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):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     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 the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of October 29, 2010, 76,761,189 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, 2010 AND 2009			3
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2010 AND MARCH 31, 2010			4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2010 AND 2009			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			32
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 [REMOVED AND RESERVED]			34
Item 5. OTHER INFORMATION			34
Item 6. EXHIBITS			34
SIGNATURES			35
EX-10.1
EX-10.2
EX-10.3
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, 2010				September 30, 2009				September 30, 2010				September 30, 2009
NET SALES		$	668,008			$	631,815			$	1,312,674			$	1,224,669
COST OF SALES			531,280				501,909				1,055,580				988,079
Gross profit			136,728				129,906				257,094				236,590
EXPENSES:
Selling, marketing and advertising			61,188				63,801				120,707				129,119
General and administrative			44,016				46,367				86,161				89,297
Restructuring			5,196				10,431				12,090				46,097
Other (income) expense, net			(9,775	)			(7,039	)			1,220				(10,400	)
Interest expense, net			15,161				14,817				30,144				29,536
			115,786				128,377				250,322				283,649
Income (loss) before reorganization items and income taxes			20,942				1,529				6,772				(47,059	)
REORGANIZATON ITEMS, NET			865				320				1,502				875
INCOME TAX PROVISION (BENEFIT)			1,988				9,130				(3,813	)			14,002
Net income (loss)			18,089				(7,921	)			9,083				(61,936	)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS			132				68				170				26
Net income (loss) attributable to Exide Technologies		$	17,957			$	(7,989	)		$	8,913			$	(61,962	)
INCOME (LOSS) PER SHARE
Basic		$	0.23			$	(0.11	)		$	0.12			$	(0.82	)
Diluted			0.22				(0.11	)			0.11				(0.82	)
WEIGHTED AVERAGE SHARES
Basic			76,492				75,880				76,416				75,848
Diluted			80,603				75,880				80,634				75,848

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, 2010				March 31, 2010
		(In thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	77,380			$	89,558
Receivables, net of allowance for doubtful accounts of $30,704 and $31,274			451,665				488,942
Inventories			472,214				418,396
Prepaid expenses and other			18,343				16,599
Deferred financing costs, net			4,963				4,944
Deferred income taxes			27,658				24,386
Total current assets			1,052,223				1,042,825
Property, plant and equipment, net			598,872				603,160
Other assets:
Goodwill and intangibles			177,490				180,428
Investments in affiliates			2,060				2,156
Deferred financing costs, net			8,218				7,316
Deferred income taxes			96,774				85,613
Other			31,497				34,728
			316,039				310,241
Total assets		$	1,967,134			$	1,956,226
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings		$	8,127			$	7,682
Current maturities of long-term debt			4,940				5,241
Accounts payable			342,071				333,532
Accrued expenses			249,890				267,374
Total current liabilities			605,028				613,829
Long-term debt			639,227				646,604
Noncurrent retirement obligations			222,736				221,248
Deferred income tax liability			28,392				23,485
Other noncurrent liabilities			107,991				103,022
Total liabilities			1,603,374				1,608,188
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, 76,761 and 75,601 shares issued and outstanding			768				756
Additional paid-in capital			1,121,673				1,119,959
Accumulated deficit			(790,182	)			(799,095	)
Accumulated other comprehensive income			16,801				10,714
Total stockholders’ equity attributable to Exide Technologies			349,060				332,334
Noncontrolling interests			14,700				15,704
Total stockholders’ equity			363,760				348,038
Total liabilities and stockholders’ equity		$	1,967,134			$	1,956,226

