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Exide Technologies Management Discusses Q1 2013 Results - Earnings Call Transcript

We also remain on track with the closure of our Frisco recycling operations and the sale of adjacent property. In October, the city is expected to fully fund an escrow account, at which time we will begin the process the wind down our operations. As we stated in June, the operations will cease before December 31, 2012. According to this time line, we expect to record a pretax gain of about $28 million as early as the second quarter. We expect to receive net proceeds of approximately $37 million when the transaction closes. With the Frisco closure, we will be exiting third-party lead sales.

As we discussed last quarter, we announced increased pricing to recoup investments to comply with new regulatory group [ph] requirements in the U.S. This pricing is now fully in effect with most of our aftermarket customers.

I am very pleased to report that Exide is now the sole battery supplier to Pep Boys. You may recall that we previously supplied all Bosch-branded batteries to this customer. We have now been awarded the remainder of Pep Boys' business, supplying all automotive, marine, line guard and heavy-duty batteries. This business is particularly attractive due to the historically high core return rates. Our product shipments for this new incremental business began in early July.

As we turn to Slide 5. Our first quarter lead production was about 80,000 tons in the U.S. As indicated by the pie chart, 77% was used to satisfy internal demand. External lead sales decreased about 1,900 tons compared to the first quarter of fiscal 2012. During the quarter, the average cost of purchased spent batteries as a percent of LME increased to record levels. As you're aware, lead has core pricing mechanics that are tied to the price of lead is quoted on the London Metals Exchange. Lead of LME is down quarter-over-quarter, but we're experiencing the opposite trend with core cost. We have been exploring and have had some success in moving to a blended LME and core charge pricing model that more accurately reflects our cost in this environment. The higher core cost negatively impacted third-party lead sales during the first quarter, which translated to little or no profits on these sales.

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