Exide Technologies (XIDE)

Fiscal Year Ended March 31, 2004 compared with Fiscal Year Ended March 31, 2003

Overview

Net loss for fiscal 2004 was $114,083, or $4.17 per basic and diluted share versus fiscal 2003 net loss of $140,885, or $5.14 per basic and diluted share. Included in fiscal 2004 consolidated net loss were reorganization

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items in connection with the bankruptcy of $67,042, restructuring costs of $52,708 ($35,326 after tax) and a charge of $15,593 for the cumulative effect of a change in accounting principle. Included in the consolidated net loss for fiscal 2003 were reorganization items of $36,370, restructuring costs of $25,658 and a non-cash charge of $37,000 for goodwill impairment resulting from an evaluation of results and updated projections of the Industrial Energy Europe and ROW segment, following the deterioration of this segment’s performance. In addition, currency remeasurement gains of $43,846 and $22,753, primarily on U.S. dollar denominated debt in Europe, have been recognized in Other (income) expense, net in fiscal 2004 and 2003, respectively.

Net Sales

Net sales were $2,500,493 for fiscal 2004 versus $2,361,101 in fiscal 2003. Currency positively impacted net sales for fiscal 2004 by approximately $229,000. The strength of the Euro in the Company’s European markets also resulted in competitive pricing pressures from Asian imports, negatively impacting average selling prices.

Transportation North America net sales were $817,710 for fiscal 2004 versus $833,493 for fiscal 2003. Revenues declined slightly due to reduced unit volumes in both the aftermarket and original equipment channels.

Transportation Europe and ROW net sales were $760,512 for fiscal 2004 versus $660,417 for fiscal 2003. Volumes declined in the original equipment channel following the loss of certain original equipment business. Selling prices were lower in fiscal 2004, principally because of competitive pricing pressures. Currency positively impacted Transportation Europe and ROW net sales in fiscal 2004 by approximately $120,000.

Industrial Energy North America net sales were $210,572 for fiscal 2004 versus $199,856 for fiscal 2003. The increase was primarily due to higher material handling application volumes and higher telecommunications market volumes.

Industrial Energy Europe and ROW net sales were $711,699 for fiscal 2004 versus $667,335 for fiscal 2003. Sales volumes were lower due to lower European material handling application shipments, reductions from strong European military shipments in fiscal 2003 and weakness in the Asian market, including disruption of the Company’s Chinese operations. Sales were also negatively impacted by competitive pricing pressures in Europe, including the impact of Asian imports. Currency positively impacted Industrial Energy Europe and ROW net sales in fiscal 2004 by approximately $109,000.

Gross Profit

Gross profit was $509,325 in fiscal 2004 versus $516,541 in fiscal 2003. Gross profit margin decreased to 20.4% in fiscal 2004 from 21.9% in fiscal 2003. Gross profit was negatively impacted by lower sales volumes, competitive pricing pressures and higher benefit costs, including medical and pension expenses, offset partially by the Company’s cost reduction programs. Currency positively impacted gross profit in fiscal 2004 by approximately $47,300. The strength of the Euro in the Company’s European markets also resulted in competitive pricing pressures from Asian imports, negatively impacting margins.

Transportation North America gross profit was $146,790 or 18.0% of net sales in fiscal 2004 versus $154,349 or 18.5% of net sales in fiscal 2003. The decrease was primarily due to the effects of lower sales volumes

Transportation Europe and ROW gross profit was $159,062 or 20.9% of net sales in fiscal 2004 versus $154,079 or 23.3% of net sales in fiscal 2003. The effects of lower sales volumes and lower pricing were partially offset by the benefits from plant rationalization and headcount reductions. Currency positively impacted Transportation Europe and ROW gross profit in fiscal 2004 by approximately $24,500.

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Industrial Energy North America gross profit was $47,032 or 22.3% of net sales in fiscal 2004 versus $47,889 or 24.0% of net sales in fiscal 2003. Gross profit was negatively impacted by competitive pricing pressures, partially offset by higher sales volume.

Industrial Energy Europe and ROW gross profit was $156,441 or 22.0% of net sales in fiscal 2004 versus $160,224 or 24.0% of net sales in fiscal 2003. Gross profit was negatively impacted by lower sales volumes and competitive pricing pressures. Currency positively impacted Industrial Energy Europe and ROW gross profit in fiscal 2004 by approximately $22,800.