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, 2010				September 30, 2009
Cash Flows From Operating Activities:
Net Income (loss)		$	9,083			$	(61,936	)
Adjustments to reconcile net loss to net cash provided by operating activities—
Depreciation and amortization			41,586				45,501
Unrealized (gain) loss on warrants			(168	)			202
Net loss on asset sales / impairments			1,353				6,174
Deferred income taxes			(8,815	)			5,898
Provision for doubtful accounts			200				3,188
Non-cash stock compensation			3,259				5,182
Reorganization items, net			1,502				875
Amortization of deferred financing costs			2,433				2,490
Currency remeasurement loss (gain)			226				(16,860	)
Changes in assets and liabilities —
Receivables			39,630				52,910
Inventories			(48,504	)			16,180
Prepaid expenses and other			(1,528	)			720
Payables			3,131				18,942
Accrued expenses			(22,113	)			(785	)
Noncurrent liabilities			2,914				(6,347	)
Other, net			1,693				(8,121	)
Net cash provided by operating activities			25,882				64,213
Cash Flows From Investing Activities:
Capital expenditures			(30,592	)			(35,910	)
Proceeds from sales of assets, net			1,301				(51	)
Net cash used in investing activities			(29,291	)			(35,961	)
Cash Flows From Financing Activities:
Increase in short-term borrowings			894				177
Decrease in borrowings under Senior Secured Credit Facility			(7,591	)			(1,501	)
(Decrease) increase in other debt			(809	)			8,214
Common stock issuance, financing costs, and other			249				—
Acquisition of noncontrolling interest in subsidiary			(3,395	)			(1,338	)
Net cash (used in) provided by financing activities			(10,652	)			5,552
Effect of Exchange Rate Changes on Cash and Cash Equivalents			1,883				5,851
Net (Decrease) Increase In Cash and Cash Equivalents			(12,178	)			39,655
Cash and Cash Equivalents, Beginning of Period			89,558				69,505
Cash and Cash Equivalents, End of Period		$	77,380			$	109,160
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period -
Interest		$	23,369			$	23,384
Income taxes (net of refunds)		$	1,155			$	(603	)

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
(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 in the United States (“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, 2010 for further information. Unless otherwise indicated or unless the context otherwise requires, references to “fiscal year” refer to the period ended March 31 of that year (e.g., “fiscal 2010” refers to the period beginning April 1, 2009 and ending March 31, 2010).

     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, financial position, and cash flows for the periods presented. This includes accounting and disclosures related to any subsequent events occurring from the balance sheet date through the date that the financial statements were issued.

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

     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)
Balance at April 1, 2010		$	756			$	1,119,959			$	(799,095	)		$	10,714			$	15,704			$	348,038
Net Income			—				—				8,913				—				170				9,083
Defined benefit plans, net of tax of $32			—				—				—				132				—				132
Translation adjustment			—				—				—				4,250				765				5,015
Net recognition of unrealized loss on derivatives, net of tax of $606			—				—				—				1,705				—				1,705
Increase in ownership of subsidiary			—				(1,782	)			—				—				(1,939	)			(3,721	)
Common stock issuance			12				237				—				—				—				249
Stock compensation			—				3,259				—				—				—				3,259
Balance at September 30, 2010		$	768			$	1,121,673			$	(790,182	)		$	16,801			$	14,700			$	363,760

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

		For the Three Months Ended								For the Six Months Ended
		September 30, 2010				September 30, 2009				September 30, 2010				September 30, 2009
		(In thousands)
Net income (loss)		$	18,089			$	(7,921	)		$	9,083			$	(61,936	)
Defined benefit plans			(348	)			32				132				2,175
Cumulative translation adjustment			24,261				11,997				5,015				32,493
Derivatives qualifying as hedges			778				(186	)			1,705				420
Total comprehensive income (loss)		$	42,780			$	3,922			$	15,935			$	(26,848	)

(3) ACCOUNTING FOR DERIVATIVES

     The Company uses derivative contracts 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. The Company does not enter into derivative contracts for trading or speculative purposes.

     The Company recognizes outstanding derivative instruments as assets or liabilities, based on measurements of their fair values. 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, and the classification of cash flows from these instruments is consistent with that of the transactions being hedged. 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 designation, 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 3.3% per annum through the remainder of the agreement. The interest rate swap is designated as a cash-flow hedging instrument.

