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

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 (State or other jurisdiction of incorporation or organization)		23-0552730 (I.R.S. Employer Identification Number)
13000 Deerfield Parkway, Building 200 Milton, Georgia (Address of principal executive offices)		30004 (Zip Code)

     Indicate by a check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

     As of October 30, 2009, 75,592,572 shares of common stock were outstanding.

 

 

EXIDE TECHNOLOGIES AND SUBSIDIARIES
TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION			3
Item 1 FINANCIAL STATEMENTS			3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008			3
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2009 AND MARCH 31, 2009			4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009 AND 2008			5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			6
Item 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			20
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			31
Item 4 CONTROLS AND PROCEDURES			31
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS			34
Item 1A. RISK FACTORS			34
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			34
Item 3. DEFAULTS UPON SENIOR SECURITIES			34
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			34
Item 5. OTHER INFORMATION			35
Item 6. EXHIBITS			35
SIGNATURES			36
EX-4.1
EX-31.1
EX-31.2
EX-32

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 Ended								For the Six Months Ended
		September 30, 2009				September 30, 2008				September 30, 2009				September 30, 2008
NET SALES		$	631,815			$	914,174			$	1,224,669			$	1,885,449
COST OF SALES			501,909				752,290				988,079				1,554,085
Gross profit			129,906				161,884				236,590				331,364
EXPENSES:
Selling, marketing and advertising			63,801				79,670				129,119				158,526
General and administrative			46,367				43,488				89,297				90,659
Restructuring			10,431				9,655				46,097				11,878
Other (income) expense, net			(7,039	)			16,692				(10,400	)			24,515
Interest expense, net			14,817				18,401				29,536				37,626
			128,377				167,906				283,649				323,204
Income (loss) before reorganization
items and income taxes			1,529				(6,022	)			(47,059	)			8,160
REORGANIZATON ITEMS, NET			320				472				875				935
INCOME TAX PROVISION			9,130				3,408				14,002				26,878
Net loss			(7,921	)			(9,902	)			(61,936	)			(19,653	)
NET INCOME ATTRIBUTABLE TO
NONCONTROLLING INTERESTS			68				334				26				894
Net loss attributable to Exide Technologies		$	(7,989	)		$	(10,236	)		$	(61,962	)		$	(20,547	)
LOSS PER SHARE
Basic and Diluted		$	(0.11	)		$	(0.14	)		$	(0.82	)		$	(0.27	)
WEIGHTED AVERAGE SHARES
Basic and Diluted			75,880				75,455				75,848				75,416

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per-share data)

		September 30, 2009				March 31, 2009
ASSETS
Current assets:
Cash and cash equivalents		$	109,160			$	69,505
Receivables, net of allowance for doubtful accounts of $32,882 and $28,855			478,710				497,841
Inventories			435,438				420,815
Prepaid expenses and other			17,855				17,427
Deferred financing costs, net			5,066				4,890
Deferred income taxes			26,572				33,005
Total current assets			1,072,801				1,043,483
Property, plant and equipment, net			609,383				586,261
Other assets:
Goodwill			4,262				4,022
Other intangibles, net			186,516				175,311
Investments in affiliates			2,031				2,048
Deferred financing costs, net			10,019				12,134
Deferred income taxes			54,866				51,272
Other			32,224				25,656
			289,918				270,443
Total assets		$	1,972,102			$	1,900,187
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings		$	8,251			$	6,977
Current maturities of long-term debt			5,083				5,048
Accounts payable			299,647				261,652
Accrued expenses			303,156				279,447
Warrants liability			1,345				1,143
Total current liabilities			617,482				554,267
Long-term debt			658,540				646,180
Noncurrent retirement obligations			212,129				197,403
Deferred income taxes			29,958				30,229
Other noncurrent liabilities			135,064				130,041
Total liabilities			1,653,173				1,558,120
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 1,000 shares authorized, 0 shares issued and outstanding			—				—
Common stock, $0.01 par value, 200,000 shares authorized, 75,530 and 75,499 shares issued and outstanding			755				755
Additional paid-in capital			1,114,745				1,111,001
Accumulated deficit			(849,243	)			(787,281	)
Accumulated other comprehensive income			35,454				1,752
Total stockholders’ equity attributable to Exide Technologies			301,711				326,227
Noncontrolling interests			17,218				15,840
Total stockholders’ equity			318,929				342,067
Total liabilities and stockholders’ equity		$	1,972,102			$	1,900,187

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

		For the Six Months Ended
		September 30, 2009				September 30, 2008
Cash Flows From Operating Activities:
Net loss		$	(61,936	)		$	(19,653	)
Adjustments to reconcile net loss to net cash provided by operating activities—
Depreciation and amortization			45,501				51,295
Unrealized loss on warrants			202				471
Net loss on asset sales / impairments			6,174				1,135
Deferred income taxes			5,898				7,606
Provision for doubtful accounts			3,188				3,641
Non-cash stock compensation			5,182				2,506
Reorganization items, net			875				935
Amortization of deferred financing costs			2,490				2,612
Currency remeasurement (gain) loss			(16,860	)			25,884
Changes in assets and liabilities —
Receivables			52,910				108,960
Inventories			16,180				9,599
Prepaid expenses and other			720				(1,248	)
Payables			18,942				(53,098	)
Accrued expenses			(785	)			(7,756	)
Noncurrent liabilities			(6,347	)			(17,759	)
Other, net			(8,121	)			(4,546	)
Net cash provided by operating activities			64,213				110,584
Cash Flows From Investing Activities:
Capital expenditures			(35,910	)			(36,154	)
Proceeds from sales of assets, net			(51	)			16,265
Net cash used in investing activities			(35,961	)			(19,889	)
Cash Flows From Financing Activities:
Increase (decrease) in short-term borrowings			177				(1,937	)
Decrease in borrowings under Senior Secured Credit Facility			(1,501	)			(1,662	)
Increase (decrease) in other debt			8,214				(3,183	)
Common stock issuance			—				244
Acquisition of noncontrolling interest in subsidiary			(1,338	)			—
Net cash provided by (used in) financing activities			5,552				(6,538	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents			5,851				(4,805	)
Net Increase In Cash and Cash Equivalents			39,655				79,352
Cash and Cash Equivalents, Beginning of Period			69,505				90,547
Cash and Cash Equivalents, End of Period		$	109,160			$	169,899
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period —
Interest		$	23,384			$	33,502
Income taxes (net of refunds)		$	(603	)		$	4,797

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2009
(Unaudited)

(1) BASIS OF PRESENTATION

     The Condensed Consolidated Financial Statements include the accounts of Exide Technologies (referred to together with its subsidiaries, unless the context requires otherwise, as “Exide” or the “Company”) and all of its majority-owned subsidiaries. These statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by generally accepted accounting principles (“GAAP”), or those disclosures normally made in the Company’s Annual Report on Form 10-K. Accordingly, the reader of this Form 10-Q should refer to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009 for further information.

     The financial information has been prepared in accordance with the Company’s customary accounting practices. In the Company’s opinion, the accompanying Condensed Consolidated Financial Statements include all adjustments of a normal recurring nature necessary for a fair statement of the results of operations and financial position for the periods presented. This includes accounting and disclosures related to any subsequent events occurring from the balance sheet date through November 5, 2009, the date the financial statements were issued.

     The Financial Accounting Standards Board (“FASB”) has issued Statement of Financial Accounting Standards (“SFAS”) No. 168 — The “FASB Accounting Standards Codification™” and the Hierarchy of Generally Accepted Accounting Principles. SFAS 168 establishes the FASB Accounting Standards Codification™ (“ASC”) as the single source of authoritative U.S. generally accepted accounting principles (GAAP). Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The ASC supersedes all existing non-SEC accounting and reporting standards. GAAP is not intended to be changed as a result of the FASB’s Codification project, and the adoption of the ASC effective with this quarterly report will have no impact on the Company’s results of operations, financial position, or cash flows.

