##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 1-11263
 EXIDE TECHNOLOGIES
 (Exact Name of Registrant as Specified in Its Charter)
 Delaware
    
    23-0552730(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)13000 Deerfield Parkway,
Building 200
Alpharetta, Georgia
(Address of principal executive offices)
    
    30004
(Zip Code)
 (678) 566-9000
(Registrants telephone number, including area code)
 þ   ̈
  o   þ o
 þ  o
 o  þ




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##### 



EXIDE TECHNOLOGIES AND SUBSIDIARIES
TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATION
    
    
    3Item 1 FINANCIAL STATEMENTS
    
    
    3CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
JUNE 30, 2006 AND 2005
    
    
    3CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2006 AND MARCH 31, 2006
    
    
    4CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
JUNE 30, 2006 AND 2005
    
    
    5NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    6Item 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    19Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    29Item 4 CONTROLS AND PROCEDURES
    
    
    29PART II. OTHER INFORMATION
    
    
    31Item 1. LEGAL PROCEEDINGS
    
    
    31Item 1A. RISK FACTORS
    
    
    31Item 2. UNREGISTERED SALES OF EQUTY SECURITIES AND USE OF PROCEEDS
    
    
    34Item 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    34Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    34Item 5. OTHER INFORMATION
    
    
    34Item 6. EXHIBITS
    
    
    34SIGNATURES
    
    
    35EX-31.1 CERTIFICATION OF THE PRESIDENT AND CEOEX-31.2 CERTIFICATION OF EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICEREX-32 CERTIFICATION PURSUANT TO SECTION 906
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1 . Financial Statements
 EXIDE TECHNOLOGIES AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited, in thousands, except per-share data)
 For the Three Months EndedJune 30, 2006
    
    
    June 30, 2005NET SALES
    
    $
    683,190
    
    
    $
    669,332COST OF SALES
    
    
    573,511
    
    
    
    567,116Gross profit
    
    
    109,679
    
    
    
    102,216EXPENSES:Selling, marketing and advertising
    
    
    68,506
    
    
    
    71,073General and administrative
    
    
    45,994
    
    
    
    43,738Restructuring and impairment
    
    
    8,884
    
    
    
    2,901Other (income) expense, net
    
    
    (3,492
    )
    
    
    3,400Interest expense, net
    
    
    22,287
    
    
    
    16,100142,179
    
    
    
    137,212Loss before reorganization items, income taxes, and minority interest
    
    
    (32,500
    )
    
    
    (34,996
    )REORGANIZATION ITEMS, NET
    
    
    1,607
    
    
    
    1,372INCOME TAX PROVISION (BENEFIT)
    
    
    3,578
    
    
    
    (754
    )MINORITY INTEREST
    
    
    211
    
    
    
    95Net loss
    
    $
    (37,896
    )
    
    $
    (35,709
    )NET LOSS PER SHAREBasic and Diluted
    
    $
    (1.51
    )
    
    $
    (1.43
    )WEIGHTED AVERAGE SHARESBasic and Diluted
    
    
    25,058
    
    
    
    25,000
  3




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EXIDE TECHNOLOGIES AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited, in thousands, except per-share data)
 June 30, 2006
    
    
    March 31, 2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    37,029
    
    
    $
    32,161Restricted cash
    
    
    629
    
    
    
    561Receivables, net of allowance for doubtful accounts of $26,041 and $21,637
    
    
    589,628
    
    
    
    617,677Inventories
    
    
    437,663
    
    
    
    414,943Prepaid expenses and other
    
    
    26,503
    
    
    
    30,243Deferred financing costs, net
    
    
    3,248
    
    
    
    3,169Deferred income taxes
    
    
    11,341
    
    
    
    11,066Total current assets
    
    
    1,106,041
    
    
    
    1,109,820Property, plant and equipment, net
    
    
    684,717
    
    
    
    685,842Other assets:Other intangibles, net
    
    
    191,322
    
    
    