     The Company also enters into foreign currency forward contracts for various time periods ranging from one month to several years. The Company uses these contracts to mitigate the effect of its exposure to foreign currency remeasurement gains and losses on selected transactions that will be settled in a currency other than the functional currency of the transacting entity. Included in these instruments is a contract in the notional amount of $60.0 million to mitigate the effect of exchange rate fluctuations of a certain foreign subsidiary’s debt that is denominated in U.S. dollars, and a contract in the notional amount of approximately $58.2 million to mitigate similar foreign exchange risk on amounts owed to the Company by a foreign subsidiary that is denominated in Euros. Certain of these contracts have been designated as fair value hedging instruments. Whether or not specifically designated as a fair value hedging instrument, changes in the fair value of these currency forward contracts are recognized immediately in earnings.

     The Company also periodically enters into short-term swap contracts for certain commodities to offset fluctuations in the price of those commodities. Because the Company has not designated these short-term contracts as hedging instruments, changes in their fair values are also 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 Sheet				Fair Value As of
		Location				September 30, 2010				March 31, 2010
						(In thousands)
Asset Derivatives:
Foreign Exchange Forward		Current assets				$	69			$	—
Foreign Exchange Forward		Other noncurrent
		assets					—				4,034
Commodity Swap		Current assets					321				665
Liability Derivatives:
Foreign Exchange Forward		Current liabilities				$	4,181			$	270
Foreign Exchange Forward		Other noncurrent
		liabilities					3,748				—
Interest Rate Swap		Current liabilities					2,837				5,350

		Statement of		For the Three Months Ended								For the Six Months Ended
		Operations Location		September 30, 2010				September 30, 2009				September 30, 2010				September 30, 2009
				(In thousands)								(In thousands)
Foreign Exchange
Forwards		Other (income)
Loss (Gain)		expense, net		$	12,922			$	2,168			$	(2,824	)		$	5,514
Commodity Swap
Gain		Cost of goods sold			(185	)			—				(78	)			—
Interest Rate Swap
Loss		Interest expense, net			1,469				1,598				2,898				3,010

(4) INTANGIBLE ASSETS AND GOODWILL

     Goodwill and intangible assets consist of:

						Trademarks and				Trademarks and
		Goodwill				Tradenames				Tradenames
		(not subject to				(not subject to				(subject to				Customer
		amortization)				amortization)				amortization)				Relationships				Technology				Total
		(In thousands)
As of September 30, 2010
Gross Amount		$	4,566			$	61,626			$	14,003			$	115,814			$	30,902			$	226,911
Accumulated Amortization			—				—				(7,096	)			(30,827	)			(11,498	)			(49,421	)
Net		$	4,566			$	61,626			$	6,907			$	84,987			$	19,404			$	177,490
As of March 31, 2010
Gross Amount		$	4,538			$	61,110			$	13,886			$	115,175			$	30,742			$	225,451
Accumulated Amortization			—				—				(6,489	)			(28,517	)			(10,017	)			(45,023	)
Net		$	4,538			$	61,110			$	7,397			$	86,658			$	20,725			$	180,428

     Amortization of intangible assets for the first six months of fiscal 2011 and 2010 were $4.3 million and $4.4 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.

(5) INVENTORIES

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

		September 30, 2010				March 31, 2010
		(In thousands)
Raw materials		$	90,008			$	73,337
Work-in-process			120,724				85,838
Finished goods			261,482				259,221
		$	472,214			$	418,396

(6) OTHER ASSETS

		September 30, 2010				March 31, 2010
		(In thousands)
Deposits (a)		$	17,720			$	18,981
Capitalized software, net			3,362				4,402
Long-term trade receivables			1,005				1,005
Retirement plans			5,050				1,958
Financial instruments			—				4,034
Other			4,360				4,348
		$	31,497			$	34,728

(7) DEBT

     At September 30, 2010 and March 31, 2010, short-term borrowings of $8.1 million and $7.7 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 4.7% and 4.5% at September 30, 2010 and March 31, 2010, respectively.