     Certain amounts in the Condensed Consolidated Financial Statements as of March 31, 2009 and for the three and six months ended September 30, 2008 have been adjusted to conform to the presentation of equivalent amounts in the current period which reflect the adoption of a new accounting standard related to the presentation of minority (noncontrolling) ownership interests in consolidated subsidiaries.

(2) STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

     The Company adopted a new accounting standard on April 1, 2009. This guidance, among other things, requires that minority ownership interests (noncontrolling interests) in consolidated subsidiaries be reflected as a component of total stockholders’ equity in the Company’s Condensed Consolidated Balance Sheets, and that earnings (losses) attributable to noncontrolling interests be shown separately from those attributable to the Company in its Condensed Consolidated Statements of Operations. The stockholders’ equity accounts for both the Company and noncontrolling interests consist of:

														Accumulated
						Additional								Other								Total
		Common				Paid-in				Accumulated				Comprehensive				Noncontrolling				Stockholders’
		Stock				Capital				Deficit				Income				Interests				Equity
		(In thousands)
Total Stockholders’ Equity at April 1, 2009		$	755			$	1,111,001			$	(787,281	)		$	1,752			$	15,840			$	342,067
Net loss			—				—				(61,962	)			—				26				(61,936	)
Defined benefit plans, net of tax			—				—				—				2,175				—				2,175
Translation adjustment			—				—				—				31,107				1,386				32,493
Unrealized gain on derivatives, net of tax			—				—				—				420				—				420
Increase in ownership of subsidiary			—				(1,438	)			—				—				(34	)			(1,472	)
Stock compensation			—				5,182				—				—				—				5,182
Total Stockholders’ Equity at September 30, 2009		$	755			$	1,114,745			$	(849,243	)		$	35,454			$	17,218			$	318,929

Total comprehensive income (loss) and its components are as follows:

		For the Three Months Ended								For the Six Months Ended
		September 30, 2009				September 30, 2008				September 30, 2009				September 30, 2008
		(In thousands)
Net loss		$	(7,921	)		$	(9,902	)		$	(61,936	)		$	(19,653	)
Defined benefit plans			32				(5,413	)			2,175				(5,233	)
Cumulative translation adjustment			11,520				(37,357	)			31,107				(38,575	)
Derivatives qualifying as hedges			(186	)			(1,236	)			420				2,675
Total comprehensive income (loss)		$	3,445			$	(53,908	)		$	(28,234	)		$	(60,786	)

Comprehensive income/loss attributable to noncontrolling interests was not material for the three month and six month periods ended September 30, 2009 and 2008.

(3) ACCOUNTING FOR DERIVATIVES

     The Company accounts for derivative instruments as assets or liabilities, based on measurements of their fair values. The Company does not enter into derivative contracts for trading or speculative purposes. Derivatives are used only to hedge the volatility arising from changes in the fair value of certain assets and liabilities that are subject to market risk, such as interest rates on debt instruments, foreign currency exchange rates, and certain commodities. If a derivative qualifies for hedge accounting, gains or losses in its fair value that offset changes in the fair value of the asset or liability being hedged (“effective” gains or losses) are reported in accumulated other comprehensive income, and subsequently recorded to earnings only as the related variability on the hedged transaction is recorded in earnings. If a derivative does not qualify for hedge accounting, changes in its fair value are reported in earnings immediately upon occurrence. Derivatives qualify for hedge accounting if they are designated as hedging instruments at their inception, and if they are highly effective in achieving fair value changes that offset the fair value changes of the assets or liabilities being hedged. Regardless of a derivative’s accounting qualification, changes in its fair value that are not offset by fair value changes in the asset or liability being hedged are considered ineffective, and are recognized in earnings immediately.

     In February 2008, the Company entered into an interest rate swap agreement to fix the variable component of interest on $200.0 million of its floating rate long-term obligations through February 27, 2011. The rate is fixed at 3.33% per annum through the remainder of the term of the agreement. The interest rate swap is designated as a cash-flow hedging instrument.

     In August 2008, the Company entered into a foreign currency forward contract in the notional amount of $62.8 million to mitigate the effect of foreign currency exchange rate fluctuations of a certain foreign subsidiary’s debt that is denominated in U.S. dollars. The forward contract and the indebtedness mature in May 2012. Because the Company has not designated this contract as a hedging instrument, changes in its fair value are recognized immediately in earnings.

     The following tables set forth information on the presentation of these derivative instruments in the Company’s Condensed Consolidated Financial Statements:

Balance

Fair Value As of

Sheet

September 30, 2009

March 31, 2009

(In thousands)

Asset Derivative:

Foreign Exchange Forward

Other noncurrent assets

n/a

$

4,962

Liability Derivatives:

Foreign Exchange Forward

Other noncurrent

$

551

n/a

Interest Rate Swap

liabilities

6,876

7,461

		Statement of				For the Three Months Ended								For the Six Months Ended
		Operations				September 30, 2009				September 30, 2008				September 30, 2009				September 30, 2008
						(In thousands)
Foreign Currency Forward
Loss (Gain) recorded in Statement of Operations		Other (income) expense, net				$	2,168			$	(2,275	)		$	5,514			$	(2,275	)
Interest Rate Swap
Realized loss recorded in Statement of Operations		Interest expense, net					1,598				523				3,010				658

     Approximately $2.3 million is expected to be reclassified from other comprehensive income (“OCI”) to interest expense during the remainder of fiscal 2010.

(4) INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

Intangible assets consist of:

		Trademarks and				Trademarks and
		Tradenames				Tradenames
		(not subject to				(subject to				Customer
		amortization)				amortization)				relationships				Technology				Total
		(In thousands)
As of September 30, 2009:
Gross Amount		$	63,301			$	14,386			$	119,307			$	31,418			$	228,412
Accumulated Amortization			—				(6,154	)			(27,031	)			(8,711	)			(41,896	)
Net		$	63,301			$	8,232			$	92,276			$	22,707			$	186,516
As of March 31, 2009:
Gross Amount		$	58,134			$	13,223			$	109,690			$	28,544			$	209,591
Accumulated Amortization			—				(5,134	)			(22,569	)			(6,577	)			(34,280	)
Net		$	58,134			$	8,089			$	87,121			$	21,967			$	175,311

Amortization of intangible assets for the first six months of fiscal 2010 and 2009 were $4.4 million and $3.9 million, respectively. Excluding the impact of any future acquisitions (if any), the Company anticipates annual amortization of intangible assets for each of the next five years to be approximately $8.0 million to $9.0 million. Intangible assets have been recorded at the legal entity level and are subject to foreign currency fluctuation.

      Goodwill

     In the fourth quarter of fiscal 2009, the Company purchased shares not previously owned in a majority-owned subsidiary. The purchase price of the additional shares amounted to approximately $4.9 million. Of this amount, approximately $4.2 million could not be attributed to the fair values of specific purchased tangible assets or identifiable intangible assets, and has been recorded as

goodwill. The goodwill has been recorded in the Company’s Transportation Europe and ROW business segment, and will be assessed at least annually for potential impairment.

(5) INVENTORIES

Inventories, valued by the first-in, first-out (“FIFO”) method, consist of:

		September 30, 2009				March 31, 2009
		(In thousands)
Raw materials		$	74,126			$	61,681
Work-in-process			94,835				87,986
Finished goods			266,477				271,148
		$	435,438			$	420,815

(6) OTHER ASSETS

Other assets consist of:

		September 30, 2009				March 31, 2009
		(In thousands)
Deposits (a)		$	19,423			$	9,265
Capitalized software, net			3,351				4,017
Loan to affiliate			1,005				1,005
Retirement plans			3,333				1,341
Financial instruments			—				4,962
Other			5,112				5,066
		$	32,224			$	25,656

(7) DEBT

     At September 30, 2009 and March 31, 2009, short-term borrowings of $8.3 million and $7.0 million, respectively, consisted of borrowings under various operating lines of credit and working capital facilities maintained by certain of the Company’s non-U.S. subsidiaries. Certain of these borrowings are collateralized by receivables, inventories and/or property. These borrowing facilities, which are typically for one-year renewable terms, generally bear interest at current local market rates plus up to one percent per annum. The weighted average interest rate on short-term borrowings was approximately 4.1% and 5.8% at September 30, 2009 and March 31, 2009, respectively.

