As filed with the Securities and Exchange Commission on
May 11, 1998
Registration No. 333-48881
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
AMENDMENT NO. 1
TO 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
_________________________
<PAGE 1>
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: [ ]
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 2
<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 MAY __, 1998
PROSPECTUS
4,392,000 Shares
YUASA, INC.
[LOGO]
Class A Common Stock
____________________________
Of the 4,392,000 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"), 3,300,000 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. 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. See
"Description of Capital Stock -- Conversion."
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 $14.00 and $16.00 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."
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
<PAGE 3> 1,092,000 (13.5%) are owned by the Selling Stockholder.
Immediately after the completion of the Offering (assuming the
Class A shares offered by the Company are sold at $15 per
share -- the midpoint on the estimated range of public offering
prices and 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 approximately 61% of the outstanding
shares of Common Stock and approximately 76% of the combined
voting power of the outstanding shares of Common Stock. See
"Principal and Selling Stockholders."
The Company has applied 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 over-allotments, 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."
____________________________
<PAGE 4>
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 June, 1998.
_____________________________
Nomura Securities International, Inc. Salomon Smith Barney
_____________________________
The date of this Prospectus is June __, 1998.
PAGE 5
<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 6
<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
<PAGE 7> 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 8
<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, (iii) assumes that the
Class A Common Stock offered by the Company is sold at $15 per
share -- the midpoint of the estimated offering prices, and
(iv) assumes that the Underwriters' over-allotment 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 believes that it 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
<PAGE 9> 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 batteries. 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 1994 through fiscal 1998 the Company's net
sales grew from $296.4 million to $396.3 million, while net
earnings decreased from $6.3 million in fiscal 1994 to
$0.6 million in fiscal 1995. The reduction in fiscal 1995 net
earnings was due primarily to a sudden increase in the cost of
raw materials and to manufacturing inefficiencies of 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 manufacturing
operations. The Company's gross profit margin increased from
17.6% to 22.2% between fiscal 1995 and fiscal 1998 and net
earnings increased from $0.6 million in fiscal 1995 to
$8.3 million in fiscal 1998 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 believes it holds the leading market position
in both the motive power and small engine starting battery
markets 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
<PAGE 10> 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 markets 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 capability 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 in the
Americas. Yuasa Japan is one of the leading manufacturers of
lead acid batteries in the world.
<PAGE 11>
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: Focus on Telecommunications, UPS
and other High Growth 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 these growing and profitable
markets.
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 and other markets which may be
identified as offering rapid growth potential.
The Company also intends to focus its engineering and
manufacturing resources on products which have applications in
the telecommunications and UPS markets and other markets which
may be identified as offering rapid growth potential. 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 partnerships with them and by taking advantage of
technical assistance available 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 through 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
<PAGE 12> 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 to further
increase efficiency.
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 13
<PAGE>
The Offering
Class A Common Stock offered by
The Company: 3,300,000 shares(1)
Class A Common Stock offered by
The Selling Stockholder: 1,092,000 shares(2)
Common Stock to be outstanding
after the Offering: 4,392,000 shares of Class A
Common Stock(1)(3)(4)
7,000,000 shares of Class B
Common Stock(4)
11,392,000 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
(assuming that Class A Common
Stock offered by the Company
is sold at $15 per share --
the midpoint of the estimated
range of public offering
prices) approximately 61% of
all of the outstanding Common
Stock and 76% 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: The net proceeds received by
the Company will be used to
<PAGE 14> repay a portion of
the Company's indebtedness.
See "Use of Proceeds."
New York Stock Exchange Listing: The Company has applied
for listing of 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' over-allotment 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 620,000 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 15
<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 financial information for each of the
five years in the period ended March 31, 1998 has been derived
from the Company's historical financial statements, which have
been audited. The pro forma information is provided for
information purposes only and does not purport to be indicative
of the results which would actually have been attained had the
events reflected therein occurred on the dates indicated, or
which may be expected to occur in the future.
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 16
<PAGE>
<TABLE>
<CAPTION>
Years Ended March 31,
=========================================================
1994 1995 1996 1997 1998
====== ====== ====== ====== ======
(In thousands, except per share and average data)
<S> <C> <C> <C> <C> <C>
Consolidated Income
Statement Data:
Net sales......... $ 296,416 $ 328,678 $ 357,517 $ 357,526 $396,317
Gross profit...... $ 61,670 $ 57,698 $ 61,722 $ 72,147 $ 87,879
Operating
expenses....... $ 39,406 $ 42,744 $ 43,952 $ 48,991 $ 56,398
Operating
earnings......... $ 18,724 $ 11,600 $ 14,255 $ 19,527 $ 27,851
Earnings before
taxes........... $ 11,179 $ 1,277 $ 2,793 $ 9,347 $ 14,138
Net earnings...... $ 6,306 $ 616 $ 1,279 $ 5,111 $ 8,308
Net earnings per
share of Common
Stock (basic and
diluted)........ $ 0.78 $ 0.08 $ 0.16 $ 0.63 $ 1.03
Dividends per
share of Common
Stock........... $ 0.20 $ 0.28 $ 0.05 $ 0.15 $ 0.49
Weighted average
shares of
Common Stock
outstanding(2).. 8,092 8,092 8,092 8,092 8,092
Pro Forma Data:
Pro forma net
earnings per
share(1)(3).... $ 0.88
Pro Forma weighted
average shares of
Common Stock
outstanding(2)(3) 11,392
Other data:
Capital
expenditures... $ 16,199 $ 19,983 $ 17,078 $ 11,203 $ 18,951
Depreciation and
amortization... $ 11,493 $ 12,386 $ 15,000 $ 14,022 $ 14,882
Gross profit
margin......... 20.8% 17.6% 17.3% 20.2% 22.2%
Operating earnings
margin.......... 6.3% 3.5% 4.0% 5.5% 7.0%
<PAGE 17>
<CAPTION>
March 31, 1998
============================
Actual As Adjusted(4)
====== ==============
(in thousands)
Consolidated Balance Sheet Data:
<S> <C> <C>
Total assets...................... $217,032 $217,032
Total debt........................ $105,677 $ 60,677
Total shareholders' equity........ $ 39,997 $ 84,997
</TABLE>
PAGE 18
<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'
over-allotment 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 6.55% for fiscal 1998, which
approximates the actual interest rate on $45.0 million
of indebtedness to be repaid with the estimated net
proceeds from the Offering. Assumes that the Class A
Common Stock is sold at $15 per share -- the midpoint
on the estimated range of the public offering
price.
(2) Amounts exclude an aggregate of 620,000 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 3,300,000 shares
of Class A Common Stock offered hereby by the
Company.
(4) Adjusted to reflect the use of estimated net proceeds
of $45.0 million to the Company from the Offering to
repay outstanding indebtedness of $45.0 million at the
time of the Offering.
PAGE 19
<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
The Company is, at present, a majority owned subsidiary
of Yuasa Japan and after the Offering will remain as such.
Immediately upon 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 61% of the total outstanding shares of
Common Stock (approximately 59% if the Underwriters' over-
allotment 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 76% 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 to
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. "
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
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
<PAGE 20> of independent directors in the future. See "Related
Party Transactions. "
The economy of Asia is, at present, highly volatile.
Although the Company does not expect that such volatility, in
light of the Company's relationship with Yuasa Japan, will have
any material impact on the Company, no assurances can be given
that it will not.
Yuasa Japan is a Japanese corporation and certain of the
Company's directors and officers are citizens and residents of
Japan. Moreover, substantially all of the assets of Yuasa Japan
and such directors and officers are located outside of the United
States. These factors could adversely affect the ability of
investors to effect service of process upon Yuasa Japan or such
directors and officers within the United States or to enforce
against such parties in U.S. courts judgments obtained in U.S.
courts, including judgments predicated upon the federal
securities laws of the United States.
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
<PAGE 21> 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 Americas and although there is an agreement (the
"Yuasa Noncompete") in place which prevents Yuasa Japan from
competing with the Company in the Americas until three years
after such time as Yuasa Japan and its affiliates directly or
indirectly cease to own shares of the Company's capital stock
possessing at least 20% of the voting power of all classes of
capital stock, nothing precludes Yuasa Japan from competing with
the Company thereafter. 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."
