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 September 30, 2006

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,
Building 200
Alpharetta, Georgia (Address of principal executive offices)		30004 (Zip Code)

(678) 566-9000
(Registrant’s telephone number, including area code)

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

     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 November 3, 2006, 60,705,652 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 SEPTEMBER 30, 2006 AND 2005 AND THE SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005			3
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2006 AND MARCH 31, 2006			4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2006 AND 2005			5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			6
Item 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			21
Item 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			34
Item 4 CONTROLS AND PROCEDURES			34
PART II. OTHER INFORMATION			37
Item 1. LEGAL PROCEEDINGS			37
Item 1A. RISK FACTORS			37
Item 2. UNREGISTERED SALES OF EQUTY SECURITIES AND USE OF PROCEEDS			39
Item 3. DEFAULTS UPON SENIOR SECURITIES			39
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			39
Item 5. OTHER INFORMATION			40
Item 6. EXHIBITS			40
SIGNATURES			41
EX-3.1 AMENDED AND RESTATED ARTICLES OF INCORPORATION
EX-10.1 2004 STOCK INCENTIVE PLAN
EX-10.3 2007 SHORT TERM INCENTIVE PLAN
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32 SECTION 906 CERTIFICATIONS OF CEO AND CFO

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EXIDE TECHNOLOGIES AND SUBSIDIARIES

		For the Three Months Ended								For the Six Months Ended
		September 30, 2006				September 30, 2005				September 30, 2006				September 30, 2005
NET SALES		$	680,299			$	686,485			$	1,363,489			$	1,355,817
COST OF SALES			574,897				582,587				1,148,409				1,149,705
Gross profit			105,402				103,898				215,080				206,112
EXPENSES:
Selling, marketing and advertising			65,944				67,615				134,450				138,687
General and administrative			36,393				43,138				82,387				86,877
Restructuring and impairment			7,039				6,640				15,923				9,540
Other (income) expense, net			6,204				1,412				2,712				4,811
Interest expense, net			22,641				16,658				44,928				32,758
			138,221				135,463				280,400				272,673
Loss before reorganization items, income taxes, and minority interest			(32,819	)			(31,565	)			(65,320	)			(66,561	)
REORGANIZATION ITEMS, NET			964				1,715				2,570				3,087
INCOME TAX PROVISION (BENEFIT)			1,294				(202	)			4,872				(956	)
MINORITY INTEREST			32				(55	)			243				40
Net loss		$	(35,109	)		$	(33,023	)		$	(73,005	)		$	(68,732	)
NET LOSS PER SHARE
Basic and Diluted		$	(1.16	)		$	(1.29	)		$	(2.61	)		$	(2.69	)
WEIGHTED AVERAGE SHARES
Basic and Diluted			30,169				25,576				27,936				25,576

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES

		September 30, 2006				March 31, 2006
ASSETS
Current assets:
Cash and cash equivalents		$	93,888			$	32,161
Restricted cash			613				561
Receivables, net of allowance for doubtful accounts of $26,404 and $21,637			569,946				617,677
Inventories			418,567				414,943
Prepaid expenses and other			30,188				30,243
Deferred financing costs, net			3,248				3,169
Deferred income taxes			5,587				11,066
Total current assets			1,122,037				1,109,820
Property, plant and equipment, net			657,316				685,842
Other assets:
Other intangibles, net			188,945				186,820
Investments in affiliates			5,141				4,783
Deferred financing costs, net			13,891				15,196
Deferred income taxes			57,941				56,358
Other			20,861				24,090
			286,779				287,247
Total assets		$	2,066,132			$	2,082,909
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings		$	11,650			$	11,375
Current maturities of long-term debt			2,692				5,643
Accounts payable			342,086				360,538
Accrued expenses			285,693				298,631
Warrants liability			1,324				2,063
Total current liabilities			643,445				678,250
Long-term debt			660,998				683,986
Noncurrent retirement obligations			315,985				333,248
Deferred income tax liability			28,055				33,590
Other noncurrent liabilities			111,794				116,430
Total liabilities			1,760,277				1,845,504
Commitments and contingencies			—				—
Minority interest			13,356				12,666
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 and 61,500 shares authorized, 60,701 and 24,546 shares issued and outstanding			607				245
Additional paid-in capital			1,007,320				888,647
Accumulated deficit			(712,660	)			(639,655	)
Accumulated other comprehensive loss			(2,768	)			(24,498	)
Total stockholders’ equity			292,499				224,739
Total liabilities and stockholders’ equity		$	2,066,132			$	2,082,909

The accompanying notes are an integral part of these statements.

EXIDE TECHNOLOGIES AND SUBSIDIARIES

		For the Six Months Ended
		September 30, 2006				September 30, 2005
Cash Flows From Operating Activities:
Net loss		$	(73,005	)		$	(68,732	)
Adjustments to reconcile net loss to net cash used in operating activities—
Depreciation and amortization			60,464				60,343
Unrealized gain on Warrants			(739	)			(7,748	)
Net loss on asset sales			6,972				2,669
Deferred income taxes			239				—
Provision for doubtful accounts			4,701				3,357
Non-cash provision for restructuring			1,343				448
Reorganization items, net			2,570				3,087
Minority interest			243				40
Amortization of deferred financing costs			1,659				897
Changes in assets and liabilities —
Receivables			62,225				12,176
Inventories			8,875				(23,497	)
Prepaid expenses and other			2,459				(11,722	)
Payables			(30,089	)			(28,945	)
Accrued expenses			(24,008	)			(37,421	)
Noncurrent liabilities			(33,301	)			(4,587	)
Other, net			(4,122	)			14,896
Net cash used in operating activities			(13,514	)			(84,739	)
Cash Flows From Investing Activities:
Capital expenditures			(15,602	)			(24,092	)
Proceeds from sales of assets, net			2,498				11,333
Net cash used in investing activities			(13,104	)			(12,759	)
Cash Flows From Financing Activities:
Increase (decrease) in short-term borrowings			(154	)			12,420
Repayments of Borrowings under Senior Secured Credit Facility			(26,545	)			—
Currency Swap			—				(12,084	)
Increase (decrease) in other debt			(3,764	)			52,277
Financing costs and other			(3	)			—
Net Proceeds from rights offering and private equity sale			117,871				—
Net cash provided by financing activities			87,405				52,613
Effect of Exchange Rate Changes on Cash and Cash Equivalents			940				(1,726	)
Net Increase (Decrease) In Cash and Cash Equivalents			61,727				(46,611	)
Cash and Cash Equivalents, Beginning of Period			32,161				76,696
Cash and Cash Equivalents, End of Period		$	93,888			$	30,085

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 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 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, 2006 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.

     These Condensed Consolidated Financial Statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and satisfaction of liabilities in the ordinary course of business. The ability of the Company to continue as a going concern is predicated upon, among other things, compliance with the provisions of the covenants of its current borrowing arrangements, the ability to generate cash flows from operations and, where necessary, obtaining financing sources sufficient to satisfy the Company’s future obligations, as well as certain contingencies described in Note 13.

     As of November 3, 2006, the Company believes, based upon its financial forecast and plans, that it will comply with the Credit Agreement covenants for at least the period through September 30, 2007. The Company has suffered recurring losses and negative cash flows from operations. Additionally, given the Company’s past financial performance in comparison to its budgets and forecasts, there is no assurance the Company will be able to meet these budgets and forecasts and be in compliance with one or more of its covenants of its Credit Agreement. These uncertainties with respect to the Company’s past performance in comparison to its budgets and forecasts and its ability to maintain compliance with its financial covenants throughout fiscal 2006 resulted in the Company’s receiving a going concern modification to its audit opinion for fiscal 2006. Failure to comply with the Credit Agreement covenants, without waiver, would result in a default under the Credit Agreement. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. Should the Company be in default, it is not permitted to borrow under the Credit Agreement, which would have a very negative effect on liquidity. Although the Company has been able to obtain waivers of prior defaults, there can be no assurance that it can do so in the future or, if it can, what the cost and terms of obtaining such waivers would be. Future defaults would, if not waived, allow the Credit Agreement lenders to accelerate the loans and declare all amounts due and payable. Any such acceleration would also result in a default under the Indentures for the Company’s notes and their potential acceleration.

