As filed with the Securities and Exchange Commission on March ,
1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
YUASA, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 3690 23-2955195
(State or other (Primary Standard (I.R.S.
jurisdiction of Industrial Classification Employer
incorporation or Code Number) Identifica-
organization) tion
Number)
P. O. Box 14145, Reading, Pennsylvania 19612-4145, (610) 208-1991
(Address, including zip code, and telephone number, including
area code of registrant's principal executive offices)
P. Michael Ehlerman
Yuasa, Inc.
P. O. Box 14145
Reading, Pennsylvania 19612-4145
(610) 208-1991
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_________________
Copies to:
Joseph M. Harenza, Esquire Michael T. Philion
Stevens & Lee Chief Financial Officer
111 North Sixth Street Vice President of Finance
Reading, Pennsylvania 19601 Yuasa, Inc.
(610) 478-2160 P.O. Box 14145
Reading, Pennsylvania
19612-4145
(610) 208-1991
Mark Kessel, Esquire
Shearman & Sterling
599 Lexington Avenue
New York, New York
(212) 848-4000
_________________________
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this Registration Statement
becomes effective.
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act, check the following box: [ ]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering:
[ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering:
[ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, check the following box: [ ]
_______________
CALCULATION OF REGISTRATION FEE
Title of each Proposed
class of Maximum
Securities Aggregate Amount of
to be Offering Registration
Registered Price(1) Fee
_________________________________________________________________
Class A Common Stock, $72,500,000 $21,388
$0.01 par value
per share
(1) Estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457 under the
Securities Act of 1933.
_______________
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH , 1998
PROSPECTUS
________ Shares
YUASA, INC.
[LOGO]
Class A Common Stock
____________________________
Of the _______ shares of Class A common stock, par value
$.01 per share (the "Class A Common Stock"), of Yuasa, Inc. (the
"Company"), a Pennsylvania corporation, being offered hereby (the
"Offering"), _____ shares are being offered by the Company, a
majority-owned subsidiary of Yuasa Corporation ("Yuasa Japan"), a
Japanese business corporation, and 1,092,000 shares are being
offered by an affiliate of Exide Corporation ("Exide" or the
"Selling Stockholder"), a Delaware Corporation. See "Principal
and Selling Stockholders." The Company will not receive any
proceeds from the sale of shares of Class A Common Stock by the
Selling Stockholder. The 1,092,000 shares being sold by the
Selling Stockholder are shares of Class B common stock, par value
$.01 per share (the "Class B Common Stock" and, together with the
Class A Common Stock, the "Common Stock") which convert to an
equal number of shares of Class A Common Stock upon transfer to
any person not an affiliate of the Selling Stockholder. See
"Description of Capital Stock -- Conversion."
Each share of Class A Common Stock entitles its holder to
one vote, and each share of Class B Common Stock entitles its
holder to two votes. Of the 8,092,000 issued and outstanding
shares of Class B Common Stock, 7,000,000 (86.5%) are owned by
Yuasa Japan and 1,092,000 (13.5%) are owned by the Selling
Stockholder. Immediately after the completion of the Offering
(assuming no exercise of the over-allotment option granted to the
Underwriters), Yuasa Japan will beneficially own all of the
7,000,000 issued and outstanding shares of Class B Common Stock,
representing __% of the outstanding Common Stock and __% of the
combined voting power of the outstanding shares of Common Stock.
See "Principal and Selling Stockholders."
Prior to the Offering, there has been no public market for
the Class A Common Stock. It is currently estimated that the
initial public offering price per share of Class A Common Stock
will be between $______ and $________ per share. For a discussion
of the factors to be considered in determining the initial public
offering price of the Class A Common Stock, see "Underwriting."
The Company intends to apply for listing of the Class A
Common Stock on the New York Stock Exchange under the symbol
"YUA."
____________________________
See "Risk Factors" beginning on page 21 for a discussion of
certain factors that should be considered by prospective
purchasers of the Class A Common Stock offered hereby.
____________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds
Proceeds
Public Discounts and to
to Selling
Commissions(1) Company(2)
Stockholder
<S> <C> <C> <C>
<C>
Per Share ........ $ $ $
$
Total(3) ......... $ $ $
$
</TABLE>
(1) The Company and the Selling Stockholder have agreed to
indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses payable by the Company
of approximately $ ________.
(3) The Company has granted the Underwriters a 30-day option to
purchase up to _________ additional shares of Class A Common
Stock, on the same terms as set forth above, solely to cover
overallotments, if any. If such option is exercised in
full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $_____, $______
and $_____, respectively. See "Underwriting."
____________________________
The shares of Class A Common Stock are offered by the
several Underwriters, subject to prior sale, when, as and if
issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other
conditions, including the right of the Underwriters to withdraw,
cancel, modify or reject any order in whole or in part. It is
expected that delivery of the shares of Class A Common Stock will
be made in New York, New York, on or about ______, 1998.
_____________________________
Nomura Securities International, Inc. Salomon Smith Barney
_____________________________
The date of this Prospectus is , 1998.
<PAGE>
[Artwork]
Certain persons participating in the Offering may engage in
transactions that stabilize, maintain, or otherwise affect the
price of the Class A Common Stock, including purchases of shares
of Class A Common Stock to stabilize their market price,
purchases of shares of Class A Common Stock to cover some or all
of a short position in the shares of Class A Common Stock
maintained by the Underwriters and the imposition of penalty
bids. For a description of these activities, see "Underwriting."
<PAGE>
FORWARD LOOKING STATEMENTS
Certain statements contained in this Prospectus under
"Prospectus Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," in
addition to certain statements contained elsewhere in this
Prospectus, are forward looking statements. Such forward looking
statements can be identified by the use of forward looking
terminology such as "believes," "expects," "may," "intends,"
"will," "should" or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by
discussions of strategy. No assurance can be given that the
future results covered by the forward looking statements will be
achieved. Such statements are subject to risks, uncertainties
and other factors which could cause actual results to differ
materially from future results expressed or implied by such
forward looking statements. The most significant of such risks,
uncertainties and other factors are discussed under the heading
"Risk Factors," in this Prospectus, and prospective investors are
urged to carefully consider such factors. The Company does not
intend to update these forward looking statements.
ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Upon completion of the Offering, the
Company will be subject to the informational requirements of the
Exchange Act, and in accordance therewith, will be required to
file periodic reports and other information with the Securities
and Exchange Commission (the "Commission"). Such information can
be inspected without charge after the Offering at the public
reference facilities of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Suite 1400,
Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material may also be
obtained at prescribed rates from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission also maintains a web site (http://www.sec.gov)
that will contain all information filed electronically by the
Company with the Commission.
This Prospectus, which constitutes a part of a Registration
Statement on Form S-1 (the "Registration Statement") filed by the
Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"), does not contain all of the
information set forth in the Registration Statement, including
the exhibits thereto. For further information with respect to
the Company and the Class A Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits
thereto. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily
complete, and, with respect to each such contract or document
filed as an exhibit to the Registration Statement, reference is
made to the copy of such contract or document, and each such
statement is qualified in all respects by such reference. A copy
of the Registration Statement, including the exhibits thereto,
may be inspected and copies thereof may be obtained as described
in the preceding paragraph with respect to periodic reports and
other information to be filed by the Company under the Exchange
Act.
The Company intends to furnish its stockholders with annual
reports containing consolidated financial statements audited by
an independent public accounting firm and to make available to
its stockholders quarterly reports containing unaudited
consolidated financial statements for the first three quarters of
each fiscal year.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety and
should be read in conjunction with the more detailed information
and Consolidated Financial Statements, including the Notes
thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated or the context otherwise requires, all
references herein to "Common Stock" include the Class A Common
Stock and the Class B Common Stock of the Company. All
information in this Prospectus (i) gives effect to the formation
of the Company to own all of the shares of the outstanding common
stock of Yuasa-Exide, Inc. ("YEI"), (ii) gives effect to the
exchange of shares of common stock in YEI held by Yuasa Japan and
Exide for shares of Class B Common Stock of the Company on a
1400-for-1 basis on March 26, 1998, and (iii) assumes that the
Underwriters' overallotment option will not be exercised.
All references in this Prospectus to the "Company" refer to
Yuasa, Inc., a Pennsylvania corporation and, unless the context
indicates otherwise, its consolidated subsidiaries, including YEI
which, effective March 9, 1998, began to do business as "Yuasa,
Inc."
All references herein to the "Offering" mean the offering of
shares of Class A Common Stock of the Company by the Company and
the Selling Stockholder pursuant to this Prospectus. All
references in this Prospectus to fiscal years are to the
Company's fiscal years ended on March 31.
The Company
The Company is the leading manufacturer and supplier of
industrial batteries and small engine starting batteries in the
Americas. The Company markets a full line of stationary and
other batteries, as well as motive power batteries and related
products and services. Stationary batteries are used primarily
to supply standby operating power for (i) telecommunications
applications, such as wireless and wireline systems,
(ii) uninterruptible power system ("UPS") applications for
electronic, security and computer systems, and (iii) switchgear
and electrical control systems used in electric utilities and
energy pipelines. Stationary and other batteries include small
engine starting batteries used to start motorcycles, all-terrain
vehicles, snowmobiles and personal watercraft. Motive power
batteries are used primarily to power industrial forklift trucks
and other materials handling equipment. Related products include
chargers, electronic power equipment and a wide variety of
battery accessories. The Company sells its products and services
through a network of distributors, independent representatives
and an internal sales force, and also maintains service centers
throughout the United States.
The Company believes that it is well-positioned to benefit
from expected continued growth in the markets for its products,
especially the market for its stationary and motive power
industrial products. According to industry sources, U.S. sales
of large (greater than 25 amperes/hour) industrial stationary and
motive power batteries were approximately $670 million in fiscal
1997 and are projected to be approximately $760 million for
fiscal 1998. Stationary batteries represent approximately 49% of
the total U.S. industrial battery market in fiscal 1998. The
stationary battery market has grown at a compounded annual growth
rate of approximately 13.7% per year over the past five years,
fueled principally by growth in the U.S. telecommunications
industry. The stationary battery market is expected to grow at a
similar rate over the next several years. Motive power batteries
represent approximately 51% of the total U.S. industrial battery
products market in fiscal 1998. The motive power battery market
has grown at a compounded annual growth rate of approximately
9.6% per year over the past five years, fueled principally by
increased demand for batteries in the industrial forklift truck
market. The motive power battery market is expected to grow at a
lower rate for the next several years.
For fiscal 1993 through fiscal 1997 the Company's net sales
grew from $281.2 million to $357.5 million, while net earnings
decreased from $9.1 million in fiscal 1993 to $0.6 million in
fiscal 1995. The reduction in fiscal 1995 net earnings was due
to a sudden increase in the cost of raw materials and to
manufacturing inefficiencies at the Company. Beginning in fiscal
1996, the Company initiated a strategic program primarily
designed to improve manufacturing efficiencies and reduce product
costs. This program included, among other items, redesigning
certain of the Company's products to reduce material costs and
automating and reengineering its manufacturing operations. The
Company's gross profit margin increased from 17.6% to 20.2%
between fiscal 1995 and fiscal 1997 and net earnings increased
from $0.6 million in fiscal 1995 to $5.1 million in fiscal 1997
due, in significant part, to the success of this program.
Operating Strengths
The Company has been able to achieve profitable growth by
capitalizing on the following operating strengths:
Strong Market Positions
The Company holds the leading market positions in both the
motive power and small engine starting battery businesses and is
among the three largest suppliers of stationary batteries in the
Americas. The Company believes that its strong market positions
result, in large part, from its extensive direct sales force and
national network of independent distributors, representatives and
service centers.
Established Brand Names
The Company believes that its brand names are among the most
highly recognized in the industries it serves. The Company sells
its stationary and related products principally under the "Yuasa"
and "Exide" brand names, motive power products principally under
the "Exide" and "General" brand names, and small engine starting
batteries under the "Yuasa" brand name, as well as under certain
private labels. The Company benefits from having the right to
use the "Yuasa" and "Exide" brand names, which hold a reputation
for high quality.
Reputation for Quality, Service and Innovation
The Company believes that its reputation for product
quality, reliability and service enhances its competitiveness.
The Company also competes on its ability to partner with its
customers to engineer innovative power solutions.
Manufacturing Efficiency
Since it began its strategic initiative to improve
manufacturing efficiency in fiscal 1996, the Company has spent
over $45.0 million, among other things, to reengineer and
automate its manufacturing operations and to increase plant
capacities. As a result, the Company believes its manufacturing
operations are among the most modern and efficient in the
industry and will provide sufficient capacity to meet expected
demand for the Company's products over the next three years
without substantial additional investment.
Broad Range of Products
The Company believes that it offers the broadest product
line in the industry, including batteries addressing a wide range
of power requirements (from 1 ampere/hour to 4,000 amperes/hour)
and applications. This broad range of products allows the
Company to customize its products to meet varying customer
requirements.
Relationship with Yuasa Japan
The Company benefits from its relationship with Yuasa Japan
through its ability to use the "Yuasa" brand name, and from
technical assistance and access to battery technology developed
by Yuasa Japan. Additionally, the Company sells batteries to
Yuasa Japan and its affiliates in the Pacific Rim, and purchases
batteries from Yuasa Japan and its affiliates for sale into the
Americas. Yuasa Japan is one of the leading manufacturers of
lead acid batteries in the world.
Business Strategy
The Company's primary objectives are to increase its net
earnings and return on shareholders' equity and to capitalize on
its operating strengths to grow faster than the markets it serves
by implementing the following strategies:
Stationary Products: Continue to Focus on High Growth
Telecommunications Markets
The Company believes that the telecommunications markets in
the United States and the rest of the Americas offer high growth
potential for sales of its stationary products. The Company
intends to take advantage of its leading position in the
stationary battery market, as well as its other operating
strengths to increase its share of this growing and profitable
market.
The Company recently strengthened its stationary business by
adding new members to its management team with broad experience
in both the industrial battery and telecommunications industries
and extensive business relationships with purchasers, and
potential purchasers, of the Company's stationary products. The
Company intends to focus this team's efforts on increasing the
Company's sales of stationary products to the telecommunications
and UPS markets.
The Company also intends to focus its engineering and
manufacturing resources on products which have applications in
the telecommunications and UPS markets. The Company intends to
continue its strategy of developing customized engineering and
other product solutions for original equipment manufacturers
("OEMs") and end users of its products through strategic
partnering with them and by taking advantage of technical
assistance from Yuasa Japan. Further, the Company intends to use
its increased manufacturing capacity and new systems and programs
to significantly improve delivery to its customers with shorter
lead times.
Motive Power and Small Engine Starting Products: Maintain
Leadership Positions
The Company intends to maintain its leadership position in
the motive power market by (i) continuing to provide a dual brand
approach, including a premium, higher performance product,
marketed under the "Exide" brand, and a lower priced product
marketed under the "General" brand, (ii) leveraging its
nationwide sales and service network, and (iii) improving
delivery to its customers with shorter lead times. The Company
intends to maintain its leadership position in the small engine
starting battery market by developing new products for emerging
applications, such as cordless electric mowers and trimmers, and
by developing programs to maintain and enhance brand image and
customer loyalty.
Continued Cost Reduction Initiatives
The Company intends to continue its cost reduction programs
initiated in fiscal 1996 by continuing to reengineer and automate
its manufacturing processes and facilities and by redesigning its
products and business processes.
Continued Expansion Into New Geographic Markets
The Company believes that Latin America presents significant
growth potential for industrial battery sales, particularly in
the telecommunications markets. The Company established a sales
and distribution business in Mexico in fiscal 1994 and entered
into a joint venture in Argentina in fiscal 1997 to market and
sell industrial batteries. The Company intends to expand into
other Latin American countries through acquisitions, joint
ventures and start-up ventures.
_________________________
The Company maintains its executive offices at
2366 Bernville Road, Reading, Pennsylvania 19605-9457. Its
mailing address is P.O. Box 14145, Reading, Pennsylvania
19612-4145, and its telephone number is (610) 208-1991.
<PAGE>
The Offering
Class A Common Stock offered by
The Company: _________ shares(1)
Class A Common Stock offered by
The Selling Stockholder: 1,092,000 shares(2)
Common Stock to be outstanding
after the Offering: _________ shares of Class A
Common Stock(1)(3)(4)
7,000,000 shares of Class B
Common Stock(4)
total shares of
Common Stock(1)(3)
Voting Rights: The Class A Common Stock and
Class B Common Stock vote as a
single class on all matters,
except as otherwise required
by law. Each share of Class A
Common Stock entitles its
holder to one vote and each
share of Class B Common Stock
entitles its holder to two
votes. All of the outstanding
shares of Class B Common Stock
are presently owned by Yuasa
Japan (86.5%) and Exide
(13.5%). Immediately after
completion of the Offering,
Yuasa Japan will own all of
the 7,000,000 issued and
outstanding shares of Class B
Common Stock, representing
approximately ___% of all of
the outstanding Common Stock
and ___% of the combined
voting power of the
outstanding shares of Common
Stock (approximately ___% of
the combined voting power if
the Underwriters' over-
allotment option is exercised
in full). See "Description of
Capital Stock."
Use of Proceeds: Substantially all the net
proceeds received by the
Company will be used to repay
a portion of the Company's
indebtedness. See "Use of
Proceeds."
New York Stock Exchange Listing: The Company intends to apply
to list the Class A Common
Stock on the New York Stock
Exchange under the symbol
"YUA."
Risk Factors: An investment in the Class A
Common Stock offered hereby is
subject to a number of risks.
Prospective investors should
consider carefully all
information set forth herein
before making an investment in
the Class A Common Stock. In
particular, prospective
investors should consider the
factors set forth herein under
"Risk Factors."
__________________
(1) Up to an aggregate of _______ additional shares of Class A
Common Stock may be sold by the Company pursuant to the
Underwriters' overallotment option. See "Underwriting."
(2) Consists of 1,092,000 shares of Class B Common Stock which
will automatically convert to Class A Common Stock in
connection with the Offering.
(3) Excludes an aggregate of_______ shares of Class A Common
Stock reserved for issuance upon exercise of outstanding
options and for future issuances under the Company's Omnibus
Stock Plan. See "Management -- Management Incentive Plans -
- Omnibus Stock Plan" and " -- Grant of Options."
(4) Each share of Class B Common Stock is convertible at any
time into one share of Class A Common Stock at the election
of the holder and converts automatically into one share of
Class A Common Stock upon a transfer by the holder to any
person other than an affiliate of such holder, except under
certain limited circumstances. See "Description of Capital
Stock -- Class A Common Stock and Class B Common Stock."
<PAGE>
Summary Consolidated Financial Information
The following tables present summary historical consolidated
financial information and certain pro forma data of the Company,
for the periods or as of the dates indicated. The historical
consolidated income statement data for each of the five years in
the period ended March 31, 1997 have been derived from the
Company's historical financial statements, which have been
audited. The historical consolidated income statement data for
the nine-month periods ended December 28, 1997 and December 29,
1996 and the historical consolidated balance sheet data as of
December 28, 1997, have been derived from unaudited consolidated
financial statements, prepared on the same basis as the audited
consolidated financial statements and, in the opinion of
management, include all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of
financial position and results of operations as of the dates and
for the periods indicated. Results of operations for the interim
periods are not necessarily indicative of the results of
operations which could be expected for the full fiscal year or
any future period. The pro forma information does not purport to
represent what the Company's results actually would have been if
such events had occurred at the dates indicated, nor does such
information purport to project the results of the Company for any
future period.
The Summary Consolidated Financial Information should be
read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and the notes thereto included
elsewhere in this Prospectus.
[see next page]
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended March 31,
December 29, December 28,
==========================================================
===========================
1993 1994 1995 1996
1997 1996 1997
(Unaudited) (Unaudited)
====== ====== ======
====== ====== ========== ==========
(In thousands,
except per share and average data)
<S> <C> <C> <C> <C>
<C> <C> <C>
Consolidated Income
Statement Data:
Net sales......... $ 281,219 $ 296,416 $ 328,678 $
357,517 $ 357,526 $ 256,430 $ 290,900
Gross profit...... $ 60,670 $ 61,670 $ 57,698 $
61,722 $ 72,147 $ 49,681 $ 65,203
Operating
expenses....... $ 39,253 $ 42,946 $ 46,098 $
47,467 $ 52,620 $ 38,864 $ 44,617
Operating
earnings......... $ 21,417 $ 18,724 $ 11,600 $
14,255 $ 19,527 $ 10,817 $ 20,586
Earnings before
taxes and minority
interest........ $ 12,429 $ 11,232 $ 1,205 $
2,777 $ 9,433 $ 3,256 $ 9,072
Net earnings...... $ 9,091 $ 6,306 $ 616 $
1,279 $ 5,111 $ 1,736 $ 5,296
Net earnings per
share of Common
Stock (basic and
diluted)........ $ 1.12 $ 0.78 $ 0.08 $
0.16 $ 0.63 $ 0.21 $ 0.65
Dividends per
share of Common
Stock........... $ 0.00 $ 0.20 $ 0.28 $
0.05 $ 0.15 $ 0.15 $ 0.21
Weighted average
shares of
Common Stock
outstanding..... 8,092 8,092 8,092
8,092 8,092 8,092 8,092
Pro Forma Data:
Pro forma net
earnings per
share(1).......
$ $
Pro Forma weighted
average shares of
Common Stock
outstanding(2)(3)
$ $
Other data:
Capital
expenditures... $ 11,318 $ 16,199 $ 19,983 $
17,078 $ 11,203 $ 9,353 $ 10,852
Depreciation and
amortization... $ 11,220 $ 11,493 $ 12,386 $
15,000 $ 14,022 $ 10,348 $ 11,151
Gross profit
margin......... 21.6% 20.8% 17.6%
17.3% 20.2% 19.4% 22.4%
Operating earnings
margin.......... 7.6% 6.3% 3.5%
4.0% 5.5% 4.2% 7.1%
<CAPTION>
December 28, 1997
(Unaudited)
=============================
Actual As Adjusted(1)
Consolidated Balance Sheet Data:
====== ==============
<S>
<C> <C>
Total assets......................
$ 231,790 $
Total debt........................
$ 129,536 $
Total Stockholders' equity........
$ 39,431 $
</TABLE>
<PAGE>
(1) Adjusted to reflect interest expense, net of related income
tax benefit, on a pro forma basis as if the net proceeds
from the Offering (assuming the Underwriters' overallotment
option is not exercised) had been utilized to repay a
portion of the Company's outstanding indebtedness at the
beginning of each period presented. Interest expense
assumes a weighted average interest rate of 6.2% for fiscal
1997 and 6.4% for the nine months ended December 28, 1997,
which approximates the actual interest rate on $45.0 million
of indebtedness to be repaid with the estimated net proceeds
from the Offering.
(2) Excludes an aggregate of _______ shares of Class A Common
Stock reserved for issuance upon exercise of outstanding
options and for future issuances under the Company's Omnibus
Stock Plan. See "Management -- Management Incentive Plans -
- Omnibus Stock Plan" and " -- Grant of Options."
(3) Adjusted to give effect to the sale of _____ shares of
Class A Common Stock offered hereby by the Company.
<PAGE>
RISK FACTORS
An investment in the shares of Class A Common Stock offered
hereby involves a number of risks. Prospective investors should
carefully consider the following information, as well as the
other information in this Prospectus, before investing in shares
of Class A Common Stock.
Relationship with Principal Stockholder
Immediately after the completion of the Offering, Yuasa
Japan will have beneficial ownership of 100% of the issued and
outstanding shares of Class B Common Stock of the Company,
representing approximately __% of the total outstanding Common
Stock (approximately __% if the Underwriters' overallotment
option is exercised in full). As a result of the voting
disparity between the classes of Common Stock, Yuasa Japan's
Class B Common Stock will represent approximately __% of the
combined voting power of the Company's Common Stock
(approximately __% if the Underwriters' over-allotment option is
exercised in full). Yuasa Japan therefore has, and will continue
to have, sufficient voting power to elect the entire Board of
Directors of the Company. Yuasa Japan will also be able, in
general, to control the vote on any corporate transaction or
other matter submitted to the stockholders for approval,
including extraordinary transactions such as mergers and sales of
all or substantially all of the Company's assets, and otherwise
substantially influence the operations and strategic direction of
the Company. Such control by Yuasa Japan may discourage certain
types of transactions in which the holders of Class A Common
Stock might receive a premium for their shares over prevailing
market prices. See "Related Party Transactions," "Principal and
Selling Stockholders" and "Description of Capital Stock."
Although Yuasa Japan has historically viewed the Company as
the operation through which Yuasa Japan markets its products in
the Americas, there is no agreement which prevents Yuasa Japan
from competing with the Company in the future in the event Yuasa
Japan changes this strategy. Similarly, although Yuasa Japan has
historically provided the Company with technical assistance,
technology and know-how, there is no agreement in effect which
would require Yuasa Japan to provide such assistance or which
would preclude Yuasa Japan from competing with the Company in the
future. See "Related Party Transactions" and "Business --
Intellectual Property -- Licenses."
Certain directors and officers of the Company are also
directors and officers of Yuasa Japan and may have conflicts of
interest with respect to certain transactions which may affect
the Company, such as business dealings between the Company and
Yuasa Japan, acquisition opportunities, the issuance of
additional shares of Common Stock and other matters involving
conflicts which cannot now be foreseen. In addition, upon
completion of the Offering, each member of the Company's Board of
Directors will be either (i) an officer or director of, and was
nominated and elected as a director by, Yuasa Japan, or (ii) an
executive officer of the Company. Although the Company intends
to appoint at least three directors who are independent of Yuasa
Japan and of the Company, following the completion of the
Offering, such directors will not constitute a majority of the
Company's Board, and the Company's Board may not have a majority
of independent directors in the future. See "Related Party
Transactions."
Telecommunications Industry and Growth of the Company
The Company expects that sales of stationary products to
telecommunications customers will account for an increasing
percentage of the Company's net sales and earnings in the future.
The continued success of the Company's stationary batteries and
other power supply products and services will depend, to a
substantial extent, on the future continued growth and the
increased accessibility and affordability of telecommunications
products and services in the Americas. There can be no assurance
that the demand for such products and services will continue to
grow.
In recent years, the telecommunications industry has
undergone substantial consolidation and change, reducing the
number of potential customers for the Company's products.