<PAGE 22>
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.
Historically, the Company has experienced higher net
sales during the fourth quarter of the year, reflecting the
customary seasonal buying patterns of its customers. 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 7% of its net sales for
fiscal 1998 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 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,
foreign sales typically are made in local 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. 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
<PAGE 23> the joint venture or the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview -- Net Sales."
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 a
license and technical assistance agreement with Yuasa Japan (the
"Yuasa License and Technology Agreement"), which gives the
Company the right, among other things, to use certain trademarks,
patents and technical know-how of Yuasa Japan until 3 years (in
the case of certain trademarks) and 5 years (in the case of
certain patents and technical know-how) after such time as Yuasa
Japan and its affiliates directly or indirectly cease to own
shares of the Company's capital stock possessing at least 20% of
the voting power of all classes of capital stock, subject to
earlier termination should the Company fail to pay royalties due,
otherwise breach the agreement and fail to cure such breach, or
become bankrupt. Such termination 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
<PAGE 24> 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
<PAGE 25> 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 of its shares of 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 $9.36 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; Reliance on Dividends and Distributions
From Subsidiaries
The Company does not presently intend to declare or pay
cash dividends on its Common Stock after completion of the
Offering in the foreseeable future. As a holding company with no
significant assets (other than its investments in its
subsidiaries) or 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 26
<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
$45.0 million ($____ million if the Underwriters' over-allotment
option is exercised in full) after deducting the underwriting
discount and estimated offering expenses of $1.0 million. The
Company intends to use all of the estimated net proceeds to repay
$45.0 million of indebtedness. The aggregate weighted average
maturity of this indebtedness is approximately 1.25 years and the
weighted average annual interest rate of this indebtedness was
6.55% during fiscal 1998. Substantially all of this indebtedness
was incurred by the Company in connection with its 1991
acquisition of Exide's industrial battery division. (See
"Related Party Transactions - General").
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 in the foreseeable future. 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; Reliance on Dividends and Distributions
From Subsidiaries."
PAGE 27
<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 March 31, 1998 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 $15.00 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 MARCH 31, 1998
ACTUAL AS ADJUSTED
----------- -----------
(in thousands)
<S> <C> <C>
Short-term debt and current
portion of long-term debt $27,997 $27,997
======= =======
Long-term debt:
Loan Facilities $68,152 $23,152
Capital Leases 9,528 9,528
------- ------
Total long-term debt 77,680 32,680
------
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 4,392,000 shares outstanding
as adjusted(1)(2) -- 44
Class B Common Stock, $0.01 par value,
100,000,000 shares authorized;
8,092,000 shares issued and
outstanding and 7,000,000 shares
outstanding as adjusted(2) 81 70
Paid-in capital 16,324 61,291
Retained earnings 24,685 24,685
Additional minimum pension liability (968) (968)
Cumulative translation adjustment (125) (125)
------- -------
Total stockholders' equity 39,997 84,997
------- -------
Total capitalization $117,677 $117,677
======== ========
</TABLE>
<PAGE 28>
________________
(1) Actual and as adjusted amounts exclude an aggregate of
620,000 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 the Company of 3,300,000 shares of Class A Common
Stock in the Offering and the conversion of 1,092,000
shares of Class B Common Stock into Class A Common
stock upon the sale of all of such shares by the
Selling Stockholder in the Offering.
PAGE 29
<PAGE>
DILUTION
As of March 31, 1998, net tangible book value of the
Company's Common Stock before giving effect to the Offering was
$19.3 million, or approximately $2.39 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 March 31, 1998, other than to give
effect to the net proceeds from the issuance of 3,300,000 shares
of Class A Common Stock to be offered by the Company in the
Offering (assuming an initial public offering price of $15.00 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 in May, 1998, the
pro forma net tangible book value of the Company as of March 31,
1998 would have been $64.3 million, or approximately $5.64 per
share. This represents an immediate increase in net tangible
book value of $3.25 per share of Common Stock to existing
stockholders and an immediate dilution of approximately $9.36 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 $15.00
Net tangible book value per share before the Offering $2.39
Increase in net tangible book value per share attributable to
new investors $3.25
Pro forma net tangible book value per share after the Offering $ 5.64
Dilution per share to new investors $ 9.36
- -----------------
</TABLE>
The following table sets forth, as of March 31, 1998, the
number of shares of Common Stock purchased from the Company, the
total consideration paid to the Company and the average price per
share 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).
<PAGE 30>
<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price
Number Percent Amount Percent per Share
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........... 8,092,000 71.0% $16,405,000 24.9% $ 2.03
New investors(1)................... 3,300,000 29.0% 49,500,000 75.1% 15.00
--------- ----- ----------- ------ ------
Total...................... 11,392,000 100.0% $65,905,000 100.0% $ 5.79
========== ====== ========= ======= ======
</TABLE>
_______________
(1) Sales by the Selling Stockholder in the Offering will
reduce the number of shares held by existing
stockholders to 7,000,000 or approximately 61% of the
total number of shares of Common Stock outstanding
after the Offering, and will increase the number of
shares held by new investors to 4,392,000 or
approximately 39% of the total number of shares
outstanding after the Offering.
The foregoing table assumes no exercise of the
Underwriters' over-allotment 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 49,600
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 31
<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, 1998 and the
consolidated balance sheet data as of March 31, 1994, 1995, 1996,
1997 and 1998 have been derived from the Company's audited
consolidated financial statements. The pro forma information is
provided for information purposes only and does not purport to be
indicative of the results which would actually have been attained
had the events reflected therein occurred on the dates indicated
or which may be expected to occur in the future.
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.
<PAGE 32>
<TABLE>
<CAPTION>
Year Ended March 31,
========================================================
1994 1995 1996 1997 1998
======== ======== ======== ======== ========
(in thousands, except per share and average data)
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data:
Net sales $296,416 $328,678 $357,517 $357,526 $396,317
Cost of goods sold 234,746 270,980 295,795 285,379 308,438
-------- -------- -------- -------- --------
Gross profit 61,670 57,698 61,722 72,147 87,879
Operating expenses 39,406 42,744 43,952 48,991 56,398
Amortization expense 3,540 3,354 3,515 3,629 3,630
-------- -------- -------- -------- --------
Operating earnings 18,724 11,600 14,255 19,527 27,851
Interest expense 7,736 9,614 11,581 9,625 9,709
Loss on Investment - - - - 4,005
Other (earnings) expense, net (191) 709 (119) 555 (1)
-------- -------- -------- -------- --------
Earnings before taxes 11,179 1,277 2,793 9,347 14,138
Income taxes 4,873 661 1,514 4,236 5,830
-------- -------- -------- -------- --------
Net earnings $ 6,306 $ 616 $ 1,279 $ 5,111 $ 8,308
======== ======== ======== ======== ========
Net earnings per share of
Common Stock (basic and
diluted) $ 0.78 $ 0.08 $ 0.16 $ 0.63 $ 1.03
Dividends per share of
Common Stock $ 0.20 $ 0.28 $ 0.05 $ 0.15 $ 0.49
Weighted average shares of
Common Stock outstanding(2) 8,092 8,092 8,092 8,092 8,092
Pro Forma data:
Pro forma net earnings
per share(1)(3) $ 0.88
Pro forma weighted average shares
of Common Stock outstanding(2)(3) 11,392
Other data:
Capital expenditures $ 16,199 $ 19,983 $ 17,078 $ 11,203 $ 18,951
Depreciation and amortization $ 11,493 $ 12,386 $ 15,000 $ 14,022 $ 14,882
Gross profit margin 20.8% 17.6% 17.3% 20.2% 22.2%
Operating earnings margin 6.3% 3.5% 4.0% 5.5% 7.0%
<CAPTION>
As of March 31, March 31, 1998
1994 1995 1996 1997 Actual As Adjusted(4)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Total assets...................... $186,039 $209,136 $219,226 $219,519 $217,032 $217,032
Total debt........................ $107,283 $124,207 $129,121 $118,436 $105,677 $ 60,677
Total Shareholders' equity........ $ 33,671 $ 31,841 $ 32,262 $ 35,842 $ 39,997 $ 84,997
</TABLE>
___________________________
PAGE 33
<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' over-allotment 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 6.55% for fiscal 1998, which
approximates the actual interest rate on $45.0 million
of indebtedness to be repaid with the estimated net
proceeds from the Offering. Assumes that the Class A
Common Stock is sold at $15 per share -- the midpoint
on the estimated range of the public offering
price.
