmen and Prestolite. We also produce and market the Exide Select, including the Orbital Battery, and NASCAR Select lines of batteries that are officially licensed by NASCAR. In North America, we are the second largest manufacturer of transportation batteries. The market is divided between sales to original equipment manufacturers and aftermarket sales. The North American transportation battery market experienced significant consolidation in the early 1990s, resulting in four principal battery manufacturers. In recent years, aggressive price competition has been the defining characteristic of this market. We believe this was the result of increased buying power among our customers resulting from industry consolidation. The aftermarket battery market in North America has a more concentrated customer base than the European battery market. In Europe, we are the largest manufacturer of transportation batteries. The European transportation battery market was fragmented until Exide purchased four automotive battery manufacturers beginning in 1994. As a result of its acquisitions, Exide now has the largest combined automotive battery market share in Europe. 2 Transportation: Original Equipment The original equipment manufacturer market consists of the sales of batteries to manufacturers of automobiles and trucks, buses and off-road agricultural and construction vehicles. The following represents the most important factors affecting the original equipment manufacturer market: . The strength of the market for passenger cars, light trucks and sports utility vehicles . Significant consolidation in the automotive industry (e.g. DaimlerChrysler, Renault/Nissan, Ford/Volvo, GM/Saab/Fiat) . Globalization of original equipment manufacturer procurement activities, which pressure suppliers to do likewise and result in product standardization and lower prices . Movement of several original equipment manufacturers into the aftermarket business (i.e. Ford/Kwik Fit) . Emergence of multi-battery and managed electrical energy systems Exide plans to address these factors by taking advantage of our: . strong market position, . global manufacturing and distribution system, . knowledge of lead-acid and advanced battery technologies, and . advanced research and development. Our original equipment manufacturer customers in North America include DaimlerChrysler, for whom we are the primary battery-supplier, as well as John Deere International, Mitsubishi, Case/New Holland, and Navistar. Our principal European original equipment manufacturer customers are Fiat, VW/Audi, the PSA group (Peugeot S.A./Citroen), the Renault group, BMW and Ford. Transportation: Aftermarket We sell aftermarket batteries principally through retail automotive parts chains and mass merchandisers, car and truck dealers, and wholesale distributors who supply service stations, repair shops, automotive and farm-equipment dealers, and small retailers. We also produce automotive-type transportation batteries for commercial applications, such as trucks, farm equipment, tractors and other off-road vehicles, as well as specialty batteries for marine and garden tractor applications. We believe the market for these specialty batteries is increasing faster than the market for conventional automotive batteries. Demand for conventional automotive replacement batteries is influenced by the following principal factors: (1) the number of vehicles in use, (2) average battery life, (3) the average age of vehicles and their condition, (4) seasonal weather conditions and (5) general population growth and economic conditions. The ratio of battery usage to vehicles in use has increased slightly in recent years, reflecting higher average miles of vehicle usage and an increasing number of vehicles used in warm climates. Aftermarket demand is more stable than the original equipment market since it is not affected by the cyclical nature of new vehicle demand. The replacement market is also larger in general than the original equipment segment, since automotive batteries tend to require replacement every three to five years. We market our aftermarket batteries to a broad range of retailers and distributors. We are the leading supplier for NAPA Distribution Centers as 3 well as many of the largest battery retailers in the United States, including Kmart, Pep Boys and CSK Inc. We are also the largest supplier of authorized replacement batteries for DaimlerChrysler and John Deere International, and we began supplying to Briggs & Stratton in the fourth quarter of fiscal year 2000. Our North American aftermarket operations includes our branch division. Our wholesale distribution branches throughout the United States and Canada sell and distribute batteries and other products to local auto parts retailers, service stations, repair shops, fleet operators, battery jobbers and other smaller volume customers. The branches also deliver batteries to our national account customers' stores and collect used and spent batteries for recycling. Our branch system is supplemented by regional accounts, small battery wholesalers, and installers. We are constantly striving to improve our aftermarket battery products. We are emphasizing our more profitable products, such as our NASCAR-licensed Exide Select and Orbital Select product lines, and have selectively instituted price increases for some products. During fiscal 2000, we introduced our "Fresh Check" seal and plain language dating on every North American manufactured aftermarket battery. Our principal North American automotive battery products include the following: Product Description Exide standard, heavy-duty This is our principal product line and includes and premium a comprehensive range of maintenance-free lead- acid batteries from our basic low-cost battery with average power and cold cranking amps and a 50-60 month warranty to our premium battery with enhanced power and a 72-month warranty. We sell these batteries under the Exide brand name and various private labels. Exide Select, officially Our Exide Select batteries are officially licensed by NASCAR licensed by NASCAR, and sell for a premium over ordinary batteries due to their exceptional quality and the strong brand loyalty of NASCAR fans. Exide Select batteries include a number of features differentiating them from ordinary batteries, including their increased durability, resistance to vibration and premature failure, and extended battery performance and life. Exide Select Orbital We recently introduced this innovative spiral wound battery in North America as the Exide Select Orbital/NASCAR. Through its patented technology and state-of-the-art recombinant design, this battery holds its charge longer, has a shelf life of up to 18 months (compared to three to six months for conventional batteries), can be recharged in a fraction of the time needed for conventional batteries, has greater power output and resists vibration better than any standard lead-acid battery, including our NASCAR Select line. This battery is totally sealed, which completely eliminates leaks and spills and allows it to be shipped via overnight carrier. We also produce automotive-type batteries for commercial applications, such as trucks, farm equipment, tractors and other off-road vehicles, as well as specialty batteries for marine and garden tractor applications for the recreational vehicle market. We produce the Full Timer battery, which employs advanced technology as the large engines, sophisticated electronics and extensive on-board accessories common in today's recreational vehicles require increased power. For the marine market, we produce the Exide Select Orbital Marine, which brings all the advantages of Exide's patented Orbital technology 4 to the marine market. The Orbital Marine maintains nearly a full charge during the off season, and can be easily recharged when necessary by most conventional charging systems, unlike typical marine gel-cell batteries that often require specialized charging equipment and long charging times. This battery is also totally sealed, making it ideal for closed environments (such as inside a boat hull). The Exide Select Orbital Marine starting battery will even deliver full power if accidentally submerged. We also produce the Nautilus Gold Dual Purpose, a combination battery, replacing separate starting and deep cycle batteries in two-battery marine and recreational vehicle systems, and the Nautilus Mega Cycle, a high performance, dual terminal battery. We believe that the markets for these specialty batteries are increasing faster than the market for conventional automotive batteries. We have a leading position in the automotive aftermarket in most European countries and our customers include ADI, KWIK FIT and many other leading aftermarket battery distributors. We sell our aftermarket batteries in Europe under a variety of well-known brand names, including Exide, Fulmen, DETA, Tudor, SONNAK, and Centra. Sales of automotive batteries in the European aftermarket are affected by the same major factors influencing the aftermarket in North America. In Europe, mass merchandisers are not yet as important as they are in North America, but they have gained market share in recent years. Also, buying groups representing smaller battery resellers have grown and begun to expand to cover multiple countries. Nonetheless, the European aftermarket is still much less concentrated than that in North America. We believe Exide's worldwide operations have made us the best-positioned manufacturer to supply mass merchandisers, buying groups and individual resellers. Our European operations distribute their aftermarket automotive batteries primarily through battery wholesalers, OEM dealer networks, hypermarkets, European purchasing centers and oil companies. Wholesalers and OEM dealers have traditionally represented the majority of this market, but supermarket chains, replacement-parts stores (represented by purchasing associations) and hypermarkets have become increasingly important. Battery wholesalers now sell and distribute batteries to a network of automotive parts retailers, service stations, independent retailers, and supermarkets throughout Europe. Our European product offerings vary by market. We generally offer a basic model, an upgrade model, a premium model and various niche products in each market. The following describes our product offerings in the United Kingdom and is representative of our product offerings elsewhere in Europe: Product Description Basic This is our standard low-cost battery. It uses traditional lead-acid technology, has average power and cold-cranking capabilities, carries a 12-month warranty and is adequate for most conventional automotive uses. The same or similar battery is marketed under private label brand names in France, Germany and Spain, under the Basic name in Italy and under various other names in other markets. 5 Classic This is our upgrade model. It still uses traditional lead-acid technology, but has increased power and cold-cranking capabilities. This battery carries a 24-month warranty and sells for an approximately 15% premium over our Basic battery. The Classic is our best-selling battery in the European market. The same or similar batteries are marketed under the Equipe name in France, the Classic name in Germany, the Leader name in Italy, the Tudor name in Spain and under various other names in other markets. Ultra This is our premium model. It has a number of features that differentiate it from ordinary batteries, including 30% more power and a 36-month warranty. The Ultra sells for an approximately 25% premium over our Basic battery. The same or similar batteries are marketed under the Formula name in France, the Top Start Plus name in Germany, the Ultra name in Italy, the Millennium 3 name in Spain and under various other names in other markets. STR/STE Our STR batteries use recombination technology to allow a lead acid battery to be installed in the passenger compartment of an automobile with no risk of fluid loss or acid fumes. We recently announced the introduction of batteries using our new STE (sealed technology evolution) technology, which uses a gas permeable membrane to prevent leakage of battery fluid while permitting gas to escape. Our STE technology has been approved for use by BMW and was included in some models beginning with the 2000 model year. Maxxima This is the equivalent of the Exide Select Orbital described above. We will market this battery under the Maxxima brand name throughout Europe. Industrial Batteries: Motive Power and Standby Sales of industrial batteries represented approximately 33% of our net sales for fiscal 2000. Industrial batteries include motive power batteries and standby batteries. In Europe, we believe we have the leading position in both the motive power and standby segments of the industrial battery market. Technical expertise and assistance and customer service are more important in the industrial battery market than in the transportation battery market. We have technical service agreements with a number of our customers. As with transportation batteries, we work closely with our customers as they develop new products, designing batteries to meet their individual needs. We built our European industrial battery business primarily by acquiring existing manufacturers with established brand names, and we continue to market our products under these brands, as they each have an established reputation for quality and expertise in particular technologies. Motive Power Batteries Our motive power batteries are fundamentally two-volt cells assembled in numerous combinations and sizes to provide capacities ranging from 30 Ah to 1500 Ah. Apart from specializing in conventional vented lead acid technology utilizing leading edge tubular positive-plate cell design, Exide also offers other battery technologies to satisfy ever-changing motive power requirements. These include maintenance-free monobloc batteries incorporating gelled electrolyte and copper-stretched metal technology (CSM) for optimum high performance applications. 6 The materials handling industry provides the single largest market for motive power batteries, typically including forklifts, electric counter balance trucks, pedestrian pallet trucks, low level order pickers, turret trucks, tow tractors, reach trucks and VNA (very narrow aisle) trucks. Other market segments requiring motive power products include; scrubber/dryer and sweeper machines in the floor cleaning market, scissor lifts, access platforms and telescopic zooms in the access market, buggies and carts in the golf market, mobility equipment in the wheelchair market, mining locomotives, electric road vehicles, electric boats and submarines. Complementary to our motive power battery portfolio is an extensive range of battery chargers, watering and maintenance equipment and battery transfer equipment. Combined with the company's technological and service expertise, we are well positioned, globally, to offer complete solutions for motive power markets. Much like the transportation battery market, the motive power battery market is divided into the original equipment market, comprised of the manufacturers of the electric vehicles described above, and the replacement market, which includes large users of such electric vehicles as well as original equipment dealer networks. Our major motive power customers in Europe include the materials-handling operations of the Linde Group (Germany), Junghreinrich Group (Germany), Atlet (Sweden), BT Rolatruc (Sweden) and Nacco Material Handling (U.S.). We also sell our motive power products to a wide range of customers in the aftermarket, ranging from large industrial concerns and retail distributors to small warehouse and manufacturing operations. In Europe, we generally sell customers a complete package of batteries, chargers and services and, increasingly, are providing full service maintenance contracts. The majority of our sales are to original equipment manufacturers, especially since these manufacturers increasingly rent, rather than sell, their electric vehicles to end users. This trend tends to favor us, as we have larger market shares in the original equipment market. We sell our motive power batteries, chargers, accessories and post-sale service primarily through our own sales organization in each country and use distributors and agents for export from Europe. Our service group, the largest in Europe, is an important component of our marketing efforts, particularly as the vehicle manufacturers make up a larger part of the market and require service assistance whenever they sell or rent their products. We distribute motive power batteries through OEM dealers, independent distributors and directly to large fleet users. Our European operations also distribute traction batteries through their own branch network. The European motive power market depends primarily on the strength of the market for materials handling equipment, which in turn is influenced by general economic conditions affecting the demand for this type of equipment. This market has benefited from a trend toward electric (rather than internal combustion) industrial vehicles and by the growth of warehousing and mass merchandisers in Europe. The increasing domination of this market by original equipment manufacturers of these vehicles, rather than end users, has given the manufacturers greater buying power. Furthermore, with the advent of the Euro and the greater price transparency that comes with it, these vehicle manufacturers have been able to standardize prices at a lower level. Standby Batteries Standby (also known as stationary) batteries are used for back-up power applications, to ensure continuous power supply in case of main (primary) power failure or outage. In today's electronic and digital world, back-up power devices incorporating standby batteries are used in most electric power systems, including those used in telecommunications, computers, hospitals, airports, traffic control, elevators, security/alarm systems, electrical power plant systems and military equipment. 7 One of the largest and fastest growing standby segments is telecommunications. Consumers of telecommunications batteries consist of manufacturers of switches and other equipment, and the system operators. The growth in the battery demand for telecommunications has been especially fueled by the deployment in every country of multiple cellular and wireless mobile communication systems where each transmitting base station requires a set of standby batteries. Other telecommunications applications include central and local switching systems (PABX), satellite stations, optical fiber repeating boxes, cable TV boxes and radio transmission stations. In these applications, the batteries are usually packaged with a 48V DC power system. The next largest segment of the standby market is uninterruptable power supplies (UPS) that are used in computer installations, such as for banks, airlines and to back up servers for the internet. UPS battery customers consist of the system manufacturers and end users. Growth in this area has paralleled the growth in computer systems. The European standby market has a diverse customer base. Our major standby battery product customers include telecommunications companies, such as British Telecom, France Telecom, Deutsche Telekom, Telecom Italia, Telefonica of Spain and Vodaphone; manufacturers of telecommunications equipment, such as Ericsson, Ascom and Alcatel; manufacturers and end users of UPS primarily for mainframe computer systems, such as Siemens and Emerson-Liebert; electrical generating companies and various European governments and armed forces. We sell our products directly to these customers and promote our products by holding seminars, participating in trade shows and distributing technical literature. Given the importance of service and technical assistance, our European operations generally ship standby batteries directly to system suppliers and UPS manufacturers who include the standby batteries in their equipment and distribute products to end users. Our standby batteries are marketed under four well-recognized brands: Sonnenschein, Tudor, Hagen and Fulmen. Sonnenschein is being developed as our global standby brand while our other brands are used on a more limited local basis. Our batteries come in a variety of shapes and sizes and are generally categorized according to both their technology and their end use. We produce standby batteries using three main technologies: Technology Description Dryfit This technology is utilized in our maintenance-free sealed batteries (valve-regulated) using a gel electrolyte. Maintenance-free sealed batteries have progressively replaced other types of standby batteries in the market because of their convenience - they can be used in both vertical and horizontal positions. The Dryfit gel electrolyte technology was invented by Exide (Sonnenschein) and presents the added advantages of high reliability and a proven operating life of up to 18 years. Our ten Dryfit product ranges offer a wide array of features such as heat resistance, deep discharge resistance, long shelf life, and high cyclic performances. Dryfit is regarded by many customers as the most reliable standby battery in the market. 8 AGM This technology is also used in maintenance-free sealed batteries, but differs from Dryfit in that these batteries feature an absorbent glass mat as a separator. More economical than Dryfit, this technology is particularly well adapted to shorter back-up time and can feature up to a 10- year design life. A total of five different ranges are available to cover most of the market requirements. A number of new product developments are currently being processed including higher rated UPS batteries and high power density batteries featuring exceptional volumetric performances. Flooded This technology is used in traditional products offering high reliability but requiring regular maintenance. The basic construction involves positive flat or tubular positive plates. Among other features, transparent containers and easily accessible internal construction allow consumers to check the precise battery status and predict potential failures, thus enhancing reliability. Military Exide is one of the world's leading suppliers of submarine batteries utilizing copper-stretched metal technology (CSM). Our customers include the navies of France, Italy, Spain, Germany, Denmark, Norway, Sweden, Turkey, Singapore and many other countries. Although our core business has traditionally been lead-acid batteries, we are also an important provider of non lead-acid batteries for high-technology military and space applications. Our lithium primary batteries are on board every space shuttle flight. Emerging Technologies Emerging Technologies is responsible for identifying new energy storage technologies we can commercialize as part of stand-alone products or systems. We believe we will benefit from the general trend towards increasing requirements for stored energy, as necessitated by the rapid expansion of such areas as mobile data transmission, mobile communications and business-to- business use of the internet. Developing technologies, including advanced batteries, fuel cells, ultra capacitors, personal transportation systems and portable information systems have the potential to be successfully commercialized by Exide through the utilization of our in-house technology development, our joint-venture partners, and future technology acquisitions from both private and public sources. We are also pursuing several long-term development programs with key customers targeting specific products. Dual-Graphite Technology Our dual-graphite technology is the first advanced battery technology program in our pipeline targeted for full commercial development. In December of 1999, we acquired a controlling interest in Lion Compact Energy, a privately held company conducting research in dual-graphite technology. Lion Compact Energy has produced numerous prototype batteries using dual-graphite energy storage. We estimate that, in full production, the dual-graphite battery will produce more than three times the power of today's most advanced batteries. Additionally, the new batteries should occupy far less space, at about half the weight and cost less than today's most advanced production batteries. 9 The initial applications being pursued for our dual-graphite battery include electric vehicles and hybrid electric vehicles, standby power for utility companies, laptop computers and portable military equipment. Markets In North America, we are the second largest manufacturer of automotive batteries. The North American automotive battery market has a more concentrated customer base than that in Europe. We compete for sales in both the aftermarket and the original equipment market primarily with three other major battery manufacturers. The North American automotive battery market has experienced aggressive price competition for many years. In Europe, we are the largest manufacturer of both automotive and industrial batteries, with a broad range of product offerings and a pan-European customer base. The European battery market has undergone consolidation in recent years, and Exide has been a major participant in this process. Historically, there was less price competition in European battery markets than in North America. Recently, however, intense price competition has emerged as a number of competitors have sought to increase market share. This price competition has been made worse by an environment of low-priced imports, excess capacity and declining lead prices. Quality We recognize that product performance and quality are critical to our success and have spent the past five years in a company-wide quality improvement effort. As a result, we now believe that our product performance and quality are equal to or better than that of any market participant. Our quality effort begins in the design phase. We design our batteries to meet and exceed industry benchmark quality standards, using robust design parameters and quality materials to achieve reliability and durability. Our commitment to quality continues through our production process. We have quality audit processes in each of our production facilities and our plant managers' compensation is based, in part, on the achievement of quality objectives. We have established an employee Lead Quality Continuous Improvement Team, and many of our plants also give quality-related bonuses to all hourly employees. Our quality program extends past the point of sale. We offer warranties on our products and conduct regular customer satisfaction surveys. All of our North American battery operations are now QS 9000 compliant. In Europe, all of our major factories are ISO 9001 approved and we have grade-A quality certification from Renault and PSA Group, BMW, VW/Audi and Fiat and Q1 approval from Ford. In addition, several of our European plants are AQAP approved by the military. We also hold individual certifications from 100% of our major industrial battery customers, such as Deutsche Telekom, Telecom Italia, Telefonica, French Railways (SNCF), as well as from large systems integrators such as Siemens, Ericsson and Alcatel. All of our traction batteries meet the applicable BSI or DIN standards. Research and Development We are committed to introducing new and technologically advanced products that provide better performance and value to the customer. To support this commitment, we dedicate significant effort to research and development. Our research and development team benefits all of our global business units by continually improving and advancing our existing technologies. 