UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

EXIDE TECHNOLOGIES

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

     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 is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (check one):

Large Accelerated Filer o     Accelerated Filer þ     Non-Accelerated Filer o

     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 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 August 3, 2007, 61,266,562 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 MONTHS ENDED JUNE 30, 2007 AND 2006			3
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2007 AND MARCH 31, 2007			4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006			5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			6
Item 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			18
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			26
Item 4 CONTROLS AND PROCEDURES			26
PART II. OTHER INFORMATION			29
Item 1. LEGAL PROCEEDINGS			29
Item 1A. RISK FACTORS			29
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			29
Item 3. DEFAULTS UPON SENIOR SECURITIES			30
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			30
Item 5. OTHER INFORMATION			30
Item 6. EXHIBITS			30
SIGNATURES			30
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32 SECTION 906 CERTIFICATIONS OF THE CEO/CFO

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXIDE TECHNOLOGIES AND SUBSIDIARIES

		For the Three Months Ended
		June 30, 2007				June 30, 2006
NET SALES		$	762,387			$	683,190
COST OF SALES			643,718				573,511
Gross profit			118,669				109,679
EXPENSES:
Selling, marketing and advertising			68,335				68,506
General and administrative			43,649				45,994
Restructuring			2,132				8,884
Other (income) expense, net			(3,541	)			(3,492	)
Interest expense, net			21,352				22,287
Loss on early extinguishment of debt			21,342				—
			153,269				142,179
Loss before reorganization items, income taxes, and minority interest			(34,600	)			(32,500	)
REORGANIZATION ITEMS, NET			442				1,607
INCOME TAX PROVISION			217				3,578
MINORITY INTEREST			423				211
Net loss		$	(35,682	)		$	(37,896	)
NET LOSS PER SHARE
Basic and Diluted		$	(0.59	)		$	(1.48	)
WEIGHTED AVERAGE SHARES
Basic and Diluted			60,926				25,635

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES

		June 30, 2007				March 31, 2007
ASSETS
Current assets:
Cash and cash equivalents		$	49,340			$	76,211
Receivables, net of allowance for doubtful accounts of $29,161 and $28,624			629,967				639,115
Inventories			487,660				411,554
Prepaid expenses and other			22,624				20,224
Deferred financing costs, net			4,612				3,411
Deferred income taxes			26,413				19,030
Total current assets			1,220,616				1,169,545
Property, plant and equipment, net			639,341				649,015
Other assets:
Other intangibles, net			193,223				191,762
Investments in affiliates			6,040				5,282
Deferred financing costs, net			19,724				12,908
Deferred income taxes			66,518				67,006
Other			20,042				24,706
			305,547				301,664
Total assets		$	2,165,504			$	2,120,224
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings		$	14,946			$	13,951
Current maturities of long-term debt			3,973				3,996
Accounts payable			358,684				360,278
Accrued expenses			297,550				299,157
Warrants liability			5,562				5,297
Total current liabilities			680,715				682,679
Long-term debt			736,858				666,507
Noncurrent retirement obligations			255,274				263,290
Deferred income tax liability			43,775				41,232
Other noncurrent liabilities			131,832				121,433
Total liabilities			1,848,454				1,775,141
Commitments and contingencies			—				—
Minority interest			15,137				14,560
STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value, 1,000 shares authorized, 0 shares issued and outstanding			—				—
Common stock, $0.01 par value, 100,000 shares authorized, 61,210 and 60,676 shares issued and outstanding			612				607
Additional paid-in capital			1,009,802				1,008,481
Accumulated deficit			(785,403	)			(745,534	)
Accumulated other comprehensive income			76,902				66,969
Total stockholders’ equity			301,913				330,523
Total liabilities and stockholders’ equity		$	2,165,504			$	2,120,224

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES

		For the Three Months Ended
		June 30, 2007				June 30, 2006
Cash Flows From Operating Activities:
Net loss		$	(35,682	)		$	(37,896	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities—
Depreciation and amortization			26,393				30,464
Unrealized loss (gain) on warrants			265				(813	)
Net (gain) loss on asset sales / impairments			(599	)			2,804
Provision for doubtful accounts			1,175				1,956
Non-cash stock compensation			1,356				400
Reorganization items, net			442				1,607
Minority interest			423				211
Amortization of deferred financing costs			999				814
Loss on early extinguishment of debt			21,342				—
Changes in assets and liabilities —
Receivables			17,719				47,526
Inventories			(70,054	)			(9,388	)
Prepaid expenses and other			(2,132	)			4,643
Payables			(5,980	)			(19,520	)
Accrued expenses			9,175				(15,245	)
Noncurrent liabilities			(19,376	)			(3,318	)
Other, net			(4,876	)			(3,611	)
Net cash (used in) provided by operating activities			(59,410	)			634
Cash Flows From Investing Activities:
Capital expenditures			(10,833	)			(7,967	)
Proceeds from sales of assets			3,427				97
Net cash used in investing activities			(7,406	)			(7,870	)
Cash Flows From Financing Activities:
Increase in short-term borrowings			548				9
Borrowings under Senior Secured Credit Facility			66,695				13,125
Increase (decrease) in other debt			1,956				(1,968	)
Financing costs and other			(30,306	)			4
Net cash provided by financing activities			38,893				11,170
Effect of Exchange Rate Changes on Cash and Cash Equivalents			1,052				934
Net (Decrease) Increase In Cash and Cash Equivalents			(26,871	)			4,868
Cash and Cash Equivalents, Beginning of Period			76,211				32,161
Cash and Cash Equivalents, End of Period		$	49,340			$	37,029

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES

     (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, 2007 for further information. The financial information contained herein is unaudited.

     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 information includes all adjustments of a normal recurring nature necessary for a fair statement of the results of operations and financial position for the periods presented.

(2) COMPREHENSIVE LOSS

          Total comprehensive loss and its components are as follows:

		For the Three Months Ended
		June 30, 2007				June 30, 2006
		(In thousands)
Net loss		$	(35,682	)		$	(37,896	)
Additions and changes to pension liability			(428	)			(352	)
Change in cumulative translation adjustment			10,361				22,120
Total comprehensive loss		$	(25,749	)		$	(16,128	)

(3) REORGANIZATION ITEMS, NET

     Reorganization items represent amounts the Company continues to incur as a result of the Chapter 11 process, from which the Company emerged as of May 5, 2004, and are presented separately in the Condensed Consolidated Statements of Operations. The following have been incurred:

		For the Three Months Ended
		June 30, 2007				June 30, 2006
		(In thousands)
Professional fees		$	398			$	830
Other (a)			44				777
Total reorganization items, net		$	442			$	1,607

Net cash paid for reorganization items during the first quarter of fiscal 2008 and 2007 was $0.4 million and $1.6 million, respectively.

(a)

Other primarily represents costs for the predecessor Company’s D&O (director & officer) insurance coverage.

(4) INTANGIBLE ASSETS

     Intangible assets consist of:

		Trademarks and				Trademarks and
		Tradenames (not				Tradenames (subject to				Customer
		subject to amortization)				amortization)				relationships				Technology				Total
		(In thousands)
As of June 30, 2007:
Gross Amount		$	61,077			$	13,892			$	115,292			$	25,784			$	216,045
Accumulated Amortization			—				(3,474	)			(15,299	)			(4,049	)			(22,822	)
Net		$	61,077			$	10,418			$	99,993			$	21,735			$	193,223
As of March 31, 2007:
Gross Amount		$	60,056			$	13,660			$	113,361			$	25,354			$	212,431
Accumulated Amortization			—				(3,147	)			(13,855	)			(3,667	)			(20,669	)
Net		$	60,056			$	10,513			$	99,506			$	21,687			$	191,762

     Amortization of intangible assets for the first quarter of fiscal 2008 and 2007 was $1.8 million and $1.7 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 average approximately $7 million. Intangible assets have been recorded at the proper legal entity level and are subject to foreign currency fluctuation. The change in the gross amounts shown above, from March 31, 2007 to June 30, 2007, result only from foreign currency translation. No other activity has occurred.

(5) INVENTORIES

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

		June 30, 2007				March 31, 2007
		(In thousands)
Raw materials		$	62,845			$	53,337
Work-in-process			115,399				89,339
Finished goods			309,416				268,878
		$	487,660			$	411,554

(6) OTHER ASSETS

Other assets consist of:

		June 30, 2007				March 31, 2007
		(In thousands)
Deposits (a)		$	11,272			$	15,596
Capitalized software, net			2,847				2,495
Loan to affiliate			2,736				3,702
Other			3,187				2,913
		$	20,042			$	24,706

(7) DEBT

     At June 30, 2007 and March 31, 2007, short-term borrowings of $14.9 million and $14 million, respectively, consisted of 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 at June 30, 2007 and March 31, 2007 was 5.8% and 5.1%, respectively.