(2) Amounts exclude an aggregate of 570,400 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 3,300,000
shares of Class A Common Stock offered hereby by the
Company. Assumes that the Class A Common Stock offered
by the Company is sold at $15 per share -- the midpoint
on the estimated range of public offering prices.
(4) Adjusted to reflect the use of estimated net proceeds
of $45.0 million to the Company from the Offering to
repay outstanding indebtedness of $45.0 million at the
time of the Offering.
PAGE 34
<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 and the Consolidated Financial Statements of the Company
and the notes thereto included elsewhere in this Prospectus.
Overview
General
The Company believes that it 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
<PAGE 35> 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 derives 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 1998. 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
been increasing and are expected 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 the Company deriving increased net sales from
installation and maintenance services. 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 at a faster rate 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
profit margins. However, during periods of rapidly declining
lead prices, product selling prices have not fallen as rapidly,
resulting in a period of increased gross profit 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.
<PAGE 36>
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 and has resulted in improvement
in the Company's gross margin. Continuation of this program
should continue to reduce 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. Under these contracts, the Company is
committed at March 31, 1998 to purchase 17.5 million pounds of
lead for a total of $4.2 million. 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, and engineering 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.
<PAGE 37>
Provision For Income Taxes
The Company has experienced a significant decrease in its
effective tax rate from approximately 54% in fiscal 1996, to 45%
in fiscal 1997 and 42% in fiscal 1998. This 12% reduction since
1996 is primarily attributable to a 10% reduction in the
effective rate for non-deductible amortization expenses on
increasing levels of pre-tax income and a 2% reduction in
effective rate for state income taxes. The Company expects its
effective tax rate in fiscal 1999 to be approximately 40%.
Amortization Expense
The Company's amortization expense is primarily
attributable to identifiable intangible assets associated with
acquisitions made by the Company, and is amortized using the
straight-line method over estimated useful lives which range from
7 to 25 years.
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>
Years Ended March 31,
1996 1997 1998
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 82.7 79.8 77.8
Gross profit 17.3 20.2 22.2
Operating expenses 12.3 13.7 14.2
Amortization expense 1.0 1.0 .9
Operating earnings 4.0 5.5 7.0
Interest expense 3.2 2.7 2.4
Loss on investment (0.0) 0.0 1.0
Other (earnings) expense, net (0.0) 0.1 0.0
Earnings before taxes 0.8 2.6 3.6
Provision for income taxes 0.4 1.2 1.5
Net earnings 0.4% 1.4% 2.1%
===== ===== =====
</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.
<PAGE 38>
<TABLE>
<CAPTION>
Year Ended March 31,
1996 1997 1998
<S> <C> <C> <C>
Net sales 8.8% 0.0% 10.8%
Gross profit 7.0% 16.9% 21.8%
Operating earnings 22.9% 37.0% 42.6%
Earnings before taxes 118.7% 234.6% 51.3%
Net earnings 107.6% 299.6% 62.6%
</TABLE>
Fiscal 1998 versus Fiscal 1997
Net Sales. Net sales for fiscal 1998 were $396.3 million
compared to $357.5 million for fiscal 1997, an increase of 10.8%.
Virtually all of this growth resulted from increased unit volumes
in the Company's stationary and motive power lines. 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 fiscal 1998 was
$87.9 million compared to $72.1 million for fiscal 1997, an
increase of 21.8%. The gross profit margin increased
2.0 percentage points to 22.2% in fiscal 1998 compared to 20.2%
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 fiscal 1998
were $56.4 million compared to $49.0 million for fiscal 1997, an
increase of 15.1%. As a percentage of net sales, operating
expenses increased slightly to 14.2% in fiscal 1998 compared to
13.7% in fiscal 1997. This increase resulted principally from
increased selling costs from expanding sales, markets,
territories and locations, and continued start-up costs related
to the new Argentina joint venture.
Amortization Expense. The Company's amortization expense
was $3.6 million in fiscal 1998 and in fiscal 1997. Amortization
expense is mainly attributable to identifiable intangibles
associated with acquisitions made by the Company, and is
amortized using the straight-line method over estimated useful
lives which range from 7 to 25 years.
Operating Earnings. Operating earnings for fiscal 1998
were $27.9 million compared to $19.5 million for fiscal 1997, an
increase of 42.6%. This increase was primarily attributable to
overall unit volume growth, coupled with the improved gross
profit margin attributable to reduced material and manufacturing
costs.
<PAGE 39>
Interest Expense. Interest expense for fiscal 1998 was
$9.7 million, which increased slightly 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. During fiscal 1998, the Company
recognized $4.0 million in losses associated with its investment
in Tucker Telecommunications Company ("Tucker"). Such losses
consisted of the full write-off of the Company's investment in
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 $8.3 million for fiscal
1998 compared to $5.1 million for fiscal 1997, an increase of
$3.2 million or 62.6%. 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 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 $49.0 million compared to $44.0 million for fiscal 1996, an
increase of 11.4%. As a percentage of net sales, operating
expenses increased to 13.7% in fiscal 1997 from 12.3% 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.
<PAGE 40>
Amortization Expense. Amortization expense was
$3.6 million in fiscal 1997 and $3.5 million in fiscal 1998.
Amortization expense is mainly attributable to identifiable
intangibles associated with acquisitions made by the Company.
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.
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 $92.2 million (which
includes the current portion of long-term debt of $14.5 million)
at March 31, 1998. At March 31, 1998, total availability under
the Company's various revolving lines of credit totalled
$75.0 million, of which $13.5 million is outstanding.
Indebtedness under the revolving lines of credit, and certain of
the term debt facilities, in an aggregate outstanding principal
amount of $43.5 million bear interest at a floating rate.
Indebtedness under certain of the long-term debt facilities in an
aggregate outstanding principle amount of $62.2 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
fiscal 1998. As of March 31, 1998, $39.0 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.
<PAGE 41>
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 $40.0 million at March 31, 1998.
Net cash provided by operating activities for fiscal 1998
was $35.7 million compared to $27.5 million for fiscal 1997.
This $8.2 million increase was primarily attributable to
increased net earnings of $3.2 million and changes in working
capital of $3.3 million.
Net cash used in investing activities was $19.0 million
in 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 used in financing activities was $14.4 million
for fiscal 1998, which was primarily attributable to reductions
in short-term borrowings by $13.8 million. Net cash used in
financing activities for fiscal 1997 was $11.9 million as all
debt was reduced by $10.7 million and a $1.2 million dividend was
paid.
Capital expenditures, including capital lease
obligations, were $19.0 million for 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 uses its short term credit facilities,
including its revolving lines of credit to fund its working
<PAGE 42> capital requirements and to finance capital additions
on an interim basis until replaced with longer term
financing.
The Company has declared and intends to pay in May, 1998,
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 all of the estimated net
proceeds from the Offering to repay the Company's indebtedness.
See "Use of Proceeds."
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.
The Company has historically relied on indebtedness to
meet certain of its liquidity requirements and can be expected to
do so in the future in light of the growth contemplated by its
business strategy.
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. The Company was
committed under forward supply contracts, to purchase
17.5 million pounds of lead for a total purchase price of
$4.2 million dollars.
Inflation
There was no significant impact on the Company's
operations as a result of inflation during the three years ended
March 31, 1998.
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
<PAGE 43> 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 regarding 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. See "Risk Factors -- Cyclical Industry; Variations
in Quarterly Results." Historically, the Company has experienced
increased net sales during the fourth quarter of the year
reflecting the customary seasonal buying patterns of its
customers. As a result of this, 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 $105,417
Gross profit...................... $20,157 $22,205 $ 22,841 22,676
Net earnings ..................... $ 1,662 $ 2,992 $ 642 3,012
Net earnings per share (basic and
diluted)........................ $ 0.21 $ 0.37 $ 0.08 $ 0.37
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)............. $ (0.01) $ 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.