10 We operate five research and development facilities in the United States and Europe. Scientists and engineers at each of these facilities are currently focused on projects to enhance the lead-acid battery. We also operate six product/process-development centers around the world. These centers work cooperatively to define and improve our production processes and are currently working on projects related to continuous grid making processes, battery assembly automation and various other efficiency and quality improvement programs. By maintaining these various sites, we have been able to transfer technologies and processes among our various operating facilities, thereby adapting best practices from around the world for use in our various production facilities. We believe our research and development efforts provide us with a competitive advantage in technological innovation. We are constantly working on new products, including smart batteries capable of indicating state of charge, and advanced batteries with gelled electrolyte for other applications. At the same time, original equipment manufacturers are designing vehicles with more compact engine compartments. To compete effectively, we have to continue to design smaller and more flexible batteries that can generate increased power. We are also working closely with European original equipment manufacturers to develop, and have supplied them with prototypes of, new 36- and 42-volt batteries for the next generation of dual-battery automotive electrical systems. As the power requirements of automotive electronics continue to increase, automotive manufacturers are designing new vehicles that will require higher voltage electrical systems needing larger or multiple batteries. These new systems will generally require a 12-volt battery for lighting systems and other low power consumption accessories within the automobile and a 36-volt or 42-volt battery, which is needed for the next generation of combined starter motor/alternators and for high power-consumption accessories such as AC power and electrical heating and cooling systems. European original equipment manufacturers plan to include high-voltage electrical systems in certain luxury models as early as the 2002 model year. We believe our European experience with these higher voltage electrical systems will provide us with a competitive advantage when the North American OEM market moves toward a higher voltage electrical system, which is anticipated by model year 2004. Patents, Trademarks and Licenses We own or have a license to use various trademarks that are of value in the conduct of our business. For example, our agreement with NASCAR grants us the exclusive right to market batteries and related accessories under the officially licensed NASCAR name and logo until 2002, and allows us to market the Exide Select line. While we believe such trademarks and trade names enhance the brand recognition of our products and therefore are important to our business, we believe our products, engineering skills, reputation for quality and relationships with our customers are also important for the maintenance and growth of our business. An unaffiliated firm has rights to the Exide mark in approximately 37 foreign countries and Exide Electronics Group, Inc., an unaffiliated company, is licensed to use the Exide name on certain devices. We have been issued many patents worldwide, including over 200 U.S. and European patents issued since 1994. Additionally, we have several patents in process covering design of lead-acid batteries and battery manufacturing equipment. The dual-graphite battery development effort has three base patents, three pending patents and an additional twelve patent disclosures. While we believe patents are important to our business operations, we also believe the loss of any single patent or several patents would not have a material adverse effect on our company. A competitor manufactures and sells a spiral wound automotive battery, which has some similarities to our new 11 Orbital Battery. Although we believe our battery does not infringe this competitor's patents, we cannot assure that this competitor will not claim that it does. Manufacturing, Raw Materials and Suppliers Lead is the principal raw material in the manufacture of batteries, representing approximately one-third of the cost of goods sold. We can obtain substantially all of our domestic lead requirements through the operation of our four secondary lead recycling plants, which reclaim lead by recycling spent lead-acid batteries. We obtain batteries for recycling from our customers and through our wholesale distribution outlet system. Other key raw materials and components in the production of batteries include lead oxide and chemicals, which are generally available from multiple sources. We have not experienced any material stoppage or slowdown in production as a result of the unavailability, or delays in the availability, of raw materials. Competition Our North American and European markets are each very competitive and some of our competitors are larger and have greater financial resources than Exide. The manufacturers in these markets compete primarily on the basis of price, quality, technical innovation, service and warranty period. Well-recognized brand names are also important for aftermarket customers who do not purchase batteries made under their own labels. Most sales are made without long term contracts. In the North American transportation aftermarket, we believe that Johnson Controls, Inc. has the largest market position, followed by Exide. Other principal competitors in this market are GNB, who we recently entered into an agreement to acquire, Delphi Automotive Systems and East Penn Manufacturing Co., Inc. Price competition in this market has been severe in recent years. Competition is strongest in the mass merchandiser channel where large customers use their buying power to command lower prices. Pricing, while still important, is less of a factor than service with smaller customers such as those served by our branch system. Our largest competitors in the North American original equipment market are Delphi Automotive Systems, Johnson Controls, Inc. and GNB. Original equipment manufacturers change battery suppliers less frequently than aftermarket customers, but because of their size can force market participants to compete on price and other terms. We expect North American competition to remain intense. We seek to maintain and grow our market positions through our branding and emphasis on technologically advanced products, such as the Orbital battery, our branded products and our substantially improved product quality and customer service. Exide has the largest market position in Europe in automotive batteries, both aftermarket and original equipment, as well as in industrial batteries. Our closest competitor in the automotive markets is Varta, followed by Fiamm, Hoppeke, and Autosil. In the industrial market Hawker is the next largest after Exide, followed by Fiamm, Hoppeke and Yuasa. The European battery markets, particularly in the automotive original equipment and industrial areas, have undergone severe price competition. Cost savings from our ongoing plant rationalization program will allow us to continue to meet this strong price competition in order to maintain our customer relationships and market positions until the competitive environment 12 improves. We will also continue to compete on the basis of our pan-European presence and our technological capabilities, as well as our strong brands. Environmental, Health and Safety Matters As a result of our manufacturing and secondary lead smelting operations, we are subject to numerous environmental laws and regulations and are exposed to liabilities and compliance costs arising from the past and current storage, handling, release and disposal of hazardous substances and hazardous wastes. Our 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 regulations and does not currently believe that environmental, health or safety compliance issues will have a material adverse effect on our business or financial condition. North America. We have been advised by the U.S. Environmental Protection Agency or state agencies that we are a Potentially Responsible Party under the Comprehensive Environmental Response, Compensation and Liability Act or similar state laws at 75 federally defined Superfund or state equivalent sites. At 44 of these sites, we have either paid or are in the process of paying our share of liability. In most instances, our obligations are not expected to be significant because our portion of any potential liability appears to be minor to insignificant in relation to the total liability of all potentially responsible parties that have been identified and are viable. Our share of the anticipated remediation costs associated with all of the Superfund sites where we have been named a Potentially Responsible Party, based on our estimated volumetric contribution to each site, is included in the environmental remediation reserves discussed below. Because our liability under such statutes may, as a technical matter, be imposed on a joint and several basis, our liability may not necessarily be based on volumetric allocations and could be greater than our estimates. We believe, however, that our Potentially Responsible Party status at these Superfund sites will not have a material adverse effect on our business or financial condition because, based on our experience, it is reasonable to expect that our liability will be roughly proportionate to our volumetric contribution of waste to the sites. We currently have greater than 50% liability at only one Superfund site, discussed below. Other than this site, our allocation exceeds 5% at only six sites at which our share of liability has not been paid as of March 31, 2000. The current allocation at these six sites averages approximately 18%. We are the primary Potentially Responsible Party at the Brown's Battery Breaking Superfund site located in Pennsylvania. The site was operated by third-party owners in the 1960s and early 1970s. In 1992, the Environmental Protection Agency issued a Record of Decision identifying several alternate remedies. During fiscal 1997, we signed a consent decree and paid $3.0 million of the Environmental Protection Agency's past costs and we are not responsible for any other past costs. We have established reserves based upon our estimates of the remediation cost. We are also involved in the assessment and remediation of various other properties, including certain Exide-owned or operated facilities. Such assessment and remedial work is being conducted pursuant to a number of state and federal environmental laws and with varying degrees of involvement by state and federal authorities. Where probable and reasonably estimable, the costs of such projects have been reserved as discussed below. In addition, certain environmental matters concerning our Company are pending in federal and state courts or with regulatory agencies. We are involved in certain legal proceedings in Indiana in which state 13 authorities allege that we have improperly characterized and handled plastic wastes generated in connection with our materials recycling program (see below). While the final resolution of these proceedings is not yet known, we may incur civil penalties in connection with such resolution, which could in some cases exceed $100,000. We do not expect that the resolution of any of these proceedings will substantially affect either the continued functioning of our recycling program or our operations generally. Environmental conditions at our properties could lead to claims for personal injury, property damage or damages to natural resources. We are currently subject to a number of such claims, including matters alleging illness arising from exposures to lead in the vicinity of our former facility in Greer, South Carolina and property damage and personal injury claims associated with our Reading, Pennsylvania facilities. We have established reserves based upon our estimates of exposure associated with these matters, which are included in the environmental reserves discussed below. During fiscal 1998, we reached an agreement with former owners of our company whereby we agreed to release and indemnify the former owners from all environmental matters relative to certain sites. We have received $8.17 million under this agreement through fiscal 2000 with an additional $1.83 million to be received in fiscal 2001. We have taken an active role in addressing environmental issues associated with our business focusing on environmental, safety and health matters. We maintain numerous permits with the Environmental Protection Agency, various state agencies and provincial regulatory authorities which allow us to transport, store and recycle spent lead acid batteries, lead-bearing hazardous wastes and certain other hazardous wastes within and between the United States and Canada. To protect the environment, minimize future liability and help ensure a stable supply of lead to our battery manufacturing facilities, we have developed a comprehensive materials recycling program. Under this program, we obtain spent lead-acid batteries through our wholesale distribution outlet system and lead bearing materials from third parties. These materials are transported to our secondary lead smelting facilities. Batteries are separated at the smelters into three constituent units: lead, dilute sulfuric acid and plastic casing material. The lead is reclaimed and refined into lead alloys for use at our battery manufacturing facilities. The plastic from battery cases is broken into pieces and extruded into pellets by adding strengtheners and other additives. The pellets are sold or used at our battery casing molding facility to make new battery cases. The dilute sulfuric acid solution is neutralized and discharged in accordance with federal, state and provincial permits. Europe. We are subject to numerous environmental, health and safety requirements and are exposed to differing degrees of liabilities, compliance costs, and cleanup requirements arising from our 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. We expect that our European operations will continue to incur capital and operating expenses in order to maintain compliance with evolving environmental, health and safety requirements or for more stringent enforcement of existing requirements in each country. In addition, accelerated consolidation of our European operations could increase our expenditures. During fiscal 1999, we sold our plant in Soest, Germany to an unrelated entity. As part of that sale, Exide indemnified the purchasers against certain environmental liabilities. Also during fiscal 2000, we completed an assessment of the environmental condition of our Cubas de Sangre smelter in Spain, and were advised by the Madrid regional authorities that a cleanup would be required. Exide has proposed remediating the Cubas site with an advanced 14 technology that would remove lead impacts over an extended period of time. We have established reserves for the Soest and Cubas sites, as part of our global environmental reserves. While the ultimate outcome of the foregoing environmental matters is uncertain, after consultation with legal counsel, we do not believe the resolution of the foregoing matters, individually or in the aggregate, will have a material adverse effect on our financial condition or results of operations, although quarterly operating results may be materially affected. We have established reserves for onsite and offsite environmental remediation costs and litigation exposures and believe that such reserves are adequate. These reserves consist of amounts accrued for our active facilities, closed facilities, and specifically for 22 of the Superfund sites. While we believe our current estimates of future remediation costs are reasonable, future findings or changes in estimates could have a material effect on the recorded reserves. The Company has established reserves for on-site and off-site environmental remediation costs and believes that such reserves are adequate. As of March 31, 2000, the amount of such reserves on the Company's consolidated balance sheet was $34.2 million. Of this amount, $23.4 million 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 earnings charges are possible. Employees Total worldwide employment was approximately 16,100 at March 31, 2000. North America. As of March 31, 2000, we employed approximately 1,500 salaried employees and approximately 3,700 hourly employees in North America. Approximately 60% of such salaried employees are engaged in sales, service and marketing and approximately 40% in manufacturing and engineering. Approximately 26% of our hourly employees are represented by unions. Relations with the unions are generally good. Contracts covering approximately 500 and 200 of our union employees expire in fiscal 2001 and 2002, respectively, and the remainder thereafter. Europe. As of March 31, 2000, we employed approximately 3,800 salaried employees and approximately 7,100 hourly employees in Europe. Approximately 75% of such salaried employees are engaged in sales, service and marketing and approximately 25% in manufacturing and engineering. Our hourly employees are generally represented by unions. Relations with the unions are generally good. Contracts covering most of our European union employees expire on various dates through calendar year 2000. Backlog We do not have a material amount of backlog orders. FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES See Note 16 to the Company's Consolidated Financial Statements appearing elsewhere herein. 15 Item 2. Properties The chart below lists the location of our principal facilities. All of the facilities are owned unless otherwise indicated. All owned properties and the leases for the leased properties are subject to liens under our credit agreement. The leases for leased facilities expire at various dates through 2015.
Approximate Location Square Footage Use - -------------------------------- ----------------------------- ------------------------------------- North America: Baton Rouge, LA 176,000 Secondary Lead Smelting Bristol, TN 631,000 Battery Manufacturing Burlington, IA 190,000 Battery Manufacturing Cannon Hollow, MO 137,000 Secondary Lead Smelting Cooper, TX 115,000 (leased) Starter and Alternator Lampeter, PA 82,000 Battery Plastics Manufacturing Manchester, IA 286,000 Battery Manufacturing Maple, Ontario, Canada 169,000 Battery Manufacturing, Distribution and Administration Muncie, IN 174,000 Secondary Lead Smelting Reading, PA 125,000 Secondary Lead Smelting and Poly Reprocess Reading, PA 135,000 Executive Offices Reading, PA 280,000 Battery Manufacturing Reading, PA 77,000 Distribution Center Salina, KS 260,000 (leased) Battery Manufacturing Salina, KS 100,000 (leased) Distribution Center Europe and Other: Bolton, England 274,000 Industrial Battery Manufacturing Auxerre, France 176,000 Automotive Battery Manufacturing Gennevilliers, France 55,000 (leased) Executive Offices Lille, France 484,000 Industrial Battery Manufacturing Nanterre, France 169,000 Automotive Battery Manufacturing Pont Ste Maxence, France 71,000 Secondary Lead Smelting Bad Lauterberg, Germany 458,500 Manufacturing, Administrative and Warehouse Budingen, Germany 278,000 Industrial Battery Manufacturing Weiden, Germany 208,000 Industrial Battery Manufacturing Casalnuovo, Italy 483,000 Industrial Battery Manufacturing Romano Di Lombardia, Italy 266,000 (leased) Automotive Battery Manufacturing Poznan, Poland (five) 887,000 Automotive Battery Manufacturing Castaheira do Riatejo, Portugal 471,000 Automotive and Industrial Battery Manufacturing Cubas, Spain 323,000 Secondary Lead Smelting Azuqueca de Henares, Spain 434,000 Automotive Battery Manufacturing and Research Malpica, Zaragoza, Spain 213,000 Automotive Battery Manufacturing Manzanares, Spain 438,000 Automotive Battery Manufacturing Madrid, Spain 7,244 (leased) Executive Offices Zaragoza, Spain 248,000 Industrial Battery Manufacturing Manisa, Turkey 145,000 Automotive Battery Manufacturing Cwmbran, Wales 105,000 Automotive Battery Manufacturing
In addition, we also lease distribution outlets in the U.S. and Europe. We believe that our facilities are in good operating condition, adequately maintained, and suitable to meet our present needs and future plans. 16 Item 3. 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. The plaintiffs in these cases are seeking compensatory and punitive damages and injunctive relief. In May 2000, Exide and counsel for the plaintiffs agreed to a settlement, subject to several material contingencies, applicable notice, and court approval, in the following battery quality cases: Martin v. Exide, filed July 12, 1998 in the United States District Court for the District of South Carolina (the "Martin case"); Lush et al. v. Exide, filed November 18, 1999 in the Circuit Court for Claiborne County, Mississippi; Gamma Group, et al. v. Exide, filed January 29, 1999 in the United States District Court for the Eastern District of Pennsylvania and Exide v. East Alabama Auto Parts Anniston, Inc., filed April 24, 1996 in the Circuit Court of Calhoun County Alabama (the "East Alabama case"). In May 2000, Exide also reached an agreement in principle on a settlement of a claim in intervention brought by the Attorney General for the State of Alabama (the Alabama Attorney General had intervened in the East Alabama case in November 1999). Exide has reserved approximately $ 13.4 million for the settlement of the private claims and the Alabama Attorney General claim. Mathis Battery Company, et al. v. Exide, filed September 4, 1998 in the Chancery Court for Weakley County, Tennessee (the "Mathis case") and Mills v. Exide, filed December 6, 1999 in the United States District Court for the Central District of California (the "Mills case") are battery quality claims that are still pending against Exide. The Mathis case is a putative class action filed by lawyers who represent the plaintiff in the Martin case and alleges substantially the same claims alleged in the Martin case. The court has not certified the Mathis case and the case has been stayed. Exide expects that if the settlement of the Martin case is approved, the Mathis case will be dismissed. The Mills case arises under an unusual provision of California law, which was recently limited by a decision of the California Supreme Court, and Exide intends to defend that matter vigorously. Additionally, the settlements do not resolve two putative class actions, both styled Dynamic Enterprises, Inc. et al. v. Exide Corp., which were filed in 1998 in the United States District Court for the Eastern District of Texas and are still pending. In the first case, the plaintiffs seek to represent battery resellers alleging used-as-new claims. Exide has opposed a motion for class certification in that case and awaits a ruling. The second case, also a putative class action, involves allegations that Exide has improperly converted or withheld customer credit balances. Exide recently began a nationwide campaign to issue checks for outstanding credit balances and has moved for summary judgment in that case. Exide has asked the court to rule on the motion for summary judgment prior to hearing argument on a pending class certification motion. Exide expects a ruling in the second case after July 13, 2000. 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 provision of misleading investor information. Exide fully and completely responded to the subpoena in January 2000, and there is no action by the Mississippi Attorney General against Exide to date. 17 As previously reported, Exide voluntarily brought certain issues to the attention of the Securities and Exchange Commission (the "SEC"), and has cooperated with its investigation. 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. The third- party defendants have moved to dismiss Exide's third-party complaint, asserting that the claims can be heard in other pending litigation involving the parties (discussed below). That motion is pending before the court. Exide is currently involved in litigation with certain former members of senior management relating to their separation agreements. One of these cases, Arthur M. Hawkins v. Exide, filed July 6, 1999 in the U.S. District Court for the Eastern District of Michigan, involves a claim by Mr. Hawkins to enforce his separation agreement with Exide. Exide has filed a counterclaim asserting fraud, breach of fiduciary duty, misappropriation of corporate assets and civil conspiracy. Messrs. Gauthier and Pearson have filed actions in the U.S. District Court for the Eastern District of Pennsylvania alleging breach of contract; these actions are respectively titled Gauthier v. Exide and Pearson v. Exide, and were respectively filed on August 17, 1999 and July 9, 1999. Exide has filed counterclaims against Messrs. Gauthier and Pearson as well, asserting fraud, breach of fiduciary duty, misappropriation of corporate assets and civil conspiracy. Pearson v. Exide and Gauthier v. Exide were consolidated for pre- trial proceedings; discovery in these cases is ongoing and they are currently scheduled to be called in the August 18, 2000 trial pool. 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. The following lawsuits of the above type were filed on August 25, 1999 in the Circuit Court for Greenville County, South Carolina and are currently pending: 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, filed on May 24, 1995; Blume v. Exide, filed on March 4, 1996; Esterly v. Exide, filed on May 30, 1995 and Saylor v. Exide, filed on October 18, 1996. Discovery in these cases is ongoing. On June 26, 2000, Johnson Controls, Inc. ("JCI") filed a lawsuit in the United States District Court for the Northern District of Illinois, Eastern Division, against Exide and three of its former officers. The suit alleges commercial bribery relating back to JCI's loss of a contract to Exide in 1994. Allegations of improper payments to a Sears employee were made public over a year ago as part of the Florida Attorney General Investigation and subsequently in several civil cases. JCI has stated that its complaint is based on "public records". Exide believes that JCI's allegations and conclusions are not supported by publicly available information and that the lawsuit was threatened and subsequently filed to pressure Exide into commercial concessions and to potentially interfere with the GNB acquisition. Exide does not believe that the suit will have any material adverse effect on its financial condition. Exide will file a civil counter-claim and is considering referring the matter to the appropriate authorities for possible criminal prosecution. 18 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 such claims or litigation to which the Company is a party, both individually and in the aggregate, will have a material adverse effect on the Company's financial condition or results of operations, although quarterly or annual operating results may be materially affected. Item 4 Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Our common stock is listed and traded on The New York Stock Exchange under the symbol "EX". The following table presents the high and low sales prices for our common stock as reported on The New York Stock Exchange Composite Tape and dividends paid for the quarters indicated.
SALES PRICES DIVIDENDS FISCAL YEAR ENDING MARCH 31 HIGH LOW DECLARED ----------- --------- -------- (per share) 1998: First Quarter $23.125 $14.625 $0.02 Second Quarter 23.125 18.750 0.02 Third Quarter 34.250 20.563 0.02 Fourth Quarter 27.000 16.313 0.02 1999: First Quarter $21.750 $16.625 $0.02 Second Quarter 19.125 9.125 0.02 Third Quarter 20.938 5.375 0.02 Fourth Quarter 21.500 11.000 0.02 2000: First Quarter $16.375 $10.000 $0.02 Second Quarter 14.625 9.375 0.02 Third Quarter 11.125 7.438 0.02 Fourth Quarter 17.500 7.438 0.02
The last reported sale price of the common stock on The New York Stock Exchange on June 23, 2000 was $8.0625 per share. As of June 23, 2000, we had approximately 21,403,831 shares of our common stock outstanding and there were 600 record holders of common stock. 19 Item 6. Selected Financial Data (In thousands, except per share data): The following table sets forth selected financial data for Exide. You should read this information in conjunction with our consolidated financial statements and notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" that appear elsewhere in this document. The selected financial information for the fiscal years ending March 31, 1996, 1997, 1998 and 1999 has been restated. See Note 1 to the Consolidated Financial Statements herein.