Although the Company does not expect continuing consolidation and
change to have a material adverse effect on the Company, there
can be no assurance that this will not be the case. See
"Business -- Products" and "-- Customers and End Users."
Competition; Industry Consolidation; Pricing Pressures
The industrial lead-acid battery market has for many years
been highly competitive, with competition based primarily on
relative product quality and reliability, price, delivery time
and after-sale service, and has recently become even more
competitive as a result of consolidation among industrial battery
purchasers, which has reduced the number of customers for the
Company's products and increased pricing pressures throughout the
industry. The Company's competitors range from development stage
companies to major domestic and international companies.
Although the U.S. market is currently dominated by domestic
manufacturers, foreign competition could increase, depending on
changes in relative prices, duties, tariffs, freight costs,
currency exchange rates or as a result of changes in technology.
Certain of the Company's competitors have technical,
marketing, sales, manufacturing, distribution and other resources
significantly greater than those of the Company, as well as
significant name recognition, established positions in the market
and long-standing relationships with OEMs and other customers.
In addition, certain of the Company's competitors own lead
smelting facilities which, during sustained periods of
substantial lead cost increases, may provide a competitive
advantage over the Company.
The Company's ability to compete in markets both inside and
outside the United States in the future could be limited by the
activities of Yuasa Japan and Exide, both of which manufacture
and sell many of the same products for the same applications as
the products offered by the Company and both of which are
substantially larger and have greater financial resources than
the Company. Exide presently derives a substantial portion of
its revenues from sales of industrial batteries in Europe and its
existing agreement not to compete with the Company expires in
June 2001. Accordingly, Exide could become a competitor of the
Company in the Americas and elsewhere in the future. Although
Yuasa Japan has historically viewed the Company as the operation
through which Yuasa Japan markets its products in the United
States and elsewhere in the Americas, there is no agreement
currently in force which would prevent Yuasa Japan from competing
with the Company in the Americas in the future. If Yuasa Japan
were to divest itself of its interest in the Company or otherwise
change its strategy in the future, it could become a competitor
of the Company. See "Related Party Transactions," "--
Relationship with Principal Stockholder" and "Business --
Competition."
Materials and Manufacturing Costs
The costs of the components of the Company's products,
particularly the cost of lead, may fluctuate and the Company may
be unable to fully pass on any future cost increases to its
customers. When lead costs rise, certain of the Company's
competitors with smelting operations may have lower lead costs
than the Company, providing them with a competitive advantage.
Although the Company has adopted strategies to help minimize
these risks, there can be no assurance that these strategies will
be successful over an extended period. See "--Cyclical Industry;
Variations in Quarterly Results," "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Raw
Material Pricing," "Business -- Raw Materials" and "--
Competition."
The Company's other manufacturing costs, which include a
variety of non-lead materials (such as plastics and steel), labor
and most other operating costs, are also affected by inflationary
pressures. The Company's ability to pass along these
inflationary cost increases through higher selling prices may be
limited during periods of stable or declining lead costs because
of established industry practices that tend to link price
increases to increased lead costs. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations --
Inflation."
Cyclical Industry; Variations in Quarterly Results
The Company is subject to certain factors affecting pricing
and net sales over which the Company has no control, such as
general economic and industry specific competitive conditions.
In particular, the industrial battery industry in which the
Company competes is cyclical in nature and the markets for the
Company's products are sensitive to the rate of economic growth
in the U.S. and world economies. In addition, products which use
the Company's small engine starting batteries are primarily sold
for leisure use, and such sales may be subject to deferral during
economic downturns. The U. S. economy has experienced a
relatively long period without major economic downturns, and
might be subject to a recession in the future. Future economic
downturns could adversely affect the Company's results of
operations and financial condition.
Traditionally, the Company's net sales, operating earnings
and net earnings have been higher in the fourth quarter, due to
the customary seasonal buying patterns of its customers and from
other factors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Fluctuations in
Quarterly Results."
Risks Associated with International Operations; Currency Risk
The Company derived approximately 12% of its net sales for
the nine months ended December 28, 1997 from sales of its
products in countries outside of the United States and the
Company plans to expand its operations significantly in Latin
America in the future. The Company's international operations
are subject to the risks usually associated with foreign
operations, including, but not limited to, the disruption of
markets, changes in export or import laws, restrictions on
currency exchanges, and the modification or introduction of other
governmental policies with potential adverse effects. Also,
sales in foreign jurisdictions typically are made in local
currencies and transactions with foreign affiliates customarily
are accounted for in foreign currencies. To the extent the
Company does not take steps to mitigate the effect of changes in
the relative value of the U.S. dollar and these foreign
currencies, the Company's results of operations and financial
condition (which are reported in U.S. dollars) could be adversely
affected by negative changes in these relative values. In
addition, the Company may expand in Latin America through joint
ventures involving local partners who may have economic, business
or legal interests or goals which are inconsistent with those of
the joint venture or the Company or who may be unable to meet
their financial or other obligations to the joint venture or the
Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview -- Net Sales."
Early Termination of Certain Licenses
The Company has exclusive, perpetual royalty-free licenses
from Exide for the use of certain trademarks and patents. Such
licenses are subject to termination in the event the Company
breaches its obligations under the license agreements related to
these trademarks and patents. The Company also has technical
assistance arrangements and licenses to use technology and
trademarks of Yuasa Japan, which Yuasa Japan could terminate.
Such termination or revocation could have a material adverse
effect on the Company's business, financial condition and results
of operations. See "Business -- Intellectual Property."
Potential Costs of Environmental Compliance
The Company is subject to numerous federal, state and local
laws and regulations that are designed to protect the environment
and employee health and safety, including those pertaining to the
storage, handling, treatment, transportation and disposal of
hazardous and toxic materials, practices and procedures
applicable to the construction and operation of the Company's
plants, and standards relating to the discharge of air, soil and
water pollutants. While the Company believes that its operations
currently comply substantially with applicable environmental,
health and safety laws and regulations, such compliance has
resulted in ongoing costs for the Company, and the Company from
time to time has had instances of alleged or actual noncompliance
that have resulted in the imposition of fines or penalties. The
Company's continued compliance with environmental, health and
safety laws and regulations could (i) require the Company to
incur significant expenses, including fines and penalties,
(ii) restrict the Company's ability to modify or expand its
facilities or continue production, and (iii) require the Company
to install pollution control equipment and make other capital
improvements.
In addition, some of the Company's manufacturing sites have
a history of industrial use. As is typical for such businesses,
soil and groundwater contamination has occurred in the past at
some sites and might occur or be discovered at other sites in the
future. The Company from time to time investigates, remediates
and monitors soil and groundwater contamination at certain of
those sites. In addition, the Company has been and in the future
may be liable to contribute to the cleanup of locations owned or
operated by other persons to which the Company or its
predecessors have sent wastes for disposal, pursuant to the
federal Comprehensive Environmental Response, Compensation and
Liability Act (commonly known as "Superfund") and other similar
laws. Under these laws, the owner or operator of contaminated
properties and the generator of wastes sent to a contaminated
disposal facility can be jointly and severally liable for the
cleanup of such properties, regardless of fault.
The Company attempts to reduce its potential liability
associated with environmental, health and safety laws and
regulations by, among other practices, recycling materials such
as lead and acid in batteries and by not owning or operating lead
smelting facilities. In addition, substantially all of the
Company's industrial battery operations were acquired from Exide
in a transaction pursuant to which the Company acquired assets
and did not contractually assume environmental and related
liabilities. These assets were acquired in 1991 and there have
not been any significant environmental claims made since that
date. Based on current information, the Company does not expect
compliance with environmental, health and safety laws and
regulations to have a material adverse effect on the business or
financial condition of the Company. However, there can be no
assurance that developments, such as increased requirements of
such laws and regulations, increasingly strict enforcement
thereof by governmental authorities, and claims for damages to
property or injury to persons resulting from the environmental,
health or safety impacts of the Company's operations, will not
cause the Company to incur significant costs and liabilities that
could have a material adverse effect. See "Business--
Environmental Regulation."
No Prior Market For Class A Common Stock
Prior to the Offering, there has been no public market for
the Common Stock and there can be no assurance that an active
market for the Class A Common Stock will develop or be sustained
after the completion of the Offering, nor can there by any
assurance that investors in the Class A Common Stock will be able
to resell their shares at or above the initial public offering
price. The initial public offering price of the Class A Common
Stock will be determined by negotiations among the Company and
the Underwriters and may not be indicative of the market price
after the Offering. See "Underwriting" for a description of the
factors to be considered in determining the initial public
offering price.
Possible Volatility of Stock Price; Shares Eligible for Future
Sale
The market price of the Class A Common Stock may be
significantly affected by, and could be subject to significant
fluctuations in response to, such factors as the Company's
operating results, changes in any earnings estimates,
announcements of significant business developments by the
Company, its competitors or other third parties, other
developments affecting the Company, its customers or its
competitors, and various factors affecting the Company's
business, the financial markets or the economy in general,
including perceptions about market conditions in the battery
industry, the impact of various regulatory proposals and general
market conditions, some of which may be unrelated to the
Company's performance. In addition, the stock market has
experienced high levels of price and volume volatility in the
past and market prices for the stock of many companies,
especially companies which have recently completed initial public
offerings, have experienced wide price fluctuations not
necessarily related to the operating performance of such
companies. Moreover, because the number of shares of Class A
Common Stock being offered hereby is small relative to the
average number of shares traded of many other publicly held
companies, the market price of Class A Common Stock may be more
susceptible to fluctuation. A decision on the part of Yuasa
Japan to sell a substantial number of shares of the Company's
Common Stock in the public market from time to time after
expiration of the 180-day lock-up period (see "Underwriting"), or
the perception that such sales may occur, could adversely affect
the market price of the Class A Common Stock. Yuasa Japan has
indicated to the Company that it has no present intent to sell
all or any shares of the Common Stock. See "-- Relationship with
Principal Stockholder" and "Principal and Selling Stockholders."
Immediate and Substantial Dilution
The initial public offering price is substantially higher
than the net tangible book value per share of the Class A Common
Stock. Investors in the Offering will therefore experience an
immediate and substantial dilution in net tangible book value per
share of Class A Common Stock of $________ per share. In
addition, any future issuance of shares of Common Stock for
consideration, or the exercise of options to purchase Common
Stock, at or below the issue price of the shares offered hereby
will cause additional dilution in terms of net tangible book
value per share. To the extent that restricted share awards are
made, there will be further dilution. See "Dilution."
Absence of Dividends
The Company does not presently intend to declare or pay cash
dividends on its Common Stock after completion of the Offering.
The Company does not expect to pay cash dividends in the
foreseeable future. As a holding company with no present
business operations of its own, the principal source of dividends
from the Company will be dividends and other distributions from
its subsidiaries. See "Dividend Policy."
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common
Stock offered by the Company hereby are estimated to be
$___________ ($_____________ if the Underwriters' over-allotment
option is exercised in full) after deducting the underwriting
discount and estimated offering expenses of $________. The
Company intends to use substantially all of the estimated net
proceeds to repay indebtedness. At December 28, 1997, the
Company had $129.5 million in aggregate indebtedness outstanding
under credit facilities with 10 different lenders. During fiscal
1997, the Company incurred $9.6 million in interest expense and
reduced $10.7 million in principal in the aggregate, with respect
to this indebtedness. The aggregate weighted average maturity of
the approximately $78.7 million in long term indebtedness is
approximately two years and the weighted average annual interest
rate on all indebtedness was 6.4% during the fiscal 1998 nine-
month period ended December 28, 1997. The Company has not yet
determined which indebtedness it will repay with the net proceeds
from the Offering. The Company will not receive any of the
proceeds of the sale of Class A Common Stock offered by the
Selling Stockholder hereunder. See note 6 to Notes to
Consolidated Financial Statements. See also "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company does not presently intend to declare or pay cash
dividends on its Common Stock after completion of the Offering.
Any determination to pay dividends in the future will be at the
discretion of the Company's Board of Directors and will depend
upon the Company's results of operations, financial condition,
contractual restrictions, restrictions imposed by applicable law
and other factors deemed relevant by the Board of Directors,
which may change the Company's dividend policy at any time.
Holders of Class A Common Stock and holders of Class B Common
Stock share equally in dividends declared by the Board. As a
holding company with no present business operations of its own,
the principal source of dividends from the Company will be
dividends and other distributions from its subsidiaries. See
"Risk Factors -- Absence of Dividends."
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt including
the current portion of long-term debt and the capitalization of
the Company as of December 28, 1997 on an actual and as adjusted
basis as of that date to (i) reflect the sale by the Company of
the shares of Class A Common Stock offered hereby (at an assumed
initial public offering price of $____________ per share) and
(ii) the use of the net proceeds of the Offering (after deducting
the underwriting discounts and commissions and estimated offering
expenses payable by the Company) as described in "Use of
Proceeds." This table should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes
thereto appearing elsewhere in this Prospectus. See also "Use of
Proceeds," "Selected Consolidated Financial Information,"
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Description of Capital Stock."
<TABLE>
<CAPTION>
AS OF
DECEMBER 28, 1997
ACTUAL
AS ADJUSTED
(Unaudited)
-----------
- -----------
(in
thousands)
<S> <C>
<C>
Short-term debt and current
portion of long-term debt $50,867
$
=======
=======
Long-term debt:
Loan Facilities $69,113
$
Capital Leases 9,556
-------
------
Total long-term debt 78,669
-------
------
Stockholders' equity:
Preferred stock, $0.01 par value,
50,000,000 shares authorized
Class A Common Stock, $0.01 par value,
100,000,000 shares authorized; no
shares issued and outstanding actual
and ___________ shares outstanding
as adjusted(1)(2) --
--
Class B Common Stock, $0.01 par value,
100,000,000 shares authorized;
___________ shares issued and
outstanding and ___________ shares
outstanding as adjusted(2) 81
__
Paid-in capital 16,324
--
Retained earnings 23,989
--
Additional minimum pension liability (827)
Cumulative translation adjustment (136)
-------
- -------
Total stockholders' equity 39,431
--
-------
- -------
Total capitalization $118,100
$ --
========
========
</TABLE>
________________
(1) Actual and as adjusted amounts exclude an aggregate of
__________ shares of Class A Common Stock reserved for
issuance upon exercise of outstanding options and for future
issuances under the Company's Omnibus Stock Plan. See
"Management -- Management Incentive Plans -- Omnibus Stock
Plan" and " -- Grant of Options."
(2) As adjusted outstanding shares give effect to the sale by
Exide of all of the 1,092,000 shares of Class B Common Stock
of the Company held by Exide in the Offering.
<PAGE>
DILUTION
As of December 28, 1997, net tangible book value of the
Company's Common Stock before giving effect to the Offering was
$17.9 million, or approximately $2.21 per share. Net tangible
book value per share is determined by dividing the net tangible
book value by the number of outstanding shares of Common Stock.
Net tangible book value is determined by deducting from total
assets all intangibles (net of amortization) and total
liabilities. Without taking into account any other changes in
net tangible book value after December 28, 1997, other than to
give effect to the net proceeds from the issuance of _____ shares
of Class A Common Stock to be offered by the Company in the
Offering (assuming an initial public offering price of $_____ per
share and after deducting the underwriting commission and
estimated expenses of the Offering payable by the Company), and
the dividend declared on March 9, 1998, payable prior to the
Offering, the pro forma net tangible book value of the Company as
of December 28, 1997 would have been $________, or approximately
$_______ per share. This represents an immediate increase in net
tangible book value of $____ per share of Common Stock to
existing stockholders and an immediate dilution of approximately
$_____ per share to new investors purchasing shares in the
Offering. The following table illustrates the per share
dilution:
<TABLE>
<S>
<C> <C>
Assumed initial public offering price per share
$_____
Net tangible book value per share before the Offering
$_____
Increase in net tangible per share attributable to new
investors $_____
Pro forma net tangible book value per share after the Offering
$_____
Dilution per share to new investors
$_____
- -----------------
</TABLE>
The following table sets forth, as of December 28, 1997, the
number of shares of Common Stock purchased from the Company, the
total consideration paid to the Company and the average price per
shares paid by (i) Yuasa Japan and Exide, the Company's two
existing stockholders, and (ii) new investors purchasing shares
of Common Stock from the Company in the Offering (before
deducting underwriting commissions and estimated offering
expenses payable by the Company).
<TABLE>
<CAPTION>
Average
Shares Purchased
Total Consideration Price
Number Percent
Amount Percent per Share
<S> <C> <C>
<C> <C> <C>
Existing stockholders..............
Yuasa Japan................ 7,000,000
Exide...................... 1,092,000
New investors......................
--------- -------
------- ------- ------
Total......................
========= =======
======= ======= ======
</TABLE>
The foregoing table assumes no exercise of the Underwriters'
overallotment option, and excludes options to acquire 570,400
shares of Class A Common Stock granted to officers and other
employees under the Company's Omnibus Stock Plan in March, 1998
at the public offering price and _____ shares of Class A Common
Stock available for future grants under that Plan. See
"Management -- Management Incentive Plan -- Omnibus Stock Plan"
and "--Grant of Stock Options." Any future issuance of shares of
Common Stock for consideration or the exercise of options to
purchase Common Stock at or below the issue price of the shares
of Class A Common Stock offered hereby will cause dilution in
terms of net tangible book value per share. See "Management --
Executive Compensation" and "Risk Factors - Immediate and
Substantial Dilution."
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following tables present selected historical
consolidated financial information and certain pro forma data of
the Company, as of the dates and for the periods indicated. The
historical consolidated income statement information for each of
the five years in the period ended March 31, 1997 and the
consolidated balance sheet data as of March 31, 1993, 1994, 1995,
1996 and 1997, have been derived from the Company's audited
consolidated financial statements. The historical consolidated
income statement information for the nine-month period ended
December 28, 1997 and the nine-month period ended December 29,
1996 and the consolidated balance sheet information as of
December 28, 1997 have been derived from unaudited consolidated
financial statements prepared on the same basis as the audited
consolidated financial statements, and, in the opinion of
management, include all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of
financial position and results of operations as of the dates and
for the periods indicated. Results of operations for the interim
periods are not necessarily indicative of the results of
operations that could be expected for the full fiscal year or any
future period. The pro forma information does not purport to
represent what the Company's results actually would have been if
such events had occurred at the dates indicated, nor does such
information purport to project the results of the Company for any
future period.
The Selected Consolidated Financial Information should be
read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended
March 31, December 29, December 28,
========================================================
===========================
1993 1994
1995 1996 1997 1996 1997
(Unaudited) (Unaudited)
======== ========
======== ======== ======== =========== ===========
(in
thousands, except per share and average data)
<S> <C> <C> <C>
<C> <C> <C> <C>
Consolidated Income Statement Data:
Net sales $281,219 $296,416
$328,678 $357,517 $357,526 $256,430 $290,900
Cost of goods sold 220,549 234,746
270,980 295,795 285,379 206,749 225,697
-------- --------
- -------- -------- -------- -------- --------
Gross profit 60,670 61,670
57,698 61,722 72,147 49,681 65,203
Operating expenses 39,253 42,946
46,098 47,467 52,620 38,864 44,617
-------- --------
- -------- -------- -------- -------- --------
Operating earnings 21,417 18,724
11,600 14,255 19,527 10,817 20,586
Interest expense 8,849 7,736
9,614 11,581 9,625 7,301 7,261
Equity (earnings) Loss of
investee - -
- - (45) 53 - 4,005
Other (earnings) expense, net 139 (244)
781 (58) 416 260 248
-------- --------
- -------- -------- -------- -------- --------
Earnings before taxes,
minority interest and
cumulative effect of change
in accounting principle 12,429 11,232
1,205 2,777 9,433 3,256 9,072
Income taxes 5,620 4,873
661 1,514 4,236 1,501 3,812
-------- -------
- ------ ------- ------ ------- --------
Earnings before minority interest
and cumulative effect of change
in accounting principle 6,809 6,359
544 1,263 5,197 1,755 5,260
Minority interest (earnings)
Loss 13 (53)
72 16 (86) (19) 36
--------- --------
- ------- ------- ------- ------- --------
Earnings before cumulative effect
of change in accounting
principle 6,822 6,306
616 1,279 5,111 1,736 5,296
Cumulative effect of change in
accounting principle (2,269) -
- - - - - -
--------- ---------
- ------- ------- ------- ------- --------
Net Earnings $ 9,091 $ 6,306 $
616 $ 1,279 $ 5,111 $ 1,736 $ 5,296
========= ========
======= ======= ======= ======= =========
Net earnings per share of
Common Stock (basic and
diluted) $ 1.12 $ 0.78 $
0.08 $ 0.16 $ 0.63 $ 0.21 $ 0.65
Dividends per share of
Common Stock $ 0.00 $ 0.20 $
0.28 $ 0.05 $ 0.15 $ 0.15 $ 0.21
Weighted average shares of
Common Stock outstanding 8,092 8,092
8,092 8,092 8,092 8,092 8,092
Pro Forma data:
Pro forma net earnings
per share(1)
$
Pro forma weighted average shares
of Common Stock outstanding(2)(3)
Other data:
Capital Expenditures $ 11,318 $ 16,199 $
19,983 $ 17,078 $ 11,203 $ 9,353 $ 10,852
Depreciation and amortization $ 11,220 $ 11,493 $
12,386 $ 15,000 $ 14,022 $ 10,348 $ 11,151
Gross profit margin 21.6% 20.8%
17.6% 17.3% 20.2% 19.4% 22.4%
Operating earnings margin 7.6% 6.3%
3.5% 4.0% 5.5% 4.2% 7.1%
<CAPTION>
December 28, 1997
As of
March 31, (Unaudited)
1993 1994
1995 1996 1997 Actual As Adjusted
(in
thousands)
<S> <C> <C> <C>
<C> <C> <C> <C>
Consolidated Balance Sheet Data:
Total assets...................... $189,299 $186,039
$209,136 $219,226 $219,519 $231,790 $
Total debt........................ $114,880 $107,283
$124,207 $129,121 $118,436 $129,536 $
Total Stockholders' equity........ $ 28,965 $ 33,671 $
31,841 $ 32,262 $ 35,842 $ 39,431 $
</TABLE>
___________________________
<PAGE>
(1) Adjusted to reflect interest expense, net of the related
income tax benefit, on a pro forma basis as if the net
proceeds from the Offering (assuming the Underwriters'
overallotment option is not exercised) had been utilized to
repay a portion of the Company's outstanding indebtedness at
the beginning of each period presented. Interest expense
assumes a weighted average interest rate of 6.2% for fiscal
1997, 6.4% for the fiscal 1998 nine months ended
December 28, 1997, which approximates the actual interest
rate on $45.0 million of indebtedness to be repaid with the
estimated net proceeds from the Offering.
(2) Actual and as adjusted amounts exclude an aggregate of
__________ shares of Class A Common Stock reserved for
issuance upon exercise of outstanding options and for future
issuances under the Company's Omnibus Stock Plan. See
"Management -- Management Incentive Plans -- Omnibus Stock
Plan" and " -- Grant of Options."
(3) As adjusted to give effect to the sale of _____ shares of
Class A Common Stock offered hereby by the Company.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's financial
condition and results of operations should be read in conjunction
with the Selected Consolidated Financial Information of the
Company, the Consolidated Financial Statements of the Company and
the notes thereto and the Unaudited Consolidated Financial
Statements and the notes thereto included elsewhere in this
Prospectus.
Overview
General
The Company is the leading manufacturer and supplier of
industrial batteries and small engine starting batteries in the
Americas. The Company markets a full line of stationary and
other batteries, as well as motive power batteries and related
products and services. Stationary batteries are used primarily
to supply standby operating power for (i) telecommunications
applications, such as wireless and wireline systems, (ii) UPS
applications for electronic, security and computer systems, and
(iii) switchgear and electrical control systems used in electric
utilities and energy pipelines. Stationary and other batteries
include small engine starting batteries used to start
motorcycles, all-terrain vehicles, snowmobiles and personal
watercraft. Motive power batteries are used primarily to power
industrial forklift trucks and other materials handling
equipment. Related products include chargers, electronic power
equipment and a wide variety of battery accessories. The Company
sells its products and services through a network of
distributors, independent representatives and an internal sales
force, and also maintains service centers throughout the United
States.
From time to time, the Company has entered into acquisitions
or joint ventures with strategic partners to expand into new
geographic markets or strengthen its existing market positions,
including, establishing an industrial battery sales and
distribution business in Mexico in fiscal 1994, entering into a
joint venture in Argentina to market and sell industrial
batteries in fiscal 1997, and acquiring certain assets of a
U.S.-based telecommunications installation and service business
in fiscal 1996. In addition, the Company has also selectively
divested certain businesses (such as Tucker Telecommunications in
fiscal 1998) or significantly reduced certain lines of business
(such as the Company's electric vehicle battery ("EV") product
line in fiscal 1996). The Company expects to continue to
undertake selective acquisitions as opportunities arise and could
divest or scale back certain lines of business if they do not
meet management's financial performance requirements. Such
transactions could have a material effect on the Company's
financial condition or results of operations. As of the date of
this Prospectus, the Company has no agreements with any
prospective candidate with respect to any specific material
transaction.
Net Sales
The Company's net sales are derived mainly from the sale of
stationary and other batteries as well as motive power batteries
to dealers, wholesale distributors, and OEMs. The Company also
receives significant net sales from the sale of chargers, power
supply equipment and accessories related to its batteries, as
well as from net sales from installation and maintenance
services. No customer accounted for more than 5% of the
Company's net sales in fiscal 1997. The market for batteries
historically has been cyclical, with periods of economic
expansion generally leading to increased demand for the Company's
products.
As a result of rapid growth in the telecommunications
industry, net sales from the Company's stationary business have
increased and are expected by the Company to continue to increase
at a faster rate than the Company's net sales as a whole. To
service the telecommunications industry successfully, the
Company's products and services will need to continue to meet
rapidly changing industry standards and specifications. The
Company expects that growth in the telecommunication industry
will also contribute to increasing net sales from installation
and maintenance services. The Company's other product lines are
generally used in mature industries principally in the United
States. In addition, the Company expects to derive an increasing
portion of its net sales from Latin American and other
international markets, where demand for the Company's products is
growing faster than in the United States.