<PAGE 44> 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 pretax 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 45>
In March 1998, the AICPA issued SOP 98-1, Accounting For
the Costs of Computer Software Developed For or Obtained For
Internal-Use. The SOP is effective for the Company on April 1,
1999. The SOP will require the capitalization of certain costs
incurred after the date of adoption in connection with developing
or obtaining software for internal-use. The Company currently
capitalizes certain external costs and expenses all other costs
as incurred. The Company believes the SOP will not materially
effect the Company's earnings or financial position.
PAGE 46
<PAGE>
BUSINESS
General
The Company believes that it 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 1994 through fiscal 1998 the Company's net
sales grew from $296.4 million to $396.3 million, while net
earnings decreased from $6.3 million in fiscal 1994 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 22.2% between fiscal 1995 and fiscal 1998 and net
earnings increased from $0.6 million in fiscal 1995 to
$8.3 million in fiscal 1998 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 61% of all of the Company's
outstanding Common Stock and approximately 76% of the combined
voting power of the outstanding shares of Common Stock <PAGE 47>
(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 right to use the
"Yuasa" brand name, and from its right to receive technical
assistance from, and its right of 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 in 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, 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:
<PAGE 48>
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
capability 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 right to use the "Yuasa" brand name, and from
its right to receive technical assistance from, and its right of
<PAGE 49> 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 in 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 partnerships 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 through shorter lead times. The
<PAGE 50> 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
<PAGE 51> 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.
<PAGE 52>
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.
<PAGE 53>
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 <PAGE 54>
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,
approximately 40% of which was attributable to the Company's U.S.
operations and approximately 60% of which was attributable to the
Company's foreign operations. 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."
<PAGE 55>
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 fiscal 1998, fiscal 1997 and fiscal 1996, the
Company's engineering expenditures, including research and
development activities, were $7.6 million, $6.8 million and
<PAGE 56> $5.5 million, which include the Company's expenditures
for application engineering and product development. At
March 31, 1998, 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.
In addition, Yuasa Japan has entered into a license and
technology agreement, under which Yuasa Japan provides the
Company with exclusive access in the Americas to technical
assistance, and to new and emerging technologies, products and
product developments relating to the Company's core business.
See "Business -- Intellectual Property -- Licenses."
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
<PAGE 57> 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 and
although there are agreements currently in force which would
prevent Yuasa Japan from competing with the Company in the
Americas until such time as Yuasa Japan ceases to own shares of
the Company's capital stock possessing at least 20% of the voting
power of all classes of capital stock of the Company, if Yuasa
Japan were to divest itself of its interest in the Company below
these levels in the future, it could become a competitor of the
Company. See "Related Party Transactions," "Risk Factors --
Relationship with Principal Stockholder" and "Competition;
Industry Consolidated Pricing Pressures."
<PAGE 58>
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 1998, the Company consumed
approximately 151.9 million pounds of lead, which cost
approximately $49.8 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.
<PAGE 59>
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 the Yuasa License and
Technology Agreement, pursuant to which the Company has the
exclusive (subject to limited exceptions) right to manufacture
and sell certain types of products in a territory comprising all
of the Americas, using patents, processes, technical know-how and
other intellectual property of Yuasa Japan, and to manufacture
and sell any derivative products, improvements and developments.
In addition, the Company is granted the right to purchase the
technical know-how for certain new products developed by Yuasa
Japan, on such terms as the Company and Yuasa Japan may agree
from time to time. The Yuasa License and Technology Agreement
also gives the Company the exclusive (subject to limited
exceptions) right to use the name and trademark "Yuasa" and
certain related trademarks, logos and trade dress in connection
with the sale of such products in the Americas. In consideration
of these rights, the Company pays royalties to Yuasa Japan.
The Yuasa License and Technology Agreement could be
terminated by Yuasa Japan on certain defaults by the Company,
such as failure to pay royalties or insolvency of the Company,
and will terminate automatically on the third (3rd) anniversary
of the first date on which Yuasa Japan and its affiliates cease
<PAGE 60> to own shares of Common Stock of the Company possessing
the right to cast at least twenty percent (20%) of the total
votes entitled to be cast by holders of all Common Stock of all
classes. Following any such termination or revocation, however,
the Company's rights thereunder with respect to trademarks would
survive for three years, and with respect to patents and
technical know-how would survive for five years.
The Company's agreements with Yuasa Japan also include
the Yuasa Noncompete, in which Yuasa Japan agrees not to sell
(directly or through certain controlled affiliates) substantially
all types of products made and sold by the Company, throughout a
territory comprising all of the Americas, for a period ending on
the third anniversary of the first date on which Yuasa Japan and
its affiliates cease to own shares of Common Stock of the Company
possessing the right to cast at least twenty percent (20%) of the
total votes entitled to be cast by holders of all Common Stock of
all classes. Unlike the Yuasa License and Technical Assistance
Agreement, however, the Yuasa Japan Agreement is not by its terms
subject to earlier revocation or termination.
The termination, revocation or expiration of the Yuasa
License and Technical Assistance Agreement or the Yuasa
Noncompete, as applicable, could have a material adverse effect
on the Company's business, financial condition and results of
operations.
Royalty payments by the Company to Yuasa Japan under the
Yuasa License and Technology Agreement and other arrangements in
effect during prior periods amounted to $1.6 million for fiscal
1998, $1.4 million for fiscal 1997, and $1.2 million for fiscal
1996. See "Related Party Transactions -- Yuasa Japan."
Employees
At March 31, 1998, the Company had approximately 2,707
employees. Of these employees, approximately 1,970 were employed
in manufacturing (with 499 being covered by collective bargaining
agreements), 380 were employed in sales and marketing (including
branch operations), 251 were employed in service and installation
and 106 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 and Sumter, South Carolina plants are represented by labor
unions under collective bargaining agreements which expire in
January, 2001 and April, 2001, respectively.
<PAGE 61>
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.
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. The Company has
received an offer in settlement of the case by the EPA of
$8,000, which the Company intends to accept. Settlement with the
EPA will provide relief from joint and several liability and late
claims for contribution from other "PRPs." In the future, the
Company 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. 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
<PAGE 62> 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 63
<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
P. Michael Ehlerman ............ 59 Vice Chairman, Chief Executive Officer
and Director
John D. Craig .................. 46 President, Chief Operating Officer and
Director
Shuji Kawata ................... 60 Vice President-International and Director
Michael T. Philion ............. 46 Vice President-Finance, Chief Financial
Officer and Assistant Secretary
Hiroshi Horiuchi ............... 55 Vice President-Export and Secretary
Yasukazu Sakai ................. 66 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 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.
P. Michael Ehlerman has served as Vice Chairman and Chief
Executive Officer of the Company since April 1, 1998. Prior
thereto, he served as President of the Company and has been a
director since 1991, when the Company acquired Exide's industrial
battery division. 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 President and Chief Operating
Officer of the Company since April 1, 1998. Prior thereto, he
served as Executive Vice President of the Company since 1995. He
has been a director since 1996. Prior thereto, Mr. Craig was
Vice President - Operations of the Company since 1994 and Vice
President - Operations of Nordyne, Inc., a manufacturer of
heating and air conditioning equipment.
<PAGE 64>
Shuji Kawata has served as a director since 1991 and as
Vice Chairman between 1995 and March 31, 1998. 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 retire as an employee of Yuasa Japan and become Vice
President-International and a full time employee of the
Company.
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. 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.
Yasukazu Sakai has served as a director of the Company
and as Vice Chairman of the Company between 1991 and March 31,
1998. 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.
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
<PAGE 65> 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 upon completion
of the Offering. Upon such resignation, the Board of the Company
intends, as soon as practicable, to elect three as yet
unidentified independent 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 approximately 76% 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.
<PAGE 66>
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 salary and other
compensation earned with respect to fiscal 1998 and bonus earned
with respect to 1997 by the Company's Vice Chairman and CEO 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.
<PAGE 67>
<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 1998 $283,133 $100,800 $ 7,500
Vice Chairman and CEO
John D. Craig 1998 $194,950 $ 55,000 $ 7,500
President and COO
Michael T. Philion 1998 $155,575 $ 36,500 $ 7,500
Vice President-
Finance and CFO
Nicholas I. Magnani 1998 $158,257 $ 16,700 $ 7,500
Vice President-
Engineering and R&D
John Shea 1998 $145,646 $ 20,000 $ 7,282
Vice President-
Motive Power
_____________
</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 or 1998.