     Total long-term debt consists of:

		June 30, 2007				March 31, 2007
		(In thousands)
Senior Secured Credit Facility		$	365,305			$	297,263
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% due in installments through 2015			25,526				23,240
Total			740,831				670,503
Less — current maturities			3,973				3,996
		$	736,858			$	666,507

Total debt including long-term debt and short-term borrowings at June 30, 2007 and March 31, 2007 was $755.8 million and $684.5 million, respectively.

     On May 15, 2007, the Company entered into a $495 million senior secured credit agreement (“Credit Agreement”). The Credit Agreement consists of a $200 million asset based revolving senior secured credit facility (the “Revolving Loan Facility”) and a $295 million senior secured term loan facility (the “Term Loan”). The proceeds of the Credit Agreement were used to fully pay off the Company’s previous senior secured credit facility. The Company recorded a loss on the early extinguishment of debt of $21.3 million. The weighted average interest rate on the senior secured credit facility at June 30, 2007 and March 31, 2007 was 8.60% and 10.17%, respectively. The Credit Agreement has no financial maintenance covenants.

The Revolving Loan

     Borrowings under the Revolving Loan Facility bear interest at a rate equal to LIBOR plus 1.75%. The applicable spread on the Revolving Loan Facility will be subject to change and may increase or decrease in accordance with a leverage-based pricing grid. The Revolving Loan Facility includes a letter of credit sub-facility of $75 million and an accordion feature that allows the Company to increase the facility size up to $250 million if it can obtain commitments from existing or new lenders for the incremental amount. The Revolving Loan Facility will mature in May 2012, but is prepayable at any time at par.

     Availability under the Revolving Loan Facility is subject to a borrowing base comprised of up to 85% of the Company’s eligible accounts receivable plus 85% of the net orderly liquidation value of eligible North American inventory less, in each case, certain limitations and reserves. Revolving loans made to the Company domestically under the Revolving Loan Facility are guaranteed by substantially all domestic subsidiaries of the Company, and revolving loans made to Exide C.V. under the Revolving Loan Facility are guaranteed by substantially all domestic subsidiaries of the Company and certain foreign subsidiaries. These guarantee obligations are secured by a lien on substantially all of the assets of such respective Borrowers and guarantors, including, subject to certain exceptions, in the case of security provided by the domestic subsidiaries, a first priority lien in current assets and a second priority lien in fixed assets.

     The Revolving Loan Facility contains customary terms and conditions, including, without limitation, limitations on liens, indebtedness, implementation of cash dominion and control agreements, and other typical covenants. A springing fixed charge financial covenant of 1.0:1.0 will be triggered if the excess availability under the Revolving Loan Facility falls below $40 million. The Company is also required to pay an unused line fee that varies based on usage of the Revolving Loan Facility.

     The Term Loan

     Borrowings under the Term Loan in U.S. dollars bear interest at a rate equal to LIBOR plus 3.25%, and borrowings under the Term Loan in Euros bear interest at a rate equal to LIBOR plus 3.50%; provided that such rates may decrease by 0.25% after December 31, 2007 if the Company achieves certain corporate credit ratings. The Term Loan will mature in May 2012, but is prepayable at any time at par value, provided that if a change in control or similar event occurs within the first year, the Company must offer to prepay the Term Loan at a price equal to 101% of par.

     The Term Loan will amortize as follows: 0.25% of the initial principal balance of the Term Loan will be due and payable on a quarterly basis commencing in September 2007, with the balance payable at maturity. Mandatory prepayment by the Company may be required under the Term Loan as a result of excess cash flow, asset sales and casualty events, in each case, subject to certain exceptions.

     The portion of the Term Loan made to the Company is guaranteed by substantially all domestic subsidiaries of the Company, and the portion of the Term Loan made to Exide C.V. is guaranteed by substantially all domestic subsidiaries of the Company and certain foreign subsidiaries. These obligations are secured by a lien on substantially all of the assets of such respective borrowers

and guarantors, including, subject to certain exceptions, in the case of security provided by the domestic subsidiaries, a first priority lien in fixed assets and a second priority lien in current assets.

     The Term Loan contains customary terms and conditions, including, without limitation, (1) limitations on debt (including a leverage or coverage based incurrence test), (2) limitations on mergers and acquisitions, (3) limitations on restricted payments, (4) limitations on investments, (5) limitations on capital expenditures, (6) limitations on asset sales with limited exceptions, (7) limitations on liens and (8) limitations on transactions with affiliates.

(8) INTEREST EXPENSE, NET

     Interest income of $0.3 million and $0.3 million is included in Interest expense, net for the three months ended June 30, 2007 and 2006, respectively.

(9) OTHER (INCOME) EXPENSE, NET

Other (income) expense, net consist of:

		For the Three Months Ended
		June 30, 2007				June 30, 2006
		(In thousands)
Net (gain) loss on asset sales / impairments		$	(599	)		$	2,804
Equity income			(183	)			(19	)
Currency remeasurement (gain) loss			(2,518	)			(5,588	)
Loss (gain) on revaluation of warrants (a)			265				(813	)
Other			(506	)			124
		$	(3,541	)		$	(3,492	)

(10) EMPLOYEE BENEFITS

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

		Pension Benefits
		For the Three Months Ended
		June 30, 2007				June 30, 2006
		(In thousands)
Components of net periodic benefit cost:
Service cost		$	1,531			$	2,223
Interest cost			8,815				8,275
Expected return on plan assets			(7,267	)			(6,149	)
Amortization of:
Prior service cost			5				4
Actuarial gain			(369	)			(292	)
Net periodic benefit cost		$	2,715			$	4,061

		Other Post-Retirement Benefits
		For the Three Months Ended
		June 30, 2007				June 30, 2006
		(In thousands)
Components of net periodic benefit cost:
Service cost		$	47			$	42
Interest cost			371				389
Amortization of:
Actuarial loss			18				53
Net periodic benefit cost		$	436			$	484

     The estimated fiscal 2008 pension plan contributions are approximately $53.1 million and other post-retirement contributions are approximately $2.5 million. Payments aggregating $14.5 million were made during the three months ended June 30, 2007.

     Cash contributions to the Company’s pension plans are generally made in accordance with minimum regulatory requirements. The Company’s U.S. plans are currently significantly under-funded. Based on current assumptions and regulatory requirements, the Company’s minimum future cash contribution requirements for its U.S. plans are expected to remain relatively high for the next few fiscal years. On November 17, 2004, the Company received written notification of a tentative determination from the Internal Revenue Service (“IRS”) granting a temporary waiver of its minimum funding requirements for its U.S. plans for calendar years 2003 and 2004, amounting to approximately $50 million, net, under Section 412(d) of the Internal Revenue Code, subject to providing a lien satisfactory to the Pension Benefit Guaranty Corporation (“PBGC”). On June 10, 2005, the Company reached agreement with the PBGC on a second priority lien on domestic personal property, including stock of its U.S. and direct foreign subsidiaries to secure the unfunded liability. The temporary waiver provides for deferral of the Company’s minimum contributions for those years to be paid over a subsequent five-year period through 2010. At June 30, 2007 the Company owed approximately $26.5 million relating to these amounts previously waived.

     Based upon the temporary waiver and sensitivity to varying economic scenarios, the Company expects the cumulative minimum future cash contributions to its U.S. pension plans will total approximately $70 million to $125 million from fiscal 2008 to fiscal 2012, including $35 million in fiscal 2008.

     The Company expects that cumulative contributions to its non U.S. pension plans will total approximately $93.2 million from fiscal 2008 to fiscal 2012, including $18.1 million in fiscal 2008. In addition, the Company expects that cumulative contributions to its other post-retirement benefit plans will total approximately $13 million from fiscal 2008 to fiscal 2012, including $2.5 million in fiscal 2008.

(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 will receive collectively 2.5 million shares of new common stock and warrants to purchase 6.6 million shares of new common stock at $30.31 per share. Approximately 13.4% of such new 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 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 of the Company 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 new 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.

     On July 20, 2007, the Company made its thirteenth distribution of new common stock and warrants for disputed general unsecured claims. Based on information available as of August 3, 2007, approximately 10.5% of new common stock and warrants reserved for this purpose have been distributed. The Company also continues to resolve certain non-objected claims.

