EXIDE TECHNOLOGIES REPORTS SECOND QUARTER 2007 RESULTS
Alpharetta, Ga. – (November 9, 2006) – Exide Technologies (NASDAQ: XIDE,www.exide.com), a global leader in stored electrical-energy solutions, today reported its financial results for its fiscal 2007 second quarter, which ended September 30, 2006.
Quarter
Consolidated net sales for the fiscal 2007 second quarter were $680.3 million versus $686.5 million for fiscal 2006 second quarter. Many of our markets experienced drops in unit volume, which were partially offset by the favorable impact of recent pricing actions in both Transportation and Industrial Energy. Much of the lower unit volumes in both of our Transportation segments can be directly attributed to our pricing strategy to drive customer profitability to more appropriate levels or sever relationships where reasonable profitability could not be achieved. In our Industrial Energy North America business, we continue to enjoy strong growth in our motive power product lines. These increases have been more than offset by a soft network power market, including lower sales to the U.S. Navy as they transition to our Valve Regulated Lead Acid (VRLA) technology.
The Company had a net loss of $35.1million or ($1.16) per share for the second quarter of 2007, compared with a net loss of $33.0 million or ($1.29) per share for the 2006 second quarter. The slight increase in net loss is primarily attributable to increased interest expense as a result of higher debt levels and higher interest rates related to amendments to our credit agreement made in the fourth quarter of fiscal 2006. Net loss per share for the second quarter of fiscal 2007 was impacted by higher weighted average shares outstanding as a result of the Company’s $75 million rights offering and $50 million private sale of common stock.
Adjusted EBITDA in the second quarter of fiscal 2007 was $33.4 million, a 34% increase over fiscal 2006 Adjusted EBITDA of $24.9 million. The increase in Adjusted EBITDA is attributable to improved margins as a result of pricing actions, and a decrease in general and administrative expenses of approximately $6.7 million related to headcount reductions and other organizational and operational streamlining initiatives. These factors were partially offset, however, by higher lead costs.
The Company uses Adjusted EBITDA as a key measure of its operational financial performance, as it is an important element of its bank agreement covenants. This measure underlies the Company’s operational performance and excludes the nonrecurring impact of the Company’s current restructuring actions. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and restructuring charges. Our Adjusted EBITDA definition also adjusts reported earnings for the effect of non-cash currency remeasurement gains or losses, the non-cash gain or loss from revaluation of the Company’s warrants liability, impairment charges and non-cash gains or losses on asset sales. See the reconciliations of net losses to Adjusted EBITDA in the attachments to this release.
Fiscal Year-To-Date
Consolidated net sales for the first six months of fiscal 2007 were $1,363.5 million versus $1,355.8 million for the first six months of fiscal 2006. Excluding the favorable impact of exchange rates, sales were slighty down year-over-year principally due to lower unit volume in our Transportation North America business driven by our pricing actions and soft network power demand in North America.
The Company had a net loss of $73.0 million or ($2.61) per share for the first six months of 2007, compared with a net loss of $68.7 million or ($2.69) per share for the first six months of 2006. The increase in net loss is primarily attributable to an increase in restructuring charges of approximately $6.4 million driven principally by the April 2006 closing of the Company’s automotive battery plant in Shreveport, Louisiana, and to a $12.2 million increase in interest expense due to higher debt and higher rates resulting from the recent amendments to our credit agreement. These were offset, to a degree, by improved operating results as more fully described below in our discussion of Adjusted EBITDA. Net loss per share was also impacted by an increase in weighted average shares outstanding as a result of the rights offering and private sale of common stock, as discussed above.
Combined Adjusted EBITDA for the first six months of fiscal 2007 was $60.6 million, an increase of 38% over fiscal 2006 Adjusted EBITDA of $44.0 million.. The increase in Adjusted EBITDA is attributable to improved margins as a result of pricing actions, slight reductions in selling, marketing, and advertising costs, and savings of approximately $4.5 million in general and administrative expenses as a result of ongoing initiatives to streamline the organization. These savings were partially offset, however, by higher lead and fuel costs.
Conference Call
The Company previously announced that it will hold a conference call to discuss its results on Friday, November 10, 2006 at 10:00 a.m. (EDT).