     Total long-term debt consists of:

		September 30, 2010				March 31, 2010
		(In thousands)
Senior Secured Credit Facility maturing 2012		$	279,712			$	286,661
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 11.0% due in installments through 2015			14,455				15,184
Total			644,167				651,845
Less-current maturities			4,940				5,241
Total Long-Term Debt		$	639,227			$	646,604

Total debt at September 30, 2010 and March 31, 2010 was $652.3 million and $659.5 million, respectively.

(8) INTEREST EXPENSE, NET

     Interest income of $0.1 million and $0.3 million, $0.3 million and $0.5 million is included in interest expense, net for the three months and six months ended September 30, 2010 and 2009, respectively.

(9) OTHER (INCOME) EXPENSE, NET

Other (income) expense, net consist of:

		For the Three Months Ended								For the Six Months Ended
		September 30, 2010				September 30, 2009				September 30, 2010				September 30, 2009
						(In thousands)
Net loss on asset sales / impairments		$	42			$	810			$	1,353			$	6,174
Equity (income) loss			(220	)			5				(190	)			40
Currency remeasurement (gain) loss (a)			(9,530	)			(7,596	)			226				(16,860	)
(Gain) loss on revaluation of warrants (b)			(67	)			(269	)			(168	)			202
Other			—				11				(1	)			44
		$	(9,775	)		$	(7,039	)		$	1,220			$	(10,400	)

(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, 2010				September 30, 2009				September 30, 2010				September 30, 2009
						(In thousands)
Components of net periodic benefit cost:
Service cost		$	796			$	866			$	1,577			$	1,685
Interest cost			8,297				9,254				16,499				18,289
Expected return on plan assets			(7,200	)			(5,911	)			(14,319	)			(11,705	)
Amortization of:
Prior service cost			2				3				5				6
Actuarial loss			265				258				530				520
Net periodic benefit cost		$	2,160			$	4,470			$	4,292			$	8,795

		Other Post-Retirement Benefits
		For the Three Months Ended								For the Six Months Ended
		September 30, 2010				September 30, 2009				September 30, 2010				September 30, 2009
						(In thousands)
Components of net periodic benefit cost:
Service cost		$	45			$	35			$	90			$	68
Interest cost			253				354				507				702
Amortization of:
Prior service cost			(122	)			(96	)			(245	)			(192	)
Actuarial loss			27				17				55				34
Net periodic benefit cost		$	203			$	310			$	407			$	612

     The estimated fiscal 2011 pension plan contributions are $19.2 million and other post-retirement contributions are $1.9 million. Payments aggregating $7.6 million were made during the six months ended September 30, 2010.

(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.

     Based on information available as of October 29, 2010, approximately 11.4% 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, which the Company contends are executory, 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 those contracts, including the Trademark License. In 2006, the Bankruptcy Court granted the Company’s request to reject certain of the contracts, including the Trademark License. EnerSys appealed those rulings. On June 1, 2010, the Third Circuit Court of Appeals reversed the Bankruptcy Court ruling, and remanded to the lower courts, holding that certain of the contracts, including the Trademark License, were not executory contracts and, therefore, were not subject to rejection. On August 27, 2010, acting on the Third Circuit’s mandate, the Bankruptcy Court vacated its prior orders and denied the Company’s motion to reject the contracts on the grounds that the agreements are not executory. On September 20, 2010, the Company filed a complaint in the Bankruptcy Court seeking a declaratory judgment that EnerSys does not have enforceable rights under the Trademark License under Bankruptcy Code provisions which the Company believes are relevant to non-executory contracts. EnerSys has filed a motion to dismiss that complaint, and briefing on the motion to dismiss is ongoing. Additionally, on September 27, 2010, the Company filed a Petition for Certiorari, requesting that the U.S. Supreme Court issue a writ of certiorari to the Third Circuit Court of Appeals to review that court’s judgment. That Petition for Certiorari remains pending.

     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.