Historical Federal Plea Agreement

     In 2001, the Company reached a plea agreement with the U.S. Attorney for the Southern District of Illinois resolving an investigation into a scheme by former officers and certain corporate entities involving fraudulent representations and promises in connection with the distribution, sale and marketing of automotive batteries between 1994 and 1997. The Company agreed to pay a fine of $27.5 million over five years, five-years probation and to cooperate with the U.S. Attorney in its prosecution of the former officers. The Company was sentenced pursuant to the terms of the plea agreement in February 2002. Generally, failure to comply with the provisions of the plea agreement, including the obligation to pay the fine, would permit the U.S. Government to reopen the case against the Company.

     On May 31, 2006, the District Court approved a Joint Agreement and Proposed Joint Resolution of Issues Raised in the government’s motion filed on November 18, 2005 regarding the payment of criminal fine. The District Court entered an order consistent with the Joint Agreement and Proposed Joint Resolution, and modified the Company’s schedule to pay the $27.5 million fine through quarterly payments over the next five years, ending in 2011. The court’s order reflects that the Company is not obligated to pay interest on outstanding amounts of unpaid fine if the Company is current on all installment payments, and allows for penalties and interest to be imposed if the Company does not comply with the modified fine payment schedule. The Company’s five-year probation ended in February 2007.

Pre-Petition Litigation Settlements

     The Company previously disclosed in its annual report on Form 10-K for fiscal 2006 tentative settlements with various plaintiffs who alleged personal injury and/or property damage from the release of hazardous materials used in the battery manufacturing process prior to the Company’s filing for Chapter 11 bankruptcy protection. The Company has finalized a settlement of these claims, as well as claims they could have asserted against third parties who may have had claims of indemnification against the Company on a pre-petition or post-petition basis. The claims will be paid in new common stock and warrants to be paid out of the reserve established under the claims reconciliation process discussed above. The terms of the settlement are still subject to approval of appropriate state courts.

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, which EnerSys appealed. Unless the appeal is successful, EnerSys will likely lose all rights to use the “Exide” trademark over time and the Company will have greater flexibility in its ability to use that mark for industrial battery products. 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

2006, the Bankruptcy Court ordered a two year transition period and denied EnerSys’ motion for a stay. EnerSys has appealed that order.

     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 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 Exide. In August 2002, the case was removed 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, which PDH then appealed to the United States District Court for the District of Delaware. 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 has noticed its appeal of this Order to the United States Court of Appeals for the Third Circuit

     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 Exide 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 Exide was obligated to replace. Exide’s answer contested the amounts claimed by PDH and Exide 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.

     From 1957 to 1982, CEAC, the Company’s principal French subsidiary, operated a plant using crocidolite asbestos fibers in the formation of battery cases, which, once formed, encapsulated the fibers. Approximately 1,500 employees worked in the plant over the period. Since 1982, the French governmental agency responsible for worker illness claims received 64 employee claims alleging asbestos-related illnesses. For some of those claims, CEAC is obligated to and has indemnified the agency in accordance with French law for approximately $0.4 million in calendar 2004. In addition, CEAC has been adjudged liable to indemnify the agency for approximately $0.1 million during the same period for the dependents of four such claimants. The Company was not required to indemnify or make any payments subsequent to calendar year 2004. In 2007, CEAC has been adjudged to indemnify the agency for approximately $0.3 million. No payment has yet been made to the agency. Although the Company cannot predict the number or size of any future claims, the Company does not believe resolution of the current or any future claims, individually or in the aggregate, will have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

     In June 2005 two former stockholders, Aviva Partners LLC and Robert Jarman filed purported class action lawsuits against the Company and certain of its current and former officers alleging violations of certain federal securities laws in the United States District Court for the District of New Jersey purportedly on behalf of those who purchased the Company’s stock between November 16, 2004 and May 17, 2005. The complaints allege that the named officers violated Sections 10(b) and 20(a) of the Securities Exchange Act and SEC Rule 10b-5 in connection with certain allegedly false and misleading public statements made during this period by the Company and its officers. The complaints did not specify an amount of damages sought. The Company denies the allegations in the complaints and intends to vigorously pursue its defense.

     United States District Judge Mary L. Cooper consolidated the Aviva Partners and Jarman cases under the Aviva Partners v. Exide Technologies, Inc. caption. In 2006 Plaintiffs filed their consolidated amended complaint in which they reiterated the claims described above but purported to state a claim on behalf of those who purchased the Company’s stock between May 5, 2004 and May 17, 2005. On March 13, 2007, the Court denied Defendants’ motions to dismiss. Discovery in this litigation is proceeding and is expected to continue throughout the remainder of 2007 and 2008. No trial date has been set in this matter.

     In October 2005, Murray Capital Management, Inc., filed suit against the Company, certain of its current and former officers and Deutsche Bank Securities, Inc in the U.S. District Court for the Southern District of New York alleging that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act and SEC Rule 10b-5, and related state laws, in connection with certain allegedly false and misleading public statements made by the Company and its officers. While Murray’s claims are largely duplicative of those set out in the Aviva and Jarman complaints, Murray also claims that false and misleading statements were made in connection with the Company’s March 2005 issuance of convertible notes and concurrent issuance of senior notes. The complaint does not specify the amount of damages sought in the suit. The Company is indemnifying Deutsche Bank pursuant to the purchase agreement under which the notes were issued. The Court granted the Company’s motion to dismiss the complaint and permitted the plaintiff to file an amended complaint, which it did. Defendants moved to dismiss the amended complaint. The Court subsequently granted Deutsche Bank’s motion to dismiss, but denied the Company’s motion and ordered that discovery proceed in

connection with Plaintiff’s claims against the Company and certain of its current and former officers. Discovery is proceeding and is expected to continue throughout the remainder of 2007 and the first half of 2008. No trial date has been set in this matter.

     In August 2006, a shareholder derivative complaint was filed in the United States District Court for the District of New Jersey by Marilyn Richardson against certain current and former officers and directors. The suit alleges that named parties breached their fiduciary duties to the Company by, among other things, making statements between November 2004 and July 2005 which plaintiffs claim were false and misleading and by allegedly failing to implement adequate internal controls and means of supervision at the Company. The suit seeks an unspecified amount of damages from the named parties and modifications to the Company’s corporate governance policies. The allegations in the complaint are similar to the Aviva Partners and Jarman shareholder class action suits described above. The individual defendants intend to vigorously defend the suit. Individual defendants have moved to dismiss the shareholder derivative complaint. In addition, the Company, on whose behalf these claims purport to be brought, has moved to dismiss the shareholder derivative complaint on the grounds that the derivative plaintiff did not file the claims in accordance with applicable laws governing the filing of derivative suits.

     In November 2006, the Company received a letter addressed to its directors from a law firm representing investment funds or accounts managed by Stanfield Capital Partners LLC (“Stanfield”). According to the letter, Stanfield holds major positions in the Company’s convertible notes and also holds positions in the Company’s senior notes and its original senior secured credit facility. Such letter stated, among other things, that Stanfield believed the Company was in default under the original senior secured credit facility and the note indentures because the $27.5 million fine described above under “Historical Federal Plea Agreement” constituted a judgment in excess of the judgment amounts permitted under such indentures. The letter also said that Stanfield believed there were breaches of the Company’s disclosure obligations in connection with the March 2005 note issuances relating to the 2001 criminal fine, the status and value of certain product inventories and statements as to likely fiscal 2005 results. The Company has discussed these allegations with Stanfield. The Company believes that all such assertions are without merit.

     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.

     The Company’s Norwegian subsidiary, Exide Sonnak AS, has received notice of claims for property damage in the approximate amount of $5.6 million allegedly as the result of a warehouse fire occurring on or about July 8, 2005 in Trondheim, Norway due to an alleged malfunctioning battery charger allegedly manufactured by the Company. The Company and its counsel are evaluating those claims. The Company currently believes that any potential liability would be covered by applicable insurance, subject to the relevant deductible.

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, including limits on employee blood lead levels, 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 (“CERCLA”) or similar state laws at 98 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 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 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 million. A reserve of new 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 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 million of additional clean-up costs discussed above, these claims would ultimately result in an inadequate reserve of new 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 new 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 negotiations and proceedings 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 whether additional cleanup will occur and, if so, the extent of any cleanup and 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 June 30, 2007 and March 31, 2007, the amount of such reserves on the Company’s Condensed Consolidated Balance Sheets were approximately $35.3 million and $34.7 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) 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 million to $9 million.

Azambuja (SONALUR) Portugal

     The Azambuja (SONALUR) facility is an active secondary lead recycling plant. Materials from past operations present at the site are stored in above-ground concrete containment vessels and in underground storage deposits. The Company finalized the process of obtaining site characterization data to evaluate remediation alternatives agreeable to local authorities. Costs for remediation are currently estimated at $2 million to $4 million.