Dial-in number for US/Canada: (877) 563-6439 Dial-in number for international callers: (706) 758-9457 Conference ID: 9682120
# # #
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 North America, Transportation Europe and Rest of World, Industrial Energy North America 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, are available atwww.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. The Company undertakes no obligation to publicly update or revise any forward-looking statement in this or any prior forward-looking statements whether as a result of new information, future developments or otherwise.
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 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) the Company’s ability to implement and fund based on current liquidity business strategies and restructuring plans, (ii) unseasonable weather (warm winters and cool summers) which adversely affects demand for automotive and some industrial batteries, (iii) 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, (iv) the Company’s ability to comply with the covenants in its debt agreements or obtain waivers of noncompliance, (v) 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, (vi) the realization of the tax benefits of the Company’s net operating loss carry forwards, which is dependent upon future taxable income, (vii) 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, (viii) competitiveness of the battery markets in North America and Europe, (ix) the substantial management time and financial and other resources needed for the Company’s consolidation and rationalization of acquired entities, (x) 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, (xi) the Company’s exposure to fluctuations in interest rates on its variable debt, (xii) the Company’s ability to maintain and generate liquidity to meet its operating needs, (xiii) general economic conditions, (xiv) the ability to acquire goods and services and/or fulfill labor needs at budgeted costs, (xv) the Company’s reliance on a single supplier for its polyethylene battery separators, (xvi) the Company’s ability to successfully pass along increased material costs to its customers, (xvii) the Company’s ability to comply with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002, (xviii) adverse reactions by creditors, vendors, customers, and others to the going-concern modification to the Company’s Consolidated Financial Statements included in the Report of Independent Registered Public Accounting Firm in the Company’s most recent Report on Form 10-K for the period ended March 31, 2006, and (xx) the Company’s significant pension obligations over the next several years.
Therefore, the Company cautions each reader of this press release carefully to consider those factors set forth above and those factors described in the Company’s Form 10-Q filed on November 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.
Financial tables attached
1
EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED
SEPTEMBER 30, 2006 AND 2005
(In thousands, except per-share data)
For the Three Months Ended
For the Six Months Ended
September 30, 2006
September 30, 2005
September 30, 2006
September 30, 2005
NET SALES
$
680,299
$
686,485
$
1,363,489
$
1,355,817
COST OF SALES
574,897
582,587
1,148,409
1,149,705
Gross profit
105,402
103,898
215,080
206,112
EXPENSES:
Selling, marketing and advertising
65,944
67,615
134,450
138,687
General and administrative
36,393
43,138
82,387
86,877
Restructuring and impairment
7,039
6,640
15,923
9,540
Other (income) expense, net
6,204
1,412
2,712
4,811
Interest expense, net
22,641
16,658
44,928
32,758
138,221
135,463
280,400
272,673