Fiscal Year Ended March 31 ------------------------------------------------------------------- 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- (Restated) (Restated) (Restated) (Restated) Income Statement Data Net sales $2,342,616 $2,333,230 $2,273,126 $2,374,278 $2,194,447 Gross profit 552,806 590,976 604,091 559,256 532,492 Selling, marketing and 276,076 290,076 311,683 334,638 319,476 advertising expenses General and 137,086 145,869 135,606 169,744 145,770 administrative expenses Goodwill amortization 15,969 17,853 16,922 20,016 17,165 Operating income (loss) 123,675 137,178 139,880 34,858 (3,517) Interest expense, net 120,600 118,837 112,301 111,679 103,988 Income taxes 6,300 14,197 14,010 23,001 10,769 Income (loss) before extraordinary 939 15,227 19,535 (126,693) (136,042) loss Extraordinary loss (1)(2)(3)(4) (9,600) (2,767) (28,513) (301) -- Net income (loss) $ (8,661) $ 12,460 $ (8,978) $ (126,994) $ (136,042) Basic net income (loss) per share $(0.44) $0.61 $(0.44) $(5.98) $(6.40) Diluted net income (loss) per share $(0.42) $0.59 $(0.42) $(5.98) $(6.40) Other Financial Data EBITDA (5) $ 230,131 $ 263,009 $ 260,925 $ 141,653 $ 90,104 Cash provided by (used in): Operating activities 36,058 78,126 167,499 77,219 95,648 Investing activities (499,830) (61,652) (76,182) (22,356) (12,623) Financing activities 449,473 (17,000) (95,446) (70,238) (73,987) Capital expenditures 106,385 84,200 87,315 76,211 63,953 Ratio of earnings to fixed charges (6) 1.0x 1.2x 1.3x 0.2x 0.0x Balance Sheet Data (at period end) Working capital $ 581,828 $ 595,296 $ 518,922 $ 301,663 $ 213,468 Property, plant and equipment, net 578,722 521,836 535,113 543,702 443,344 Total assets 2,694,362 2,436,275 2,331,549 2,195,816 1,901,461 Total debt 1,340,025 1,289,682 1,248,983 1,205,806 1,118,385 Common stockholders' equity (deficit) 422,333 350,578 274,954 134,135 (66,376)
1. During fiscal 1996, the Company recorded a loss of $9,600 (net of a tax benefit of $5,958) from the early retirement of debt under the U.S. Credit Agreement. 2. During fiscal 1997, the Company recorded a loss of $2,767 with no income tax effect resulting from a modification of debt in connection with entering into a series of bond swap agreements for $38,000 (principal amount) of its 10% and 10 3/4% Senior Notes. 20 3. During fiscal 1998, the Company recorded a loss of $28,513 (net of a tax benefit of $3,667) resulting from a modification of debt in connection with entering a bond swap agreement for $21,000 (principal amount) of its 10% Senior Notes; the retirement of its 10.75% Senior Notes and the remainder of its 12.25% Senior Subordinated Deferred Coupon Debentures; the retirement of the U.S. Credit Agreements and European Facilities Agreement in connection with entering into the Senior Secured Global Credit Facilities Agreement; a modification of debt in connection with reducing the maximum commitment on the European Facilities Agreement; and the redemption of $108,119 (face value) of its outstanding 12.25% Zero-Coupon Bonds. 4. During fiscal 1999, the Company recorded a loss of $301 with no income tax effect resulting from a modification of debt in connection with entering into bond swap agreements for $4,430 (principal amount) of its 10% Senior Notes. 5. Represents earnings before interest, taxes, depreciation of property, plant and equipment, goodwill and other amortization and losses on sales of receivables. EBITDA should not be considered as an alternative to net income as an indicator of the Company's operating performance or to cash flows as a measure of liquidity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". 6. For purposes of computing the ratio of earnings to fixed charges, earnings consist of income (loss) before income taxes plus fixed charges (excluding capitalized interest) and amortization of capitalized interest. Fixed charges consist of interest expense, amortization of debt expense, capitalized interest, and one-third of rent expense, deemed representative of the interest factor. 21 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Factors Which Affect Our Financial Performance In the last three fiscal years, our financial performance has been affected by several major factors including: 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. Lead market prices declined substantially over the last three fiscal years. 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 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. Our results for the periods presented were adversely impacted by the overall weakness in European currencies. Weather. Unusually cold winters or hot summers accelerate battery failure and increase demand for automotive replacement batteries. During the periods discussed below, unusually warm winters resulted in fewer automotive battery failures in North America and Europe and this adversely affected our aftermarket sales. Results of Operations Year Ended March 31, 2000 Compared with Year Ended March 31, 1999 Excluding non-recurring or unusual charges, the Company reported net income of $6.5 million, or $.31 per diluted share, for the fiscal year ended March 31, 2000, as compared to a restated net loss, excluding non-recurring or unusual charges, of $8.5 million, or $.40 per diluted share, for the previous fiscal year. Earnings in fiscal 2000 were favorably impacted by: . strong Industrial battery market demand in Europe, particularly in the telecommunications sector in the latter part of the year. . increases in average selling prices in the U.S. due to our continued focus on a "better mix of customers". . reduced costs in Europe due to general efficiency improvements. 22 These operating improvements were offset in part by: . the negative impact of the weak Euro, which affected pre-tax earnings by approximately $8.6 million. . automotive aftermarket sales volume reductions in North America and Europe due to unusually warm winter weather. . continued pricing pressure in the European automotive aftermarket and OEM businesses. . increased selling, general and administrative costs in North America. Including non-recurring or unusual items, the Company reported a net loss of $136.0 million, or $6.40 per diluted share, for fiscal 2000, compared to a net loss of $127.0 million, or $5.98 per diluted share, for fiscal 1999. The Company recorded certain unusual or non-recurring charges aggregating $142.6 million in fiscal 2000, including $125.1 million in the fourth quarter. In fiscal 1999, the Company recorded $118.4 million of non-recurring or unusual charges described in the fiscal 1999 and fiscal 1998 comparison below. No tax benefits were recorded on the non-recurring or unusual charges in fiscal 2000 or fiscal 1999. The charges in fiscal 2000 consisted of: . $13.4 million provision to cover resolution of "used as new" claims litigation. The Company reached a tentative settlement covering the most significant of our cases and we now believe the remaining claims can be settled. The cash portion including legal fees, is less than $10 million. The balance of the provision is in coupons that can be redeemed, for the purchase of a new battery. The tentative agreement remains subject to court approval and final negotiation. . $39.3 million of restructuring charges, related primarily to the Company's realignment to a customer-focused global business unit strategy, including severance charges of $20.0 million and $19.3 million in asset write-downs and closure costs related to planned closures of manufacturing operations and other facilities including the Reading, Pennsylvania battery plant, certain U.S. branch locations and the Company's ongoing consolidation of European operations. Additional restructuring charges may be recorded over the next several years as additional plant closures and consolidation of administrative functions are identified as part of the Company's program to improve our cost structure. . $18.4 million of write-downs to net realizable value related to the ongoing divestiture of non-core businesses. . An increase to the Company's environmental reserves of $3.0 million. . Non-cash charges of $51.0 million related to asset write-downs and adjustments of balance sheet reserves, including $23.9 million in warranty reserves. . The Company also recorded $17.5 million of unusual items in the third fiscal quarter of fiscal 2000, including a charge for in-process research and development of $14.3 million for the acquisition of Lion Compact Energy and additional divestiture related charges of $3.2 million. 23 The Company restated results for fiscal 1999 and fiscal 1998 as a result of the Company's former management team's improper authorization of the deferral of a pre-fiscal 1998 charge until fiscal 1998 and 1999. This resulted in an increase in earnings of $.14 per diluted share and $.03 per diluted share in fiscal 1999 and fiscal 1998, respectively. This impact is reflected in the discussion and reported results herein. There is no impact in fiscal 2000. The Company changed its method of valuing inventory for U.S. battery inventories from the last-in, first-out ("LIFO") method to the first-in, first- out ("FIFO") method. This change did not impact the Company's earnings for any of the periods presented. Generally accepted accounting principles require the Company to restate for this particular accounting change. As such, retained earnings for the earliest period presented have been restated herein. The fiscal 2000 non-recurring or unusual charges discussed above, and the fiscal 1999 charges specified in the fiscal 1999 and fiscal 1998 comparison below, were the main factors impacting fiscal 2000 and fiscal 1999 as reported operating results. Comparative results were as follows: Net Sales. Net sales decreased $179.9 million or 7.6% to $2,194.4 million as compared to $2,374.3 million in fiscal 1999. Included in this reduction is the $23.9 million of warranty non-cash charge previously discussed. Unusual charges of $10.3 million were recorded in fiscal 1999. Approximately $126 million or 70% of the fiscal 2000 decrease related to weakened currency rates in Europe. The remaining decrease relates to the global automotive aftermarket sales volume reduction along with continued automotive pricing pressure in Europe, partially offset by average selling price increases in the U.S. and the strong European Industrial market. Industrial battery sales (included above) were $707.2 million in fiscal 2000 versus $730.7 million in fiscal 1999. Gross Profit. Gross profit for fiscal 2000 decreased $26.8 million or 4.8% to $532.5 million. Besides non-recurring or unusual charges of $35.7 million in fiscal 2000 and $64.0 million in fiscal 1999, gross profit was favorably impacted by the strong European Industrial market, average selling price increases in the U.S. and reduced European manufacturing costs. These improvements were mitigated by the weak Euro, the overall volume reductions in the automotive aftermarket business and the European automotive pricing pressures. Operating Expenses. Operating expenses increased $11.6 million or 2.2% to $536.0 million. Besides non-recurring or unusual charges of $69.7 million in fiscal 2000 and $35.9 million in fiscal 1999, operating expenses were favorably impacted by European general and administrative cost reductions and the weak Euro, offset by increased expenses in North America. Interest Expense, net. Interest expense, net decreased $7.7 million or 6.9% to $104.0 million versus $111.7 million in 1999 as a result of lower borrowing levels and the impact of weaker European currencies. Also included in interest expense in fiscal 2000 was a non-recurring charge of $0.7 million. Other (Income) Expense, net. Other (income) expense, net in fiscal 2000 was $16.0 million versus $28.9 million in 1999. Besides non-recurring or unusual charges of $12.6 million in fiscal 2000 and $8.2 million in fiscal 1999, other income was favorably impacted in fiscal 2000 by gains on certain sales of land of approximately $4.5 million. 24 Income Tax Provision. Income tax expense decreased $12.2 million to $10.8 million. The U.S. and European non-recurring or unusual charges in both fiscal years were not tax benefited. Year Ended March 31, 1999 Compared with Year Ended March 31, 1998 Net Sales. Net sales increased $101.2 million or 4.4% to $2,374.3 million as compared to $2,273.1 million in fiscal 1998. The increase was primarily attributable to the following factors: . The inclusion of DETA (a German industrial and automotive battery manufacturer) acquired on September 1, 1997 for 12 months of fiscal 1999 versus 7 months of fiscal 1998 ($75.5 million). . Higher automotive battery volumes in North America of 5.2% ($40.0 million)offset by higher sales deductions of $11.7 million. Along with a full year of DETA sales, European sales were also favorably impacted by exchange rates ($17.8 million) and slightly higher automotive unit volume. These increases were partially offset by unfavorable automotive battery pricing/mix in Europe, lower industrial sales (excluding the full year effect of DETA) and a reduction in other European sales. Industrial battery sales (included above) for fiscal 1999 were $730.7 million for fiscal 1999 versus $691.4 million in 1998. Gross Profit. Gross profit for fiscal 1999 decreased $44.8 million or 7.4% to $559.3 million. The decrease in gross profit is largely a result of the items discussed above and the following: . A $44.3 million charge related to write-downs associated with exiting non- core business activities and the closure of certain facilities, . A $6.6 million loss on lead hedging contracts in North America, . A $6.1 million charge for an adverse appellate court ruling in a patent infringement lawsuit, . A $3.7 million charge for the write-off of inventory and equipment related to an abandoned project, and . A $2.1 million charge for the write-off of unsaleable inventory specified for the Russian market. These decreases were partially offset by reduced manufacturing costs, particularly in Europe, along with the impact of sales volume increases mentioned above and a greater emphasis on sales of higher profit margin batteries. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $60.2 million or 13.0% to $524.4 million. The impact of including DETA for 12 months in fiscal 1999 versus only 7 months in fiscal 1998 resulted in approximately $19.3 million of the increase. Also contributing to this increase was: . Charges of $8.8 million related to specific legal expenses, including settlement of the Florida Attorney General investigation, . A $8.5 million charge for increased bad debt reserves primarily related to North American customers who have filed for bankruptcy, 25 . A $7.1 million charge related to separation packages of 25 executives and additional retirement charges, . A $4.8 million charge for uncollectable receivables from sales in Russia, . The unfavorable impact of foreign exchange rates ($3.9 million) and . A $2.4 million charge relating to write-downs associated with existing non- core business activities. Goodwill amortization increased $3.1 million or 18.3% to $20.0 million from $16.9 million in 1998, resulting primarily from the write-off of goodwill associated with the closure of a smelter operation and the write-off of impaired goodwill from certain branch acquisitions of $2.4 million. Operating Income. Operating income decreased $105.0 million as a result of the matters discussed above. Interest Expense. Interest expense decreased $0.6 million or 0.6% to $111.7 million versus $112.3 million in 1998 as a result of lower rates achieved through debt restructuring completed in the third and fourth quarters of fiscal year 1998. Other (Income) Expense, net. Other (income) expense, net in 1999 was $28.9 million versus ($5.9) million in 1998 for a change of $34.8 million. Contributing to this change was: . Currency transaction losses in 1999 of $8.6 million versus currency transaction gains of $6.8 million in 1998, . A $6.0 million charge in 1999 recorded for an amendment fee related to interest rate swap agreements and . Fiscal 1998 included a $5.6 million gain from an involuntary conversion due to a fire. Income Tax Provision. Income tax expense increased $9.0 million to $23.0 million despite the $139.1 million reduction in pre-tax earnings. U.S. tax losses and certain European tax losses were not tax benefited in fiscal 1999. Net Income/Loss. The net loss increased from $9.0 million in fiscal 1998 to $127.0 million in fiscal 1999 primarily as a result of the matters discussed above offset by a $28.2 million reduction in extraordinary loss relating to the early retirement of debt. Seasonality and Weather We sell most of our automotive aftermarket batteries during the fall and early winter (our second and third fiscal quarters). Retailers buy automotive batteries during these periods so they will have enough inventory when cold weather strikes. In addition, many of our industrial battery customers in Europe do not place their battery orders until the end of the calendar year. The seasonality of our business increases our working capital requirements. Demand for automotive aftermarket batteries is significantly affected by the weather. Unusually cold winters or hot summers accelerate battery failure and increase demand for automotive replacement batteries. Mild winters and 26 cool summers have the opposite effect. As a result, if our sales are reduced by an unusually warm winter or cool summer, it is not possible for us to recover these sales in later periods. Further, if our sales are adversely affected by the weather, we cannot make offsetting cost reductions to protect our gross margins in the short-term because a large portion of our manufacturing and distribution costs are fixed. Pending Acquisition of GNB As discussed in Item 1, on May 9, 2000, the Company entered into an agreement to acquire the global battery business of GNB for consideration of approximately $368 million (including $333 million in cash and four million Exide common shares) plus assumed liabilities. GNB is a leading U.S. and Pacific Rim manufacturer of both automotive and industrial batteries with annual sales of approximately $1.0 billion. The acquisition, which is expected to close in fiscal 2001, is subject to foreign regulatory review, financing and settlement of certain non-compete agreements. Financing is currently being arranged and is expected to be sourced through a combination of debt and certain asset securitizations. Liquidity and Capital Resources Our liquidity requirements arise primarily from the funding of seasonal working capital needs, obligations on our indebtedness and capital expenditures. Historically, we have met these liquidity requirements through operating cash flows, borrowed funds and the proceeds of sales of accounts receivable and sale leaseback transactions. Additional cash has been generated in the current year, and will be generated in fiscal 2001 from the sale of non-core businesses. We have 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 from us, up to a maximum commitment of $75.0 million and $175.0 million, respectively. Because of the seasonality of our business, more cash is typically generated in our third and fourth fiscal quarters than the first and second quarters. Our greatest cash demands from operations occur during the months of June through October. We believe we will be able to meet our requirements for liquidity with cash generated from operations, reduced working capital requirements, borrowings under the revolving credit portion of our credit agreement, the proceeds from sales of accounts receivable under our securitization facilities and/or sales of non-core businesses and assets. EBITDA, excluding non-recurring or unusual items and discounts on receivables sold, was $227.5 million for the current fiscal year versus $260.1 million in the prior year. Our cash flow from operating activities was $167.5 million (including $134.2 million related to sales of receivables), $77.2 million (including $29.3 million related to sales of receivables) and $95.6 million (net of a $23.5 million decrease related to sales of receivables) in fiscal 1998, 1999 and 2000, respectively. Primary working capital year on year is down approximately $118.6 million, due primarily to inventory reductions of approximately $50.3 million and approximately $41.0 million from currency effects. Our capital expenditures were $87.3 million, $76.2 million and $64.0 million in fiscal 1998, 1999 and 2000, respectively. Our credit agreement restricts the amount of capital expenditures which we can make, but we believe that such restrictions will not adversely effect our capital expenditure programs. Capital expenditures are estimated to be approximately $60.0 million in fiscal 2001. 27 The Company generated more than $80.0 million in cash and assumed liabilities from the sale of non-core businesses and other assets in fiscal 2000. Proceeds were used primarily to reduce debt. Businesses now planned to be sold in fiscal 2001 are expected to generate cash in excess of $100 million. In fiscal 2000 we recorded $39.3 million of restructuring charges, related primarily to the Company's realignment to a customer-focused global business unit strategy, including severance charges of $20.0 million and $19.3 million in asset write-downs and closure costs related to planned closures of manufacturing operations and other facilities including the Reading, Pennsylvania battery plant, certain U.S. branch locations and the Company's ongoing consolidation of European operations. Additional restructuring charges may be recorded over the next several years as additional plant closures and consolidation of administrative functions are identified as part of the Company's program to improve our cost structure. The expected cash portion of the charge, largely related to severance, will be paid out primarily in fiscal 2001. These cash outlays will be offset by prospective operating cost savings. Debt levels decreased year on year by $88 million from $1.206 billion to $1.118 billion principally due to reductions in inventory levels and cash proceeds from the sale of non-core businesses in fiscal 2000. As of March 31, 2000, we had $344.1 million outstanding and $205.5 million available under our credit agreement after consideration of $7.5 million of outstanding letters of credit. The use of such availability may be limited by certain covenants in the credit agreement. Increases in interest rates on such obligations could adversely affect our results of operations and financial condition. We have an interest rate collar agreement which reduces the impact of changes in interest rates on a portion of our floating rate debt. The collar agreement effectively limits the PIBOR (Paris Interbank Offered Rate) base 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. We have three currency and interest rate swap agreements which effectively convert $175 million of borrowings under the credit agreement and certain inter- company loans into 406.2 million French Francs (U.S. $68.5 million), 66.8 million Euros (U.S. $64.5 million) and 25.2 million British pounds sterling (U.S. $42 million). We receive LIBOR and pay PIBOR and pounds sterling LIBOR. Effective March 9, 2000 the Company assigned 382.5 million French Francs (U.S. $64.5 million) of its existing currency and interest rate swap agreement to a new counterparty and received a cash payment of Euro 8.5 million. Simultaneously, the Company entered into a new 66.8 million Euro (U.S. $64.5 million) one-year currency and interest rate hedge agreement. The company receives LIBOR plus 2.25% and pays Euro LIBOR plus 2.27%. As of March 31, 2000, we have 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 certain European countries' taxable income. (See Note 9 to our Consolidated Financial Statements). Our net deferred tax assets include certain amounts of net operating loss carryforwards, principally in the U.S., which management believes are realizable through a combination of anticipated tax planning strategies and forecasted future taxable income. Failure to achieve forecasted future taxable income might affect the ultimate realization of any remaining recorded net deferred tax assets. 28 Effects of Inflation Inflation has not had a material impact on our operations during the past three years. We generally have been able to offset the effects of inflation with price increases, cost-reduction programs and operating efficiencies. Future Environmental Developments We are subject to extensive federal, state, local and foreign environmental, health and safety laws and regulations. Future environmental, health and safety standards may be more stringent. We anticipate that such potential standards could cause an increase in our capital expenditures and operating costs. Unless and until the standards are adopted it is not possible to estimate these costs with any certainty or to predict whether they will have a material effect on our financial condition or results of operations. See "Business-Environmental, Health and Safety Matters". 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 was consistent with prior 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, . 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 7A. Quantitative and Qualitative Disclosures About Market Risks We are exposed to market risks from changes in foreign currency exchange rates, certain commodity prices and interest rates. In order to manage these risks, we participate in a risk management program, which includes entering into certain foreign exchange and commodity forward contracts and options. 29 A discussion of our accounting policies for derivative instruments is provided in Notes 1 and 5 to the financial statements. We maintain risk management control systems to monitor foreign exchange, commodity and interest rate risks, and related hedge positions. Positions are monitored using a variety of analytical techniques including market value, sensitivity analysis, and value-at-risk models. The following analyses are based on sensitivity analysis tests which assume instantaneous, parallel shift in exchange rates and commodity prices. For options and instruments with non-linear returns, appropriate models are utilized to determine the impact of sensitivity shifts. Foreign Currency Exchange Rate Risk We have foreign currency exposures related to buying, selling and financing in currencies other than the local currencies in which we operate. More specifically, we are exposed to foreign currency risk related to uncertainty to which future earnings or assets and liability values are exposed due to operating cash flows and various financial instruments that are denominated in foreign currencies. Currently, our most significant foreign currency exposures relate to France, Italy, United Kingdom, Spain and Germany. As of March 31, 2000, the net gain based on fair value of financial instruments with exposure to foreign currency risk was about $10.2 million. The potential loss in fair value liability for such financial instruments from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be about $29.5 million. The model assumes a parallel shift in foreign currency exchange rates; however, exchange rates rarely move in the same direction. The assumption that exchange rates change in a parallel fashion may overstate the impact of changing exchange rates. Commodity Price Risk We enter into commodity forward and option contracts. These contracts are executed to offset our exposure to the potential change in prices mainly for various metals used in the manufacturing of our lead acid batteries. No such contracts were outstanding at March 31, 2000. Interest Rate Risk We have historically entered into interest rate swaps and other interest sensitive forward and option contracts. Such contracts are executed to offset our exposure to interest rate risk on our debt. Certain Hedging Activities On May 11, 1998, we entered into an interest rate bond swap agreement for $4.4 million (principal amount) of our 10% Senior Notes. Under the agreement, we paid LIBOR plus 1.75% to a counterparty and received from the counterparty the fixed coupon rate payments we made. At the end of the agreement, the counterparty was guaranteed repayment of its open market purchase price of the notes, which exceeded face value by $233,000. 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 $301,000. In October 1998, we paid an amendment fee of $6.0 million to the counterparty to the interest rate swap agreements related to $45.1 million of our 10% Senior Notes due 2005. This fee was recorded as other expense in the third fiscal quarter of 1999. In November 1998, we terminated the $45.1 million interest rate swap agreements. In connection with such termination, we made a cash payment of $4.6 million, of which $2.5 million was recorded as a 30 bond discount. In January 1999, we amended certain provisions (effective December 27, 1998) of our existing credit agreement. Recently Issued Accounting Pronouncements SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities", establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that entities recognize derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company is currently evaluating the impact of the statement and will be required to adopt it in the first quarter of fiscal 2002. Item 8. Financial Statements and Supplementary Data See Index to Consolidated Financial Statements and Schedule at page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant The following sets forth certain biographical data regarding our current directors and executive officers as of March 31, 2000: Robert A. Lutz, 68, has served as Chairman and Chief Executive Officer of Exide since December 1998 and a member of the Office of the Chairman since May 2000. Mr. Lutz retired in July 1998 as Vice Chairman of Chrysler. Previously, Mr. Lutz was Chrysler's President and Chief Operating Officer responsible for its car and truck operations worldwide, Mr. Lutz became President of Chrysler in January 1991. Prior to joining Chrysler, Mr. Lutz held senior executive and operating positions with Ford, GM and BMW. Mr. Lutz is also a director of Northrop Grumman, ASCOM, a Swiss telecommunications and electronics company, Silicon Graphics Incorporated and Kepner-Tregoe. Craig H. Muhlhauser, 51, will begin his tenure as Exide's President and Chief Operating Officer and a member of the Office of the Chairman effective July 2000. Mr. Muhlhauser will also serve as the interim leader for Exide's Transportation: Aftermarket Global Business Unit. From 1997 until shortly before joining Exide, Mr. Muhlhauser held several senior executive positions with Ford Motor Company and Visteon Automotive Systems, a $17.8 billion auto systems and components supplier. Mr. Muhlhauser served as Vice President of Global Marketing Sales and Service for Visteon before becoming a vice president at Ford and President of Visteon. Before his tenure at Ford and Visteon, Mr. Muhlhauser served as Senior Vice President of Sales and Services for United Technologies Corporation, a global supplier of propulsion systems; he held this position from 1995 until 1997. 31 Kevin R. Morano, 46, has served as Exide's Executive Vice President and Chief Financial Officer and a member of the Office of the Chairman since May 2000. Before joining Exide, Morano served in a variety of executive positions for ASARCO Incorporated, a copper mining, specialty chemicals and aggregates producer. Mr. Morano held the position of President and Chief Operating Officer of ASARCO from April 1999 until December 1999. Prior to serving as President and Chief Operating Officer, Mr. Morano held the positions of ASARCO's Executive Vice President and Chief Financial Officer from January 1998 until April 1999. Mr. Morano also served as ASARCO's Vice President and Chief Financial Officer from April 1993 until January 1998. Mr. Morano is a director of Apex Silver Mines Limited. Neil S. Bright, 53, has served as Exide's Executive Vice President, Motive Power Global Business Unit since April 2000. Mr. Bright joined Chloride, a subsidiary of Exide, in 1969 and has held a variety of positions with Chloride and other Exide subsidiaries since that time. Albrecht M. Leuschner, 62, has been Exide's Executive Vice President, Standby Global Business Unit since April 2000. Dr. Leuschner joined Exide in 1997 as Managing Director for Exide's German Group. From 1983 until 1997, Dr. Leuschner served as Chairman of CEAG AG and as Chief Executive Officer of DETA Akkumulatorenwerk GmbH, a German battery maker. Ronald J. Gardhouse, 53, has been Exide's Executive Vice President, Transportation: Original Equipment Global Business Unit since April 2000. Mr. Gardhouse was appointed Chairman of Exide Holding Europe in June 2000. Mr. Gardhouse joined Exide in April 1999 as Executive Vice President and Chief Financial Office of Exide Holding Europe. These positions with Exide followed Mr. Gardhouse's retirement from a 24-year career with Chrysler. During his tenure at Chrysler, Mr. Gardhouse served as President, Asia Pacific Operations from July 1996 to April 1999 and Assistant Treasurer from 1993 to 1996. Jack J. Sosiak, 61, has been Exide's senior executive in charge of human resources since 1983, most recently as Executive Vice President, Human Resources since February 1995. John R. Van Zile, 48, has been Exide's Vice President, General Counsel and Secretary since October 1996. Prior to joining Exide, Mr. Van Zile was Assistant General Counsel/Assistant Secretary of Coltec Industries, a manufacturer of commercial, industrial and aerospace products, a position he held since January 1985. Francois J. Castaing, 55, has served as a director of Exide since March 1999. Mr. Castaing is President of Castaing & Associates, an automotive industry consulting firm, he began consulting shortly after his 1997 retirement from Chrysler. From 1987 until his retirement from Chrysler, Mr. Castaing was an executive with Chrysler. Among the positions that Mr. Castaing held with Chrysler was that of Vice President of Vehicle Engineering, a position he held from 1988 until 1996. In 1996, Mr. Castaing was promoted to Executive Vice President of Chrysler. Lynne V. Cheney, 58, has served as a director of Exide since February 2000. Ms. Cheney is a Senior Fellow at the American Enterprise Institute for Public Policy Research, which she joined in 1993. From 1986 until 1993, Ms. Cheney served as Chairperson for the National Endowment for the Humanities. Additionally, Ms. Cheney serves as a director for Lockheed Martin Corporation, Reader's Digest Association, Inc., American Express/IDS Mutual Fund Group, and Union Pacific Resources Group, Inc. 32 John A. James, 58, became a director of Exide in March 1999. Mr. James is Chairman of the Board and Chief Executive Officer of The O-J Group, a group of transportation-related companies, which he co-founded in 1971. Mr. James is also a director of the Hartford Development Foundation and a member of the National Association of Black Automotive Suppliers. Jody G. Miller, 42, became a director of Exide in December 1999. Ms. Miller is a Venture Partner with Maveron LLC, a Seattle-based venture capital firm that she joined in February 2000. Before joining Maveron, from 1995 until January 1999, Ms. Miller served in several senior executive positions with Americast, a digital video and interactive services partnership between Ameritech, BellSouth, GTE, SNET and the Walt Disney Company. While at Americast, Ms. Miller served as Acting President and Chief Operating Officer, Executive Vice President and Senior Vice President for Operations. In the period between her tenures at Americast and Maveron, Ms. Miller served as a consultant. Ms. Miller also served in the White House as special assistant to the President from 1993 to 1995, where she was involved with matters such as healthcare, welfare reform and NAFTA. Heinz C. Prechter, 58, became a director of Exide in March 1999. Mr. Prechter is Chairman of Prechter Holdings, a holding company he founded in 1965 that owns various manufacturing companies, one of which is a supplier of the automobile industry. Mr. Prechter is also the Founding Chairman and Director of Automotive Supplier Co-Operative. Mr. Prechter also sits on the Boards of The Budd Company and Comerica Incorporated. John E. Robson, 70, became a director of Exide in March 1999. Mr. Robson is a Senior Advisor with Robertson Stephens, an investment banking firm, and has been with Robertson Stephens since 1993. From 1989 to 1993, Mr. Robson served as Deputy Secretary of the United States Treasury. Mr. Robson also served previously as President and Chief Executive Officer of G D Searle, a global pharmaceutical company, and Dean of Emory University's School of Business Administration. Mr. Robson is also a director of ProLogis Trust, a global provider of distribution services and facilities, Pharmacia Corporation and Northrop Grumman Corporation. ITEM 11. Executive Compensation The information under the heading Executive Compensation in the Company's definitive Proxy Statement for its annual meeting of stockholders to be held on August 11, 2000, is hereby incorporated by reference. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. The information under the heading Stock Ownership in the Company's definitive Proxy Statement for its annual meeting of stockholders to be held on August 11, 2000, is hereby incorporated by reference. ITEM 13. Certain Relationships and Related Transactions The information under the heading Certain Transactions in the Company's definitive Proxy Statement for its annual meeting of stockholders to be held on August 11, 2000, is hereby incorporated by reference. PART IV 33 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Index to Financial Statements See Index to Consolidated Financial Statements and Schedule at page F-1. (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of the period covered by this report. (c) Exhibits Required by Item 601 of Regulation S-K See Index to Exhibits. (d) Financial Statement Schedules See Index to Consolidated Financial Statements and Schedule at page F-1. 34 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, (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. 35 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EXIDE CORPORATION By: /s/ Robert A Lutz ------------------------------------------ Robert A. Lutz Chairman and Chief Executive Officer By: /s/ Kevin R. Morano ------------------------------------------ Kevin R. Morano Executive Vice President and Chief Financial Officer Date: June 29, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. By: /s/ Robert A. Lutz By: /s/ John A. James --------------------------------- ------------------------------------ Robert A. Lutz, Chairman and John A. James, Director Chief Executive Officer By: /s/ Kevin R. Morano By: /s/ Jody G. Miller --------------------------------- ------------------------------------ Kevin R. Morano, Executive Jody G. Miller, Director Vice President and Chief Financial Officer By: /s/ Kenneth S. Pawloski By: /s/ Heinz C. Prechter --------------------------------- ------------------------------------ Kenneth S. Pawloski, Vice Heinz C. Prechter, Director President, Corporate Controller By: /s/ Francois J. Castaing By: /s/ John E. Robson --------------------------------- ------------------------------------ Francois J. Castaing, Director John E. Robson, Director By: /s/ Lynne V. Cheney --------------------------------- Lynn V. Cheney, Director 36 INDEX TO EXHIBITS *2.1 Coordinating Agreement, dated May 9, 2000, between Exide Corporation and Pacific Dunlop Holdings (USA) Inc. and Amendments No. 1 and 2 thereto dated June 19 and June 28, 2000, respectively; Stock Purchase Agreement With Respect To Pacific Dunlop GNB Corporation, dated May 9, 2000, between Exide Corporation and Pacific Dunlop Holdings (USA) Inc. and Amendment thereto dated June 28, 2000; Asset Purchase Agreement, dated June 28, 2000, between Pacific Dunlop Holdings (N.Z.) Limited and Exide New Zealand Limited; Asset Purchase Agreement, dated June 28, 2000, between GNB Battery Technologies Limited, Australian Battery Company (Aust.) Pty Ltd, Pacific Dunlop Limited and Exide Australia Pty Limited; Stock Purchase Agreement with respect to GNB Technologies NV, dated June 28, 2000, between P.D. International Pty Limited and Pacific Dunlop Holdings (Europe) Ltd and Exide Holding Europe; Stock Purchase Agreement with respect to GNB Technologies Limited, dated June 28, 2000, between Pacific Dunlop Holdings (Europe) Ltd and Exide Holding Europe; Stock Purchase Agreement with respect to GNB Technologies (China) Limited, dated June 28, 2000, between Pacific Dunlop Holdings (Hong Kong) Limited and Traeson Pte Ltd (to be renamed Exide Holding Asia Pte Limited); Asset Purchase Agreement, dated June 28, 2000, between Pacific Dunlop Holdings (Singapore) Pte Ltd and Bluewall Pte Ltd (to be renamed Exide Singapore Pte Limited); Stock Purchase Agreement with respect to GNB Technologies (India) Private Limited, dated June 28, 2000, between Pacific Dunlop Holdings (Singapore) Pte Ltd and Traeson Pte Ltd (to be renamed Exide Holding Asia Pte Limited); Trademark Purchase Agreement, dated June 28, 2000 between PD Licencing Pty Ltd and Exide Australia Pty Limited. The registrant will furnish supplementally to the Commission on request copies of any schedule to the foregoing which has been omitted. 3.1 Restated Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 4.1 of the Registrant's Registration Statement on Form S-3 (No. 333 - 29991). 3.2 Restated Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 of the Registrant's 1999 Annual Report on Form 10-K. 3.3 Form of Rights Agreement dated as of September 18, 1998 between Exide Corporation and American Stock Transfer and Trust Company, as Rights Agent, including the form of Certificate of Designation, Preferences and Rights of Junior Participating Preferred Shares, Series A attached thereto as Exhibit A, the form of Rights Certificate attached thereto as Exhibit B and the Summary of Rights attached thereto as Exhibit C, incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed September 21, 1998; amendment to rights agreements dated as of October 15, 1998. 4.1 Registration Rights Agreement among the Registrant, Wilmington Securities, Inc. and certain other holders of the Registrant's Common Stock, incorporated by reference to Exhibit 4.14 to the 1993 Registration Statement. 4.2 Indenture dated as of April 28, 1995, between the Registrant and The Bank of New York, as trustee, incorporated by reference to Exhibit 99.3 of the Registrant's Form 8-K dated June 2, 1995. 4.3 Indenture dated as of December 15, 1995 between the Registrant and The Bank of New York, as trustee, incorporated by reference to Exhibit 4.7 to the Registrant's 1996 Annual Report on Form 10-K. 4.4 Fiscal and Paying Agency Agreement, dated April 23, 1997, by and among Exide Holding Europe S.A., Exide Corporation, The Bank of New York and 37 Deutsche Bank Aktiengesellschaft, incorporated by reference to Exhibit 4.9 to the Registrant's 1997 Annual Report on Form 10-K. 10.1 Receivables Purchase Agreement, dated as of March 31, 1997, among Exide U.S. Funding Corporation, Three Rivers Funding Corporation and the Registrant, incorporated by reference to Exhibit 10.1 to the Registrant's 1997 Annual Report on Form 10-K. 10.2 Sale Agreement, dated March 31, 1997, between the Registrant and Exide U.S. Funding Corporation, incorporated by reference to Exhibit 10.2 to the Registrant's 1997 Annual Report on Form 10-K. 10.3 Separation Agreement with James M. Diasio, effective June 1, 2000. 10.4.1 Employment Agreement with Robert A. Lutz, incorporated by reference to Exhibit 10.7 to the Registrant's 1999 Annual Report on Form 10-K. 10.5 Lease Agreement (Series B) dated September 1, 1976 pertaining to the Salina, Kansas manufacturing facilities, incorporated by reference to Exhibit 10.22 to the Registrant's Registration Statement on Form S-1 (No. 33-13632), as amended (the "S-1 Registration Statement"). 10.6 Exide Corporation 1993 Stock Incentive Plan, incorporated by reference to Exhibit 99.1 to Registrant's Registration Statement on Form S-8 (File No. 333-413). 10.7 Exide Corporation 1993 Long Term Incentive Plan, incorporated by reference to Exhibit 10.25 to the S-1 Registration Statement. 10.8 Exide Corporation Amended and Restated 1996 Non-Employee Directors Stock Plan, incorporated by reference to Exhibit 10.25 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 28, 1998. 10.9 Exide Corporation 1997 Stock Option Plan, incorporated by reference to Exhibit 10.20 to the Registrant's 1998 Annual Report on Form 10-K. 10.10 Exide Corporation 1999 Stock Incentive Plan, as amended, incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 1999. 10.11 Amended and Restated Nonqualified Stock Option Agreement for Robert A. Lutz, incorporated by reference to Exhibit 10.30 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended January 2, 2000. 10.12 Amended and Restated Nonqualified Stock Option Agreement for Ronald J. Gardhouse. 10.13 Nonqualified Stock Option Agreement for Kevin R. Morano. 10.14 Agreement dated September 30, 1994, among Gemala (Isle of Man) Limited, PT Sapta Panji Manggala, and B.I.G. Batteries Group Limited. Deed dated September 30, 1994, among Euro Exide Corporation Limited, Gemala (Isle of Man) Limited and B.I.G. Batteries Group Limited. Master Agreement dated September 30, 1994 among Euro Exide Corporation Limited, Gemala (Isle of Man) Limited, B.I.G. Batteries Group Limited and PT Sapta Panji Manggala, incorporated by reference to Exhibit 10.24 of the December 1994 Registration Statement. 38 10.15 Credit and Guarantee Agreement dated December 19, 1997 among the Registrant, certain of the Registrant's subsidiaries, Lehman Brothers Inc., Credit Suisse First Boston, Lehman Commercial Paper Inc. and other lenders and related amendment dated May 27, 1998, incorporated by reference to Exhibit 10.22 to the Registrant's 1998 Annual Report on Form 10-K; Second Amendment, dated January 8, 1999, incorporated by reference to Exhibit 10.25 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended December 27, 1998; Third Amendment, dated September 24, 1999, incorporated by reference to Exhibit 10.29 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended October 3, 1999. 10.16 Receivables Sale Agreement, dated June 3, 1997 among CMP Batteries Limited, Exide (Dagenham) Limited, Fulmen (U.K.) Limited, B.I.G. Batteries Limited and Exide Europe Funding LTD, incorporated by reference to Exhibit 10.23 to the Registrant's 1998 Annual Report on Form 10-K. 18.1 Preferability Letter. 21.1 Subsidiaries of the Registrant. 23.1 Consent of independent public accountants. 27.1 Financial data schedule. * Will be filed subsequently. 39 EXIDE CORPORATION AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2 CONSOLIDATED STATEMENTS OF OPERATIONS F-3 CONSOLIDATED BALANCE SHEETS F-4 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) F-6 CONSOLIDATED STATEMENTS OF CASH FLOWS F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8 CONSOLIDATED SUPPORTING SCHEDULE FILED: II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES F-35
All other schedules are omitted because they are not applicable, not required, or the information required to be set forth therein is included in the Consolidated Financial Statements or in the Notes thereto. F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders of Exide Corporation: We have audited the accompanying consolidated balance sheets of Exide Corporation (a Delaware corporation) and subsidiaries as of March 31, 1999 and 2000, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three fiscal years in the period ended March 31, 2000 (1999 and prior as restated - see Note 1). These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Exide Corporation and subsidiaries as of March 31, 1999 and 2000, and the results of their operations and their cash flows for each of the three fiscal years in the period ended March 31, 2000, in conformity with accounting principles generally accepted in the United States. As explained in Note 1 to the consolidated financial statements, the Company has given retroactive effect to the change in accounting for inventory costing. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the accompanying index to the consolidated financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Philadelphia, Pa., June 29, 2000 F-2 EXIDE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per-share data)
For the Fiscal Year Ended March 31, ------------------------------------------------------ (Restated) (Restated) 1998 1999 2000 ----------- ----------- ----------- NET SALES $ 2,273,126 $ 2,374,278 $ 2,194,447 COST OF SALES BEFORE ASSET SALES 1,669,035 1,815,022 1,640,371 NET LOSS ON ASSET SALES -- -- 21,584 ----------- ----------- ----------- Gross profit 604,091 559,256 532,492 ----------- ----------- ----------- OPERATING EXPENSES: Selling, marketing and advertising 311,683 334,638 319,476 General and administrative 135,606 169,744 145,770 Restructuring -- -- 39,336 Purchased research and development -- -- 14,262 Goodwill amortization 16,922 20,016 17,165 ----------- ----------- ----------- 464,211 524,398 536,009 ----------- ----------- ----------- Operating income (loss) 139,880 34,858 (3,517) ----------- ----------- ----------- INTEREST EXPENSE,net 112,301 111,679 103,988 OTHER (INCOME) EXPENSE, net (5,852) 28,852 16,043 ----------- ----------- ----------- Income (loss) before income taxes, minority interest and extraordinary loss 33,431 (105,673) (123,548) INCOME TAX PROVISION 14,010 23,001 10,769 ----------- ----------- ----------- Income (loss) before minority interest and extraordinary loss 19,421 (128,674) (134,317) MINORITY INTEREST (114) (1,981) 1,725 ----------- ----------- ----------- Income (loss) before extraordinary loss 19,535 (126,693) (136,042) EXTRAORDINARY LOSS RELATED TO EARLY RETIREMENT OF DEBT, net of income tax benefit of $3,667 in 1998 (28,513) (301) -- ----------- ----------- ----------- Net income (loss) $ (8,978) $ (126,994) $ (136,042) =========== =========== =========== BASIC EARNINGS PER SHARE: Income (loss) before extraordinary loss $ 0.95 $ (5.97) $ (6.40) Extraordinary loss (1.39) (0.01) -- ----------- ----------- ----------- Net income (loss) $ (0.44) $ (5.98) $ (6.40) =========== =========== =========== DILUTED EARNINGS PER SHARE: Income (loss) before extraordinary loss $ 0.90 $ (5.97) $ (6.40) Extraordinary loss (1.32) (0.01) -- ----------- ----------- ----------- Net income (loss) $ (0.42) $ (5.98) $ (6.40) =========== =========== =========== WEIGHTED AVERAGE SHARES: Basic 20,588 21,245 21,263 =========== =========== =========== Diluted 21,642 21,245 21,263 =========== =========== ===========
The accompanying notes are an integral part of these statements. F-3 EXIDE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except per-share data) March 31, ------------------------- (Restated) 1999 2000 ---------- ----------- ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents $ 20,596 $ 28,110 Receivables, net of allowance for doubtful accounts of $54,111 and $64,177, respectively 388,665 379,490 Inventories 505,404 405,720 Prepaid expenses and other 20,541 16,026 Deferred income taxes 13,303 20,138 ---------- ----------- Total current assets 948,509 849,484 ---------- ----------- PROPERTY, PLANT AND EQUIPMENT, NET 543,702 443,344 ---------- ---------- OTHER ASSETS: Goodwill, net 566,173 501,117 Investments in affiliates 23,072 20,665 Deferred financing costs, net 16,967 12,796 Deferred income taxes 61,019 37,583 Other 36,374 36,472 ---------- ----------- 703,605 608,633 ---------- ----------- Total assets $2,195,816 $ 1,901,461 ========== =========== The accompanying notes are an integral part of these statements. (Continued) F-4 EXIDE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued) (In thousands, except per-share data)
March 31, ---------------------------------------- (Restated) 1999 2000 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) - --------------------------------------------- CURRENT LIABILITIES: Short-term borrowings $ 20,881 $ 24,666 Current maturities of long-term debt 30,439 32,047 Accounts payable 250,625 260,352 Accrued interest 27,181 28,882 Accrued compensation 70,292 66,734 Product warranty reserve 44,988 44,750 Other current liabilities 202,440 178,585 ----------- ----------- Total current liabilities 646,846 636,016 ----------- ----------- LONG-TERM DEBT 1,154,486 1,061,672 ----------- ----------- NONCURRENT RETIREMENT OBLIGATIONS 134,051 128,827 ----------- ----------- OTHER NONCURRENT LIABILITIES 108,652 123,329 ----------- ----------- COMMITMENTS AND CONTINGENCIES (Notes 3, 12 and 14) MINORITY INTEREST 17,646 17,993 ----------- ----------- STOCKHOLDERS' EQUITY (DEFICIT) Common stock, $.01 par value 60,000 shares authorized; 21,359 and 21,401 shares issued and outstanding 213 214 Additional paid-in capital 490,147 490,399 Accumulated deficit (181,779) (319,530) Notes receivable - stock award plan (786) (734) Unearned compensation (129) - Accumulated other comprehensive loss (173,531) (236,725) ----------- ----------- Total stockholders' equity (deficit) 134,135 (66,376) ----------- ----------- Total liabilities and stockholders' equity (deficit) $ 2,195,816 $ 1,901,461 =========== ===========
The accompanying notes are an integral part of these statements. F-5 EXIDE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE FISCAL YEARS ENDED MARCH 31, 1998, 1999 AND 2000 (In thousands, except per-share data)
Notes Additional Receivable - Common Paid-in Stock Award Unearned Accumulated Stock Capital Plan Compensation Deficit ----- ---------- ----------- ------------ ----------- Balance at March 31, 1997, as previously reported $ 213 $489,427 $(1,696) $(516) $ (21,569) Cumulative effect of prior period adjustments -- -- -- -- (20,832) ----- -------- ------- ----- --------- Balance at March 31, 1997, as restated 213 489,427 (1,696) (516) (42,401) ----- -------- ------- ----- --------- Net loss for fiscal 1998 -- -- -- -- (8,978) Minimum pension liability adjustment, net of tax -- -- -- -- -- Translation adjustment -- -- -- -- -- Comprehensive income (loss) Common stock issued under employee stock purchase plan -- 172 -- -- -- Common stock issued pursuant to Board of Directors' grants -- 318 -- -- -- Forfeiture of common stock grants -- (66) 66 -- -- Payment for common stock grants -- -- 21 -- -- Amortization of unearned compensation -- -- -- 194 -- Cash dividends paid ($0.08/share) -- -- -- -- (1,699) ----- -------- ------- ----- --------- Balance at March 31, 1998, as restated 213 489,851 (1,609) (322) (53,078) ===== ======== ======= ===== ========= Net loss for fiscal 1999 -- -- -- -- (126,994) Minimum pension liability adjustment, net of tax -- -- -- -- -- Translation adjustment -- -- -- -- -- Comprehensive income (loss) Common stock issued under employee stock purchase plan -- 148 -- -- -- Common stock issued pursuant to Board of Directors' grants -- 165 (51) -- -- Forfeiture of common stock grants -- (17) 17 -- -- Payment for common stock grants -- -- 857 -- -- Amortization of unearned compensation -- -- -- 193 -- Cash dividends paid ($0.08/share) -- -- -- -- (1,707) ----- -------- ------- ----- --------- Balance at March 31, 1999, as restated 213 490,147 (786) (129) (181,779) ===== ======== ======= ===== ========= Net loss for fiscal 2000 -- -- -- -- (136,042) Minimum pension liability adjustment, net of tax -- -- -- -- -- Translation adjustment -- -- -- -- -- Comprehensive income (loss) Common stock issued under employee stock purchase plan 1 165 -- -- -- Common stock issued pursuant to Board of Directors' grants -- 87 -- -- -- Forfeiture of common stock grants -- -- 52 -- -- Amortization of unearned compensation -- -- -- 129 -- Cash dividends paid ($0.08/share) -- -- -- -- (1,709) ----- -------- ------- ----- --------- Balance at March 31, 2000 $214 $490,399 $ (734) $ -- $(319,530) ===== ======== ======= ===== =========
Accumulated Other ---------------- Comprehensive Income (Loss) --------------------------- Minimum Pension Liability Cumulative Adjustment, Translation Comprehensive Net of Tax Adjustment Income (Loss) ----------- ----------- ------------- Balance at March 31, 1997, as previously reported $ (4,993) $ (89,456) Cumulative effect of prior period adjustments -- -- --------- ---------- Balance at March 31, 1997, as restated (4,993) (89,456) ========= ========== Net loss for fiscal 1998 -- -- $ (8,978) Minimum pension liability adjustment, net of tax 2,226 -- 2,226 Translation adjustment -- (67,878) (67,878) --------- Comprehensive income (loss) $ (74,630) ========= Common stock issued under employee stock purchase plan -- -- Common stock issued pursuant to Board of Directors' grants -- -- Forfeiture of common stock grants -- -- Payment for common stock grants -- -- Amortization of unearned compensation -- -- Cash dividends paid ($0.08/shares) -- -- --------- ---------- Balance at March 31, 1998, as restated (2,767) (157,334) ========= ========== Net loss for fiscal 1999 -- -- $(126,994) Minimum pension liability adjustment, net of tax 985 -- 985 Translation adjustment -- (14,415) (14,415) --------- Comprehensive income (loss) $(140,424) ========= Common stock issued under employee stock purchase plan -- -- Common stock issued pursuant to Board of Directors' grants -- -- Forfeiture of common stock grants -- -- Payment for common stock grants -- -- Amortization of unearned compensation -- -- Cash dividends paid ($0.08/share) -- -- --------- ---------- Balance at March 31, 1999, as restated (1,782) (171,749) ========= ========== Net loss for fiscal 2000 -- -- $(136,042) Minimum pension liability adjustment, net of tax (311) -- (311) Translation adjustment -- (62,883) (62,883) --------- Comprehensive income (loss) $(199,236) ========= Common stock issued under employee stock purchase plan -- -- Common stock issued pursuant to Board of Directors' grants -- -- Forfeiture of common stock grants -- -- Amortization of unearned compensation -- -- Cash dividends paid ($0.08/share) --------- ---------- Balance at March 31, 2000 $ (2,093) (234,632) ========= ==========
The accompanying notes are an integral part of these statements. F-6 EXIDE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
For the Fiscal Year Ended March 31, --------------------------------------- 1998 1999 (Restated) (Restated) 2000 ----------- ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (8,978) $ (126,994) $ (136,042) Adjustments to reconcile net income (loss) to net cash provided by operating activities - Depreciation and amortization 103,584 123,153 95,706 Extraordinary loss 28,513 301 - - Net loss on asset sales - - - - 21,584 Purchased research and development - - - - 14,262 Deferred income taxes 7,050 9,106 16,199 Original issue discount on notes 10,080 9,341 9,992 Provision for losses on accounts receivable 7,060 23,243 6,859 Provision for restructuring - - - - 39,336 Minority interest (114) (1,981) 1,725 Amortization of deferred financing costs 5,583 4,737 3,610 Net change from sales of receivables 134,187 29,263 (23,483) Changes in assets and liabilities excluding effects of acquisitions and divestitures - Receivables (8,074) (26,353) (29,139) Inventories (29,871) 51,307 50,324 Prepaid expenses and other (7,801) (749) 1,466 Payables and accrued expenses (34,272) (35,539) (1,162) Other, net (39,448) 18,384 24,411 ---------- ----------- ----------- Net cash provided by operating activities 167,499 77,219 95,648 ---------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of certain businesses, net of cash acquired (40,455) (14,825) (2,582) Capital expenditures (87,315) (76,211) (63,953) Equipment purchases held for sale (8,015) - - - - Proceeds from sales of assets 50,303 41,707 53,105 Insurance proceeds from fire damage 9,300 26,973 807 ---------- ----------- ----------- Net cash used in investing activities (76,182) (22,356) (12,623) ---------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in short-term borrowings 2,743 3,439 7,486 Borrowings under Global Credit Facilities Agreement 540,022 606,791 639,089 Repayments under Global Credit Facilities Agreement (67,886) (659,471) (709,673) Borrowings under U.S. Credit Agreement 272,500 - - - - Repayment of U.S. Credit Agreement borrowings (289,500) - - - - Borrowings under European Facilities Agreement 151,884 - - - - Repayment of European Facilities Agreement (474,854) - - - - Repayment of Acquired Debt (64,644) - - - - Issuance of 9.125% Senior Notes 102,130 - - - - Retirement of 10.75% Senior Notes (150,000) - - - - Retirement of 12.25% Senior Subordinated Notes (106,002) - - - - Increase (decrease) in other debt 7,002 (17,490) (8,448) Debt issuance costs (17,142) (1,800) (732) Dividends paid (1,699) (1,707) (1,709) ---------- ----------- ----------- Net cash used in financing activities (95,446) (70,238) (73,987) ---------- ----------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (2,964) 358 (1,524) ---------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,093) (15,017) 7,514 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 42,706 35,613 20,596 ---------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 35,613 $ 20,596 $ 28,110 ========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for - Interest (net of amount capitalized) $ 96,415 $ 93,995 $ 89,955 Income taxes (net of refunds) $ 6,423 $ 10,852 $ 16,180
The accompanying notes are an integral part of these statements. F-7 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per-share data) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation The consolidated financial statements include the accounts of Exide Corporation and all of its majority owned subsidiaries (collectively the "Company"). All significant intercompany transactions have been eliminated. Investments in affiliates largely represents investments accounted for by the cost method. Investments in 20% to 50% owned companies are included in the consolidated financial statements on the basis of the equity method of accounting. The Company's equity in the net income (loss) of these companies is not material. Nature of Operations The Company is the largest manufacturer and marketer of lead acid batteries in the world consisting of automotive batteries in North America and automotive and industrial batteries in Europe. The Company markets automotive batteries to a broad range of retailers and distributors of replacement batteries and automotive original equipment manufacturers. The Company's industrial batteries consist of traction batteries, such as those used in forklift trucks and other electric vehicles, and standby batteries used for back-up power applications, such as those for telecommunication systems. See Note 2 for a discussion of the Company's realignment to a Global Business Unit structure effective April 1, 2000. See Note 3 for a discussion of our pending acquisition of GNB Technologies, Inc. Seasonality and Weather The automotive aftermarket is seasonal as retail sales of replacement batteries are generally higher in the fall and winter. Accordingly, demand for the Company's automotive batteries is generally highest in the fall and early winter (the Company's second and third fiscal quarters) as retailers build inventories in anticipation of the winter season. European sales are concentrated in the fourth calendar quarter (the Company's third fiscal quarter) due to the shipment of batteries for the winter season and the practice of many industrial battery customers (particularly governmental and quasi-governmental entities) of deferring purchasing decisions until the end of the calendar year. Demand for automotive batteries is significantly affected by weather conditions. Unusually cold winters or hot summers accelerate battery failure and increase demand for automotive replacement batteries. Mild winters and cool summers have the opposite effect. Major Customers and Concentration of Credit The Company has a number of major retail and original equipment manufacture ("OEM") customers, both in North America and Europe. No single customer accounted for more than 10% of consolidated net sales during any of the fiscal years presented. The Company does not believe that a material part of its business is dependent upon a single customer, the loss of which would have a material long-term impact on the business of the Company. However, the loss of one or more of the Company's largest customers would most likely have a negative short-term impact on the Company's results of operations. F-8 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) During the fourth fiscal quarter of 1999, the Company terminated its supplier agreement with a major retail customer. Costs associated with the contract termination included write-offs of inventory of $1,900 included in cost of sales, and prepaid customer incentives of $5,400 which were reflected as a reduction of net sales. During fiscal 1998 and 1999 certain of the Company's North American retail customers declared bankruptcy. In connection with these bankruptcies, the Company recorded provisions for losses on accounts receivable of $6,300 and $5,800 during 1998 and 1999, respectively. Foreign Currency Translation The functional currency of each of the Company's foreign subsidiaries is primarily the respective local currency. Assets and liabilities of the Company's foreign subsidiaries and affiliates are translated into U.S. dollars at the current rate of exchange existing at year-end, and revenues and expenses are translated at average monthly exchange rates. Translation gains and losses are recorded as a component of other comprehensive income within stockholders' equity. Foreign currency gains and losses from certain inter-company transactions meeting the indefinite reversal criteria of SFAS No. 52 "Foreign Currency Translation" are also recorded as a component of other comprehensive income. Transaction gains and losses not meeting this indefinite reversal criteria are included in other (income) expense, net. The Company recorded net transaction (gains) losses of ($6,815),$8,600 and $897 in fiscal 1998, 1999 and 2000, respectively. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Inventories Inventories, which consist of material, labor and overhead, are stated at the lower of cost or market using the first-in, first-out ("FIFO") method. See "Restatement" within this footnote for discussion of the Company's change in valuing its U.S. battery inventory. Property, Plant and Equipment Property, Plant and Equipment at March 31 consists of:
1999 2000 --------- --------- Land $ 46,628 $ 32,659 Buildings and improvements 244,538 213,143 Machinery and equipment 539,121 528,242 Construction in progress 24,216 16,747 --------- --------- 854,503 790,791 Less - Accumulated depreciation (310,801) (347,447) --------- --------- Property, plant and equipment, net $ 543,702 $ 443,344 ========= =========
F-9 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Property, plant and equipment are stated at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of depreciable assets. Accelerated methods are used for tax purposes. Useful lives of depreciable assets, by class, are as follows: Buildings and improvements 5 to 40 years Machinery and equipment 3 to 10 years Cost and accumulated depreciation for property retired or disposed of are removed from the accounts, and any gain or loss on disposal is credited or charged to earnings. Expenditures for maintenance and repairs are charged to expense as incurred. In connection with constructing property and equipment, the Company capitalized $1,277, $967 and $159 of interest costs during fiscal years 1998, 1999 and 2000, respectively. Depreciation expense was $78,097, $96,750 and $76,257 for fiscal years 1998, 1999 and 2000, respectively. Goodwill Goodwill is amortized over 40 years on a straight-line basis. Accumulated amortization as of March 31, 1999 and 2000, was $76,659 and $84,849, respectively. It is the Company's policy to review goodwill (and other long- lived assets) for possible impairment, when an indication of impairment exists, on the basis of whether the carrying amount of such assets is fully recoverable from projected, undiscounted net cash flows of the related business. If such a review would indicate that the carrying amount of goodwill and/or other long- lived assets is not recoverable the Company then reduces the carrying amount of such assets to fair value. During fiscal 1999, the Company wrote off $2,419 of goodwill associated with certain U.S. branches, as well as the decision to shut down a U.S. lead smelter. These writeoffs are included in operating expenses. Estimated Warranty Costs The Company recognizes the estimated cost of warranty obligations as a reduction of sales in the period in which the related products are sold. These estimates are based on historical trends. Hedging Agreements The Company enters into certain currency and interest rate hedge agreements to manage interest costs associated with long-term debt. The differential to be paid or received on these agreements is accrued as interest rates change and is recognized monthly over the life of the agreements. See Note 5 for further discussion. The Company enters into certain lead hedging agreements to manage the cost of externally purchased lead. No such agreements were outstanding as of March 31, 2000. Income Taxes The Company accounts for income taxes under the provisions of SFAS No. 109 "Accounting for Income Taxes", which requires the use of the liability method in accounting for deferred taxes. If it is more likely than not that some portion, or all, of a deferred tax asset will not be realized, a valuation allowance is recognized. F-10 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Noncurrent Retirement Obligations Noncurrent retirement obligations consist principally of reserves for pension obligations, postretirement health care and other retirement benefits. Earnings Per Share Basic earnings per share ("EPS") is computed using the weighted average number of common shares outstanding for the period while diluted EPS is computed assuming conversion of all dilutive securities such as options. Included below is a reconciliation of shares for the basic and diluted EPS computations.