(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
<PAGE 68> 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
<PAGE 69> 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 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 (equal to 5% of the
estimated number of shares of the Company's Common Stock
outstanding upon completion of the Offering), 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"). Options and SARs 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 will,
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
the 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 on
or after 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
<PAGE 70> 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 Omnibus Stock 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.
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 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,
<PAGE 71> 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 Awards 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
fully vested and immediately exercisable. 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. Unless otherwise permitted by an Award
agreement and in accordance with applicable law, 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, nonqualified 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
John A. Shea 18,600 Nonqualified Stock Option March 31, 2008
</TABLE>
<PAGE 72>
The number of shares reserved for issuance under the plan
and the number of shares subject to options will be adjusted to
the extent that the number of shares reserved for issuance are
less than or exceed 5% of the shares of the Company's Common
Stock outstanding upon completion of the Offering.
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.
PAGE 73
<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 "Exide 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, including certain
European 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 compliance of
the non-compete agreements with Exide as they related to Europe
in order to permit Exide to acquire these European operations, in
exchange for a right of first refusal to acquire those operations
if Exide elects to sell them. Exide's obligations under the
Exide 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."
<PAGE 74>
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 1996, 1997 and 1998, respectively,
the Company purchased approximately 16.2 million, 5.4 million,
and 6.0 million pounds of lead from Exide, at prevailing market
prices. These purchases amounted to approximately $9.5 million,
$1.8 million, and $1.5 million, respectively, and accounted for
19.1%, 3.8%, and 3.9%, respectively, of the Company's lead
purchases during fiscal 1996, 1997 and 1998.
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
$1.3 million, $1.4 million and $1.2 million in fiscal 1996, 1997
and 1998, 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 1996 and 1997, the Company
also supplied Exide with EV batteries (used in golf cart
applications) built to Exide's specifications. Total sales to
Exide during fiscal 1996, 1997 and 1998 amounted to approximately
$20.0 million, $4.6 million and $3.8 million, respectively.
Total purchases of lead, certain other battery components
and other goods and services from Exide amounted to approximately
$10.8 million, $6.9 million and $4.4 million for fiscal 1996,
1997 and 1998, 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 May 1998. The
dividend will be in the aggregate amount of $2.3 million, of
which 13.5% will be paid to Exide.
<PAGE 75>
Yuasa Japan
Yuasa License and Technology Agreement. Yuasa Japan has
entered into the Yuasa License and Technology Agreement with the
Company, which gives the Company, among other things, exclusive
(subject to limited exceptions) licenses to use certain patents
and technology of Yuasa Japan, 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, together with payments under similar arrangements in
effect for prior periods, amounted to $1.6 million for fiscal
1998, $1.5 million for fiscal 1997, and $1.1 million for fiscal
1996. See "Business -- Intellectual Property -- Licenses."
The Yuasa License and Technology Agreement can be
terminated by Yuasa Japan on certain defaults by the Company,
such as failure to pay royalties or insolvency of the Company,
and will expire automatically on the third (3rd) anniversary of
the first date on which Yuasa Japan and its affiliates cease to
own shares of Common Stock of the Company possessing the right to
cast at least twenty percent (20%) of the total votes entitled to
be cast by holders of all Common Stock of all classes. Following
any such termination or revocation, however, the Company's rights
thereunder with respect to trademarks would survive for three
years, and with respect to patents and technical know-how would
survive for five years.
The Company's agreements with Yuasa Japan also include
the Yuasa Noncompete, in which Yuasa Japan agrees not to sell
(directly or through certain controlled affiliates) substantially
all types of products made and sold by the Company, throughout a
territory comprising all of the Americas, for a period ending on
the third anniversary of the first date on which Yuasa Japan and
its affiliates cease to own shares of Common Stock of the Company
possessing the right to cast at least twenty percent (20%) of the
total votes entitled to be cast by holders of all Common Stock of
all classes. Unlike the Yuasa License and Technical Assistance
Agreement, however, the Yuasa Japan Agreement is not by its terms
subject to earlier revocation or termination.
The termination, revocation or expiration of the Yuasa
License and Technical Assistance Agreement or the Yuasa
Noncompete, as applicable, could have a material adverse effect
on the Company's business, financial condition and results of
operations. 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
<PAGE 76> executives and other personnel at meetings of directors
and management, and visits to the Company's facilities. See
"Principal and Selling Stockholders."
During fiscal 1996, 1997, and 1998 the Company purchased
approximately $20.6 million, $15.0 million, and $17.9 million,
respectively, of finished batteries, parts and accessories from
Yuasa Japan and its affiliates. During fiscal 1996, 1997, and
1998, the Company sold approximately $10.0 million, $6.0 million,
and $7.8 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 May, 1998. The
dividend will be in the aggregate amount of $2.3 million, of
which 86.5% will be paid to Yuasa Japan.
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 31, 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.
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 3,300,000 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.
<PAGE 77>
<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)(5) 7,000,000 86.5% 14,000,000 86.5% 7,000,000 61% 14,000,000 76%
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) As of the date of the Prospectus, 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 11,392,000
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' over-allotment
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 approximately 76% 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.
(5) Yuasa Japan is a Japanese public company. As of
March 31, 1998, there were no holders of 5% or more of
its common stock, except Yuasa Trading Co., Ltd.
(7.1%), Mitsui Mutual Life Insurance, Co. (6.3%), and
The Mitsui Trust and Banking Co., Ltd. (5.4%), each of
which is a Japanese publicly held company.
PAGE 78
<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 61% of the shares of Common
Stock of the Company outstanding and approximately 76% 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
<PAGE 79> 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 Class B Common Stock represents
less than 33.4% 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
<PAGE 80> (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
<PAGE 81> 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,
<PAGE 82> 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). <PAGE 83>
Transfer Agent and Registrar
The transfer agent and registrar for the Class A Common
Stock and the Class B Common Stock is American Stock Transfer &
Trust Company.
PAGE 84
<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
<PAGE 85> 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
<PAGE 86> 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. <PAGE 87>
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 and financial
statement schedule of Yuasa, Inc. at March 31, 1998, and for the
year then ended, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young, LLP, independent
auditors, and at March 31, 1997, and for the two years ended
March 31, 1997 and March 31, 1996, by Price Waterhouse LLP,
independent accountants, as set forth in their respective reports
thereon appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firms as
experts in accounting and auditing. In connection with engaging
Price Waterhouse LLP to provide its consent to be named as an
expert and to include its report in this Prospectus, in
accordance with its firm's general practice, Price Waterhouse LLP
requested and the Company agreed, to indemnify Price Waterhouse
LLP for the payment of solely the legal costs and expenses that
Price Waterhouse LLP might incur in its successful defense of a
legal action or proceeding that arises as a result of the consent
of Price Waterhouse LLP to the incorporation of its audit report
on the Company's 1997 and 1996 financial statements in the
Registration Statement. With respect to such indemnification,
legal costs and expenses must be actually and reasonably incurred
by Price Waterhouse LLP in connection with the defense or
settlement of such action or proceeding and so long as Price
Waterhouse LLP acted in good faith and in a manner in or not
opposed to the best interests of the Company, except that no
indemnification shall be made in respect to any claim, issue or
matter as to which Price Waterhouse LLP shall have been
determined to be liable to the Company or for which Price
Waterhouse LLP was unsuccessful in its defense. A successful
defense in this context would be one in which Price Waterhouse
LLP (or any of its members) is determined to have been neither
culpable nor obligated to pay any part of the plaintiff's damages
with respect to any such action or proceeding.
<PAGE 88>
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 two 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, 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, 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 89
<PAGE>
YUASA, INC.
INDEX TO FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Reports of Independent Accountants F-
2
F-3
Consolidated Balance Sheets at March 31, 1997 and 1998
F-4
Consolidated Statements of Income for the Years Ended
March 31, 1996, 1997 and 1998
F-5
Consolidated Statements of Changes in Shareholders'
Equity for the Years Ended March 31, 1996, 1997
and 1998
F-6
Consolidated Statements of Cash Flows for the Years
Ended March 31, 1996, 1997 and 1998
F-7
Notes to the Consolidated Financial Statements
F-8
PAGE F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Yuasa, Inc.