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 or may be a “Potentially Responsible Party” under the Comprehensive Environmental Response, Compensation and Liability Act or similar state laws regarding 104 federally defined Superfund or state equivalent sites. At 45 of these sites, the Company has paid or settled its share of liability. While the Company believes it is probable it has no liability or its liability for many of the remaining sites will be treated as disputed unsecured claims under the Plan, there can be no assurance these matters will be determined in the Company’s favor. 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 is expected to 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 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, 2010 and March 31, 2010, the amount of such reserves on the Company’s Condensed Consolidated Balance Sheets was approximately $31.0 million and $31.8 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 taken out of service in 1999, but remains 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, 2010, the Company had outstanding letters of credit with a face value of $53.6 million and surety bonds with a face value of $2.3 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, 2010, 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, 2010, bank guarantees with an aggregate face value of $16.2 million were outstanding.

Sales Returns and Allowances

     The Company provides for an allowance for product returns and/or allowances. Based upon product examination in the 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) are as follows:

Balance at March 31, 2010		$	36,257
Accrual for sales returns and allowances			20,438
Settlements made (in cash or credit) and currency translation			(18,359	)
Balance at September 30, 2010		$	38,336

(12) INCOME TAXES

     The effective tax rate for the second quarter of fiscal year 2011 and fiscal year 2010 is (72.4%) and (29.2%) respectively. The effective tax rate for the second quarter of fiscal 2011 was 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, Spain, and France. The effective tax rate for the second quarter of fiscal 2010 was additionally impacted by the recognition of valuation allowances in Australia and Italy. The Company released its full valuation allowance in second quarter fiscal 2011 recorded in Australia and Italy after determining that it was more likely than not that the Company would realize all deductible temporary differences and carryforwards in the foreseeable future.

     The effective tax rate for fiscal 2011 year-to-date was primarily affected by the following discrete items: The release of a valuation allowance in Australia and Italy of ($9.0) million; the benefit through a Polish adjustment to tax basis in intangibles of ($4.2) million; and the release of a liability for uncertain tax positions in Australia of ($0.9) million.

     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 or previously established valuation allowances should be released. This review is performed on a jurisdiction by jurisdiction basis. As global market conditions and the Company’s financial results in certain jurisdictions improve, the continued release of related valuation allowances may occur.

     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, 2004. 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 $52.0 million to $53.3 million during the first six months of fiscal 2011 due primarily to the effects of foreign currency translation plus unrecognized tax benefits established during the period less unrecognized tax benefits released during the period through tax settlements. The amount, if recognized, that would affect the Company’s effective tax rate at September 30, 2010 is $21.1 million.

     The Company classifies interest and penalties on uncertain tax benefits as income tax expense. At September 30, 2010 and March 31, 2010, before any tax benefits, the Company had $3.7 million and $3.9 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 forecasted annual effective tax rate by $0.9 million.

(13) RESTRUCTURING

     During the first six months of fiscal 2011, 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, 2010, the Company recognized restructuring charges of $12.1 million, representing $9.4 million for severance and $2.7 million for related closure costs. These charges represent consolidation efforts in the Transportation Americas, Transportation Europe and Rest of World (“ROW”), and Industrial Europe and ROW segments for approximately 206 positions.

     Summarized restructuring reserve activity:

		Severance Costs				Closure Costs				Total
						(In thousands)
Balance at March 31, 2010		$	19,483			$	7,095			$	26,578
Restructuring Charges			9,424				2,666				12,090
Payments and Currency Translation			(17,106	)			(6,575	)			(23,681	)
Balance at September 30, 2010		$	11,801			$	3,186			$	14,987

     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) EARNINGS (LOSS) PER SHARE

     The Company computes basic earnings (loss) per share by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net earnings (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. For the three and six months ended September 30, 2010, market rates were below the level at which interest payments for these notes are required.