1998 1999 2000 ------ ------ ------ Basic EPS Shares 20,588 21,245 21,263 Effect of Dilutive Securities 1,054 -- -- ------ ------ ------ Diluted EPS Shares 21,642 21,245 21,263 ====== ====== ======
There is no difference between basic and diluted EPS regarding the amount of income (loss) before extraordinary loss used for the computations. The Convertible Senior Subordinated Notes (see Note 5), which, if converted, would result in an additional 4,993 common shares, have not been included in the diluted EPS calculation for all periods presented since the effect would be antidilutive. The effect of dilutive securities in fiscal 1998 is primarily comprised of stock options and grants. Options to purchase 266 and 3,079 shares with exercise prices ranging from $9.563 to $29.50 were outstanding at March 31, 1999 and 2000, respectively, but were not included in the computation of diluted EPS because the option's exercise price was greater than the average market price of the common shares. These options expire in the years 2000 to 2009. All other options outstanding at March 31, 1999 and 2000 were not included in the fiscal 1999 and 2000 computation of diluted EPS because of the Company's fiscal 1999 and 2000 loss position. Revenue Recognition The Company records sales upon product shipment. Advertising The Company expenses advertising costs as incurred. The Company is party to certain sponsorship agreements, whereby the related costs are recognized over the life of the agreement, generally one year. Comprehensive Income In fiscal 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 established new rules for the reporting and presentation of comprehensive income and its components. However, the adoption of this statement had no impact on the Company's net income (loss) or stockholders' equity (deficit). SFAS No. 130 requires the change in the minimum pension liability, foreign currency translation adjustments and foreign currency gains and losses from certain inter-company transactions meeting the indefinite reversal criteria to be included in other comprehensive income(loss). Prior years' financial statements have been reclassified to conform to these requirements. The minimum pension liability adjustment was net of deferred tax assets of $1,505, $960 and $156 as of March 31, 1998, 1999, and 2000, respectively. F-11 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Risks Associated with International Operations and Currency Risk The Company's international operations are subject to risks normally associated with foreign operations, including, but not limited to, the disruption of markets, changes in export or import laws, restrictions on currency exchanges and the modification or introduction of other government policies with potentially adverse effects. The majority of the Company's sales and expenses are denominated in currencies other than U.S. dollars, and changes in exchange rates may have a material effect on the Company's reported results of operations and financial position. In addition, a significant portion of the Company's indebtedness is denominated in U.S. dollars. For all periods presented, stockholders' equity was unfavorably impacted by the weakening of major European currencies, as shown in the accompanying financial statements. The Company enters into foreign exchange contracts, including forward and purchased option contracts. The Company enters into forward exchange contracts to reduce the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities, as well as certain firm commitments and highly anticipated cash flows. The Company is also party to purchased option contracts which, if exercised, involve the sale or purchase of foreign currency at a fixed exchange rate for a specified period of time. As of March 31, 2000, the net value of open forward exchange contracts and the related gains and losses were not material. Restatement The Company restated results for fiscal 1999 and fiscal 1998 as a result of the Company's former management team's improper authorization of the deferral of a pre-fiscal 1998 charge, related to a transaction with a related party, until fiscal 1998 and 1999. This resulted in a reduction of the net loss of $838, or $.03 per diluted share, and $2,927, or $.14 per diluted share, in fiscal 1998 and fiscal 1999, respectively. This impact is reflected in the reported results herein. There is no impact on fiscal 2000. The Company changed its method of valuing inventory for U.S. battery inventories from the last-in, first-out ("LIFO") method to the FIFO method in the fourth quarter of fiscal 2000. This change did not impact the Company's earnings for any of the periods presented. The change was made to better match the Company's current manufacturing costs with revenues given the continuing decline in these costs, make our methodology more consistent with others in the industry and allow for the valuing of inventory consistently throughout the Company, particularly with the Global Business Unit structure realignment, discussed in Note 2. Generally accepted accounting principles require the Company to restate for this particular accounting change. As such, retained earnings for the earliest period presented has been reduced by $17,067 herein. Certain other prior period amounts have been reclassified to conform to the fiscal 2000 presentation. F-12 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Recently Issued Accounting Standards SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities", as amended by SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities", establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that entities recognize derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company is currently evaluating the impact of the statement and will be required to adopt it in the first quarter of fiscal 2002. 2. GLOBAL BUSINESS UNIT STRUCTURE REALIGNMENT: The Company announced in fiscal 2000 a realignment to a customer-focused global business unit structure, effective April 1, 2000, to allow the Company to more effectively service all of its customers' needs and requirements. This strategy is in contrast to the Company's geographic based structure in place through March 31, 2000. The Company recorded restructuring charges of $39,336, consisting of $20,000 in severance benefits and $19,300 for targeted plant and branch closings, primarily related to this realignment. The charges relate to the Company's closure of the Reading, Pennsylvania plant and six branches in the U.S. as well as headcount reductions of 168 employees in the U.S. and Europe. Through March 31, 2000, $13,282 of charges against the reserve have occurred consisting of $2,610 of severance benefits paid and $10,672 of asset writedowns. Remaining expenditures will occur over the next several years as permitted under applicable regulations and in accordance with existing contracts. 3. ACQUISITIONS AND DIVESTITURES: On May 9, 2000, the Company entered into an agreement to acquire the global battery business of Australian-based Pacific Dunlop Limited, including its subsidiary GNB Technologies, Inc. ("GNB"), for consideration of approximately $368,000, (including $333,000 in cash and 4,000 Exide common shares) plus assumed liabilities. GNB is a leading U.S. and Pacific Rim manufacturer of both automotive and industrial batteries with annual sales of approximately $1 billion. The acquisition, which is expected to close in fiscal 2001, is subject to due diligence, foreign regulatory review, financing and settlement of certain non-compete agreements. The Company anticipates accounting for this acquisition under the purchase method. 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 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 $14,262 write- off for purchased research and development costs. The purchased in-process F-13 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) research and development had not yet reached technological feasibility, and the technology had no alternative future use, as of the date of acquisition. During the fourth quarter of fiscal 1999, the Company, as part of strategic review of its operations, identified certain non-core businesses for divestiture and the Board of Directors authorized and approved a related divestiture plan. The Company hired an investment-banking firm at that time to assist in marketing the businesses. Based on the above actions, the Company recorded an impairment charge of $38,600 in cost of sales and $2,000 in operating expenses in the fourth quarter of fiscal 1999 relative to the identified businesses. The Company recorded additional net charges of $21,584 in cost of sales in fiscal 2000 related to these divestitures. Before recognition of the impairment, these businesses had a net book value of approximately $72,400 and operating losses of approximately $8,400 during fiscal 1999 and $3,200 in fiscal 2000. The Company anticipates selling the remaining non-core businesses during fiscal 2001. The Company sold its battery separator operations in fiscal 2000 for approximately $47,000, 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 its United States 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 included in net loss on asset sales in the accompanying consolidated statements of operations. The Company sold additional non-core businesses in fiscal 2000 with cash proceeds of approximately $6,700. Effective September 1, 1997, the Company acquired three related German battery producers and marketers, DETA Akkumulatorenwerk GmbH, MAREG Accumulatoren GmbH and FRIWO SILBERKRAFT GmbH (together "DETA") for approximately $34,000 plus assumed debt of approximately $64,600. This acquisition was accounted for as a purchase and the results of DETA's operations were included in the Company's consolidated statements of operations effective September 1, 1997. In connection with previous European acquisitions, the Company recorded liabilities of $153,000 related to exit costs, primarily severance benefits to be paid to certain employees who were identified for termination as a result of consolidation and identified plant closings. Through March 31, 2000, $145,200 of charge-offs have occurred consisting of $133,300 of severance benefits paid (including $32,500, $27,900 and $10,300 in fiscal 1998, 1999 and 2000, respectively) with the remaining amount associated with plant closing costs. Remaining expenditures will occur over the next several years as permitted under applicable regulations. F-14 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. INVENTORIES: March 31, ---------------------------- 1999 2000 ---------- ---------- Raw materials $ 132,697 $ 111,168 Work-in-process 74,549 64,412 Finished goods 298,158 230,140 ---------- ---------- $ 505,404 $ 405,720 ========== ========== In connection with the purchase of lead for anticipated manufacturing requirements, the Company enters into commodity forward and futures contracts. These contracts are used as a hedging strategy to help protect against volatility in lead prices. The Company remains at risk for possible changes in the market value of the commodity contracts; however, such risk should be mitigated by price changes in lead. The contracts are accounted for as hedges and, accordingly, gains or losses are deferred and recognized in inventory upon execution of the contract. At March 31, 2000, the Company had no outstanding contracts hedging lead purchases. 5. DEBT: At March 31, 1999 and 2000, short-term borrowings of $20,881 and $24,666, respectively, consisted of various operating lines of credit and working capital facilities maintained by certain of the Company's non-U.S. subsidiaries. Certain of these borrowings are secured by receivables, inventories and/or property. These borrowing facilities, which are typically for one-year renewable terms, generally bear interest at current local market rates plus up to one percent. As of March 31, 1999 and 2000, the weighted average interest rate on these borrowings was 12.0% and 16.4%, respectively. Following is a summary of the Company's long-term debt at March 31, 1999 and 2000:
1999 2000 -------------- ------------- Senior Secured Global Credit Facilities Agreement - Borrowings primarily at LIBOR plus 2.25% - 3.0% (at a weighted average rate of 6.87% and 8.16% at March 31, 1999 and 2000) $ 424,186 $ 336,636 9.125% Senior Notes, (Deutsche mark denominated) due April 15, 2004 96,373 85,515 10% Senior Notes, due April 15, 2005 300,000 300,000 Convertible Senior Subordinated Notes, due December 15, 2005 316,377 326,369 Other, including capital lease obligations (see Note 14), debt discount and other loans at interest rates generally ranging from 3.7% to 11.5% due in installments through 2015 47,989 45,199 ----------- ----------- 1,184,925 1,093,719 Less - Current maturities (30,439) (32,047) ----------- ----------- $ 1,154,486 $ 1,061,672 =========== ===========
The Company's $650,000 Senior Secured Global Credit Facilities Agreement has three borrowing Tranches: a $150,000 six year multi-currency term A loan, a $250,000 seven and one-quarter year U.S. dollar term B loan, and a $250,000 six year multi-currency revolving credit line. This facility contains a number of financial and other covenants customary for such agreements including restrictions on new indebtedness, liens, leverage rates, acquisitions and capital expenditures. In fiscal 1999 and fiscal 2000, the Company amended certain provisions of the existing $650,000 Senior Secured Global Credit Facilities Agreement. Principal payments on nonrevolving debt will continue through March 2005. Availability under the Senior Secured Global Credit Facilities F-15 EXIDE CORPORATION AND SUBSIDIARIES NOTED TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Agreement. Principal payments on nonrevolving debt will continue through March 2005. Availability under the Senior Secured Global Credit Facilities Agreement, net of outstanding letters of credit, is currently $205,505. The use of such availability may be limited by certain covenants in the credit agreement. The write-off of the remaining deferred financing costs under the former U.S. Credit Agreement and European Facilities Agreement resulted in an extraordinary loss of $8,336 (net of income tax benefit of $2,899) in fiscal 1998. On April 23, 1997, the Company issued 175 million Deutsche mark (U.S. $96,373) 9.125% Senior Notes due on April 15, 2004. The Company used the funds to repay indebtedness under the then existing U.S. credit agreement and previous European Facilities Agreement. In April 1995, the Company issued $300,000 in aggregate principal amount of 10% Senior Notes. The 10% Senior Notes are redeemable at the option of the Company, in whole or in part, at any time on or after April 15, 2000, initially at 105% of the principal amount, plus accrued interest, declining to 100% of the principal amount, plus accrued interest on or after April 15, 2002. During fiscal 1999, the Company paid an amendment fee of $6,000 to the counterparty for $45,055 of interest rate swap agreements related to its 10% Senior Notes. This fee was recorded as other expense. The Company then terminated these interest rate swap agreements and made a cash payment of $4,588, of which $2,478 was recorded as a bond discount and is being amortized over the remaining life of the 10% Senior Notes. In December 1995, the Company issued Convertible Senior Subordinated Notes due December 15, 2005, with a face amount of $397,000 discounted to $287,797. These notes have a coupon rate of 2.9% with a yield to maturity of 6.75%. The notes are convertible into the Company's common stock at a conversion rate of 12.5473 shares per $1 principal amount at maturity, subject to adjustments in certain events. The Company enters into currency and interest rate hedge agreements to manage interest costs associated with long-term debt. We have three currency and interest rate swap agreements which effectively convert $175,000 of borrowings under the credit agreement and certain inter-company loans into 406,200 French Francs (U.S. $68,500), 66,800 Euros (U.S. $64,500) and 25,200 British pounds sterling (U.S. $42,000). We receive LIBOR and pay PIBOR and pounds sterling LIBOR. Effective March 9, 2000 the Company assigned 382,500 French Francs (U.S. $64,500) of its existing currency and interest rate swap agreement to a new counterparty and received a cash payment of Euro 8,525. Simultaneously, the Company entered into a new 66,800 Euro (U.S. $64,500) one-year currency and interest rate hedge agreement. The Company receives LIBOR plus 2.25% and pays Euro LIBOR plus 2.27%. Additionally, effective December 23, 1997, the Company entered into two three-year interest rate collar agreements that reduce the impact of changes in interest rates on a portion of the Company's floating rate debt. These agreements effectively limit the PIBOR base interest rate on 593,050 French francs (U.S. $100,000) of borrowing under the Global Credit Facilities Agreement to no more than 6.6% and no less than 3.5%. During fiscal 1998, 1999 and 2000, the Company recognized $689, $1,833 and $3,274, respectively, of reduced interest expense related to these swap and collar agreements. Counterparties to bond swap transactions and interest rate hedge agreements are major financial institutions. Management believes the risk of incurring losses related to credit risk is remote and any losses would be immaterial. F-16 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Annual principal payments required under long-term debt obligations at March 31, 2000 are as follows: Fiscal Year Amount ----------- ----------- 2001 $ 32,047 2002 31,649 2003 29,782 2004 76,231 2005 286,628 Thereafter 637,382 ----------- $ 1,093,719 =========== 6. EMPLOYEE BENEFIT PLANS AND POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS: The Company has noncontributory defined benefit pension plans covering substantially all hourly employees in North America. Plans covering hourly employees provide pension benefits of stated amounts for each year of credited service. The Company has numerous defined contribution plans in North America and Europe with related expense of $5,077, $6,046 and $5,585 in fiscal 1998, 1999, and 2000, respectively. European subsidiaries of the Company sponsor several defined benefit plans that cover substantially all employees who are not covered by statutory plans. For defined benefit plans, charges to expense are based upon costs computed by independent actuaries. In most cases, the defined benefit plans are not funded and the benefit formulas are similar to those used by the North American plans. The Company provides certain health care and life insurance benefits for a limited number of retired employees. In addition, a limited number of the Company's active employees may become eligible for those benefits if they reach normal retirement age while working for the Company. The Company accrues the estimated cost of providing postretirement benefits during the employees' applicable years of service. F-17 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table sets forth the plans' funded status and the amounts recognized in the Company's consolidated financial statements:
Pension Benefits Other Benefits -------------------------- ------------------------- 1999 2000 1999 2000 ----------- ---------- ----------- --------- Change in benefit obligation: - ----------------------------- Benefit obligation at beginning of year $ 281,038 $ 295,676 $ 18,505 $ 18,572 Service cost 7,428 7,186 195 206 Interest cost 18,149 16,823 1,266 1,085 Actuarial (gain)/loss 4,939 (1,949) 373 (2,993) Plan participants' contributions 949 1,062 - - Benefit paid (14,555) (12,048) (1,619) (1,267) Plan amendments 288 977 - - Currency translation (1,855) (14,114) (148) 58 Settlements and Other (705) (7,822) - - --------- --------- -------- -------- Benefit obligation at end of year $ 295,676 $ 285,791 $ 18,572 $ 15,661 ========= ========= ======== ======== Change in Plan Assets: - ---------------------- Fair value of plan assets at beginning of year $ 172,065 $ 187,227 $ - $ - Actual return on plan assets 20,114 17,820 - - Employer contributions 12,319 9,532 1,619 1,267 Plan participants' contributions 949 1,062 - - Benefits paid (14,555) (12,048) (1,619) (1,267) Currency translation (3,665) (1,193) - - Settlements and Other - (8,345) - - --------- --------- -------- -------- Fair value of plan assets at end of year $ 187,227 $ 194,055 $ - $ - ========= ========= ======== ======== Reconciliation of funded status: - -------------------------------- Funded status $ (108,449) $ (91,736) $(18,572) $(15,661) Unrecognized net Transition obligation 269 220 1,022 998 Prior service cost 2,406 2,939 - - Actuarial loss 9,652 3,337 4,309 1,332 Contributions after measurement date 218 230 - - --------- --------- -------- -------- Net amount recognized $ (95,904) $ (85,010) $(13,241) $(13,331) ========= ========= ======== ======== Amounts recognized in statement of - ---------------------------------- financial position: - ------------------- Prepaid benefit cost $ 22,245 $ 22,592 $ - $ - (Accrued) benefit cost (123,023) (111,920) (13,241) (13,331) Intangible asset 1,636 2,069 - - Accumulated other comprehensive (income) loss 3,238 2,249 - - --------- --------- -------- -------- Net amount recognized $ (95,904) $ (85,010) $(13,241) $(13,331) ========= ========= ======== ======== Pension Benefits Other Benefits ------------------- ------------------ 1999 2000 1999 2000 -------- -------- -------- ------- Weighted-average assumptions as of March 31: Discount rate 6.0% 6.6% 6.6% 8.0% Expected return on plan assets 7.5% 7.7% -- -- Rate of compensation increase 4.2% 4.3% -- --
For measurement purposes, an 8.2% and an 8.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1999 and 2000, respectively. The rate was assumed to decrease gradually to 5.1% for fiscal 2004 and remain at that level thereafter. F-18 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pension Benefits Other Benefits ----------------------------------- ------------------------------------ 1998 1999 2000 1998 1999 2000 --------- --------- --------- --------- --------- ---------- Components of net periodic benefit cost: Service cost $ 6,930 $ 7,428 $ 7,186 $ 186 $ 195 $ 206 Interest cost 15,479 18,149 16,823 1,323 1,266 1,085 Expected return on plan assets (11,313) (14,318) (14,193) -- -- -- Amortization of net- Transition obligation 32 31 30 70 64 65 Prior service cost 169 267 357 -- -- -- (Gain) / Loss 62 (48) (10) -- -- -- -------- -------- -------- -------- -------- -------- Net periodic benefit cost (a) $ 11,359 $ 11,509 $ 10,193 $ 1,579 $ 1,525 $ 1,356 ======== ======== ======== ======== ======= ======== (a) Excludes the impact of curtailments of $(1,303), $(706) and $1,083 in fiscal 1998, 1999 and 2000, respectively.