We have audited the accompanying consolidated balance
sheet of Yuasa, Inc. as of March 31, 1998, and the related
consolidated statements of income, changes in shareholders'
equity and cash flows for the fiscal year ended March 31, 1998.
Our audit also included the financial statement schedule (as it
pertains to fiscal 1998) listed in the Index at Item 16(b).
These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards 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. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of Yuasa, Inc. at March 31, 1998,
and the consolidated results of its operations and its cash flows
for the fiscal year ended March 31, 1998, in conformity with
generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic fiscal 1998 financial statements taken as a
whole, presents fairly in all material respects the information
set forth therein.
Ernst & Young LLP
May 6, 1998
Harrisburg, Pennsylvania
PAGE F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Yuasa, Inc.
In our opinion, the accompanying consolidated balance sheet
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 the results of
their operations and cash flows for the years ended March 31,
1997 and March 31, 1996, 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 16,
which is as of March 26, 1998
PAGE F-3
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Balance Sheets
(in thousands, except per share data)
March 31, March 31,
1997 1998
Assets
<S> <C> <C>
Current assets
Cash $ 4,965 $ 7,311
Accounts receivable, less
allowance for doubtful accounts
of $811 for 1997 and $921 for 1998 40,243 31,803
Inventories 60,055 63,261
Deferred taxes 2,181 1,978
Prepaid expenses and other current assets 6,171 4,388
Total current assets 113,615 108,741
Property, plant and equipment, net 77,481 83,250
Intangible assets, net 24,338 20,695
Deferred taxes 2,903 3,551
Other 1,182 795
Total assets $ 219,519 $ 217,032
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Short-term debt and current portion of
long-term liabilities $ 36,225 $ 27,997
Accounts payable 32,622 34,474
Dividends payable - 2,315
Accrued expenses 30,037 32,510
Total current liabilities 98,884 97,296
Long-term liabilities
Long-term debt 72,294 68,152
Capital lease obligations 9,917 9,528
Other 2,582 2,059
Total liabilities 183,677 177,035
Commitments and contingencies
Shareholders' equity
Preferred stock, $0.01 par value,
50,000 shares authorized, no shares
issued and outstanding - -
Class A common stock, $0.01 par value,
100,000 authorized shares; no shares
issued and outstanding - -
Class B common stock, $0.01 par value,
100,000 shares authorized, 8,092 shares
issued and outstanding 81 81
Paid-in capital 16,324 16,324
Retained earnings 20,372 24,685
Cumulative translation adjustment (108) (125)
Minimum pension liability (827) (968)
Total shareholders' equity 35,842 39,997
Total liabilities and shareholders' equity $ 219,519 $ 217,032
========== =========
</TABLE>
The accompanying notes are an integral part of these
financial statements. <PAGE F-4>
PAGE F-5
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Statements of Income
(in thousands, except per share data)
Years Ended March 31,
1996 1997 1998
<S> <C> <C> <C>
Net sales $357,517 $357,526 $396,317
Cost of goods sold 295,795 285,379 308,438
Gross profit 61,722 72,147 87,879
Operating expenses 43,952 48,991 56,398
Amortization expense 3,515 3,629 3,630
Operating earnings 14,255 19,527 27,851
Interest expense 11,581 9,625 9,709
Loss on investment - - 4,005
Other expense (earnings) (119) 555 (1)
Earnings before taxes 2,793 9,347 14,138
Income taxes 1,514 4,236 5,830
Net earnings $ 1,279 $ 5,111 $ 8,308
======== ======== ========
Basic and diluted earnings per share $ .16 $ .63 $ 1.03
======== ======== ========
Weighted average shares of
Common Stock outstanding 8,092 8,092 8,092
======== ======== =======
Dividends per share $ .05 $ .15 $ .49
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
PAGE F-6
<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, 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
Minimum pension (141) (141)
Net earnings 8,308 8,308
Dividends (3,995) (3,995)
Cumulative translation
adjustment (17) (17)
Balance at March 31,
1998 $ - $ - $ 81 $16,324 $24,685 $ (125) $ (968) $39,997
======= ====== ===== ======= ======= ======== ====== =======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
PAGE F-7
<PAGE>
<TABLE>
<CAPTION>
YUASA, INC.
Consolidated Statements of Cash Flows
(in thousands)
Years Ended March 31,
1996 1997 1998
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,279 $ 5,111 $ 8,308
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization 15,000 14,022 14,882
Provision for doubtful accounts 38 398 366
Provision for deferred taxes (1,978) (257) (445)
Loss on sale of subsidiary 127 -
Profit on sale-leaseback of machinery
and equipment (267) (327) (327)
Loss on retirement and write-downs of
property, plant and equipment 56 468 30
Loss on investment - - 1,450
Changes in assets and liabilities, net of
acquisitions and divestitures:
(Increase) decrease in accounts
receivable (3,526) (1,903) 8,074
(Increase) decrease in inventories (4,161) 5,768 (3,206)
(Increase) decrease in prepaid expenses
and other current assets (764) (2,599) 1,783
(Increase) decrease in other assets (157) 2,475 (997)
Increase in accounts payable 116 4,454 801
Increase in accrued expenses 5,126 217 5,217
Decrease in other liabilities (1,255) (278) (199)
Net cash provided by operating activities 9,634 27,549 35,737
Cash flows from investing activities:
Capital expenditures (17,078) (11,203) (18,951)
Investments in subsidiaries and affiliates (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 15 145 -
Net cash used in investing activities (12,442) (14,287) (18,951)
Cash flows from financing activities:
Net decrease in short-term debt (18,005) ( 3,395) (13,835)
Proceeds from issuance of long-term debt 30,000 1,760 10,000
Repayments of long-term debt ( 6,000) ( 8,033) (8,133)
Repayments of capital lease obligations ( 1,078) ( 1,016) (792)
Dividends paid ( 400) ( 1,200) (1,680)
Net cash (used in) provided by
financing activities 4,517 (11,884) (14,440)
Net increase in cash 1,709 1,378 2,346
Cash beginning of year 1,878 3,587 4,965
Cash, end of year $ 3,587 $ 4,965 $ 7,311
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
PAGE F-8
<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.
Revenue and Warranty Expense Recognition
Sales are recorded upon shipment of products and as
services are rendered. 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 $11,074, $10,044 and $11,164
for fiscal years 1996, 1997 and 1998, respectively.
Maintenance and repairs are expensed as incurred. Interest
on capital projects is capitalized during the construction
period and amounted to $523, $688 and $431 in fiscal 1996,
1997 and 1998, respectively. Gains and losses from
dispositions or retirements of property, plant and equipment
are recognized currently.
<PAGE F-9>
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.
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 shareholders' equity.
<PAGE F-10>
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 pretax 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 a qualifying special-purpose
entity 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. As of March 31, 1997 and 1998, a total of
$30,000 and $40,000, respectively, 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, $1,907 in
fiscal 1997 and $1,858 in fiscal 1998.
<PAGE F-11>
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 that the 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.
In March 1998, the AICPA issued SOP 98-1, Accounting For
the Costs of Computer Software Developed For or Obtained For
Internal-Use. The SOP is effective for the Company on
April 1, 1999. The SOP will require the capitalization of
certain costs incurred after the date of adoption in
connection with developing or obtaining software for
internal-use. The Company currently capitalizes certain
external costs and expenses all other costs as incurred.
The Company believes the SOP will not materially effect the
Company's earnings or financial position.
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.
<PAGE F-12>
2. Business Combinations:
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,
1997 1998
<S> <C> <C>
Raw materials $10,650 $ 9,657
Work-in-process 12,083 13,402
Finished goods 37,322 40,202
$60,055 $63,261
======= =======
</TABLE>
Inventory reserves for obsolescence and other estimated
losses were $625 and $725 at March 31, 1997 and March 31,
1998, respectively.