    186,820Investments in affiliates
    
    
    4,863
    
    
    
    4,783Deferred financing costs, net
    
    
    14,716
    
    
    
    15,196Deferred income taxes
    
    
    58,974
    
    
    
    56,358Other
    
    
    23,100
    
    
    
    24,090292,975
    
    
    
    287,247Total assets
    
    $
    2,083,733
    
    
    $
    2,082,909LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term borrowings
    
    $
    11,794
    
    
    $
    11,375Current maturities of long-term debt
    
    
    5,209
    
    
    
    5,643Accounts payable
    
    
    353,374
    
    
    
    360,538Accrued expenses
    
    
    294,689
    
    
    
    298,631Warrants liability
    
    
    1,250
    
    
    
    2,063Total current liabilities
    
    
    666,316
    
    
    
    678,250Long-term debt
    
    
    701,827
    
    
    
    683,986Noncurrent retirement obligations
    
    
    342,355
    
    
    
    333,248Deferred income tax liability
    
    
    34,398
    
    
    
    33,590Other noncurrent liabilities
    
    
    116,412
    
    
    
    116,430Total liabilities
    
    
    1,861,308
    
    
    
    1,845,504Commitments and contingencies
    
    
    
    
    
    
    Minority interest
    
    
    13,413
    
    
    
    12,666STOCKHOLDERS EQUITYCommon stock, $0.01 par value, 61,500 shares authorized, 24,551 and 24,546 shares issued and outstanding
    
    
    245
    
    
    
    245Preferred stock, $0.01 par value, 1,000 shares authorized, 0 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    889,048
    
    
    
    888,647Accumulated deficit
    
    
    (677,551
    )
    
    
    (639,655
    )Accumulated other comprehensive loss
    
    
    (2,730
    )
    
    
    (24,498
    )Total stockholders equity
    
    
    209,012
    
    
    
    224,739Total liabilities and stockholders equity
    
    $
    2,083,733
    
    
    $
    2,082,909
  4




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EXIDE TECHNOLOGIES AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 For the Three Months EndedJune 30, 2006
    
    
    June 30, 2005Cash Flows From Operating Activities:Net loss
    
    $
    (37,896
    )
    
    $
    (35,709
    )Adjustments to reconcile net loss to net cash provided by (used in) operatingDepreciation and amortization
    
    
    30,464
    
    
    
    30,341Unrealized gain on Warrants
    
    
    (813
    )
    
    
    (8,126
    )Net loss (gain) on asset sales
    
    
    2,804
    
    
    
    1,596Deferred income taxes
    
    
    (591
    )
    
    
    Provision for doubtful accounts
    
    
    1,956
    
    
    
    1,426Non-cash provision for restructuring
    
    
    1,207
    
    
    
    5Reorganization items, net
    
    
    1,607
    
    
    
    1,372Minority interest
    
    
    211
    
    
    
    95Amortization of deferred financing costs
    
    
    814
    
    
    
    454Changes in assets and liabilities Receivables
    
    
    47,526
    
    
    
    42,282Inventories
    
    
    (9,388
    )
    
    
    (22,687
    )Prepaid expenses and other
    
    
    4,643
    
    
    
    2,147Payables
    
    
    (19,520
    )
    
    
    (18,414
    )Accrued expenses
    
    
    (15,245
    )
    
    
    (17,058
    )Noncurrent liabilities
    
    
    (3,318
    )
    
    
    (5,192
    )Other, net
    
    
    (3,827
    )
    
    
    11,962Net cash provided by (used in) operating activities
    
    
    634
    
    
    
    (15,506
    )Cash Flows From Investing Activities:Capital expenditures
    
    
    (7,967
    )
    
    
    (11,545
    )Proceeds from sales of assets
    
    
    97
    
    
    
    9,982Net cash used in investing activities
    
    
    (7,870
    )
    
    
    (1,563
    )Cash Flows From Financing Activities:Increase in short-term borrowings
    
    
    9
    
    
    