Expenses

Expenses were $537,035 in fiscal 2004 versus $593,887 in fiscal 2003. Included in expenses are restructuring charges of $52,708 in fiscal 2004 and $25,658 in fiscal 2003. Also included in fiscal 2003 expenses is a charge for goodwill impairment of $37,000. Excluding these items, expenses were $484,327 and $531,229 in fiscal 2004 and 2003, respectively. Currency unfavorably impacted expenses by approximately $45,600 in fiscal 2004. The net decrease in expenses was impacted by the following matters: (i) fiscal 2004 selling, marketing and advertising costs in each of the Company’s business segments were favorably impacted by the Company’s cost-reduction programs, primarily through headcount reductions; (ii) expenses in each of the Company’s business segments for fiscal 2004 were negatively impacted by an increase in benefit costs, including medical and pension expenses; (iii) expenses for fiscal 2004 include $9,700 net gain on asset sales, included in Other (income) expense, net; and (iv) fiscal 2004 and 2003 expenses included currency remeasurement gains of $43,846 and $22,753, respectively, included in Other (income) expense, net.

Transportation North America expenses were $83,770 in fiscal 2004 versus $90,624 in fiscal 2003. The decrease in expenses was due primarily to the Company’s cost reduction programs, offset partially by increased benefit costs, including medical and pension expenses.

Transportation Europe and ROW expenses were $83,422 in fiscal 2004 versus $71,440 in fiscal 2003. Currency unfavorably impacted Transportation Europe and ROW expenses in fiscal 2004 by approximately $12,400. The resulting decrease in expenses was due primarily to the Company’s cost reduction programs, offset partially by increased benefit costs, including pension expense.

Industrial Energy North America expenses were $32,635 in fiscal 2004 versus $43,263 in fiscal 2003. The decrease was due primarily to the Company’s cost reduction programs and restructuring expenses in fiscal 2003 associated with the downsizing of a manufacturing facility, partially offset by higher selling expenses and increased benefit costs, including medical and pension expenses.

Industrial Energy Europe and ROW expenses were $152,002 in fiscal 2004 versus $165,593 in fiscal 2003. Fiscal 2004 expenses included a $3,175 gain on the sale of the Company’s European non-lead battery assets. Fiscal 2003 expenses included a goodwill impairment charge of $37,000. Excluding these items, expenses were $155,177 and $128,593 in fiscal 2004 and 2003, respectively. The increase was due primarily to restructuring expenses associated with the Company’s European consolidation efforts and increased benefit costs, including pension expense, partially offset by the Company’s cost reduction programs. Currency unfavorably impacted Industrial Energy Europe and ROW expenses in fiscal 2004 by approximately $20,500.

Unallocated expenses, net, which include corporate expenses, interest expense, currency remeasurement losses (gains) and losses on sales of accounts receivable, were $185,206 in fiscal 2004 versus $222,967 in fiscal 2003. Expenses for fiscal 2004 and 2003 included currency remeasurement gains of $43,846 and $22,753, respectively. Currency unfavorably impacted unallocated expenses in fiscal 2004 by approximately $12,700. Corporate expenses in fiscal 2004 and fiscal 2003 were $118,765 and $127,943, respectively. The decrease in corporate expenses was due to the favorable impact of the Company’s cost-reduction programs, offset partially

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by increased benefit costs, including medical and pension expenses and higher restructuring costs. Interest expense, net was $99,027 in fiscal 2004 versus $105,788 in fiscal 2003. The decrease in interest expense is due to lower interest rates and lower amortization expense associated with deferred financing costs.

Loss before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $27,710, or (1.1)% of net sales in fiscal 2004 versus $77,346, or (3.3)% of net sales in fiscal 2003 due to the items discussed above.

Transportation North America income before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $63,020, or 7.7% of net sales in fiscal 2004 versus $63,725, or 7.6% of net sales in fiscal 2003, due to the items discussed above.

Transportation Europe and ROW income before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $75,640, or 9.9% of net sales in fiscal 2004 versus $82,639, or 12.5% of net sales in fiscal 2003, due to the items discussed above.