     Total long-term debt consists of:

		September 30, 2009				March 31, 2009
		(In thousands)
Senior Secured Credit Facility		$	296,383			$	287,966
10.5% Senior Secured Notes due 2013			290,000				290,000
Floating Rate Convertible Senior Subordinated Notes due 2013			60,000				60,000
Other, including capital lease obligations and other loans at interest rates generally ranging up to 9% due in installments through 2015			17,240				13,262
Total			663,623				651,228
Less — current maturities			5,083				5,048
Total Long-Term Debt		$	658,540			$	646,180

Total debt at September 30, 2009 and March 31, 2009 was $671.9 million and $658.2 million, respectively.

(8) INTEREST EXPENSE, NET

     Interest income of $0.3 million and $0.9 million, $0.5 million and $1.7 million is included in interest expense, net for the three months and six months ended September 30, 2009 and 2008, respectively.

(9) OTHER (INCOME) EXPENSE, NET

Other (income) expense, net consist of:

		For the Three Months Ended								For the Six Months Ended
		September 30, 2009				September 30, 2008				September 30, 2009				September 30, 2008
		(In thousands)
Net loss on asset sales / impairments		$	810			$	1,040			$	6,174			$	1,135
Equity loss (income)			5				(1,276	)			40				(1,427	)
Currency remeasurement (gain) loss			(7,596	)			27,690				(16,860	)			25,884
(Gain) loss on revaluation of warrants (a)			(269	)			(9,214	)			202				471
Other			11				(1,548	)			44				(1,548	)
		$	(7,039	)		$	16,692			$	(10,400	)		$	24,515

     The increase in currency remeasurement gain relates primarily to gains on intercompany loans to foreign subsidiaries denominated in Euros and Australian currencies.

(10) EMPLOYEE BENEFITS

     The components of the Company’s net periodic pension and other post-retirement benefit costs are as follows:

		Pension Benefits
		For the Three Months Ended								For the Six Months Ended
		September 30, 2009				September 30, 2008				September 30, 2009				September 30, 2008
						(In thousands)
Components of net periodic benefit cost:
Service cost		$	866			$	1,136			$	1,685			$	2,315
Interest cost			9,254				9,679				18,289				19,561
Expected return on plan assets			(5,911	)			(7,861	)			(11,705	)			(15,845	)
Amortization of:
Prior service cost			3				5				6				11
Actuarial loss (gain)			258				(678	)			520				(1,384	)
Net periodic benefit cost		$	4,470			$	2,281			$	8,795			$	4,658

		Other Post-Retirement Benefits
		For the Three Months Ended								For the Six Months Ended
		September 30, 2009				September 30, 2008				September 30, 2009				September 30, 2008
						(In thousands)
Components of net periodic benefit cost:
Service cost		$	35			$	51			$	68			$	104
Interest cost			354				336				702				674
Amortization of:
Prior service cost			(96	)			(96	)			(192	)			(192	)
Actuarial loss			17				34				34				67
Net periodic benefit cost		$	310			$	325			$	612			$	653

     The estimated fiscal 2010 pension plan contributions are $14.9 million and other post-retirement contributions are $2.0 million. Payments aggregating $8.3 million were made during the six months ended September 30, 2009.

(11) COMMITMENTS AND CONTINGENCIES

Claims Reconciliation

     On April 15, 2002, the “Petition Date”, Exide Technologies, together with certain of its subsidiaries (the “Debtors”), filed voluntary petitions for reorganization under Chapter 11 of the federal bankruptcy laws (“Bankruptcy Code” or “Chapter 11”) in the United States Bankruptcy Court for the District of Delaware (“Bankruptcy Court”). The Debtors continued to operate their businesses and manage their properties as debtors-in-possession throughout the course of the bankruptcy case. The Debtors, along with the Official Committee of Unsecured Creditors, filed a Joint Plan of Reorganization (the “Plan”) with the Bankruptcy Court on February 27, 2004 and, on April 21, 2004, the Bankruptcy Court confirmed the Plan.

     Under the Plan, holders of general unsecured claims were eligible to receive collectively 2.5 million shares of common stock and warrants to purchase up to approximately 6.7 million shares of common stock at $29.84 per share. Approximately 13.4% of such common stock and warrants were initially reserved for distribution for disputed claims. The Official Committee of Unsecured Creditors, in consultation with the Company, established such reserve to provide for a pro rata distribution of new common stock and warrants to holders of disputed claims as they become allowed. As claims are evaluated and processed, the Company will object to some claims or portions thereof, and upward adjustments (to the extent common stock and warrants not previously distributed remain) or downward adjustments to the reserve will be made pending or following adjudication of such objections. Predictions regarding the allowance and classification of claims are difficult to make. With respect to environmental claims in particular, it is difficult to assess the Company’s potential liability due to the large number of other potentially responsible parties. For example, a demand for the total cleanup costs of a landfill used by many entities may be asserted by the government using joint and several liability theories. Although the Company believes that there is a reasonable basis to believe that it will ultimately be responsible for only its proportional share of these remediation costs, there can be no assurance that the Company will prevail on these claims. In addition, the scope of remedial costs, or other environmental injuries, is highly variable and estimating these costs involves complex legal, scientific and technical judgments. Many of the claimants who have filed disputed claims, particularly environmental and personal injury claims, produce little or no proof of fault on which the Company can assess its potential liability.

Such claimants often either fail to specify a determinate amount of damages or provide little or no basis for the alleged damages. In some cases, the Company is still seeking additional information needed for a claims assessment and information that is unknown to the Company at the current time may significantly affect the Company’s assessment regarding the adequacy of the reserve amounts in the future.

     As general unsecured claims have been allowed in the Bankruptcy Court, the Company has distributed approximately one share of common stock per $383.00 in allowed claim amount and approximately one warrant per $153.00 in allowed claim amount. These rates were established based upon the assumption that the common stock and warrants allocated to holders of general unsecured claims on the effective date, including the reserve established for disputed claims, would be fully distributed so that the recovery rates for all allowed unsecured claims would comply with the Plan without the need for any redistribution or supplemental issuance of securities. If the amount of general unsecured claims that is eventually allowed exceeds the amount of claims anticipated in the setting of the reserve, additional common stock and warrants will be issued for the excess claim amounts at the same rates as used for the other general unsecured claims. If this were to occur, additional common stock would also be issued to the holders of pre-petition secured claims to maintain the ratio of their distribution in common stock at nine times the amount of common stock distributed for all unsecured claims.

     No claims were allowed during the fiscal quarter ended September 30, 2009, and therefore no distribution of stock and warrants were made for the period. Based on information available as of October 30, 2009, approximately 11.3% of common stock and warrants reserved for this purpose has been distributed. The Company also continues to resolve certain non-objected claims.

Private Party Lawsuits and other Legal Proceedings

     In 2003, the Company served notices to reject certain executory contracts with EnerSys, including a 1991 Trademark and Trade Name License Agreement (the “Trademark License”), pursuant to which the Company had licensed to EnerSys use of the “Exide” trademark on certain industrial battery products in the United States and 80 foreign countries. EnerSys objected to the rejection of certain of the executory contracts, including the Trademark License. In 2006, the Court granted the Company’s request to reject the contracts, and it ordered a two-year transition period, which has now expired. EnerSys appealed those rulings, and the appeal remains pending. Because the Bankruptcy Court authorized rejection of the Trademark License, as with other executory contracts at issue, EnerSys will have a pre-petition general unsecured claim relating to the alleged damages arising therefrom. The Company reserves the ability to consider payment in cash of some portion of any settlement or ultimate award on EnerSys’ claim of alleged rejection damages.