    11,352Borrowings under Senior Secured Credit Facility
    
    
    152
    
    
    
    Currency Swap
    
    
    
    
    
    
    (12,084
    )Increase in other debt
    
    
    11,005
    
    
    
    9,733Financing costs and other
    
    
    4
    
    
    
    Net cash provided by financing activities
    
    
    11,170
    
    
    
    9,001Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    934
    
    
    
    (1,766
    )Net Increase (Decrease) In Cash and Cash Equivalents
    
    
    4,868
    
    
    
    (9,834
    )Cash and Cash Equivalents, Beginning of Period
    
    
    32,161
    
    
    
    76,696Cash and Cash Equivalents, End of Period
    
    $
    37,029
    
    
    $
    66,862
  5




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EXIDE TECHNOLOGIES AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 June 30, 2006
 (In thousands, except share and per-share data)
 (Unaudited)
 (1) BASIS OF PRESENTATION
        6




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(2) WARRANTS
     7




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(3) COMPREHENSIVE LOSS
  For the Three Months EndedJune 30, 2006
    
    
    June 30, 2005Net loss
    
    $
    (37,896
    )
    
    $
    (35,709
    )Additions and changes to minimum pension liability
    
    
    (352
    )
    
    
    Change in cumulative translation adjustment
    
    
    22,120
    
    
    
    (20,535
    )Total comprehensive loss
    
    $
    (16,128
    )
    
    $
    (56,244
    )
 (4) REORGANIZATION ITEMS, NET
  For the Three Months EndedJune 30, 2006
    
    
    June 30, 2005Professional fees
    
    $
    830
    
    
    $
    828Other (a)
    
    
    777
    
    
    
    544Total reorganization items, net
    
    $
    1,607
    
    
    $
    1,372
   (5) INTANGIBLE ASSETS, NET AND GOODWILL
 Trademarks and
    
    
    Trademarks andTradenames (not
    
    
    Tradenames (subject to
    
    
    CustomerIntangible assets, net:
    
    subject to amortization)
    
    
    amortization)
    
    
    relationships
    
    
    Technology
    
    
    TotalAs of March 31, 2006:Gross Amount
    
    $
    56,331
    
    
    $
    12,813
    
    
    $
    106,594
    
    
    $
    23,781
    
    
    $
    199,519Accumulated Amortization
    
    
    
    
    
    
    (1,939
    )
    
    
    (8,499
    )
    
    
    (2,261
    )
    
    
    (12,699
    )Net
    
    $
    56,331
    
    
    $
    10,874
    
    
    $
    98,095
    
    
    $
    21,520
    
    
    $
    186,820As of June 30, 2006:Gross Amount
    
    $
    58,210
    
    
    $
    13,241
    
    
    $
    110,185
    
    
    $
    24,574
    
    
    $
    206,210Accumulated Amortization
    
    
    
    
    
    
    (2,265
    )
    
    
    (9,982
    )
    
    
    (2,641
    )
    
    
    (14,888
    )Net
    
    $
    58,210
    
    
    $
    10,976
    
    
    $
    100,203
    
    
    $
    21,933
    
    
    $
    191,322
  Goodwill
  8




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(6) INVENTORIES
  June 30, 2006
    
    
    March 31, 2006Raw materials
    
    $
    67,602
    
    
    $
    64,248Work-in-process
    
    
    88,050
    
    
    
    79,923Finished goods
    
    
    282,011
    
    
    
    270,772$
    437,663
    
    
    $
    414,943
 (7) OTHER ASSETS
  June 30, 2006
    
    
    March 31, 2006Deposits
    
    $
    10,317
    
    
    $
    10,317Capitalized software, net
    
    
    5,311
    
    
    
    6,524Loan to affiliate
    
    
    3,565
    
    
    
    3,563Other
    
    
    3,907
    
    
    
    3,686$
    23,100
    
    
    $
    24,090
  (8) DEBT
   June 30, 2006
    
    
    March 31, 2006Senior Secured Credit Facility
    
    $
    333,603
    
    
    $
    316,27710.5% Senior Secured Notes due 2013
    
    
    290,000
    
    
    