     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 earnings (loss) per share. Basic and diluted earnings (loss) per share for the three and six months ended September 30, 2010 and 2009 are summarized as follows:

		For the Three Months Ended								For the Six Months Ended
		September 30, 2010				September 30, 2009				September 30, 2010				September 30, 2009
						(In thousands, except per share amounts)
Net income (loss) attributable to Exide Technologies		$	17,957			$	(7,989	)		$	8,913			$	(61,692	)
Basic weighted average shares outstanding			76,492				75,880				76,416				75,848
Effect of dilutive securities:
Floating Rate Convertible Senior Subordinated Notes			3,697				—				3,697				—
Employee stock options			350				—				393				—
Employee restricted stock awards (non-vested)			64				—				128				—
			4,111				—				4,218				—
Diluted weighted average shares outstanding			80,603				75,880				80,634				75,848
Basic earnings (loss) per share:		$	0.23			$	(0.11	)		$	0.12			$	(0.82	)
Diluted earnings (loss) per share:		$	0.22			$	(0.11	)		$	0.11			$	(0.82	)

     For the three and six months ended September 30, 2010, 2,195,053 and 2,248,524 stock options, respectively, were excluded from the diluted earnings per share calculation because their exercise prices were greater than the average market price of the related common stock for the periods, and their inclusion would be antidilutive. The remaining options were included in the treasury stock method calculation, and the resulting incremental shares were included in the calculation of diluted earnings per share. In addition, 6,725,444 warrants were outstanding for both periods, but were all excluded from the diluted earnings per share

calculation because their exercise prices were greater than the market price of the related common stock for the period, and their inclusion would also be antidilutive. Due to a net loss for the three and six month periods ended September 30, 2009, certain potentially dilutive shares were excluded from the diluted loss per share calculation for those periods because their effect would be antidilutive:

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

(15) FAIR VALUE MEASUREMENTS

     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, 2010								March 31, 2010
						Estimated Fair								Estimated Fair
		Carrying Value				Value				Carrying Value				Value
						(In thousands)
(Liability) Asset:
Senior Secured Credit Facility		$	(279,712	)		$	(261,975	)		$	(286,661	)		$	(264,816	)
Senior Secured Notes due 2013			(290,000	)			(297,250	)			(290,000	)			(294,350	)
Convertible Senior Subordinated Notes due 2013			(60,000	)			(43,050	)			(60,000	)			(39,150	)
Interest Rate Swap (a)			(2,837	)			(2,837	)			(5,350	)			(5,350	)
Foreign Currency Forwards (a)
Asset			69				69				4,034				4,034
Liability			(7,929	)			(7,929	)			(270	)			(270	)
Commodity Swap (a)			321				321				665				665

	•		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 instruments 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, 2010:
Assets:
Foreign currency forward		$	69			$	—			$	69			$	—
Commodity Swap (diesel fuel)			321				—				321				—
Liabilities:
Interest rate swap			2,837				—				2,837				—
Foreign exchange forward			7,929				—				7,929				—
March 31, 2010:
Assets:
Foreign exchange forward		$	4,034			$	—			$	4,034			$	—
Commodity Swap (diesel fuel)			665				—				665				—
Liabilities:
Interest rate swap			5,350				—				5,350				—
Foreign exchange forward			270				—				270				—

     The Company uses a market approach to determine the fair values of all of its derivative instruments subject to recurring fair value measurements. The fair value of the interest rate swap is determined 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 forwards were determined based upon quoted forward exchange rates for the related currencies, and is classified as Level 2 based on the nature of the underlying market in which these derivatives are traded. The fair value of the commodity swap (diesel fuel) was determined based on observable forward prices for home heating oil, and is also classified as Level 2 based on the nature of the market in which these derivatives are 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.

     The Company’s transportation batteries include starting, lighting, and ignition batteries for cars, trucks, off-road vehicles, agricultural and construction vehicles, motorcycles, recreational vehicles, marine, and other applications. The market for transportation batteries includes aftermarket and OEM customers. The Company’s Industrial Energy batteries are used in the material handling industry for such applications as electric forklift trucks, floor cleaning machinery, powered wheelchairs, railroad locomotives, and mining machinery, and in a broad range of industries for back-up power applications to ensure continuous power supply and avoid temporary power failures or outage. The market for industrial energy batteries includes motive power and network power customers.