     In July 2001, Pacific Dunlop Holdings (US), Inc. (“PDH”) and several of its foreign affiliates under the various agreements through which Exide and its affiliates acquired GNB, filed a complaint in the Circuit Court for Cook County, Illinois alleging breach of contract, unjust enrichment and conversion against Exide and three of its foreign affiliates. The plaintiffs maintain they are entitled to approximately $17.0 million in cash assets acquired by the defendants through their acquisition of GNB. In December 2001, the Court denied the defendants’ motion to dismiss the complaint, without prejudice. The defendants filed an answer and counterclaim. In 2002, the Court authorized discovery to proceed as to all parties except the Company. In August 2002, the case was moved to the U.S. Bankruptcy Court for the Northern District of Illinois. In February 2003, the U.S. Bankruptcy Court for the Northern District of Illinois transferred the case to the U.S. Bankruptcy Court in Delaware. In November 2003, the Bankruptcy Court denied PDH’s motion to abstain or remand the case and issued an opinion holding that the Bankruptcy Court had jurisdiction over PDH’s claims and that liability, if any, would lie solely against Exide Technologies and not against any of its foreign affiliates. The Bankruptcy Court denied PDH’s motion to reconsider. In an order dated March 22, 2007, the U.S. District Court for the District of Delaware denied PDH’s appeal in its entirety, affirming the Orders of the Bankruptcy Court. PDH then appealed the matter to the United States Court of Appeals for the Third Circuit. On September 19, 2008, the Third Circuit vacated the prior orders of the Bankruptcy Court, remanding the matter with instructions that the Bankruptcy Court hear evidence before ruling whether Exide (as opposed to its non-debtor affiliates) would be solely liable, if any liability is found at all, under the GNB agreements.

     In December 2001, PDH filed a separate action in the Circuit Court for Cook County, Illinois seeking recovery of approximately $3.1 million for amounts allegedly owed by the Company under various agreements between the parties. The claim arises from letters of credit and other security allegedly provided by PDH for GNB’s performance of certain of GNB’s obligations to third parties that PDH claims the Company was obligated to replace. The Company’s answer contested the amounts claimed by PDH and the Company filed a counterclaim. Although this action has been consolidated with the Cook County suit concerning GNB’s cash assets, the claims relating to this action have been transferred to the U.S. Bankruptcy Court for the District of Delaware and are currently subject to a stay injunction by that court. The Company plans to vigorously defend itself and pursue its counterclaims.

     On July 1, 2005, the Company was informed by the Enforcement Division of the Securities and Exchange Commission (the “SEC”) that it commenced a preliminary inquiry into statements the Company made in fiscal 2005 regarding its ability to comply with fiscal 2005 loan covenants and the going concern modification in the audit report in the Company’s annual report on Form 10-K for fiscal 2005. The SEC noted that the inquiry should not be construed as an indication by the SEC or its staff that any violations

of law have occurred. The Company intends to fully cooperate with the inquiry and continues to do so.

Environmental Matters

     As a result of its multinational manufacturing, distribution and recycling operations, the Company is subject to numerous federal, state, and local environmental, occupational health, and safety laws and regulations, as well as similar laws and regulations in other countries in which the Company operates (collectively, “EH&S laws”).

     The Company is exposed to liabilities under such EH&S laws arising from its past handling, release, storage and disposal of materials now designated as hazardous substances and hazardous wastes. The Company previously has been advised by the U.S. Environmental Protection Agency (“EPA”) or state agencies that it is a “Potentially Responsible Party” under the Comprehensive Environmental Response, Compensation and Liability Act or similar state laws at 100 federally defined Superfund or state equivalent sites. At 45 of these sites, the Company has paid its share of liability. While the Company believes it is probable its liability for most of the remaining sites will be treated as disputed unsecured claims under the Plan, there can be no assurance these matters will be discharged. If the Company’s liability is not discharged at one or more sites, the government may be able to file claims for additional response costs in the future, or to order the Company to perform remedial work at such sites. In addition, the EPA, in the course of negotiating this pre-petition claim, had notified the Company of the possibility of additional clean-up costs associated with Hamburg, Pennsylvania properties of approximately $35.0 million, as described in more detail below. The EPA has provided summaries of past costs and an estimate of future costs that approximate the amounts in its notification; however, the Company disputes certain elements of the claimed past costs, has not received sufficient information supporting the estimated future costs, and is in negotiations with the EPA. To the extent the EPA or other environmental authorities dispute the pre-petition nature of these claims, the Company would intend to resist any such effort to evade the bankruptcy law’s intended result, and believes there are substantial legal defenses to be asserted in that case. However, there can be no assurance that the Company would be successful in challenging any such actions.

     The Company is also involved in the assessment and remediation of various other properties, including certain Company-owned or operated facilities. Such assessment and remedial work is being conducted pursuant to applicable EH&S laws with varying degrees of involvement by appropriate legal authorities. Where probable and reasonably estimable, the costs of such projects have been accrued by the Company, as discussed below. In addition, certain environmental matters concerning the Company are pending in various courts or with certain environmental regulatory agencies with respect to these currently or formerly owned or operating locations. While the ultimate outcome of the foregoing environmental matters is uncertain, after consultation with legal counsel, the Company does not believe the resolution of these matters, individually or in the aggregate, will have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

     On September 6, 2005, the U.S. Court of Appeals for the Third Circuit issued an opinion in U.S. v. General Battery/Exide (No. 03-3515) affirming the district court’s holding that the Company is liable, as a matter of federal common law of successor liability, for lead contamination at certain sites in the vicinity of Hamburg, Pennsylvania. This case involves several of the pre-petition environmental claims of the federal government for which the Company, as part of its Chapter 11 proceeding, had established a reserve of common stock and warrants. The amount of the government claims for these sites at the time reserves were established was approximately $14.0 million. On October 2, 2006, the United States Supreme Court denied review of the appellate decision, leaving Exide subject to a stipulated judgment for approximately $6.5 million, based on the ruling that Exide has successor liability for these EPA cost recovery claims. The judgment will be a general unsecured claim payable in common stock and warrants. Additionally, the EPA has asserted a general unsecured claim for costs related to other Hamburg, Pennsylvania sites. The current amount of the government’s claims for the aforementioned sites (including the stipulated judgment discussed above) is approximately $20.0 million. A reserve of common stock and warrants for the estimated value of all claims, including the aforementioned claims, was established as part of the Plan.

     In October 2004, the EPA, in the course of negotiating a comprehensive settlement of all its environmental claims against the Company, had notified the Company of the possibility of additional clean-up costs associated with other Hamburg, Pennsylvania properties of approximately $35.0 million. The EPA has provided cost summaries for past costs and an estimate of future costs that approximate the amounts in its notification; however, the Company disputes certain elements of the claimed past costs, has not received sufficient information supporting the estimated future costs, and is in negotiations with the EPA.

     As unsecured claims are allowed in the Bankruptcy Court, the Company is required to distribute common stock and warrants to the holders of such claims. To the extent the government is able to prove the Company is responsible for the alleged contamination at the other Hamburg, Pennsylvania properties and substantiate its estimated $35.0 million of additional clean-up costs discussed above, these claims would ultimately result in an inadequate reserve of common stock and warrants to the extent not offset by the reconciliation of all other claims for lower amounts than the aggregate reserve. The Company would still retain the right to perform and pay for such cleanup activities, which would preserve the existing reserved common stock and warrants. Except for the government’s cost recovery claim resolved by the U.S. v. General Battery/Exide case discussed above, it remains the Company’s position that it is not liable for the contamination of this area, and that any liability it may have derives from pre-petition events

which would be administered as a general, unsecured claim, and consequently no provisions have been recorded in connection therewith.

     The Company is conducting an investigation and risk assessment of lead exposure near its Reading recycling plant from past facility emissions and non-Company sources such as lead paint. This is being performed under a consent order with the EPA. The Company has previously removed soil from properties with the highest soil lead content, and is in discussions with the EPA to resolve differences regarding the need for, and extent of, further actions by the Company. Alternatives have been reviewed and appropriate reserve estimates made. At this time, the Company cannot determine from available information the extent of additional cleanup which will occur, or the amount of any cleanup costs that may finally be incurred.