    290,000Floating Rate Convertible Senior Subordinated Notes due 2013
    
    
    60,000
    
    
    
    60,000Other, including capital lease obligations and other loans at interest rates generally ranging up to 11%
due in installments through 2015
    
    
    23,433
    
    
    
    23,352Total
    
    
    707,036
    
    
    
    689,629Less  current maturities
    
    
    5,209
    
    
    
    5,643$
    701,827
    
    
    $
    683,986
  (9) INTEREST EXPENSE, NET
  9




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(10) OTHER (INCOME) EXPENSE, NET
  For the Three Months EndedJune 30, 2006
    
    
    June 30, 2005Net loss on asset sales
    
    $
    2,804
    
    
    $
    1,596Equity income
    
    
    (19
    )
    
    
    (535
    )Currency (gain) loss
    
    
    (5,588
    )
    
    
    11,674(Gain) loss on revaluation of foreign
currency forward contract
    
    
    
    
    
    
    (1,081
    )Gain on revaluation of Warrants
    
    
    (813
    )
    
    
    (8,126
    )Other
    
    
    124
    
    
    
    (128
    )$
    (3,492
    )
    
    $
    3,400
 (11) EMPLOYEE BENEFITS
  Pension BenefitsFor the Three Months EndedJune 30, 2006
    
    
    June 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    2,223
    
    
    $
    2,745Interest cost
    
    
    8,275
    
    
    
    8,305Expected return on plan assets
    
    
    (6,149
    )
    
    
    (5,370
    )Amortization of:Prior service cost
    
    
    4
    
    
    
    Actuarial loss
    
    
    (292
    )
    
    
    Net periodic benefit cost
    
    $
    4,061
    
    
    $
    5,680
 Other Post-Retirement BenefitsFor the Three Months EndedJune 30, 2006
    
    
    June 30, 2005Components of net periodic benefit cost:Service cost
    
    $
    42
    
    
    $
    25Interest cost
    
    
    389
    
    
    
    334Amortization of:Actuarial loss
    
    
    53
    
    
    
    Net periodic benefit cost
    
    $
    484
    
    
    $
    359
   10




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(12) ENVIRONMENTAL MATTERS
  (13) COMMITMENTS AND CONTINGENCIES
 Claims Reconciliation
   11




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Historical Federal Plea Agreement
       Pre-Petition Litigation Settlements
  Private Party Lawsuits and other Legal Proceedings
  12




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13




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Environmental Matters
   14




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.
      Tampa, Florida
 15




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Columbus, Georgia
  Azambuja (SONALUR) Portugal
  Guarantees
   Sales Returns and Allowances
   Balance at March 31, 2006
    
    $
    45,618Accrual for sales returns and allowances provided during the period
    
    
    11,352Settlements made (in cash or credit) during the period
    
    
    (10,875
    )Currency translation
    
    
    1,072Balance at June 30, 2006
    
    $
    47,167
 (14) RESTRUCTURING
   16




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Severance Costs
    
    
    Closure Costs
    
    
    TotalBalance at March 31, 2006
    
    $
    6,773
    
    
    $
    3,025
    
    
    $
    9,798Charges, Three Months Ended June 30, 2006
    
    
    5,431
    
    
    
    3,453
    
    
    
    8,884Payments and Currency Translation
    
    
    (6,410
    )
    
    
    (3,636
    )
    
    
    (10,046
    )Balance at June 30, 2006
    
    $
    5,794
    
    
    $
    2,842
    
    
    $
    8,636
  (15) NET LOSS PER SHARE
   (16) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
    17




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(17) SEGMENT INFORMATION
      18




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For the Three Months Ended June 30, 2006Transportation
    
    
    IndustrialEurope
    
    
    
    
    
    
    EuropeNorth
    
    
    and
    
    
    North
    
    
    and
    
    
    OtherAmerica
    
    
    ROW
    
    
    America
    
    
    ROW
    
    
    (a)
    