The battery industry and the Company have in the past been
able to increase product prices in response to significant
increases in the cost of lead. However, in periods of rapid lead
cost increases, selling price increases are not generally able to
keep pace with lead costs, resulting in a period of reduced gross
margins. However, the converse is also true. During periods of
rapidly declining lead prices, product selling prices have not
fallen as rapidly, resulting in a period of increased gross
margins.
The Company expects to continue to develop its service
business in connection with, among other things, growth in demand
for batteries and installation services in the telecommunications
industry. These activities require that the Company estimate
certain direct and indirect costs of delivering services in
advance of the date on which such service is performed.
The Company's foreign net sales and certain expenses are
transacted in foreign currencies. The Company reviews from time
to time its foreign currency exposure and evaluates whether it
should enter into hedging transactions. The Company does not
presently hedge its foreign currency risks, as it does not
believe it has a material exposure. Exchange rate fluctuations
did not have a material effect on the financial results of the
Company for fiscal 1997 and fiscal 1998.
Cost of Goods Sold
All direct and indirect manufacturing and distribution costs
are included in cost of goods sold. The principal costs include
lead, plastics, steel, separators, direct and indirect labor and
benefits, freight costs, energy costs and depreciation.
Beginning in fiscal 1996, the Company initiated a comprehensive
cost reduction program. Among other things, this program focused
on improving manufacturing efficiency by automating and
reengineering its operations and processes and redesigning
products to reduce material costs.
Lead represents a significant component of the Company's
total cost of goods sold. Lead is a commodity whose prices
fluctuate from time to time. To the extent these prices
fluctuate, the Company's operating results will be affected. The
Company is not currently party to a long-term lead supply
contract, but it does routinely engage in forward contract
purchases from its major suppliers to secure in advance a
portion, generally not exceeding 50%, of its expected lead
requirements for periods of up to one year. This policy is
authorized by the Company's Board of Directors and implemented by
authorized officers. The Company purchases other commodities,
including plastics, steel, separators, and energy used in its
manufacturing activities, in the open market from various sources
and their availability and price are subject to normal market
conditions. Some of the Company's manufacturing plants are
located near customers; nevertheless, because of the lead content
and consequent weight of its battery products and the large
geographic territory in which it operates, the Company incurs
significant freight costs in shipping its products.
Operating Expenses
The Company's operating expenses include sales, general and
administrative, engineering, intangible amortization and other
costs. These costs include salary and benefits, advertising,
promotional materials and certain promotion expenses, bad debt
expenses and professional fees, many of which are not directly
affected by sales volumes. Operating expenses also include
certain non-capitalized start-up costs associated with the
Company's expansion into international markets and its research
and development programs, both of which the Company expects to
increase in future periods as the Company continues to expand its
products and geographic markets. The Company also expects to
incur additional general and administrative expenses as a result
of becoming a publicly-held company.
Results of Operations
The following table sets forth items of income and expense
reflected in the Company's consolidated statements of income as
percentages of its net sales for the periods indicated (minor
differences are due to roundings):
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended March
31, December 29, December 28,
1995 1996
1997 1996 1997
(Unaudited)
<S> <C> <C>
<C> <C> <C>
Net sales 100.0% 100.0%
100.0% 100.0% 100.0%
Cost of goods sold 82.4 82.7
79.8 80.6 77.6
Gross profit 17.6 17.3
20.2 19.4 22.4
Operating expenses 14.0 13.3
14.7 15.2 15.3
Operating earnings 3.6 4.0
5.5 4.2 7.1
Interest expense 2.9 3.2
2.7 2.8 2.5
Equity (earnings) loss of investee 0.0 (0.0)
0.0 0.0 1.4
Other (earnings) expense, net 0.3 (0.0)
0.1 0.1 0.1
Earnings before taxes and minority interest 0.4 0.8
2.6 1.3 3.1
Provision for income taxes 0.2 0.4
1.2 0.6 1.3
Earnings before minority interest 0.2 0.4
1.5 0.7 1.8
Minority interest (earnings) loss 0.0 0.0
0.0 0.0 0.0
Net Earnings 0.2% 0.4%
1.4% 0.7% 1.8%
==== ====
==== ==== ====
</TABLE>
The following table sets forth the percentage increase over
the prior comparable period of selected items of income and
expense reflected in the Company's consolidated statements of
income.
<TABLE>
<CAPTION>
Year Ended
March 31, Nine Months Ended
1996
1997 December 28, 1997
(Unaudited)
<S> <C>
<C>
Net Sales 8.8%
0.0% 13.5%
Gross profit 7.0%
16.9% 31.2%
Operating earnings 22.9%
37.0% 90.3%
Earnings before taxes and minority interest 130.5%
239.7% 178.6%
Net Earnings 107.6%
299.6% 205.1%
</TABLE>
Fiscal 1998 Nine Months Ended December 28, 1997 versus
Fiscal 1997 Nine Months Ended December 28, 1996
Net Sales. Net sales for the fiscal 1998 nine months ended
December 28, 1997 were $290.9 million compared to $256.4 million
for the same period in fiscal 1996, an increase of 13.5%.
Substantially all of this increase is due to increased unit
volumes. Net sales for stationary and other products and
services, and motive power products and services, represented
approximately 57% and 43% of consolidated net sales,
respectively.
Gross Profit. Gross profit for the fiscal 1998 nine months
ended December 28, 1997 was $65.2 million compared to
$49.7 million for the same period in fiscal 1997, an increase of
31.2%. The gross profit margin increased 3 percentage points to
22.4% in fiscal 1998 compared to 19.4% in fiscal 1997. This
substantial increase in gross profit margin was, in significant
part, attributable to continued reductions in material and
manufacturing costs associated with the Company's ongoing cost
reduction initiatives.
Operating Expenses. Operating expenses for the fiscal 1998
nine months ended December 28, 1997 were $44.6 million compared
to $38.9 million for the same period in fiscal 1997, an increase
of 14.8%. As a percentage of net sales, operating expenses
remained relatively unchanged.
Operating Earnings. Operating earnings for the fiscal 1998
nine months ended December 28, 1997 were $20.6 million compared
to $10.8 million for the same period in fiscal 1997, an increase
of 90.3%. This increase was primarily attributable to overall
unit volume growth, coupled with the improved gross profit margin
attributable to reduced material and manufacturing costs.
Interest Expense. Interest expense for the fiscal 1998 nine
months ending December 28, 1997 was $7.3 million and unchanged
from the same period in fiscal 1997. During this period, a
modest increase in interest rates was offset by slightly lower
borrowings.
Loss on Investment in Joint Venture. During the fiscal 1998
nine months ended December 28, 1997, the Company recognized
$4.0 million in losses associated with its investment in Tucker
Telecommunications Company (Tucker). Such losses consisted of
the Company's share of operating losses of Tucker plus the cost
of settling certain guarantee obligations of Tucker related to
the closing of its business during this period.
Net Earnings. Net earnings were $5.3 million for the fiscal
1998 nine months ended December 28, 1997 compared to $1.7 million
for the same nine month period in fiscal 1997, an increase of
$3.6 million or approximately 205%. This increase was primarily
attributable to increased unit volume and reductions in both
material and manufacturing costs associated with the Company's
cost reduction initiatives, offset by the $4.0 million loss in
joint venture investment.
Fiscal 1997 versus Fiscal 1996
Net Sales. Net sales for both fiscal 1997 and fiscal 1996
were $357.5 million. When adjusting fiscal 1996 net sales by
$14.0 million for the discontinued EV product line, fiscal 1997
net sales increased 4.1%. Net sales for stationary and other
products and services, and motive power products and services,
represented approximately 57% and 43% of consolidated net sales
respectively. In addition, in late fiscal 1996, the Company
expanded its business in the stationary integrated sales and
service area for its telecommunications customers, through the
acquisition of certain assets of Advanced Power Systems, which
accounted for increased net sales of approximately $3.6 million
in fiscal 1997.
Gross Profit. Gross profit for fiscal 1997 was
$72.1 million compared to $61.7 million in fiscal 1996, an
increase of 16.9%. The gross profit margin increased 2.9
percentage points in fiscal 1997 to 20.2%, compared to 17.3% in
fiscal 1996. This substantial increase in gross profit margin
was primarily attributable to a reduction in material and
manufacturing costs associated with the Company's cost reduction
initiatives. Additionally, the discontinuance of the EV product
line at the end of fiscal 1996 improved the fiscal 1997 gross
profit margin by approximately 0.8%.
Operating Expenses. Operating expenses for fiscal 1997 were
$52.6 million compared to $47.5 million for fiscal 1996, an
increase of 10.9%. As a percentage of net sales, operating
expenses increased to 14.7% in fiscal 1997 from 13.3% in fiscal
1996. This increase resulted principally from increased
engineering costs for new products, start-up costs related to a
new joint venture in Argentina and the discontinuance of the EV
product line in 1996 which had negligible operating expenses.
Operating Earnings. Operating earnings for fiscal 1997 were
$19.5 million compared to $14.3 million for fiscal 1996, an
increase of 37.0%. This increase was primarily attributable to
the improved gross profit margin, offset by the increased
operating expenses previously discussed.
Interest Expense. Interest expense for fiscal 1997 was
$9.6 million compared to $11.6 million in fiscal 1996. This
decrease resulted from a decrease in the Company's outstanding
indebtedness in fiscal 1997, primarily as a result of improved
cash flow and earnings and a modest reduction in interest rates.
Net Earnings. Net earnings for fiscal 1997 were
$5.1 million compared to $1.3 million for fiscal 1996, an
increase of approximately 300%. This significant increase was
primarily attributable to reductions in both material and
manufacturing costs associated with the Company's cost reduction
initiatives, improved earnings connected with the discontinuance
of the EV product line and reductions in interest expense.
Fiscal 1996 versus Fiscal 1995
Net Sales. Net sales for fiscal 1996 were $357.5 million
compared to $328.7 million for fiscal 1995, an increase of 8.8%.
Virtually all of this growth resulted from increased unit volumes
in the Company's stationary and motive product lines. Net sales
for stationary and other products and services, and motive power
products and services, represented approximately 59% and 41% of
consolidated net sales, respectively.
Gross Profit. Gross profit for fiscal 1996 was
$61.7 million compared to $57.7 million in fiscal 1995, an
increase of 7.0%. The gross profit margin decreased in fiscal
1996 to 17.3%, compared to 17.6% in fiscal 1995. This modest
decrease in gross profit margin was primarily attributable to the
continuing impact on margins of significant increases in lead
costs during the last half of fiscal 1995 and early fiscal 1996
and additional costs incurred by the Company in fiscal 1996
associated with launching its cost reduction program.
Operating Expenses. Operating expenses and other expenses
for fiscal 1996 were $47.5 million compared to $46.1 million for
fiscal 1995, an increase of 3.0%. As a percentage of net sales,
operating expenses decreased to 13.3% in fiscal 1996 from 14.0%
in fiscal 1995.
Operating Earnings. Operating earnings for fiscal 1996 were
$14.3 million compared to $11.6 million for fiscal 1995, an
increase of 22.9%. This increase was primarily attributable to
higher unit volume and a modest reduction in operating expenses
as a percentage of net sales.
Interest Expense. Interest expense for fiscal 1996 was
$11.6 million compared to $9.6 million in fiscal 1995. This
increase resulted primarily from increases both in the Company's
outstanding indebtedness and interest rates in fiscal 1996.
Net Earnings. Net earnings for fiscal 1996 were
$1.3 million compared to $0.6 million for fiscal 1995, an
increase of approximately 107%. This increase was primarily
attributed to increased unit volume, partially offset by lower
gross profit margins and higher interest expense.
Liquidity and Capital Resources
The Company uses cash from operations and from financing
activities to fund its working capital needs, fund its capital
expenditures and make payments on outstanding indebtedness.
The Company has various credit facilities available to
assist it in meeting its liquidity requirements. These consist
of term loans, revolving lines of credit, capital equipment lease
obligations and a structured, asset-backed accounts receivable
financing facility. The outstanding balance under the term loans
and capital equipment lease obligations was $87.2 million (which
includes the current portion of long-term debt of $8.5 million)
at December 28, 1997. These balances are subject to periodic
amortization of principal in an aggregate amount of $3.1 million
for the remainder of the fiscal year ending March 31, 1998,
$44.5 million during fiscal 1999 and $9.3 million during fiscal
2000. At December 28, 1997, total availability under the
Company's various revolving lines of credit totalled
$78.0 million, of which $42.3 million is outstanding.
Indebtedness under the revolving lines of credit, and certain of
the term debt facilities, in an aggregate outstanding principal
amount of $72.4 million bear interest at a floating rate.
Indebtedness under certain of the long-term debt facilities in an
aggregate outstanding principle amount of $57.1 million bear
interest at fixed annual rates ranging from 3.0% to 7.9%. The
weighted average maturity of the Company's long-term debt is
approximately two years. The average annual interest rate for
all of the Company's credit facilities was approximately 6.4% for
the nine months ended December 28, 1997 and 6.2% for fiscal 1997.
As of December 28, 1997, $45.0 million of outstanding
indebtedness of the Company was guaranteed by Yuasa Japan. The
Company anticipates that subsequent to the Offering, none of the
Company's indebtedness will be guaranteed by Yuasa Japan.
The Company's financing agreements with certain of its
lenders contain various covenants which, absent prepayment in
full of the indebtedness or the receipt of waivers ,would limit
the Company's ability to conduct certain specified business
transactions including incurring debt, extending credit, mergers,
consolidations or similar transactions, buying or selling assets
out of the ordinary course of business, engaging in sale and
leaseback transactions and certain other actions. The Company
believes it is presently in full compliance with all such
covenants. The Company intends to repay certain of the
indebtedness to which some of the foregoing covenants apply using
the net proceeds of the Offering. The Company sells accounts
receivable, on a continuous basis, to an asset-backed structured
finance conduit. The maximum amount available on this receivable
financing was $30.0 million at December 28, 1997 and was
increased to $40.0 million on March 16, 1998. At December 28,
1997 the Company classified a $30.0 million term loan due in
December 1998 as a long-term liability because the Company
received a commitment from a bank to refinance such facility
under substantially similar terms and conditions.
Net cash provided by operating activities in the first nine
months of fiscal 1998 and for fiscal 1997 were $2.1 million, and
$27.5 million, respectively. The decrease for the first nine
months of fiscal 1998 was primarily attributable to increases in
accounts receivable and inventory levels. It is not unusual for
large fluctuations in these two areas to occur during the third
and fourth quarter of the Company's fiscal year. The Company has
typically experienced significant reductions in both accounts
receivable and inventory balances in the fourth quarter of the
fiscal year and believes that this will also occur in fiscal
1998.
Net cash used in investing activities was $10.9 million in
the first nine months of fiscal 1998 and was used principally to
add property, plant and equipment, primarily for expansion of
manufacturing capacity and cost reduction initiatives, as well as
normal replacements. Net cash used in investing activity for
fiscal 1997 was $14.3 million, which included $11.1 million for
property, plant and equipment additions related primarily to
capacity expansion, cost reduction and replacement activities and
$3.2 million related to the acquisition of certain assets in the
United States and a joint venture in Argentina.
Net cash provided by financing activities was $5.9 million
in the first nine months of fiscal 1998. The Company increased
short-term borrowings by $11.5 million, offset by principal
repayments on long-term borrowings of $3.9 million and the
payment of a $1.7 million dividend. Net cash used in financing
activities for fiscal 1997 was $11.9 million as debt was reduced
by $10.7 million and a $1.2 million dividend was paid.
Capital expenditures, including capital lease obligations,
are estimated to be $6.1 million for the remaining three months
in fiscal 1998. Future capital expenditures will continue to be
focused on increasing manufacturing capacity when required to
support increased demand for the Company's products, cost
reduction projects, routine replacement, quality and
environmental projects. Capital expenditures for fiscal 1999 are
estimated to be approximately $20 million.
The Company has declared, and prior to the completion of the
Offerings, intends to pay, a cash dividend of $2.3 million to its
current stockholders, Yuasa Japan and Exide. The dividend will
be paid from fiscal 1998 earnings. The Company has also
committed to advance up to $5.0 million to Yuasa Japan under a
revolving note agreement which expires on March 30, 1999. Net
proceeds of the Offering will not be used either to pay the
$2.3 million cash dividend or to advance funds to Yuasa Japan
under the revolving note agreement.
The Company intends to use substantially all of the
estimated net proceeds from the Offering (after deduction of
underwriting discounts and the Company's estimated offering
expenses) to repay the Company's indebtedness.
The Company continues to have significant liquidity
requirements. In addition to financing its working capital
needs, the Company requires cash to fund debt service and capital
expenditures. The Company believes that existing cash balances,
cash flow from operating activities, and borrowings available
under its credit facilities will be sufficient to fund working
capital needs, capital expenditures and debt service requirements
of the Company through fiscal 1999.
Raw Materials
Lead, plastics, steel, copper, separators and sulfuric acid
are among the major raw materials used in the manufacturing of
the Company's products and, accordingly, represent a significant
portion of the Company's materials costs. Lead alone accounted
for approximately 30% of all the Company's raw material purchases
in all fiscal periods presented.
Inflation
There was no significant impact on the Company's operations
as a result of inflation during the three years ended March 31,
1997, or the nine months ended December 28, 1997.
Information Systems
The Company has analyzed its information systems and
software and has undertaken and expects to continue to undertake
capital projects with respect to these systems, including
upgrades or installations of personal computer and networking
systems and the Company's accounting, management information and
communications systems. The Company is communicating with
customers, suppliers, financial institutions and others with
which it does business in respect of their Year 2000 compliance.
Management does not anticipate that the Company will incur
significant operating expenses or be required to invest heavily
in additional computer systems improvements to be Year 2000
compliant, and does not anticipate that business operations will
be disrupted or that its customers will experience any
interruption of service as a result of the millennium change.
The Company does not believe that the "Year 2000" issue will have
a material adverse impact on its operations.
Fluctuations in Quarterly Results
The Company's quarterly results are subject to fluctuation.
Historically, the Company has experienced increased net sales
during the fourth quarter of the year due to the customary
seasonal buying patterns of its customers and from other factors.
As a result of this and other factors, the Company's fourth
quarter net sales, gross profit, operating earnings and net
earnings typically have been the highest of any quarter.
The following table sets forth the Company's summary
unaudited historical results of operations on a quarterly basis:
<TABLE>
<CAPTION>
First Second
Third Fourth
Quarter Quarter
Quarter Quarter
(dollars in
thousands except per share data)
<S> <C> <C>
<C> <C>
Fiscal 1998
Net sales......................... $94,677 $91,795
$104,428
Gross profit...................... $20,157 $22,205
$ 22,841
Net earnings ..................... $ 1,662 $ 2,992
$ 642
Net earnings per share (basic and
diluted)........................ $ 0.21 $ 0.37
$ 0.08
Fiscal 1997
Net sales......................... $85,370 $85,821
$ 85,239 $101,096
Gross profit...................... $15,574 $16,986
$ 17,121 $ 22,466
Net earnings ..................... $ 66 $ 899
$ 810 $ 3,336
Net earnings per share (basic and
diluted)........................ $ 0.01 $ 0.11
$ 0.10 $ 0.41
Fiscal 1996
Net sales......................... $90,175 $82,206
$ 87,201 $ 97,935
Gross profit...................... $14,891 $14,890
$ 14,536 $ 17,405
Net earnings (loss)............... $ (126) $ 430
$ (224) $ 1,199
Net earnings (loss) per share
(basic and diluted)............. (0.02) $ 0.05
$ (0.03) $ 0.15
</TABLE>
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
121 ("SFAS 121"), Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. This
standard specifies when assets should be reviewed for impairment,
how to determine if an asset is impaired, how to measure an
impairment loss, and what disclosures are necessary in the
financial statements. The Company adopted SFAS 121 on April 1,
1996 and recorded a charge of $0.4 million during fiscal 1997.
In June 1996, the FASB issued Statement of Financial
Accounting Standards No. 125, Accounting for transfers and
Servicing of Financial Assets and Extinguishment of Liabilities,
which provides accounting and reporting standards for sales,
securitizations, and servicing of receivables and other financial
assets, secured borrowing and collateral transactions, and the
extinguishment of liabilities. The Company has modified its
asset-backed accounts receivable financing agreements to meet the
new requirements to enable it to continue recognizing transfers
of certain receivables to special-purpose entities as sales. The
adoption of this standard had no impact on the Company.
In 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, Earnings per Share. This standard replaced
the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. All earnings per
share amounts have been presented to conform to this standard.
In June 1997, the FASB issued Statement of Financial
Accounting Standards 130 ("SFAS 130"), Reporting Comprehensive
Income, which establishes rules for reporting and displaying all
changes in shareholders' equity exclusive of transactions with
owners, such as capital investments. Examples of comprehensive
income include unrealized gains or losses on available-for-sale
securities, translation adjustments on investments in foreign
subsidiaries, and certain changes in minimum pension liabilities.
The statement is effective for fiscal years beginning after
December 15, 1997. Adoption of SFAS 130 will not impact the
Company's financial condition or results of operations.
In June 1997, the FASB issued Statement of Financial
Accounting Standards 131 ("SFAS 131"), Disclosures about Segments
of an Enterprise and Related Information, which is effective for
years beginning after December 15, 1997. SFAS 131 establishes
standards for the way that public businesses report information
about operating segments in annual financial statements and
requires that those businesses report selected information about
operating segments in interim financial reports. It also
establishes standards for related disclosures about products and
services, geographic areas, and major customers. The Company
will adopt the new requirements for the fiscal year ending March
31, 1999, which will require retroactive application. The
Company has not completed its review of this standard and has not
determined the impact its adoption will have on the Company's
financial statements.
<PAGE>
BUSINESS
General
The Company is the leading manufacturer and supplier of
industrial batteries and small engine starting batteries in the
Americas. The Company markets a full line of stationary and
other batteries, as well as motive power batteries and related
products and services. Stationary batteries are used primarily
to supply standby operating power for (i) telecommunications
applications, such as wireless and wireline systems, (ii) UPS
applications for electronic, security and computer systems, and
(iii) switchgear and electrical control systems used in electric
utilities and energy pipelines. Stationary and other batteries
include small engine starting batteries used to start
motorcycles, all-terrain vehicles, snowmobiles and personal
watercraft. Motive power batteries are used primarily to power
industrial forklift trucks and other materials handling
equipment. Related products include chargers, electronic power
equipment and a wide variety of battery accessories. The Company
sells its products and services through a network of
distributors, independent representatives and an internal sales
force, and also maintains service centers throughout the United
States.
For fiscal 1993 through fiscal 1997 the Company's net sales
grew from $281.2 million to $357.5 million, while net earnings
decreased from $9.1 million in fiscal 1993 to $0.6 million in
fiscal 1995. The reduction in fiscal 1995 net earnings was due
to a sudden increase in the cost of raw materials and
manufacturing inefficiencies at the Company. Beginning in fiscal
1996, the Company initiated a strategic program primarily
designed to improve manufacturing efficiencies and reduce product
costs. This program included, among other items, redesigning
certain of the Company's products to reduce material costs and
automating and reengineering its manufacturing operations. The
Company's gross profit margin increased from 17.6% to 20.2%
between fiscal 1995 and fiscal 1997 and net earnings increased
from $0.6 million in fiscal 1995 to $5.1 million in fiscal 1997
due, in significant part, to the success of this program.
The Company was formed in 1998 to hold the stock of YEI.
YEI was formed in 1965 to purchase and resell industrial
batteries manufactured by Yuasa Japan. In June 1991, YEI
acquired the stationary and motive power business and related
assets of Exide's U.S. industrial battery operations. In 1992,
Yuasa Japan caused an existing U.S. battery manufacturing joint
venture between YEI and Exide to merge with YEI. Immediately
after completion of the Offering, Yuasa Japan will own all of the
7,000,000 issued and outstanding shares of Class B Common Stock,
representing approximately ___% of all of the Company's
outstanding Common Stock and ___% of the combined voting power of
the outstanding shares of Common Stock (approximately ___% of the
combined voting power if the Underwriters' over-allotment option
is exercised in full). See "Risk Factors -- Relationship with
Principal Stockholder" and "Description of Capital Stock." The
Company benefits from its relationship with Yuasa Japan through
its ability to use the "Yuasa" brand name, and from technical
assistance and access to battery technology developed by Yuasa
Japan. Additionally, the Company sells batteries to Yuasa Japan
and its affiliates for sale in the Pacific Rim and purchases
batteries from Yuasa Japan and its affiliates for sale into the
Americas. See "Related Party Transactions."
Industry
The Company believes that it is well-positioned to benefit
from expected continued growth in the markets for its products,
including the market for its stationary and motive power
industrial products. According to industry sources, U.S. sales
of large (greater than 25 amperes/hour) industrial stationary and
motive power batteries were approximately $670 million for fiscal
1997 and are projected to be approximately $760 million for
fiscal 1998. Stationary batteries represent approximately 49% of
this total U.S. industrial battery market in fiscal 1998. The
stationary battery market has grown at a compounded annual growth
rate of approximately 13.7% per year over the past five years,
fueled principally by growth in the U.S. telecommunications
industry. The U.S. market for telecommunications services has
grown significantly during this period, and is expected to
continue to grow as cellular, personal communication services
("PCS"), paging, specialized mobile radio and other new and
emerging technologies become increasingly accessible and
affordable to a growing number of customers. In addition, use of
the World Wide Web and other Internet services, electronic funds
transfers, e-mail and other electronic data interchange, fax
transmissions, television cable and other forms of electronic
data transmission has grown and appears likely to continue to
grow significantly. This growth has required, and the Company
believes will continue to require, substantial investment by
service providers in infrastructure equipment and installation,
including batteries and related products and services of the type
offered by the Company. Motive power batteries represent
approximately 51% of this total U.S. industrial battery products
market in fiscal 1998. The motive power battery market has grown
at a compounded annual growth rate of approximately 9.6% per year
over the past five years, fueled principally by increased demand
for batteries in the industrial forklift market. The motive
power battery market is expected to grow at a lower rate for the
next several years.
Operating Strengths
The Company has been able to achieve profitable growth by
capitalizing on the following operating strengths:
Strong Market Positions
The Company holds the leading market positions in both the
motive power and small engine starting battery businesses and is
among the three largest suppliers of stationary batteries in the
Americas. The Company believes that its strong market positions
result, in large part, from its extensive direct sales force and
national network of independent distributors, representatives and
service centers.