PAGE F-13
<PAGE>
4. Property, Plant and Equipment:
Property, plant and equipment consists of:
<TABLE>
<caption
March 31,
1997 1998
<S> <C> <C>
Land $ 6,371 $ 6,378
Buildings and improvements 42,760 43,588
Machinery and equipment 74,632 83,408
Construction in progress 6,260 13,543
130,023 146,917
Less: Accumulated depreciation
and amortization (52,542) (63,667)
Net property, plant and equipment $77,481 $83,250
======= =======
</TABLE>
5. Intangible Assets:
Intangible assets consist of:
<TABLE>
<CAPTION>
March 31,
1997 1998
<S> <C> <C>
Non-compete agreements $21,254 $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
44,263 44,263
Less: accumulated amortization (19,925) (23,568)
Intangible assets $24,338 $20,695
======= =======
</TABLE>
<PAGE F-14>
6. Accrued Expenses
Accrued expenses consist of:
<TABLE>
<CAPTION>
March 31,
1997 1998
<S> <C> <C>
Product warranty reserve $ 4,951 $ 5,397
Payroll and related benefits 11,873 12,173
Interest 1,233 1,256
Other 11,980 13,684
Accrued Expenses $30,037 $32,510
======= =======
</TABLE>
7. Debt:
Short-Term Debt
Short-term debt consists primarily of borrowings
associated with revolving bank lines of credit. The Company
had $27,300 and $13,468 in borrowings under lines of credit
and $70,700 and $61,532 in available but unused lines of
credit with banks at March 31, 1997 and 1998, 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% (weighted average of 5.9% and 6.2% at March 31, 1997
and 1998, respectively).
Long-Term Debt
<TABLE>
<CAPTION>
March 31,
1997 1998
<S> <C> <C>
Unsecured loan payable in a lump-sum
due December 10, 1998, bearing interest
at 7.90% fixed per annum. $30,000 $30,000
Unsecured loan payable in semi-annual
installments from January 10,
1995 through July 10, 1999,
bearing interest at 7.37% fixed per annum. 15,000 9,000
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. 3,800 1,900
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 <PAGE F-15>
interest in the Company's corporate headquarters. 1,627 1,392
Unsecured 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 6.25% at March 31, 1998). 10,000 10,000
Unsecured 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 6.25% at March 31, 1998). 20,000 20,000
Unsecured loan payable in 20 quarterly
installments of $500 from
July 1, 2001 through April 1, 2006
bearing interest at a fixed rate of
6.43%. - 10,000
80,427 82,292
Less: Current Portion 8,133 14,140
$72,294 $68,152
======= =======
</TABLE>
The Company paid $11,842, $9,985 and $10,075 for interest
during fiscal 1996, 1997 and 1998 respectively. Aggregate
maturities of long-term debt in each of the five years after
March 31, 1998 are as follows:
1999 $14,140
2000 9,248
2001 6,255
2002 7,763
2003 8,271
Thereafter 6,615
$52,292
=======
Excluded from above is the $30,000 loan payable due
December 10, 1998. The Company has the ability and intent
to enter into a financing agreement with a bank to refinance
the loan on a long-term basis. Repayment terms shall be
determined in November 1998; however, under no circumstances
will repayment be required prior to July 1, 1999.
Yuasa Corporation has guaranteed $39,000 of the Company's
outstanding long-term debt.
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,
<PAGE F-16> 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 $40.0 million at
March 31, 1998.
As of March 31, 1998, under arrangements with certain
banks, the Company had $2,663 of standby letters of credit
outstanding.
8. Loss on Investment:
During the year ended March 31, 1998, the Company
recognized $4,005 in losses associated with its investment
in Tucker Telecommunications Company (Tucker). Such losses
consisted primarily of the cost of settling certain
guarantee obligations of Tucker related to the closing of
its business during the year and the write-off of all the
Company's investment.
9. Income Taxes:
Earnings before income taxes consists of the
following:
<TABLE>
<CAPTION>
Year Ended March 31,
1996 1997 1998
<S> <C> <C> <C>
U.S. operations $1,837 $8,715 $13,652
Foreign operations 956 632 486
$2,793 $9,347 $14,138
====== ====== =======
</TABLE>
PAGE F-17
<PAGE>
Income tax expense (benefit) is comprised of the
following:
<TABLE>
<CAPTION>
Years Ended March 31,
1996 1997 1998
<S> <C> <C> <C>
Current:
Federal $ 2,435 $4,075 $5,748
State 1,057 364 538
Foreign - 54 (11)
Total current 3,492 4,493 6,275
Deferred:
Federal $(1,831) $ (235) $ (424)
State (157) (22) (21)
Foreign 10 - -
Total deferred (1,978) (257) (445)
Income tax expense $ 1,514 $4,236 $5,830
======= ====== ======
</TABLE>
Income taxes paid by the Company for the years ended
March 31, 1996, 1997 and 1998 were $2,930, $3,454 and
$3,618, 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,
1997 1998
<S> <C> <C>
Deferred tax assets:
Accounts receivable $ 233 $ -
Inventories 766 900
Intangibles, principally due to
differences in amortization 1,158 1,309
Deferred gain 581 468
Net operating loss carryforwards 446 379
Accrued liabilities and other items 4,876 5,211
Gross deferred tax assets 8,060 8,267
Valuation allowance (252) (185)
Net deferred tax assets 7,808 8,082
Deferred tax liabilities:
Accounts receivable 525
Intangibles, principally due to
differences in amortization 189 118
Plant and equipment, principally due
to differences in depreciation 1,532 1,906
Prepaid expenses and other items 1,003 4
Gross deferred tax liabilities 2,724 2,553
Net deferred tax asset $5,084 $5,529
====== ======
<PAGE F-18>
</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,
1996 1997 1998
<S> <C> <C> <C>
U.S. statutory income taxes (at 35%) $ 978 $3,271 $4,948
Increase (decrease) resulting from:
State income taxes, net of federal
effect 142 229 336
Non-deductible intangible amortization
and other 330 263 357
Other 64 473 189
$1,514 $4,236 $5,830
====== ====== ======
</TABLE>
At March 31, 1998, the Company has not made provision for
U.S. federal and state income taxes on approximately $127 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.
10. 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.
<PAGE F-19>
Net pension cost for the defined benefit plans of the
Company includes the following components:
<TABLE>
<CAPTION>
Years Ended March 31,
1996 1997 1998
<S> <C> <C> <C>
Service cost $323 $401 $520
Interest cost 171 257 314
Actual loss (return) plan assets (263) (227) (717)
Net amortization and deferrals 140 104 522
Net pension cost $371 $535 $639
==== ==== ====
</TABLE>
The funded status of the defined benefit plans of the
Company is as follows:
<TABLE>
<CAPTION>
March 31,
1997 1998
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $(3,579) $(4,910)
======= =======
Accumulated benefit obligation $(3,889) $(5,313)
======= =======
Actuarial present value of
projected benefit obligation $(3,889) $(5,313)
Plan assets at fair value 2,894 4,196
Plan assets less projected
benefit obligation (995) (1,117)
Unrecognized prior service cost 58 125
Unrecognized net loss 1,345 1,621
Additional minimum liability (1,403) (1,746)
Accrued pension cost $ (995) $(1,117)
======= =======
</TABLE>
The projected benefit obligation (PBO) was determined
using a discount rate of 7.75% during fiscal 1997 and 7.0%
during fiscal 1998. The PBO increased mainly due to a
change in the actuarial assumptions, principally the
reduction in the discount rate. The assumed long-term rate
of return on plan assets was 9% in fiscal 1996, 1997 and
1998.
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
<PAGE F-20> 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. During fiscal 1998, 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 1998, 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 1996, 1997 and 1998 were $1,269, $1,167 and
$1,270, 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 1996, 1997 and 1998 were
$69, $122 and $116, respectively.
11. 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.
The following is an analysis of the leased property under
capital leases by major classes:
<TABLE>
<CAPTION>
March 31,
1997 1998
<S> <C> <C>
Classes of property
Land $ 232 $ 232
Building 4,474 4,474
Machinery and equipment 11,463 11,463
16,169 16,169
Less: Accumulated depreciation (13,373) (13,891)
$ 2,796 $ 2,278
======= =======
<PAGE F-21>
</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, 1998 are as follows:
<TABLE>
<CAPTION>
Lease Type
Capital Operating
<S> <C> <C>
1999 $ 807 $ 4,049
2000 430 3,830
2001 9,688 2,268
2002 - 132
Thereafter - 4,488
Total minimum payments $10,925 $14,767
=======
Less: Interest at rates ranging
from 4.0% to 9.7% 1,008
Present value of net minimum
lease payments 9,917
Less: Current portion 389
Long-term portion $ 9,528
=======
</TABLE>
Operating lease rental expense was $6,489, $6,786, and
$7,431 for fiscal 1996, 1997, and 1998 respectively.
