Exide's New Management Changes Direction
20 January 1999
Exide's New Management Changes Direction; Provides Preliminary Estimates of Third-Quarter Results
READING, Pa., Jan. 19 -- The new executive management of
Exide Corporation , following a review of business strategy and
operations, has elected to refocus the business by pursuing high-profit
opportunities rather than expansion through acquisition of market share.
"Our focus will be different," explained Robert A. Lutz, Chairman,
President and Chief Executive Officer. "Rather than build the business
through a pursuit of market share by simply being the high-volume supplier, we
are going to concentrate on profitable business, rejecting or relinquishing
business which, though high in unit sales, does not measure up in profits."
Lutz, who joined Exide December 1, 1998, has been working with a
management team assembled shortly after the second fiscal quarter came to an
end (September 27). Executive Vice President and Chief Financial Officer
James Diasio rejoined the organization in October while Nicholas Stratigeas
was elevated in mid October to executive vice president of sales and
marketing, North America
Management decided, in light of investment-community consensus of the
company's third- quarter results, to report its own preliminary estimates,
based on information at hand, including certain strategic decisions.
"Operationally, we will be short of expectations," explained Diasio. "In
addition, we will be short (of expectations) as a result of decisions we made
on business strategy and certain other third-quarter events. This reflects
our commitment to change the basic operational premise of the company."
The company expects to report results for the third quarter, which ended
December 27, 1998, in the range from $(1.75) to $(1.90) per share. Of this
amount, approximately $(1.00) to $(1.05) reflects the adverse consequences of
the company's inability to benefit from its U.S. tax losses.
Some of the more significant charges for the third quarter include:
Facilities closure -- The decisions to close the Frankfort, IN, and
Memphis, TN, facilities were a direct reflection of the new management
philosophy and resulted in a $6.1 million charge. A change in the lead
market, as well as in the company's long-term lead needs, precipitated the
closure of the Memphis smelter. The move away from a volume/market-share
based structure brought about the decision to abandon the plan for a
centralized refurbishment center at the former Frankfort battery manufacturing
plant.
Russian operations -- The realities of a rapidly changing -- and
deteriorating -- economic situation in Russia resulted in a $6.9 million
charge. This reflects uncollectible receivables and the write off of
"unsaleable" inventory specified for the Russian market.
Security battery -- A $3.7 million write off of primarily inventory and
equipment with no alternative use following the decision to end development of
a security battery.
Bad debts -- An additional write off of $3.1 million for receivables
related primarily for customers going through bankruptcies (for which it has
become probable that such amounts would not be collected).
Severance -- A $6.5 million charge will be taken related to the
termination packages of 24 executives (primary reflecting packages for the
former Chairman/President/CEO and executive vice president/President of North
American operations). These executives left during the third quarter.
Interest-rate swap agreements -- As discussed in the second-quarter Form
10-Q, the company expensed an amendment fee of $6 million which was paid to
the counter party to its interest-rate swap agreements related to its
10-percent Senior Notes.
In addition to these third-quarter situations which will affect earnings,
the company is in negotiations with a major national account which could
result in relinquishing between two-thirds and all of the business with this
account. Any financial impact would be reflected in the fourth quarter or
beyond.
Lutz's revised approach to Exide's business strategy reflects lessons
learned in the automotive industry where he had been Vice-Chairman and Chief
Operating Officer for the Chrysler Corporation.
"Volume and market share had been king in the auto business," he
explained. "And blind pursuit of a piece of all segments has gotten a lot of
car companies into trouble.
"We realized the key was building products efficiently and at a profit.
We would develop and market products in segments in which we could effectively
compete, while ignoring other ones. We also decided to concentrate on high-
profit segments like trucks and sport utilities, knowing that any success in
these would be rewarded.
"At Exide we will look at the world battery market, decide which segments
make the most sense for us to pursue and then apply our resources accordingly.
And we will not sign customers simply for the glamour of the deal or the
numbers to be built!
"Again, we will be looking at business in a different, new way. This
change will be reflected in actions which may affect our bottom line. These
may be difficult decisions, but they will be necessary."
Exide Corporation is the world's leading manufacturer of automotive and
industrial lead- acid batteries. Sales exceeded $2.2 billion in fiscal year
1998. The company has operations in 19 countries.
Exide has additional interest in related technologies including battery
chargers, accessories, starters and alternators. Further information about
Exide is 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 which may
cause the actual results of the company to be materially different from any
results expressed or implied by such forward-looking statements. These are
enumerated in further detail in the company's Form 10-K.