     Generally, the Company’s principal sources of liquidity are cash from operations, borrowings under the Credit Agreement, and proceeds from any asset sales which are not used to repay Credit Agreement debt. The Credit Agreement requires that the proceeds from asset sales be used for the pay down of Term Loans, except for specific exceptions which permit the Company to retain $30.0 million from specified non-core asset sales and 50% of the proceeds of the sale of other specified assets with an estimated value of $100.0 million.

     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. The Debtors declared May 5, 2004 as the effective date of the Plan, and substantially consummated the transactions provided for in the Plan on such date (the “Effective Date”).

     The emergence from Chapter 11 resulted in a new reporting entity (the “Successor Company”) and adoption of Fresh Start reporting in accordance with Statement of Position 90-7 (“SOP 90-7”), “Financial Reporting by Entities in Reorganization under the Bankruptcy Code.” Fresh Start reporting required the Company to allocate the reorganization value to its assets based upon their estimated fair values in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” (“SFAS 141”). In connection with the development of the plan of reorganization the Company was primarily responsible for the valuation and directed its financial advisors to prepare a valuation analysis of its business. Management considered a number of

factors, including valuations or appraisals, when estimating the fair values of the Company’s assets and liabilities. Each liability existing at the Plan confirmation date, other than deferred taxes, was stated at present values of amounts to be paid determined at appropriate current interest rates. Adoption of Fresh Start reporting has resulted in material adjustments to the historical carrying value of the Company’s assets and liabilities.

(2) WARRANTS

     In connection with the consummation of the Plan, the Company issued warrants entitling the holders to purchase up to 6.25 million shares of new common stock at an exercise price of $32.11 per share (the number of warrants issuable being subject to adjustments allowed for by the claims reconciliation and allowance process set forth in the Plan). The Company has accounted for the warrants in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-19 “Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company’s Own Stock” (“EITF 00-19”) and SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“SFAS 150”). Because the Warrant Agreement provides for a cash settlement upon a change in control under certain specified conditions, the warrants have been accounted for and classified as a liability in the Condensed Consolidated Balance Sheets.

     The warrants are exercisable through May 5, 2011. The exercise price, the number of shares purchasable upon the exercise of each warrant and the number of warrants outstanding are subject to adjustment from time to time upon occurrence of certain events described in the Warrant Agreement. In accordance with the provisions of the Warrant Agreement dated May 5, 2004, and as a result of the completed $75.0 million rights offering and private sale of $50.0 million of common stock, an additional 371,164 became issuable and the exercise price of the warrants was adjusted to $30.31.

     In accordance with EITF 00-19 and SFAS 150, the warrants have been marked-to-market based upon quoted market prices. This mark-to-market resulted in recognition of unrealized (gain) loss of $0.1 million and $0.4 million for the second quarter of fiscal 2007 and 2006, respectively, and ($0.7 million) and ($7.7 million) for the first six months of fiscal 2007 and 2006, respectively, which is reported in Other (income) expense, net in the Condensed Consolidated Statements of Operations. Future results of operations may be subject to volatility from changes in the market value of such warrants.

(3) COMPREHENSIVE LOSS

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

		For the Three Months Ended								For the Six Months Ended
		September 30, 2006				September 30, 2005				September 30, 2006				September 30, 2005
Net loss		$	(35,109	)		$	(33,023	)		$	(73,005	)		$	(68,732	)
Additions and changes to minimum pension liability			61				22				(291	)			279
Change in cumulative translation adjustment			(99	)			(2,851	)			22,021				(23,642	)
Total comprehensive loss		$	(35,147	)		$	(35,852	)		$	(51,275	)		$	(92,095	)

(4) REORGANIZATION ITEMS, NET

     Reorganization items, net represent costs the Company continues to incur as a result of the Chapter 11 process and are presented separately in the Condensed Consolidated Statements of Operations. The following have been incurred (in thousands):

		For the Three Months Ended								For the Six Months Ended
		September 30, 2006				September 30, 2005				September 30, 2006				September 30, 2005
Professional fees		$	525			$	1,168			$	1,354			$	1,996
Other (a)			439				547				1,216				1,091
Total reorganization items, net		$	964			$	1,715			$	2,570			$	3,087

Net cash paid for reorganization items during the three months ended September 30, 2006 and 2005 and the six months ended September 30, 2006 and 2005, was approximately $1.0 million, $1.9 million, $2.6 million and $8.4 million, respectively.

(a) Other primarily represents expenses related to directors and officer’s liability insurance coverage for directors and officers of the Predecessor Company.

(5) INTANGIBLE ASSETS, NET

		Trademarks and				Trademarks and
		Tradenames (not				Tradenames (subject				Customer
		subject to amortization)				to amortization)				Relationships				Technology				Total
						(in thousands)
As of March 31, 2006:
Gross Amount		$	56,331			$	12,813			$	106,594			$	23,781			$	199,519
Accumulated Amortization			—				(1,939	)			(8,499	)			(2,261	)			(12,699	)
Net		$	56,331			$	10,874			$	98,095			$	21,520			$	186,820
As of September 30, 2006:
Gross Amount		$	58,020			$	13,197			$	109,785			$	24,494			$	205,496
Accumulated Amortization			—				(2,519	)			(11,096	)			(2,936	)			(16,551	)
Net		$	58,020			$	10,678			$	98,689			$	21,558			$	188,945

Amortization of intangible assets for the first six months of fiscal 2007 and 2006 was $3.4 million and $3.3 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 $6.6 million. Intangible assets have been pushed down to the proper legal entity and are subject to foreign currency fluctuation.

(6) INVENTORIES

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

		September 30, 2006				March 31, 2006
Raw materials		$	69,813			$	64,248
Work-in-process			86,444				79,923
Finished goods			262,310				270,772
		$	418,567			$	414,943

(7) OTHER ASSETS

     Other assets consist of (in thousands):

		September 30, 2006				March 31, 2006
Deposits		$	10,317			$	10,317
Capitalized software, net			3,966				6,524
Loan to affiliate			2,249				3,563
Other			4,329				3,686
		$	20,861			$	24,090

     Deposits principally represent amounts held by the beneficiaries as cash collateral for those parties’ contingent obligations with respect to certain environmental matters, workers compensation insurance and operating lease commitments.

(8) DEBT

     At September 30, 2006 and March 31, 2006, short-term borrowings of $11.7 million and $11.4 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.

     Total long-term debt is as follows (in thousands):

		September 30, 2006				March 31, 2006
Senior Secured Credit Facility		$	293,238			$	316,277
10.5% Senior Secured Notes due 2013			290,000				290,000
Floating Rate Convertible Senior Subordinated Notes due 2013			60,000				60,000
Other, including capital lease obligations and other loans at interest rates generally ranging up to 11.0% due in installments through 2015			20,452				23,352
Total			663,690				689,629
Less — current maturities			2,692				5,643
		$	660,998			$	683,986

     Total debt including short-term borrowings at September 30, 2006 and March 31, 2006 was $675.3 million and $701.0 million , respectively.

(9) INTEREST EXPENSE, NET

     Interest income of $0.4 million, $0.4 million, $0.7 million, and $0.9 million is included in Interest expense, net for the three months ended September 30, 2006 and 2005 and the six months ended September 30, 2006 and 2005, respectively.

(10) OTHER (INCOME) EXPENSE, NET

     Other (income) expense, net consist of (in thousands):

		For the Three Months Ended								For the Six Months Ended
		September 30, 2006				September 30, 2005				September 30, 2006				September 30, 2005
Net loss on asset sales / disposals		$	4,169			$	1,024			$	6,972			$	2,669
Equity income			(331	)			(455	)			(350	)			(989	)
Currency (gain) loss			1,387				1,360				(4,202	)			13,034
Loss on revaluation of foreign currency forward contract			—				—				—				(1,081	)
(Gain) loss on revaluation of Warrants			74				378				(739	)			(7,748	)
Other			905				(895	)			1,031				(1,074	)
		$	6,204			$	1,412			$	2,712			$	4,811

(11) EMPLOYEE BENEFITS

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

		Pension Benefits
		For the Three Months Ended								For the Six Months Ended
		September 30, 2006				September 30, 2005				September 30, 2006				September 30, 2005
Components of net periodic benefit cost:
Service cost		$	2,249			$	2,708			$	4,472			$	5,452
Interest cost			8,346				8,178				16,621				16,484
Expected return on plan assets			(6,206	)			(5,299	)			(12,355	)			(10,669	)
Amortization of:
Prior service cost			5				—				10				—
Actuarial loss			(300	)			—				(592	)			—
Net periodic benefit cost		$	4,094			$	5,587			$	8,156			$	11,267

		Other Post-Retirement Benefits
		For the Three Months Ended								For the Six Months Ended
		September 30, 2006				September 30, 2005				September 30, 2006				September 30, 2005
Components of net periodic benefit cost:
Service cost		$	42			$	25			$	84			$	50
Interest cost			390				335				780				669
Amortization of:
Actuarial loss			53				—				106				—
Net periodic benefit cost		$	485			$	360			$	970			$	719

     During the first quarter of fiscal 2007, the Company amended its U.S. pension plan to freeze future accruals for non-collectively bargained employees effective May 15, 2006. The partial plan freeze did not trigger any curtailment charges or credits under SFAS 88. The above SFAS 87 net periodic pension cost reflects the partial plan freeze.

     The estimated fiscal 2007 pension plan contributions are approximately $62.8 million and other post-retirement contributions are approximately $2.8 million. At September 30, 2006, the Company has paid $43.4 million of the $62.8 million required pension plan contributions. 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 $50.0 million, net, under Section 412(d) of the Internal Revenue Code, subject to providing a lien satisfactory to the Pension Benefit Guaranty Corporation (“PBGC”). In accordance with the Credit Agreement and upon the agreement of the administrative agent, 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 September 30, 2006 the Company owed approximately $31.9 million relating to these amounts previously waived.

     Based upon the temporary waiver and sensitivity to varying economic scenarios, the Company expects its cumulative minimum future cash contributions to its U.S. pension plans will total approximately $115.0 million to $165.0 million from fiscal 2007 to fiscal 2011, including $46.7 million in fiscal 2007.

     The Company expects that cumulative contributions to its non U.S. pension plans will total approximately $84.0 million from fiscal 2007 to fiscal 2011, including $16.1 million in fiscal 2007. In addition, the Company expects that cumulative contributions to its other post-retirement benefit plans will total approximately $13.0 million from fiscal 2007 to fiscal 2011, including $2.8 million in fiscal 2007.

(12) 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 safety and health laws and regulations, as well as similar laws and regulations in other countries in which the Company operates. For a discussion of environmental matters, see Note 13.

(13) COMMITMENTS AND CONTINGENCIES

   Claims Reconciliation

     Holders of general unsecured claims will receive collectively 2.5 million shares of new common stock and warrants to purchase 6.25 million shares of new common stock at $32.11 per share, adjusted to 6.6 million shares with a exercise price of $30.31 based on the closing of the recent $75.0 million rights offering and $50.0 million private sale of common stock. Approximately 13.4% of such new common stock and warrants were initially reserved for distribution for disputed general unsecured claims under the Plan’s claims reconciliation and allowance procedures. 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 general unsecured 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 or other resolution of such objections. Predictions regarding the allowance and classification of claims are inherently difficult to make.

     With respect to environmental claims in particular, there is inherent difficulty in assessing 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 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, are 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 and either specify no 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 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 per $383.00 in allowed claim amount and approximately one warrant per $153.00 in allowed claim amount. These rates were established based upon the assumption that the common stock and warrants allocated to non-noteholder general unsecured claims on the effective date of the Plan, including the reserve established for disputed general unsecured 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 non-noteholder 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 non-noteholder general unsecured claims. If this were to occur, additional common stock would also be issued to the holders of pre-petition secured claims to maintain the ratio of their distribution in common stock at nine times the amount of common stock distributed for all unsecured claims.

     Based on information currently available, as of October 20, 2006, approximately 7.4% of new stock and warrants reserved for distribution for disputed general unsecured claims has been distributed. The Company also continues to resolve certain non-objected claims.

     On October 20, 2006, the Company made its tenth distribution of new common stock and warrants.

   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, to 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 April 15, 2002, the Company filed for protection under Chapter 11 of the Bankruptcy Code. Later in 2002, the United States Attorney’s Office for the Southern District of Illinois filed a claim as a general unsecured creditor of the Company’s subsidiary, Exide Illinois, Inc. for $27.9 million. The Company did not pay any installments of the criminal fine before or during its bankruptcy proceedings, nor did it pay any installments of the criminal fine after the Company emerged from bankruptcy in May 2004. As previously reported, if the U.S. Government were to assert that the obligation to pay the fine was not discharged under the Plan of Reorganization, the Company could be required to pay it.

     In December 2004, the U.S. Attorney’s Office requested additional information regarding whether the Company adequately disclosed its financial condition at the time the plea agreement and the associated fine were approved by the U.S. District Court. The Company supplied correspondence and other materials responsive to this request.

     On November 18, 2005 the U.S. Attorney’s Office filed a motion in the District Court for a hearing to make inquiry of the Company’s failure to comply with the Court’s judgment and terms of probation, principally through failure to pay the fine, and a motion to show cause why the Company should not be held in contempt. In its motion, the U.S. Attorney’s Office asserted that Exide Illinois was in default from its nonpayment of the criminal fine and was in violation of the terms of probation. The U.S. Attorney also asserted that bankruptcy did not discharge criminal fines, and that the Company did not adequately disclose its financial condition at the time the plea agreement and associated fines were approved by the District Court.

     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.

     Under the order, Exide Technologies must provide security in a form acceptable to the court and to the government by February 26, 2007 for its guarantee of any remaining unpaid portion of the fine, but may petition the court prior thereto if the Company believes its financial viability would be jeopardized by providing such security. 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.

  Private Party Lawsuits and other Legal Proceedings

     On March 14, 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, and the Bankruptcy Court conducted a hearing on the Company’s rejection request. On April 3, 2006, the Court granted the Company’s request to reject the contracts. EnerSys has filed a notice of appeal. 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 June 2006, the Bankruptcy Court ordered a two year transition period and denied Enersys’ motion for a stay. Enersys has appealed that order. The parties engaged in court ordered mediation on July 27, 2006 which was unsuccessful. The Company filed a motion to expedite the appeal. which remains pending. EnerSys filed its opening appellate brief on September 5, 2006 and the Company filed its brief in opposition on October 5, 2006.

     In July 2001, Pacific Dunlop Holdings (US), Inc. (“PDH”) and several of its foreign affiliates under the various agreements through which Exide and its affiliates acquired GNB, filed a complaint in the Circuit Court for Cook County, Illinois alleging breach of contract, unjust enrichment and conversion against Exide and three of its foreign affiliates. The plaintiffs maintain they are entitled to approximately $17.0 million in cash assets acquired by the defendants through their acquisition of GNB. In December 2001, the Court denied the defendants’ motion to dismiss the complaint, without prejudice to re-filing the same motion after discovery proceeds. The defendants filed an answer and counterclaim. On July 8, 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 and in October 2002, the parties presented oral arguments, in the case of PDH, to remand the case to Illinois state court and, in the case of Exide, to transfer the case to the U.S. Bankruptcy Court for the District of Delaware. On February 4, 2003, the U.S. Bankruptcy Court for the Northern District of Illinois transferred the case to the U.S. Bankruptcy Court in Delaware. On November 19, 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. PDH subsequently filed a motion to reconsider, and on June 16, 2005, the Bankruptcy Court denied PDH’s motion to reconsider. PDH has appealed the Bankruptcy court’s decisions to the U.S. District Court for the District of Delaware. That court, pursuant to a Standing Order requiring mandatory mediation of all appeals from the Bankruptcy Court, scheduled a mediation in Wilmington, Delaware which took place on November 3, 2005. The appeal will proceed and remains pending. 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 in calendar year 2005 and through September 30, 2006. 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.

     The Company’s Shanghai, China subsidiary, Exide Technologies (Shanghai) Company Limited (“Exide Shanghai”), has been the subject of an investigation by the Anti-Smuggling Bureau of the Shanghai Customs Administration (“Anti-Smuggling Bureau”). A report was submitted by the Anti-Smuggling Bureau to the Shanghai Municipal People’s Public Prosecutor’s Office, First Division (“Prosecutor’s Office”). The Prosecutor’s Office rejected the report, and with regard to two supplemental investigatory reports, the Company understands that in both instances no criminal prosecution was recommended against Exide Shanghai, its officers, directors and employees.