Industrial Energy North America income before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $14,397, or 6.8% of net sales in fiscal 2004 versus $4,626, or 2.3% of net sales in fiscal 2003, due to the items discussed above.

Industrial Energy Europe and ROW income (loss) before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $4,439, or 0.6% of net sales in fiscal 2004 versus ($5,369), or (0.8)% of net sales in fiscal 2003, due to the items discussed above.

Reorganization Items

Reorganization items represent amounts the Company incurred as a result of the Chapter 11 filing and are presented separately in the Consolidated Statements of Operations. Reorganization items for fiscal 2004 and 2003 were $67,042 and $36,370, respectively. These items include professional fees including financial and legal services, employee retention costs for key members of management, costs associated with rejection of certain executory contracts and interest income earned as a result of having assumed excess cash balances due to the Chapter 11 filing. The increase in reorganization expenses for fiscal 2004 reflects a significant increase in legal costs associated with development of the Company’s Plan and preparation for Bankruptcy Court hearings. See Note 9 to the Consolidated Financial Statements.

Income Taxes

In fiscal 2004, an income tax provision of $3,271 was recorded on a pre-tax loss of $94,752. In fiscal 2003, an income tax provision of $26,969 was recorded on a pre-tax loss of $113,716. The effective tax rate was (3.5%) and (23.7%) in fiscal 2004 and 2003, respectively. The effective tax rate for fiscal 2004 and fiscal 2003 was impacted by the generation of income in tax-paying jurisdictions, principally Europe, 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 both the U.S. and certain international regions. The effective tax rate for fiscal 2004 was also impacted by the adjustment of previously recognized valuation allowances in certain international jurisdictions based on updated financial projections. The effective tax rate for fiscal 2003 was also impacted by the non-deductibility of the $37,000 Industrial Energy Europe and ROW goodwill impairment charge.

During fiscal 2003, the Company reorganized the ownership structure of certain of its foreign subsidiaries and recorded an impairment charge on certain intercompany investments for statutory purposes. These actions have no effect on reported pre-tax operating results but resulted in a net tax benefit.

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Fiscal Year Ended March 31, 2004 compared with Fiscal Year Ended March 31, 2003

Overview

Net loss for fiscal 2004 was $114,083, or $4.17 per diluted share versus fiscal 2003 net loss of $140,885, or $5.14 per diluted share. Included in fiscal 2004 consolidated net loss were reorganization items in connection with the bankruptcy of $67,042, restructuring costs of $52,708 ($35,326 after tax) and a charge of $15,593 for the cumulative effect of a change in accounting principle. Included in the consolidated net loss for fiscal 2003 were reorganization items of $36,370, restructuring costs of $25,658 and a non-cash charge of $37,000 for goodwill impairment resulting from an evaluation of results and updated projections of the Industrial Energy Europe and ROW segment, following the deterioration of this segment’s performance. In addition, currency remeasurement gains of $43,846 and $22,753, primarily on U.S. dollar denominated debt in Europe, have been recognized in Other (income) expense, net in fiscal 2004 and 2003, respectively.

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Net Sales

Net sales were $2,500,493 for fiscal 2004 versus $2,361,101 in fiscal 2003. Currency positively impacted net sales for fiscal 2004 by approximately $229,000. The strength of the Euro in the Company’s European markets also resulted in competitive pricing pressures from Asian imports, negatively impacting average selling prices.

Transportation North America net sales were $817,710 for fiscal 2004 versus $833,493 for fiscal 2003. Revenues declined slightly due to reduced unit volumes in both the aftermarket and original equipment channels.

Transportation Europe and ROW net sales were $760,512 for fiscal 2004 versus $660,417 for fiscal 2003. Volumes declined in the original equipment channel following the loss of certain original equipment business. Selling prices were lower in fiscal 2004, principally because of competitive pricing pressures. Currency positively impacted Transportation Europe and ROW net sales in fiscal 2004 by approximately $120,000.

Industrial Energy North America net sales were $210,572 for fiscal 2004 versus $199,856 for fiscal 2003. The increase was primarily due to higher material handling application volumes and higher telecommunications market volumes.