     The Company has established reserves for on-site and off-site environmental remediation costs where such costs are probable and reasonably estimable and believes that such reserves are adequate. As of September 30, 2009 and March 31, 2009, the amount of such reserves on the Company’s Condensed Consolidated Balance Sheets was approximately $32.2 million and $33.8 million, respectively. Because environmental liabilities are not accrued until a liability is determined to be probable and reasonably estimable, not all potential future environmental liabilities have been included in the Company’s environmental reserves and, therefore, additional earnings charges are possible. Also, future findings or changes in estimates could have a material adverse effect on the recorded reserves and cash flows.

     The sites that currently have the largest reserves include the following:

Tampa, Florida

     The Tampa site is a former secondary lead recycling plant, lead oxide production facility, and sheet lead-rolling mill that operated from 1943 to 1989. Under a RCRA Part B Closure Permit and a Consent Decree with the State of Florida, Exide is required to investigate and remediate certain historic environmental impacts to the site. Cost estimates for remediation (closure and post-closure) are expected to range from $12.5 million to $20.5 million depending on final State of Florida requirements. The remediation activities are expected to occur over the course of several years.

Columbus, Georgia

     The Columbus site is a former secondary lead recycling plant that was mothballed in 1999, which is part of a larger facility that includes an operating lead acid battery manufacturing facility. Groundwater remediation activities began in 1988. Costs for supplemental investigations, remediation and site closure are currently estimated at $6.0 million to $9.0 million.

Guarantees

     At September 30, 2009, the Company had outstanding letters of credit with a face value of $48.8 million and surety bonds with a face value of $4.2 million. The majority of the letters of credit and surety bonds have been issued as collateral or financial assurance with respect to certain liabilities the Company has recorded including, but not limited to, environmental remediation obligations and self-insured workers’ compensation reserves. Failure of the Company to satisfy its obligations with respect to the primary obligations secured by the letters of credit or surety bonds could entitle the beneficiary of the related letter of credit or surety bond to demand payments pursuant to such instruments. The letters of credit generally have terms up to one year. Collateral held by the sureties in the form of letters of credit at September 30, 2009, pursuant to the terms of the agreement, totaled approximately $2.2 million.

     Certain of the Company’s European and Asia Pacific subsidiaries have issued bank guarantees as collateral or financial assurance in connection with environmental obligations, income tax claims and customer contract requirements. At September 30, 2009, bank guarantees with a face value of $14.0 million were outstanding.

Sales Returns and Allowances

     The Company provides for an allowance for product returns and/or allowances. Based upon its manufacturing re-work process, the Company believes that the majority of its product returns are not the result of product defects. The Company recognizes the estimated cost of product returns as a reduction of sales in the period in which the related revenue is recognized. The product return estimates are based upon historical trends and claims experience, and include assessment of the anticipated lag between the date of sale and claim/return date.

     Changes in the Company’s sales returns and allowances liability (in thousands):

Balance at March 31, 2009		$	39,721
Accrual for sales returns and allowances provided			16,064
Settlements made (in cash or credit), and currency translation			(15,315	)
Balance at September 30, 2009		$	40,470

(12) INCOME TAXES

     The effective tax rates for the second quarter of fiscal 2010 and 2009 were impacted by the generation of income in tax-paying jurisdictions in certain countries in Europe, the U.S., Asia, and Canada, and the recognition of valuation allowances on tax benefits generated from losses in the United Kingdom, Italy, Spain, France, and Australia. The effective tax rate for the second quarter of fiscal 2010 and 2009, respectively, was also impacted by the recognition of $11.7 million and $23.7 million of valuation allowances on current period tax benefits generated primarily in the United Kingdom, France, Spain, Italy, and Australia. In addition, the effective tax rate for the second quarter of fiscal 2010 was impacted by $0.2 million in warrant revaluation expense, which is fully included for U.S. tax purposes. During the first half of fiscal 2009, the Company established a full valuation reserve of $13.3 million on its net deductible temporary differences and loss carryforwards related to its Australian operations. In addition, the income tax provision for the first half of fiscal 2009 decreased as a result of the removal of $3.1 million in valuation allowances against net deferred tax assets generated from the Company’s Austrian and Mexican operations.

     The significant components of the Company’s effective tax rate are as follows:

		For the Three Months Ended								For the Six Months Ended
		September 30, 2009				September 30, 2008				September 30, 2009				September 30, 2008
		(In thousands)
Federal statutory rate			35.0	%			35.0	%			35.0	%			35.0	%
Change in valuation allowances			1017.0	%			-160.3	%			-69.7	%			392.0	%
Revaluation of warrants			-7.8	%			49.7	%			-0.2	%			2.3	%
Rate differences on foreign subsidiaries			-313.9	%			27.4	%			11.2	%			-50.1	%
Other, net			24.9	%			-4.3	%			-5.5	%			-7.2	%
Effective tax rate			755.2	%			-52.5	%			-29.2	%			372.0	%

     Each quarter, the Company reviews the need to report the future realization of tax benefits of deductible temporary differences or loss carryforwards on its financial statements. All available evidence is considered to determine whether a valuation allowance should be established against these future tax benefits. This review is performed on a jurisdiction by jurisdiction basis.

     The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With limited exceptions, the Company is no longer subject to U.S. federal income tax examinations by tax authorities for years ended before March 31, 2008. With respect to state and local jurisdictions and countries outside of the United States, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax audits for years ended before March 31, 2002. Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest and penalties have been provided for any adjustments that could result from these years.

     The Company’s unrecognized tax benefits increased from $70.5 million to $79.0 million during the second quarter of fiscal 2010 due primarily to the effects of foreign currency translation plus unrecognized tax benefits established during the period. The amount, if recognized, that would affect the Company’s effective tax rate at September 30, 2009 is $38.5 million.

     The Company classifies interest and penalties on uncertain tax benefits as income tax expense. At September 30, 2009 and March 31, 2009, before any tax benefits, the Company had $4.7 million and $4.3 million, respectively, of accrued interest and penalties on unrecognized tax benefits.

     During the next twelve months, the Company does not expect the resolution of any tax audits which could potentially reduce unrecognized tax benefits by a material amount. However, expiration of the statute of limitations for a tax year in which the Company has recorded an uncertain tax benefit will occur in the next twelve months. The removal of this uncertain tax benefit would affect the Company’s effective tax rate by $0.6 million.

(13) RESTRUCTURING

     During the first six months of fiscal 2010, the Company has continued to implement operational changes to streamline and rationalize its structure in an effort to simplify the organization and eliminate redundant and/or unnecessary costs. As part of these restructuring programs, the nature of the positions eliminated range from plant employees and clerical workers to operational and sales management.

     During the six months ended September 30, 2009, the Company recognized restructuring charges of $46.1 million, representing $40.5 million for severance and $5.6 million for related closure costs. These charges represent consolidation efforts in the Transportation America, Transportation Europe and Rest of World (“ROW”), and Industrial Europe and ROW segments for approximately 1,215 positions.

     Summarized restructuring reserve activity:

		Severance Costs				Closure Costs				Total
		(In thousands)
Balance at March 31, 2009		$	37,800			$	4,618			$	42,418
Restructuring Charges			40,499				5,598				46,097
Payments and Currency Translation			(28,759	)			(2,591	)			(31,350	)
Balance at September 30, 2009		$	49,540			$	7,625			$	57,165

     Remaining expenditures principally represent (i) severance and related benefits payable per employee agreements and/or regulatory requirements, (ii) lease commitments for certain closed facilities, branches and offices, as well as leases for excess and permanently idle equipment payable in accordance with contractual terms, and (iii) certain other closure costs including dismantlement and costs associated with removal obligations incurred in connection with the exit of facilities.