     In April 2003, the Company sold its Torrejon, Spain nickel-cadmium plant. The Company has learned that the Torrejon courts are conducting an investigation of three petitions submitted to determine whether criminal charges should be filed for alleged injuries and endangerment of workers’ health at the former Torrejon plant. The petitions contain criminal allegations against current and former employees but only allegations of civil liability against the Company. The investigations have been consolidated into one court. The Company has retained counsel in the event that any charges ultimately are filed.

     Between 1996 and 2002, one of the Company’s Spanish subsidiaries negotiated dual-scale salaries under collective bargaining agreements for workers at numerous facilities. Several claims challenging the dual-scale salary system have been brought in various

Spanish courts covering multiple jurisdictions. To date, the Company has lost its challenges in only one jurisdiction, where it continues to litigate some of these claims and prevailed in other jurisdictions. The Company does not currently anticipate any material adverse affect on the Company’s financial condition, cash flows or results of operations.

     In June 2005, the Company received notice that two former stockholders, Aviva Partners LLC and Robert Jarman, had separately filed purported class action lawsuits against the Company and certain of its current and former officers alleging violations of certain federal securities laws. The cases were filed 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.

     On August 29, 2005, District Judge Mary L. Cooper consolidated the Aviva Partners and Jarman cases under the Aviva Partners v. Exide Technologies, Inc. caption, lead docket number 05-3098 (MLC). On March 24, 2006 District Judge Cooper appointed the Alaska Hotel & Restaurant Employees Pension Trust Fund and Lakeway Capital Management Co-Lead Plaintiffs for the putative class of former Exide stockholders and appointed the law firms of Lerach Coughlin Stoja Geller Rudman & Robbins LLP and Schatz & Nobel, P.C. as Co-Lead Counsel for the putative class. On May 8, 2006 Co-Lead 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. Defendants have moved to dismiss all claims against them and await a ruling on their motion. Discovery is currently stayed pursuant to the discovery-stay provisions of the Private Securities Litigation Reform Act of 1995.

     On October 6, 2005, Murray Capital Management, Inc., filed suit against the Company, certain of its current and former officers and Deutsche Bank Securities, Inc. The case was filed in the U.S. District Court for the Southern District of New York under the caption Murray Capital Management, Inc. v. Exide Technologies, et al., docket number 05 Civ. 8570 (AKH), and alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act and SEC Rule 10b-5, among other 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. In October 2005, Deutsche Bank Securities Inc. made formal written demand that the Company indemnify it in connection with the Murray litigation pursuant to the purchase agreement for the Senior Secured Notes and the Floating Rate Convertible Senior Subordinated Notes. The Company has accepted the indemnification obligations from Deutsche Bank. On August 21, 2006, the U.S. District Court for the Southern District of New York held a hearing on the Company’s Motion to Dismiss the complaint filed in 2005 by Murray Capital Management, Inc. The Court granted our Motion to Dismiss without prejudice, and permitted the plaintiff 45 days to file an amended complaint. On or about October 6, 2006, the Plaintiff filed an amended complaint. Defendants intend to move to dismiss the amended complaint.

     On August 18, 2006 a shareholder derivative complaint was filed in the 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 previously filed and disclosed consolidated Aviva Partners and Jarman shareholder class action suits described above. The individual defendants intend to vigorously defend the suit.

     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 Credit Agreement debt. Such letter states, among other things, that Stanfield believes the Company is in default under the Credit Agreement and the note indentures because the $27.5 million fine described above under “Historical Federal Plea Agreement” constitutes a judgment in excess of the judgment amounts permitted under such indentures. The letter also says that Stanfield believes 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 believes that all such assertions are without merit. Such letter does not request any specific action by the Company, but rather states that the letter is intended to promote a “meaningful dialogue” between Stanfield and the Company and that if Stanfield does not receive an “adequate response” from the Company by November 8, 2006, it will “proceed accordingly.” Counsel for the Company has contacted such law firm and is attempting to determine what response Stanfield is seeking.

     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 any deductible.

   Environmental Matters

     As a result of its manufacturing, distribution and recycling operations, the Company is subject to numerous federal, state and local environmental, occupational safety and health 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 97 federally defined Superfund or state equivalent sites. At 44 of these sites, the Company has paid its share of liability. While the Company believes it is probable its liability for most of the remaining sites will be treated as disputed unsecured claims under the Plan, there can be no assurance these matters will be discharged. If the Company’s liability is not discharged at one or more sites, the government may be able to file claims for additional response costs in the future, or to order the Company to perform remedial work at such sites. In addition, the EPA, in the course of negotiating this pre-petition claim, had notified the Company of the possibility of additional clean-up costs associated with Hamburg, Pennsylvania properties of approximately $35.0 million, as described in more detail below. To date the EPA has not made a formal claim for this amount or provided any cost data in support of this estimate. 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 current amount of the government claims for these sites is approximately $14.0 million. On October 2, 2006, the United States Supreme Court denied review of the appellate decision, leaving Exide subject to a stipulated judgment for approximately $6.5 million, based on the ruling that Exide has successor liability for these EPA cost recovery claims. The judgment will be a general unsecured claim payable in common stock and warrants. Additionally, the EPA has asserted a general unsecured claim for costs related to other Hamburg, Pennsylvania sites. The current amount of the government’s claims for the aforementioned sites (including the stipulated judgment discussed above) is approximately $14.0 million. A reserve of common stock and warrants for the estimated value of all claims, including the aforementioned claims, was established as part of the Plan.

     In October 2004, the EPA, in the course of negotiating a comprehensive settlement of all its environmental claims against the Company, had notified the Company of the possibility of additional clean-up costs associated with other Hamburg, Pennsylvania properties of approximately $35.0 million. To date the EPA has not made a formal claim for this amount or provided any cost data in support of this estimate.

     As unsecured claims are allowed in the Bankruptcy Court, the Company is required to distribute common stock and warrants to the holders of such claims. To the extent the government is able to prove the Company is responsible for the alleged contamination

at the other Hamburg, Pennsylvania properties and substantiate its estimated $35.0 million of additional clean-up costs, these claims would ultimately result in an inadequate reserve of common stock and warrants to the extent not offset by the reconciliation of all other claims for lower amounts than the aggregate reserve. The Company would still retain the right to perform and pay for such cleanup activities, which would preserve the existing reserved common stock and warrants discussed in this Note 13. Except for the government’s cost recovery claim resolved by the U.S. v. General Battery/Exide case discussed above, it remains the Company’s position that it is not liable for the contamination of this area, and that any liability it may have derives from pre-petition events which would be administered as a general, unsecured claim, and consequently no provisions have been recorded in connection therewith.

     The Company has established reserves for on-site and off-site environmental remediation costs where such costs are probable and reasonably estimable and believes that such reserves are adequate. As of September 30, 2006 and March 31, 2006, the amount of such reserves on the Company’s Condensed Consolidated Balance Sheets were approximately $35.0 million and $36.7 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 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 done under a Consent Order with the U.S. 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 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 from $6.0 million to $9.0 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 $3.5 million to $7.0 million.

  Purchase Commitment

     In October 2006, the Company entered into various natural gas supply agreements totaling $9.0 million to purchase natural gas for certain of its North American facilities. The agreements are effective through March 2007. The agreements require the Company to purchase a committed amount of natural gas at a monthly fixed price, which the Company believes it will consume in its normal course of operations during the period November 2006 to March 2007.

  Guarantees

     At September 30, 2006, the Company had outstanding letters of credit with a face value of $44.3 million and surety bonds with a face value of $30.1 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 September 30, 2006, pursuant to the terms of the agreement, was $30.1 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 September 30, 2006, bank guarantees with a face value of $15.7 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. Many returns are in fact subsequently sold as seconds at a reduced price. 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 consolidated sales returns and allowances liability follows (in thousands):

Balance at March 31, 2006		$	45,618
Accrual for sales returns and allowances provided during the period			24,205
Settlements made (in cash or credit) during the period			(23,881	)
Foreign currency translation			812
Balance at September 30, 2006		$	46,754

(14) RESTRUCTURING

     During the first six months of fiscal 2007, the Company has continued to implement organizational and operational changes to streamline and rationalize its structure in an effort to simplify the organization and eliminate redundant and/or unnecessary costs. As part of these restructuring programs, the nature of the positions eliminated range from plant employees and clerical workers to operational and sales management.

     During the six months ended September 30, 2006, the Company recognized restructuring charges of $15.9 million, representing approximately $9.6 million for severance and $6.3 million for related closure costs. These charges resulted from closure of the Shreveport, Louisiana manufacturing plant in the Transportation North America segment, consolidation efforts in the Industrial Energy Europe and Rest of World (“ROW”) segment, headcount reductions in the Transportation Europe and ROW segment, headcount reductions in Industrial Energy North America segment and corporate severance. Approximately 325 positions have been eliminated in connection with fiscal 2007 restructuring activities.

     Summarized restructuring reserve activity follows (in thousands):

		Severance Costs				Closure Costs				Total
Balance at March 31, 2006		$	6,773			$	3,025			$	9,798
Charges, Six Months Ended September 30, 2006			9,584				6,339				15,923
Payments and Currency Translation			(13,773	)			(6,192	)			(19,965	)
Balance at September 30, 2006		$	2,584			$	3,172			$	5,756

     Remaining expenditures principally represent (i) severance and related benefits payable per employee agreements and regulatory requirements over periods up to three years (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, over periods up to five years and (iii) certain other closure costs including dismantlement and costs associated with removal obligations incurred in connection with the exit of facilities.

(15) 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 Plan have been included as outstanding common shares for purposes of calculating net loss per share for the three months and six months ended September 30, 2006 and 2005.

     For the three and six months ended September 30, 2006 and 2005, the Company incurred net losses. Therefore, potential

dilutive common shares were not used in the calculation of diluted net loss per share as they would have an anti-dilutive effect.

     As a result of the consummation of the $75.0 million rights offering and the private sale of $50.0 million of common stock (see Note 16), the Company issued a total of 35,712,570 shares of its common stock. Upon consummation of the rights offering, the fair value of the Company’s common stock was more than the rights offering’s $3.50 per share subscription price. Accordingly, basic and diluted loss per common share have been restated for the three- and six-month periods ended September 30, 2005, to reflect a stock dividend of 576,122 shares of the Company’s common stock.

     For each period presented, the amount of loss used in the calculation of diluted loss per share was the same as the amount of loss used in the calculation of basic loss per share.

(16) RIGHTS OFFERING AND PRIVATE SALE OF COMMON STOCK

     On September 18, 2006, the Company completed the $75.0 million rights offering that it launched in August 2006 which allowed stockholders to purchase additional shares of common stock. The Company distributed at no charge to its holders of common stock non-transferable subscription rights to purchase shares of the Company’s common stock. Each holder received 0.85753 of a subscription right for each share of common stock owned at the close of business on August 23, 2006, subject to adjustments to eliminate fractional rights. On September 18, 2006, the Company also completed a private sale of $50.0 million of common stock. The subscription price for each share of common stock purchased in the rights offering, including shares purchased in the private placement by certain investors, was $3.50 per share. The per share price was equal to a 20% discount to the average closing price of the Company’s common stock for the 30 trading day period ended July 6, 2006.

     In completing the rights offering and private sale of common stock, the Company issued an additional 35,712,570 shares of its common stock, including 10,927,015 shares subscribed for by public shareholders (not including certain investors) and 24,785,555 shares issued to certain investors in a private placement directly from the Company. The shares issued to certain investors that were existing shareholders prior to the rights offering represented the number of shares of the Company’s common stock that such investors would otherwise have been entitled to purchase pursuant to its basic subscription privilege in the rights offering. The Company has incurred approximately $7.1 million of expenses in connection with the rights offering and private sale of common stock.

     The Company has determined that another Internal Revenue Code Section 382 (“Sec. 382”) ownership change occurred during the quarter ending September 30, 2006 as a result of the Company’s rights offering and private sale of common stock. Sec. 382 places annual limits on the amount of the Company’s U.S. net operating loss carry forwards (“NOLs”) that may be used to offset taxable income. While the Company has not yet finalized its calculation of the annual NOL limitation, the Company estimates the annual limitation to be approximately $4.0 million to $5.0 million. A full valuation allowance continues to be provided on the U.S. NOLs.

(17) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 151 (“SFAS 151”), “Inventory Costs — an amendment of ARB No. 43, Chapter 4.” SFAS 151 discusses the general principles applicable to the pricing of inventory. Paragraph 5 of ARB 43, Chapter 4 provides guidance on allocating certain costs to inventory. This Statement amends ARB 43, Chapter 4, to clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of production facilities. As required by SFAS 151, we adopted this new accounting standard on April 1, 2006. The adoption of SFAS 151 did not have a material impact on the Company’s financial position or results of operations.

     In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123R”). SFAS 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. SFAS 123R also establishes fair value as the measurement method in accounting for share-based payments. The FASB required the provisions of SFAS 123R be adopted for interim or annual periods beginning after June 15, 2005. In April 2005, the SEC adopted a new rule amending the compliance dates for SFAS 123R for public companies. In accordance with this rule, we adopted SFAS 123R effective April 1, 2006 using the modified prospective transition method. This method requires the Company to expense the remaining unrecognized portion of unvested awards outstanding at the effective date and any awards granted or modified at the effective date, but does not require restatement of prior periods. Prior to the adoption of

SFAS 123R, as permitted by SFAS No. 123, the Company applied intrinsic value accounting for its stock option plan under APB 25 (See Note 18). Compensation cost for stock options, if any, was measured as the excess of the market price of the company’s common stock at the date of grant over the exercise price to be paid by the grantee to acquire the stock. The Company applied the disclosure-only provisions of SFAS 123. We did not modify the terms of any previously granted options in anticipation of the adoption of SFAS 123R. The adoption of SFAS 123R did not have a material impact on the Company’s financial position or results of operations.

     In June 2005, the FASB issued Statement of Financial Accounting Standards No. 154 (“SFAS 154”), “Accounting Changes and Error Corrections.” SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement requires retrospective applications to prior periods’ financial statements of a voluntary change in accounting principle unless it is impracticable. In addition, this Statement requires that a change in depreciation, amortization or depletion for long-lived, non-financial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. This new accounting standard was effective April 1, 2006. The adoption of SFAS 154 had no impact on our financial statements.

     In February 2006, the FASB issued Statement of Financial Accounting Standards No. 155 (“SFAS 155”), “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140.” SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to separate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. This new accounting standard is effective April 1, 2007. The adoption of SFAS 155 is not expected to have an impact on our financial statements.

     In March 2006, the FASB issued Statement of Financial Accounting Standards No. 156 (“SFAS 156”), “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140.” SFAS 156 requires that all separately recognized servicing rights be initially measured at fair value, if practicable. In addition, this Statement permits an entity to choose between two measurement methods (amortization method or fair value measurement method) for each class of separately recognized servicing assets and liabilities. This new accounting standard is effective April 1, 2007. The adoption of SFAS 156 is not expected to have an impact on our financial statements.

     In July 2006, the FASB issued FIN 48 “Accounting For Uncertainty In Income Taxes — an Interpretation of FASB Statement 109.” FIN 48 clarifies that an entity’s tax benefits recognized in tax returns must be more likely than not of being sustained prior to recording the related tax benefit in the financial statements. As required by FIN 48, we will adopt this new accounting standard effective April 1, 2007. We are currently reviewing the impact of FIN 48 on our financial statements.

     In September 2006, the FASB issued SFAS No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans” (an amendment of FASB Statements No. 87, 88, 106, and 132R) (“SFAS 158”). SFAS 158 requires an employer to recognize in its statement of financial position an asset for a plan’s over funded status or a liability for a plan’s under funded status, measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions), and recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. Those changes will be reported in our comprehensive income and as a separate component of stockholders’ equity. SFAS 158 is effective for recognition of the funded status of the benefit plans for fiscal years ending after December 15, 2006 and is effective for the measurement date provisions for fiscal years ending after December 15, 2008. The Company is currently evaluating the effect of SFAS 158 on its financial statements.

     Also in September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff believes that registrants should quantify errors using both the balance sheet and income statement approach when quantifying a misstatement. SAB 108 is effective for the Company’s fiscal year ending March 31, 2007. The Company is currently evaluating the impact of SAB 108 on the Company’s consolidated financial statements.

(18) STOCK-BASED COMPENSATION PLANS

     Prior to April 1, 2006, the Company accounted for its stock-based compensation plans under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” which only required the Company to disclose the pro forma effects of the plans on a net income (loss) and earnings (loss) per share basis as provided by SFAS No. 123, “Accounting for Stock-Based Compensation.” The Company did not recognize compensation expense in fiscal periods ended prior to April 1, 2006 with respect to options that had an exercise price equal to the fair market value of the Company’s common stock on the date of the grant. Had compensation expense for these options been recognized in the Condensed Consolidated Financial Statements based on the fair value at the grant dates under the related provisions of SFAS No. 123, the pro forma net income (loss) and earnings (loss) per share would have been as follows:

		Three Months				Six Months
		Ended				Ended
		September 30, 2005				September 30, 2005
Net loss as reported		$	(33,023	)		$	(68,732	)
Less: stock based compensation expense determined under the fair value based method			(473	)			(473	)
Pro forma net loss		$	(33,496	)		$	(69,205	)
Weighted average shares outstanding			25,576				25,576
Basic and diluted loss per share:
As reported		$	(1.29	)		$	(2.69	)
Pro forma		$	(1.31	)		$	(2.71	)

(19) SEGMENT INFORMATION

     The Company reports its results for four business segments, Transportation North America, Transportation Europe and Rest of World (“ROW”), Industrial Energy North America 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.

     Commencing with the first quarter of fiscal 2007, the Company’s chief decision-maker determined it to be more appropriate to allocate certain costs to its segments, which were previously reflected in “Other” as unallocated corporate costs. These costs include the Company’s global Information Technology organization, its Shared Services expenses including country related finance organizations in Europe and ROW, its country Human Resource organizations, and certain of its legal costs which can be directly attributed to a business segment. This change in reporting was made to better align the Company’s cost structure with the business segment responsible for driving the cost. This change resulted in an allocation of corporate costs to the reportable segment in the quarter ended September 30, 2006 and the six months ended September 30, 2006 for a total of $15.0 million and $30.7 million allocated among the business segments, including costs of $3.7 million and $7.4 million to Transportation North America, $5.3 million and $10.9 million to Transportation Europe and ROW, $1.2 million and $2.3 million to Industrial Energy North America, and $4.8 million and $10.1 million to Industrial Energy Europe and ROW, respectively, as compared to prior periods. Prior period costs were not reclassified to conform to this change. Therefore, the results between the periods may not be comparable. Certain other corporate costs, including interest expense, are not allocated or charged to the business segments.

     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 (in thousands):

		For the Three Months Ended September 30, 2006
		Transportation								Industrial
						Europe								Europe
		North				and				North				and				Other
		America				ROW				America				ROW				(a)				Consolidated
		(in thousands)
Net sales		$	227,711			$	186,937			$	64,972			$	200,679							$	680,299
Gross profit			36,683				21,395				14,045				33,279								105,402
Income (loss) before reorganization items, income taxes, and minority interest			5,824				(7,192	)			5,313				(1,118	)			(35,646	)			(32,819	)

		For the Three Months Ended September 30, 2005
		Transportation								Industrial
						Europe								Europe
		North				and				North				and				Other
		America				ROW				America				ROW				(a)				Consolidated
		(in thousands)
Net sales		$	225,981			$	187,906			$	73,045			$	199,553				—			$	686,485
Gross profit			28,923				23,895				14,051				37,029				—				103,898
Income (loss) before reorganization items, income taxes, and minority interest			3,518				4,582				4,917				7,559				(52,141	)			(31,565	)

		For the Six Months Ended September 30, 2006
		Transportation								Industrial
						Europe								Europe
		North				and				North				and				Other
		America				ROW				America				ROW				(a)				Consolidated
		(in thousands)
Net sales		$	442,221			$	369,688			$	137,921			$	413,659							$	1,363,489
Gross profit			69,617				41,002				31,656				72,805								215,080
Income (loss) before reorganization items, income taxes, and minority interest			1,012				(13,335	)			12,804				2,516				(68,317	)			(65,320	)

		For the Six Months Ended September 30, 2005
		Transportation								Industrial
						Europe								Europe
		North				and				North				and				Other
		America				ROW				America				ROW				(a)				Consolidated
		(in thousands)
Net sales		$	444,149			$	367,345			$	140,478			$	403,845				—			$	1,355,817
Gross profit			59,396				42,661				27,051				77,004				—				206,112
Income (loss) before reorganization items, income taxes, and minority interest			7,600				2,935				9,286				17,122				(103,504	)			(66,561	)

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 our 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 13 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 North America, Transportation Europe and Rest of World (“ROW”), Industrial Energy North America 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 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.

     Commencing with the first quarter of fiscal 2007, the Company’s chief decision-maker determined it to be more appropriate to allocate certain costs to its segments, which were previously reflected in “Other” as unallocated corporate costs. These costs include the Company’s global Information Technology organization, its Shared Services expenses including country related finance organizations in Europe and ROW, its country Human Resource organizations, and certain of its legal costs which can be directly attributed to a business segment. This change in reporting was made to better align the Company’s cost structure with the business segment responsible for driving the cost. This change resulted in an allocation of corporate costs to the reportable segment in the quarter ended September 30, 2006 and the six months ended September 30, 2006 for a total of $15.0 million and $30.7 million allocated among the business segments, including costs of $3.7 million and $7.4 million to Transportation North America, $5.3 million and $10.9 million to Transportation Europe and ROW, $1.2 million and $2.3 million to Industrial Energy North America, and $4.8 million and $10.1 million to Industrial Energy Europe and ROW, respectively, as compared to prior periods. Prior period costs were not reclassified to conform to this change. Therefore, the results between the periods may not be comparable. Certain other corporate costs, including interest expense, are not allocated or charged to the business segments.

Factors Which Affect the Company’s Financial Performance

     Lead and other Raw Materials. Lead represents approximately one-third 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 from $939.00 per metric tonne for the six months ended September 30, 2005 to $1,145.00 for the six months September 30, 2006. At November 3, 2006, the quoted price on the LME was $1,710.00 per metric tonne. The Company is also experiencing higher costs for other raw materials, including polypropylene. To the extent that lead prices continue to be volatile, going up or down, and the Company is unable to pass on these or other higher material costs to its customers, its financial performance is adversely impacted. Inversely, as lead prices decrease the Company may not be able to retain the current pricing as customers seek disproportionate price reductions.

     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 is adversely impacted.

     Competition. The global transportation and industrial energy battery markets, are highly competitive. In recent years, competition has continued to intensify and is impacting the Company’s ability to pass along increased prices to keep pace with rising production costs. The effects of this competition have been exacerbated by excess capacity 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. The Company is also exposed, although 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 six months months ended September 30, 2006, approximately 57.5% of the Company’s net sales were generated in Europe and ROW. Further, approximately 61.3% of the Company’s aggregate accounts receivable and inventory as of September 30, 2006 were 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 fourth fiscal quarters). Retailers 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.

Second Quarter of Fiscal 2007 Highlights and Outlook

     The Company’s reported results continued to be impacted in fiscal 2007 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 North American 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. This helps the Company in North America 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 second quarter of fiscal 2007, the average cost of spent batteries has increased approximately 16.3% versus the second quarter of fiscal 2006. Therefore, the higher market price of lead with respect to North American manufacturing 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, lead price escalators and long-term lead supply contracts. 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, the selective pricing actions, lead price escalators in some contracts, long-term lead supply 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 to improve the Company’s liquidity and operating cash flow through aggressive 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; and

     (iii) Continuing to reduce costs, improve customer service and satisfaction through enhanced quality and reduced lead times. The Company is continuing to drive these strategies through its Take Charge initiative, including a limited engagement with the principal consultant to assume maximum transferability of skills and knowledge from the consultant to the Company to ensure sustainability, as well as its EXCELL lean supply chain initiative, improved and focused supplier procurement initiatives across the Company and reductions in salaried headcount and discretionary spending.