     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, 2010
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
		(In thousands)
Net sales		$	227,038			$	205,419			$	69,888			$	165,663			$	—			$	668,008
Gross profit			47,671				38,654				16,911				33,492				—				136,728
Expenses (a)			29,637				27,086				10,929				32,963				15,171				115,786
Income (loss) before reorganization items and income taxes			18,034				11,568				5,982				529				(15,171	)			20,942
Depreciation and amortization			6,809				4,608				2,821				4,690				1,722				20,650
Restructuring expenses			309				2,140				42				2,420				285				5,196

		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
Depreciation and amortization			6,987				5,695				2,572				6,118				1,649				23,021
Restructuring expenses			769				1,124				110				7,704				724				10,431

		For the Six Months Ended September 30, 2010
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
										(In thousands)
Net sales		$	454,092			$	386,792			$	138,379			$	333,411			$	—			$	1,312,674
Gross profit			87,429				69,915				33,099				66,651				—				257,094
Expenses (a)			60,054				50,239				22,173				68,115				49,741				250,322
Income (loss) before reorganization items and income taxes			27,375				19,676				10,926				(1,464	)			(49,741	)			6,772
Depreciation and amortization			13,736				9,423				5,663				9,321				3,443				41,586
Restructuring expenses			1,744				2,666				109				6,972				599				12,090

		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	)
Depreciation and amortization			14,015				10,996				5,121				12,122				3,247				45,501
Restructuring expenses			4,146				19,868				169				20,857				1,057				46,097

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.

     The Company’s transportation batteries include starting, lighting, and ignition batteries for cars, trucks, off-road vehicles, agricultural and construction vehicles, motorcycles, recreational vehicles, marine, and other applications. The market for transportation batteries is divided between sales to aftermarket customers and OEMs. The Company’s Industrial Energy segments supply motive power and network power applications. Motive power batteries are used in the material handling industry for electric forklift trucks and in other industries, including those related to floor cleaning machinery, powered wheelchairs, railroad locomotives, and mining machinery. Network power batteries are used in a broad range of industries for back-up power applications to ensure continuous power supply and avoid temporary power failures or outage.

     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 49.7% 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 increased 15.5% from $1,721 per metric ton for the six months ended September 30, 2009 to $1,988 per metric ton for the six months ended September 30, 2010. During the first six months of fiscal 2011, the LME lead price has increased from $2,119 per metric ton at March 31, 2010 to $2,261 per metric ton at September 30, 2010. At October 29, 2010, the quoted price on the LME was $2,436 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 2011, the exchange rate of the Euro to the U.S. Dollar has decreased 8.6% on average to $1.28 compared to $1.40 for the first six months of fiscal 2010. At September 30, 2010, the exchange rate of the Euro to the U.S, Dollar was $1.36 or 0.7% higher as compared to $1.35 at March 31, 2010. Fluctuations in foreign currencies impacted the Company’s results for the periods presented herein. For the first six months ended September 30, 2010, approximately 54.9% of the

Company’s net sales were generated in Europe and ROW. Further, approximately 65.1% of the Company’s aggregate accounts receivable and inventory as of September 30, 2010 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 global economic conditions. In addition, capital spending by major customers in our network power channels continue 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, the Company typically does not recover these sales in later periods. Further, if the Company’s sales are adversely affected by the weather, the Company typically 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 three and six months ended September 30, 2010. See Notes 3 and 7 to the Condensed Consolidated Financial Statements in this Form 10-Q.

Second quarter of Fiscal 2011 Highlights and Outlook

     The Company’s reported results continue to be impacted in fiscal 2011 by 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. The average price of spent batteries increased approximately 22.3% in the second quarter of fiscal 2011 versus the second quarter of fiscal 2010. 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: