Exide Technologies Announces Financial Results for Third Quarter of Fiscal Year 2006
ALPHARETTA, Ga.--Feb. 9, 2006--Exide Technologies (www.exide.com) today announced financial results for the third quarter of fiscal 2006 ended December 31, 2005.Consolidated net sales for the third quarter of fiscal 2006 increased slightly to $733.4 million from $727.9 million during the same period a year ago. Higher sales volumes in the Company's Industrial Energy business and the favorable impact of lead surcharges and other pricing actions were largely offset by changes in currency rates, which negatively impacted the Company's net sales for the quarter by approximately $35.9 million.
Consolidated net loss for the third quarter of fiscal 2006 was $27.7 million, including $6.5 million in restructuring costs and $1.3 million in bankruptcy-related costs. During the same period in fiscal 2005, the Company recorded a net loss of $439 million, including a $399 million non-cash goodwill impairment charge and a tax valuation charge of $35.4 million.
"Although we are far from satisfied with our performance during the third quarter, there were clearly some bright spots for Exide," said Gordon A. Ulsh, President and Chief Executive Officer. "First, the motive and network power segments in both Industrial Energy divisions continue to provide profitable growth. Second, the reorganization that we launched last spring and the Take Charge! program initiated in late summer are providing tangible benefits in terms of reduced costs and improved efficiency. Third, we continued on a disciplined review of our customer contracts to determine which business meets our profitability requirements and which business we should discontinue if it no longer contributes to our profitable growth. Fourth, the payback from price increases and lead escalators that we began implementing months ago in response to rising commodity costs are now showing up on our bottom line."
The price of lead on the London Metal Exchange averaged $976 per metric tonne during the third quarter of fiscal 2006 compared with $893 during the previous quarter and an average of $901 during the third quarter of fiscal 2005. In the fourth quarter, the Company is dealing with lead prices that have risen as high as $1,414 per metric tonne on the LME.
Adjusted EBITDA
Exide uses Adjusted EBITDA as a key measure of the Company's operational and financial performance because the Company believes that Adjusted EBITDA is a useful adjunct to net income (loss) and other measurements under Generally Accepted Accounting Principles ("GAAP") because it is a meaningful measure of the Company's performance, as interest, taxes, depreciation and amortization can vary significantly between companies due in part to differences in accounting policies, tax strategies, levels of indebtedness, capital purchasing practices and interest rates. Adjusted EBITDA also assists management in evaluating operating performance, is used to evaluate performance under the Company's senior secured bank facility, and is sometimes used to evaluate performance for executive compensation. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and restructuring charges.
The Company's Adjusted EBITDA decreased to $41.1 million during the third quarter of fiscal 2006 from $52 million during the same period a year ago. The results were driven principally by lower sales in the European Transportation business, as well as the absence of some one-time items that benefited the Company during the prior-year period. The results also include negative currency impacts of $2.6 million.
On a comparative basis, the results reported during the third quarter of fiscal 2005 included a $7.5 million benefit associated with an insurance payment following a fire at the Company's Bad Lauterberg manufacturing plant in Germany, a portion of which was related to property damage. In addition, the prior-year third quarter benefited from the recognition of $3.0 million of previously deferred income on a customer contract that ended and the Company had fulfilled its obligations in the period.
A reconciliation of Adjusted EBITDA to net income reported under GAAP has been included in the financial supplements of this earnings release.
Industrial Energy Business
The Company's Industrial Energy business reported consolidated global net sales of $276.1 million during the third quarter of fiscal 2006, an increase of 2.6 percent over the same period the previous year. The increase was driven largely by strong performance in North America, where sales rose 21 percent due to a 28.6 percent increase in product demand in network power and a 13.7 percent increase in motive power. Quarterly sales in the Company's Europe and the Rest of Word ("Europe-ROW") division declined 2.2 percent year-over-year; excluding the impact of foreign exchange, Industrial Energy sales in Europe-ROW increased by approximately 5.9 percent.
Net income for the period increased to $10.1 million from a net loss of $137.0 million, which included a goodwill impairment charge of $159.8 million. Current-year results were adversely affected by a restructuring and asset impairment charge in the aggregate amount of $10.1 million relating to the closure of the Kankakee, Illinois, plant.
Adjusted EBITDA for Industrial Energy decreased $4.6 million quarter-over-quarter to $32.9 million. The fiscal 2005 result, however, included a portion of the Bad Lauterberg insurance payment related to property damage and the $3.0 million in deferred income. Excluding the benefit from insurance and recognition of deferred income during the prior-year quarter, Adjusted EBITDA improved during the third quarter of fiscal 2006.