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 (the “10-K”) for the fiscal year ended March 31, 2006 affect the preparation of its Condensed Consolidated Financial Statements. The reader of this report should refer to the 10-K for further information.

Results of Operations

Three months ended September 30, 2006 compared with three months ended September 30, 2005

Overview

     Net loss for the second quarter of fiscal 2007 was $35.1 million versus the second quarter of fiscal 2006 net loss of $33.0 million. Second quarter fiscal 2007 results include a $6.7 million decrease in general and administrative expenses, a $6.0 million increase in interest expense, restructuring costs of $7.0 million, and continuing reorganization items in connection with the bankruptcy of $1.0 million. Second quarter fiscal 2006 results include restructuring costs of $6.6 million, and reorganization items in connection with the bankruptcy of $1.7 million. In addition, net loss on asset sales/disposals of $4.2 million and $1.0 million have been recognized in Other (income) expense, net in the second quarter of fiscal 2007 and 2006, respectively.

Net Sales

     Net sales were $680.3 million in the second quarter of fiscal 2007 versus $686.5 million in the second quarter of fiscal 2006. Foreign currency translation positively impacted net sales in the second quarter of fiscal 2006 by approximately $14.5 million. Net sales, excluding foreign currency translation impact, were $20.7 million lower as a result of weaker Transportation demand in Europe and ROW in aftermarket sales, weaker Industrial Energy demand in Europe and ROW in the motive power market, and weaker Industrial Energy demand in North America in the network power market. Lower demand was partially offset by the impact of favorable pricing actions in both Transportation and Industrial Energy. Much of the lower unit volumes in both of our Transportation segments can be directly attributed to our pricing strategy to drive customer profitability to more appropriate levels or severe relationships where reasonable profitability could not be achieved.

										FAVORABLE (UNFAVORABLE)
		For the Three Months Ended												Currency				Non-Currency
		September 30, 2006				September 30, 2005				TOTAL				Related				Related
						(in thousands)
Transportation
North America		$	227,711			$	225,981			$	1,730				—			$	1,730
Europe & ROW			186,937				187,906				(969	)			7,021				(7,990	)
			414,648				413,887				761				7,021				(6,260	)
Industrial Energy
North America			64,972				73,045				(8,073	)			—				(8,073	)
Europe & ROW			200,679				199,553				1,126				7,520				(6,394	)
			265,651				272,598				(6,947	)			7,520				(14,467	)
TOTAL		$	680,299			$	686,485			$	(6,186	)		$	14,541			$	(20,727	)

Transportation North America net sales were $227.7 million in the second quarter of fiscal 2007 versus $226.0 million in the second quarter of fiscal 2006. Net sales increased $1.7 million or 0.8% due to higher average selling prices from lead and other related pricing actions offsetting lower aftermarket volume. Transportation North America has experienced lower volumes in original equipment and aftermarket sales, in part, as a result of the Company’s efforts to rationalize customer profitability. Although the Company has been focused on cost cutting efforts, it has also been increasing its efforts to pass on commodity cost increases to its customers. In many cases the Company has been successful in passing on these costs, although on a lag basis. In cases where the Company has not been successful, it has determined rather than to continue to absorb customer losses it would not accept further business from certain of these customers. During the three months ended September 30, 2006, the Company experienced lower volumes of approximately $23.0 million resulting from this effort. In the future as a result of the Company’s customer profitability rationalization efforts, the Company can not be certain that it will not continue to experience lower volumes.

     Transportation Europe and ROW net sales were $186.9 million in the second quarter of fiscal 2007 versus $187.9 million in the second quarter of fiscal 2006. Foreign currency translation positively impacted net sales in the second quarter of fiscal 2006 by approximately $7.0 million. Excluding the impact of foreign currency translation, net sales decreased $8.0 million or 4.3% due to reduced unit sales in its aftermarket channels, partially offset by higher OE volumes and the overall impact of favorable pricing actions.

     Industrial Energy North America net sales in the second quarter of fiscal 2007 were $65.0 million versus $73.0 million in the second quarter of fiscal 2006. Net sales decreased $8.1 million or 11.1% due to weaker network power demand including lower sales to the U.S. Navy as they transition to our Valve Regulated Lead Acid (“VRLA”) technology, partially offset by volume growth in motive power and the favorable impact of lead related and other pricing actions.

     Industrial Energy Europe and ROW net sales in the second quarter of fiscal 2007 were $200.7 million versus $199.6 million in the second quarter of fiscal 2006. Foreign currency translation positively impacted net sales in the second quarter of fiscal 2007 by approximately $7.5 million. Excluding the impact of foreign currency translation, net sales decreased $6.4 million, or 3.2% due to weaker demand in the motive power market, partially offset by higher average selling prices due to lead and other related pricing actions.

Gross Profit

     Gross profit was $105.4 million, or 15.5% of net sales in the second quarter of fiscal 2007 versus $103.9 million, or 15.1% of net sales in the second quarter of fiscal 2006. Foreign currency translation positively impacted gross profit in the second quarter of fiscal 2007 by approximately $2.0 million. Gross profit was essentially flat as a result of higher average selling prices due to lead and other related pricing actions and by improved efficiencies, offset by higher lead costs (average LME prices were $1,189.00 dollars per metric tonne in the second quarter of fiscal 2007 versus $891.00 dollars per metric tonne in the second quarter of fiscal 2006).

		For the Three Months Ended								For the Three Months Ended
		September 30, 2006								September 30, 2005								FAVORABLE (UNFAVORABLE)
						Percent of								Percent of								Currency				Non-Currency
		TOTAL				Net Sales				TOTAL				Net Sales				TOTAL				Related				Related
										(in thousands)
Transportation
North America		$	36,683				16.1	%		$	28,923				12.8	%		$	7,760				—			$	7,760
Europe & ROW			21,395				11.4	%			23,895				12.7	%			(2,500	)			796				(3,296	)
			58,078				14.0	%			52,818				12.8	%			5,260				796				4,464
Industrial Energy
North America			14,045				21.6	%			14,051				19.2	%			(6	)			—				(6	)
Europe & ROW			33,279				16.6	%			37,029				18.6	%			(3,750	)			1,246				(4,996	)
			47,324				17.8	%			51,080				18.7	%			(3,756	)			1,246				(5,002	)
TOTAL		$	105,402				15.5	%		$	103,898				15.1	%		$	1,504			$	2,042			$	(538	)

     Transportation North America gross profit was $36.7 million, or 16.1% of net sales in the second quarter of fiscal 2007 versus $28.9 million, or 12.8% of net sales in the second quarter of fiscal 2006. The effect of higher average selling prices was partially offset by higher lead and other commodity costs.

     Transportation Europe and ROW gross profit was $21.4 million, or 11.4% of net sales in the second quarter of fiscal 2007 versus $23.9 million, or 12.7% of net sales in the second quarter of fiscal 2006. Foreign currency translation positively impacted gross profit in the second quarter of fiscal 2007 by approximately $0.8 million. Excluding foreign currency translation, the decrease was primarily due to lower aftermarket sales volumes, a shift in customer demand from branded to lower-priced, non branded products, and higher lead and other commodity costs only partially recovered through higher selling prices.

     Industrial Energy North America gross profit was $14.0 million, or 21.6% of net sales in the second quarter of fiscal 2007 versus $14.1 million, or 19.2% of net sales in the second quarter of fiscal 2006. Gross profit was roughly flat versus fiscal 2006 due to higher pricing offsetting lower network power sales volume.

     Industrial Energy Europe and ROW gross profit was $33.3 million, or 16.6% of net sales in the second quarter of fiscal 2007 versus $37.0 million, or 18.6% of net sales in the second quarter of fiscal 2006. Foreign currency translation positively impacted Industrial Energy Europe and ROW gross profit in the second quarter of fiscal 2007 by approximately $1.2 million. Gross profit was negatively impacted by lower motive power volume and higher lead and other commodity costs, partially offset by higher pricing.