(14) LOSS PER SHARE

     The Company computes basic loss per share by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss, after adding back the after-tax amount of interest recognized in the period associated with the Company’s Floating Rate Convertible Senior Subordinated Notes, by diluted weighted average shares outstanding. Potentially dilutive shares include the assumed exercise of stock options and the assumed vesting of restricted stock and stock unit awards (using the treasury stock method) as well as the assumed conversion of the convertible debt, if dilutive (using the if-converted method). Shares which are contingently issuable under the Company’s plan of reorganization have been included as outstanding common shares for purposes of calculating basic loss per share.

     Due to a net loss for the three and six month periods ended September 30, 2009 and September 30, 2008, certain potentially dilutive shares were excluded from the diluted loss per share calculation because their effect would be antidilutive:

		As of
		September 30, 2009				September 30, 2008
		(In thousands)
Shares associated with convertible debt (assumed conversion)			3,697				3,697
Employee stock options			4,040				3,548
Restricted stock awards			895				1,119
Warrants			6,725				6,725
Total shares excluded			15,357				15,089

(15) FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company uses available market information and appropriate methodologies to estimate the fair value of its financial instruments. Considerable judgment is required in interpreting market data to develop these estimates. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Certain of these financial instruments are with major financial institutions and expose the Company to market and credit risks and may at

times be concentrated with certain counterparties or groups of counterparties. The creditworthiness of counterparties is continually reviewed, and full performance is currently anticipated.

     The Company’s cash and cash equivalents, accounts receivable, accounts payable, and short-term borrowings all have carrying amounts that are a reasonable estimate of their fair values. The carrying values and estimated fair values of the Company’s long-term obligations and other financial instruments are as follows:

		September 30, 2009								March 31, 2009
						Estimated Fair								Estimated Fair
		Carrying Value				Value				Carrying Value				Value
						(In thousands)
(Liability) Asset:
Senior Secured Credit Facility		$	(296,383	)		$	(264,473	)		$	(287,966	)		$	(195,817	)
Senior Secured Notes due 2013			(290,000	)			(282,750	)			(290,000	)			(174,000	)
Convertible Senior Subordinated Notes due 2013			(60,000	)			(36,000	)			(60,000	)			(17,475	)
Interest Rate Swap (a)			(6,876	)			(6,876	)			(7,461	)			(7,461	)
Foreign Currency Forward (a)			(551	)			(551	)			4,962				4,962

	•		Level 1 — Observable inputs such as quoted prices in active markets for identical assets and liabilities;
	•		Level 2 — Inputs other than quoted prices in active markets that are observable either directly or indirectly; and
	•		Level 3 — Inputs from valuation techniques in which one or more key value drivers are not observable, and must be based on the reporting entity’s own assumptions.

The following table represents our financial (liabilities) assets that are measured at fair value on a recurring basis, and the basis for that measurement:

						Quoted Price in				Significant
						Active Markets				Other				Significant
		Total				for				Observable				Unobservable
		Fair Value				Identical Assets				Inputs				Inputs
		Measurement				(Level 1)				(Level 2)				(Level 3)
						(In thousands)
September 30, 2009:
Interest rate swap		$	(6,876	)			—			$	(6,876	)			—
Foreign currency forward			(551	)			—				(551	)			—
March 31, 2009:
Interest rate swap		$	(7,461	)			—			$	(7,461	)			—
Foreign currency forward			4,962				—				4,962				—

The fair value of the interest rate swap is based on observable prices as quoted for receiving the variable LIBOR rate, and paying fixed interest rates and, therefore, was classified as Level 2. The fair value of the foreign currency forward was based upon current quoted market prices and is classified as Level 2 based on the nature of the underlying market in which this derivative is traded. For additional discussion of the Company’s derivative instruments and hedging activities, see Note 3.

(16) SEGMENT INFORMATION

     The Company reports its results for four business segments: Transportation Americas, Transportation Europe and ROW, Industrial Energy Americas and Industrial Energy Europe and ROW. The Company is a global producer and recycler of lead-acid batteries, and its four business segments provide a comprehensive range of stored electrical energy products and services for transportation and industrial applications. The Company will continue to evaluate its reporting segments pending future organizational changes that may take place.

     Transportation markets include original-equipment (“OE”) and aftermarket automotive, heavy-duty truck, agricultural and marine applications, and new technologies for hybrid vehicles and automotive applications. Industrial markets include batteries for telecommunications systems, electric utilities, railroads, uninterruptible power supplies (“UPS”), lift trucks and other material handling equipment, and mining and other commercial vehicles.

     The Company’s four reportable segments are determined based upon the nature of the markets served and the geographic regions in which they operate. The Company’s chief operating decision-maker monitors and manages the financial performance of these four business groups.

     Selected financial information concerning the Company’s reportable segments is as follows:

		For the Three Months Ended September 30, 2009
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
		(In thousands)
Net sales		$	224,770			$	182,446			$	56,559			$	168,040			$	—			$	631,815
Gross profit			51,815				29,967				13,062				35,062				—				129,906
Expenses (a)			29,629				25,811				9,948				43,807				19,182				128,377
Income (loss) before reorganization items and income taxes			22,186				4,156				3,114				(8,745	)			(19,182	)			1,529
(a) includes:
Restructuring expenses			769				1,124				110				7,704				724				10,431

		For the Three Months Ended September 30, 2008
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
		(In thousands)
Net sales		$	315,610			$	245,355			$	76,830			$	276,379			$	—			$	914,174
Gross profit			55,741				27,011				22,990				56,142				—				161,884
Expenses (a)			31,987				33,582				10,067				45,511				46,759				167,906
Income (loss) before reorganization items and income taxes			23,754				(6,571	)			12,923				10,631				(46,759	)			(6,022	)
(a) includes:
Restructuring expenses			381				2,304				77				6,741				152				9,655

		For the Six Months Ended September 30, 2009
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
		(In thousands)
Net sales		$	455,566			$	328,893			$	116,493			$	323,717			$	—			$	1,224,669
Gross profit			90,006				48,788				26,322				71,474				—				236,590
Expenses (a)			62,516				68,014				20,595				96,149				36,375				283,649
Income (loss) before reorganization items and income taxes			27,490				(19,226	)			5,727				(24,675	)			(36,375	)			(47,059	)
(a) includes:
Restructuring expenses			4,146				19,868				169				20,857				1,057				46,097

		For the Six Months Ended September 30, 2008
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
		(In thousands)
Net sales		$	621,985			$	521,228			$	166,027			$	576,209			$	—			$	1,885,449
Gross profit			115,187				57,442				46,781				111,954				—				331,364
Expenses (a)			64,741				64,620				20,033				89,537				84,273				323,204
Income (loss) before reorganization items and income taxes			50,446				(7,178	)			26,748				22,417				(84,273	)			8,160
(a) includes:
Restructuring expenses			683				3,005				(3	)			8,038				155				11,878

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion and analysis provide information which management believes is relevant to an assessment and understanding of the Company’s consolidated financial condition and results of operations. The discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto contained in this Report on Form 10-Q.

     Some of the statements contained in the following discussion of the Company’s financial condition and results of operations refer to future expectations or include other “forward-looking” information. Those statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by these statements. The forward-looking information is based on various factors and was derived from numerous assumptions. See “Cautionary Statement for Purposes of the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995,” included in this Report on Form 10-Q for a discussion of factors to be considered when evaluating forward-looking information detailed below. These factors could cause our actual results to differ materially from the forward looking statements contained herein. For a discussion of certain legal contingencies, see Note 11 to the Condensed Consolidated Financial Statements.

Executive Overview

     The Company is a global producer and recycler of lead-acid batteries. The Company’s four business segments, Transportation Americas, Transportation Europe and Rest of World (“ROW”), Industrial Energy Americas, and Industrial Energy Europe and ROW provide a comprehensive range of stored electrical energy products and services for transportation and industrial applications.