Established Brand Names
The Company believes that its brand names are among the
most highly recognized in the industries it serves. The Company
sells its stationary and related products principally under the
"Yuasa" and "Exide" brand names, motive power products
principally under the "Exide" and "General" brand names, and
small engine starting batteries under the "Yuasa" brand name, as
well as under certain private labels. The Company benefits from
using the "Yuasa" and "Exide" brand names and from the reputation
for high quality associated with them.
Reputation for Quality, Service and Innovation
The Company believes that its reputation for product
quality, reliability and service enhances its competitiveness.
The Company also competes on its ability to partner with its
customers to engineer innovative power solutions.
Manufacturing Efficiency
Since it began its strategic initiative to improve
manufacturing efficiency in fiscal 1996, the Company has spent
over $45.0 million, among other things, to reengineer and
automate its manufacturing operations and to increase plant
capacities. As a result, the Company believes its manufacturing
operations are among the most modern and efficient in the
industry and will provide sufficient capacity to meet expected
demand for the Company's products over the next three years
without substantial additional investment.
Broad Range of Products
The Company believes that it offers the broadest product
line in the industry, including batteries addressing a wide range
of power requirements (from 1 ampere/hour to 4,000 amperes/hour)
and applications. This broad range of products allows the
Company to customize its products to meet varying customer
requirements.
Relationship with Yuasa Japan
The Company benefits from its relationship with Yuasa Japan
through its ability to use the "Yuasa" brand name, and from
technical assistance and access to battery technology developed
by Yuasa Japan. Additionally, the Company sells batteries to
Yuasa Japan and its affiliates for sale in the Pacific Rim, and
purchases batteries from Yuasa Japan and its affiliates for sale
into the Americas. Yuasa Japan is one of the leading
manufacturers of lead acid batteries in the world.
Business Strategy
The Company's primary objectives are to increase its net
earnings and return on shareholders' equity and to capitalize on
its operating strengths to grow faster than the markets it serves
by implementing the following strategies:
Stationary Products: Continue to Focus on High Growth
Telecommunications Markets
The Company believes that the telecommunications markets in
the United States and the rest of the Americas offer high growth
potential for sales of its stationary products. The Company
intends to take advantage of its leading position in the
stationary battery market, as well as its other operating
strengths to increase its share of this growing and profitable
market.
The Company recently strengthened its stationary business by
adding new members to its management team with broad experience
in both the industrial battery and telecommunications industries
and with extensive business relationships with purchasers, and
potential purchasers, of the Company's stationary products. The
Company intends to focus this team's efforts on increasing the
Company's sales of its stationary products to the
telecommunications and UPS markets.
The Company also intends to focus its engineering and
manufacturing resources on products which have applications in
the telecommunications and UPS markets. The Company intends to
continue its strategy of developing customized engineering and
other product solutions for OEMs and end users of its products
through strategic partnering with them and by taking advantage of
technical assistance from Yuasa Japan. Further, the Company
intends to use its increased manufacturing capacity and new
systems and programs to significantly improve delivery to its
customers with shorter lead times.
Motive Power and Small Engine Starting Products: Maintain
Leadership Position
The Company intends to maintain its leadership position in
the motive power market by (i) continuing to provide a dual brand
approach, including a premium, higher performance product,
marketed under the "Exide" brand, and a lower priced product
marketed under the "General" brand, (ii) leveraging its
nationwide sales and service network, and (iii) improving
delivery to its customers with shorter lead times. The Company
intends to maintain its leadership position in the small engine
starting battery market by developing new products for emerging
applications such as cordless electric mowers and trimmers, and
by developing programs to maintain and enhance brand image and
customer loyalty.
Continued Cost Reduction Initiatives
The Company intends to continue its cost reduction programs
initiated in fiscal 1996 by continuing to reengineer and automate
its manufacturing processes and facilities and by redesigning its
products and business processes.
Continued Expansion Into New Geographic Markets
The Company believes that Latin America presents significant
growth potential for industrial battery sales particularly in the
telecommunications markets. The Company established a sales and
distribution business in Mexico in fiscal 1994 and entered into a
joint venture in Argentina in fiscal 1996 to market and sell
industrial batteries. The Company intends to expand into other
Latin American countries through acquisitions, joint ventures and
start-up ventures.
Products
General
The Company's lead acid battery products span a broad range
of sizes, configurations and electrical capacities (from 1
ampere/hour to 4,000 amperes/hour) and are generally of either
the flooded or the valve regulated ("VRLA") type. Of these two
types, VRLA batteries represent newer technology. This broad
range of products allows the Company to more readily meet
customer specifications.
Stationary and Other Products
The Company's stationary products include a variety of lead-
acid batteries (both flooded and VRLA) and power supply cabinets,
enclosures and other equipment and services. The Company's
stationary products are used to provide "last resort" backup or
standby power for facilities or electrical equipment in the event
of a loss of power from the primary power source, generally
external alternating current ("AC"). Primary applications
include (i) telecommunications, such as central telephone
exchanges, microwave relay stations, and many other wireless and
wireline systems; (ii) UPS, principally for computers and
computer-controlled equipment, hospital life support equipment,
corporate and residential alarm systems, point of sale equipment,
emergency lighting, closed circuit television systems, computers
(mainframe, desktop and portable), medical equipment, test
equipment and various types of instrumentation and (iii) standby
power for switchgear and other instrumentation control systems
and equipment for electric utilities, pipeline systems and
desalinization plants, and to help cover peak loads experienced
by electric utilities.
Because of the significantly different needs of the
telecommunications, UPS, switchgear and other stationary battery
markets, the Company offers a distinct line of batteries for each
of those markets, each comprising a variety of products. These
batteries range from 1 to 4,000 ampere/hours in electrical
capacity. UPS normally provide up to fifteen minutes of AC power
in the event of loss of power from the primary external power
source, typically to provide orderly shut-down of computer
equipment to protect against loss of data, or to ensure continued
operation of life support or other equipment during power outages
on a short-term basis until emergency generators are able to
start operating at sufficient capacity to power the equipment.
For typical telecommunications applications, the Company's
batteries are designed to provide high reliability and extended
operation (up to eight hours before recharging). For typical
switchgear and electrical control systems in electric utilities,
the Company's batteries are designed to provide high reliability
over an eight-hour period to back up the electrical
instrumentation and control systems, while also providing a very
high discharge rate for short periods at several intervals to
operate the switchgear. The Company's small capacity VRLA
standby and UPS batteries and related products are sold under the
"Yuasa" brand name and the Company's large capacity standby
batteries and related products are sold principally under the
"Exide" brand name.
The Company's power system products, principally chargers,
power control and distribution equipment, perform a wide variety
of functions. The Company's chargers and power rectifiers
convert or rectify external AC power into direct current ("DC")
power at the appropriate level and quality of voltage and apply
that DC power to charge the battery and, in some cases (such as
telecommunications and UPS), to operate the customer's equipment.
For applications that require different power levels, the
Company's power control and distribution equipment can distribute
DC power at appropriate levels to each application.
The Company also manufactures and purchases for resale a
wide variety of battery trays, component racks, cabinets and
other accessories that are used in conjunction with its motive
power and stationary battery and power systems products and a
complete line of cabinets for office installation of lead-acid
batteries. Some of the Company's racks and cabinets are designed
to meet very demanding customer specifications, including racks
designed to withstand seismic shocks and weatherproof cabinets to
meet Regional Bell Operating Company specifications.
The Company's Integrated Systems and Service ("IS&S") unit
provides turnkey engineering, design, furnishing, installation,
service, maintenance and management of stationary products and DC
power systems, chiefly to the telecommunications industry. Its
services include (i) design of integrated wireless and wireline
telecommunications base stations, (ii) manufacture of some or all
of associated DC power supplies and electronic equipment;
(iii) manufacture and supply of backup batteries and enclosures
or other accessories; and (iv) on site installation and ongoing
maintenance and management of the complete system. Through the
Company's service network, the Company's IS&S unit offers its
Certified Power Program, which is an extended service contract,
allowing the customer to outsource DC power management functions.
The Company's small engine starting batteries are of both
flooded and VRLA types and are used to start small engines, such
as those found in motorcycles, all-terrain vehicles, snowmobiles,
and personal watercraft. The products are sold under the "Yuasa"
brand name and under certain private labels.
Motive Power Products
The Company's motive power products include complete systems
and individual components, mainly to power, monitor, charge and
test the batteries used in industrial forklift trucks and other
materials handling equipment. They are used in a variety of
other applications, such as starting diesel locomotive engines,
and railroad and grade crossing warning lights. Batteries for
the motive power market are primarily flooded, although VRLA
batteries are gaining increasing acceptance in this market.
Motive power batteries typically are designed to provide
relatively high discharge rates for a six- to eight-hour
operating period. They also require durable casings and content
to withstand the rigors of operation within moving vehicles that
subject them to high levels of vibration and shock. The life
expectancy of motive power batteries is normally five years as a
result of the strenuous conditions to which they are subject.
The Company's motive power chargers rectify AC to DC to
recharge motive power batteries during the intervals between the
operating periods of the vehicles which the batteries power. The
Company's other principal motive power accessories include
electronic controls to operate power rectifiers from remote
locations, a system for periodically adding water to batteries,
which can also be fitted with an automatic activator energized by
the power rectifier, and a variety of trays, connectors and other
accessories. Motive power products are sold primarily under the
"Exide" and "General" brand names.
Customers and End Users
Stationary and Other Products
Telecommunications Industry. End users are typically local,
and long distance wire and wireless telecommunications service
providers, as well as OEMs of telecommunications equipment. See
"Risk Factors -- Telecommunications Industry and Growth of the
Company."
Computer Industry. End users of UPS are primarily
businesses, and some consumers, who have significant computer
installations, or who otherwise desire additional protection
against data losses, as well as health care providers having
life-support or other critical equipment. The Company's
customers include OEMs of UPS and distributors of aftermarket
replacement equipment.
Security/Electronics Users. End users are typically
businesses and consumers who purchase or own alarm systems.
Significant customers include OEMs and their suppliers,
distributors and contractors.
Electric Utilities, etc. End users of the Company's large-
capacity standby batteries include industrial installations such
as electric utilities, petroleum pipelines, and desalinization
plants. Customers include utilities, the petroleum industry, and
government and military entities.
Other Users. The Company sells its small engine batteries
to substantially all OEMs in North America, motorcycle and
automotive warehouse distributors, and after-market replacement
retailers. Other battery manufacturers and distributors also
purchase significant quantities of the Company's products to
resell under their own brand names to large retail customers.
Motive Power Products
The customer base of this business unit is extremely
diverse. It includes dealers of industrial forklift trucks and
other materials handling equipment and, to a lesser extent, OEMs
and end users of such equipment. End users include
manufacturers, distributors, warehouses, and retailers.
Distribution and Sales
Distribution, sales and service of products vary with the
product or service type, and the brand under which they are sold.
Motive power products marketed under the "General" brand are sold
and serviced primarily through a network of independent
representatives. Motive power products bearing the "Exide" brand
are sold and serviced primarily through the Company's in-house
sales force. Large capacity stationary products bearing the
"Exide" brand are sold and serviced primarily through a
combination of in-house sales force and manufacturing
representatives. The Company's small capacity stationary
products, which generally bear the "Yuasa" brand, are sold and
serviced primarily through independent representatives. IS&S
sells integrated services through independent representatives and
in-house sales force, whereas the installation and service work
associated with IS&S is conducted primarily through in-house
technicians. Small engine starting batteries are sold primarily
through an in-house sales force.
The Company's in-house sales and marketing forces total
approximately 380 employees, and the Company has approximately
107 independent representatives for its products and services.
Regardless of the business unit or product line, the Company's
independent representatives generally operate under a written
contract covering, among other things, an exclusive territory and
providing for compensation on a commission basis, with incentives
provided for higher margin sales. The Company's representatives
generally do not market the products of any of the Company's
competitors, although many representatives regularly service
competitors' products, while offering the Company's products as
replacements.
Warranties
The Company generally offers a limited warranty on its
industrial battery products and selected power supply equipment.
The Company's small engine starting batteries generally carry no
warranty. These warranties are generally limited to replacement
of defective material; however such limitations could be
contested in the event of a warranty claim. The Company believes
that its warranty reserve is adequate to cover future warranty
costs.
International and Export
The Company's international business operations focus
primarily on Canada, Mexico, South America and, through Yuasa
Japan affiliates, the Pacific Rim. This business consists of a
network of subsidiaries and affiliated companies, an internal
sales force, and independent representatives, and is responsible
for the sale of substantially all of the Company's products
outside the U.S. Total international net sales were
approximately 12% of consolidated net sales in fiscal 1998 and
approximately 9% in fiscal 1997. Net sales of stationary
products represented approximately 64% of consolidated net sales
attributable to international operations in fiscal 1998 and
approximately 56% in fiscal 1997. See "Risk Factors -- Risks
Associated with International Operations; Currency Risk."
Manufacturing Operations
The following chart lists the Company's manufacturing and
principal distribution facilities, their principal functions, the
approximate size of the facility, and whether the Company owns
the identified facility or leases it:
<TABLE>
<CAPTION>
Manufacturing Plants and Distribution Centers
Square Owned/
Location Function
Footage Leased
<S> <C>
<C> <C>
Hays, KS Small Capacity Stationary Batteries;
distribution 360,000 Owned
Richmond, KY Motive Power and Large Capacity
Stationary
Batteries; distribution
357,000 Owned
Sumter, SC Motive Power and Large Capacity
Stationary
Batteries; distribution
303,000 Owned
Laureldale, PA Small Engine Starting Batteries;
distribution 110,000 Owned
Cleveland, OH Chargers; distribution
63,000 Owned
Sumter, SC
(H&R Metal Products Inc.) Battery Trays and Racks
46,374 Owned
Fogelsville, PA Distribution
92,000 Leased
Dallas, TX DC Power Equipment (primarily for
wireless
telecommunications industry)
45,380 Leased
</TABLE>
All battery plants are certified to ISO 9002; the Cleveland,
Ohio charger plant and its engineering and service groups are
certified to ISO 9001. The Company believes that its ISO
certification in 1995 made it the first ISO 9000 registered
battery corporation in North America. ISO certifications are
given by the International Organization for Standardization to
businesses that establish (and document their compliance with)
quality assurance programs and procedures. The Company believes
that certain of its customers attach significance to ISO
certification, and that some customers require ISO certification
of their vendors as a condition of purchasing from them. The
Company believes that its manufacturing operations and product
line focus at each of its plant facilities allows for flexible
manufacturing and the ability to move large unit volumes
efficiently. The Company also benefits from an experienced
workforce.
The Company believes that its manufacturing operations are
among the most modern and efficient in the industry and will
provide sufficient capacity to meet present and anticipated
levels of operations. However, disruption of production at a
plant where a key product line is produced could have a material
adverse effect on the Company.
Application Engineering and Product Development
General
For the nine months ended December 28, 1997, fiscal 1997 and
fiscal 1996, the Company's engineering expenditures, including
research and development activities, were $5.8 million,
$6.8 million and $5.5 million, which include the Company's
expenditures for application engineering and product development.
At December 28, 1997, the Company employed a manufacturing
engineering group comprising 44 engineers, scientists and
technicians.
New Products
Since the early 1980s, technological developments in the
battery industry have been limited principally to the development
of VRLA batteries. VRLA batteries are sealed, generally do not
contain caps for adding water, are designed to require minimal
maintenance and, under normal operating conditions, they need not
be installed in separate facilities. Market acceptance of these
batteries has been greatest in the UPS and telecommunications
portion of the standby power market, although they are also
gaining wider acceptance in the motive power battery market.
During the last several years, the Company has focused its
research and development efforts on improving existing products
and manufacturing processes, expanding its product lines and on
developing new product lines, particularly for its
telecommunications customers. Examples include:
-- a new line of VRLA stationary batteries, primarily
for UPS applications; a new line of batteries designed
specifically to meet the short duration, high energy
power requirements of standby systems for computer
installations; and an expanded line of power
rectifiers, power supplies and other components for
telecommunications applications.
-- a modular battery using tubular positive plates in
combination with gelled electrolyte designed for use in
long-duration, high-cycle telecommunications
applications, as well as for renewable energy storage,
switchgear, UPS and peak shaving/load leveling. The
gel additive provides a larger volume of electrolyte
than the absorbed glass mat technology typically used
in the telecommunications industry.
Competition
General
The industrial lead-acid battery market is highly
competitive and has experienced substantial consolidation both
among competitors who manufacture and sell industrial batteries
and among customers who purchase industrial batteries. This
factor has resulted in a decrease in the number of customers for
the Company's products and increased competitive pressure on the
Company. The Company's competitors range from development stage
companies to major domestic and international companies. Some of
these companies have technical, marketing, sales, manufacturing,
distribution, and other resources significantly greater than
those of the Company. In addition, some of these companies have
significant name recognition, established positions in the
market, and long-standing relationships with OEMs and other
customers.
In addition, certain of the Company's competitors own lead
smelting facilities and may therefore, during sustained periods
of substantial lead cost increases, have a competitive advantage
over the Company.
The Company's competitors are primarily domestic
manufacturers, although foreign competition could become a factor
depending on changes in the relative levels of domestic prices,
duties, tariffs, freight costs, currency exchange rates and the
impact of changing technology. The Company competes primarily on
the basis of product quality, reliability of service and delivery
and price. The Company believes that its products and services
are competitively priced and its reputation for quality products
and service help maintain its competitive position in the
industry, although there can be no assurance that continued
consolidation and continuing competition will not have an adverse
effect on the Company in the future.
The Company's ability to compete in markets both inside and
outside the United States in the future could be limited by the
activities of Yuasa Japan and Exide, both of which manufacture
and sell many of the same products for the same applications as
the products offered by the Company and both of which are
substantially larger and have greater financial resources than
the Company. Exide presently derives a substantial portion of
its revenues from sales of industrial batteries in Europe and its
existing agreement not to compete with the Company expires in
June 2001. Accordingly, Exide could become a competitor of the
Company in the Americas and elsewhere in the future. Although
Yuasa Japan has historically viewed the Company as the operation
through which Yuasa Japan markets its products in the United
States and elsewhere in the Americas, there is no agreement
currently in force which would prevent Yuasa Japan from competing
with the Company in the Americas in the future. If Yuasa Japan
were to divest itself of its interest in the Company or otherwise
change its strategy in the future, it could become a competitor
of the Company. See "Related Party Transactions," "--
Relationship with Principal Stockholder" and "Business --
Competition."
Stationary and Other Products
The stationary battery market in the Americas is highly
competitive and is dominated by the Company, C&D Technologies,
Inc. ("C&D"), and GNB Technologies ("GNB"). Competition in the
stationary products market is based to a great extent on
reputation, product quality and reliability, and price, as well
as the availability of after-sale service.
Motive Power Products
Price is an important competitive factor in the motive power
market. Product offerings, product quality and reliability and
service capability also are important factors. The motive power
market in the Americas is dominated by four manufacturers: the
Company, C&D, East Penn Manufacturing Co., and GNB. The Company
believes that it is the leader in the motive power market.
Raw Materials
The principal raw materials used in the manufacture of the
Company's products are lead, plastics, steel, copper, separators
and sulfuric acid. The principal raw material used by the
Company is lead. In fiscal 1997, the Company consumed
approximately 148.0 million pounds of lead, which cost
approximately $49.0 million and represented approximately 30% of
the Company's raw material purchases.
The Company buys its lead from a number of leading
suppliers. Lead is a commodity product. It is traded on the
world's commodity markets and its prices fluctuate on a daily
basis. Its cost is therefore subject to rapid fluctuations. To
mitigate the adverse effects of these fluctuations, from time to
time the Company makes forward purchases of lead, generally not
exceeding 50% of its projected lead requirements for periods
generally of up to one year from its lead suppliers.
Other significant materials required in the Company's
production processes include steel, plastic products, and
separators, substantially all of which are manufactured by third
parties. See "Risk Factors -- Materials and Manufacturing
Costs."
Intellectual Property
General
There are no patents which the Company considers to be
material to the Company's business. Although the Company applies
for patents on new inventions and designs, from time to time, the
Company believes that the growth of its business will depend
primarily upon the quality of its products and its relationships
with its customers, rather than the extent of its patent
protection.
The Company owns or possesses licenses and other rights to
use a number of trademarks in conjunction with its business. The
Company has registered many of these trademarks in various styles
in the United States Patent and Trademark Office, Canada and
other countries. The Company believes many such rights and
licenses are important to its business. Some of the significant
trademarks owned by the Company include: "HUP," "Loadhog,"
"Superhog," "Cobra," and "Dynacell."
Licenses
In connection with the Company's acquisition of Exide's
industrial battery division in 1991, Exide provided perpetual,
exclusive, world-wide, royalty-free, licenses to the Company to
use certain trademarks and patents in connection with the
industrial battery business and related products, excluding golf
cart batteries manufactured at the Company's Sumter S.C. plant
and automotive, motorcycle, garden, tractor and marine engine
starting batteries and related products. The licensed trademarks
include "GBC," "ESB," "Exide," "Willard," "Hybernator,"
"Ironclad-Exide," "Liberator," "Oasis," and "Titan," among
others. The Company views many of these as of substantial value
in the marketing of its products. The licensed patents include
technology relating to a variety of designs and manufacturing
processes. The Company also licensed certain of such patents
back to Exide simultaneously. Although these licenses are
perpetual, they could be revoked by Exide if the Company's
products using the licensed trademarks fail to meet certain
quality standards, or if the Company assigns the trademarks
outside the scope of the industrial battery business, and the
Company fails to begin to cure those circumstances within 90 days
of notice from Exide, or if the Company becomes bankrupt.
The Company is a party to several agreements and
arrangements with Yuasa Japan (the "Yuasa Technology
Agreements"), which give the Company the right to manufacture
certain types of batteries (consisting mainly of small capacity
VRLA and motorcycle batteries) using technical know-how provided
by Yuasa Japan, for sale in the United States, Canada and their
territories and possessions. Pursuant to the Yuasa Technology
Agreements, Yuasa Japan agreed to give the Company technical
assistance and support, future improvements and innovations
related to these products and their manufacture and the right to
purchase the technical know-how for certain new products
developed by Yuasa Japan. In addition, the Yuasa Technology
Agreements give the Company licenses to use certain trademarks of
Yuasa Japan, including the name "Yuasa," in connection with the
sale of small capacity VRLA and motorcycle batteries in the U.S.
and its possessions. In consideration of these rights, the
Company pays royalties to Yuasa Japan.
Although the Yuasa Technology Agreements technically
terminated with the merger of the former motorcycle battery
manufacturing joint venture between the Company and Exide into
the Company in 1992, the Company (as successor to the joint
venture) and Yuasa Japan have continued to observe the terms of
the Yuasa Technology Agreements, including royalty payments. In
addition, Yuasa Japan has provided the Company with technical
assistance and know-how in areas of battery technology outside
the scope of the Yuasa Technology Agreements, and has permitted
the Company to sell the products covered by the Yuasa Technology
Agreements in additional territories, including the rest of the
Americas, and the Company expects Yuasa Japan to continue to do
so in the future. There is, however, no agreement in effect
which would require Yuasa Japan to continue to observe or extend
the term of the Yuasa Technology Agreements, or continue to
provide the same or similar levels of assistance outside the
scope thereof in the future, or allow the Company to sell in
additional territories, nor can there be any other assurance that
Yuasa Japan will continue to do so in the future. See "Risk
Factors -- Relationship with Principal Stockholder" and "-- Early
Termination of Certain Licenses."
Royalty payments by the Company to Yuasa Japan under the
Yuasa Technology Agreements amounted to $1.2 million for the nine
months ended December 28, 1997, $1.5 million for fiscal 1997,
and $1.1 million for fiscal 1996, See "Related Party
Transactions -- Yuasa Japan."
Employees
At December 31, 1997, the Company had approximately 2,712
employees. Of these employees, approximately 1,980 were employed
in manufacturing (with 133 being covered by collective
bargaining agreements), 377 were employed in sales and marketing
(including branch operations), 239 were employed in service and
installation and 116 were employed in engineering, finance and
administrative activities.
The Company's management considers its employee relations to
be good. Historically, there has been no material labor unrest,
disruption of production or strike by the Company's employees.
Employees at the Company's Laureldale, Pennsylvania, Hays,
Kansas, Richmond, Kentucky and Dallas, Texas plants are not
represented by unions. Employees at the Company's Cleveland,
Ohio plant are represented by a labor union under a collective
bargaining agreement which expires in January, 2001. On
February 23, 1995, the Company's employees at its Sumter, South
Carolina battery plant elected to be represented by a union.
Between that time and August, 1997 the Company contested the
validity of this election. Since September, 1997 the Company and
the union's agent have been negotiating a proposed collective
bargaining agreement, and the membership has continued to work
without a contract and without any work stoppage.
Environmental Regulation
The Company is subject to numerous federal, state and local
laws and regulations designed to protect the environment and
employee health and safety, including those pertaining to the
storage, handling, treatment, transportation and disposal of
hazardous and toxic materials, practices and procedures
applicable to the construction and operation of the Company's
plants, and standards relating to the discharge of air, soil and
water pollutants. The Company believes that its operations
currently are in substantial compliance with applicable
environmental, health and safety laws and regulations. Such
compliance has resulted in ongoing costs for the Company, and the
Company from time to time has had instances of alleged or actual
noncompliance that have resulted in the imposition of fines or
penalties. The Company is currently finalizing a settlement with
the State of South Carolina concerning certain alleged violations
under the federal Clean Air Act at its Sumter plant, pursuant to
which the Company expects to pay a civil penalty of $105,000.
While the Company does not anticipate having other future
obligations under such settlement agreement, the Company's
continued compliance with environmental, health and safety laws
and regulations could require the Company to incur significant
expenses, including fines and penalties, could restrict the
Company's ability to modify or expand its facilities or continue
production, and could require the Company to install pollution
control equipment and make other capital improvements, such as
currently ongoing improvements to wastewater treatment systems at
two plants.
Certain of the Company's manufacturing sites have a history
of industrial use. As is typical for such businesses, soil and
groundwater contamination has occurred in the past at some sites
and might occur or be discovered at other sites in the future.