Transportation Business
Consolidated global net sales in Transportation decreased slightly during the period to $457.4 million from $458.8 million reported in the prior-year period. These results were primarily due to foreign exchange as the U.S. Dollar strengthened primarily against the Euro, and because of lower unit volume in Europe-ROW, which was offset by higher volumes in North America. Warmer-than-expected weather and higher commodity prices adversely impacted volumes in each region's aftermarket business. Finally, pricing actions to recover higher commodity costs in each region resulted in erosion of market share as some customers moved their business to lower-priced competitors; reduced market share also resulted from Exide's decision not to renew some business that no longer met the Company's profitability requirements.
Net income for the period increased to $16.1 million from a net loss of $212.2 million, including a goodwill impairment charge of $239.6 million.
Adjusted EBITDA for the period was $35.9 million, down from $44.8 million in the same period a year ago, the result of not fully recovering rising manufacturing and distribution costs through pricing actions.
Conference Call Details
Members of Exide's senior management team will host a conference call on Thursday, February 9, 2006 for members of the investment community to discuss the Company's financial results and general business operations at 10:00 a.m. Eastern Standard Time.
Domestic Dial-In Number: (877) 563-6439
International Dial-In Number: (706) 758-9457
Conference Identification Number: 3786649
For individuals unable to participate in the conference call, a telephone replay will be available from 2 p.m. on February 9, 2006 until midnight on March 9, 2006 at:
Domestic Replay Number: (800) 642-1687
International Replay Number: (706) 645-9291
Conference Identification Number: 3786649
Non-financial participants can listen to the earnings call by accessing the Investor Relations page of the Exide website, www.exide.com.
About Exide Technologies
Exide Technologies, with operations in 89 countries, is one of the world's largest producers and recyclers of lead-acid batteries. The Company's four global business groups - Transportation Americas, Transportation Europe and Rest of World, Industrial Energy Americas and Industrial Energy Europe and Rest of World - provide a comprehensive range of stored electrical energy products and services for industrial and transportation applications.
Transportation markets include original-equipment and aftermarket automotive, heavy-duty truck, agricultural and marine applications, and new technologies for hybrid vehicles and 42-volt automotive applications. Industrial markets include network power applications such as telecommunications systems, electric utilities, railroads, photovoltaic (solar-power related) and uninterruptible power supply (UPS), and motive-power applications including lift trucks, mining and other commercial vehicles.
Further information about Exide, including its financial results, is available at www.exide.com.
Forward-Looking Statements
Except for historical information, this press release 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, (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 and (e) statements regarding the ability to comply with or alternatively obtain amendments under the Company's debt agreements.
Factors that could cause actual results to differ materially from these forward looking statements include, but are not limited to, the following general factors such as: (i) adverse reactions by creditors, vendors, customers, and others to, among other things, the Company's results, financial conditions or compliance with financial covenants, (ii) the Company's ability to implement and fund based on current liquidity business strategies and restructuring plans, (iii) unseasonable weather (warm winters and cool summers) which adversely affects demand for automotive and some industrial batteries, (iv) the Company's substantial debt and debt service requirements which may restrict the Company's operational and financial flexibility, as well as imposing significant interest and financing costs (v) the Company's ability to comply with the covenants in its debt agreements or obtain waivers of noncompliance, (vi) the litigation proceedings to which the Company is subject, the results of which could have a material adverse effect on the Company and its business, (vii) the realization of the tax benefits of the Company's net operating loss carry forwards, of which is dependent upon future taxable income, (viii) the fact that lead, a major constituent in most of the Company's products, experiences significant fluctuations in market price and is a hazardous material that may give rise to costly environmental and safety claims, (ix) competitiveness of the battery markets in North America and Europe, (x) the substantial management time and financial and other resources needed for the Company's consolidation and rationalization of acquired entities, (xi) risks involved in foreign operations such as disruption of markets, changes in import and export laws, currency restrictions, currency exchange rate fluctuations and possible terrorist attacks against U.S. interests, (xii) the Company's exposure to fluctuations in interest rates on its variable debt, (xiii) the Company's ability to maintain and generate liquidity to meet its operating needs, (xiv) general economic conditions, (xv) the ability to acquire goods and services and/or fulfill labor needs at budgeted costs, (xvi) the Company's reliance on a single supplier for its polyethylene battery separators, (xvii) the Company's ability to comply with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002, (xviii) the ability to successfully pass along increased costs to its customers, and (xix) the Company's ability to successfully resolve the $27.5 million fine with the U.S. Attorney's Office for the Southern District of Illinois.
Therefore, the Company cautions each reader of this press release carefully to consider those factors set forth above and those factors described in Amendment No. 1 to the Company's Registration Statement on Form S-3 filed with the SEC on September 14, 2005 and in the Company's most recent Form 10-Q filed on February 9, 2006 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.
EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per-share data)
Successor Company Successor Company
for the for the
Three Months Ended Three Months Ended
December 31, 2005 December 31, 2004
--------------------------------------------
NET SALES $ 733,442 $ 727,902
COST OF SALES 614,609 602,151
------------------ ---------------------
Gross profit 118,833 125,751
------------------ ---------------------
EXPENSES:
Selling, marketing and
advertising 66,261 69,003
General and
administrative 42,471 47,365
Restructuring and
impairment 6,511 5,713
Goodwill Impairment -- 399,388
Other expense (income)
net 7,973 (5,005)
Interest expense net 18,404 11,728
------------------ ---------------------
141,620 528,192
------------------ ---------------------
Loss before
reorganization items,
income taxes and
minority interest (22,787) (402,441)
REORGANIZATION ITEMS, NET 1,311 2,236
INCOME TAX PROVISION 3,528 34,484
MINORITY INTEREST 32 (121)
------------------ ---------------------
Net loss $ (27,658) $ (439,040)
================== =====================
NET LOSS PER SHARE
Basic and Diluted $ (1.11) $ (17.56)
================== =====================
WEIGHTED AVERAGE SHARES
Basic and Diluted 25,000 25,000
================== =====================
EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per-share data)
Successor Successor Predecessor
Company Company Company
for the for the for the
Nine Months Period Period
May 6, 2004 April 1, 2004
Ended to to
December 31, December 31, May 5,
2005 2004 2004
------------ ------------ -------------
NET SALES $2,089,259 $1,763,429 $ 214,607
COST OF SALES 1,764,317 1,477,867 179,137
------------ ------------ -------------
Gross profit 324,942 285,562 35,470
------------ ------------ -------------
EXPENSES:
Selling, marketing and
advertising 204,948 178,617 24,504
General and administrative 129,347 108,601 17,940
Restructuring and impairment 16,051 12,986 602
Goodwill Impairment -- 399,388 --
Other expense (income) net 12,781 (57,042) 6,222
Interest expense net 51,163 29,165 8,870
---------- ---------- -----------
414,290 671,715 58,138
---------- ---------- -----------
Loss before reorganization
items, income taxes and
minority interest (89,348) (386,153) (22,668)
REORGANIZATION ITEMS, NET 4,398 5,654 18,434
FRESH START ACCOUNTING
ADJUSTMENTS, NET -- -- (228,371)
GAIN ON DISCHARGE OF
LIABILITIES SUBJECT TO
COMPROMISE -- -- (1,558,839)
INCOME TAX PROVISION (BENEFIT) 2,572 30,782 (2,482)
MINORITY INTEREST 72 (75) 26
---------- ---------- -----------
Net income (loss) $ (96,390) $ (422,514) $ 1,748,564
========== ========== ===========
NET INCOME (LOSS) PER SHARE
Basic and Diluted $ (3.86) $ (16.90) $ 63.86
========== ========== ===========
WEIGHTED AVERAGE SHARES
Basic and Diluted 25,000 25,000 27,383
========== ========== ===========
EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per-share data)
Successor Company
-------------------------
December 31, March 31,
ASSETS 2005 2005
------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 36,872 $ 76,696
Restricted cash 548 1,323
Receivables, net of allowance for doubtful
accounts of $20,236 and $22,471 635,221 687,715
Inventories 429,451 397,689
Prepaid expenses and other 34,182 21,275
Deferred financing costs, net 1,770 1,725
Deferred income taxes 5,419 4,305
---------- ----------
Total current assets 1,143,463 1,190,728
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET 691,384 799,763
OTHER ASSETS:
Intangible assets, net 188,229 192,854
Investments in affiliates 7,147 9,010
Deferred financing costs, net 11,215 12,784
Deferred income taxes 55,711 55,896
Other 26,030 29,745
---------- ----------
288,332 300,289
---------- ----------
Total assets $2,123,179 $2,290,780
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 14,700 $ 1,595
Current maturities of long-term debt 24,380 632,116
Accounts payable 341,411 340,480
Accrued expenses 347,465 385,521
Warrants liability 1,688 11,188
---------- ----------
Total current liabilities 729,644 1,370,900
LONG-TERM DEBT 639,213 20,047
NONCURRENT RETIREMENT OBLIGATIONS 313,294 329,628
NONCURRENT DEFERRED TAX LIABILITY 29,511 24,178
OTHER NONCURRENT LIABILITIES 97,532 106,004
---------- ----------
Total liabilities 1,809,194 1,850,757
---------- ----------
COMMITMENTS AND CONTINGENCIES -- --
MINORITY INTEREST 11,993 12,764
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value, 1,000
shares authorized, 0 shares issued and