Guarantees

     At June 30, 2007, the Company had outstanding letters of credit with a face value of $45.3 million and surety bonds with a face value of $4.5 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 surety in the form of letters of credit at June 30, 2007, pursuant to the terms of the agreement, totaled approximately $4.5 million.

     Certain of the Company’s European subsidiaries have bank guarantees outstanding, which have been issued as collateral or financial assurance in connection with environmental obligations, income tax claims and customer contract requirements. At June 30, 2007, bank guarantees with a face value of $19.9 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.

     A reconciliation of changes in the Company’s sales returns and allowances liability follows (in thousands):

Balance at March 31, 2007		$	48,526
Accrual for sales returns and allowances provided during the period			12,529
Settlements made (in cash or credit), and currency translation during the period			(10,967	)
Balance at June 30, 2007		$	50,088

(12) INCOME TAXES

     The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years ended before March 31, 2004.

     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, 2001. 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 adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of SFAS 109,” (“FIN 48”) effective April 1, 2007. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of FIN 48, the Company recognized a $4.2 million increase in the liability for unrecognized tax benefits and the related liability for interest and penalties. This amount was accounted for entirely as a reduction

to the April 1, 2007 balance of accumulated deficit.

     As of April 1, 2007, after implementation of FIN 48, the Company’s unrecognized tax benefits were $66.2 million. The amount, if recognized, that would affect the Company’s effective tax rate is $19.6 million at April 1, 2007.

     The Company classifies interest and penalties on uncertain tax benefits as income tax expense. At April 1, 2007, before any tax benefits, the Company had $3.1 million 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. As of June 30, 2007, there were no material changes to the amount of unrecognized tax benefits or the related accrued interest and penalties.

(13) RESTRUCTURING

     During the first quarter of fiscal 2008, 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 three months ended June 30, 2007, the Company recognized restructuring charges of $2.1 million, representing $1.1 million for severance and $1 million for related closure costs. These charges resulted from consolidation efforts in the Industrial Energy Europe and Rest of World (“ROW”) segment, headcount reductions in the Transportation Europe and ROW segment, and corporate severance. Approximately 20 positions have been eliminated in connection with fiscal 2008 restructuring activities.

     Summarized restructuring reserve activity:

		Severance Costs				Closure Costs				Total
						(In thousands)
Balance at March 31, 2007		$	1,860			$	3,803			$	5,663
Restructuring Charges			1,139				993				2,132
Payments and Currency Translation			(1,214	)			(1,136	)			(2,350	)
Balance at June 30, 2007		$	1,785			$	3,660			$	5,445

     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) NET LOSS PER SHARE

     Basic net loss per share is computed using the weighted average number of common shares outstanding for the period, while diluted net loss per share is computed assuming conversion of all dilutive securities. Shares which are contingently issuable under the Company’s plan of reorganization have been included as outstanding common shares for purposes of calculating net loss per share.

     Due to a net loss in the three months ended June 30, 2007, 1,492,719 shares of securities issuable in connection with stock option and restricted stock (unvested) plans have been excluded from the diluted loss per share calculation because their effect would be anti-dilutive.

(15) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, SFAS 157 does not require any new fair value measurements. However, for some entities, the application of SFAS 157 will change current practice. SFAS 157 is effective for fiscal years beginning after November 15, 2007 (the Company’s fiscal 2009), and interim periods within those years. The Company will assess the effect of this pronouncement on its financial

statements, but at this time, no material effect is expected.

     In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. SFAS 159 is effective for fiscal years beginning after November 15, 2007 (the Company’s fiscal 2009). The Company will assess the effect of this pronouncement on its financial statements, but at this time, no material effect is expected.

(16) SEGMENT INFORMATION

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

     Transportation markets include original-equipment and aftermarket automotive, heavy-duty truck, agricultural and marine applications, and new technologies for hybrid vehicles and 42-volt automotive applications. Industrial markets include batteries for telecommunications systems, electric utilities, railroads, uninterruptible power supply (UPS), lift trucks and other material handling equipment, 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 decision-maker monitors and manages the financial performance of these four business groups.

     Certain asset information otherwise required to be disclosed is not reflected below as it is not allocated by segment nor utilized by management in the Company’s operations.

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

		For the Three Months Ended June 30, 2007
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
														(In thousands)
Net sales		$	251,029			$	212,709			$	65,274			$	233,375			$	—			$	762,387
Gross profit			47,725				22,149				16,111				32,684				—				118,669
Expenses			31,027				25,856				10,106				34,106				52,174				153,269
Income (loss) before reorganization items, income taxes, and minority interest			16,698				(3,707	)			6,005				(1,422	)			(52,174	)			(34,600	)

		For the Three Months Ended June 30, 2006
		Transportation								Industrial
						Europe								Europe				Other
		Americas				and ROW				Americas				and ROW				(a)				Consolidated
														(In thousands)
Net sales		$	214,509			$	182,753			$	72,949			$	212,979				—			$	683,190
Gross profit			32,934				19,607				17,611				39,527				—				109,679
Expenses			37,746				25,750				10,120				35,892				32,671				142,179
Income (loss) before reorganization items, income taxes, and minority interest			(4,812	)			(6,143	)			7,491				3,635				(32,671	)			(32,500	)

(17) SUBSEQUENT EVENT

     On July 6^th, 2007, the Upper House of the German Parliament (Bundesrat) passed into law the German Business Tax Reform 2008 bill. The law would reduce the Company’s German subsidiaries’ marginal tax rate from approximately 37% to 28%. In accordance with SFAS No. 109, the effect of this change in tax law will be reflected in the Company’s financial statements for the period ending September 30, 2007 as changes in tax law must be reflected in the period of enactment. The Company estimates this new law will reduce its net deferred tax asset and result in a charge to tax expense related to its German subsidiaries of $17 to $18 million.

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

     The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s consolidated results of operation and financial condition. 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 the 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 risk factors that should be considered when evaluating forward-looking information detailed below. These factors could cause our actual results to differ materially from the forward looking statements. 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 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 42-volt automotive applications. Industrial markets include batteries for telecommunications systems, electric utilities, railroads, uninterruptible power supply (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 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 42% 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 of the lead prices quoted on the London Metal Exchange (“LME”) have increased almost 100% from $1,100 per metric ton for the three months ended June 30, 2006 to $2,176 for the three months ended June 30, 2007. At August 3, 2007, the quoted price on the LME was $3,389 per metric ton. To the extent that lead prices continue to be volatile, and the Company is unable to pass higher material costs resulting from this volatility on to its customers, its financial performance and liquidity 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 plants and diesel fuel for distribution of its products. The Company seeks to recoup these increased energy costs through price increases or surcharges. To the extent the Company is unable to pass on these 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 impacted the Company’s ability to pass along increased prices to keep pace with rising production costs. The effect of this competition has been heightened by excess capacity and fluctuating lead prices as well as low-priced Asian imports impacting our markets.

     Exchange Rates. The Company is exposed to foreign currency risk in most European countries, principally from fluctuations in the Euro and British Pound. For the first quarter of fiscal 2008, the exchange rate of the Euro to the U.S. Dollar has increased 7.2% on a weighted average basis to $1.35 compared to $1.26 for the first quarter of fiscal 2007. The British Pound is up 8.7% for the same period. The Euro and British Pound are up 1.3% and 2%, respectively, at June 30, 2007 as compared to March 31, 2007.

     The Company is also exposed, to a lesser extent, to foreign currency risk in Australia and the Pacific Rim. Movements of 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. Movements in European currencies impacted the Company’s results for the periods presented herein. For the three months ended June 30, 2007, approximately 59% of the Company’s net sales was generated in Europe and ROW. Further, approximately 71% of the Company’s aggregate accounts receivable and inventory as of June 30, 2007 was held by its European subsidiaries.

     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.

     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 portions of its fourth fiscal quarters). Retailers and distributors buy automotive batteries during these periods so they will have sufficient inventory for cold weather periods. In addition, many of the Company’s industrial battery customers in Europe do not place their battery orders until the end of the calendar year. 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.

First Quarter of Fiscal 2008 Highlights and Outlook

     The Company’s reported results continue to be impacted in fiscal 2008 by increases in the price of lead and other commodity costs that are primary components in the manufacture of batteries and energy costs used in the manufacturing and distribution of the Company’s products.

     In the Americas market, the Company obtains the vast majority of its lead requirements from six 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 rise in lead prices, however, the cost of spent batteries has also increased. For the first quarter of fiscal 2008, the average cost of spent batteries increased approximately 28% versus the first quarter of fiscal 2007. Therefore, the higher market price of lead with respect to manufacturing in the Americas continues to impact results. The Company continues to take selective pricing actions and attempts to secure higher captive spent battery return rates to help mitigate these risks.

