MILTON, Ga. – Exide Technologies announced preliminary fiscal 2012 second quarter and year to date financial results for the periods ended Sept. 30, 2011.
Exide reports that on Oct. 11, 2011, the company was apprised of allegations at its Portugal recycling facility of certain intentional misstatements of production and inventories over a multi-year period that began in approximately 2004. Exide says it immediately commenced an investigation into the allegations. Based on results of the investigation to date, the company says it does not believe these actions extend beyond the one facility in Portugal. However, until the investigation is completed, the company cannot issue final financial information for the quarter nor can the company’s independent auditor complete its Statement of Accounting Standards 100 review for the same period. Accordingly, the results herein are preliminary estimates and subject to change, which could significantly impact financial results.
As of the date hereof, the company reports:
Net sales for the fiscal 2012 second quarter of $773 million, up $105 million versus the prior year second quarter and up $28 million sequentially.
Operating income for the current year period of $21.2 million versus $26.3 million of operating income in the second quarter of fiscal 2011, which includes an out of period charge of approximately $5 million pretax for the Transportation Europe and ROW segment relating to the intentional misstatements of production and inventories referenced above. Pending completion of the investigation, the company currently believes that the out of period adjustment is not material to any prior period or to the projected full year financial results.
Jim Bolch, president and CEO, stated, "Our Transportation Americas business continues to weigh on consolidated results and is overshadowing improved results in the other three segments. Given this significant issue, among other factors, we are revising our previously provided full year outlook. We now expect operating income, excluding restructuring and impairment charges, to be approximately 10 percent below the comparable prior year amount of $138 million, assuming no change to our estimates of the misstatements of production and inventories, stable lead prices and no additional significant decline in global economic conditions."
"In light of these developments, and as noted below, we are taking aggressive actions to reduce costs and improve operating results, particularly in the Transportation Americas segment," Bolch added.
The significant amount of excess capacity in the company’s Transportation Americas business has been a major ongoing structural cost issue. The company has carried the excess capacity for the past 18 months in anticipation of securing a sizable aftermarket customer. To date, this has not occurred and the company believes the factory utilization is unacceptably low. As a result, Exide has decided to reduce its transportation flooded battery footprint in the Americas by idling the Bristol, Tenn., flooded battery facility. This action is expected to provide a reduction in annual costs of $20 million to $25 million, commencing in the latter part of fiscal 2013.
While this action will limit the company’s ability to grow this segment in the short to mid-term, Exide believes it will allow the company to focus productivity-related capital spending in the remaining battery facilities. It will also allow the company to target more funding to further Absorbed Glass Mat (AGM) investments as well as the industrial businesses, positioning the company for more profitable future growth.
The amount and timing of charges associated with the Transportation Americas capacity reduction at the Bristol, Tenn., facility have yet to be finalized. As these details are developed, appropriate disclosures will be communicated.
Additionally, the company has initiated cost reduction actions that include a global reduction-in-force to be completed during the fiscal 2012 third quarter, which are expected to generate annualized savings of slightly more than $7 million. The company has also redirected a significant portion of its research, development and engineering resources to product design efforts in order to deliver lower product costs. These value analysis, value engineering, or VAVE, initiatives are expected to provide roughly $10 million of annualized savings in the Transportation Americas business alone. Of this amount, the company expects approximately $7 million to be realized in fiscal 2013.
The company also announced leadership changes specifically in the Americas business. Paul Hirt Jr. will be joining the company on Nov. 18 as the new president, Exide Americas. Hirt comes to Exide with strong operational and commercial experience in multiple industries including demonstrated results in turnaround situations. Additionally, several other key leadership changes have been announced in the Americas operations team to drive improved performance in the company’s manufacturing and recycling operations.