The Company from time to time investigates, remediates and
monitors soil and groundwater contamination at certain of these
sites. In addition, the Company has been named as a de minimis
"Potentially Responsible Party" at one National Priority List
site pursuant to Superfund, and in the future may be liable
pursuant to this law and other similar laws to contribute to the
cleanup of other locations, owned or operated by other persons,
to which the Company or its predecessors have sent wastes for
disposal. Although the Company does not anticipate having
material liability with respect to this National Priority List
site, under these laws the owner or operator of contaminated
properties and the generator of wastes sent to a contaminated
disposal facility can be jointly and severally liable for the
cleanup of such properties, regardless of fault.
The Company attempts to reduce its potential liability
associated with environmental, health and safety laws and
regulations by, among other practices, recycling materials such
as lead and acid in batteries and purchasing lead from third
parties rather than owning or operating lead smelting facilities.
In addition, substantially all of the Company's industrial
battery operations were acquired from Exide in a transaction
pursuant to which the Company acquired assets and did not
contractually assume environmental and related liabilities.
These assets were acquired in 1991 and there have not been any
significant environmental claims made since that date. In
addition, the Company has established a program for
environmental, health and safety compliance, supervised by
certain employees, under which Company personnel design
procedures for auditing practices subject to environmental,
health and safety laws and regulations, and monitor and
communicate to other Company employees regulatory activities and
developments, including certain standards for reducing lead
exposure to employees promulgated under the federal Occupational
Safety and Health Act of 1970. Based on current information, the
Company does not expect compliance with environmental, health and
safety laws and regulations to have a material adverse effect on
the business or financial condition of the Company. However,
there can be no assurance that developments, such as increased
requirements of such laws and regulations, increasingly strict
enforcement thereof by governmental authorities, and claims for
damages to property or injury to persons resulting from the
environmental, health or safety impacts of the Company's
operations, will not cause the Company to incur significant costs
and liabilities that could have such a material adverse effect.
See "Risk Factors -- Potential Costs of Environmental
Compliance."
Litigation
The Company is, from time to time, involved in routine
litigation incidental to the conduct of its business. In the
opinion of management, none of such litigation, individually or
in the aggregate, could be expected to have a material adverse
effect on the financial condition, results of operations or cash
flows of the Company.
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding
the Company's existing directors and executive officers. A
summary of the background and experience of each director and
executive officer is set forth in the paragraphs following the
table.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Teruhisa Yuasa ................. 62 Chairman of the Board
Shuji Kawata ................... 60 Vice Chairman and
Director
Yasukazu Sakai ................. 66 Vice Chairman and
Director
P. Michael Ehlerman ............ 59 President and Director
John D. Craig .................. 46 Executive Vice
President and
Director
Michael T. Philion ............. 46 Vice President-Finance
and Chief
Financial Officer and
Assistant
Secretary
Hiroshi Horiuchi ............... 55 Vice President-Export
and Secretary
Director
Arthur M. Hawkins .............. 55 Director
James Kanda .................... 58 Director
Raymond J. Kenny ............... 71 Director
</TABLE>
Teruhisa Yuasa has served as Chairman of the Board and as a
director of the Company since 1991. Mr. Yuasa has served as
Chairman of Yuasa Japan, a publicly-traded Japanese manufacturer
of a full line of lead acid automotive and industrial batteries,
since 1997 and as a director since 1970. Prior to his election
as Chairman, he served as President of Yuasa Japan. Mr. Yuasa
is also President and a director of Yuasa Trading Co., a publicly
traded Japanese trading company.
Shuji Kawata has served as Vice Chairman of the Company
since 1995 and as a director since 1991. Mr. Kawata has served
as a director of Yuasa Japan since 1991 and has been an employee
of Yuasa Japan since 1960. Effective April 1, 1998, he will
relinquish his position as Vice Chairman of the Company, retire
as an employee of Yuasa Japan and become Vice President-
International and a full time employee of the Company.
Yasukazu Sakai has served as Vice Chairman of the Company
and as a director since 1991. Mr. Sakai has been employed in
various senior executive positions by Yuasa Japan since 1954 and
has been a director of Yuasa Japan since 1986. Effective
April 1, 1998, he will relinquish his position as Vice Chairman
but will continue as a director of the Company.
P. Michael Ehlerman has served as President of the Company
and as a director since 1991, when the Company acquired Exide's
industrial battery division. Mr. Ehlerman has been elected as
Vice Chairman and Chief Executive Officer of the Company
effective April 1, 1998. Prior to becoming President of the
Company, Mr. Ehlerman was employed by Exide and a predecessor,
General Battery Corporation, in various executive management
positions.
John D. Craig has served as Executive Vice President of the
Company since 1995 and as a director since 1996. Prior thereto,
Mr. Craig was Vice President - Operations of the Company since
1994. Prior thereto he was Vice President - Operations of
Nordyne, Inc., a manufacturer of heating and air conditioning
equipment. He has been elected as President and Chief Operating
Officer of the Company effective April 1, 1998.
Michael T. Philion has served as Vice President-Finance;
Chief Financial Officer and Assistant Secretary of the Company
since 1994. Prior thereto, he was employed as Chief Financial
Officer of the Wood Company, a food service management company.
He was elected as Assistant Secretary in 1997 and has been
elected as Acting Secretary, effective April 1, 1998.
Hiroshi Horiuchi has served as a director and as Vice
President-Export of the Company since 1995. Prior thereto, he
served as Deputy General Manager-International Division of Yuasa
Japan since 1991.
Arthur M. Hawkins has served as a director of the Company
since 1992. Mr. Hawkins has served as Chairman, President, Chief
Executive Officer and a director of Exide Corporation, a
publicly-traded U.S. manufacturer of a full line of lead acid
automotive and industrial batteries since 1985. He has advised
the Company that he intends to resign as a director of the
Company as soon as practicable on completion of the Offering.
James Kanda has served as a director of the Company since
1991. Over the past five years, he has served as a consultant to
Yuasa Japan and a special advisor to its Chairman and President.
Raymond J. Kenny has served on the Board of Directors of the
Company since 1991. Prior to his retirement in 1993, he served
as Vice President Operations of the Company.
The Board of Directors
The Company's Board of Directors presently consists of nine
members and is divided into three classes: Class I directors,
whose terms expire in 1999; Class II directors whose terms expire
in 2000; and Class III directors whose terms expire in 2001.
Each of the Company's directors is presently either (i) an
officer or director of, and was nominated and elected as a
director by, Yuasa Japan or Exide (see "Principal and Selling
Stockholders"), or (ii) an executive officer of the Company.
Messrs. Yuasa, Ehlerman and Kanda have been elected to serve as
Class I directors until the 1999 annual meeting of stockholders;
Messrs. Kawata, Horiuchi and Kenny have been elected to serve as
Class II directors until the 2000 annual meeting of stockholders;
and Messrs. Sakai, Hawkins, and Craig have been elected to serve
as Class III directors until the 2001 annual meeting of
stockholders. Each of Messrs. Horiuchi (Class II), and Hawkins
(Class III) has advised the Company that he intends to resign as
a director of the Company as soon as practicable after completion
of the Offering. Upon such resignation, the Board of the Company
intends to elect three non-management directors who are not
affiliated with Yuasa Japan or the Company, one to sit as a
Class I director, one to sit as a Class II director and one to
sit as a Class III director. See "Related Party Transactions."
The Company's Bylaws provide that, among other things,
(i) each class of directors must consist, as nearly as possible,
of one-third of the total number of directors; (ii) one class
must be elected each year to serve for a term of three years,
after a transitional period, or until earlier removal or
resignation; and (iii) sitting directors have the ability to fill
vacancies arising from resignations or from newly-created
directorships for the balance of the term of the class to which
they are elected. The next annual meeting of the stockholders of
the Company to be held after the closing of the Offering is
scheduled for July, 1999. Executive officers are elected
annually and hold office until their successors are duly elected
and qualified or until earlier removal or resignation.
A Stockholders' Agreement dated as of April 1, 1992 (the
"Stockholders' Agreement") between the Company and Exide entitles
Exide to designate one person for election to the Board of
Directors of the Company acceptable to Yuasa Japan. Yuasa Japan
has contractually obligated itself to determine that Mr. Hawkins
is acceptable to it and Exide historically has exercised its
right to name Mr. Hawkins as a director. On completion of the
Offering and sale by Exide of its Class B Common Stock, this
obligation will terminate. The other directors were selected,
nominated and elected by Yuasa Japan. Following the Offering,
Yuasa Japan will own all of the issued and outstanding Class B
Common Stock representing _______% of the combined voting power
of all shares of outstanding Common Stock and will be able to
nominate and elect all of the members of the Board. See "Related
Party Transactions."
Committees of the Board of Directors
The Board of Directors of the Company has formed a new
standing Audit Committee and a new standing Compensation
Committee, effective as of the completion of the Offering and
will appoint members to such committees on the election of at
least three independent directors.
Compensation Committee
The Compensation Committee will consist solely of
non-employee directors, and the Company's Chief Executive Officer
as an ex officio member. The Compensation Committee makes
recommendations to the Board of Directors with respect to
compensation, including stock based compensation, of members of
the Company's executive staff.
Audit Committee
The Audit Committee will have general responsibility for
supervision of financial controls, as well as for accounting and
audit activities of the Company. The Audit Committee, a majority
of which will consist of non-management directors independent of
Yuasa Japan, will annually review the qualification of the
Company's independent certified public accountants, make
recommendations to the board of directors as to their selection
and review the planning, fees and results of their audit.
Director Compensation
The members of the Board of Directors of the Company do not
currently receive compensation for services rendered as members
of the Board of Directors. After completion of the Offering, the
Company will pay each director, who is not an employee of the
Company or an employee, officer or representative of Yuasa Japan,
a quarterly retainer of $5,000, plus $1,000 for each Board
meeting attended and $500 for each committee meeting attended.
Directors and Officers' Insurance
The Company is in the process of obtaining a policy of
directors' and officers' liability insurance to cover all
directors, officers and employees of the Company and its
subsidiaries for liability, loss, damage and expense which they
may incur in their capacities as such. The Company expects that
this policy will be in place prior to the completion of the
Offering.
Executive Compensation
The following table sets forth all compensation earned with
respect to fiscal 1997 by the Company's President and each of the
four other most highly compensated executive officers of the
Company whose total annual salary and bonus exceeded $100,000 for
services rendered in all capacities to the Company.
<TABLE>
<CAPTION>
Name and
Principal Year Ended Annual Compensation
All Other
Position March 31 Salary Bonus(1)
Compensation(2)(3)
<S> <C> <C> <C>
<C>
P. Michael Ehlerman 1997 $250,000 $101,000
$ 8,063
President
John D. Craig 1997 $187,313 $ 55,000
$ 7,361
Executive Vice
President
Michael T. Philion 1997 $146,000 $ 37,000
$ 7,361
Vice President-
Finance and CFO
Nicholas I. Magnani 1997 $148,750 $ 17,000
$ 8,748
Vice President-
Engineering and R&D
Bruce K. Retter 1997 $110,004 $ 20,000
$ 5,549
Vice President-
Sport Utility
_____________
</TABLE>
(1) Represents amounts paid under the Company's (short-term)
Management Incentive Plan in respect of fiscal 1997. The
Company did not have a long-term incentive plan during 1997.
(2) Amounts in this column represent the Company's annual
retirement contribution (generally, 4% of earnings on such
employee's Form W-2) and matching contributions under the
Company's 401(k) Plan for the years indicated. See
"Salaried Retirement and 401(k) Plan."
(3) Compensation in the form of perquisites and other personal
benefits has been omitted because such perquisites and other
personal benefits constituted less than the lesser of
$50,000 or 10% of each named executive officer's total
annual salary and bonus.
Management Incentive Plans
The purpose of the Company's Management Incentive Plan (the
"Short Term Plan") is to provide short-term incentive to key
officers and employees of the Company for meeting and exceeding
certain established financial performance goals. Participation
in the Short Term Plan is limited to a maximum incentive reward
as a percent of base salary earnings determined for each eligible
participant. Each participant is measured on a combination of
Company and personal objectives with the exception of
participants who are employed in certain of the Company's
manufacturing facilities, whose incentive award is based upon one
hundred percent of facility objectives. Incentive awards are
payable in a lump sum early in the next fiscal year immediately
following the determination of the eligibility to receive an
incentive award. The eligibility of a participant who is
discharged or resigns during a plan year will be automatically
canceled. In the case of termination due to death or retirement,
or if a participant becomes eligible to participate during the
plan year (which requires a minimum of six months of service in
the applicable incentive year), the participant or his or her
estate will be eligible for a reduced incentive reward. For
purposes of determining an incentive award, base salary is
defined as W-2 salary earnings exclusive of any payments under
the Short Term Plan and any non-reoccurring adjustments to
salary.
During fiscal 1997, the Company adopted the Long Term
Incentive Plan (the "Long Term Plan"). The purpose of this plan
is to attract, motivate and retain key executives of the Company.
The Long Term Plan is structured in three-year cycles with a new
cycle beginning each year. The first cycle begins in fiscal 1998
and runs through the end of fiscal 2000. For fiscal 1998, twelve
executives were named by the Board to participate. Participation
is established annually for each new performance cycle. An
executive who voluntarily terminates employment with the Company
(other than for retirement) is not entitled to receive a payment
for an uncompleted cycle. The Board establishes financial
targets for the Long Term Plan at the beginning of each cycle.
For the fiscal 1998-2000 cycle, the Board set the target at the
three-year average of return on average capital employed by the
Company. In addition to the target, the Board sets performance
points below and above which no payment will be made. Awards are
capped at a percentage of base pay which varies with financial
performance. Earned awards are paid after each completed cycle.
The Board has reserved the right to adjust financial targets for
divestures or acquisitions which have a material impact on
performance factors. If a change in control of the Company
occurs, and the Long Term Plan is terminated or substantially
changed, all uncompleted cycles vest. Absent a change in
control, no amounts will be paid under the Long Term Plan until
after completion of the first cycle at the end of fiscal 2000.
The Offering does not result in a change in control within the
meaning of this plan.
Salaried Retirement and 401(k) Plan
The Company maintains the Salaried Retirement and 401(k)
Plan (the "Savings Plan") for the benefit of its salaried
employees. The Savings Plan is a defined contribution plan and
is qualified under Sections 401(a) and 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Salaried
employees are eligible to participate in the Savings Plan after
the completion of six-months of service. The Company is
required, under the terms of the Savings Plan, to make a
retirement contribution on behalf of each eligible employee in an
amount equal to four percent of such employees compensation as
defined in the Savings Plan. The Savings Plan permits
participants to elect to contribute, pursuant to salary
reduction, up to 15% of such participant's Compensation (as
defined in the Savings Plan) on a pre-tax basis. The Company is
required to match at least twenty-five percent of the first four
percent of compensation contributed by the participant.
Omnibus Stock Plan
The Company's Board and shareholders have approved the
Omnibus Stock Plan effective March 9, 1998. The purpose of the
Omnibus Stock Plan is to provide additional incentives to
employees of the Company and certain eligible independent
contractors by facilitating their purchase of stock in the
Company. The Omnibus Stock Plan will have a term of ten years
from the date of its adoption (unless the plan is earlier
terminated by the Board of Directors of the Company) after which
no awards may be made. Pursuant to the Omnibus Stock Plan,
620,000 shares of Class A Common Stock will be reserved for
future issuance by the Company, in the form of newly-issued or
treasury shares, upon exercise of stock options ("Options") or
stock appreciation rights ("SARs"), or the grant of restricted
stock ("Restricted Stock"). Options, SARs, and Restricted Stock
are collectively referred to herein as "Awards." If Awards
should expire, become unexercisable or be forfeited for any
reason without having been exercised or without becoming vested
in full, the shares of Class A Common Stock subject to such
Awards would, unless the Omnibus Stock Plan shall have been
terminated, be available for the grant of additional Awards under
the Omnibus Stock Plan. Approximately twenty individuals are
eligible to participate in the Omnibus Stock Plan.
The Omnibus Stock Plan will, after April 1, 1998, be
administered by the Compensation Committee. The Compensation
Committee selects the employees to whom Awards are to be granted,
the number of shares to be subject to such Awards, and the terms
and conditions of such Awards (provided that any discretion
exercised by the Compensation Committee must be consistent with
the terms of the Omnibus Stock Plan).
The Company intends Options granted under the Omnibus Stock
Plan to constitute both (i) incentive stock options (options that
afford favorable tax treatment to recipients upon compliance with
certain restrictions pursuant to Section 422 of Code, and that do
not result in tax deductions to the Company unless participants
fail to comply with Section 422 of the Code) ("ISOs")) and
(ii) Options that do not so qualify ("NQSOs"). The exercise
price for Options will be, in the case of an ISO, the fair market
value of the Common Stock on the day of grant and in the case of
an NQSO, the option price will be determined by the Compensation
Committee on the day of grant. The Omnibus Stock Plan permits
the Compensation Committee to impose exercise and transfer
restrictions on the Common Stock that optionees may purchase. It
is possible that the Compensation Committee will impose such
restrictions on shares subject to options granted under the
Omnibus Stock Plan's effective date. No Option shall be
exercisable after the expiration of ten years from the date it is
granted; provided, however, that in the case of any employee who
owns more than 10% of the outstanding Common Stock at the time an
ISO is granted, the option price for the ISO shall not be less
than 110% of the price at which the Common Stock is sold in the
Offering, and the ISO shall not be exercisable after the
expiration of five years from the date it is granted. An
otherwise unexpired Option, unless otherwise determined by the
Compensation Committee, shall cease to be exercisable upon (i) an
employee's termination of employment for "cause" (as defined in
the Stock Compensation Plan), (ii) the date six months after
termination of service due to retirement, (iii) the date three
months after an employee terminates service for a reason other
than just cause, death, or disability, (iv) the date an employee
terminates service due to disability (except as to "vested"
options), or (v) the date two years after termination of such
service due to the employee's death.
A SAR may be granted in tandem with all or any part of any
Option or without any relationship to any Option. Whether or not
a SAR is granted in tandem with an Option, exercise of the SAR
will entitle the optionee to receive, as the Compensation
Committee prescribes in the grant, all or a percentage of the
excess of the then fair market value of the shares of Common
Stock subject to the SAR at the time of its exercise, over the
aggregate exercise price of the shares subject to the SAR.
Payment to the optionee may be made in cash or shares of Class A
Common Stock, as determined by the Compensation Committee.
Restricted Stock is Class A Common Stock which is
nontransferable and forfeitable until a grantee's interest vests.
Nevertheless, the grantee is entitled to vote the Restricted
Stock and to receive dividends and other distributions made with
respect to the Restricted Stock. To the extent that a grantee
becomes vested in his Restricted Stock at any time during the
"Restriction Period" (as defined in the Omnibus Stock Plan) and
has satisfied applicable income tax withholding obligations, the
Company may deliver unrestricted shares of Common Stock to the
grantee. Vesting of Restricted Stock may be accelerated at the
discretion of the Compensation Committee. At the end of the
Restriction Period, the grantee will forfeit to the Company any
shares of Restricted Stock as to which he did not earn a vested
interest during the Restriction Period.
The Company will receive no monetary consideration for the
granting of Awards under the Omnibus Stock Plan, and will receive
no monetary consideration other than the Option exercise price
for each share issued to optionees upon the exercise of Options.
The Option exercise price may be paid in cash or Common Stock.
The exercise of Options and SARs and the conditions under which
Restricted Stock vests will be subject to such terms and
conditions established by the Compensation Committee as are set
forth in a written agreement between the Compensation Committee
and the optionee (to be entered into at the time an Award is
granted). In the event that the fair market value per share of
the Common Stock falls below the option price of previously
granted Options or SARs, the Compensation Committee will have the
authority, with the consent of the optionee, to cancel
outstanding Options or SARs and to reissue new Options or SARs at
the then current fair market price per share of the Common Stock.
Although directors and officers of the Company generally
would be prohibited under the federal securities laws from
profiting from certain purchases and sales (or sales and
purchases) of shares of Common Stock within any six-month period,
they generally will not be prohibited by such laws from
exercising options and immediately selling the shares they
receive. As a result, the Company's directors and officers
generally will be permitted to benefit in the event the market
price for the shares exceeds the exercise price of their Options,
without being subject to loss in the event the market price falls
below the exercise price.
Notwithstanding the provisions of any Award that provides
for its exercise or vesting in installments, all shares of
Restricted Stock shall become fully vested upon a "change in
control" (as defined in the Omnibus Stock Plan) and, for a period
of 60 days beginning on the date of such change in control, all
Options and SARs shall be immediately exercisable and fully
vested and all restrictions shall lapse. In the event of a
change in control, the Compensation Committee may permit the
holders of exercisable Options to surrender their Options in
exchange for cash in an amount equal to the excess of the fair
market value of the Common Stock subject to the Options over
their exercise price. No Award is assignable or transferable
except by will or the laws of descent and distribution, or
pursuant to the terms of a "qualified domestic relations order"
(within the meaning of Section 414(p) of the Code and the
regulations and rulings thereunder).
Grant of Stock Options
The Compensation Committee, when formed, intends to grant,
conditioned upon the successful completion of the Offering,
incentive stock options under the Omnibus Stock Plan to certain
executive officers of the Company identified below to purchase
shares of the Company's Class A Common Stock at the public
offering price set forth on the cover page of this Prospectus.
The options granted will become exercisable to the extent of 40%
of the options granted on the second anniversary of the date of
grant, with an additional 20% of the options granted becoming
exercisable on the third, fourth, and fifth anniversaries of the
date of grant. The options will expire ten years after the date
of grant, subject to earlier termination in accordance with the
provisions of the Omnibus Stock Plan. The options are not
assignable or otherwise transferable, except by will or the laws
of descent and distribution. During fiscal 1998, the Company
issued options under the Omnibus Stock Plan to acquire 570,400
shares of Class A Common Stock at an exercise price equal to the
public offering price set forth on the cover page of this
Prospectus to 16 officers and employees of the Company, including
the following executive officers:
<TABLE>
<CAPTION>
Number of Shares
Name Subject to Option Type
of Option Expiration Date
<S> <C> <C>
<C>
P. Michael Ehlerman 186,000
Nonqualified Stock Option March 31, 2008
John D. Craig 124,000
Nonqualified Stock Option March 31, 2008
Michael T. Philion 62,000
Nonqualified Stock Option March 31, 2008
Nicholas I. Magnani 24,800
Nonqualified Stock Option March 31, 2008
Bruce K. Retter 18,600
Nonqualified Stock Option March 31, 2008
</TABLE>
Compensation Committee Interlocks and Insider Participation
The Company did not have a Compensation Committee during
fiscal 1997 and compensation decisions during fiscal 1997 were
made, with respect to the President, by the Company's Board of
Directors and with respect to other Company officers, by the
President. The Board of Directors voted to establish a
Compensation Committee, effective April 1, 1998.
Employment Contracts, Termination of Employment and Change in
Control Agreements
There are at present no employment, termination, severance
or change in control agreements between the Company and any of
its executive officers.
<PAGE>
RELATED PARTY TRANSACTIONS
Ongoing Transactions with Exide
General
On June 10, 1991, the Company acquired the assets of the
industrial battery division, including certain trademarks of
Exide, together with a related covenant not to compete, for
approximately $120 million. As part of this purchase, Exide and
the Company entered into a number of agreements which are still
in effect. The following description constitutes a summary of
certain of these agreements and other agreements entered into
with Exide after June 10, 1991. The following description is
subject to and is qualified in its entirety by reference to the
agreements, copies of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
Except for the Stockholders' Agreement, which will terminate on
completion of the Offering, these agreements will not be affected
by the Offering or the sale by Exide of its shares of the
Company's stock. See "Principal and Selling Stockholders."
Agreement Not to Compete
Exide and the Company are parties to an Agreement Not to
Compete dated June 10, 1991 (the "Agreement Not to Compete").
Pursuant to this agreement, Exide agreed not to compete in the
industrial battery business in North and South America and in
over 160 other countries. The businesses in which Exide may not
compete include the manufacturing and sale of batteries for all
industrial uses including electrical vehicle batteries and
battery products, other than golf cart batteries formerly
manufactured at the Company's Sumter, South Carolina plant, and
also excluding automotive, motorcycle, garden tractor and marine
engine starting batteries. Since June 1991, Exide has acquired
certain European battery manufacturers who own and operate
industrial battery operations. The Company waived certain of the
provisions of its agreements with Exide in order to permit Exide
to acquire these European industrial battery operation, in
exchange for a right of first refusal to acquire those operations
if Exide elects to sell them. Exide's obligations under the
Agreement Not to Compete expire in June, 2001 at which time Exide
will be free of its obligation not to compete with the Company.
Trademark and Patent Licensing Agreements
Exide has granted the Company licenses to use Exide's name
and certain trademarks and patents in connection with various
products manufactured by the Company. See "Business --
Intellectual Property - Licenses."
Other Transactions with Exide
The Company engages in other transactions with Exide in the
ordinary course of its business. The Company believes that those
transactions are on terms and conditions which are no less
favorable than those available from unrelated parties.
Lead. During fiscal 1995, 1996 and 1997, respectively, the
Company purchased approximately 17.3 million, 16.2 million, and
5.4 million pounds of lead from Exide, at prevailing market
prices. These purchases amounted to approximately $10.0 million,
$9.5 million and $1.8 million, respectively, and accounted for
19.0%, 19.1% and 3.8%, respectively, of the Company's lead
purchases during fiscal 1995, 1996 and 1997.
Utilities. The Company has agreements with Exide for the
supply of electricity, gas and waste water treatment services to
the Company's Laureldale, Pennsylvania small starting engine
battery facility. These services had a total cost of
$1.2 million, $1.3 million and $1.4 million in fiscal 1995, 1996
and 1997, respectively. The Company is free to obtain these
utility services from other sources if it so chooses, and any of
these services provided by Exide could be terminated by the
Company on 90 days notice. Absent breach by the Company,
however, the services cannot be terminated by Exide without
substantially greater advance notice, during which time the
Company could make other arrangements for the same services
without disruption of its operations or material cost.
Other Sales and Purchases. The Company supplies Exide with
motorcycle batteries. In fiscal 1995 and 1996, the Company also
supplied Exide with EV batteries (used in golf cart applications)
built to Exide's specifications. Total sales to Exide during
fiscal 1995, 1996 and 1997 amounted to approximately
$20.6 million, $20.0 million and $4.6 million, respectively.
Total purchases of lead, certain other battery components
and other goods and services from Exide amounted to approximately
$16.4 million, $10.8 million and $6.9 million for fiscal 1995,
1996 and 1997, respectively.