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $159,259, $153,943, and $38,239, respectively, as of March 31, 1999 and $149,988, $141,986, and $38,805 respectively as of March 31, 2000. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
One Percentage- One Percentage- Point Increase Point Decrease --------------- --------------- Effect on total of service and interest cost components $ 138 $ (110) Effect on the postretirement benefit obligation $ 1,369 $ (1,111)
7. PREFERRED SHARE PURCHASE RIGHTS PLAN: In fiscal 1999, the Company's Board of Directors announced that it adopted a Preferred Share Purchase Rights Plan and declared a dividend distribution to be made to stockholders of record on September 29, 1998, of one Preferred Share Purchase Right (a "Right") on each outstanding share of common stock. Each Right entitles the registered holder to purchase from the Company one one- thousandth of a share of Junior Participating Preferred Stock, Series A, par value $.01 per share, of the Company (the "Preferred Shares") at an exercise price of $60 per one one-thousandth of a Preferred Share, subject to adjustment. The Rights are not exercisable, or transferable apart from the common stock, until the earlier to occur of (i) ten days following a public announcement that a person or group other than certain exempt persons (an "Acquiring Person"), together with persons affiliated or associated with such Acquiring Person (other than those that are exempt persons) acquired, or obtained the right to acquire, beneficial ownership of 15% (20% as to the state of Wisconsin Investment Board) or more of the outstanding common stock, or (ii) ten business days following the commencement or public disclosure of an intention to commence a tender offer or exchange offer (other than a permitted offer, as defined) by a person other than an exempt person if, upon consummation of the offer, such person would acquire beneficial ownership of 15% (20% as to the State of Wisconsin Investment Board) or more of the outstanding common stock (subject to certain exceptions). Thereafter, if the Company is not the surviving corporation in a merger or other business combination, or if common stocks are changed or exchanged, or in a transaction or transactions wherein 50% or more of its consolidated assets or earning power are sold, each Right would entitle the holder (other than the Acquiring Person and certain related persons or transferees) upon exercise to F-19 EXIDE CORPORATION AND SUBSIDIARIES NOTED TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) receive, in lieu of Preferred Shares, a number of shares of common stock of the acquiring company or the Company, as the case may be, having a value of two times the exercise price of the Right. The Rights are redeemable at the Company's option at any time before public disclosure that an Acquiring Person has become such, for $.01 per Right, and expire on September 18, 2008. Each Preferred Share will be entitled to a minimum preferential quarterly dividend payment equal to the greater of $25 per share or 1,000 times the dividend declared per common stock. The Preferred Shares have liquidation preference, as defined. In addition, each Preferred Share will have 1,000 votes per share, voting together with the common stock. 8. STOCK GRANTS AND OPTIONS: The Company's shareholders approved 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 awards in the form of incentive stock options, nonqualified stock options or restricted shares of common stock. Substantially all of the 2,300 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. In November 1998, the Board of Directors approved an option grant of 1,800 shares to the Company's new Chairman and Chief Executive Officer as part of his employment arrangement. Such options vest at a rate of 600 shares per year on each anniversary date of his employment. On May 1, 1997 the Board of Directors adopted the 1997 Stock Option Plan that authorizes the granting of stock options to key employees of the Company covering up to 2,000 shares of common stock. No options become vested or exercisable before May 1, 2007 unless the market price of the common stock increases to certain levels. If the market price increases to $30.00 per share, 40% of the granted options become vested, if it reaches $50.00, another 40% become vested and if it achieves $75.00 the remainder will become vested, provided, that in the case of each such percentage which so vests, the vested options are then only exercisable as follows; 40% on the date of vesting and 20% each on the first, second and third anniversaries. The exercise price for each share is equal to the fair market value of the common stock on the date of the grant of the option ($16.625). These options will expire on June 1, 2007. On May 23, 1996, the Board of Directors adopted the 1996 Non-Employee Directors Stock Plan (the "Directors Stock Plan") whereby Directors of the Company are granted common stock as part of their compensation. Under this plan, approximately 18, 10 and 29 shares were granted during fiscal 1998, 1999 and 2000, respectively. The market value of the shares awarded on the date of the fiscal 1998, 1999 and 2000 grants was $319, $149 and $312, respectively, and was charged to expense at the grant date. During fiscal 1995, a total of 40 restricted shares of the Company's common stock were granted to certain employees. The market value of the shares awarded on the date of grant ($1,935) was recorded as unearned compensation and shown as a separate component of stockholders' equity. In fiscal 1996, 20 of these shares were canceled. Unearned compensation was amortized to expense over the five year vesting period ending in fiscal 2000 and amounted to $194, $193 and $129 in fiscal 1998, 1999 and 2000, respectively. F-20 EXIDE CORPORATION AND SUBSIDIARIES NOTED TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In October 1993, the Board of Directors adopted the Long-Term Incentive Plan ("Incentive Stock Plan"), which may grant awards to key employees in the form of incentive stock options, nonqualified stock options, restricted shares of common stock or units valued on the basis of long-term performance of the Company ("Performance Units"). Options may be accompanied by stock appreciation rights ("Rights"). All of the awards to date have been nonqualified stock options, none of which were accompanied by Rights. All awards vest ratably over periods ranging from four to five years, with the maximum exercise period of the awards ranging from five years and three months to ten years. The maximum aggregate number of shares of common stock with respect to options, restricted shares, Performance Units or Rights granted without accompanying options that may be granted pursuant to the Incentive Stock Plan is 700 shares. On April 29, 1993, the Board of Directors adopted an Incentive Compensation Plan, under which certain members of the Company's management were granted a total of approximately 812 shares of the Company's common stock. These shares are fully vested and have certain restrictions related to sale, transferability and employment. Participants must pay $2.25 per share, the estimated fair value at the grant date, prior to the transferring of such shares. Stock grant and option transactions are summarized as follows:
Weighted Incentive Average Exercise Compensation Stock Price of Plan Options Stock Options ------------- -------- ---------------- Shares under option: Outstanding at March 31, 1997 754 679 $27.39 Granted -- 2,000 $16.63 Exercised (9) -- Forfeited (34) (207) $26.68 ---- ----- Outstanding at March 31, 1998 711 2,472 $18.69 ---- ----- Granted -- 1,840 $10.13 Exercised (337) -- Forfeited -- (848) $19.64 ---- ----- Outstanding at March 31, 1999 374 3,464 $13.91 ---- ----- Granted -- 1,987 $11.32 Exercised (23) (1) $16.63 Forfeited -- (416) $14.57 ---- ----- Outstanding at March 31, 2000 351 5,034 $12.85 ==== ===== Options available for grant at March 31, 2000 -- 548 ==== ===== Exercisable at March 31, 1998 -- 439 $19.69 Exercisable at March 31, 1999 -- 664 $18.37 Exercisable at March 31, 2000 -- 1,243 $14.64
The grant-date market value of all outstanding options is equal to their respective exercise prices. Outstanding stock options have an average remaining contractual life of 8 years at March 31, 2000 with the exercise prices for these options ranging from $9.563 to $29.50. As provided for in SFAS No. 123, "Accounting for Stock-Based Compensation," the Company utilizes the intrinsic value method of expense recognition under APB Opinion No. 25. Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation expense for the stock option plans been determined consistently with the provisions of SFAS No. 123, the Company's net income (loss) and net income (loss) per share would have been the pro forma amounts indicated below: F-21 EXIDE CORPORATION AND SUBSIDIARIES NOTED TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fiscal Year Ended March 31, ---------------------------------- 1998 1999 2000 (Restated) (Restated) ---------- ---------- ---------- Net income (loss): As reported $ (8,978) $(126,994) $(136,042) Pro forma $(18,758) $(127,580) $(142,798) Basic net income (loss) per share: As reported $ (0.44) $ (5.98) $ (6.40) Pro forma $ (0.91) $ (6.01) $ (6.72) Diluted net income (loss) per share: As reported $ (0.42) $ (5.98) $ (6.40) Pro forma $ (0.87) $ (6.01) $ (6.72)
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following range of assumptions used for the option grants which occurred during fiscal 1998, 1999 and 2000:
Fiscal Year Ended March 31, ----------------------------------------- 1998 1999 2000 -------- ------------- ----------- Volatility 31.0% 32.0% - 32.5% 34.8% Risk-free interest rate 6.8% 4.8% - 4.9% 6.0% - 6.8% Expected life in years 10.0 6.0 - 8.0 10.0 Dividend yield 0.4% 0.6% 0.9%
9. INCOME TAXES: The provision for income taxes includes federal, state and foreign taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. The components of the provision for income taxes for the fiscal years ended March 31, 1998, 1999 and 2000, are as follows:
Restated --------------------- 1998 1999 2000 -------- -------- -------- Current: Federal $ -- $ -- $ -- State (1,040) 200 130 Foreign 8,000 13,695 (5,560) -------- -------- -------- 6,960 13,895 (5,430) -------- -------- -------- Deferred: Federal 1,869 -- (11,031) State -- -- (1,261) Foreign 5,181 9,106 28,491 -------- -------- -------- 7,050 9,106 16,199 -------- -------- -------- Total Provision $ 14,010 $ 23,001 $ 10,769 ======== ======== ========
Major differences between the federal statutory rate and the effective tax rate F-22 EXIDE CORPORATION AND SUBSIDIARIES NOTED TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) are as follows:
Restated ------------------- 1998 1999 2000 ------ ------ ------ Federal statutory rate 35.0% (35.0)% (35.0)% State taxes, net of federal benefit (2.7) 0.1 0.1 Nondeductible goodwill 19.2 6.2 4.5 Difference in rates on foreign subsidiaries (0.4) 0.2 0.3 Tax losses not benefited -- 52.7 40.6 Purchased research and development -- -- 4.0 Other, net (9.2) (2.4) (5.8) ------ ------ ------ Effective tax rate 41.9% 21.8% 8.7% ====== ====== ======
The following is a summary of the significant components of the Company's deferred tax assets and liabilities as of March 31, 1999 and 2000:
1999 2000 --------- --------- Deferred tax assets: Operating loss and tax credit carryforwards $ 195,015 $ 213,534 Compensation reserves 31,449 19,497 Environmental reserves 11,165 13,354 Bad debt 9,252 13,376 Self-insurance 14,841 5,604 Warranty 7,675 12,034 Asset and other realization reserves 16,341 18,086 Other 21,272 45,321 Valuation allowance (206,780) (266,304) --------- --------- 100,230 74,502 --------- --------- Deferred tax liabilities: Depreciation/property basis (11,061) (11,171) Inventory basis difference (6,517) (5,610) Other (8,330) -- --------- --------- (25,908) (16,781) --------- --------- Net deferred tax assets $ 74,322 $ 57,721 ========= =========
As of March 31, 2000, the Company has net operating loss carryforwards for U.S. income tax purposes of approximately $206,800 which expire in years 2005 through 2020. For financial reporting purposes, a valuation allowance has been recognized to reduce the deferred tax assets for which it is more likely than not that the benefits will not be realized. As of March 31, 2000, certain of the Company's foreign subsidiaries have net operating loss carryforwards for income tax purposes of approximately $305,200, of which approximately $59,900 expire in years 2001 through 2010. For financial reporting purposes, a valuation allowance has been recognized to reduce the deferred tax assets related to certain net operating loss carryforwards and certain nondeductible reserves for which it is more likely than not that the related tax benefits will not be realized. F-23 EXIDE CORPORATION AND SUBSIDIARIES NOTED TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company's net deferred tax assets include certain amounts of net operating loss carryforwards, principally in the U.S., which management believes are realizable through a combination of anticipated tax planning strategies and forecasted future taxable income. The Company has implemented certain tax planning strategies in prior years to utilize a portion of such deferred tax assets. Failure to achieve forecasted future taxable income might affect the ultimate realization of any remaining recorded net deferred tax assets. As of March 31, 2000, the Company has not provided for withholding or U.S. Federal income taxes on undistributed earnings of foreign subsidiaries since such earnings are expected to be reinvested indefinitely or substantially offset by available foreign tax credits. 10. RECEIVABLES SALE AGREEMENTS: In July 1997, certain of the Company's European subsidiaries sold selected receivables to a wholly owned bankruptcy remote subsidiary of the Company, Exide Europe Funding Ltd., which in turn established a multi-currency receivable sale facility (collectively, the "European Agreement") with a financial institution, whereby the financial institution has committed to purchase, with limited recourse, all right, title and interest in these receivables up to a maximum net investment of $175,000. The net proceeds from the initial sale of accounts receivable under the European Agreement were used to repay borrowings under the European Facilities Agreement. As of March 31, 1999 and 2000, net uncollected receivables sold under the European Agreement were $156,611 and $147,628, respectively. Losses and expenses related to receivables sold under this agreement for fiscal 1998, fiscal 1999 and fiscal 2000 were $7,550, $8,450 and $9,381, respectively, and are included in other (income) expense, net in the consolidated statements of operations. The Company entered into a Receivables Sale Agreement (the "U.S. Agreement") with certain banks (the "Purchasers"), and under this agreement, the Purchasers have committed to purchase, with limited recourse, all right, title and interest in selected accounts receivable of the U.S. company, up to a maximum net investment of $75,000. In connection with the U.S. Agreement, during fiscal 1997 the Company established a wholly owned, bankruptcy remote subsidiary, Exide U.S. Funding Corporation, to purchase accounts receivable at a discount from the Company on a continuous basis, subject to certain limitations as described in the U.S. Agreement. Exide U.S. Funding Corporation simultaneously sells the accounts receivable at the same discount to the Purchasers. As of March 31, 1999 and 2000, net uncollected receivables sold under the U.S. Agreement were $75,000 and $60,500, respectively. Losses and expenses related to receivables sold under this agreement for fiscal years 1998, 1999 and 2000 were $4,084, $4,065, and $4,577, respectively, and are included in other (income) expense, net in the consolidated statements of operations. The above transactions qualify as sales under the provisions of SFAS No. 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." 11. RELATED-PARTY TRANSACTIONS: The Company purchased $5,979, $5,225 and $4,394 of product from Yuasa, Inc., ("Yuasa"), a 13.5%-owned affiliate, during fiscal 1998, 1999 and 2000, respectively. The Company also sold $2,601, $2,129 and $2,567 of product to Yuasa during fiscal 1998, 1999 and 2000, respectively. In addition, the Company provides certain administrative services and pays certain expenses for F-24 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Yuasa. Yuasa reimbursed the Company for these costs totaling $1,673, $1,705 and $1,701 during fiscal 1998, 1999 and 2000, respectively. As of March 31, 1999 and 2000, the Company had a net receivable of $623 and $716, respectively, from Yuasa. 12. 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 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 44 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. The Company currently has greater than 50% liability at only one Superfund site, discussed below. Other than this site, the Company's allocation exceeds 5% at only six sites at which the Company's share of liability has not been paid as of March 31, 2000. The current allocation at these five sites averages approximately 18%. The Company is the primary PRP at the Brown's Battery Breaking Superfund site located in Pennsylvania. The site was operated by third-party owners in the 1960's and early 1970's. In 1992, the EPA issued a Record of Decision identifying several alternate remedies. During fiscal 1997, the Company signed a consent decree and paid $3,000 of the EPA's past costs and is not responsible for any other past costs. The Company has established its F-25 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) reserves based upon its estimates of the remediation cost. The Company is also involved in the assessment and remediation of various other properties, including certain Company owned or operated facilities. Such assessment and remedial work is being conducted pursuant to a number of state and federal environmental laws and with varying degrees of involvement by state and federal authorities. Where probable and reasonably estimable, the costs of such projects have been reserved by the Company, as discussed below. In addition, certain environmental matters concerning the Company are pending in federal and state courts or with certain environmental regulatory agencies. During fiscal 1998, the Company reached an agreement with former owners of the Company whereby the Company agreed to release and indemnify the former owners from environmental matters relative to certain sites. In exchange for this release, the Company received $8,167 through fiscal 2000. The remaining $1,833 is to be received in fiscal 2001. 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 past and current activities at various European entities. 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 due to more stringent enforcement of existing requirements in each country. While the ultimate outcome of the foregoing North American and European 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 financial condition or results of operations, although quarterly operating results may be materially affected. 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. The Company has established reserves for on-site and off-site environmental remediation costs and believes that such reserves are adequate. As of March 31, 2000, the amount of such reserves on the Company's consolidated balance sheet was $34,240. Of this amount, $23,375 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 earnings charges are possible. F-26 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. FAIR VALUE OF FINANCIAL INSTRUMENTS: The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies; however, considerable judgment is required in interpreting market data to develop these estimates. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Certain of these financial instruments are with major financial institutions and expose the Company to market and credit risks and may at times be concentrated with certain counterparties or groups of counterparties. The creditworthiness of counterparties is continually reviewed, and full performance is anticipated. The methods and assumptions used to estimate the fair value of each class of financial instruments are set forth below: . Cash and cash equivalents, accounts receivable and accounts payable -- The carrying amounts of these items are a reasonable estimate of their fair values. . Investments in affiliates -- The estimated fair value of these investments could not be obtained without incurring excessive costs as they have no quoted market price. . Long-term receivables -- The carrying amounts of these items are a reasonable estimate of their fair value. . Short-term borrowings -- Borrowings under the line of credit arrangements have variable rates that reflect currently available terms and conditions for similar debt. The carrying amount of this debt is a reasonable estimate of its fair value. . Long-term debt -- Borrowings under the Senior Secured Global Credit Facilities have variable rates that reflect currently available terms and conditions for similar debt. The carrying amount of this debt is a reasonable estimate of its fair value. The 9.125% and 10% Senior Notes and Convertible Senior Subordinated Debentures are traded occasionally in public markets. The carrying values and estimated fair values of these obligations are as follows at March 31, 1999 and 2000: 1999 2000 ------------------ -------------------- Estimated Estimated Carrying Fair Carrying Fair Value Value Value Value -------- --------- --------- ---------- 10.00% Senior Notes $300,000 $297,000 $300,000 $285,000 9.125% Senior Notes (Deutsche mark denominated) 96,373 95,650 85,515 83,829 2.90% Convertible Senior Subordinated Notes 316,377 218,900 326,369 218,845 . Interest rate protection agreements and bond swap agreements have no carrying value; however, if the Company were to terminate these agreements at March 31, 1999 and 2000, the Company would have collected $3,851 and $11,748, respectively, based on quotes from financial institutions. F-27 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) . Lead forward and futures contracts -- The estimated fair value of the outstanding instrument at March 31, 1999 is less than the contract value by $1,584 based on quotes from brokers. At March 31, 2000, the Company had no outstanding contracts hedging lead purchases. . Foreign currency contracts -- The fair value is based on quotes obtained from financial institutions. As of March 31, 1999, the fair value of foreign currency contracts approximated contract value. As of March 31, 2000, the estimated fair value of the outstanding contracts was ($1,610). 14. COMMITMENTS AND CONTINGENCIES: 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. The plaintiffs in these cases are seeking compensatory and punitive damages and injunctive relief. In May 2000, Exide and counsel for the plaintiffs agreed to a settlement, subject to several material contingencies, applicable notice, and court approval, in the following battery quality cases: Martin v. Exide, filed July 12, 1998 in the United States District Court for the District of South Carolina (the "Martin case"); Lush et al. v. Exide, filed November 18, 1999 in the Circuit Court for Claiborne County, Mississippi; Gamma Group, et al. v. Exide, filed January 29, 1999 in the United States District Court for the Eastern District of Pennsylvania and Exide v. East Alabama Auto Parts Anniston, Inc., filed April 24, 1996 in the Circuit Court of Calhoun County Alabama (the "East Alabama case"). In May 2000, Exide also reached an agreement in principle on a settlement of a claim in intervention brought by the Attorney General for the State of Alabama (the Alabama Attorney General had intervened in the East Alabama case in November 1999). Exide has reserved approximately $ 13,400 for the settlement of the private claims and the Alabama Attorney General claim. Mathis Battery Company, et al. v. Exide, filed September 4, 1998 in the Chancery Court for Weakley County, Tennessee (the "Mathis case") and Mills v. Exide, filed December 6, 1999 in the United States District Court for the Central District of California (the "Mills case") are battery quality claims that are still pending against Exide. The Mathis case is a putative class action filed by lawyers who represent the plaintiff in the Martin case and alleges substantially the same claims alleged in the Martin case. The court has not certified the Mathis case and the case has been stayed. Exide expects that if the settlement of the Martin case is approved, the Mathis case will be dismissed. The Mills case arises under an unusual provision of California law, which was recently limited by a decision of the California Supreme Court, and Exide intends to defend that matter vigorously. Additionally, the settlements do not resolve two putative class actions, both styled Dynamic Enterprises, Inc. et al. v. Exide Corp., which were filed in 1998 in the United States District Court for the Eastern District of Texas and are still pending. In the first case, the plaintiffs seek to represent battery resellers alleging used-as-new claims. Exide has opposed a motion for class certification in that case and awaits a ruling. The second case, also a putative class action, involves allegations that Exide has improperly converted F-28 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) or withheld customer credit balances. Exide recently began a nationwide campaign to issue checks for outstanding credit balances and has moved for summary judgment in that case. Exide has asked the court to rule on the motion for summary judgment prior to hearing argument on a pending class certification motion. Exide expects a ruling in the second case after July 13, 2000. 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 provision of misleading investor information. Exide fully and completely responded to the subpoena in January 2000, and there is no action by the Mississippi Attorney General against Exide to date. As previously reported, Exide voluntarily brought certain issues to the attention of the Securities and Exchange Commission (the "SEC"), and has cooperated with its investigation. 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 $15,000. 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. The third-party defendants have moved to dismiss Exide's third-party complaint, asserting that the claims can be heard in other pending litigation involving the parties (discussed below). That motion is pending before the court. Exide is currently involved in litigation with certain former members of senior management relating to their separation agreements. One of these cases, Arthur M. Hawkins v. Exide, filed July 6, 1999 in the U.S. District Court for the Eastern District of Michigan, involves a claim by Mr. Hawkins to enforce his separation agreement with Exide. Exide has filed a counterclaim asserting fraud, breach of fiduciary duty, misappropriation of corporate assets and civil conspiracy. Messrs. Gauthier and Pearson have filed actions in the U.S. District Court for the Eastern District of Pennsylvania alleging breach of contract; these actions are respectively titled Gauthier v. Exide and Pearson v. Exide, and were respectively filed on August 17, 1999 and July 9, 1999. Exide has filed counterclaims against Messrs. Gauthier and Pearson as well, asserting fraud, breach of fiduciary duty, misappropriation of corporate assets and civil conspiracy. Pearson v. Exide and Gauthier v. Exide were consolidated for pre- trial proceedings; discovery in these cases is ongoing and they are currently scheduled to be called in the August 18, 2000 trial pool. 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. The following lawsuits of the above type were filed on August 25, 1999 in the Circuit Court for Greenville County, South Carolina and are currently pending: 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. F-29 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Exide. Finally, the following lawsuits of this type are currently pending in the Court of Common Pleas for Berks County, Pennsylvania: Grillo v. Exide, filed on May 24, 1995; Blume v. Exide, filed on March 4, 1996; Esterly v. Exide, filed on May 30, 1995 and Saylor v. Exide, filed on October 18, 1996. Discovery in these cases is ongoing. On June 26, 2000, Johnson Controls, Inc. ("JCI") filed a lawsuit in the United States District Court for the Northern District of Illinois, Eastern Division, against Exide and three of its former officers. The suit alleges commercial bribery relating back to JCI's loss of a contract to Exide in 1994. Allegations of improper payments to a Sears employee were made public over a year ago as part of the Florida Attorney General Investigation and subsequently in several civil cases. JCI has stated that its complaint is based on "public records". Exide believes that JCI's allegations and conclusions are not supported by publicly available information and that the lawsuit was threatened and subsequently filed to pressure Exide into commercial concessions and to potentially interfere with the GNB acquisition. Exide does not believe that the suit will have any material adverse effect on its financial condition. Exide will file a civil counter-claim and is considering referring the matter to the appropriate authorities for possible criminal prosecution. 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 such claims or litigation to which the Company is a party, both individually and in the aggregate, will have a material adverse effect on the Company's financial condition or results of operations, although quarterly or annual operating results may be materially affected. Future minimum lease payments under operating and capital leases that have initial or remaining noncancelable lease terms in excess of one year at March 31, 2000, are: Fiscal Year Operating Capital ----------- --------- --------- 2001 $ 48,128 $ 2,853 2002 41,618 2,704 2003 33,925 2,487 2004 28,164 2,542 2005 23,141 2,559 Thereafter 28,043 16,343 --------- --------- Total minimum payments $ 203,019 $ 29,488 ========= Less- Interest on capital leases (4,359) --------- Total principal payable on capital $ 25,129 leases (included in Note 5) ========= In fiscal 1998 and 1999, the Company entered into sale/leaseback transactions,where the Company sold certain machinery and equipment with a book value of $16,400 and $31,600 respectively, for $49,500 and $47,600, respectively, and leased the same machinery and equipment back over periods ranging from eight to nine years. The gains of $33,100, and $16,000, respectively have been deferred F-30 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) and are being recognized ratably over the life of the leases. Rent expense amounted to $48,973, $57,264 and $54,680 for fiscal years 1998, 1999 and 2000, respectively. The Company has an 81.5% investment in a European joint venture. The other party to the transaction has the right to require the Company to purchase its 18.5% interest in the joint venture for a defined multiple of earnings of the joint venture. The Company has various purchase commitments for materials, supplies and other items incident to the ordinary course of business. See Note 3 for discussion of the battery separator agreement entered into as part of the Company's sale of these operations. In the aggregate, remaining commitments are at prices that approximate current market. F-31 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED): The following is a summary of the Company's unaudited quarterly consolidated results of operations for fiscal years 1999 and 2000:
Fiscal Quarter Ended (Restated) ------------------------------------------------------------------ June 28, September 27, December 27, March 31, 1998 1998 1998 1999 ----------- ------------- ------------- --------------- Net Sales $ 544,532 $ 601,136 $ 678,530 $ 550,080 Gross profit 140,794 161,510 164,646 92,306 Income (loss) before extraordinary loss (5,413) 2,759 (45,223) (78,816) Net income (loss) (5,714) 2,759 (45,223) (78,816) Basic earnings per share: Income (loss) before extraordinary loss (0.26) 0.13 (2.13) (3.70) Extraordinary loss (0.01) -- -- -- --------- ------------ ------------ ------------- Net income (loss) $ (0.27) $ 0.13 $ (2.13) $ (3.70) ========= ============ ============ ============= Diluted earnings per share: Income (loss) before extraordinary loss $ (0.26) $ 0.13 $ (2.13) $ (3.70) Extraordinary loss (0.01) -- -- -- --------- ------------ ------------ ------------- Net income (loss) $ (0.27) $ 0.13 $ (2.13) $ (3.70) ========= ============ ============ ============= Fiscal Quarter Ended ------------------------------------------------------------------ July 4, October 3, January 2, March 31, 1999 1999 2000 2000 ----------- ------------- ------------- --------------- Net Sales $ 518,715 $ 556,434 $ 618,528 $ 500,770 Gross profit 129,169 149,764 172,265 81,294 Net income (loss) (9,302) 4,226 (3,643) (127,323) Basic earnings per share $ (0.44) $ 0.20 $ (0.17) $ (5.99) Diluted earnings per share $ (0.44) $ 0.20 $ (0.17) $ (5.99)
16. BUSINESS SEGMENTS: In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which established new standards regarding the disclosure of operating segments. The Company operated on a geographic basis through March 31, 2000 with two 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. Geographic operating segments within Europe have been aggregated for disclosure purposes in accordance with SFAS No. 131. Revenues are attributed to geographic areas based on the location of the sale to the third party. Intersegment sales are not material. Summarized financial information concerning the Company's reportable segments for the fiscal years ended March 31 is shown in the following tables: F-32 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
North America Intercompany Consolidated 1998 (Restated) Europe Other(a) Eliminations (Restated) - --------------------------------- ------------ ------------- ------------ -------------- --------------- Net sales to third parties $ 814,163 $ 1,438,299 $ 30,248 $ (9,584) $ 2,273,126 Interest expense, net 63,891 41,590 6,820 -- 112,301 Depreciation & amortization 42,382 58,429 2,773 -- 103,584 Income tax provision/(benefit) (15,376) 29,221 165 -- 14,010 Extraordinary loss (21,995) (6,518) -- -- (28,513) Net income (loss) (35,259) 38,588 (12,307) -- (8,978) EBITDA (b) 83,436 179,812 (2,323) -- 260,925 Capital expenditures 30,495 53,868 2,952 -- 87,315 Total assets $ 634,253 $ 1,619,078 $ 78,218 $ -- $ 2,331,549 North America Intercompany Consolidated 1999 (Restated) Europe Other(a) Eliminations (Restated) - --------------------------------- ------------ ------------- ------------ -------------- --------------- Net sales to third parties $ 838,851 $ 1,513,875 $ 34,211 $ (12,659) $ 2,374,278 Interest expense, net 47,280 56,905 7,494 -- 111,679 Depreciation & amortization 44,378 75,847 2,928 -- 123,153 Income tax provision 200 22,307 494 -- 23,001 Extraordinary loss (301) -- -- -- (301) Net income (loss) (89,011) 18,789 (56,772) -- (126,994) EBITDA (b) 9,996 177,506 (45,849) -- 141,653 Capital expenditures 12,213 63,715 283 -- 76,211 Total assets $ 517,023 $ 1,647,748 $ 31,045 $ -- $ 2,195,816 North Intercompany 2000 America Europe Other(a) Eliminations Consolidated - --------------------------------- ------------ ------------- ------------ -------------- --------------- Net sales to third parties $ 752,563 $ 1,416,241 $ 36,584 $ (10,941) $ 2,194,447 Interest expense, net 46,410 49,723 7,855 -- 103,988 Depreciation & amortization 23,559 71,442 705 95,706 Income tax provision/(benefit) (12,275) 22,931 113 -- 10,769 Net income (loss) (85,597) (17,993) (32,452) -- (136,042) EBITDA (b) (51,597) 165,895 (24,194) 90,104 Capital expenditures 10,050 53,903 -- -- 63,953 Total assets $ 463,847 $ 1,429,815 $ 7,799 $ -- $ 1,901,461
(a) Other includes primarily the operations of the Company's starter and alternator, charger and accessories businesses. (b) Represents earnings before interest, taxes, depreciation of property, plant and equipment, goodwill and other amortizations and losses on sales of receivables. EBITDA should not be considered as an alternative to net income as an indicator of the Company's operating performance or to cash flows as a measure of liquidity F-33 EXIDE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Revenues from External Customers --------------------------------------- 1998 1999 2000 ---------- ---------- ---------- United States $ 807,472 $ 837,111 $ 729,153 France 261,971 261,762 241,136 Germany 406,693 452,770 417,167 UK 236,140 259,106 239,784 Italy 166,489 173,210 169,627 Spain 187,927 193,974 191,390 Other 206,434 196,345 206,190 ---------- ---------- ---------- Total $2,273,126 $2,374,278 $2,194,447 ========== ========== ========== Long-Lived Assets --------------------------------------- 1998 1999 2000 ---------- ---------- ---------- United States $ 173,344 $ 131,462 $ 110,740 France 47,375 46,309 39,646 Germany 111,065 87,638 74,226 UK 55,746 56,444 54,936 Italy 26,791 45,096 37,147 Spain 61,282 71,776 75,182 Other 59,510 104,977 51,467 ---------- ---------- ---------- Total $ 535,113 $ 543,702 $ 443,344 ========== ========== ========== F-34 SCHEDULE II EXIDE CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (Amounts in thousands)
Balance at Additions Balance Beginning Charged to at End of of Period Expense Charge-offs Other (1) Period ------------- ------------- ------------- ------------ ------------ Year ended March 31, 1998: Allowance for doubtful accounts $ 38,486 $ 7,060 $ (5,484) $ (2,574) $ 37,488 ============= ============= ============= ============ ============ Restructuring charges $ 90,500 $ -- $ (32,900) $ 800 $ 58,400 ============= ============= ============= ============ ============ Year ended March 31, 1999: Allowance for doubtful accounts $ 37,488 $ 23,243 $ (6,270) $ (350) $ 54,111 ============= ============= ============= ============ ============ Restructuring charges $ 58,400 $ -- $ (40,300) $ -- $ 18,100 ============= ============= ============= ============ ============ Year ended March 31, 2000: Allowance for doubtful accounts $ 54,111 $ 17,146 $ (8,392) $ 1,312 $ 64,177 ============= ============= ============= ============ ============ Restructuring charges $ 18,100 $ 39,336 $ (23,582) $ (3,377) $ 30,477 ============= ============= ============= ============ ============
(1) Primarily the impact of currency changes as well as the acquisitions and divestitures of certain businesses. F-35 EX-3.3 2 0002.txt AGREEMENT TO RIGHTS AGREEMENT AMENDMENT TO RIGHTS AGREEMENT This Amendment is made as of October 15, 1998 by and between Exide Corporation, a Delaware corporation (the "Company"), and American Stock Transfer and Trust company, a New York corporation (the "Rights Agent"). RECITALS -------- The Company and the Rights Agent are parties to a Rights Agreement dated as of September 18, 1998 (the "Agreement"). The Board of Directors of the Company has determined to permit the State of Wisconsin Investment Board to increase its beneficial ownership in the Company up to 20% of the outstanding Common Stock (as defined in the Agreement) and has authorized the execution of this Amendment in order to permit such ownership under the Agreement. NOW, THEREFORE, in consideration of the premises, the parties hereby amend the Agreement by substituting the following for the last sentence of Section 1(a) thereof: "Notwithstanding the foregoing, (1) if any Person, together with all Affiliates and Associates of such Person, is on the date of this Agreement the Beneficial Owner of a greater percentage than 15% of the Common Stock outstanding, then as to such Person, Affiliates and Associates, such greater percentage (but no more) shall be deemed substituted for all purposes herein for 15% and (ii) as to the State of Wisconsin Investment Board, 20% of the Common Stock outstanding shall be substituted for all purposes herein for 15%." IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. EXIDE CORPORATION By: /s/ John R. Van Zile Name: John R. Van Zile Title: Vice President and General Counsel AMERICAN STOCK TRANSFER AND TRUST COMPANY By: /s/ Herbert J. Lemmer Name: Herbert J. Lemmer Title: Vice President EX-10.3 3 0003.txt SEPARATION AGREEMENT EXHIBIT 10.3 Confidential Separation Agreement This Confidential Separation Agreement (this "Agreement") is entered into between James M. Diasio, an individual residing at 2144 Buckingham Drive, Jamison, Pennsylvania 18929 ("Employee"), and Exide Corporation, a Delaware corporation, with its principal executive offices at 645 Penn Street, Reading, PA 19601 (hereinafter referred to as "Exide"). WITNESSETH: ---------- WHEREAS, Employee worked for Exide as Vice President, Corporate Controller from April, 1994 until September, 1997, as of which time he resigned his position with Exide; and WHEREAS, Employee was invited by Exide's Board of Directors to rejoin Exide in October, 1998, as its Executive Vice President, Chief Financial Officer; and WHEREAS, pursuant to an Employment Agreement executed in September 1998 (the "Employment Agreement"), Employee currently is employed by Exide as a salaried executive holding the title of Executive Vice President, Chief Financial Officer; and WHEREAS, Exide and Employee now mutually agree that Employee will resign from his employment with Exide; and WHEREAS, Exide and Employee now mutually agree that the Employment Agreement shall be revoked, including its termination provisions; and WHEREAS, Exide and Employee desire to enter into this Agreement to ensure that there are no disputes between the parties and that their future cooperation on certain matters is ensured. NOW THEREFORE, Employee and Exide, each intending to be legally bound hereby, agree as follows: 1. Separation Date. On the Separation Date, as defined herein, Employee --------------- will resign from his employment with Exide. Employee acknowledges and agrees that, after the Separation Date, he shall have no further rights to employment or re-employment with Exide; he hereby releases and waives any and all rights or claims he may have to continued employment or re-employment with Exide subsequent to such date. The "Separation Date" shall be the earlier to occur of (a) a date determined by Employee and stated in written notification provided to Exide or (b) a date determined by Exide and stated in written notification provided to Employee; provided, however, that in no event shall the Separation Date occur before June 1, 2000. 2. Transition Benefits. Exide will provide Employee with the following ------------------- benefits for the time periods described below (the "Transition Benefits"): a. Separation Payments. Exide will continue to pay to Employee his ------------------- base salary in effect on the Separation Date, $300,000 annually (the "Separation Payments"), for a period of two (2) years from the Separation Date (the "Separation Payment Period"). The Separation Payments shall be paid to Employee monthly on Exide's regular payroll dates. In the event that Employee accepts other employment during the Separation Payment Period, the full amount of the Separation Payments shall continue to be made to Employee. Further, in the event of Employee's death or incapacitating mental disability during the Separation Payment Period, the Separation Payments will continue and be paid to Employee's beneficiary, in accordance with Employee's Designation of Beneficiary, attached hereto as Exhibit A. b. Income Protection Payments. At the conclusion of the Separation -------------------------- Payment Period, Exide will continue to pay to Employee his base salary in effect on the Separation Date, $300,000 annually (the "Income Protection Payments"), for a period of up to fifty-two (52) weeks, in accordance with Section VI.D of the Exide Income Protection Policy for Salaried Employees (the "Policy"), a copy of which is attached hereto as Exhibit B (the "Income Protection Payment Period"). The Income Protection Payments will be made on a monthly basis on Exide's regular payroll dates pursuant to the terms and conditions of the Policy; provided, also, that Exide hereby agrees that Employee meets the Policy's eligibility requirements notwithstanding the provisions of Section II of the Policy. If, during the Income Protection Payment Period, Employee receives remuneration from any source, including without limitation wages from other employment or consulting fees for contracted services, but excluding bonus payments, commission payments and stock options, which in the aggregate is less than the Income Protection Payment amount due, Exide will continue to pay to Employee the Income Protection Payment with an offset for such remuneration. If the level of such remuneration exceeds the level of the Income Protection Payment amount, then no Income Protection Payment shall be made. Adjustments in the Income Protection Payment amount will be made on a calendar month basis. Employee understands and agrees that each Income Protection Payment will be accompanied by a statement requesting verification of any amount of such remuneration received by Employee, which shall be signed by Employee and returned to Exide before the next Income Protection Payment will be issued. Nothing in this provision, however, shall obligate Employee to seek or continue other employment during the Income Protection Payment Period. No amendment of the Policy by Exide shall reduce the amount of Income Protection Payments to be paid to Employee under this Agreement. 2 c. Health Care and Dental Coverage. Exide will continue Employee's ------------------------------- and his dependents' participation in the Exide family health care and dental coverage plans in which he/they participated on the Separation Date on the same terms and conditions as though Employee were an active employee of Exide. Exide will continue Employee's participation in each plan until the earlier to occur of: (a) Employee accepts employment from an employer providing a health care or dental plan, or (b) the conclusion of the Separation Payment Period. If Employee accepts employment from an employer that offers one, but not both, of the foregoing benefits, coverage under Exide's plan shall cease for the benefit(s) offered, and coverage for the other(s) shall continue. Employee recognizes that Exide has retained the right to amend, modify or terminate such benefit plans and understands and agrees that he, like active Exide employees, will be subject to all terms and conditions of such plans in effect until Employee's participation is terminated under the terms of this Agreement. Upon termination of Employee's participation, Employee will be eligible to extend the health care and dental coverage in effect at the time in accordance with the provisions of COBRA, 29 U.S.C. (S)(S) 1161 et seq. d. Corporate Vehicle. Until the termination of the Separation ----------------- Payments, Employee will be permitted to retain the use of the corporate vehicle that he is using as of the Separation Date under the same terms and conditions that existed on the Separation Date, including, without limitation, all deductions and withholdings required by law and Exide policies. Upon termination of the Separation Payments, Employee shall have the option of retaining the corporate vehicle by assuming the obligation to make the then remaining lease payments thereon, if any, or to purchase the vehicle at Exide's un-amortized value in accordance with Exide's lease terms for the vehicle. e. Outplacement. During the Separation Payment Period and the ------------ Income Protection Payment Period, Exide will provide an allowance of up to $85,000 in total for outplacement services for Employee, payable directly to any firm or firms engaged by Employee to facilitate Employee's transition to a new employer. f. Medical Reimbursement Account. Employee may continue to submit ----------------------------- reimbursement claims for medical expenses incurred through December 31, 2000 to First Rehabilitation Life Insurance Company. Reimbursable expenses under such medical reimbursement account may not exceed $2,500 during the one-year period from January 1, 2000 through December 31, 2000. 3. Accrued and Unused Vacation. On the first regular payroll date --------------------------- following the Separation Date, Exide will pay to Employee all accrued and unused vacation time for calendar year 2000. 4. Annual Incentive Plan. Exide acknowledges and agrees that --------------------- Employee has been designated as an Eligible Participant under the terms of the Exide Corporation Annual 3 Incentive Plan, effective April 1, 1999 (the "Incentive Plan"), as that term is defined in the Incentive Plan. As such, Employee will be eligible to receive an award for the Incentive Year ending on March 31, 2000, in accordance with the terms of the Incentive Plan. Employee acknowledges and agrees, however, that because his employment with Exide will terminate before he completes the Incentive Year ending on March 31, 2001, he will not be eligible for an award, in whole or in part, for that Incentive Year. 5. Non-Qualified Deferred Compensation Plan. Exide acknowledges ---------------------------------------- that Employee has deferred a portion of his compensation under the Exide Corporation Deferred Compensation Plan. Employee's interest under such plan shall be distributed to Employee as permitted by the terms of the plan. 6. Employee's Continued Cooperation. During the Separation Payment -------------------------------- Period and during the Income Protection Payment Period, Employee agrees that he will cooperate with Exide in: (a) any legal or similar matter, including matters such as any investigations of Exide by governmental entities, any internal investigations by Exide and any litigation involving Exide or its past, present and future employees, directors or other personnel; (b) consulting with Exide regarding the work performed by Employee and transition of such work to others at Exide for the departments which reported to Employee (Internal Audit, Finance, Treasury, Tax and Information Technology), including reasonable telephone inquiries and on-site assistance, not to exceed five (5) hours per month; and (c) if he is the subject of any subpoena or mandate of law to provide testimony or information about Exide, he shall notify Exide by providing a copy of the subpoena or other mandate so that it is received by Exide's General Counsel within three (3) calendar days of the date on which Employee receives it. Employee's duty to cooperate under this Section will continue regardless of the level of Income Protection Payments being made to Employee. Exide will use its best efforts at all times to schedule times for meetings and other forms of cooperation so that they will not unduly interfere with other activities of Employee, such as any future employment he may accept. In connection with such cooperation, Employee shall be reimbursed for all of his reasonable costs and expenses if pre-approved by Exide, including reasonable attorneys' fees and costs and transportation costs. Employee will not be compensated, however, for the actual time spent by him in providing such cooperation. Exide acknowledges that it has authorized Employee, and Employee has agreed, to cooperate with Exide in its voluntary responses to the Security and Exchange Commission's follow-up inquiries regarding certain issues raised by the Florida Attorney-General investigation ("SEC Investigation"), and that Employee has engaged the law firm of Kirkpatrick & Lockhart LLP as his counsel in connection with the SEC Investigation. Exide agrees that it will reimburse Employee for the reasonable attorneys' fees and costs incurred by Employee in providing such cooperation and that Employee will be permitted to forward the invoices of Kirkpatrick & Lockhart LLP to Exide's General Counsel for direct payment by Exide, it being understood that information on the invoices reflecting attorney client communications may be deleted therefrom. 4 Exide further agrees that it will reimburse Employee for other reasonable professional fees and related costs in connection with his cooperation in the SEC Investigation only if the activities associated with such fees and costs have been pre-approved, in writing, by Exide's General Counsel. Nothing in this Agreement requires Employee to waive any attorney client or work product privilege between Employee and any attorney representing Employee. 7. Indemnification. Exide acknowledges and agrees that Employee is --------------- entitled to indemnification in accordance with the Restated By-Laws of Exide Corporation, Article V, adopted January 29, 1999. These indemnification rights do not extend to activities in which Employee may engage pursuant to Section 6 of this Agreement after the Separation Date; accordingly, Exide agrees that Employee shall not be obligated to perform any such activity if it will expose him to civil or criminal liability for which he will not be indemnified. 8. Stock Options. Upon entering into this Agreement, Employee ------------- renounces any and all claims to any stock options granted to him during his employment, including all non vested options and all vested and unexercised options; provided, however, that Employee will be entitled to retain the options described below: a. 1993 Options. Employee will retain the options covering ------------ 20,000 shares of Exide common stock granted September 18, 1998 pursuant to the Exide 1993 Long-Term Incentive Plan, as amended, at an exercise price of $10.81 per share (the "1993 Options"). The 1993 Options will vest and become immediately exercisable on the Separation Date and will remain exercisable until September 18, 2008; provided, however, that in the event Exide terminates this Agreement for Good Cause (as defined in Section 10 hereof), all outstanding unexercised 1993 Options shall be forfeited immediately. b. 1999 Options. Employee will retain the options covering ------------ 60,000 shares of Exide common stock granted August 11, 1999 pursuant to the Exide 1999 Stock Incentive Plan, as amended, at an exercise price of $11.375 per share (the "1999 Options"). The 1999 Options will vest and become immediately exercisable on the Separation Date and will remain exercisable until August 11, 2009; provided, however, that in the event Exide terminates this Agreement for Good Cause (as defined in Section 10 hereof), all outstanding unexercised 1999 Options shall be forfeited immediately. Except as provided in this Agreement, all other provisions of the Exide 1993 Long-Term Incentive Plan, as amended, and the Exide 1999 Stock Incentive Plan, as amended, shall govern the 1993 and 1999 Options, respectively. In the event Employee requests approval to transfer the 1993 and/or 1999 Options to a trust for the benefit of his children, Exide shall cooperate in forwarding such request for approval to Exide's Board of Directors, or the appropriate Committee of the Board, as required by the terms of the aforementioned plans. 5 9. All Other Benefits. Except as provided in this Agreement, ------------------ Employee's and his dependents' participation, coverage and eligibility for all other fringe and employee benefits programs of Exide, including any qualified retirement plan, long-term disability plan, and accidental death and disability insurance, shall cease on the Separation Date; provided, however, that Employee shall continue to be entitled to the benefits which were vested and accrued on the Separation Date under the Exide Corporation Salaried Retirement and 401(k) Plan in accordance with the terms of that plan. 10. Termination of Agreement. Employee acknowledges and agrees that, ------------------------ should Exide have Good Cause, as defined herein, Exide shall be entitled to terminate this Agreement at any time during the Separation Payment Period or during the Income Protection Payment Period. "Good Cause" shall mean any act, conduct or omission on Employee's part, whether occurring prior to, on or after the date of this Agreement, that gives rise to or constitutes: (a) the conviction of Employee of, or the entry of a plea of guilty or nolo contendere by Employee to, any crime involving moral turpitude or any felony; (b) breach by Employee of any fiduciary duty owed to Exide or to any affiliated company or subsidiary, provided however that Employee's reasonable exercise of business judgment as it relates to financial accounting for Employer shall not constitute a breach of fiduciary duty; or (c) a violation of any provision of Sections 11- 14 and/or 16 of this Agreement, provided, however, that before Exide shall exercise its right to terminate this Agreement for a breach of Sections 13, 14 or 16, Exide shall provide Employee with a detailed written notification of the alleged violation of such Section(s), a statement of action necessary to cure such alleged violation, and a period of thirty (30) calendar days within which to cure it. If Employee cures the alleged violation under Subsection (c) of this Section, as specified in Exide's notice, then no termination shall occur. Exide acknowledges that, as of the date it executed this Agreement, it was not aware of a breach of fiduciary duty owed by Employee to Exide or to any affiliated company or subsidiary. In the event Exide terminates this Agreement for Good Cause, it shall have no further obligation to Employee under this Agreement beyond the date that notice of termination is given, including without limitation any obligation to pay to Employee the Transition Benefits hereunder. 