Certain operating lease agreements contain renewal or
purchase options and/or escalation clauses.
<PAGE F-22>
12. 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,
1996 1997 1998 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Company
Exide(1) $10,752 $ 6,888 $ 4,431 $19,965 $ 4,633 $ 3,793
Yuasa Corporation(2) 20,597 15,005 11,622 10,010 6,000 7,767
$31,349 $21,893 $16,053 $29,975 $10,633 $11,560
======= ======= ======= ======= ======= =======
</TABLE>
The following balances with related parties are outstanding
as of:
<TABLE>
<CAPTION>
Accounts Payable Accounts Receivable
March 31, March 31,
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Company
Exide(1) $ 702 $ 280 $1,053 $1,588
Yuasa Corporation(2) 480 511 969 1,450
$1,182 $ 791 $2,022 $3,038
====== ====== ====== ======
</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.
<PAGE F-23> Transactions between the Company and Yuasa
Corporation and affiliates approximate market prices.
The Company incurred royalty expenses from Yuasa
Corporation related to sales of motorcycle and small
stationary batteries. Royalty expenses for fiscal 1996,
1997 and 1998 were $1,069, $1,497 and $1,601, respectively.
Royalties payable at March 31, 1997 and 1998 were $485 and
$447, respectively, which are included in accrued
expenses.
Additionally, the Company incurred expenses from Yuasa
Corporation of approximately $250 per year for fiscal 1996,
1997, and 1998, related to the reimbursement of Yuasa
Corporation out-of-pocket expenses associated with services
provided to the Company.
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 31, 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.
13. 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.
<PAGE F-24> Under these contracts, the Company was
committed at March 31, 1998 to purchase 17.5 million pounds
of lead for a total purchase price of $4,227.
14. Concentration of Credit Risk
Financial instruments which subject the Company to
potential concentration of credit risk consist principally
of trade accounts and notes receivable 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 letters of
credit, in certain circumstances.
15. Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(Dollars in Thousands)
<S> <C> <C> <C> <C>
1998
Net Sales $ 94,677 $ 91,795 $104,428 $105,417
Gross Profit $ 20,157 $ 22,205 $ 22,841 $ 22,676
Net Earnings $ 1,662 $ 2,992 $ 642 $ 3,012
Net Earnings per
share (basic
and diluted) $ .21 $ .37 $ .08 $ .37
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) $ .01 $ .11 $ .10 $ .41
</TABLE>
The results of operations for the third quarter of 1998 reflect a
$4.0 million loss on its investment in Tucker. See Note 8.
16. 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
<PAGE F-25> 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.
17. 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.
18. Stock Options
In connection with the planned initial public offering,
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.
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.
PAGE F-26
<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 F-27
<PAGE>
Shares
[LOGO]
YUASA, Inc.
Class A Common Stock
___________________________
PROSPECTUS
___________________________
Nomura Securities International, Inc.
Salomon Smith Barney
, 1998
PAGE F-28
<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.
<PAGE 1>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
1.1 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 License and Technical Assistance Agreement dated
__________, 1998 between Yuasa, Inc. and Yuasa
Corporation (Japan).*
10.4 Agreement Not to Compete dated __________, 1998
between Yuasa, Inc. and Yuasa Corporation
(Japan).*
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).*
23.3 Consent of Ernst & Young LLP.
24. Power of Attorney (contained as part of signature
page).**
27.1 Financial Data Schedule.
______________________________
* To be filed by amendment.
** Previously filed.
(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
<PAGE 2> 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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under
the Securities Act of 1933, the information omitted from the form
of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
PAGE 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Reading,
Commonwealth of Pennsylvania, on May 11, 1998.
YUASA, INC.
By /s/ P. Michael Ehlerman*
P. Michael Ehlerman, President
Pursuant to the requirements of the Securities Act of
1933, this Amendment No. 1 to Registration Statement has been
signed by the following persons in the capacities and on the date
indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Teruhisa Yuasa* Chairman of the Board; May 11, 1998
Teruhisa Yuasa Director
/s/ P. Michael Ehlerman* Vice Chairman and CEO; May 11, 1998
P. Michael Ehlerman, individually Director (Principal
and as attorney in fact Executive Officer)
/s/ Michael T. Philion Vice President - May 11, 1998
Michael T. Philion Finance, CFO (Principal
Financial Officer)
/s/ Raymond J. Grzybowski* Controller (Principal May 11, 1998
Raymond J. Grzybowski Accounting Officer)
/s/ John D. Craig* President and Chief May 11, 1998
John D. Craig Operating Officer;
Director
/s/ Hiroshi Horiuchi* Vice President - May 11, 1998
Hiroshi Horiuchi Export and Secretary;
Director
/s/ Arthur M. Hawkins* Director May 11, 1998
Arthur M. Hawkins
/s/ Yasukazu Sakai* Director May 11, 1998
Yasukazu Sakai
/s/ Shuji Kawata* Vice President- May 11, 1998
Shuji Kawata International; Director <PAGE 4>
/s/ James Kanda* Director May 11, 1998
James Kanda
/s/ Raymond J. Kenny* Director May 11, 1998
Raymond J. Kenny
</TABLE>
*By /s/ Michael T. Philion
Michael T. Philion
Attorney-IN-FACT
PAGE 5
<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 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 6
<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, 1998:
Allowance for doubtful
accounts ................... 811 366 256 921
Allowance for inventory
losses ..................... 625 1,750 1,650 725
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
</TABLE>
<PAGE 7>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part
of Amendment No. 1 to the Registration Statement on Form S-1 of
our report dated May 27, 1997, except for Note 16, which is as of
March 26, 1998, relating to the consolidated financial statements
of Yuasa, Inc., which appears in such Prospectus. We also
consent to the application of such report to the Financial
Statement Schedule for the two years ended March 31, 1997, listed
under Item 16(b) of this Registration Statement when the schedule
is read in conjunction with the financial statements referred to
in our report. The audits referred to in such report also
included this schedule. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Philadelphia, PA
May 8, 1998
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption
"Experts" and to the use of our report dated May 6, 1998, in
Amendment No. 1 to the Registration Statement (Form S-1 No. 333-
48881) and related Prospectus of Yuasa, Inc. for the registration
of 4,392,000 shares of its common stock.
/s/ Ernst & Young LLP
Harrisburg, Pennsylvania
May 6, 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 YEARS ENDED MARCH
31, 1997 AND MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1998
<PERIOD-START> APR-01-1996 APR-01-1997
<PERIOD-END> MAR-31-1997 MAR-31-1998
<CASH> 4,965 7,311
<SECURITIES> 0 0
<RECEIVABLES> 41,054 32,724
<ALLOWANCES> 811 921
<INVENTORY> 60,055 63,261
<CURRENT-ASSETS> 113,615 108,741
<PP&E> 130,023 146,917
<DEPRECIATION> 52,542 63,661
<TOTAL-ASSETS> 219,519 217,032
<CURRENT-LIABILITIES> 98,884 97,296
<BONDS> 0 0
0 0
0 0
<COMMON> 81 81
<OTHER-SE> 35,761 39,916
<TOTAL-LIABILITY-AND-EQUITY> 219,519 217,032
<SALES> 357,526 396,317
<TOTAL-REVENUES> 357,526 396,317
<CGS> 285,379 308,438
<TOTAL-COSTS> 285,379 308,438
<OTHER-EXPENSES> 52,620 60,028
<LOSS-PROVISION> 398 366
<INTEREST-EXPENSE> 9,625 9,709
<INCOME-PRETAX> 9,347 14,138
<INCOME-TAX> 4,236 5,830
<INCOME-CONTINUING> 5,111 8,308
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,111 8,308
<EPS-PRIMARY> .63 1.03
<EPS-DILUTED> .63 1.03
</TABLE>