    
    ConsolidatedNet sales
    
    $
    214,509
    
    
    $
    182,753
    
    
    $
    72,949
    
    
    $
    212,979
    
    
    
    
    
    
    $
    683,190Gross profit
    
    
    32,934
    
    
    
    19,607
    
    
    
    17,611
    
    
    
    39,527
    
    
    
    
    
    
    
    109,679Income (loss) before reorganization
items, income taxes, and minority
interest
    
    
    (4,812
    )
    
    
    (6,143
    )
    
    
    7,491
    
    
    
    3,635
    
    
    
    (32,671
    )
    
    
    (32,500
    )
 For the Three Months Ended June 30, 2005Transportation
    
    IndustrialEurope
    
    
    
    
    
    EuropeNorth
    
    and
    
    North
    
    and
    
    OtherAmerica
    
    ROW
    
    America
    
    ROW
    
    (a)
    
    ConsolidatedNet sales
    
    $
    218,168
    
    
    $
    179,439
    
    
    $
    67,433
    
    
    $
    204,292
    
    
    
    
    
    
    $
    669,332Gross profit
    
    
    30,473
    
    
    
    18,766
    
    
    
    13,000
    
    
    
    39,977
    
    
    
    
    
    
    
    102,216Income (loss) before reorganization
items, income taxes, and minority
interest
    
    
    4,082
    
    
    
    (1,647
    )
    
    
    4,369
    
    
    
    9,563
    
    
    
    (51,363
    )
    
    
    (34,996
    )
 (a)
    
    Other includes unallocated corporate expenses, interest
expense, net, currency remeasurement losses (gains), and
gains on revaluation of Warrants.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations  (In thousands, except per share data)
   Executive Overview
    19




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Factors Which Affect the Companys Financial Performance
 Lead and other Raw Materials.
 Energy Costs.
 Competition
 Exchange Rates
 Markets
 Seasonality and Weather.
  Interest Rates.
 First Quarter of Fiscal 2007 Highlights and Outlook
   20




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Critical Accounting Policies and Estimates
   Results of Operations
 Three months ended June 30, 2006 compared with three months ended June 30, 2005
 Overview
  21




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Net Sales
  INCREASE / (DECREASE)For the Three Months Ended
    
    
    
    
    
    
    Currency
    
    
    Non-CurrencyJune 30, 2006
    
    
    June 30, 2005
    
    
    TOTAL
    
    
    Related
    
    
    RelatedTransportationNorth America
    
    $
    214,509
    
    
    $
    218,168
    
    
    
    ($3,659
    )
    
    
    
    
    
    
    ($3,659
    )Europe & ROW
    
    
    182,753
    
    
    
    179,439
    
    
    
    3,314
    
    
    
    (344
    )
    
    
    3,658397,262
    
    
    
    397,607
    
    
    
    (345
    )
    
    
    (344
    )
    
    
    (1
    )Industrial EnergyNorth America
    
    
    72,949
    
    
    
    67,433
    
    
    
    5,516
    
    
    
    
    
    
    
    5,516Europe & ROW
    
    
    212,979
    
    
    
    204,292
    
    
    
    8,687
    
    
    
    (157
    )
    
    
    8,844285,928
    
    
    
    271,725
    
    
    
    14,203
    
    
    
    (157
    )
    
    
    14,360TOTAL
    
    $
    683,190
    
    
    $
    669,332
    
    
    $
    13,858
    
    
    
    ($501
    )
    
    $
    14,359
     Gross Profit
  22




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For the Three Months Ended
    
    
    For the Three Months EndedJune 30, 2006
    
    
    June 30, 2005
    
    
    INCREASE / (DECREASE)Percent of
    
    
    
    
    
    
    Percent of
    
    
    
    
    