Stockholders' Agreement. The Stockholders' Agreement
between the Company and Exide, as presently in effect, contains
various rights and obligations with respect to the Class B Common
Stock owned by Yuasa Japan and Exide, but will terminate when
Exide sells its Common Stock in the Offering.
Dividend. On March 9, 1998 the Company's Board of Directors
declared a special dividend, payable in June 1998. The dividend
will be in the aggregate amount of $2.3 million, of which 13.5%
will be payable to Exide before completion of the Offering.
Yuasa Japan
Yuasa Technology Agreements. Yuasa Japan has entered into
the Yuasa Technology Agreements with the Company, which give the
Company manufacturing rights with regard to certain types of
batteries, technical assistance and support, future improvements
and innovations related to the products and their manufacture,
the right to purchase certain other technical know-how and a
license to use the name "Yuasa." In consideration of these
rights, the Company pays royalties to Yuasa Japan, which amounted
to $1.4 million for fiscal 1995, $1.1 million for fiscal 1996,
and $1.5 million for fiscal 1997. See "Business -- Intellectual
Property -- Licenses."
Although Yuasa Japan has provided the Company with technical
assistance and know-how in areas of battery technology outside
the scope of the Yuasa Technology Agreements, and has permitted
the Company to sell covered products in additional territories,
including the rest of the Americas, and the Company expects Yuasa
Japan to continue to do so in the future, there is no agreement
in effect which would require Yuasa Japan to continue to observe
or extend the term of the Yuasa Technology Agreements, or
continue to provide the same or similar levels of assistance
within or outside the scope thereof in the future or allow the
Company to sell the covered products in additional territories,
nor can there be any other assurance that Yuasa Japan will
continue to do so in the future. See "Risk Factors --
Relationship with Principal Stockholder" and "-- Competition;
Industry Consolidation; Pricing Pressures."
The Company also makes payments to Yuasa Japan of
approximately $250,000 per year, for travel and other expenses
incurred by Yuasa Japan in connection with providing technical
and management assistance to the Company and attendance by its
executives and other personnel at meetings of directors and
management, and visits to the Company's facilities. See
"Principal and Selling Stockholders."
During fiscal 1995, 1996 and 1997, the Company purchased
approximately $17.6 million, $20.6 million and $15.0 million,
respectively, of finished batteries, parts and accessories from
Yuasa Japan and its affiliates. During fiscal 1995, 1996 and
1997, the Company sold approximately $8.8 million, $10.0 million
and $6.0 million, respectively, of finished batteries to Yuasa
Japan and its affiliates.
Dividend. On March 9, 1998 the Company's Board of Directors
declared a special dividend, payable in June 1998. The dividend
will be in the aggregate amount of $2.3 million, of which 86.5%
will be payable to Yuasa Japan before completion of the Offering.
In March, 1998, the Company entered into a revolving credit
facility for up to $5 million with Yuasa Japan. Under this
facility, Yuasa Japan may borrow, repay and reborrow from the
Company at any time until March 30, 1999. At March 27, 1998, no
amounts were outstanding under this facility. This facility is
unsecured, matures in its entirety on March 31, 1999, and bears
interest at a rate approximately equal to the U.S. Federal funds
rate plus 1%, payable monthly.
The Company believes that transactions between the Company
and Yuasa Japan are on terms and conditions which are no less
favorable than those available from unrelated parties.
Future Related Party Transactions
The Company has adopted a policy, effective as of the date
of the closing of the Offering, requiring that all material
transactions (including amendments, modifications or extensions
of existing transactions) between the Company and its executive
officers, directors and affiliates (including Yuasa Japan) be
approved in advance by both (i) a majority of the members of the
Company's Board of Directors, and (ii) a majority of the
independent members of the Company's Board of Directors. See
"Risk Factors -- Relationship with Principal Stockholder."
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding
the beneficial ownership of the Common Stock as of the date of
this Prospectus, and as adjusted to reflect the issuance and sale
by the Company of _______ shares of Class A Common Stock in the
Offering, for each person who is known to the Company to own
beneficially more than 5% of the Common Stock.
<TABLE>
<CAPTION>
Common
Common
Shares Beneficially
Number of Shares Beneficially Number of
Owned Prior Votes
Entitled Owned After Votes Entitled
to Offering(1) to be
Cast Offering(1)(2) to be Cast
Name Number Percent(3) Number
Percent Number Percent(3) Number Percent
<S> <C> <C> <C>
<C> <C> <C> <C> <C>
Yuasa Corporation(4) 7,000,000 86.5% 14,000,000
86.5% 7,000,000 --% 14,000,000 --%
NT Building, 47-1, OH-I
1-Chome, Shinagawa - ku
Tokyo 140 Japan
Exide Corporation(4) 1,092,000 13.5% 2,184,000
13.5% -- -- -- --
1400 North Woodward Avenue
Suite 130
Bloomfield Hills, MI 48304
</TABLE>
__________
(1) No director or executive officer of the Company beneficially
owns any shares of Common Stock. The shareholders named in
the table have sole voting and investment power with respect
to all shares indicated.
(2) Yuasa Japan and Exide have agreed not to purchase additional
shares of Common Stock in the Offering.
(3) Applicable percentage of ownership is based on 8,092,000
shares of Class B Common Stock outstanding on the date of
this Prospectus and a total of __________ shares of Class A
Common Stock and Class B Common Stock outstanding after the
completion of the Offering and assumes no exercise of the
Underwriters' overallotment option. Excludes options to
acquire 570,400 shares of Class A Common Stock granted under
the Company's Omnibus Stock Plan which by their terms, are
not exercisable until March 2000. The 7,000,000 Class B
shares owned by Yuasa Japan after the Offerings represent
____% of the combined voting power of all shares of Common
Stock outstanding.
(4) See "Related Party Transactions" for additional information
relating to the Company's relationships with Yuasa Japan and
with Exide.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description is a summary and is subject to and
qualified in its entirety by reference to the provisions of the
Company's Articles of Incorporation and Bylaws, copies of which
have been filed as an exhibit to the Registration Statement of
which this Prospectus is a part and to the applicable provisions
of the Pennsylvania Business Corporation Law of 1988, as amended
(the "PBCL").
Class A Common Stock and Class B Common Stock
The Company possesses the authority, under its Articles of
Incorporation, to issue up to 100 million shares of Class A
Common Stock, par value $.01 per share, and up to 100 million
shares of Class B Common Stock, par value $.01 per share. Shares
of Class A Common Stock and shares of Class B Common Stock carry
the same rights, powers, preferences, privileges and limitations,
except that Class A Common Stock has one vote per share on all
matters while Class B Common Stock has two votes per share on all
matters. Prior to the Offering, there were 8,092,000 shares of
Class B Common Stock outstanding, of which 1,092,000 were held of
record by Exide, and 7,000,000 were held of record by Yuasa
Japan.
After giving effect to the Offering (including the sale of
its interest by Exide) the Class B Common Shares held by Yuasa
Japan will represent approximately _______% of the shares of
Common Stock of the Company outstanding and _______% of the
combined voting power of all Common Stock outstanding upon
completion of the offering. See "Principal and Selling
Stockholders."
Holders of Common Stock on completion of the Offering do not
possess preemptive rights or rights to subscribe for additional
securities of the Company.
Shares of Class B Common Stock will automatically become
shares of Class A Common Stock upon any sale or transfer of such
Class B Common Stock by Yuasa Japan or by Exide Corporation to
any person or entity other than an affiliate of Yuasa Japan. In
addition, shares of Class A Common Stock acquired by Yuasa Japan
or any other person in the open market in negotiated transactions
or from the Company will retain their status as such and will not
convert to Class B shares. See "-- Conversion."
Voting Rights - Common Stock
Holders of Class A Common Stock are entitled to one vote per
share on all matters. Holders of Class B Common Stock are
entitled to two votes per share on all matters. Except as
otherwise required by law, the holders of both Class A Common
Stock and Class B Common Stock will vote together as a single
class on all matters presented to the stockholders for their vote
or approval. Shareholders are not entitled to cumulate their
votes for the election of directors.
Because of the disproportionate voting rights of the Class B
Common Stock, Yuasa Japan will be able to control the outcome of
matters submitted to a vote of the Company's stockholders,
including the election of directors, even when the number of
outstanding shares of Class B Common Stock which it owns is less
than a majority of the number of shares of all classes of Common
Stock then outstanding. Only if and when the number of
outstanding shares of (i) Class B Common Stock or (ii) Class B
Common Stock and the Class A Common Stock owned by Yuasa Japan,
in the aggregate, represents less than _______% and _______%,
respectively, of the number of shares of all classes of Common
Stock then outstanding would the holders of Class A Common Stock
be able to cast more votes than Yuasa Japan. See "Risk Factors
- -- Relationship with Principal Stockholder."
Dividends
Holders of Class A Common Stock and Class B Common Stock are
entitled to receive dividends at the same rate on a per share
basis if, as and when such dividends are declared by the Board of
Directors of the Company out of assets or funds available
therefor, subject to standard limitations on dividends under
state law. In the case of a dividend or other distribution
payable in shares of a class of Common Stock, including
distributions pursuant to stock splits or divisions of Common
Stock, only shares of Class A Common Stock may be distributed
with respect to Class A Common Stock and only shares of Class B
Common Stock may be distributed with respect to Class B Common
Stock. The number of shares of each class of Common Stock so
distributed shall be equal in number on a per share basis.
Conversion
Class A Common Stock has no conversion rights. Shares of
Class B Common Stock are convertible into Class A Common Stock,
in whole or in part, at any time and from time to time at the
option of the holder, on the basis of one share of Class A Common
Stock for each share of Class B Common Stock converted. Each
share of Class B Common Stock will automatically convert into one
share of Class A Common Stock when the holder sells, exchanges or
otherwise transfers such Class B shares to any person other than
an affiliate of such holder. A bona fide pledge of shares of
Class B Common Stock would not constitute a transfer of such
stock for purposes of this provision.
The Company has agreed to (i) at all times reserve and keep
available, out of its authorized but unissued shares of Class A
Common Stock, such number of shares of Class A Common Stock
issuable upon the conversion of all outstanding shares of Class B
Common Stock, (ii) cause any share of Class A Common Stock
issuable upon conversion of a share of Class B Common Stock that
requires registration with or approval of any governmental
authority under federal or state law before such shares may be
issued upon conversion to be so registered or approved and
(iii) use its best efforts to list the shares of Class A Common
Stock required to be delivered upon conversion prior to such
delivery upon such national securities exchange upon which the
outstanding Class A Common Stock is listed at the time of such
delivery.
Restrictions on Transfer of Class B Common Stock
Upon sale, exchange or other transfer of Class B Common
Stock by Yuasa Japan to an entity not affiliated with the
transferor, those shares of Class B Common Stock automatically
become shares of Class A Common Stock. Notwithstanding the
foregoing (i) Yuasa Japan may pledge shares of Class B Common
Stock to a financial institution pursuant to a bona fide pledge
of such shares as collateral security for indebtedness, provided
that (i) such shares remain subject to the transfer restrictions
set forth above and (ii) Yuasa Japan retains the sole and
exclusive right to vote such pledged shares.
Reclassification, Merger and Dissolution
In the event the Company enters into any consolidation,
merger, combination or other transaction in which shares of
Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, the shares of Class A
Common Stock and Class B Common Stock, treated as a single class,
will be exchanged for or changed into the same amount of stock,
securities, cash or any other property, as the case may be, into
which or for which each share of any other class of Common Stock
is exchanged or changed. In the event of any dissolution,
liquidation or winding up of the affairs of the Company, after
payment of the debts and other liabilities of the Company, the
remaining assets of the Company will be distributable ratably
among the holders of the Class A Common Stock and Class B Common
Stock treated as a single class. None of the Class A Common
Stock or Class B Common Stock may be reclassified, subdivided or
combined in any manner unless the other class is simultaneously
reclassified, subdivided or combined in the same proportion. The
holders of the Class A Common Stock and Class B Common Stock are
not entitled to preemptive rights, other than Exide under the
Stockholders' Agreement which, by its terms, will expire upon
completion of the Offering. See "Related Party Transactions."
Preferred Stock
The Company's Board of Directors is authorized to issue
preferred stock, without the approval of the Company's
shareholders. The rights, qualifications, limitations and
restrictions on each series of Preferred Stock issued will be
determined by the Board of Directors at the time of issuance and
may include, among other things, rights to participating
dividends, voting rights and convertibility into shares of the
Company's Class A Common Stock. Shares of preferred stock may be
issued with dividend, redemption, voting, and liquidation rights
taking priority over Common Stock, and may be convertible into
Common Stock, as determined by the Company's Board of Directors
at the time of issuance.
Limitation on Directors' Liability
As authorized by the PBCL, the Company's Bylaws provide that
no director of the Company shall be liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as
a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in
respect of certain unlawful dividend payments or stock
redemptions or repurchases or (iv) for any transaction from which
the director derived an improper personal benefit. The effect of
these provisions will be to eliminate the rights of the Company
and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a
director for breach of fiduciary duty as a director (including
breaches resulting from negligent or grossly negligent behavior)
except in the situations described in clauses (i)-(iv) of the
preceding sentence. These provisions do not affect the
availability of equitable remedies such as injunctive relief and
will not alter the liability of directors under federal
securities laws. The Company is in the process of obtaining a
policy of insurance to cover its directors and officers for loss,
damage and expense which they incur in their capacity as such.
See "Management--Directors and Officers Insurance."
In 1990, Pennsylvania adopted legislation further amending
the PBCL. This legislation generally: (1) expands the factors
and groups (including shareholders) which the Company's Board of
Directors can consider in determining whether a certain action is
in the best interests of the corporation; (2) provides that the
Company's Board of Directors need not consider the interests of
any particular group as dominant or controlling; (3) provides
that the Company's directors, in order to satisfy the presumption
that they have acted in the best interests of the corporation,
need not satisfy any greater obligation or higher burden of proof
with respect to actions relating to an acquisition or potential
acquisition of control; (4) provides that actions relating to
acquisitions of control that are approved by a majority of
"disinterested directors" are presumed to satisfy the directors'
standard, unless it is proven by clear and convincing evidence
that the directors did not assent to such action in good faith
after reasonable investigation; and (5) provides that the
fiduciary duty of the Company's directors is solely to the
corporation and may be enforced by the corporation or by a
shareholder in a derivative action, but not by a shareholder
directly. The 1990 amendments to the PBCL also provide that the
fiduciary duty of directors shall not be deemed to require
directors to (1) redeem any rights under, or to modify or render
inapplicable, any shareholder rights plan; (2) render
inapplicable, or make determinations under, provisions of the
PBCL relating to control transactions, business combinations,
control-share acquisitions or disgorgement by certain controlling
shareholders following attempts to acquire control; or (3) act as
the board of directors, a committee of the board or an individual
director solely because of the effect such action might have on
an acquisition or potential or proposed acquisition of control of
the corporation or the consideration that might be offered or
paid to shareholders in such an acquisition.
Pennsylvania Anti-takeover Laws
The PBCL contains certain provisions which, among other
things: (1) require that, following any acquisition by any
person or group of 20% of a public corporation's voting power,
the remaining shareholders have the right to receive payment for
their shares, in cash, from such person or group in an amount
equal to the "fair value" of the shares, including an increment
representing a proportion of any value payable for control of the
corporation; and (2) prohibit for five years, subject to certain
exceptions, a "business combination" (which includes a merger or
consolidation of the corporation or a sale, lease or exchange of
assets) with a shareholder or group of shareholders beneficially
owning 20% or more of a public corporation's voting power. These
provisions, together with (i) the multiple voting rights accorded
the Class B Common Stock, (ii) the ability of the Board to issue
preferred stock and determine the rights, qualifications,
limitations and restrictions with respect to such preferred stock
without the approval of the Company's shareholders, (iii) the
classified nature of the Company's Board, (iv) the matters
discussed under "Limitation on Directors' Liability," and
(v) provisions in the Company's Articles of Incorporation
requiring a supermajority vote to amend certain provisions of the
Company's Articles may, in the event Yuasa Japan ceases to own
shares of Class B Common Stock sufficient to control the Company,
have the effect of discouraging a potentially interested
purchaser from attempting a non-negotiated bid for the Company or
of otherwise deferring or preventing a change in control of the
Company.
Chapter 25 of the PBCL contains certain other
"anti-takeover" provisions which apply to a "registered
corporation," unless the registered corporation elects not to be
governed by such provisions. The Company will be a "registered
corporation" within the meaning of Chapter 25 of the PBCL because
the common stock of the Company is entitled to vote generally in
the election of directors and will be registered under the
Securities Exchange Act of 1934. The relevant provisions are
contained in Subchapters 25E through 25H of the PBCL. As
permitted under the PBCL, the Company has opted out of the
provisions of Subchapters 25E (relating to control transactions),
25F (relating to business combinations), 25G (relating to
control-share acquisitions) and 25H (relating to disgorgement).
As a result of the Company opting out of Subchapter 25G (relating
to control-share acquisitions) the Company is not subject to
Subchapter 25I (relating to severance payments) or Subchapter 25J
(relating to labor contracts).
Transfer Agent and Registrar
The transfer agent and registrar for the Class A Common
Stock and the Class B Common Stock is _______________.
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the
underwriting agreement (the "Underwriting Agreement"), among the
Company, Exide and each of the underwriters named below (the
"Underwriters"), the Company and Exide have agreed to sell to
each of the Underwriters, and each of the Underwriters, for whom
Nomura Securities International, Inc. ("Nomura") and Smith
Barney, Inc. are acting as representatives (the
"Representatives"), has agreed to purchase severally from the
Company and Exide the number of shares of Class A Common Stock
set forth opposite its name below:
<TABLE>
<CAPTION>
Number of
Underwriters Shares
<S> <C>
Nomura Securities International, Inc.
Smith Barney, Inc. ------
Total ======
</TABLE>
In the Underwriting Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to
purchase all the shares of Class A Common Stock offered hereby,
if any are purchased. In the event of default by an Underwriter,
the Underwriting Agreement provides that, in certain
circumstances, purchase commitments of the non-defaulting
Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Representatives have advised the Company and Exide that
the Underwriters propose initially to offer the shares of Class A
Common Stock to the public at the initial public offering price
set forth on the cover page of this Prospectus and to certain
dealers, including the Underwriters, at such price less a
concession not in excess of $______ per share of Class A Common
Stock. The Underwriters may allow, and such dealers may reallow,
a discount not in excess of $_______ per share of Class A Common
Stock to certain other dealers. After the initial public
offering, the public offering price, concession and discount may
be changed by the Representatives.
The Company, its directors and executive officers and Yuasa
Japan have agreed, subject to certain exceptions, not to,
directly or indirectly, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant
for the sale of, or otherwise transfer or dispose of any Common
Stock or securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or hereafter
acquired by the person executing the agreement or with respect to
which the person executing the agreement thereafter acquires the
power of disposition, or exercise any right to require the
Company to file a registration statement under the Securities Act
with respect to the foregoing or (ii) enter into any swap or
other agreement or transaction that transfers, in whole or part,
directly or indirectly, the economic consequence of ownership of
the Common Stock, whether any such swap or transaction is to be
settled by delivery of Common Stock or other securities, in cash
or otherwise, without the prior written consent of Nomura, for a
period of 180 days after the date of this Prospectus.
The Company has granted to the Underwriters an over-
allotment option, exercisable not later than 30 days after the
date of this Prospectus, to purchase up to an aggregate of
_______ additional shares of Class A Common Stock at the initial
public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus. To
the extent that the Underwriters exercise this option, each
Underwriter will be committed, subject to certain conditions, to
purchase a number of additional shares of Class A Common Stock
proportionate to such Underwriter's initial commitment as
indicated in the preceding table, and the Company will be
obligated, pursuant to the option, to sell such shares of Class A
Common Stock to the Underwriters. The over-allotment option may
be exercised for fewer than all of the shares subject to such
option. The Underwriters may exercise the option only to cover
over-allotments, if any, made in connection with the sale of the
Class A Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms
as those on which the shares of Class A Common Stock are being
offered.
Prior to the Offering, there has been no public market for
the Class A Common Stock. The initial public offering price for
the Class A Common Stock was determined by negotiation between
the Company and the Representatives. The factors considered in
determining the initial public offering price, in addition to
prevailing market conditions, are price-to-earnings ratios of
publicly traded companies that the Representatives believe to be
comparable to the Company, certain financial information of the
Company, the history of, and the prospects for, the Company and
the industry in which it competes, and an assessment of the
Company's management, its past and present operations, the
prospects for, and timing of, future revenues of the Company, the
present state of the Company's development, and the above factors
in relation to market values and various valuation measures of
other companies engaged in activities similar to the Company.
There can be no assurance that an active trading market will
develop for the Class A Common Stock or that the Class A Common
Stock will trade in the public market subsequent to the Offering
made hereby at or above the initial public offering price. The
initial public offering price set forth on the cover page of this
Prospectus should not be considered an indication of the actual
value of the Class A Common Stock. Such price is subject to
change as a result of market conditions and other factors. The
Company intends to apply to list the Class A Common Stock on the
New York Stock Exchange under the symbol "YUA."
The Company and Exide have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof.
The Representatives have advised the Company and Exide that
the Underwriters do not intend to confirm sales of Class A Common
Stock offered hereby to any accounts over which they exercise
discretionary authority.
Until the distribution of the Class A Common Stock is
completed, rules of the Commission may limit the ability of the
Underwriters and certain selling group members to bid for and
purchase the Class A Common Stock. As an exception to these
rules, Nomura is permitted to engage in certain transactions that
stabilize the price of the Class A Common Stock. Such
transactions may consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Class A Common
Stock.
If the Underwriters create a short position in the Class A
Common Stock in connection with the Offering, (i.e., if they sell
more shares of Class A Common Stock than are set forth on the
cover page of this Prospectus), they may reduce that short
position by purchasing Class A Common Stock in the open market.
The may also elect to reduce any short position by exercising all
or part of the over-allotment option described above.
Nomura may also impose a penalty bid on certain Underwriters
and selling group members. This means that if Nomura purchases
shares of Class A Common Stock in the open market to reduce the
Underwriters' short position or to stabilize the price of the
Class A Common Stock, Nomura may reclaim the amount of the
selling concession from the Underwriters and selling group
members who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price
of the security to be higher than it might be in the absence of
such purchases. The imposition of a penalty bid might also have
an effect on the price of a security to the extent that it were
to discourage resales of the security by purchasers in the
Offering.
Neither the Company nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of
any effect that the transactions described above may have on the
price of the Class A Common Stock. In addition, neither the
Company nor any of the Underwriters makes any representation that
the Representatives will engage in such transaction or that such
transactions, once commenced, will not be discontinued without
notice.
Certain of the Underwriters and their respective affiliates
have provided from time to time, and expect to provide in the
future, financial advisory and investment banking services for,
or normal banking relationships with, the Company and its
affiliates, for which they receive customary compensation.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby
will be passed upon for the Company by Stevens & Lee,
Philadelphia and Reading, Pennsylvania. Certain legal matters
will be passed upon for the Underwriters by Shearman & Sterling,
New York, New York. Shearman & Sterling will rely on the opinion
of Stevens & Lee with respect to matters of Pennsylvania law.
EXPERTS
The consolidated financial statements of the Company as of
March 31, 1997 and 1996 and for each of the three years in the
period ended March 31, 1997 included in the Prospectus have been
so included in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of such firm as
experts in accounting and auditing.
CHANGE IN INDEPENDENT ACCOUNTANTS
Effective as of December 1, 1997, Price Waterhouse LLP
declined to re-propose to serve as the Company's independent
accountants. The report of Price Waterhouse LLP as of March 31,
1997 and for each of the three years in the period then ended did
not contain an adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or
accounting principles. In connection with the audits for the
years ended March 31, 1996 and 1997 and through December 1, 1997,
Price Waterhouse LLP has indicated to the Company that it concurs
with the Company's assertion that there were no disagreements
between the Company and Price Waterhouse LLP which, if not
resolved to the satisfaction of Price Waterhouse LLP on any
matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, would have caused
Price Waterhouse LLP to make reference thereto in their report on
the financial statements for such years. The Company
subsequently appointed Ernst & Young LLP as its independent
accountants. This appointment was approved by the Company's
Board of Directors. Prior to retaining Ernst & Young LLP, the
Company had not consulted with Ernst & Young LLP regarding the
application of accounting principles or the type of audit opinion
that might be rendered on the Company's financial statements.
None of the reports of Price Waterhouse LLP on the Company's
previously issued consolidated financial statements as of
March 31, 1995, March 31, 1996 and March 31, 1997 contained an
adverse opinion or a disclaimer of opinion, nor was any such
report qualified or modified as to uncertainty, audit scope or
accounting principles. Furthermore, during that period there
were no "reportable events" within the meaning of Item
304(a)(1)(v) of Regulation S-K promulgated under the Securities
Act.
<PAGE>
YUASA, INC.
