Exide Reports Second Quarter and Six Month FY'99 Results
28 October 1998
Exide Reports Second Quarter and Six Month FY'99 Results
READING, Pa., Oct. 27 -- Exide Corporation , the
world's leading manufacturer of lead-acid batteries, today reported net
earnings for its second fiscal quarter ended September 27, 1998 of
$2.3 million or $.11 per basic and diluted share, slightly above the
expectations it announced two weeks ago. Exide reported net earnings (after
an extraordinary charge) of $6.7 million or $.33 per basic and $.31 per
diluted share in the comparable quarter last year.
Net sales for the second quarter increased $48.7 million, or 8.8%, to
$601.1 million, as compared to $552.4 million for the same period last year.
This increase is largely due to:
-- The inclusion of DETA, (a German industrial and automotive battery
manufacturer) which was acquired effective September 1, 1997
($31 million)
-- Higher automotive sales in North America ($12 million)
-- Higher industrial and automotive sales in Europe ($6 million), after
eliminating the impact of foreign exchange rates.
Gross profit for the second quarter of FY '99 increased $12.7 million or
8.6%, to $161.0 million from $148.3 million for the same period last year,
representing the net effect of these primary factors:
-- Higher automotive and industrial volume in North America and Europe
(including DETA) of $15.4 million; and,
-- Manufacturing cost reductions related to the European rationalization/
consolidation process.
These factors were partially offset by:
-- Unfavorable product mix and less profitable customer mix in North
America ($4.1 million). The announced 3.95% price increase effective
November 1st should help to offset this issue in the future.
-- Higher production costs in certain U.S. manufacturing facilities
($2.4 million), principally at the Bristol facility which experienced a
fire in December, 1997.
-- Higher depreciation in Europe ($2.5 million) including the effect of
the DETA acquisition.
Profit before tax (PBT) for the second quarter of FY '99 decreased
$3.3 million to $9.7 million from $13.0 million for the same period last year,
as a result of the factors discussed above, as well as the following:
-- Adverse impact of including DETA for the entire fiscal quarter (versus
only September in fiscal 1998) of $1.0 million (July and August are
typically loss months given low sales volume);
-- Higher provisions for uncollectible receivables in North America
($2.8 million) related primarily to several large battery retailers
which filed Chapter 11 in 1998;
-- Higher branch operating costs ($2.3 million);
-- Foreign exchange losses of $2.1 million in the second quarter of fiscal
1999 as compared to net foreign exchange gains of $1.0 million in the
second quarter of fiscal 1998.
Net income for the second quarter of fiscal 1999 was $2.3 million as
compared to $6.7 million for the same period last year. This decrease is
largely attributable to the factors discussed above coupled with the high
effective tax rate of 77.5%. This tax rate results from an inability to
record an income tax benefit ($2.6 million) due to a realization issue related
to the second quarter fiscal 1999 U.S. taxable loss.
For the Six Months Ended September 27, 1998:
Net sales for the six months ended September 27, 1998 increased by
$102.9 million or 9.9% to $1,146 million as compared to $1,043 million for the
same period last year. This increase is largely due to the inclusion of DETA
which was acquired effective September 1, 1997 ($81 million), higher
automotive sales in North America ($14 million) and higher industrial and
automotive sales in Europe ($22 million), after eliminating the impact of
foreign exchange rates.
Gross profit and profit before tax for the first six months of fiscal 1999
were impacted by the same factors affecting the second quarter discussion
above.
Net income for the six months ended September 27, 1998 was a loss of
$4.1 million compared to a loss of $8.0 million for the same period last year.
The fiscal 1999 net loss was largely attributable to the PBT shortfall
discussed above coupled with the high effective tax rate previously discussed.
Net income for the six months of fiscal 1998 included the recognition of a
$8.8 million extraordinary loss related to early retirement of debt.