Loss before reorganization items, income taxes, and minority interest
(32,819
)
(31,565
)
(65,320
)
(66,561
)
REORGANIZATION ITEMS, NET
964
1,715
2,570
3,087
INCOME TAX PROVISION (BENEFIT)
1,294
(202
)
4,872
(956
)
MINORITY INTEREST
32
(55
)
243
40
Net loss
$
(35,109
)
$
(33,023
)
$
(73,005
)
$
(68,732
)
NET LOSS PER SHARE
Basic and Diluted
$
(1.16
)
$
(1.29
)
$
(2.61
)
$
(2.69
)
WEIGHTED AVERAGE SHARES
Basic and Diluted
30,169
25,576
27,936
25,576
2
EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2006 AND MARCH 31, 2006
(In thousands, except per-share data)
September 30, 2006
March 31, 2006
ASSETS
Current assets:
Cash and cash equivalents
$
93,888
$
32,161
Restricted cash
613
561
Receivables, net of allowance for doubtful accounts of $26,404 and $21,637
569,946
617,677
Inventories
418,567
414,943
Prepaid expenses and other
30,188
30,243
Deferred financing costs, net
3,248
3,169
Deferred income taxes
5,587
11,066
Total current assets
1,122,037
1,109,820
Property, plant and equipment, net
657,316
685,842
Other assets:
Other intangibles, net
188,945
186,820
Investments in affiliates
5,141
4,783
Deferred financing costs, net
13,891
15,196
Deferred income taxes
57,941
56,358
Other
20,861
24,090
286,779
287,247
Total assets
$
2,066,132
$
2,082,909
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings
$
11,650
$
11,375
Current maturities of long-term debt
2,692
5,643
Accounts payable
342,086
360,538
Accrued expenses
285,693
298,631
Warrants liability
1,324
2,063
Total current liabilities
643,445
678,250
Long-term debt
660,998
683,986
Noncurrent retirement obligations
315,985
333,248
Deferred income tax liability
28,055
33,590
Other noncurrent liabilities
111,794
116,430
Total liabilities
1,760,277
1,845,504
Commitments and contingencies
—
—
Minority interest
13,356
12,666
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 1,000 shares authorized, 0 shares issued and outstanding
—
—
Common stock, $0.01 par value, 100,000 and 61,500 shares authorized, 60,701 and 24,546 shares issued and outstanding
607
245
Additional paid-in capital
1,007,320
888,647
Accumulated deficit
(712,660
)
(639,655
)
Accumulated other comprehensive loss
(2,768
)
(24,498
)
Total stockholders’ equity
292,499
224,739
Total liabilities and stockholders’ equity
$
2,066,132
$
2,082,909
3
EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(In thousands, except per-share data)
For the Six Months Ended
September 30, 2006
September 30, 2005
Cash Flows From Operating Activities:
Net loss
$
(73,005
)
$
(68,732
)
Adjustments to reconcile net loss to net cash used in operating activities—
Depreciation and amortization
60,464
60,343
Unrealized gain on Warrants
(739
)
(7,748
)
Net loss on asset sales
6,972
2,669
Deferred income taxes
239
—
Provision for doubtful accounts
4,701
3,357
Non-cash provision for restructuring
1,343
448
Reorganization items, net
2,570
3,087
Minority interest
243
40
Amortization of deferred financing costs
1,659
897
Changes in assets and liabilities —
Receivables
62,225
12,176
Inventories
8,875
(23,497
)
Prepaid expenses and other
2,459
(11,722
)
Payables
(30,089
)
(28,945
)
Accrued expenses
(24,008
)
(37,421
)
Noncurrent liabilities
(33,301
)
(4,587
)
Other, net
(4,122
)
14,896
Net cash used in operating activities
(13,514
)
(84,739
)
Cash Flows From Investing Activities:
Capital expenditures
(15,602
)
(24,092
)
Proceeds from sales of assets, net
2,498
11,333
Net cash used in investing activities
(13,104
)
(12,759
)
Cash Flows From Financing Activities:
Increase (decrease) in short-term borrowings
(154
)
12,420
Repayments of Borrowings under Senior Secured Credit Facility
(26,545
)
—
Currency Swap
—
(12,084
)
Increase (decrease) in other debt
(3,764
)
52,277
Financing costs and other
(3
)
—