     Transportation markets include Original Equipment (“OE”) and aftermarket automotive, heavy-duty truck, agricultural and marine applications, and new technologies for hybrid vehicles and automotive applications. Industrial markets include batteries for telecommunications systems, electric utilities, railroads, uninterruptible power supplies (“UPS”), lift trucks, mining, and other commercial vehicles.

     The Company’s four reportable segments are determined based upon the nature of the markets served and the geographic regions in which they operate. The Company’s chief operating decision-maker monitors and manages the financial performance of these four business groups.

Factors Which Affect the Company’s Financial Performance

     Lead and other Raw Materials. Lead represents approximately 44.3% of the Company’s cost of goods sold. The market price of lead fluctuates. Generally, when lead prices decrease, customers may seek disproportionate price reductions from the Company, and when lead prices increase, customers may resist price increases. Both of these situations may cause customer demand for the Company’s products to be reduced and the Company’s net sales and gross margins to decline. The average price of lead as quoted on the London Metals Exchange (“LME”) has decreased 18% from $2,108 per metric ton for the six months ended September 30, 2008 to $1,721 per metric ton for the six months ended September 30, 2009. At October 30, 2009, the quoted price on the LME was $2,321 per metric ton. To the extent that lead prices continue to be volatile and the Company is unable to maintain existing pricing or pass higher material costs resulting from this volatility to its customers, its financial performance will be adversely impacted.

     Energy Costs. The Company relies on various sources of energy to support its manufacturing and distribution process, principally natural gas at its recycling facilities, electricity in its battery plants, and diesel fuel for distribution of its products. The Company seeks to recoup increased energy costs through price increases or surcharges. To the extent the Company is unable to pass on higher energy costs to its customers, its financial performance will be adversely impacted.

     Competition. The global transportation and industrial energy battery markets are highly competitive. In recent years, competition has continued to intensify and has affected the Company’s ability to pass along increased prices to keep pace with rising production costs. The effects of this competition have been exacerbated by excess capacity in certain of the Company’s markets, and fluctuating lead prices and low-priced Asian imports in certain of the Company’s markets.

     Exchange Rates. The Company is exposed to foreign currency risk in most European countries, principally from fluctuations in the Euro. For the first six months of fiscal 2010, the exchange rate of the Euro to the U.S. Dollar has decreased 8.9% on average to $1.40 compared to $1.53 for the first six months of fiscal 2009. At September 30, 2009, the exchange rate of the Euro to the U.S, Dollar was $1.46 or 10.1% higher as compared to $1.33 at March 31, 2009. Fluctuations in foreign currencies impacted the Company’s results for the periods presented herein. For the first six months ended September 30, 2009, approximately 53.3% of the Company’s net sales were generated in Europe and ROW. Further, approximately 67.4% of the Company’s aggregate accounts receivable and inventory as of September 30, 2009 were held by its European subsidiaries.

     The Company is also exposed, although to a lesser extent, to foreign currency risk in the U.K., Poland, Australia, and various

countries in the Pacific Rim. Fluctuations of foreign exchange rates against the U.S. Dollar can result in variations in the U.S. Dollar value of non-U.S. sales, expenses, assets, and liabilities. In some instances, gains in one currency may be offset by losses in another.

     Markets. The Company is subject to concentrations of customers and sales in a few geographic locations and is dependent on customers in certain industries, including the automotive, communications and data and material handling markets. Economic difficulties experienced in these markets and geographic locations impact the Company’s financial results. OE volumes in the transportation and motive power channels have been and continue to be depressed, reflecting current unfavorable global economic conditions. In addition, capital spending by major customers in the Company’s network power channels continues to be below historic levels.

     Seasonality and Weather. The Company sells a disproportionate share of its transportation aftermarket batteries during the fall and early winter (the Company’s third and a portion of its fourth fiscal quarters). Retailers and distributors buy automotive batteries during these periods so they will have sufficient inventory for cold weather periods. The impact of seasonality on sales has the effect of increasing the Company’s working capital requirements and also makes the Company more sensitive to fluctuations in the availability of liquidity.

     Unusually cold winters or hot summers may accelerate battery failure and increase demand for transportation replacement batteries. Mild winters and cool summers may have the opposite effect. As a result, if the Company’s sales are reduced by an unusually warm winter or cool summer, it is not possible for the Company to recover these sales in later periods. Further, if the Company’s sales are adversely affected by the weather, the Company cannot make offsetting cost reductions to protect its liquidity and gross margins in the short-term because a large portion of the Company’s manufacturing and distribution costs are fixed.

     Interest Rates. The Company is exposed to fluctuations in interest rates on its variable rate debt, portions of which were hedged during the six months ended September 30, 2009. See Notes 3 and 7 to the Condensed Consolidated Financial Statements in this Report on Form 10-Q.

Second quarter of Fiscal 2010 Highlights and Outlook

     The Company’s reported results continue to be impacted in fiscal 2010 by unfavorable global economic conditions, as well as fluctuations in the cost of materials and energy used in the manufacturing and distribution of the Company’s products.

     In the Americas, the Company obtains the vast majority of its lead requirements from five Company-owned and operated secondary lead recycling plants. These facilities reclaim lead by recycling spent lead-acid batteries, which are obtained for recycling from the Company’s customers and outside spent-battery collectors. Recycling helps the Company in the Americas control the cost of its principal raw material as compared to purchasing lead at prevailing market prices. Similar to the fluctuation in lead prices, however, the price of spent batteries has also fluctuated. After a long period of rising prices, the average price of spent batteries decreased approximately 2.1% in the second quarter of fiscal 2010 versus the second quarter of fiscal 2009. The Company continues to take pricing actions and is attempting to secure higher captive spent battery return rates to help mitigate the risks associated with this price volatility.

     In Europe, the Company’s lead requirements are mainly fulfilled by third-party suppliers. Because of the Company’s exposure to the historically volatile lead market prices in Europe, the Company has implemented several measures to offset changes in lead prices, including selective pricing actions and lead price escalators. The Company has automatic lead price escalators with virtually all OEM customers. The Company currently obtains a small portion of its lead requirements from recycling in its European facilities.

     The Company expects that volatility in lead and other commodity costs, which affect all business segments, will continue to affect the Company’s financial performance. However, selective pricing actions, lead price escalators in certain contracts and fuel surcharges are intended to help mitigate these risks. The implementation of selective pricing actions and price escalators generally lag the rise in market prices of lead and other commodities. Both lead price escalators and fuel surcharges may not be accepted by our customers, and if the price of lead decreases, our customers may seek disproportionate price reductions.

     In addition to managing the impact of fluctuation in lead and other commodity costs on the Company’s results, the key elements of the Company’s underlying business plans and continued strategies are:

(i) Successful execution and completion of the Company’s restructuring plan and organizational realignment of divisional and corporate functions intended to result in further targeted headcount reductions.

(ii) Actions designed to improve the Company’s liquidity and operating cash flow through working capital reduction plans, the sale of non-strategic assets and businesses, streamlining cash management processes, implementing plans to minimize the cash costs of the Company’s restructuring initiatives, and closely managing capital expenditures.

(iii) Continued factory and distribution productivity improvements through its established EXCELL program and Take Charge! initiative.

(iv) Continued review and rationalization of the various brand offerings of products in its markets to gain efficiencies in manufacturing and distribution, and better leverage the Company’s marketing spending.

(v) Increased research and development and engineering investments designed to develop enhanced lead-acid products as well as products utilizing alternative chemistries. In this regard, the Company continues to identify government funding opportunities to support near and long-term technological improvements in energy storage applications.

(vi) Gain further product and process efficiencies with implementation of the Global Procurement structure. This initiative focuses on leveraging existing relationships and creating an infrastructure for global search for products and components.

Critical Accounting Policies and Estimates

     The Company’s discussion and analysis of its financial condition and results of operations is based upon the Company’s Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates based on its historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     The Company believes that the critical accounting policies and estimates disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009 affect the preparation of its Condensed Consolidated Financial Statements. The reader of this report should refer to Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009 for further information.