     In Europe, the Company’s lead requirements are mainly obtained from third-party suppliers. Because of the Company’s exposure to lead market prices in Europe, and based on historical price increases and apparent volatility in lead prices, the Company has implemented several measures to offset higher lead prices, including selective pricing actions, and lead price escalators. In addition, the Company has automatic price escalators with many OEM customers. The Company currently recycles a small portion of its lead requirements in its European facilities.

     The Company expects that these higher lead and other commodity costs, which affect all business segments, will continue to put pressure on 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 lags the rise in market prices of lead and other commodities. Both price escalators and fuel surcharges are subject to the risk of customer acceptance.

     In addition to managing the impact of higher 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 ongoing restructuring plans, and organizational realignment of divisional and corporate functions resulting in further headcount reductions, principally in selling, general and administrative functions globally.

(ii) Actions designed to improve the Company’s liquidity and operating cash flow through working capital reduction plans, the sales 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 Take Charge! initiative, which is now installed in 12 of its 28 manufacturing locations, including continuing a focused relationship with the principal consultant. This year will see further integration of the Excell initiative.

(iv) The Company will continue to review and rationalize the various brand offerings of product in its markets to gain efficiencies in manufacturing and distribution, and better leverage of its marketing spending.

(v) The Company will 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 are 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 historical experience and on various other assumptions that are believed 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, 2007 (the “Annual Report”) affect the preparation of its Condensed Consolidated Financial Statements. The reader of this report should refer to the Annual Report for further information.

Results of Operations

Three months ended June 30, 2007 compared with three months ended June 30, 2006

     Net Sales

Net sales were $762.4 million for the first quarter of fiscal 2008 versus $683.2 million in the first quarter of fiscal 2007. Currency translation (primarily the strengthening of the Euro against the U.S. dollar) favorably impacted net sales in the first quarter of fiscal 2008 by approximately $31.7 million. Excluding the currency translation impact, net sales increased by approximately $47.5 million or 7% primarily as a result of higher Transportation demand worldwide and better overall pricing.

										FAVORABLE (UNFAVORABLE)
		For the Three Months Ended												Currency				Non-Currency
		June 30, 2007				June 30, 2006				TOTAL				Related				Related
										(In thousands)
Transportation
Americas		$	251,029			$	214,509			$	36,520			$	—			$	36,520
Europe & ROW			212,709				182,753				29,956				15,097				14,859
Industrial Energy
Americas			65,274				72,949				(7,675	)			—				(7,675	)
Europe & ROW			233,375				212,979				20,396				16,564				3,832
TOTAL		$	762,387			$	683,190			$	79,197			$	31,661			$	47,536

     Transportation Americas net sales were $251 million for the first quarter of fiscal 2008 versus $214.5 million for the first quarter of fiscal 2007. Net sales for the first quarter of fiscal 2008 were $36.5 million or 17.0% higher than the first quarter of fiscal 2007 due to an increase in aftermarket volumes and the favorable impact of price increases.

     Transportation Europe and ROW net sales were $212.7 million for the first quarter of fiscal 2008 versus $182.8 million for the

first quarter of fiscal 2007. Net sales, before the favorable impact of $15.1 million in foreign currency translation, were higher by $14.9 million or 8.1% mainly due to higher OE volumes and the overall impact of favorable pricing actions in both the OE and aftermarket channels.

     Industrial Energy Americas net sales were $65.3 million for the first quarter of fiscal 2008 versus $72.9 million for the first quarter of fiscal 2007. Net sales were $7.7 million or 10.5% lower due to a sizable motive power build for a particular customer in fiscal 2007 that was not repeated in fiscal 2008 as well as continued softness in the telecom wireless market, offset partially by higher average selling prices.

     Industrial Energy Europe and ROW net sales were $233.4 million for the first quarter of fiscal 2008 versus $213 million for the first quarter of fiscal 2007. Net sales, before a favorable currency translation impact of $16.6 million, increased $3.8 million or 1.8% due to higher average selling prices related to lead and other pricing actions, partially offset by lower volumes in both the motive power and network power markets.

     Gross Profit

     Gross profit was $118.7 million in the first quarter of fiscal 2008 versus $109.7 million in the first quarter of fiscal 2007. Gross margin decreased 0.5% to 15.6% in the first quarter of fiscal 2008 from 16.1% in the first quarter of fiscal 2007. Gross profit in each of the Company’s business segments was negatively impacted by significantly higher lead costs (average LME prices were $2,176 per metric ton in the first quarter of fiscal 2008 versus $1,100 per metric ton in the first quarter of fiscal 2007), and was only partially recovered by higher average selling prices, along with improved production efficiencies. Currency translation favorably impacted gross profit in the first quarter of fiscal 2008 by $3.8 million.

		For the Three Months Ended								For the Three Months Ended
		June 30, 2007								June 30, 2006								FAVORABLE / (UNFAVORABLE)
						Percent of								Percent of								Currency				Non-Currency
		TOTAL				Net Sales				TOTAL				Net Sales				TOTAL				Related				Related
														(In thousands)
Transportation
Americas		$	47,725				19.0	%		$	32,934				15.4	%		$	14,791			$	—			$	14,791
Europe & ROW			22,149				10.4	%			19,607				10.7	%			2,542				1,531				1,011
Industrial Energy
Americas			16,111				24.7	%			17,611				24.1	%			(1,500	)			—				(1,500	)
Europe & ROW			32,684				14.0	%			39,527				18.6	%			(6,843	)			2,227				(9,070	)
TOTAL		$	118,669				15.6	%		$	109,679				16.1	%		$	8,990			$	3,758			$	5,232

     Transportation Americas gross profit was $47.7 million or 19.0% of net sales in the first quarter of fiscal 2008 versus $32.9 million or 15.4% of net sales in the first quarter of fiscal 2007. This increase is partially due to higher sales volumes in the aftermarket channel combined with higher overall average selling prices. In addition, this segment continued to realize incremental productivity savings from its ongoing Take Charge! initiative.

     Transportation Europe and ROW gross profit was $22.1 million or 10.4% of net sales in the first quarter of fiscal 2008 versus $19.6 million or 10.7% of net sales in the first quarter of fiscal 2007. Currency translation favorably impacted gross profit during the first quarter of fiscal 2008 by approximately $1.5 million. The remaining increase in gross profit was primarily due to the impact of favorable pricing actions, but was substantially offset by higher raw material costs and lower relative sales to the aftermarket channels, which tend to be at higher margins.

     Industrial Energy Americas gross profit was $16.1 million or 24.7% of net sales in the first quarter of fiscal 2008 versus $17.6 million or 24.1% of net sales in the first quarter of fiscal 2007. The decrease in gross profit was primarily due to lower sales volumes, while the increased gross profit percentage was primarily due to higher average selling prices and cost reduction initiatives, partially offset by higher lead costs.

     Industrial Energy Europe and ROW gross profit was $32.7 million or 14.0% of net sales in the first quarter of fiscal 2008 versus $39.5 million or 18.6% of net sales in the first quarter of fiscal 2007. Currency translation favorably impacted Industrial Energy Europe and ROW gross profit in the first quarter of fiscal 2008 by approximately $2.2 million. The overall decrease in gross profit was primarily due to the delayed impact of lead price escalator provisions in contracts with major customers in relation to the rapid increase in lead costs, partially offset by manufacturing cost reductions resulting from installation of Take Charge! initiatives at 3 of the 6 major manufacturing facilities.

     Expenses

     Expenses were $153.3 million in the first quarter of fiscal 2008 versus $142.2 million in the first quarter of fiscal 2007. First quarter fiscal 2008 expenses include a loss on early extinguishment of debt of $21.3 million, the details of which are discussed in Note 7 of the Condensed Consolidated Financial Statements. Foreign currency translation unfavorably impacted expenses by approximately $5.9 million in the first quarter of fiscal 2008. General and administrative expenses decreased by $2.4 million, from $46.0 million in the first quarter of fiscal 2007 to $43.6 million in the first quarter of fiscal 2008. Also, restructuring charges declined $6.8 million, from $8.9 million in the first quarter of fiscal 2007 to $2.1 million in the first quarter of fiscal 2008. Fiscal 2007 restructuring expenses included the financial impact of closing our Shreveport, Louisiana transportation battery plant.