Industrial Energy Europe and ROW net sales were $711,699 for fiscal 2004 versus $667,335 for fiscal 2003. Sales volumes were lower due to lower European material handling application shipments, reductions from strong European military shipments in fiscal 2003 and weakness in the Asian market, including disruption of the Company’s Chinese operations. Sales were also negatively impacted by competitive pricing pressures in Europe, including the impact of Asian imports. Currency positively impacted Industrial Energy Europe and ROW net sales in fiscal 2004 by approximately $109,000.

Gross Profit

Gross profit was $509,325 in fiscal 2004 versus $516,541 in fiscal 2003. Gross profit margin decreased to 20.4% in fiscal 2004 from 21.9% in fiscal 2003. Gross profit was negatively impacted by lower sales volumes, competitive pricing pressures and higher benefit costs, including medical and pension expenses, offset partially by the Company’s cost reduction programs. Currency positively impacted gross profit in fiscal 2004 by approximately $47,300. The strength of the Euro in the Company’s European markets also resulted in competitive pricing pressures from Asian imports, negatively impacting margins.

Transportation North America gross profit was $146,790 or 18.0% of net sales in fiscal 2004 versus $154,349 or 18.5% of net sales in fiscal 2003. The decrease was primarily due to the effects of lower sales volumes

Transportation Europe and ROW gross profit was $159,062 or 20.9% of net sales in fiscal 2004 versus $154,079 or 23.3% of net sales in fiscal 2003. The effects of lower sales volumes and lower pricing were partially offset by the benefits from plant rationalization and headcount reductions. Currency positively impacted Transportation Europe and ROW gross profit in fiscal 2004 by approximately $24,500.

Industrial Energy North America gross profit was $47,032 or 22.3% of net sales in fiscal 2004 versus $47,889 or 24.0% of net sales in fiscal 2003. Gross profit was negatively impacted by competitive pricing pressures, partially offset by higher sales volume.

Industrial Energy Europe and ROW gross profit was $156,441 or 22.0% of net sales in fiscal 2004 versus $160,224 or 24.0% of net sales in fiscal 2003. Gross profit was negatively impacted by lower sales volumes and competitive pricing pressures. Currency positively impacted Industrial Energy Europe and ROW gross profit in fiscal 2004 by approximately $22,800.

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Expenses

Expenses were $537,035 in fiscal 2004 versus $593,887 in fiscal 2003. Included in expenses are restructuring charges of $52,708 in fiscal 2004 and $25,658 in fiscal 2003. Also included in fiscal 2003 expenses is a charge for goodwill impairment of $37,000. Excluding these items, expenses were $484,327 and $531,229 in fiscal 2004 and 2003, respectively. Currency unfavorably impacted expenses by approximately $45,600 in fiscal 2004. The net decrease in expenses was impacted by the following matters: (i) fiscal 2004 selling, marketing and advertising costs in each of the Company’s business segments were favorably impacted by the Company’s cost-reduction programs, primarily through headcount reductions; (ii) expenses in each of the Company’s business segments for fiscal 2004 were negatively impacted by an increase in benefit costs, including medical and pension expenses; (iii) expenses for fiscal 2004 include $9,700 net gain on asset sales, included in Other (income) expense, net; and (iv) fiscal 2004 and 2003 expenses included currency remeasurement gains of $43,846 and $22,753, respectively, included in Other (income) expense, net.

Transportation North America expenses were $83,770 in fiscal 2004 versus $90,624 in fiscal 2003. The decrease in expenses was due primarily to the Company’s cost reduction programs, offset partially by increased benefit costs, including medical and pension expenses.

Transportation Europe and ROW expenses were $83,422 in fiscal 2004 versus $71,440 in fiscal 2003. Currency unfavorably impacted Transportation Europe and ROW expenses in fiscal 2004 by approximately $12,400. The resulting decrease in expenses was due primarily to the Company’s cost reduction programs, offset partially by increased benefit costs, including pension expense.

Industrial Energy North America expenses were $32,635 in fiscal 2004 versus $43,263 in fiscal 2003. The decrease was due primarily to the Company’s cost reduction programs and restructuring expenses in fiscal 2003 associated with the downsizing of a manufacturing facility, partially offset by higher selling expenses and increased benefit costs, including medical and pension expenses.