Arthur R. Taylor, Exide Board and Executive Committee member said, "The
strong sales momentum evident in our second quarter is indicative of the
underlying health of our business. Demand for Exide products is stronger than
ever, as units sold increased by 9% to 25 million when compared to the same
six-month period last year. A prominent consumer magazine, in its October
1998 issue, ranked those Exide products tested as "Very Good to Excellent",
including the products made for Sears and NAPA. These high marks reinforce
our commitment to provide the best technology in its class at the highest
possible levels of quality and service worldwide."
The Company has implemented a broad restructuring plan designed to
leverage Exide's technology, brand, and distribution strengths. In FY '99, the
Company has closed or consolidated five industrial and automotive facilities
in North America and Europe and presently operates 28 plants compared to 33 a
year ago. Additionally, the company is working to address certain aspects of
its fixed cost structure, such as selling its owned corporate airplanes and
other non-productive assets.
Robert Irwin, Exide Board and Executive Committee member said, "Plans for
attacking these issues are being implemented even as we aggressively pursue a
high-caliber individual for the position of Chief Executive Officer. We are
continuing to consolidate manufacturing capacity and address many aspects of
our fixed-costs in order to improve our profit performance for all of our
shareholders."
Exide Corporation is the world's leading manufacturer of automotive and
industrial lead-acid batteries with operations in 19 countries worldwide.
Exide has significant additional interest in related technologies including
battery chargers, accessories, starters and alternators. Further information
about Exide's businesses and products are available at http://www.exideworld.com
Certain statements in this press release may constitute forward-looking
statements under the Securities Litigation Reform Act of 1995. As such, they
involve known and unknown risks, uncertainties, and other factors that may
cause the actual results of the Company to be materially different from any
results expressed or implied by such forward-looking statements. These are
enumerated in further detail in the Company's Form 10-K.
EXIDE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except share and per-share data)
For the Three Months Ended For the Six Months Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1998 1997 1998 * 1997
NET SALES $ 601,136 $ 552,389 $ 1,145,668 $ 1,042,754
COST OF SALES 440,102 404,043 844,480 770,100
Gross profit 161,034 148,346 301,188 272,654
OPERATING EXPENSES:
Selling, marketing
and advertising 80,014 69,906 158,545 138,719
General and
administrative 36,203 31,876 73,184 63,033
Goodwill
amortization 4,672 4,283 8,848 8,401
120,889 106,065 240,577 210,153
Operating
income 40,145 42,281 60,611 62,501
INTEREST EXPENSE,
net 26,912 27,834 53,455 57,098
OTHER EXPENSE,
net 3,547 1,426 5,961 3,677
Income before
income taxes,
minority interest
and extraordinary
loss 9,686 13,021 1,195 1,726
INCOME TAX EXPENSE 7,505 5,085 5,167 1,526
Income (loss) before
minority interest and
extraordinary loss 2,181 7,936 (3,972) 200
MINORITY INTEREST (102) (218) (202) (509)
Income (loss) before
extraordinary loss 2,283 8,154 (3,770) 709
EXTRAORDINARY LOSS RELATED
TO EARLY RETIREMENT
OF DEBT, net of income tax
benefit of $0 for the
six months ended
September 27, 1998 and
$768 for the three and
six months ended
September 28, 1997 -- (1,445) (301) (8,758)
Net income
(loss) $ 2,283 $ 6,709 $ (4,071) $ (8,049)
BASIC EARNINGS PER SHARE:
Income (loss)
before extraordinary
loss $ 0.11 $ 0.40 $ (0.18) $ 0.04
Extraordinary loss -- (0.07) (0.01) (0.43)
Net income (loss) $ 0.11 $ 0.33 $ (0.19) $ (0.39)
DILUTED EARNINGS PER SHARE:
Income (loss) before
extraordinary
loss $ 0.11 $ 0.38 $ (0.18) $ 0.03
Extraordinary loss -- (0.07) (0.01) (0.41)
Net income (loss) $ 0.11 $ 0.31 $ (0.19) $ (0.38)
WEIGHTED AVERAGE SHARES:
Basic 21,238,526 20,588,905 21,195,561 20,581,057
Diluted 21,259,065 21,680,806 21,360,630 21,463,753
* Certain prior quarter amounts have been reclassified to conform to
current quarter presentation.