outstanding -- --
Common stock, $0.01 par value, 61,500 shares
authorized, 24,542 and 24,407 shares issued
and outstanding 245 234
Additional paid-in capital 888,479 888,157
Accumulated deficit (563,313) (466,923)
Accumulated other comprehensive (loss)
income (23,419) 5,791
---------- ----------
Total stockholders' equity 301,992 427,259
---------- ----------
Total liabilities and stockholders'
equity $2,123,179 $2,290,780
========== ==========
EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Successor Predecessor
Successor Company Company
Company for the for the
for the Period Period
Nine Months May 6, 2004 April 1, 2004
Ended to to
December 31, December 31, May 5, 2004
2005 2004 2004
----------- ------------ -------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $(96,390) $(422,514) $ 1,748,564
Adjustments to reconcile net
income (loss) to net cash used
in operating activities:
Depreciation and amortization 90,519 84,194 7,848
Impairment of Goodwill -- 399,388 --
Gain on discharge of liabilities
subject to compromise -- -- (1,558,839)
Fresh Start accounting
adjustments, net -- -- (228,371)
Unrealized gain on Warrants (9,500) (61,488) --
Net loss on asset sales 12,270 1,227 --
Provision for doubtful accounts 2,401 2,167 473
Deferred income taxes -- 680 --
Non-cash provision for
restructuring 1,002 108 18
Reorganization items, net 4,398 5,654 18,434
Insurance proceeds -- 2,143 --
Minority interest 72 (75) 26
Amortization of deferred
financing costs 1,347 -- 1,251
Changes in assets and
liabilities, excluding effects
of Fresh Start accounting,
acquisitions and divestitures:
Receivables 10,342 (41,745) 45,924
Inventories (51,451) (12,408) (10,873)
Prepaid expenses and other (13,199) (2,378) 286
Payables 19,007 32,464 (20,967)
Accrued expenses (17,208) (28,982) (20,564)
Noncurrent liabilities (7,210) (3,443) (294)
Other, net 9,199 31,360 9,898
-------- --------- -----------
Net cash used in operating
activities (44,401) (13,648) (7,186)
-------- --------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (37,861) (44,577) (7,152)
Proceeds from sales of assets 19,657 20,962 2,800
-------- --------- -----------
Net cash used in investing
activities (18,204) (23,615) (4,352)
-------- --------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase in short-term borrowings 13,963 4,174 2,425
Repayments under Senior Notes -- -- (110,082)
Borrowings under Credit Facility -- 168,593 621,258
Repayments under Credit Facility (12,804) (169,332) (452,875)
Currency Swap (12,084) -- --
Increase (decrease) in other debt 36,081 (2,036) (2,412)
Financing costs and other -- (682) (23,146)
-------- --------- -----------
Net cash provided by financing
activities 25,156 717 35,168
-------- --------- -----------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS (2,375) 3,031 (1,447)
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (39,824) (33,515) 22,183
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 76,696 59,596 37,413
-------- --------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 36,872 $ 26,081 $ 59,596
======== ========= ===========
EXIDE TECHNOLOGIES AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION BY SEGMENT
SUCCESSOR COMPANY FOR THE THREE MONTHS ENDED DECEMBER 31, 2005
Industrial
Transportation Energy
---------------- ----------------
North Europe North Europe
America and ROW America and ROW Other TOTAL
------- -------- ------- -------- ------- --------
Net income (loss) $3.7 $12.4 ($4.3) $14.4 ($53.9) ($27.7)
Interest expense,
net 18.4 18.4
Income tax
provision
(benefit) 3.5 3.5
--------------------------------------------------
EBIT $3.7 $12.4 ($4.3) $14.4 ($31.9) ($5.7)
Depreciation and
amortization 7.3 8.4 2.8 8.1 3.6 30.2
Reorganization
items, net 0.0 0.0 0.0 0.0 1.3 1.3
Restructuring and
impairment, net (0.0) 2.6 1.8 1.7 0.4 6.5
Other restructuring
costs included in
cost of sales and
general and
administrative
expenses 0.1 (0.0) (0.1) 0.2 (0.1) 0.1
Currency
remeasurement
loss (gain) 1.7 0.0 0.3 0.0 (1.3) 0.7
Gain on
revaluation of
foreign currency
forward contract 0.0 0.0 0.0 0.0 0.0 0.0
Minority interest 0.0 0.0 0.0 0.0 0.1 0.1
Unrealized gain
on revaluation
of warrants 0.0 0.0 0.0 0.0 (1.8) (1.8)
Loss (gain) on
sale of capital
assets 1.5 0.3 8.5 0.2 (0.9) 9.6
Other non-cash
losses (gains) (2.0) (0.0) (0.7) (0.2) 3.0 0.1
Adjusted EBITDA $12.3 $23.6 $8.4 $24.5 ($27.7) $41.1
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