INDEX TO FINANCIAL STATEMENTS
Unaudited Consolidated Financial Statements
Consolidated Balance Sheets at March 31, 1997 and
December 28, 1997 and Pro Forma December 28, 1997 F-2
Consolidated Statements of Income for the Nine Months
Ended December 29, 1996 and December 28, 1997 F-4
Consolidated Statements of Cash Flows for the Nine
Months Ended December 29, 1996 and December 28, 1997 F-5
Notes to the Consolidated Financial Statements F-6
Audited Consolidated Financial Statements
Report of Independent Accountants F-11
Consolidated Balance Sheets at March 31, 1996 and 1997 F-12
Consolidated Statements of Income for the Years Ended
March 31, 1995, 1996 and 1997 F-14
Consolidated Statements of Changes in Shareholders'
Equity for the Years Ended March 31, 1995, 1996
and 1997 F-15
Consolidated Statements of Cash Flows for the Years
Ended March 31, 1995, 1996 and 1997 F-16
Notes to the Consolidated Financial Statements F-17
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Balance Sheets
(in thousands, except per share data)
Pro Forma
March 31,
December 28, December 28,
1997
1997 1997
(Unaudited) (Unaudited)
(See Note 12)
Assets
<S> <C> <C>
<C>
Current assets
Cash $ 4,965 $
2,163 $ 2,163
Accounts receivable, net 40,243
51,853 51,853
Inventories 60,055
66,541 66,541
Deferred taxes 2,181
1,911 1,911
Prepaid expenses and other current assets 6,171
3,776 3,776
Total current assets 113,615
126,244 126,244
Property, plant and equipment:
Land 6,371
6,371 6,371
Buildings and improvements 42,760
43,472 43,472
Machinery and equipment 74,632
80,735 80,735
Construction in progress 6,260
10,249 10,249
130,023
140,827 140,827
Less: Accumulated depreciation and
amortization (52,542)
(60,825) (60,825)
Net property, plant and equipment 77,481
80,002 80,002
Other assets:
Intangible assets, net of amortization 24,338
21,580 21,580
Deferred taxes 2,903
1,270 1,270
Other, including investment in affiliate 1,182
2,694 2,694
28,423
25,544 25,544
Total assets $ 219,519 $
231,790 $ 231,790
=========
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion of
long-term liabilities $ 36,225 $
50,867 $ 50,867
Accounts payable 32,622
29,778 29,778
Accrued warranty and other expenses 30,037
30,993 30,993
Dividend payable -
- 2,315
Total current liabilities 98,884
111,638 113,953
Long-term liabilities
Long-term debt 72,294
69,113 69,113
Capital lease obligations 9,917
9,556 9,556
Other 2,582
2,052 2,052
Total liabilities 183,677
192,359 194,674
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value,
50,000 shares authorized -
- -
Class A common stock, $0.01 par value,
100,000; no shares issued and
outstanding -
- -
Class B common stock, $0.01 value,
authorized 100,000 shares, issued
and outstanding 8,092 81
81 81
Paid-in capital 16,324
16,324 16,324
Retained earnings 20,372
23,989 21,674
Cumulative translation adjustment (108)
(136) (136)
Minimum pension liability (827)
(827) (827)
Total shareholders' equity 35,842
39,431 37,116
Total liabilities and shareholders'
equity $ 219,519 $
231,790 $ 231,790
==========
========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Statements of Income
(in thousands, except per share data)
Nine months
ended
December 29,
December 28,
1996
1997
(Unaudited)
(Unaudited)
<S> <C>
<C>
Net sales $ 256,430
$ 290,900
Cost of goods sold 206,749
225,697
Gross profit 49,681
65,203
Operating expenses 38,864
44,617
Operating earnings 10,817
20,586
Interest expense 7,301
7,261
Loss on investment in joint venture -
4,005
Other expense 260
248
Earnings before taxes and minority interest 3,256
9,072
Income taxes 1,501
3,812
Earnings before minority interest 1,755
5,260
Minority interest (earnings) loss (19)
36
Net earnings $ 1,736
$ 5,296
============
===========
Basic and diluted earnings per share:
Net earnings per share of Common Stock $ .21
$ .65
Weighted average shares of
Common Stock outstanding 8,092
8,092
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Statements of Cash Flows
(in thousands)
Nine months
ended
December 29,
December 28,
1996
1997
(Unaudited)
(Unaudited)
<S> <C>
<C>
Cash flows from operating activities:
Net earnings $ 1,736
$ 5,296
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization 10,348
11,151
Provision for doubtful accounts 296
278
Provision for deferred taxes (193)
(38)
Profit on sale-leaseback of machinery
and equipment (245)
(245)
Loss on retirement of property, plant
and equipment 173
69
Loss on investment in joint venture -
4,005
Changes in assets and liabilities, net of
acquisitions and divestitures:
Decrease (increase) in accounts receivable 4,790
(11,080)
Decrease (increase) in inventories 4,393
(6,386)
Decrease in prepaid expenses and other
current assets 191
1,584
Decrease (increase) in other assets 312
(2,687)
Decrease in accounts payable (2,335)
(3,624)
Increase in accrued warranty and other expenses 1,130
2,074
Increase in other liabilities 203
1,733
Net cash provided by operating activities 20,799
2,130
Cash flows from investing activities:
Capital expenditures (9,353)
(10,852)
Investments in subsidiaries and affiliates (3,229)
-
Net cash used in investing activities (12,582)
(10,852)
Cash flows from financing activities:
Net (decrease) increase in short-term debt (145)
11,538
Proceeds from issuance of long-term debt 1,760
-
Repayment of long-term debt (5,205)
(3,181)
Repayments of capital lease obligations (761)
(757)
Dividends paid (1,200)
(1,680)
Net cash (used in) provided by
financing activities (5,551)
5,920
Net increase (decrease) in cash 2,666
(2,802)
Cash, beginning of period 3,587
4,965
Cash, end of period $ 6,253
$ 2,163
==========
=========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
YUASA, INC.
Notes to the Consolidated Financial Statements
(Unaudited - in thousands)
_________________________________________________________________
1. Basis of Presentation
The accompanying interim financial data are unaudited, and
therefore do not include all of the information and
footnotes required by generally accepted accounting
principles for complete financial statements. However, in
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation are reflected in the consolidated financial
statements. The consolidated balance sheet as of March 31,
1997 is derived from audited financial statements. The
interim financial data should be read in conjunction with
the consolidated financial statements and notes thereto
contained in the Company's registration statement on
Form S-1. The results of operations for the nine months
ended December 28, 1997 are not necessarily indicative of
the results to be expected for the full year ending
March 31, 1998.
2. Earnings Per Share
In 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings per Share." All earnings per share
amounts for all periods have been presented to conform to
SFAS 128 requirements.
3. Inventories
Inventories consist of:
<TABLE>
<CAPTION>
March 31, 1997 December 28,
1997
<S> <C> <C>
Raw materials $10,650 $ 9,530
Work in process 12,083 13,202
Finished goods 37,322 43,809
$60,055 $66,541
======= =======
</TABLE>
4. Accrued Warranty and Other Expenses
Accrued warranty and other expenses consist of:
<TABLE>
<CAPTION>
March 31, 1997 December 28,
1997
<S> <C> <C>
Product warranty reserve $ 4,951 $ 5,297
Payroll and related benefits 11,873 10,649
Interest 1,233 1,539
Other 11,980 13,508
$30,037 $30,993
======= =======
</TABLE>
5. Income Taxes
A reconciliation of income taxes at the statutory rate to
the income tax provision is as follows:
<TABLE>
<CAPTION>
Nine Months
Ended
December 29, 1996
December 28, 1997
<S> <C> <C>
U. S. statutory income tax (at 35%) $1,107
$3,175
State income tax, net of federal
income tax benefit 78
191
Other 316
446
$1,501
$3,812
======
======
</TABLE>
6. Loss on Investment in Joint Venture
During the nine months ended December 28, 1997, the Company
recognized $4,005 in losses associated with its investment
in Tucker Telecommunications Company (Tucker). Such losses
consisted of the Company's share of operating losses of
Tucker plus the cost of settling certain guarantee
obligations of Tucker related to the closing of its business
during this period.
7. Contingencies
The Company is involved in routine litigation incidental to
the conduct of its business the results of which, in the
opinion of management, are not likely to be material to the
Company's financial condition, results of operations or cash
flows.
As a result of its manufacturing activities, the Company is
subject to various environmental laws and is exposed to the
costs and risks of handling, processing, storing and
disposing of hazardous and toxic substances (primarily lead
and acid). The Company's operations are also subject to
federal and state occupational and health regulations,
particularly relating to the control of blood lead levels in
the workplace. The Company is involved in certain
environmental matters pending before the federal and state
courts and regulatory agencies. In the opinion of
management, such matters known to the Company are not
expected to have a material adverse effect on the Company's
financial condition, results of operations or cash flows,
but the full extent of the Company's liability in this area
cannot be quantified at this time.
8. New Accounting Pronouncements Not Yet Adopted
In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about
Segments of an Enterprise and Related Information," which is
effective for years beginning after December 15, 1997.
SFAS 131 establishes standards for the way that public
businesses report information about operating segments in
annual financial statements and requires that those
businesses report selected information about operating
segments in interim financial reports. It also establishes
standards for related disclosures about product and
services, geographic areas, and major customers. The
Company will adopt the new requirements in fiscal 1999,
which will require retroactive application. Management has
not completed its review of SFAS 131 and has not determined
the impact adoption will have on the Company's financial
statements.
In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income," which establishes rules for reporting
and displaying all changes in shareholders' equity exclusive
of transactions with owners, such as capital investments.
Examples of comprehensive income include unrealized gains or
losses on available-for-sale securities, transaction
adjustments on investments in foreign subsidiaries, and
certain changes in minimum pension liabilities. The
Statement is effective for fiscal years beginning after
December 15, 1997.
9. Related Party Transactions
The Company transacts business with several entities with
which it is related through common ownership. Summarized
below are the Company's transactions with related parties.
<TABLE>
<CAPTION>
Purchases
Sales
Nine Months Ended
Nine Months Ended
December 29, December 28,
December 29, December 28,
Company 1996 1997
1996 1997
<S> <C> <C>
<C> <C>
Exide (1) $ 4,842 $ 3,551
$2,913 $2,244
Yuasa Corporation (2) 9,491 7,506
4,104 5,630
$14,333 $11,057
$7,017 $7,874
======= =======
====== ======
</TABLE>
The following balances with related parties are outstanding
as of:
<TABLE>
<CAPTION>
Accounts Payable
Accounts Receivable
March 31, December 28,
March 31, December 28,
Company 1996 1997
1996 1997
<S> <C> <C> <C>
<C>
Exide (1) $ 702 $ 493
$1,053 $ 188
Yuasa Corporation (2) 480 1,166
969 917
$1,182 $1,659
$2,022 $1,105
====== ======
====== ======
</TABLE>
Payment terms are generally the same as those extended to
unrelated third parties, and the balances are settled within
the stated terms.
(1) The Company purchases lead, certain battery components
and administrative services from Exide. The Company
sells certain finished batteries to Exide.
Transactions between the Company and Exide approximate
market prices.
(2) The Company purchases from and sells to Yuasa
Corporation and its affiliates certain finished
batteries depending upon market demands. Additionally,
the Company purchases certain finished batteries, parts
and accessories from Yuasa Corporation and affiliates.
Transactions between the Company and Yuasa Corporation
and affiliates approximate market prices.
Additionally, the Company incurred royalty expenses to Yuasa
Corporation related to sales of motorcycle and small
stationary batteries. Royalty expenses for nine months
ended December 29, 1996 and December 28, 1997 were $1,099
and $1,154, respectively.
10. Subsequent Events
Effective March 9, 1998, the Company was incorporated in the
Commonwealth of Pennsylvania as the holding company for its
wholly-owned operating subsidiary Yuasa-Exide, Inc.
(Subsidiary). On March 26, 1998, the Company's shareholders
exchanged their shares of the Subsidiary for shares of
Class B Common Stock of the Company. The basis of the
exchange was 1 share of the Subsidiary common stock for
1,400 shares of the Company's Class B Common Stock. All
shares of Common Stock and per share amounts have been
presented to give retroactive effect to the formation of the
Company.
Additionally, the Company's Board of Directors and
Shareholders approved the Omnibus Stock Plan (the Plan).
Under the Plan, awards denominated or payable in shares,
options to purchase shares of the Company's Class A Common
Stock or stock appreciation rights may be granted. A
combined maximum of 5% of: (i) the total outstanding shares
of Common Stock of the Company plus (ii) shares issuable
under the Plan may be granted under the Plan.
Additionally, the Board of Directors and shareholders
approved, subject to successful completion of the Company's
initial public offering, the granting of options to purchase
570,400 shares of Class A Common Stock with an exercise
price equal to the Offering Price to the public.
And finally, the Board of Directors declared a dividend of
$2,315 ($.29 per share) which will be payable in June, 1998.
This dividend has been reflected in the pro forma
December 28, 1997 balance sheet in accordance with Staff
Accounting Bulletin No. 98.
11. Initial Public Offering
On March 30, 1998, the Company filed a registration
statement on Form S-1 with the Securities and Exchange
Commission in anticipation of a public offering of common
stock.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Yuasa, Inc.
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of income, changes in
shareholders' equity and cash flows present fairly, in all
material respects, the financial position of Yuasa, Inc. and its
subsidiaries (the Company) at March 31, 1997 and 1996, and the
results of their operations and cash flows for each of the three
years in the period ended March 31, 1997, in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Philadelphia, PA
May 27, 1997, except for Note 14,
which is as of March 26, 1998
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Balance Sheets
(in thousands, except per share data)
March 31,
March 31,
1996
1997
Assets
<S> <C>
<C>
Current assets
Cash $ 3,587
$ 4,965
Accounts receivable, less
allowance for doubtful accounts
of $704 for 1996 and $811 for 1997 38,738
40,243
Inventories 65,823
60,055
Deferred taxes 2,311
2,181
Prepaid expenses and other current assets 3,442
6,171
Total current assets 113,901
113,615
Property, plant and equipment:
Land 4,866
6,371
Buildings and improvements 38,868
42,760
Machinery and equipment 66,683
74,632
Construction in progress 6,457
6,260
116,874
130,023
Less: Accumulated depreciation and amortization (42,939)
(52,542)
Net property, plant and equipment 73,935
77,481
Other assets:
Intangible assets, net of amortization 27,891
24,338
Deferred taxes 2,293
2,903
Other, including investment in affiliate 1,206
1,182
31,390
28,423
Total assets $ 219,226
$ 219,519
=========
=========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt and current portion of
long-term liabilities $ 39,598
$ 36,225
Accounts payable 28,166
32,622
Accrued warranty and other expenses 26,822
30,037
Total current liabilities 94,586
98,884
Long-term liabilities:
Long-term debt 78,800
72,294
Capital lease obligations 10,723
9,917
Other 2,855
2,582
Total liabilities 186,964
183,677
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value,
50,000 shares authorized -
-
Class A common stock, $0.01 par value,
100,000; no shares issued and
outstanding -
-
Class B common stock, $0.01 par value,
authorized 100,000 shares, issued and
outstanding 8,092 81
81
Paid-in capital 16,324
16,324
Retained earnings 16,461
20,372
Cumulative translation adjustment (133)
(108)
Minimum pension liability (471)
(827)
Total shareholders' equity 32,262
35,842
Total liabilities and shareholders' equity $ 219,226
$ 219,519
==========
=========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Statements of Income
(in thousands, except per share data)
Years Ended
March 31,
1995 1996
1997
<S> <C> <C>
<C>
Net sales $328,678
$357,517 $357,526
Cost of goods sold 270,980
295,795 285,379
Gross profit 57,698
61,722 72,147
Operating expenses 46,098
47,467 52,620
Operating earnings 11,600
14,255 19,527
Interest expense 9,614
11,581 9,625
Equity (earnings) loss of investee -
(45) 53
Other expense (earnings) 781
(58) 416
Earnings before taxes and minority interest 1,205
2,777 9,433
Income taxes 661
1,514 4,236
Earnings before minority interest 544
1,263 5,197
Minority interest loss (earnings) 72
16 (86)
Net earnings $ 616 $
1,279 $ 5,111
========
======== =======
Basic and diluted earnings per share:
Net earnings per share of Common Stock $ .08 $
.16 $ .63
Weighted average shares of
Common Stock outstanding 8,092
8,092 8,092
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Statements of Changes in Shareholders'
Equity
(in thousands)
Total
Common Common
Cumulative Minimum share-
Preferred stock stock Paid-in
Retained translation pension holders'
stock class A class B capital
earnings adjustment liability Equity
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Balance at
April 1, 1994 $ - $ - $ 81 $16,324
$17,266 $ - $ (303) $33,368
Minimum pension
(46) (46)
Net earnings
616 616
Dividends
(2,300) (2,300)
Cumulative translation
adjustment
203 203
Balance at March 31,
1995 - - 81 16,324
15,582 203 (349) 31,841
Minimum pension
(122) (122)
Net earnings
1,279 1,279
Dividends
(400) (400)
Cumulative translation
adjustment
(336) (336)
Balance at March 31,
1996 - - 81 16,324
16,461 (133) (471) 32,262
Minimum pension
(356) (356)
Net earnings
5,111 5,111
Dividends
(1,200) (1,200)
Cumulative translation
adjustment
25 25
Balance at March 31,
1997 $ - $ - $ 81 $16,324
$20,372 $ (108) $(827) $35,842
======= ====== ===== =======
======= ======== ====== =======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Statements of Cash Flows
(in thousands)
Years Ended
March 31,
1995 1996
1997
<S> <C> <c
<C>
Cash flows from operating activities:
Net earnings $ 616 $
1,279 $ 5,111
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization 12,386
15,000 14,022
Provision for doubtful accounts 347
38 398
Provision for deferred taxes (26)
(1,978) (257)
Loss on sale of subsidiary -
127 -
Profit on sale-leaseback of machinery
and equipment (234)
(267) (327)
Loss on retirement and write-downs of
property, plant and equipment 346
56 468
Changes in assets and liabilities, net of
acquisitions and divestitures:
Increase in accounts receivable (1,265)
(3,526) (1,903)
(Increase) decrease in inventories (9,367)
(4,161) 5,768
Increase in prepaid expenses and other
current assets (3,218)
(764) (2,599)
(Increase) decrease in other assets 1,191
(157) 2,475
Increase in accounts payable 3,685
116 4,454
Increase in accrued warranty and other
expenses 4,307
5,126 217
Increase (decrease) in other liabilities 99
(1,255) (278)
Net cash provided by operating activities 8,867
9,634 27,549
Cash flows from investing activities:
Capital expenditures (19,983)
(17,078) (11,203)
Payment for acquisition of Canadian
marketing rights (1,000)
- - -
Investments in subsidiaries and affiliates (700)
(1,500) (3,229)
Proceeds from sale of subsidiary -
109 -
Proceeds from sale-leaseback of machinery
and equipment -
6,012 -
Proceeds from sales of
property, plant and equipment 128
15 145
Net cash used in investing activities (21,555)
(12,442) (14,287)
Cash flows from financing activities:
Net increase (decrease) in short-term debt 20,799
(18,005) ( 3,395)
Proceeds from issuance of long-term debt -
30,000 1,760
Repayment of long-term debt (3,000) (
6,000) ( 8,033)
Repayments of capital lease obligations (1,346) (
1,078) ( 1,016)
Dividends paid (2,300)
(400) ( 1,200)
Net cash (used in) provided by
financing activities 14,153
4,517 (11,884)
Net increase in cash 1,465
1,709 1,378
Cash beginning of year 413
1,878 3,587
Cash, end of year $ 1,878 $
3,587 $ 4,965
=======
======= =======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
<PAGE>
YUASA, INC.
Notes to Consolidated Financial Statements
(in thousands)
_________________________________________________________________
1. Summary of Significant Accounting Policies:
Description of Business
YUASA, INC. (the Company) is a manufacturer and supplier of
industrial batteries and small engine starting batteries.
The Company's shareholders are Yuasa Corporation (86.5%) and
Exide Corporation (13.5%).
Principles of Consolidation
The consolidated financial statements include the accounts
of the Company and its majority owned and wholly-owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated. See Note 2 regarding
business combinations.
Revenue Recognition
Sales are recorded upon shipment of products. Expenses for
estimated warranty claims are accrued in the period of sales
recognition.
Inventories
Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method.
The cost of inventory consists principally of material,
labor and associated overhead.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and
includes expenditures which substantially increase the
useful lives of the assets. Depreciation is provided using
the straight-line method over the estimated useful lives of
the assets as follows: 10 to 33 years for buildings and
improvements and 3 to 10 years for machinery and equipment.
Depreciation expense totaled $8,596, $11,074 and $10,044 for
fiscal years 1995, 1996 and 1997 respectively. Maintenance
and repairs are expensed as incurred. Interest on capital
projects is capitalized during the construction period and
amounted to $515, $523 and $688 in fiscal 1995, 1996 and
1997, respectively. Gains and losses from dispositions or
retirements of property, plant and equipment are recognized
currently.
Intangible Assets
Identifiable intangible assets, such as purchased patents
and trademarks, are amortized using the straight-line method
over their estimated useful lives, which range from 7 to 25
years. Non-compete agreements are amortized over the lives
of the contracts (5 to 10 years) using the straight-line
method. Goodwill represents the excess of cost over the
fair value of net assets acquired resulting from business
acquisitions. Management reviews the carrying value of
goodwill and other intangibles on an ongoing basis. When
factors indicate that an intangible asset may be impaired,
management uses an estimate of the undiscounted future cash
flows over the remaining life of the asset in measuring
whether the intangible asset is recoverable. If such an
analysis indicates that impairment has in fact occurred, the
book value of the intangible asset is written down to its
estimated fair value using discounted cash flows.
Amortization expense totaled $3,790, $3,926 and $3,978 for
fiscal year 1995, 1996 and 1997, respectively.
Environmental Expenditures
Environmental expenditures that will benefit future
operations are capitalized; all other environmental
expenditures are expensed as incurred. Accruals are
recorded when environmental expenditures for remedial
efforts are probable and the amounts can be reasonably
estimated.
Income Taxes
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to temporary
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
bases. These temporary differences are measured using
enacted tax rates expected to apply to taxable income in the
years in which the temporary differences are expected to be
realized.
Valuation allowances are recorded to reduce deferred tax
assets when it is probable that a tax benefit will not be
realized. The provision for income taxes represents income
taxes paid or payable for the current year and the change in
deferred taxes during the year.
Foreign Currency Translation
Results of foreign operations are translated into U.S.
dollars using average exchange rates during the period while
assets and liabilities are translated into U.S. dollars
using current rates as of the Balance Sheet date. The
resulting translation adjustments are accumulated as a
separate component of stockholders' equity.
Transaction gains and losses resulting from exchange rate
changes on transactions denominated in currencies other than
those of the foreign subsidiaries are included in income in
the year in which the change occurs.
Earnings per Share
In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 128 (SFAS 128),
"Earnings Per Share." All earnings per share amounts have
been presented to conform to the SFAS 128 requirements.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Accounting Standards Change
In March 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
No. 121 (SFAS 121), "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of."
This standard specifies when assets should be reviewed for
impairment, how to determine if an asset is impaired, how to
measure an impairment loss, and what disclosures are
necessary in the financial statements. The Company adopted
SFAS 121 on April 1, 1996 and recorded a charge of $400
during the year ended March 31, 1997.
In June 1996, the FASB issued Statement No. 125 (SFAS 125),
"Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities," which provides
accounting and reporting standards for sales
securitizations, and servicing of receivables and other
financial assets, secured borrowing and collateral
transactions, and the extinguishment of liabilities. The
Company has modified an agreement to meet the new
requirements to enable it to continue recognizing transfers
of certain receivables to special-purpose entities as sales.
This agreement is structured to allow the Company to sell to
an affiliate of a bank, without recourse, all right, title
and interest in designated accounts receivable up to
$30,000. As of March 31, 1996 and 1997 a total of $30,000
of accounts receivable were sold. Receivables are sold
daily at a discount rate based upon U.S. federal funds plus
1/4%. Discounts included in interest expense were $1,949 in
fiscal 1996 and $1,907 in fiscal 1997.
New Accounting Pronouncements Not Yet Adopted
In June 1997, FASB issued Statement of Financial Accounting
Standards No. 131 (SFAS 131), "Disclosures about Segments of
an Enterprise and Related Information," which is effective
for years beginning after December 15, 1997. SFAS 131
establishes standards for the way that public businesses
report information about operating segments in annual
financial statements and requires that those businesses
report selected information about operating segments in
interim financial reports. It also establishes standards
for related disclosures about products and services,
geographic areas, and major customers. The Company will
adopt the new requirements for the fiscal year ended
March 31, 1999, which will require retroactive application.
Management has not completed its review of SFAS 131 and has
not determined the impact adoption will have on the
Company's financial statements.
In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income," which establishes rules for reporting
and displaying all changes in shareholders' equity exclusive
of transactions with owners, such as capital investments.
Examples of comprehensive income include unrealized gains or
losses on available-for-sale securities, translation
adjustments on investments in foreign subsidiaries, and
certain changes in minimum pension liabilities. SFAS 130 is
effective for fiscal years beginning after December 15,
1997.
Financial Instruments
The Company's financial instruments recorded on the balance
sheet include cash, accounts and notes receivable, accounts
payable and debt. Because of the short maturity, the
carrying amount of cash, accounts and notes receivable,
accounts payable and short-term debt approximates fair
value. Fair value of long-term debt is based on rates
available to the Company for debt with similar terms and
maturities and is deemed to approximate book value.
2. Business Combinations:
On August 3, 1994, the Company paid $700 for a 48% minority
interest in Tucker Telecommunications Company (Tucker), a
Texas corporation in the business of manufacturing
telecommunications equipment. The Company also paid $300
for a non-compete agreement with Tucker. The agreement also
provided the Company with the right to purchase the
remaining 52% interest for $750 on December 29, 1997 or
before that date if certain conditions were met pursuant to
the Agreement. The Company was also guarantor of certain
debt obligations of Tucker in the amount of $3,500. The
investment in Tucker is accounted for using the equity
method of accounting. (See Note 15, Subsequent Events.)
On October 1, 1995, the Company sold its 51% interest in
Arctic Yuasa-Exide Company for $147 which resulted in a loss
on sale of $127.
Effective November 30, 1995, the Company paid $600 for the
inventory and fixed assets of Advanced Power Systems, Inc.
(APS), a Pennsylvania corporation in the business of
installing and servicing certain telecommunications
equipment. The Company also paid two former owners of APS
$900 for agreements not to compete.
On July 1, 1996, the Company paid $350 for a 55% interest in
Yuasa-Exide Argentina, a joint venture in the business of
manufacturing and marketing lead acid batteries and related
equipment.
On September 9, 1996, the Company paid $2,879 for the fixed
assets and inventory of H&R Metal Products Inc., a South
Carolina corporation which manufactures metal trays for
certain battery types. The Company also entered into non-
compete and consulting agreements with the former owner of
H&R Metal Products Inc., whereby the Company is to make
total payments of $300 and $400, respectively over five
years.
3. Inventories:
Inventories consist of:
<TABLE>
<CAPTION>
March 31,
1996
1997
<S> <C> <C>
Raw materials $10,834
$10,650
Work-in-process 11,303
12,083
Finished goods 43,686
37,322
$65,823
$60,055
=======
=======
</TABLE>
Inventory reserves for obsolescence and other estimated
losses were $627 and $625 at March 31, 1996 and March 31,
1997, respectively.