    
    Currency
    
    
    Non-CurrencyTOTAL
    
    
    Net Sales
    
    
    TOTAL
    
    
    Net Sales
    
    
    TOTAL
    
    
    Related
    
    
    RelatedTransportationNorth America
    
    $
    32,934
    
    
    
    15.4
    %
    
    $
    30,473
    
    
    
    14.0
    %
    
    $
    2,461
    
    
    
    
    
    
    $
    2,461Europe & ROW
    
    
    19,607
    
    
    
    10.7
    %
    
    
    18,766
    
    
    
    10.5
    %
    
    
    841
    
    
    
    (29
    )
    
    $
    87052,541
    
    
    
    13.2
    %
    
    
    49,239
    
    
    
    12.4
    %
    
    
    3,302
    
    
    
    (29
    )
    
    $
    3,331Industrial EnergyNorth America
    
    
    17,611
    
    
    
    24.1
    %
    
    
    13,000
    
    
    
    19.3
    %
    
    
    4,611
    
    
    
    
    
    
    $
    4,611Europe & ROW
    
    
    39,527
    
    
    
    18.6
    %
    
    
    39,977
    
    
    
    19.6
    %
    
    
    (450
    )
    
    
    (56
    )
    (
    $
    394
    )57,138
    
    
    
    20.0
    %
    
    
    52,977
    
    
    
    19.5
    %
    
    
    4,161
    
    
    
    (56
    )
    
    $
    4,217TOTAL
    
    $
    109,679
    
    
    
    16.1
    %
    
    $
    102,216
    
    
    
    15.3
    %
    
    $
    7,463
    
    
    
    ($85
    )
    
    $
    7,548
     Expenses
  (i)
    
    the first quarter of fiscal 2006 included a gain on revaluation of foreign
currency forward contract of $1,081;(ii)
    
    interest, net increased $6,187 due to higher interest rates and higher debt levels;(iii)
    
    the first quarter of fiscal 2007 and the first quarter of fiscal 2006 expenses included
currency remeasurement (gains) losses of ($5,588) and $11,674, respectively, included in
Other (income) expense, net;(iv)
    
    the first quarter of fiscal 2007 and 2006 expenses included a gain on revaluation of
Warrants of $813 and $8,126, included in Other (income) expense, net; and(v)
    
    the first quarter of fiscal 2007 and 2006 expenses included a loss on sale of assets of
$2,804 and $1,596, included in other (income) expense, net.
 INCREASE / (DECREASE)For the Three Months Ended
    
    
    
    
    
    
    Currency
    
    
    Non-CurrencyJune 30, 2006
    
    
    June 30, 2005
    
    
    TOTAL
    
    
    Related
    
    
    RelatedTransportationNorth America
    
    $
    37,746
    
    
    $
    26,391
    
    
    $
    11,355
    
    
    
    
    
    
    $
    11,355Europe & ROW
    
    
    25,750
    
    
    
    20,413
    
    
    
    5,337
    
    
    
    97
    
    
    
    5,24063,496
    
    
    
    46,804
    
    
    
    16,692
    
    
    
    97
    
    
    
    16,595
 23




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##### Table of Contents



INCREASE / (DECREASE)For the Three Months Ended
    
    
    
    
    
    
    Currency
    
    
    Non-CurrencyJune 30, 2006
    
    
    June 30, 2005
    
    
    TOTAL
    
    
    Related
    
    
    RelatedIndustrial EnergyNorth America
    
    
    10,120
    
    
    
    8,631
    
    
    
    1,489
    
    
    
    
    
    
    
    1,489Europe & ROW
    
    
    35,892
    
    
    
    30,414
    
    
    
    5,478
    
    
    
    79
    
    
    
    5,39946,012
    
    
    
    39,045
    
    
    
    6,967
    
    
    
    79
    
    
    
    6,888Unallocated
corporate expenses
    
    
    32,671
    
    
    
    51,363
    
    
    
    (18,692
    )
    
    
    102
    
    
    