Results of Operations

Three months ended September 30, 2009 compared with three months ended September 30, 2008

Net Sales

     Net sales were $631.8 million for the second quarter of fiscal 2010 versus $914.2 million in the second quarter of fiscal 2009. Foreign currency translation (primarily the Euro against the U.S. dollar) unfavorably impacted net sales in the second quarter of fiscal 2010 by approximately $16.2 million. Excluding the foreign currency translation impact, net sales decreased by approximately $266.2 million, or 29.1% primarily the result of lower unit sales and $57.4 million in lead related price reductions.

										FAVORABLE / (UNFAVORABLE)
		For the Three Months Ended												Currency				Non-Currency
		September 30, 2009				September 30, 2008				TOTAL				Related				Related
		(In thousands)
Transportation
Americas		$	224,770			$	315,610			$	(90,840	)		$	—			$	(90,840	)
Europe & ROW			182,446				245,355				(62,909	)			(8,142	)			(54,767	)
Industrial Energy
Americas			56,559				76,830				(20,271	)			—				(20,271	)
Europe & ROW			168,040				276,379				(108,339	)			(8,028	)			(100,311	)
TOTAL		$	631,815			$	914,174			$	(282,359	)		$	(16,170	)		$	(266,189	)

     Transportation Americas net sales were $224.8 million for the second quarter of fiscal 2010 versus $315.6 million for the second quarter of fiscal 2009. Net sales decreased by $90.8 million or 28.8% due to a decline in aftermarket and OEM unit sales as well as a $10.5 million unfavorable impact caused by the lower average price of lead. Lower unit sales in the current quarter included the transition of two customers (NAPA and CSK) to an alternative supplier. Third-party lead sales for the fiscal 2010 second quarter were approximately $3.6 million higher than such sales during the fiscal 2009 second quarter.

     Transportation Europe and ROW net sales were $182.5 million for the second quarter of fiscal 2010 versus $245.4 million for the second quarter of fiscal 2009. Net sales, excluding an unfavorable impact of $8.1 million in foreign currency translation, decreased by $54.8 million or 22.3% mainly due to lower unit volumes in the aftermarket and OEM channels, as well as $30.4 million in reduced pricing related to the decrease in the market price of lead. Unit sales in the European aftermarket channel, however, increased in the 2010 fiscal second quarter by 5.1% compared to such sales in the comparable 2009 fiscal period.

     Industrial Energy Americas net sales were $56.6 million for the second quarter of fiscal 2010 versus $76.8 million for the second quarter of fiscal 2009. Net sales decreased by $20.3 million or 26.4% due to lower unit sales in the motive power and network power markets as well as a $7.6 million unfavorable pricing due to the lower average price of lead.

     Industrial Energy Europe and ROW net sales were $168.0 million for the second quarter of fiscal 2010 versus $276.4 million for the second quarter of fiscal 2009. Net sales, excluding an unfavorable foreign currency translation impact of $8.0 million, decreased $100.3 million or 36.3% due to lower unit sales in the network power and motive power markets as well as an $8.9 million unfavorable lead related pricing.

     Gross Profit

     Gross profit was $129.9 million in the second quarter of fiscal 2010 versus $161.9 million in the second quarter of fiscal 2009. Gross margin increased 2.9% to 20.6% from 17.7% in the second quarter of fiscal 2009. Gross profit in each of the Company’s business segments was impacted by lower unit sales, partially offset by improved manufacturing efficiencies. Foreign currency translation unfavorably impacted gross profit in the second quarter of fiscal 2010 by $2.7 million.

		For the Three Months Ended
		September 30, 2009								September 30, 2008								FAVORABLE / (UNFAVORABLE)
						Percent of								Percent of								Currency				Non-Currency
		TOTAL				Net Sales				TOTAL				Net Sales				TOTAL				Related				Related
		(In thousands)
Transportation
Americas		$	51,815				23.1	%		$	55,741				17.7	%		$	(3,926	)		$	—			$	(3,926	)
Europe & ROW			29,967				16.4	%			27,011				11.0	%			2,956				(1,242	)			4,198
Industrial Energy
Americas			13,062				23.1	%			22,990				29.9	%			(9,928	)			—				(9,928	)
Europe & ROW			35,062				20.9	%			56,142				20.3	%			(21,080	)			(1,450	)			(19,630	)
TOTAL		$	129,906				20.6	%		$	161,884				17.7	%		$	(31,978	)		$	(2,692	)		$	(29,286	)

     Transportation Americas gross profit was $51.8 million or 23.1% of net sales in the second quarter of fiscal 2010 versus $55.7 million or 17.7% of net sales in the second quarter of fiscal 2009. The decrease in gross profit is primarily due to lower unit sales, partially offset by improved plant and distribution efficiencies. The increase in gross margin percentage also reflects the benefits of restructuring initiatives taken in the first quarter of fiscal 2010.

     Transportation Europe and ROW gross profit was $30.0 million or 16.4% of net sales in the second quarter of fiscal 2010 versus $27.0 million or 11.0% of net sales in the second quarter of fiscal 2009. Foreign currency translation unfavorably impacted gross profit during the second quarter of fiscal 2010 by approximately $1.2 million. The remaining increase in gross profit was primarily due to benefits realized by the closure of the Auxerre, France battery plant and savings realized in all facilities from the Take Charge! initiative. These savings were partially offset by lower unit sales, principally in the OEM channels.

     Industrial Energy Americas gross profit was $13.1 million or 23.1% of net sales in the second quarter of fiscal 2010 versus $23.0 million or 29.9% of net sales in the second quarter of fiscal 2009. The decrease in gross profit was primarily due to lower unit sales in both the network power and motive power markets.

     Industrial Energy Europe and ROW gross profit was $35.1 million or 20.9% of net sales in the second quarter of fiscal 2010 versus $56.1 million or 20.3% of net sales in the second quarter of fiscal 2009. Gross profit, excluding an unfavorable foreign currency translation impact of $1.5 million, decreased $19.6 million primarily due to lower unit sales in both the network power and motive power markets, partially offset by improved plant and distribution efficiencies. The closure of the Company’s battery facility in the U.K. began to favorably impact results late in the quarter.

     Expenses

Total expenses were $128.3 million in the second quarter of fiscal 2010 versus $167.9 million in the second quarter of fiscal 2009, and were impacted by the following items:

	•		Selling, marketing, and advertising expenses decreased $15.9 million, to $63.8 million in the second quarter of fiscal 2010 from $79.7 million in the second quarter of fiscal 2009 due in part to a favorable foreign currency translation of $3.0 million. Excluding the foreign currency translation impact, the expenses decreased by $12.9 million primarily due to decreases in sales commissions and other spending controls.
	•		General and administrative expenses increased $2.9 million, to $46.4 million in the second quarter of fiscal 2010 from $43.5 million in the second quarter of fiscal 2009. The increase included a favorable foreign currency translation impact of $2.1 million. Excluding the foreign currency translation impact, the expenses in the second quarter of fiscal 2010 increased by $5.0 million primarily due to increases in engineering spending and non-cash stock compensation costs, partially offset by decreases in discretionary expenses.
	•		Restructuring expenses increased $0.7 million to $10.4 million in the second quarter of fiscal 2010 from $9.7 million in the second quarter of fiscal 2009. This increase primarily related to costs associated with headcount reductions in certain manufacturing facilities, principally the Over Hulton, U.K. industrial energy battery plant closure.
	•		Other (income) expenses were ($7.0) million in the second quarter of fiscal 2010 versus $16.7 million in the second quarter of fiscal 2009. The net change was primarily driven by a currency remeasurement gain of $7.5 million in the current period compared with a $26.8 million loss in the prior year, partially offset by a $8.9 million lower gain on revaluation of warrants.
	•		Interest expense decreased $3.6 million, to $14.8 million in the second quarter of fiscal 2010 from $18.4 million in the second quarter of fiscal 2009 primarily due to the favorable impact of lower borrowings and interest rates on borrowings under the Company’s Credit Agreement.