<PAGE>
4. Intangible Assets:
Intangible assets consist of:
<TABLE>
<CAPTION>
March 31,
1996
1997
<S> <C> <C>
Non-compete agreements $21,200
$21,254
Proprietary technology 8,679
8,679
Patents 6,035
6,035
Tradenames and trademarks 5,907
5,907
Goodwill and marketing rights 2,388
2,388
44,209
44,263
Less: accumulated amortization (16,318)
(19,925)
Intangible assets $27,891
$24,338
=======
=======
</TABLE>
5. Accrued Warranty and Other Expenses
Accrued warranty and other expenses consist of:
<TABLE>
<CAPTION>
March 31,
1996
1997
<S> <C> <C>
Product warranty reserve $ 5,768 $
4,951
Payroll and related benefits 11,009
11,873
Interest 1,642
1,233
Other 8,403
11,980
$26,822
$30,037
=======
=======
</TABLE>
6. Debt:
Short-Term Debt
Short-term debt consists primarily of borrowings associated
with revolving bank lines of credit. The Company had
$30,695 and $27,300 in borrowings under lines of credit and
$62,125 and $70,700 in available but unused lines of credit
with banks at March 31, 1996 and 1997, respectively. These
lines of credit are renewed annually and are unsecured.
Borrowings generally bear interest at the federal funds rate
plus a percentage which ranged between 0.3% and 0.5%.
Long-Term Debt
<TABLE>
<CAPTION>
March
31,
1996
1997
<S> <C>
<C>
Loan payable in a lump-sum
due December 10, 1998, bearing interest
at 7.90% fixed per annum. $30,000
$30,000
Loan payable in semi-annual
installments from January 10,
1995 through July 10, 1999,
bearing interest at 7.37% fixed per annum. 21,000
15,000
Mortgage loan payable in
three annual installments
through December 20, 1998,
bearing interest at 5.94% per annum.
Loan is secured by a first mortgage lien
interest in the Company's corporate headquarters. 5,700
3,800
Loan payable in monthly
installments through August 1, 2003,
bearing interest at 3.00% fixed per annum.
Loan is secured by a second mortgage lien
interest in the Company's corporate headquarters. -
1,627
Loan payable in ten
semi-annual installments
from May 10, 1998 through
November 10, 2002, bearing interest
at a rate of LIBOR +.375% per annum
(approximately 5.97% at March 31, 1997). 10,000
10,000
Loan payable in ten
semi-annual installments
from April 30, 1998 through
October 30, 2002, bearing interest
at a rate of LIBOR +.375% per annum
(approximately 5.97% at March 31, 1997). 20,000
20,000
86,700
80,427
Less: Current portion 7,900
8,133
$78,800
$72,294
=======
=======
</TABLE>
<PAGE>
The Company paid $9,735, $11,842 and $9,985 for interest
during fiscal 1995, 1996 and 1997 respectively. Aggregate
maturities of long-term debt in each of the five years after
March 31, 1997 are as follows:
1998 $ 8,133
1999 44,141
2000 9,248
2001 6,255
2002 6,243
Thereafter 6,407
$80,427
=======
$45,000 of the Company's outstanding long-term debt is
guaranteed by Yuasa Corporation.
7. Income Taxes:
Earnings (loss) before income taxes consists of the
following:
<TABLE>
<CAPTION>
Year Ended March 31,
1995 1996 1997
<S> <C> <C> <C>
U.S. operations $2,147 $1,821 $9,508
Foreign operations (942) 956 (75)
$1,205 $2,777 $9,433
====== ====== ======
</TABLE>
<PAGE>
Income tax (benefit) comprises the following:
<TABLE>
<CAPTION>
Years Ended March 31,
1995 1996 1997
<S> <C> <C> <C>
Current:
Federal $ 687 $ 2,435 $4,075
State - 1,057 364
Foreign - - 54
Total current 687 3,492 4,493
Deferred:
Federal $ 140 $(1,831) $
(235)
State (149) (157)
(22)
Foreign (17) 10 -
Total deferred (26) (1,978)
(257)
Income tax expense $ 661 $ 1,514 $4,236
===== ======= ======
</TABLE>
Income taxes paid by the Company for the years ended
March 31, 1995, 1996 and 1997 were $273, $2,930 and $3,454,
respectively.
The following table sets forth the tax effects of temporary
differences that give rise to significant portions of the
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
Years Ended March
31,
1995 1996
1997
<S> <C> <C>
<C>
Deferred tax assets:
Accounts receivable $ 310 $ 259
$ 233
Inventories 1,367 1,035
766
Intangibles, principally due to
differences in amortization 405 973
1,158
Deferred gain 619 695
581
Net operating loss carryforwards 810 307
446
Accrued liabilities and other items 3,625 4,976
4,876
Gross deferred tax assets 7,136 8,245
8,060
Valuation allowance (616) (113)
(252)
Net deferred tax assets 6,520 8,132
7,808
Deferred tax liabilities:
Intangibles, principally due to
differences in amortization 309 246
189
Plant and equipment, principally due
to differences in depreciation 3,584 2,321
1,532
Prepaid expenses and other items 77 961
1,003
Gross deferred tax liabilities 3,970 3,528
2,724
Net deferred tax asset $2,550 $4,604
$5,084
====== ======
======
</TABLE>
The Company has recorded a valuation allowance for net
deferred tax assets in foreign tax jurisdictions, primarily
related to net operating loss carryforwards, due to the
significant losses incurred in these tax jurisdictions in
previous years.
A reconciliation of income taxes at the statutory rate to
the income tax provision is as follows:
<TABLE>
<CAPTION>
Years Ended
March 31,
1995 1996
1997
<S> <C> <C>
<C>
U.S. statutory income taxes (at 35%) $410 $ 944
$3,207
Increase (decrease) resulting from:
State income taxes, net of federal
effect 87 142
229
Non-deductible intangible amortization
and other 165 330
263
Other (1) 98
537
$661 $1,514
$4,236
==== ======
======
</TABLE>
At March 31, 1997, the Company has not made provision for
U.S. federal and state income taxes on approximately $163 of
foreign earnings which are expected to be reinvested
indefinitely. Upon distribution of those earnings in the
form of dividends or otherwise, the Company would be subject
to U.S. income taxes (subject to an adjustment for foreign
tax credits) and withholding taxes payable to the various
foreign countries.
8. Pension Plans:
The Company has noncontributory defined benefit pension
plans covering substantially all hourly employees. The
benefits for these plans are based primarily on stated
amounts for each year of credited service. Company
contributions to these plans are made in accordance with
applicable laws and tax regulations. Plan assets consist of
mutual funds and common trust funds invested in bonds,
common stocks and money market funds.
Net pension cost for the defined benefit plans of the
Company includes the following components:
<TABLE>
<CAPTION>
Years Ended March 31,
1995 1996 1997
<S> <C> <C> <C>
Service cost $300 $323 $401
Interest cost 139 171 257
Actual loss (return) plan assets 13 (263)
(227)
Net amortization and deferrals ( 97) 140 104
Net pension cost $355 $371 $535
==== ==== ====
</TABLE>
The funded status of the defined benefit plans of the
Company is as follows:
<TABLE>
<CAPTION>
March 31,
1996 1997
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $(2,173) $(3,579)
======= =======
Accumulated benefit obligation $(2,692) $(3,889)
======= =======
Actuarial present value of
projected benefit obligation $(2,692) $(3,889)
Plan assets at fair value 2,157 2,894
Plan assets less projected
benefit obligation (535) (995)
Unrecognized prior service cost 48 58
Unrecognized net loss 766 1,345
Additional minimum liability (814) (1,403)
Accrued pension cost $ (535) $ (995)
======= =======
</TABLE>
The projected benefit obligation (PBO) was determined using
a discount rate of 7.75% during fiscal 1996 and 1997. The
PBO increased mainly due to a change in the actuarial
assumptions, principally mortality tables. The assumed
long-term rate of return on plan assets was 9% in fiscal
1995, 1996 and 1997.
Substantially all salaried employees are eligible to
participate in the Salaried Retirement and 401(k) Plan.
Under this Plan, the Company contributes annually 4% of
eligible employees' salaries to a trust fund. In addition
to the employer contribution, a salaried employee may make
voluntary contributions to the Plan of up to 12% of their
salary. Subsequent to March 31, 1997, the voluntary
contribution percentage was increased from 12% to 15%. The
Company is obligated to make additional contributions, to
the extent of the employee's participation in the Plan, of
25% of the amount contributed by the employee up to a
maximum of 4% of the employee's salary. The 401(k) program
also allows for Company discretionary matching
contributions. For fiscal 1997, total Company contributions
were 25% of the amount contributed by the employee up to a
maximum of 4% of the employee's salary. Employer
contributions made to the salaried retirement and 401(k)
plan for fiscal 1995, 1996, and 1997 were $1,243, $1,269,
and $1,167, respectively.
The Company provides all hourly-paid employees with at least
one year of eligible service at the Richmond, KY, Sumter, SC
and Laureldale, PA manufacturing facilities with an Hourly
Savings Plan. Under this Plan an employee may make
voluntary contributions to the Plan of up to 12% of their
salary. The Company has the option, based on performance
factors, to contribute an amount equal to 25% of the amount
contributed by the employee, up to a maximum of 4% of the
employee's salary. Employer contributions made to the
hourly savings plan for fiscal 1995, 1996, and 1997 were
$42, $69, and $122, respectively.
9. Leases
The Company has entered into various capital lease
arrangements in connection with its Reading, PA and Hays, KS
manufacturing facilities. Payments under these arrangements
are supported by letters of credit partially guaranteed by
Yuasa Corporation. The Company has also entered into
capital lease arrangements for certain computer equipment.
During fiscal 1996, the Company sold certain manufacturing
equipment at its Richmond, KY, Sumter, SC, Laureldale, PA,
and Cleveland, OH manufacturing facilities, and at its
Northeast Distribution Center in Fogelsville, PA, to a
leasing subsidiary of a bank for $6,012. Coincident with
this sale, the Company leased the equipment back under an
operating lease with an eight year term. The transaction
resulted in a net gain of $589 which is being amortized over
the life of the lease.
The following is an analysis of the leased property under
capital leases by major classes:
<TABLE>
<CAPTION>
March 31,
1996
1997
<S> <C> <C>
Classes of property
Land $ 232 $
232
Building 4,474
4,474
Machinery and equipment 13,954
11,463
18,660
16,169
Less: Accumulated depreciation (14,312)
(13,373)
$ 4,348 $
2,796
=======
=======
</TABLE>
Amortization relating to fixed assets under capital leases
is included in depreciation expense.
The Company's future minimum lease payments under capital
and operating leases which have non-cancelable terms in
excess of one year at March 31, 1997 are as follows:
<TABLE>
<CAPTION>
Lease Type
Capital
Operating
<S> <C> <C>
1998 $ 1,223 $
3,763
1999 778
3,243
2000 401
3,386
2001 9,774
1,886
2002
1,578
Thereafter -
2,766
Total minimum payments 12,176
$16,622
=======
Less: Interest at rates ranging
from 4.0% to 9.7% 1,467
Present value of net minimum
lease payments 10,709
Less: Current portion 792
Long-term portion $ 9,917
=======
</TABLE>
Operating lease rental expense was $7,319, $6,489 and
$6,786, for fiscal 1995, 1996 and 1997, respectively.
Certain operating lease agreements contain renewal or
purchase options and/or escalation clauses.
10. Related Party Transactions
The Company transacts business with several entities with
which it is related through common ownership. Summarized
below are the Company's transactions with related parties.
<TABLE>
<CAPTION>
Purchases
Sales
Years Ended
Years Ended
March 31,
March 31,
1995 1996 1997 1995
1996 1997
<S> <C> <C> <C> <C> <C>
<C>
Company
Exide(1) $16,408 $10,752 $ 6,888 $20,566
$19,965 $ 4,633
Yuasa Corporation(2) 17,575 20,597 15,005 8,817
10,010 6,000
$33,983 $31,349 $21,893 $29,383
$29,975 $10,633
======= ======= ======= =======
======= =======
</TABLE>
The following balances with related parties are outstanding
as of:
<TABLE>
<CAPTION>
Accounts Payable Accounts
Receivable
March 31,
March 31,
1996 1997 1996
1997
<S> <C> <C> <C>
<C>
Company
Exide(1) $ 335 $ 702 $1,521
$1,053
Yuasa Corporation(2) 891 480 675
969
$1,226 $1,182 $2,196
$2,022
====== ====== ======
======
</TABLE>
Payment terms are generally the same as those extended to
unrelated third parties, and the balances are settled within
the stated terms.
(1) The Company purchases lead, certain battery components
and administrative services from Exide. The Company
sells certain finished batteries to Exide.
Transactions between the Company and Exide approximate
market prices.
(2) The Company purchases from and sells to Yuasa
Corporation and its affiliates certain finished
batteries depending upon market demands. Additionally,
the Company purchases certain finished batteries, parts
and accessories from Yuasa Corporation and affiliates.
Transactions between the Company and Yuasa Corporation
and affiliates approximate market prices.
Additionally, the Company incurred royalty expenses to Yuasa
Corporation related to sales of motorcycle and small
stationary batteries. Royalty expenses for fiscal 1995,
1996, and 1997 were $1,397, $1,069, and $1,497,
respectively. Royalties payable at March 31, 1996 and 1997
were $254 and $485, respectively.
11. Commitments and Contingencies
The Company is involved in routine litigation incidental to
the conduct of its business the results of which, in the
opinion of management, are not likely to be material to the
Company's financial condition, results of operations, or
cash flows.
As a result of its manufacturing activities, the Company is
subject to various environmental laws and is exposed to the
costs and risks of handling, processing, storing and
disposing of hazardous and toxic substances (primarily lead
and acid). The Company's operations are also subject to
Federal and state occupational and health regulations,
particularly relating to the control of blood lead levels in
the workplace. The Company is involved in certain
environmental matters pending before the Federal and state
courts and regulatory agencies. In the opinion of
management, such matters known to the Company are not
expected to have a material adverse effect on the Company's
financial condition or results of operations, but the full
extent of the Company's liability in this area cannot be
quantified at this time.
In order to ensure a steady supply of lead and to keep the
cost of products stable, the Company has entered into
contracts with suppliers for the purchase of lead. Each
such contract is for a period not extending beyond one year.
Under these contracts, the Company is committed at March 31,
1997 to purchase 56.4 million pounds of lead for a total
purchase price of $19,584.
12. Concentration of Credit Risk
Financial instruments which subject the Company to potential
concentration of credit risk consist principally of trade
receivables and temporary cash investments. The Company
places its temporary cash investments with various financial
institutions and, generally, limits the amount of credit
exposure to any one financial institution. Concentrations
of credit risk with respect to trade receivables is limited
by a large customer base and its geographic dispersion. The
Company performs ongoing credit evaluations of its
customers' financial condition and requires collateral, such
as letter of credit, in certain circumstances.
13. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
First Second Third
Fourth
Quarter Quarter Quarter
Quarter
(Dollars in
Thousands)
<S> <C> <C> <C>
<C>
1997
Net Sales $ 85,370 $ 85,821 $ 85,239
$101,096
Gross Profit $ 15,574 $ 16,986 $ 17,121
$ 22,466
Net Earnings $ 66 $ 899 $ 810
$ 3,336
Basic Net Earnings
per share $ .01 $ .11 $ .10
$ .41
1996
Net Sales $ 90,175 $ 82,206 $ 87,201
$ 97,935
Gross Profit $ 14,891 $ 14,890 $ 14,536
$ 17,405
Net Earnings (loss) $ (126) $ 430 $ (224)
$ 1,199
Basic Net Earnings
(loss) per share $ (.02) $ .05 $ (.03)
$ .15
</TABLE>
14. Subsequent Event - Capital Structure
Effective March 9, 1998, the Company was incorporated in the
Commonwealth of Pennsylvania as the holding company for its
wholly-owned operating subsidiary Yuasa-Exide, Inc.
(Subsidiary). On March 26, 1998, the Company's shareholders
exchanged their shares of the Subsidiary for shares of
Class B Common Stock of the Company. The basis of the
exchange was 1 share of the Subsidiary common stock for
1,400 shares of the Company's Class B Common Stock. All
shares of Common Stock and per share amounts have been
presented to give retroactive effect to the formation of the
Company.
15. Subsequent Event - Loss on Investment in Joint Venture
(Unaudited)
During the nine months ended December 28, 1997, the Company
recognized $4,005 in losses associated with its investment
in Tucker Telecommunications Company (Tucker). Such losses
consisted of the Company's share of operating losses of
Tucker plus the cost of settling certain guarantee
obligations of Tucker related to the closing of its business
during this period.
<PAGE>
No dealer, salesperson or other individual has been authorized to
give any information or make any representations not contained in
this Prospectus in connection with the offering covered by this
Prospectus. If given or made, such information or
representations must not be relied upon as having been authorized
by the Company or the Underwriters. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to
buy, the Class A Common Stock in any jurisdiction where, or to
any person to whom, it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an
implication that there has not been any change in the facts set
forth in this Prospectus or in the affairs of the Company since
the date hereof.
_________________________________________________________________
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY ...........................................
RISK FACTORS .................................................
USE OF PROCEEDS ..............................................
DIVIDEND POLICY ..............................................
CAPITALIZATION ...............................................
DILUTION .....................................................
SELECTED CONSOLIDATED FINANCIAL INFORMATION ..................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ...................................
BUSINESS .....................................................
MANAGEMENT ...................................................
RELATED PARTY TRANSACTIONS ...................................
PRINCIPAL AND SELLING STOCKHOLDERS ...........................
DESCRIPTION OF CAPITAL STOCK .................................
UNDERWRITING .................................................
LEGAL MATTERS ................................................
EXPERTS ......................................................
CHANGE IN INDEPENDENT ACCOUNTANTS ............................
_________________________________________________________________
Until , 1998 (25 days after the date of this
Prospectus), all dealers effecting transactions in the Class A
Common Stock, whether or not participating in this distribution,
may be required to deliver a Prospectus. This delivery
requirement is in addition to the obligation of dealers to
deliver a Prospectus when acting as Underwriters and with respect
to their unsold allotments or subscriptions.
<PAGE>
Shares
[LOGO]
YUASA, Inc.
Class A Common Stock
___________________________
PROSPECTUS
___________________________
Nomura Securities International, Inc.
Salomon Smith Barney
, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following expenses, other than the SEC registration fee,
are estimated. All expenses of this offering will be paid by the
Company.
SEC registration fee $ 21,388
NASD filing fee $ 7,750
NYSE listing fee $ 84,600
Blue Sky fees and expenses $ 50,000
Transfer agent's and registrar's fees and expenses $ 50,000
Printing and engraving expenses $ 50,000
Accounting fees and expenses $250,000
Legal fees and expenses (other than Blue Sky fees
and expenses) $200,000
Miscellaneous $ 86,262
Total $800,000
Item 14. Indemnification of Directors and Officers.
Section 6.01 of Article VI of Registrant's By-Laws
(Exhibit 3.2 hereto), provide for the indemnification of its
directors and officers under certain circumstances and are
incorporated herein by reference. The Pennsylvania Business
Corporation Law also provides for indemnification as set forth in
Section 145 thereof, which is incorporated herein by reference.
The effect of those provisions is to indemnify the directors and
officers of the Registrant against all costs, expenses and
amounts of liability incurred by them in connection with any
action, suit or proceeding in which they are involved by reason
of their affiliation with the Registrant, to the fullest extent
permitted by law.
The Underwriting Agreement (Exhibit 1.1 hereto) contains
certain provisions pursuant to which the Underwriters have agreed
to indemnify the Registrant, its directors, each of the officers
who signed the Registration Statement, each person who controls
the Registrant within the meaning of the Securities Act of 1933,
the Registrant's principal subsidiary, and each person who
controls the Registrant's principal subsidiary within the meaning
of the Securities Act of 1933.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
1. Underwriting Agreement.*
3.1 Articles of Incorporation.*
3.2 Bylaws.*
5.1 Opinion of Stevens & Lee, P.C. re legality of shares.*
10.1 1998 Yuasa, Inc. Omnibus Stock Plan.*
10.2 Asset Purchase Agreement between Yuasa Battery
(America), Inc. and Exide Corporation dated June 10,
1991.*
10.3 Technical Assistance Agreement dated July 1, 1988
between Yuasa Battery Co., Ltd. and Yuasa Exide Battery
Corporation.*
10.4 License Agreement dated February 6, 1979 between Yuasa
Battery Co., Ltd. and Yuasa General Battery
Corporation.*
10.5 Technical Assistance Agreement dated November 5, 1985
between Yuasa Battery Co., Ld. and Yuasa General
Battery Corporation.*
16.1 Letter of Price Waterhouse LLP re change in
accountants.
21. Subsidiaries of Yuasa, Inc.*
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Stevens & Lee (included in Exhibit 5.1).*
24. Power of Attorney (contained as part of signature
page).
27.1 Financial Data Schedule.
______________________________
* To be filed by amendment.
(b) Financial Statement Schedules and Related Reports
Schedule II
Valuation and Qualifying Accounts
Item 17. Undertakings.
The undersigned Registrant hereby undertakes to provide to
the Underwriters at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Reading, Commonwealth of Pennsylvania,
on March 27, 1998.
YUASA, INC.
By /s/ P. Michael Ehlerman
P. Michael Ehlerman, President
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints P. Michael
Ehlerman, Michael T. Philion and Joseph M. Harenza, Esquire, and
each of them, his true and lawful attorney-in-fact, as agent with
full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacity, to sign any or
all amendments to this Registration Statement and to file the
same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto such attorney-in-fact and agent full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as they might
or could to in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Teruhisa Yuasa Chairman of the Board;
March 27, 1998
Teruhisa Yuasa Director
/s/ P. Michael Ehlerman President;
March 27, 1998
P. Michael Ehlerman, individually Director (Principal
and as attorney in fact Executive Officer)
/s/ Michael T. Philion Vice President -
March 27, 1998
Michael T. Philion Finance, CFO (Principal
Financial Officer)
/s/ Raymond J. Grzybowski Controller (Principal
March 27, 1998
Raymond J. Grzybowski Accounting Officer)
/s/ John D. Craig Executive Vice
March 27, 1998
John D. Craig President; Director
/s/ Hiroshi Horiuchi Vice President -
March 27, 1998
Hiroshi Horiuchi Export and Secretary;
Director
/s/ Arthur M. Hawkins Director
March 27, 1998
Arthur M. Hawkins
/s/ Yasukazu Sakai Vice Chairman; Director
March 27, 1998
Yasukazu Sakai
/s/ Shuji Kawata Vice Chairman; Director
March 27, 1998
Shuji Kawata
/s/ James Kanda Director
March 27, 1998
James Kanda
/s/ Raymond J. Kenny Director
March 27, 1998
Raymond J. Kenny
</TABLE>
<PAGE>
No dealer, salesman or other person has been authorized to
give any information or to make any representations other than
those contained in this Prospectus in connection with the
offering described herein, and, if given or made, such
information or representations must not be relied upon as having
been authorized by the Company, any Selling Stockholder or any
Underwriter. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities other
that those specifically offered hereby or of any securities
offered hereby in any jurisdiction to any person to whom it is
unlawful to make an offer or solicitation in such such
jurisdiction. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any
implication that the information herein is correct as of any time
subsequent to its date.
Until _____________, 1998 (90 days after the date of this
Prospectus), all dealers effecting transactions in the registered
securities, whether or not participating in this distribution,
may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as
Underwriters and with respect to their unsold allotments or
subscriptions.
YUASA, Inc.
_________ Shares
Class A
Common Stock
PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column
D Column E
Additions
Balance at Charged to
Balance
Beginning Costs and
at End of
Description of Period Expenses
Deductions Period
<S> <C> <C> <C>
<C>
Valuation Accounts Deducted in
the Consolidated Balance
Sheet from the Assets to which
They Apply:
Year Ended March 31, 1997:
Allowance for doubtful
accounts ................... 704 398 291
811
Allowance for inventory
losses ..................... 627 1,499 1,501
625
Year Ended March 31, 1996:
Allowance for doubtful
accounts ................... 778 38 112
704
Allowance for inventory
losses ..................... 200 1,470 1,043
627
Year ended March 31, 1995:
Allowance for doubtful
accounts ................... 1,189 347 758
778
Allowance for inventory
losses ..................... 67 200 67
200
</TABLE>
Exhibit 16.1
March 30, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Yuasa, Inc.
Ladies and Gentlemen:
We have read "Change in Independent Accountants" of Yuasa,
Inc.'s Form S-1 dated March 30, 1998 and are in agreement with
the statements contained therein.
Very truly yours,
Price Waterhouse LLP
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting
part of this Registration Statement on Form S-1 of our report
dated May 27, 1997, except for Note 14, which is as of March 26,
1998, relating to consolidated financial statements
of Yuasa, Inc., which appears in such Prospectus. We also
consent to the reference to us under the heading "Experts" in
such Prospectus.
PRICE WATERHOUSE LLP
Philadelphia, PA
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF YUASA-EXIDE, INC.
FOR THE YEAR ENDED MARCH 31, 1997 AND THE NINE MONTHS ENDED
DECEMBER 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> MAR-31-1997 DEC-28-1997
<PERIOD-START> APR-01-1996 APR-01-1997
<PERIOD-END> MAR-31-1997 DEC-28-1997
<CASH> 4,965 2,163
<SECURITIES> 0 0
<RECEIVABLES> 41,054 52,863
<ALLOWANCES> 811 1,010
<INVENTORY> 60,055 66,541
<CURRENT-ASSETS> 113,615 126,244
<PP&E> 130,023 140,827
<DEPRECIATION> 52,542 60,825
<TOTAL-ASSETS> 219,519 231,790
<CURRENT-LIABILITIES> 98,884 111,638
<BONDS> 0 0
0 0
0 0
<COMMON> 81 81
<OTHER-SE> 35,761 39,350
<TOTAL-LIABILITY-AND-EQUITY> 219,519 231,790
<SALES> 357,526 290,900
<TOTAL-REVENUES> 357,526 290,900
<CGS> 283,379 225,697
<TOTAL-COSTS> 283,379 225,697
<OTHER-EXPENSES> 52,620 44,617
<LOSS-PROVISION> 398 278
<INTEREST-EXPENSE> 9,625 7,261
<INCOME-PRETAX> 9,433 9,072
<INCOME-TAX> 4,236 3,812
<INCOME-CONTINUING> 5,197 5,260
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,111 5,296
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