Net Proceeds from rights offering and private equity sale
117,871
—
Net cash provided by financing activities
87,405
52,613
Effect of Exchange Rate Changes on Cash and Cash Equivalents
940
(1,726
)
Net Increase (Decrease) In Cash and Cash Equivalents
61,727
(46,611
)
Cash and Cash Equivalents, Beginning of Period
32,161
76,696
Cash and Cash Equivalents, End of Period
$
93,888
$
30,085
4
EXIDE TECHNOLOGIES AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION BY SEGMENT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
(in millions)
Transportation
Industrial Energy
North
Europe
North
Europe
America
and ROW
America
and ROW
Other
TOTAL
Net income (loss)
$
5.8
($7.2
)
$
5.3
($1.1
)
($37.9
)
($35.1
)
Interest expense, net
—
—
—
—
22.6
22.6
Income tax provision (benefit)
—
—
—
—
1.3
1.3
EBIT
$
5.8
($7.2
)
$
5.3
($1.1
)
($14.0
)
($11.2
)
Depreciation and amortization
6.8
8.3
2.2
9.2
3.5
30.0
Take Charge
0.4
—
—
—
0.1
0.5
Reorganization items, net
—
—
—
—
1.0
1.0
Restructuring and impairment, net
0.7
4.8
(0.3
)
1.5
0.3
7.0
Other restructuring costs included in
cost of sales and general and
administrative expenses
0.1
—
—
—
(0.4
)
(0.3
)
Currency remeasurement loss (gain)
(0.7
)
0.3
0.1
(0.1
)
1.8
1.4
Unrealized gain on revaluation of warrants
—
—
—
—
0.1
0.1
Loss (gain) on sale of capital assets
4.0
0.3
(0.1
)
(0.3
)
0.2
4.1
Other non-cash losses (gains)
0.2
(0.1
)
—
0.2
0.5
0.8
Adjusted EBITDA
$
17.3
$
6.4
$
7.2
$
9.4
($6.9
)
$
33.4
5
EXIDE TECHNOLOGIES AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION BY SEGMENT
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006
(in millions)
Transportation
Industrial Energy
North
Europe
North
Europe
America
and ROW
America
and ROW
Other
TOTAL
Net income (loss)
$
1.0
($13.3
)
$
12.8
$
2.5
($76.0
)
($73.0
)
Interest expense, net
—
—
—
—
44.9
44.9
Income tax provision (benefit)
—
—
—
—
4.9
4.9
EBIT
$
1.0
($13.3
)
$
12.8
$
2.5
($26.2
)
($23.2
)
Depreciation and amortization
14.2
16.5
4.7
18.1
7.0
60.5
Take Charge
1.0
0.3
—
—
0.1
1.4
Reorganization items, net
—
—
—
—
2.6
2.6
Restructuring and impairment, net
6.7
6.1
0.4
2.3
0.4
15.9
Other restructuring costs included in cost of sales
and general and administrative expenses
0.3
—
—
—
(0.3
)
—
Currency remeasurement loss (gain)
0.1
—
0.4
—
(4.7
)
(4.2
)
Minority interest
—
—
—
—
0.2
0.2
Unrealized gain on revaluation of warrants
—
—
—
—
(0.7
)
(0.7
)
Loss (gain) on sale of capital assets
6.9
0.3
(0.1
)
(0.2
)
—
6.9
Other non-cash losses (gains)
0.1
—
0.1
—
1.0
1.2
Adjusted EBITDA
$
30.3
$
9.9
$
18.3
$
22.7
($20.6
)
$
60.6
6
EXIDE TECHNOLOGIES AND SUBSIDIARIES
COMPARATIVE FY07 Q2 NET SALES AND ADJUSTED EBITDA BY SEGMENT
(in millions)
Transportation
Industrial Energy
Europe
Europe
North
and
North
and
Unallocated
America
ROW
America
ROW
Corporate
Consolidated
Q2 FY07
Net sales
$
227.7
$
186.9
$
64.9
$
200.7
—
$
680.3
Adjusted EBITDA
$
17.3
$
6.4
$
7.2
$
9.4
($6.9
)
$
33.4
Q2 FY06
Net sales
$
226.0
$
187.9
$
73.0
$
199.6
—
$
686.5
Adjusted EBITDA (1)
$
7.6
$
7.4
$
6.8
$
13.2
($10.1
)
$
24.9
(1) Includes pro forma effect of the allocation of certain Corporate costs.
7
EXIDE TECHNOLOGIES AND SUBSIDIARIES
COMPARATIVE FY07 YTD NET SALES AND ADJUSTED EBITDA BY SEGMENT
(in millions)
Transportation
Industrial Energy
Europe
Europe
North
and
North
and
Unallocated
America
ROW
America
ROW
Corporate
Consolidated
YTD FY07
Net sales
$
442.2
$
369.7
$
137.9
$
413.7
—
$
1,363.5
Adjusted EBITDA
$
30.3
$
9.9
$
18.3
$
22.7
($20.6
)
$
60.6
YTD FY06
Net sales
$
444.2
$
367.3
$
140.5
$
403.8
—
$
1,355.8
Adjusted EBITDA (1)
$
16.5
$
8.7
$
13.0
$
26.1
($20.3
)
$
44.0
(1) Includes pro forma effect of the allocation of certain Corporate costs.
8
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