Expenses

     Expenses were $138.2 million in the second quarter of fiscal 2007 versus $135.5 million in the second quarter of fiscal 2006. Expenses included restructuring charges of $7.0 million in the second quarter of fiscal 2007 and $6.6 million in the second quarter of fiscal 2006. Stronger foreign currency translation unfavorably impacted expenses by approximately $2.8 million in the second quarter of fiscal 2007. Excluding foreign currency translation, expenses were essentially flat and included the following matters: (i) interest, net increased $6.0 million principally due to higher interest rates and higher debt levels; (ii) general and administrative expense decreased by $6.7 million due to the favorable impact of the Company’s cost reduction programs; and (iii) fiscal 2007 and fiscal 2006 second quarter expenses included net loss on asset sales/disposals of $4.2 million and $1.0 million, respectively, included in Other (income) expense, net.

										FAVORABLE (UNFAVORABLE)
		For the Three Months Ended												Currency				Non-Currency
		September 30, 2006				September 30, 2005				TOTAL				Related				Related
						(in thousands)
Transportation
North America		$	30,859			$	25,405			$	(5,454	)			—			$	(5,454	)
Europe & ROW			28,587				19,313				(9,274	)			(1,017	)			(8,257	)
			59,446				44,718				(14,728	)			(1,017	)			(13,711	)
Industrial Energy
North America			8,732				9,134				402				—				402
Europe & ROW			34,397				29,470				(4,927	)			(1,373	)			(3,554	)
			43,129				38,604				(4,525	)			(1,373	)			(3,152	)
Unallocated corporate expenses			35,646				52,141				16,495				(428	)			16,923
TOTAL		$	138,221			$	135,463			$	(2,758	)		$	(2,818	)		$	60

     Transportation North America expenses were $30.9 million in the second quarter of fiscal 2007 versus $25.4 million in the second quarter of fiscal 2006. The increase in expenses was primarily due to $3.7 million of corporate costs that were allocated in the second quarter of fiscal 2007 that were not allocated in the comparable fiscal 2006 and $4.2 million of additional write off/disposal of fixed assets associated with the closure of the Shreveport, LA. Battery plant.

     Transportation Europe and ROW expenses were $28.6 million in the second quarter of fiscal 2007 versus $19.3 million in the second quarter of fiscal 2006. Foreign currency translation favorably impacted Transportation Europe and ROW expenses in the second quarter of fiscal 2007 by approximately $1.0 million. Excluding foreign currency translation impact, expenses increased primarily due to $5.3 million of corporate costs that were allocated in the second quarter of fiscal 2007 that were not allocated in fiscal 2006, and $3.4 higher restructuring costs, partially offset by savings associated with headcount reductions, and other savings driven by an ongoing program to streamline administrative functions.

     Industrial Energy North America expenses were $8.7 million in the second quarter of fiscal 2007 versus $9.1 million in the second quarter of fiscal 2006. The decrease in expenses primarily relates to lower general and administrative expense and lower selling and advertising expenses, partially offset by $1.2 million of corporate costs that were allocated in the second quarter of fiscal 2007 that were not allocated in fiscal 2006.

     Industrial Energy Europe and ROW expenses were $34.4 million in the second quarter of fiscal 2007 versus $29.5 million in the second quarter of fiscal 2006. Foreign currency translation favorably impacted Industrial Energy Europe and ROW expenses in the second quarter of fiscal 2007 by approximately $1.4 million. Excluding the impact of foreign currency translation, the increase in expenses primarily relates to $4.8 million of corporate costs that were allocated in the second quarter of fiscal 2007 that were not allocated in fiscal 2006.

     Unallocated expenses, net, which include corporate expenses, interest expense, currency remeasurement losses (gains), and losses (gains) on revaluation of warrants, were $35.6 million in the second quarter of fiscal 2007 versus $52.1 million in the second quarter of fiscal 2006. Corporate expenses were $11.5 million and $33.7 million in the second quarter of fiscal 2007 and fiscal 2006, respectively. This decrease was primarily due to the allocation of approximately $15.0 million of costs to the business segments in the second quarter of fiscal 2007 that were not allocated in the second quarter of fiscal 2006, combined with the favorable impact of the Company’s cost reduction programs, primarily through headcount reductions. Interest expense, net was $22.6 million in the second quarter of fiscal 2007 versus $16.7 million in the second quarter of fiscal 2006, principally due to higher debt levels and higher interest rates.

Loss before reorganization items, income taxes, and minority interest

     The components affecting loss before reorganization items, income taxes, and minority interest are discussed above.

		For the Three Months Ended								For the Three Months Ended
		September 30, 2006								September 30, 2005
						Percent of								Percent of				FAVORABLE/
		TOTAL				Net Sales				TOTAL				Net Sales				(UNFAVORABLE)
										(in thousands)
Transportation
North America		$	5,824				2.6	%		$	3,518				1.6	%		$	2,306
Europe & ROW			(7,192	)			(3.8	%)			4,582				2.4	%			(11,774	)
			(1,368	)			(0.3	%)			8,100				2.0	%			(9,468	)
Industrial Energy
North America			5,313				8.2	%			4,917				6.7	%			396
Europe & ROW			(1,118	)			(0.6	%)			7,559				3.8	%			(8,677	)
			4,195				1.6	%			12,476				4.6	%			(8,281	)
Other			(35,646	)			n/a				(52,141	)			n/a				16,495
TOTAL		$	(32,819	)			(4.8	%)		$	(31,565	)			(4.6	%)		$	(1,254	)

Reorganization items

     Reorganization items, net, represent amounts the Company incurred and continues to incur as a result of the Chapter 11 filing. See Note 4 to the Condensed Consolidated Financial Statements.

Income Taxes

     In the second quarter of fiscal 2007, the Company recorded an income tax provision of $1.3 million on pre-tax loss of ($33.8) million. In the second quarter of fiscal 2006, an income tax provision (benefit) of ($0.2) million was recorded on a pre-tax income (loss) of ($33.2) million. The effective tax rate was (3.8%) and 0.6% in the second quarter of fiscal 2007 and 2006, respectively. The effective tax rate for the second quarter of fiscal 2007 and 2006 was impacted by the generation of income in tax-paying jurisdictions, principally certain countries in Europe 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, and France. The effective tax rate for the second quarter of fiscal 2007 was impacted by the recognition of $15.6 million of valuation allowances on current year tax benefits generated primarily in the U.S., United Kingdom, France, Spain, and Italy.

Six months ended September 30, 2006 compared with six months ended September 30, 2005

Overview

     Net loss for the first half of fiscal 2007 was $73.0 million versus the first half of fiscal 2006 net loss of $68.7 million            First half fiscal 2007 results include a $4.5 million decrease in general and administrative expenses, a $12.2 million increase in interest expense, restructuring costs of $15.9 million, continuing reorganization items in connection with the bankruptcy of $2.6 million, and a gain on revaluation of warrants of $0.7 million. First half fiscal 2006 results include restructuring costs of $9.5 million, reorganization items in connection with the bankruptcy of $3.1 million, and a gain on revaluation of warrants of $7.7 million. In addition, net currency remeasurement (gains) losses and revaluation of foreign currency contracts of ($4.2) million and $12.0 million, primarily on U.S. dollar denominated debt in Europe, have been recognized in Other (income) expense, net in the first half of fiscal 2007 and 2006, respectively.

Net Sales

     Net sales were $1,363.5 million in the first half of fiscal 2007 versus $1,355.8 million in the first half of fiscal 2006. Foreign currency translation positively impacted net sales in the first half of fiscal 2006 by approximately $14.0 million. Net sales excluding foreign currency translation impact were lower as a result of lower volumes in the Company’s Transportation businesses and Industrial Energy North America business, partially offset by higher volumes and pricing in the Company’s Industrial Energy Europe and ROW segment.

										FAVORABLE (UNFAVORABLE)
		For the Six Months Ended												Currency				Non-Currency
		September 30, 2006				September 30, 2005				TOTAL				Related				Related
						(in thousands)
Transportation
North America		$	442,221			$	444,149			$	(1,928	)			—			$	(1,928	)
Europe & ROW			369,688				367,345				2,343				6,677				(4,334	)
			811,909				811,494				415				6,677				(6,262	)
Industrial Energy
North America			137,921				140,478				(2,557	)			—				(2,557	)
Europe & ROW			413,659				403,845				9,814				7,364				2,450
			551,580				544,323				7,257				7,364				(107	)
TOTAL		$	1,363,489			$	1,355,817			$	7,672			$	14,041			$	(6,369	)