    (18,794
    )TOTAL
    
    $
    142,179
    
    
    $
    137,212
    
    
    $
    4,967
    
    
    $
    278
    
    
    $
    4,689
      Income (loss) before reorganization items, income taxes, and minority interest
  24




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##### Table of Contents



For the Three Months Ended
    
    
    For the Three Months EndedJune 30, 2006
    
    
    June 30, 2005Percent of
    
    
    
    
    
    
    Percent of
    
    
    INCREASE /TOTAL
    
    
    Net Sales
    
    
    TOTAL
    
    
    Net Sales
    
    
    (DECREASE)TransportationNorth America
    
    
    ($4,812
    )
    
    
    (2.2
    %)
    
    $
    4,082
    
    
    
    1.9
    %
    
    
    ($8,894
    )Europe & ROW
    
    
    (6,143
    )
    
    
    (3.4
    %)
    
    
    (1,647
    )
    
    
    (0.9
    %)
    
    
    (4,496
    )(10,955
    )
    
    
    (2.8
    %)
    
    
    2,435
    
    
    
    0.6
    %
    
    
    (13,390
    )Industrial EnergyNorth America
    
    
    7,491
    
    
    
    10.3
    %
    
    
    4,369
    
    
    
    6.5
    %
    
    
    3,122Europe & ROW
    
    
    3,635
    
    
    
    1.7
    %
    
    
    9,563
    
    
    
    4.7
    %
    
    
    (5,928
    )11,126
    
    
    
    3.9
    %
    
    
    13,932
    
    
    
    5.1
    %
    
    
    (2,806
    )Other
    
    
    (32,671
    )
    
    
    n/a
    
    
    
    (51,363
    )
    
    
    n/a
    
    
    
    18,692TOTAL
    
    
    ($32,500
    )
    
    
    (4.8
    %)
    
    
    ($34,996
    )
    
    
    (5.2
    %)
    
    $
    2,496
     Reorganization Items
  Income Taxes
  Liquidity and Capital Resources
   25




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26




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Sources Of Cash
      27




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Uses Of Cash
          Financial Instruments and Market Risk
  28




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Accounts Receivable Factoring Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risks
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
    Changes in Internal Control Over Financial Reporting
   29




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##### Table of Contents




    
    A lack of sufficient resources in our accounting and finance organization
    
    Controls over the completeness, accuracy, and valuation of certain inventories
    
    Controls over accounting for investments in affiliates
    
    Controls over accounting for income taxes, and
    
    Effective segregation of duties
   
    
    Several corporate level accounting and finance review practices have been implemented to
improve oversight into regional accounting issues, including more adequate global review of
balance sheet accounts requiring judgment and estimates;
    
    Hiring additional accounting and audit personnel to focus on our ongoing remediation initiatives and compliance efforts;
    
    Ensuring our inventory controls operate as designed;
    
    Ensuring our controls over investments in affiliates operate as designed;
    
    Engaging expert resources to assist with worldwide tax planning and compliance; and
    
    Re-allocating and/or relocating duties of accounting and finance personnel to enhance segregation of duties.
  CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR
PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
    30




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
   The Company has experienced significant increases in raw material prices, particularly lead, and
further changes in the prices of raw materials or in energy costs could have a material adverse
impact on the Company.
  Holders of the Companys common stock are subject to the risk of dilution of their investment as
the result of the issuance of additional shares of common stock and warrants to purchase common
stock to holders of pre-petition claims to the extent the reserve of common stock and warrants
established to satisfy such claims is insufficient.
   
 
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Restrictive covenants restrict the Companys ability to operate its business and to pursue the
Companys business strategies, and its failure to comply with these covenants could result in an
acceleration of its indebtedness.
  
    
    incur additional indebtedness or enter into sale and leaseback transactions;
    
    pay dividends or make distributions on our capital stock or certain other restricted
payments or investments;
    
    purchase or redeem stock;
    
    issue stock of our subsidiaries;
    
    make investments and extend credit;
    
    engage in transactions with affiliates;
    
    transfer and sell assets;
    
    effect a consolidation or merger or sell, transfer, lease or otherwise dispose of all or
substantially all of our assets; and
 
    
    create liens on our assets to secure debt.
  32




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##### Table of Contents



Holders of the Companys common stock are subject to dilution from the previously announced rights
offering and sale of additional shares.
  The Company has large pension contributions required over the next several years.
  Other Risk Factors
  
    
    The going concern modification received from the Companys independent registered public
accounting firm could cause adverse reactions from the Companys creditors, vendors,
customers and others.
    