										FAVORABLE / (UNFAVORABLE)
		For the Three Months Ended												Currency				Non-Currency
		June 30, 2007				June 30, 2006				TOTAL				Related				Related
										(In thousands)
Transportation
Americas		$	31,027			$	37,746			$	6,719				—			$	6,719
Europe & ROW			25,856				25,750				(106	)			(1,883	)			1,777
Industrial Energy
Americas			10,106				10,120				14				—				14
Europe & ROW			34,106				35,892				1,786				(2,394	)			4,180
Unallocated expenses			52,174				32,671				(19,503	)			(1,667	)			(17,836	)
TOTAL		$	153,269			$	142,179			$	(11,090	)		$	(5,944	)		$	(5,146	)

     Transportation Americas expenses were $31.0 million in the first quarter of fiscal 2008 versus $37.7 million in the first quarter of fiscal 2007. The decrease was primarily due to prior year expenses which included $6 million of restructuring charges and $2.9 million of asset impairments related to the closure of the Shreveport, Louisiana Battery Plant, partially offset by higher selling expenses.

     Transportation Europe and ROW expenses were $25.9 million in the first quarter of fiscal 2008 versus $25.8 million in the first quarter of fiscal 2007. Currency translation unfavorably impacted expenses in the first quarter of fiscal 2008 by approximately $1.9 million. Excluding the impact of foreign exchange, expenses declined by $1.8 million due to the favorable impact of ongoing cost reduction programs and lower restructuring expense.

     Industrial Energy Americas expenses were $10.1 million in the first quarter of fiscal 2008 versus $10.1 million in the first quarter of fiscal 2007. The business continues to manage spending closely to offset the impact of economics in the face of lower year-to-date volumes.

     Industrial Energy Europe and ROW expenses were $34.1 million in the first quarter of fiscal 2008 versus $35.9 million in the first quarter of fiscal 2007. Expenses, before an unfavorable currency translation impact of approximately $2.4 million, decreased by $4.2 million primarily due to a $1.6 million gain on asset sale, lower selling and advertising costs, and the positive impact of cost reduction programs implemented in the second half of fiscal 2007.

     Unallocated expenses were $52.2 million in the first quarter of fiscal 2008 versus $32.7 million in the first quarter of fiscal 2007, and include unallocated corporate costs, interest expense, currency remeasurement loss (gain), and loss (gain) on revaluation of warrants. The increase in unallocated expenses was largely attributable to the $21.3 million loss on early extinguishment of debt in the first quarter of 2008, which is discussed in Note 7 of the Condensed Consolidated Financial Statements. In addition, unallocated expenses were impacted by the following matters:

	(i)		interest expense, net decreased $0.9 million principally due to lower interest rates under the Company’s new credit facility;
	(ii)		currency translation unfavorably impacted unallocated expenses in the first quarter of fiscal 2008 by approximately $1.7 million;
	(iii)		corporate expenses in the first quarter of fiscal 2008 and 2007 were $12.1 million and $16.8 million respectively. The decrease was primarily due to the inclusion in prior year expense of $3.5 million of expenses for professional fees related to the potential sale of the Industrial Europe and ROW business segment which the Company did not pursue further, and lower general and administrative cost resulting from the Company’s continued restructuring efforts.

(iv)

included in Other (income) expense, net in the first quarter of fiscal 2008 and 2007, respectively:

	•		foreign currency remeasurement gain of $2.5 million and $5.6 million;
	•		loss (gain) on revaluation of warrants of $0.3 million and ($0.8) million.

     Reorganization Items

     Reorganization items represent amounts the Company continues to incur subsequent to its emergence from Chapter 11 filing in May 2004 and are presented separately in the Condensed Consolidated Statements of Operations. Reorganization items for the first quarter of fiscal 2008 and 2007 were $0.4 million and $1.6 million, respectively. These items include professional fees including financial and legal services. See Note 3 to the Condensed Consolidated Financial Statements.

     Income Taxes

     In the first quarter of fiscal 2008, the Company recorded an income tax provision of $0.2 million on pre-tax loss of $35.0 million. In the first quarter of fiscal 2007, the Company recorded an income tax provision of $3.6 million on a pre-tax loss of $34.1 million. The effective tax rate was (0.6%) and (10.5%) in the first quarter of fiscal 2008 and 2007, respectively. The effective tax rate for the first quarter of both periods was impacted by the generation of income in tax-paying jurisdictions, principally certain countries in Europe, New Zealand, and Canada, with limited or no offset on a consolidated basis as a result of recognition of valuation allowances on tax benefits generated from current period losses in the U.S., the United Kingdom, Italy, Spain, Australia, and France. The effective tax rate for the first quarter of fiscal 2008 and 2007, respectively, was impacted by the recognition of $11.0 million and $28.7 million of valuation allowances on current year tax benefits generated primarily in the U.S., United Kingdom, France, Spain, and Italy.

Liquidity and Capital Resources

     As of June 30, 2007, the Company had total liquidity of $139.5 million consisting of cash and cash equivalents of $49.3 million and availability under the Company’s revolving loan facility and other loan facilities of $43.1 million and $47.1 million, respectively. This compared to a total liquidity position of $145.9 million at March 31, 2007 consisting of cash and cash equivalents of $76.2 million and availability under the Revolving Loan Facility and other credit facilities of $59.3 million and $10.4 million, respectively. On August 3, 2007, total liquidity was approximately $157 million, consisting of availability under the Company’s revolving loan facility and other loan facilities of $57 million and $47 million, respectively, and an estimated $53 million in cash and cash equivalents. It should be noted that cash and cash equivalents fluctuate substantially on a daily basis due in part to the timing of account receivable collections, and mid-period balances are subject to the monthly reconciliation process of the Company’s numerous global accounts.

On May 15, 2007, the Company entered into a $495 million senior secured credit agreement (“Credit Agreement”). The Credit Agreement consists of a $200 million asset based revolving senior secured credit facility (the “Revolving Loan Facility”) and a $295 million senior secured term loan facility (the “Term Loan”). The proceeds of the Credit Agreement were used to fully pay off the Company’s previous senior secured credit facility. The Company recorded a loss on the early extinguishment of debt of $21.3 million. The weighted average interest rate on the senior secured credit facility at June 30, 2007 and March 31, 2007 was 8.60% and 10.17%, respectively. The Credit Agreement has no financial maintenance covenants.

The Revolving Loan

     Borrowings under the Revolving Loan Facility bear interest at a rate equal to LIBOR plus 1.75%. The applicable spread on the Revolving Loan Facility will be subject to change and may increase or decrease in accordance with a leverage-based pricing grid. The Revolving Loan Facility includes a letter of credit sub-facility of $75 million and an accordion feature that allows the Company to increase the facility size up to $250 million if it can obtain commitments from existing or new lenders for the incremental amount. The Revolving Loan Facility will mature in May 2012, but is prepayable at any time at par.

     Availability under the Revolving Loan Facility is subject to a borrowing base comprised of up to 85% of the Company’s eligible accounts receivable plus 85% of the net orderly liquidation value of eligible North American inventory less, in each case, certain limitations and reserves. Revolving loans made to the Company domestically under the Revolving Loan Facility are guaranteed by substantially all domestic subsidiaries of the Company, and revolving loans made to Exide C.V. under the Revolving Loan Facility are guaranteed by substantially all domestic subsidiaries of the Company and certain foreign subsidiaries. These guarantee obligations are secured by a lien on substantially all of the assets of such respective Borrowers and guarantors, including, subject to certain exceptions, in the case of security provided by the domestic subsidiaries, a first priority lien in current assets and a second priority lien in fixed assets.

     The Revolving Loan Facility contains customary terms and conditions, including, without limitation, limitations on liens, indebtedness, implementation of cash dominion and control agreements, and other typical covenants. A springing fixed charge financial covenant of 1.0:1.0 will be triggered if the excess availability under the Revolving Loan Facility falls below $40 million. The Company is also required to pay an unused line fee that varies based on usage of the Revolving Loan Facility.

The Term Loan

     Borrowings under the Term Loan in U.S. dollars bear interest at a rate equal to LIBOR plus 3.25%, and borrowings under the Term Loan in Euros bear interest at a rate equal to LIBOR plus 3.50%; provided that such rates may decrease by 0.25% after December 31, 2007 if the Company achieves certain corporate credit ratings. The Term Loan will mature in May 2012, but is prepayable at any time at par value, provided that if a change in control or similar event occurs within the first year, the Company must offer to prepay the Term Loan at a price equal to 101% of par.

     The Term Loan will amortize as follows: 0.25% of the initial principal balance of the Term Loan will be due and payable on a quarterly basis commencing in September, 2007, with the balance payable at maturity. Mandatory prepayment by the Company may be required under the Term Loan as a result of excess cash flow, asset sales and casualty events, in each case, subject to certain exceptions.