11. Confidentiality of Agreement. Employee and Exide agree that as a ---------------------------- material condition of this Agreement, neither shall disclose the terms or conditions of this Agreement to any third party or entity. However, this Section will not prohibit either party from disclosing the terms or conditions of this Agreement to their respective attorneys, tax advisors or accountants, or to members of Employee's immediate family, or as may be lawfully required or ordered by any state or federal administrative agency, tribunal or court of law; provided, however, that before either party discloses any provision of this Agreement to any person in accordance with this Section, he/it first shall notify such person of the existence of this confidentiality requirement and obtain the agreement of the person to abide by it. Nothing in this Section shall preclude either 6 Exide or Employee from disclosing the terms of this Agreement as may be necessary in prosecution or defense of any action brought by one party against the other with respect to any matter addressed by this Agreement. 12. Confidentiality of Business Information. During the Separation --------------------------------------- Payment Period, the Income Protection Payment Period and at all times thereafter, Employee agrees: (a) not to make any public statement to the press or third parties, except as compelled by valid and binding legal process, concerning Exide's non-public business objectives, management practices or other non-public information, without first receiving Exide's written approval; and (b) not to use, divulge or disclose, directly or indirectly, any proprietary or confidential information of Exide to any third party, except his personal legal advisor or except as compelled by valid and binding legal process, without prior written approval of Exide. If, in the case of legal process which compels a disclosure under one of the exceptions in this Section, Exide in its sole discretion determines that the legal process is not valid or binding and desires to challenge the process, it shall be responsible for all legal fees and costs associated with such challenge. 13. Agreement Not to Compete. Employee hereby agrees that for a six (6) ------------------------ month period from the Separation Date, Employee will not provide services or support to or accept employment from any competitor of Exide, as determined by Exide, without Exide's prior written consent. If Employee wishes to seek Exide's consent or wishes to obtain confirmation that a prospective employer is not a competitor, he shall direct such inquiry to Exide's General Counsel, who will respond in writing to Employee as promptly as possible and in no event longer than fourteen (14) calendar days. In addition, Employee hereby agrees that at no time during the Separation Payment Period or the Income Protection Payment Period will Employee knowingly provide services or support to or accept employment from any entity in which Arthur M. Hawkins or any affiliate of Arthur M. Hawkins holds a controlling ownership interest. 14. Return of Corporate Property. On or before the Separation Date, ---------------------------- Employee will return to Exide's Executive Vice President, Human Resources all Exide corporate property and copies thereof in his possession or under his custody or control, including without limitation all files, corporate credit cards, automobiles (except the corporate vehicle as provided in Section 2(d) of this Agreement), keys and access cards, calling cards, cellular or mobile telephone, parking permit, laptop and other computer equipment and software and club membership cards. Employee' access to such property and facilities shall cease immediately upon the Separation Date, and he shall be responsible for reimbursing Exide for all personal expenses associated with any of the foregoing incurred before that date. Employee, however, shall be permitted to have access to and maintain copies of documentary information related to Exide's business which is directly relevant to the cooperation Employee is rendering under Section 6 hereof, provided that he shall return all such information promptly upon the conclusion of the activities in question. 15. Job Reference. Exide understands that Employee may seek employment in ------------- the future with another entity or may seek to work as a consultant or independent contractor, and that there may be a need for Employee or an entity to obtain information about Employee's 7 employment with Exide. Any such inquiries shall be directed to Exide's Executive Vice President, Human Resources. In response to such inquiries, Exide shall provide the information contained in the reference letter attached hereto as Exhibit C. 16. General Release of Claims by Employee. In consideration of the ------------------------------------- Transition Benefits granted to Employee under this Agreement, Employee, for himself and his respective administrators, executors, agents, beneficiaries and assigns, does waive, release and forever discharge Exide (as defined below for purposes of these release provisions) of and from any and all Claims (as defined below) relating, regarding or referring to Employee's employment with Exide, the terms and conditions of such employment and his resignation from employment. Employee agrees not to file a lawsuit to assert any such Claim. This release covers any and all Claims arising from the beginning of time up to and including the Separation Date, but does not cover Claims relating to the enforcement of this Agreement. a. Definition of "Claims". For purposes of these release ---------------------- provisions, "Claims" include without limitation all actions or demands of any kind that Employee now has, or may have or claim to have in the future. More specifically, Claims include rights, causes of action, damages, penalties, losses, attorneys' fees, costs, expenses, obligations, agreements, judgments and other liabilities of any kind or description whatsoever, either in law or in equity, whether known or unknown, suspected or unsuspected. All of the following are among the types of Claims which will be barred by this release and covenant not to sue: contract claims (whether express or implied); tort claims, such as for defamation or emotional distress; claims under federal, state and municipal laws, regulations, ordinances or court decisions of any kind; claims of discrimination, harassment or retaliation, whether based on race, color, religion, gender, sex, age, sexual orientation, handicap and/or disability, national origin or any other legally protected class; claims under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act and similar statutes and municipal ordinances; claims under the Employee Retirement Income Security Act, the Fair Labor Standards Act, state wage payment laws and state wage and hour laws; claims under the Family and Medical Leave Act and similar state leave laws; and claims for wrongful discharge. This enumeration of the Claims covered by this release is not intended to be, and shall not be construed as, an exhaustive list. Notwithstanding the foregoing provisions of this Section, workers' compensation claims under 77 P.S. (S) 71 which arose out of conditions existing in the course of Employee's employment prior to the Separation Date shall not be covered by this release. b. Definition of "Exide". For purposes of these release provisions, --------------------- "Exide" includes without limitation Exide Corporation and its respective past, present and future parents, affiliates, subsidiaries, divisions, predecessors, successors, assigns, employee benefit plans and trusts. It also includes all past, present and future managers, directors, officers, partners, agents, 8 employees, attorneys, representatives, consultants, associates, fiduciaries, plan sponsors, administrators and trustees of each of the foregoing. c. Scope of Release. Employee declares and agrees that any Claims ---------------- he may have incurred or sustained may not be fully known to him and may be more numerous and more serious than he now believes or expects. Further, in making this Agreement, Employee relies wholly upon his own judgment of the future development, progress and result of said Claims, both known and unknown, and acknowledges that he has not been influenced to any extent whatsoever in the making of this Agreement by any representations or statements regarding said Claims made by individuals or entities who are within the definition of Exide, as defined in these release provisions. Employee further acknowledges that he accepts the terms herein in full settlement and satisfaction of all such Claims and that no such Claim is reserved. d. Indemnification for Breach of Release. Under the terms of this ------------------------------------- release, Employee is barred from asserting any of the Claims described above against Exide. If Employee does commence, join in, continue or in any other manner attempt to assert a Claim in violation of this release and covenant not to sue, or otherwise breaches any promise made in this Agreement, he agrees to indemnify and hold harmless Exide, as defined in these release provisions, from and against all losses incurred, including without limitation costs and attorneys' and expert fees, in defending such Claim or pursuing the released party's rights hereunder. e. No Admission of Wrongdoing. Employee understands and agrees that -------------------------- by entering into this Agreement, Exide, its directors, officers and/or agents do not admit any wrongdoing, violation of law or invasion of any of his rights. f. Consideration for Release. Employee further acknowledges that ------------------------- the consideration recited in this Agreement is the sole and only consideration for this Agreement; that such consideration is adequate and fair; and that no representations, promises or inducements have been made by Exide, or any of its directors, officers, employees, or agents other than as appear in this Agreement. g. Consideration Period. Employee acknowledges that he has been -------------------- provided with a period of at least thirty (30) calendar days to consider the terms of this offer from the date this Agreement first was presented to him on February 8, 2000. Employee agrees that any changes to this offer, whether material or immaterial, will not restart the running of the 30-day minimum period. Employee agrees to notify Exide of his acceptance of this Agreement by delivering a signed and witnessed copy to Exide's Executive Vice President, Human Resources no later than April 25, 2000. Employee understands that he may take the entire consideration period to consider this Agreement. Employee may return this Agreement in less than the full consideration period only if his decision to shorten the consideration period is knowing and voluntary and was not induced in any way by Exide. By 9 signing and returning this Agreement, Employee acknowledges that the consideration period afforded Employee a reasonable period of time to consider fully each and every term of this Agreement, including the release and covenant not to sue, and that Employee has given the terms full and complete consideration. h. Revocation Period. Employee acknowledges that he shall have ----------------- seven (7) calendar days after signing this Agreement to revoke it if he chooses to do so. If Employee elects to revoke this Agreement, he shall give written notice of such revocation to Exide's Executive Vice President, Human Resources in such a manner that it is actually received within the seven (7) calendar day period. i. Consultation with Legal Counsel. Employee acknowledges that he ------------------------------- has been advised to consult with independent legal counsel of his choosing, at his expense, regarding the meaning and binding effect of this Agreement and each and every term hereof prior to executing it and that he has done so. Employee, intending to be legally bound hereby, certifies and warrants that he has read carefully this Agreement and has executed it voluntarily and with full knowledge and understanding of its significance, meaning and binding effect. Employee further declares that he is competent to understand the content and effect of this Agreement. 17. General Release of Claims by Exide. In consideration of the promises ---------------------------------- made by Employee in this Agreement, Exide (having the meaning set forth in Section 16 of this Agreement) does waive, release and forever discharge Employee and his respective administrators, executors, agents, beneficiaries and assigns of and from any and all Claims (as defined below) relating, regarding or referring to Employee's employment with Exide, the terms and conditions of such employment, Employee's performance of his duties as an Exide employee and his resignation from such employment. Exide agrees not to file a lawsuit to assert any such Claims. This release covers any and all Claims arising from the beginning of time up to and including the Separation Date, but does not cover Claims relating to the enforcement of this Agreement. a. Definition of "Claims." For purposes of these release ----------------------- provisions, "Claims" include without limitation all actions or demands of any kind that Exide now has, or may have or may claim to have had in the future. Claims also include rights, causes of action, damages, penalties, losses, attorneys' fees, costs, expenses, obligations, agreements, judgments and other liabilities of any kind or description whatsoever, either in law or in equity; provided, however, that notwithstanding any other provision of this Agreement, the definition of Claims shall be limited to Claims of which Exide had actual knowledge on or before the Separation Date. All of the following are among the types of Claims which will be barred by this release and covenant not to sue: contract claims (whether express or implied); breach of fiduciary duty claims, provided that Employee has reasonably exercised business judgment as it relates to financial accounting for Employer; tort claims, including defamation; and claims under federal, state and municipal laws, regulations, ordinances or court decisions of any kind. This 10 enumeration of Claims covered by this release is not intended to be, and shall not be construed as, an exhaustive list. b. No Admission of Wrongdoing. Exide understands and agrees that by -------------------------- entering into this Agreement, Employee does not admit any wrongdoing, violation of law or invasion of any of its rights. c. Consideration for Release. Exide further acknowledges that the ------------------------- consideration recited in this Agreement is the sole and only consideration for this release; that such consideration is adequate and fair; and that no representations, promises or inducements have been made by Employee or any of his agents or counsel other than as appear in this Agreement. 18. Integration. Except as expressly provided herein, this Agreement ----------- contains the entire understanding of the parties and supersedes all verbal and written agreements, including without limitation any and all Employment Agreements between Employee and Exide, and there are no other agreements, representations or warranties between the parties not referenced or set forth in this Agreement. 19. Governing Law. Except to the extent superseded by federal law (e.g., ------------- ERISA), this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania without giving effect to the choice of law provisions of any state. 20. Headings. The headings in this Agreement are included solely for ease -------- of reference and shall not be applied or construed to limit or expand upon the rights created hereunder. 21. Corporate Authority. Exide warrants and promises that all corporate ------------------- authorizations necessary for execution of this Agreement have been obtained and that the person executing this Agreement on its behalf has full authority to do so. 22. Counterparts. This Agreement may be executed in counterparts, each of ------------ which will be deemed an original, but all of which shall constitute one and the same agreement. Each party shall execute this Agreement twice and each party shall retain an original. 23. Notices. All notices and other communications required or committed ------- hereunder or necessary in connection herewith shall be in writing and shall be deemed to have been given when hand delivered, in person or by recognized courier and delivery service, when, telefaxed to the recipient's correct telefax number (with receipt confirmed) or when mailed by registered or certified mail, return receipt requested, as follows, provided that a change of address shall be deemed given only when received: 11 If to Exide: John R. Van Zile, Esquire Vice President, General Counsel and Secretary Exide Corporation 3600 Green Court, Suite 720 Ann Arbor, MI 48105 With a copy to: Jack J. Sosiak Executive Vice President, Human Resources Exide Corporation 645 Penn Street Reading, PA 19601 If to Employee: James M. Diasio 2144 Buckingham Drive Jamison, PA 18929 With a copy to: Joseph I. Goldstein, Esq. Lawrence Coe Lanpher, Esq. Kirkpatrick & Lockhart LLP 1800 Massachusetts Avenue, N.W. Washington, DC 20036-1800 IN WITNESS WHEREOF, the parties have executed this Agreement. Sworn to and Subscribed Before Me this Day Of , 2000. ___________________________ ______________________________________ Notary Public James M. Diasio Sworn to and Subscribed EXIDE CORPORATION before me this ___ Day of _________, 2000 By:___________________________________ ___________________________ Robert A. Lutz, Chairman and CEO Notary Public 12 EX-10.12 4 0004.txt AMENDED AND RESTATED NONQUALIFIED STOCK OPTION EXHIBIT 10.12 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 Ronald J. Gardhouse (the "Optionee"). This Agreement amends and restates the Nonqualified Stock Option Agreement, made as of April 16, 1999, made by the Company in favor of the Optionee. As a material inducement to Optionee's agreement to become employed by the Company, on April 16, 1999 (the "Grant Date") the Company granted to the Optionee an option (the "Option") to acquire 100,000 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 $14.125 (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 be fully vested on the Grant Date. (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. 1 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 Signature Page to Amended and Restated Stock Option Agreement IN WITNESS WHEREOF, the Company has executed this Agreement as of January 11, 2000. Optionee: Ronald J. Gardhouse Number of Option Shares: 100,000 Exercise Price: $14.125 per share Grant Date: April 16, 1999 Normal Vesting: 100,000 Option Shares on April 16, 1999 EXIDE CORPORATION By:________________________________ Alan C. Johnson President and COO OPTIONEE Ronald J. Gardhouse 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 April 16, 1999 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 $14.125 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 EX-10.13 5 0005.txt NONQUALIFIED STOCK OPTION AGREEMENT EXHIBIT 10.13 EXIDE CORPORATION NONQUALIFIED STOCK OPTION AGREEMENT This Nonqualified Stock Option Agreement (this "Agreement"), is made as of May 22, 2000 by Exide Corporation, a Delaware corporation (the "Company"), in favor of Kevin R. Morano (the "Optionee") Executive Vice President and Chief Financial Officer. As a material inducement to the Optionee's agreement to become employed by the Company, on May 22, 2000 (the "Grant Date") the Company granted to the Optionee an option (the "Option") to acquire 150,000 shares of the Company's common stock, par value $.01 per share (the "Option Shares"). The Option was not granted pursuant to a stock option plan, however, the option is subject to the administrative provisions of the Company's 1999 Stock Incentive Plan (the "Plan"). 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 $8.25 (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 four equal installments on each of the first four 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 fourth anniversary of the Grant Date. 1 (b) Vesting Under Certain Circumstances. Notwithstanding ----------------------------------- paragraph 2(a) above, under certain circumstances the vesting rules of 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 the 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 the Agreement and the Plan shall be resolved in accordance with the terms of the Plan. 5. Rights of the 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 ------------------- "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 the common stock ------------- issued or issuable upon the exercise of the Option and (ii) all 2 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 in connection with any conversion, merger, consolidation or recapitalization or other reorganization affecting the common stock. * * * * * 3 EX-18.1 6 0006.txt PREFERABILITY LETTER Exhibit 18.1 June 25, 2000 Exide Corporation Re: Form 10-K Report for the year ended March 31, 2000 Gentlemen/Ladies: This letter is written to meet the requirements of Regulation S-K calling for a letter from a registrant's independent accountants whenever there has been a change in accounting principle or practice. The Company changed its method of valuing inventory for its United States battery inventories from the last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO") method in the fourth quarter of 2000. According to the management of the Company, this change was made to better match the Company's current manufacturing costs with revenues given the continuing decline in these costs, to make the Company's methodology more consistent with others in the industry and allow for the valuing of inventory consistently throughout the Company, particularly with the Global Business Unit management structure that was adopted effective April 1, 2000. A complete coordinated set of financial and reporting standards for determining the preferability of accounting principles among acceptable alternative principles has not been established by the accounting profession. Thus, we cannot make an objective determination of whether the change in accounting described in the preceding paragraph is to a preferable method. However, we have reviewed the pertinent factors, including those related to financial reporting, in this particular case on a subjective basis, and our opinion stated below is based on our determination made in this manner. We are of the opinion that the Company's change in method of accounting is to an acceptable alternative method of accounting, which, based upon the reasons stated for the change and our discussions with you, is also preferable under the circumstances in this particular case. In arriving at this opinion, we have relied on the business judgment and business planning of your management. Very truly yours, /s/ ARTHUR ANDERSEN LLP EX-21.1 7 0007.txt SUBSIDIARIES OF THE REGISTRANT Exhibit 21.1
Jurisdiction Subsidiary Name Ownership of Incorporation Exide Canada, Inc. 100.0% Canada 8301 Keele Street Maple, Ontario Canada L6A1T2 General Battery Corporation 100.0% Delaware 645 Penn St. Reading, PA 19601 Sociedad Espanola del Acumulador Tudor S.A. 95.99% Spain Condessa de Venadito 1 28027 Madrid Spain Sociedade Portuguesa do Acumulador Tudor, S.A. (SPAT) 94.8% Portugal Rua Actor Tasso, 1 1050 Lisbon, Portugal Deutscle Exide GmbH 100.0% Germany Coesterweg, 45 D-59494 Soest, Germany Hagen, AG 98.57% Germany Coesterweg, 45 D-59494 Soest, Germany Exide Automotive, GmbH 100.00% Germany Miramstrasse 74 34123 Kassel, Germany Exide Batteriewerke GmbH 99.50% Austria Puntigamerstrasse 127 8055 Graz, Austria Mercolec Tudor, BV 100.00% Netherlands Amsteldjik 166 1079 LH Amsterdam, Netherlands Tudor Hellenic S.A. 95.99% Greece 3 Plastria St. GR 144-52 Metamorfosi, Greece
Tudor India 75.00% India 147 Jolly Maker Chambers 2 - 14th Fl. Nariman Point - Bombay 400021, India Exide Holding Europe SA 100.00% France 5 a 7 allee des pierres Mayettes 92636 Gennevilliers, France Compagnie Europeene d'Accumulateurs 100.00% France 5 a 7 allee des pierres Mayettes 92636 Gennevilliers, France TS Batteries 100.00% France 5 a 7 allee des pierres Mayettes 92636 Gennevilliers, France Batterie Hagen SA 100.00% France 5 a 7 allee des pierres Mayettes 92636 Gennevilliers, France Exide Automotive BV 99.90% Belgium 93 rue de Florival 1390 Archennes, Belgium CMP Batterijen NV 99.90% Belgium 93 rue de Florival 1390 Archennes, Belgium Hagen Batterijen BV 100.00% Netherlands Zoonebaan 6 3606 CA Maarsen, Netherlands CMP Batterijen BV 100.00% Netherlands Postus 162 Produktiestraat 25 3130 AD Vlaardingen, Netherlands ATSA Batterijen BV 100.00% Netherlands Energieweg 105 Postbus 26 3640 AA Mijdrecht, Netherlands Exide Automotive BV 100.00% Netherlands Energieweg 105 3641 RT Mijdrecht, Netherlands Industria Composizione Stampate (ICS) 100.00% Italy Via bergamo, 1 Canonica d'Adda Bergamo 28040, Italy
Societa Industrial Accumulatori Srl (SINAC) 100.00% Italy Via Dante Allghieri 100/106 Romano Di Lombardia, Italy Compagnie Generale Accumulatori Spa 100.00% Italy Via Benevento 40 80013 Casalnuove Di Napoli, Itlay Accumulatorenfabrik Sonnenschein GmbH 99.92% Gemany Thiergarten 63654 Budingen Sonnenschein Lithium GmbH 49.60% Germany Industriestrasse 22 63654 Budingen CENTRA Spolka Akcyjna (CENTRA) 96.82% Poland Gdynska 31/33 61-0166 Pozen, Poland INCI Exide Aku Sanayi; Anomi Sirketi 50.00% Turkey Organize Sanayi Bolgesi 45030 Maines, Turkey Fulmen Iberica 96.13% Spain Poligono Industrial El Pla C/Miguel Torello Pages, 11-13 06750 Molin de rel, Spain Tudor AB 100.00% Sweden 449 81 Nol 8-44041 Exide Sonnak A/S 100.00% Norway Molovelen 25 N-3191 Horten, Norway Exide Oy 100.00% Finland Sahkotie, 8 8F-01510 Vantaa, Finland CMP Batteries Ltd 100.00% England PO Box 1 Salford Road Over Hulton Bolton BL5 1DD TS Batteries Limited 100.00% England PO Box 1 Salford Road Over Hulton Bolton BL5 1DD
Euro Exide Corporation Limited 81.50% United Kingdom PO Box 1 Salford Road Over Hulton Bolton BL5 1DD Exide Batteries Limited 81.50% United Kingdom Caldicot Way, Cwmbran Gwent, Wales BIG Batteries Limited 81.50% United Kingdom Caldicot Way, Cwmbran Gwent Wales BIG France SARL 81.50% France 6/10 rue Olaf Palme, Emerainville Pariest, 77312 Marne la Vallee, France Exide (Holdings) Limited 81.50% United Kingdom Chequers Lane Dagenham, Essex RM9 6PX Exide Batterrier AB 81.50% Sweden Box 458 651 10 Karistad, Stockholm, Sweden I.C.C.S. Batterie Vertrieb GmbH 100.00% Germany Miramstrasse 74 34123 Kassell, Germany
Refined Metals 100.00% Delaware 257 W. Mallary St. Memphis, TN 38109 DETA Akkumulatorenwerk GmbH 100.00% Germany Postfach 11 64 D. 37421 Bad Lautergerg, Germany Middland Batteries 100.00% United Kingdom PO Box 1 Salford Road Over Hulton Bolton, BL 1 DD National Batteries LTD 75.0% United Kingdom 6/7 Parkway Estate Longbridge Road Trafford Paark Manchester MI M17 1SN FRIWO Siberkraft GmbH 100.00% Germany Postfach 11 64 D. 37421 Bad Lauterberg, Germany
EX-23.1 8 0008.txt CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports in this Form 10-K, into the Company's previously filed Registration Statement File Nos. 333-39269, 333-29991, 333-11695, 333-00885, 333-00413, 33- 64169, 33-62295 and 33-62467. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania June 29, 2000 EX-27 9 0009.txt FINANCIAL DATA SCHEDULE
5 12-MOS MAR-31-2000 APR-01-1999 MAR-31-2000 28,110 0 443,667 64,177 405,720 849,484 790,791 347,447 1,901,461 636,016 1,061,672 0 0 214 (66,590) 1,901,461 2,194,447 2,194,447 1,661,955 1,661,955 0 6,859 103,988 (123,548) 10,769 (136,042) 0 0 0 (136,042) (6.40) (6.40)
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