    The Company is subject to a preliminary SEC inquiry.
    
    The Company is subject to fluctuations in exchange rates and other risks associated with
its non-U.S. operations which could adversely affect the Companys results of operations.
    
    The Companys liquidity is affected by the seasonality of its business. Warm winters and
cool summers adversely affect the Company.
    
    Decreased demand in the industries in which the Company operates may adversely affect
its business.
    
    The loss of the Companys sole supplier of polyethylene battery separators would have a
material adverse effect on the Companys business.
    
    Many of the industries in which the Company operates are cyclical.
    
    The Company is subject to pricing pressure from its larger customers.
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##### Table of Contents




    
    The Company faces increasing competition and pricing pressure from other companies in
its industries, and if the Company is unable to compete effectively with these competitors,
the Companys sales and profitability could be adversely affected.
    
    If the Company is not able to develop new products or improve upon its existing products
on a timely basis, the Companys business and financial condition could be adversely
affected.
    
    The Company may be adversely affected by the instability and uncertainty in the world
financial markets and the global economy, including the effects of turmoil in the Middle
East.
    
    The Company may be unable to successfully implement its business strategy, which could
adversely affect its results of operations and financial condition.
    
    The Company is subject to costly regulation in relation to environmental, health and
safety matters, which could adversely affect its business and results of operations.
    
    The EPA or state environmental agencies could take the position that the Company has
liability under environmental laws that were not discharged in bankruptcy. To the extent
these authorities are successful in disputing the pre-petition nature of these claims, the
Company could be required to perform remedial work that has not yet been performed for
alleged pre-petition contamination, which would have a material adverse effect on the
Companys financial condition, cash flows or results of operations.
    
    The Company may be adversely affected by legal proceedings to which the Company is, or
may become, a party.
    
    The cost of resolving the Companys pre-petition disputed claims, including legal and
other professional fees involved in settling or litigating these matters, could have a
material adverse effect on its financial condition, cash flows and results of operations.
    
    The Companys ability to operate its business effectively could be impaired if the
Company fails to attract and retain experienced key personnel.
    
    Work stoppages or other labor issues at the Companys facilities or its customers or
suppliers facilities could adversely affect the Companys operations.
    
    The Companys substantial indebtedness could adversely affect its financial condition.
    
    The Companys internal control over financial reporting was not effective as of March 31, 2006.
    
    The Companys liquidity position remains constrained. If the Company fails to meet
operations objectives and the shortfall is not replaced through other means, the lack of
liquidity would have a material adverse impact on the Company.
    
    The Company has entered into a plea agreement with the U.S. Attorney for the Southern
District of Illinois under which it is required to pay a fine of $27.5 million over five
years. If the Company is unable to post adequate security for this fine by February 2007
and the U.S. District Court is unwilling to modify the plea agreement, the Company could be
unable to remain in compliance with its senior credit facility and senior secured notes,
which could have a material adverse effect on its business and financial condition.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 31.1
    
    Certification of Gordon Ulsh, President and Chief Executive Officer,
pursuant to Section 302 of Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Francis M. Corby, Jr., Executive Vice President and
Chief Financial Officer, pursuant to Section 302 of Sarbanes-Oxley
Act of 2002.32
    
    Certifications pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
 34




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##### Table of Contents



SIGNATURES
  EXIDE TECHNOLOGIESBy:
    
    /S/ Francis M. Corby, Jr.Francis M. Corby, Jr.Executive Vice President andChief Financial OfficerDate: August 8, 2006
 35