     The portion of the Term Loan made to the Company is guaranteed by substantially all domestic subsidiaries of the Company, and the portion of the Term Loan made to Exide C.V. is guaranteed by substantially all domestic subsidiaries of the Company and certain foreign subsidiaries. These obligations are secured by a lien on substantially all of the assets of such respective borrowers and guarantors, including, subject to certain exceptions, in the case of security provided by the domestic subsidiaries, a first priority lien in fixed assets and a second priority lien in current assets.

     The Term Loan contains customary terms and conditions, including, without limitation, (1) limitations on debt (including a leverage or coverage based incurrence test), (2) limitations on mergers and acquisitions, (3) limitations on restricted payments, (4) limitations on investments, (5) limitations on capital expenditures, (6) limitations on asset sales with limited exceptions, (7) limitations on liens and (8) limitations on transactions with affiliates.

     In March 2005, the Company issued $290 million in aggregate principal amount of 10.5% Senior Secured Notes due in 2013. Interest of $15.2 million is payable semi-annually on March 15 and September 15. The 10.5% Senior Secured Notes are redeemable at the option of the Company, in whole or in part, on or after March 15, 2009, initially at 105.25% of the principal amount, plus accrued interest, declining to 100% of the principal amount, plus accrued interest on or after March 15, 2011. The 10.5% Senior Secured Notes are redeemable at the option of the Company, in whole or in part, subject to payment of a make whole premium, at any time prior to March 15, 2009. In addition, until May 15, 2008, up to 35% of the 10.5% Senior Secured Notes are redeemable at the option of the Company, using the net proceeds of one or more qualified equity offerings. In the event of a change of control or the sale of certain assets, the Company may be required to offer to purchase the 10.5% Senior Secured Notes from the note holders. Those notes are secured by a junior priority lien on the assets of the U.S. parent company, including the stock of its subsidiaries. The indenture governing the terms of these notes contains financial covenants which limit the ability of the Company and its subsidiaries to among other things incur debt, grant liens, pay dividends, invest in non-subsidiaries, engage in related party transactions and sell assets. Under the indenture, proceeds from asset sales (to the extent in excess of a $5 million threshold) must be applied to offer to repurchase notes to the extent such proceeds exceed $20 million in the aggregate and are not applied within 365 days to retire senior secured credit agreement borrowings or the Company’s pension contribution obligations that are secured by a first priority lien on the Company’s assets or to make investments or capital expenditures.

     Also, in March 2005, the Company issued Floating Rate Convertible Senior Subordinated Notes due in 2013, with an aggregate principal amount of $60 million. These notes bear interest at a per annum rate equal to the 3-month LIBOR, adjusted quarterly, minus a spread of 1.5%. The interest rate at June 30 and March 31, 2007 was 3.9% and 3.4%, respectively. Interest is payable quarterly. The notes are convertible into the Company’s common stock at a conversion rate of 57.5705 shares per one thousand dollars principal amount at maturity, subject to adjustments for any common stock splits, dividends on the common stock, tender and exchange offers by the Company for the common stock and third party tender offers, and in the case of a change in control in which 10% or more of the consideration for the common stock is cash or non-traded securities, the conversion rate increases, depending on the value offered and timing of the transaction, to as much as 70.2247 shares per one thousand dollars principal amount.

     At June 30, 2007, the Company was in compliance in all material respects with covenants contained in the Credit Agreement and indenture agreements that cover the 10.5% senior secured notes and floating rate convertible subordinated notes.

     At June 30, 2007, the Company had outstanding letters of credit with a face value of $45.3 million and surety bonds with a face value of $4.5 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 surety in the form of letters of credit at June 30, 2007, pursuant to the terms of the agreement, was $4.5 million.

     Risks and uncertainties could cause the Company’s performance to differ from management’s estimates. As discussed under “Factors Which Affect the Company’s Financial Performance – Seasonality and Weather,” the Company’s business is seasonal. During the Company’s first and second fiscal quarters, the Company builds inventory in anticipation of increased sales in the winter months. This inventory build increases the Company’s working capital needs. During these quarters, because working capital needs are already high, unexpected costs or increases in costs beyond predicted levels would place a strain on the Company’s liquidity.

Sources Of Cash

     The Company’s liquidity requirements have been met historically and will continue to be met through cash provided by operations, borrowed funds, the proceeds of sales of accounts receivable, and the sale of non-core assets. The Credit Agreement allows the Company to retain the first $60 million from proceeds from the sale of non-core assets.

     The Company generated $3.4 million and $0.01 million in cash from the sale of non-core assets in the first quarter of fiscal 2008 and fiscal 2007, respectively. These sales principally relate to the sale of surplus land and buildings.

     Cash flows provided by financing activities were $38.9 million and $11.2 million in the first quarter of fiscal 2008 and fiscal 2007, respectively. This increase relates primarily to incremental borrowings under the Company’s Credit Agreement, partially offset by costs associated with the extinguishment of the Company’s previous credit facility.

     Total debt at June 30, 2007 was $755.8 million, as compared to $684.5 million at March 31, 2007. See Note 7 to the Condensed Consolidated Financial Statements for the composition of such debt.

Uses Of Cash

     The Company’s liquidity needs arise primarily from the funding of working capital needs, obligations on indebtedness and capital expenditures. Because of the seasonality of the Company’s business, more cash has been typically generated in the third and fourth fiscal quarters than the first and second fiscal quarters. Greatest cash demands from operations have historically occurred during the months of June through October.

     The decrease in net cash flow from operations versus the first quarter of fiscal 2007 relates primarily to seasonality related increases in inventory levels as operating units prepare for heavier sales in the third and fourth quarters, partially driven by higher lead prices.

     Restructuring costs of $2.4 million and $10 million were paid during the first quarter of fiscal 2008 and 2007, respectively. The Company anticipates that it will have ongoing liquidity needs to support its operational restructuring programs during fiscal 2008, which include payment of remaining accrued restructuring costs of approximately $5.4 million as of June 30, 2007. The Company’s ability to successfully implement these restructuring strategies on a timely basis may be impacted by its access to sources of liquidity. For further discussion see Note 13 to the Consolidated Financial Statements.

     Capital expenditures were $10.8 million and $8.0 million in the first quarter of fiscal 2008 and 2007, respectively.

     The estimated fiscal 2008 pension plan contributions are approximately $53.1 million and other post-retirement contributions are approximately $2.5 million. Payments aggregating $14.5 million were made during the three months ended June 30, 2007.

     Cash contributions to the Company’s pension plans are generally made in accordance with minimum regulatory requirements. The Company’s U.S. plans are currently significantly under-funded. Based on current assumptions and regulatory requirements, the Company’s minimum future cash contribution requirements for its U.S. plans are expected to remain relatively high for the next few fiscal years. On November 17, 2004, the Company received written notification of a tentative determination from the Internal Revenue Service (“IRS”) granting a temporary waiver of its minimum funding requirements for its U.S. plans for calendar years 2003 and 2004, amounting to approximately $50 million, net, under Section 412(d) of the Internal Revenue Code, subject to providing a lien satisfactory to the Pension Benefit Guaranty Corporation (“PBGC”). On June 10, 2005, the Company reached agreement with the PBGC on a second priority lien on domestic personal property, including stock of its U.S. and direct foreign subsidiaries to secure the unfunded liability. The temporary waiver provides for deferral of the Company’s minimum contributions for those years to be paid over a subsequent five-year period through 2010. At June 30, 2007 the Company owed approximately $26.5 million relating to these amounts previously waived.

     Based upon the temporary waiver and sensitivity to varying economic scenarios, the Company expects the cumulative minimum future cash contributions to its U.S. pension plans will total approximately $70 million to $125 million from fiscal 2008 to fiscal 2012, including $35 million in fiscal 2008.

     The Company expects that cumulative contributions to its non U.S. pension plans will total approximately $93.2 million from fiscal 2008 to fiscal 2012, including $18.1 million in fiscal 2008. In addition, the Company expects that cumulative contributions to its other post-retirement benefit plans will total approximately $13 million from fiscal 2008 to fiscal 2012, including $2.5 million in fiscal 2008.

Financial Instruments and Market Risk

     From time to time, the Company uses forward contracts to economically hedge certain currency exposures and certain lead purchasing requirements. The forward contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company expects that it may increase the use of financial instruments, including fixed and variable rate debt as well as swap, forward and option contracts to finance its operations and to hedge interest rate, currency and certain lead purchasing requirements in the future. The swap, forward, and option contracts would be entered into for periods consistent with related underlying exposures and would not constitute positions independent of those exposures. The Company has not, and does not intend to enter into contracts for speculative purposes nor be a party to any leveraged instruments.

     The Company’s ability to utilize financial instruments may be restricted because of tightening, and/or elimination of credit availability with counter-parties. If the Company is unable to utilize such instruments, the Company may be exposed to greater risk with respect to its ability to manage exposures to fluctuations in foreign currencies, interest rates, and lead prices.

Accounts Receivable Factoring Arrangements

     In the ordinary course of business, the Company utilizes accounts receivable factoring arrangements in countries where programs of this type are typical. Under these arrangements, the Company may sell certain of its trade accounts receivable to financial institutions. The arrangements in virtually all cases do not contain recourse provisions against the Company for its customers’ failure to pay. The Company sold approximately $58.5 million and $45.2 million of foreign currency trade accounts receivable as of June 30, 2007 and March 31, 2007, respectively. Changes in the level of receivables sold from year to year are included in the change in accounts receivable within cash flow from operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

     Changes to the quantitative and qualitative market risks as of June 30, 2007 are described in Item 2 above, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”. Also, see the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2007 for further information.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     The Company maintains “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

     As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of senior management, including the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon, and as of the date of this evaluation, the chief executive officer and the chief financial officer concluded that the Company’s disclosure controls and procedures were effective.

     The certifications of our principal executive officer and principal financial officer required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 are attached as exhibits to this quarterly report on Form 10-Q. The disclosures set forth in this Item 4 contain information concerning the evaluation of the Company’s disclosure controls and procedures, internal control over financial reporting and changes in internal control over financial reporting referred to in those certifications. Those certifications should be read in conjunction with this Item 4 for a more complete understanding of the matters covered by the certifications.

Changes in Internal Control Over Financial Reporting

     There have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2007 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR
PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Except for historical information, this report may be deemed to contain “forward-looking” statements. The Company desires to avail itself of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”) and is including this cautionary statement for the express purpose of availing itself of the protection afforded by the Act.

Examples of forward-looking statements include, but are not limited to (a) projections of revenues, cost of raw materials, income or loss, earnings or loss per share, capital expenditures, growth prospects, dividends, the effect of currency translations, capital structure, and other financial items, (b) statements of plans and objectives of the Company or its management or Board of Directors, including the introduction of new products, or estimates or predictions of actions by customers, suppliers, competitors or regulating authorities, (c) statements of future economic performance, and (d) statements of assumptions, such as the prevailing weather conditions in the Company’s market areas, underlying other statements and statements about the Company or its business.

Factors that could cause actual results to differ materially from these forward looking statements include, but are not limited to, the following general factors such as: (i) the Company’s ability to implement and fund based on current liquidity business strategies and restructuring plans, (ii) unseasonable weather (warm winters and cool summers) which adversely affects demand for automotive and some industrial batteries, (iii) the Company’s substantial debt and debt service requirements which may restrict the Company’s operational and financial flexibility, as well as imposing significant interest and financing costs, (iv) the litigation proceedings to which the Company is subject, the results of which could have a material adverse effect on the Company and its business, (v) the realization of the tax benefits of the Company’s net operating loss carry forwards, which is dependent upon future taxable income, (vi) the fact that lead, a major constituent in most of the Company’s products, experiences significant fluctuations in market price and is a hazardous material that may give rise to costly environmental and safety claims, (vii) competitiveness of the battery markets in the Americas and Europe, (viii) the substantial management time and financial and other resources needed for the Company’s consolidation and rationalization of acquired entities, (ix) risks involved in foreign operations such as disruption of markets, changes in import and export laws, currency restrictions, currency exchange rate fluctuations and possible terrorist attacks against U.S. interests, (x) the Company’s exposure to fluctuations in interest rates on its variable debt, (xi) the Company’s ability to maintain and generate liquidity to meet its operating needs, (xii) general economic conditions, (xiii) the ability to acquire goods and services and/or fulfill labor needs at budgeted costs, (xiv) the Company’s reliance on a single supplier for its polyethylene battery separators, (xv) the Company’s ability to successfully pass along increased material costs to its customers, and (xvi) the loss of one or more of the Company’s major customers for its industrial or transportation products.

The Company cautions each reader of this report to carefully consider those factors hereinabove set forth. Such factors have, in some instances, affected and in the future could affect the ability of the Company to achieve its projected results and may cause actual results to differ materially from those expressed herein.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

 

See Note 11 to the Condensed Consolidated Financial Statements in this document.

Item 1A. Risk Factors

     The following risk factors, which were disclosed in the Company’s fiscal 2007 Form 10-K, have not materially changed since we filed our fiscal 2007 Form 10-K. See Item 1A to Part I of the Company’s fiscal 2007 Form 10-K for a complete discussion of these risk factors. (in thousands, except per share data)

	•		The Company remains subject to a preliminary SEC inquiry.
	•		The Company is subject to fluctuations in exchange rates and other risks associated with its non-U.S. operations which could adversely affect the Company’s results of operations.
	•		The Company’s liquidity is affected by the seasonality of its business. Warm winters and cool summers adversely affect the Company.
	•		Decreased demand in the industries in which the Company operates may adversely affect its business.
	•		The loss of the Company’s sole supplier of polyethylene battery separators would have a material adverse effect on the Company’s business.
	•		Many of the industries in which the Company operates are cyclical.
	•		The Company is subject to pricing pressure from its larger customers.
	•		The Company faces increasing competition and pricing pressure from other companies in its industries, and if the Company is unable to compete effectively with these competitors, the Company’s sales and profitability could be adversely affected.
	•		If the Company is not able to develop new products or improve upon its existing products on a timely basis, the Company’s business and financial condition could be adversely affected.
	•		The Company may be adversely affected by the instability and uncertainty in the world financial markets and the global economy, including the effects of turmoil in the Middle East.
	•		The Company may be unable to successfully implement its business strategy, which could adversely affect its results of operations and financial condition.
	•		The Company is subject to costly regulation in relation to environmental, health and safety matters, which could adversely affect its business and results of operations.
	•		The Environmental Protection Agency (“EPA”) or state environmental agencies could take the position that the Company has liability under environmental laws that were not discharged in bankruptcy. To the extent these authorities are successful in disputing the pre-petition nature of these claims, the Company could be required to perform remedial work that has not yet been performed for alleged pre-petition contamination, which would have a material adverse effect on the Company’s financial condition, cash flows or results of operations.
	•		The Company may be adversely affected by legal proceedings to which the Company is, or may become, a party.
	•		Holders of the Company’s common stock are subject to the risk of dilution of their investment as the result of the issuance of additional shares of common stock and warrants to purchase common stock to holders of pre-petition claims to the extent the reserve of common stock and warrants established to satisfy such claims is insufficient.
	•		The Company has experienced significant increases in raw material prices, particularly lead and further charges in the price of raw materials or in energy costs could have a material adverse impact on the Company.
	•		The cost of resolving the Company’s pre-petition disputed claims, including legal and other professional fees involved in settling or litigating these matters, could have a material adverse effect on its financial condition, cash flows and results of operations.
	•		Work stoppages or other labor issues at the Company’s facilities or its customers’ or suppliers’ facilities could adversely affect the Company’s operations. The Company’s substantial indebtedness could adversely affect its financial condition.
	•		Restrictive covenants limit the Company’s ability to operate its business and to pursue its business strategies, and its failure to comply with these covenants could result in an acceleration of its indebtedness. Holders of the Company’s common stock are subject to the risk of dilution of their investment as the result of the issuance of additional shares of common stock and warrants to purchase common stock to holders of pre-petition claims to the extent the reserve of common stock and warrants established to satisfy such claims is insufficient.
	•		Holders of the Company’s common stock are subject to the risk of dilution of their investment as the result of the issuance of additional shares of common stock and warrants to purchase common stock to holders of pre-petition claims to the extent the reserve of common stock and warrants established to satisfy such claims is insufficient.
	•		The Company’s Ability to Recognize the Benefits of Deferred Tax Assets is Dependent on Future Cash Flows and Taxable Income

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

     On April 20, 2007, the Company issued 12,443 shares of common stock and 31,208 warrants to purchase common stock at a price of $30.31 per share. The shares and warrants were issued pursuant to the Plan of Reorganization under Section 1145 of the U.S. Bankruptcy Code.

Item 3. Defaults Upon Senior Securities

None

Item 4.Submission of Matters to a Vote of Security Holders

None

Item 5.Other Information

None

Item 6. Exhibits

31.1		Certification of Gordon Ulsh, President and Chief Executive Officer, pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2		Certification of Francis M. Corby, Jr., Executive Vice President and Chief Financial Officer, pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32		Certifications pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		EXIDE TECHNOLOGIES
		By:		/S/ Francis M. Corby, Jr.
				Francis M. Corby, Jr.
				Executive Vice President and
				Chief Financial Officer
				Date: August 7, 2007