Industrial Energy Europe and ROW expenses were $152,002 in fiscal 2004 versus $165,593 in fiscal 2003. Fiscal 2004 expenses included a $3,175 gain on the sale of the Company’s European non-lead battery assets. Fiscal 2003 expenses included a goodwill impairment charge of $37,000. Excluding these items, expenses were $155,177 and $128,593 in fiscal 2004 and 2003, respectively. The increase was due primarily to restructuring expenses associated with the Company’s European consolidation efforts and increased benefit costs, including pension expense, partially offset by the Company’s cost reduction programs. Currency unfavorably impacted Industrial Energy Europe and ROW expenses in fiscal 2004 by approximately $20,500.

Unallocated expenses, net, which include corporate expenses, interest expense, currency remeasurement losses (gains) and losses on sales of accounts receivable, were $185,206 in fiscal 2004 versus $222,967 in fiscal 2003. Expenses for fiscal 2004 and 2003 included currency remeasurement gains of $43,846 and $22,753, respectively. Currency unfavorably impacted unallocated expenses in fiscal 2004 by approximately $12,700. Corporate expenses in fiscal 2004 and fiscal 2003 were $118,765 and $127,943, respectively. The decrease in corporate expenses was due to the favorable impact of the Company’s cost-reduction programs, offset partially by increased benefit costs, including medical and pension expenses and higher restructuring costs. Interest expense, net was $99,027 in fiscal 2004 versus $105,788 in fiscal 2003. The decrease in interest expense is due to lower interest rates and lower amortization expense associated with deferred financing costs.

Loss before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $27,710, or (1.1)% of net sales in fiscal 2004 versus $77,346, or (3.3)% of net sales in fiscal 2003 due to the items discussed above.

Transportation North America income before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $63,020, or 7.7% of net sales in fiscal 2004 versus $63,725, or 7.6% of net sales in fiscal 2003, due to the items discussed above.

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Transportation Europe and ROW income before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $75,640, or 9.9% of net sales in fiscal 2004 versus $82,639, or 12.5% of net sales in fiscal 2003, due to the items discussed above.

Industrial Energy North America income before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $14,397, or 6.8% of net sales in fiscal 2004 versus $4,626, or 2.3% of net sales in fiscal 2003, due to the items discussed above.

Industrial Energy Europe and ROW income (loss) before reorganization items, income taxes, minority interest and cumulative effect of change in accounting principle was $4,439, or 0.6% of net sales in fiscal 2004 versus ($5,369), or (0.8)% of net sales in fiscal 2003, due to the items discussed above.

Reorganization Items

Reorganization items represent amounts the Company incurred as a result of the Chapter 11 filing and are presented separately in the Consolidated Statements of Operations. Reorganization items for fiscal 2004 and 2003 were $67,042 and $36,370, respectively. These items include professional fees including financial and legal services, employee retention costs for key members of management, costs associated with rejection of certain executory contracts and interest income earned as a result of having assumed excess cash balances due to the Chapter 11 filing. The increase in reorganization expenses for fiscal 2004 reflects a significant increase in legal costs associated with development of the Company’s Plan and preparation for Bankruptcy Court hearings. See Note 8 to the Consolidated Financial Statements.

Income Taxes

In fiscal 2004, an income tax provision of $3,271 was recorded on a pre-tax loss of $94,752. In fiscal 2003, an income tax provision of $26,969 was recorded on a pre-tax loss of $113,716. The effective tax rate was (3.5%) and (23.7%) in fiscal 2004 and 2003, respectively. The effective tax rate for fiscal 2004 and fiscal 2003 was impacted by the generation of income in tax-paying jurisdictions, principally Europe, 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 both the U.S. and certain international regions. The effective tax rate for fiscal 2004 was also impacted by the adjustment of previously recognized valuation allowances in certain international jurisdictions based on updated financial projections. The effective tax rate for fiscal 2003 was also impacted by the non-deductibility of the $37,000 Industrial Energy Europe and ROW goodwill impairment charge.

During fiscal 2003, the Company reorganized the ownership structure of certain of its foreign subsidiaries and recorded an impairment charge on certain intercompany investments for statutory purposes. These actions have no effect on reported pre-tax operating results but resulted in a net tax benefit.