As filed with the Securities and Exchange Commission on December 15, 2023.

Registration No. 333-257667

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 6 to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Clarios International Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware		3714		86-3573574
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

5757 N Green Bay Avenue

Florist Tower Glendale, Wisconsin, 53209-4408 (414) 214-6500

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

 

Claudio Morfe Chief Legal Officer and Corporate Secretary Clarios International Inc. 5757 N Green Bay Avenue Florist Tower Glendale, Wisconsin, 53209-4408 (414) 214-6500

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

 

Copies to:

 

Michael Kaplan Marcel Fausten Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 (212) 450-4000		David Lopez Helena Grannis Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, New York 10006 (212) 225-2000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

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 of 1933, 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.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☐
				Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

 

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 the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

EXPLANATORY NOTE

This registration statement contains a prospectus relating to an offering of shares of our common stock (for purposes of this Explanatory Note, the “Common Stock Prospectus”), together with separate prospectus pages relating to an offering of our Series A Mandatory Convertible Preferred Stock (for purposes of this Explanatory Note, the “Mandatory Convertible Preferred Stock Prospectus”). The complete Common Stock Prospectus follows immediately. Following the Common Stock Prospectus are the following alternative pages for the Mandatory Convertible Preferred Stock Prospectus:

 

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front and back cover pages, which will replace the front and back cover pages of the Common Stock Prospectus;

 

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pages for the “Summary—The Offering” section, which will replace the “Summary—The Offering” section of the Common Stock Prospectus;

 

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pages for the “Description of Mandatory Convertible Preferred Stock” section, which will replace the “Mandatory Convertible Preferred Stock Offering” section of the Common Stock Prospectus;

 

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pages for the “Material U.S. Federal Income Tax Considerations” section, which will replace the “Material U.S. Federal Tax Consequences for Non-U.S. Holders of Common Stock” section of the Common Stock Prospectus; and

 

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pages for the “Underwriting” section, which will replace the “Underwriting” section of the Common Stock Prospectus.

The following disclosures or references contained within the Common Stock Prospectus will be replaced or removed in the Mandatory Convertible Preferred Stock Prospectus:

 

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references to “Mandatory Convertible Preferred Stock Offering” will be replaced with references to “Description of Mandatory Convertible Preferred Stock” in the Mandatory Convertible Preferred Stock Prospectus;

 

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references to “this offering” contained in “Use of Proceeds,” “Dividend Policy,” “Capitalization,” “Dilution,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Management,” “Principal Stockholders,” “Certain Relationships and Related Party Transactions,” “Description of Capital Stock” and “Shares Eligible for Future Sale” (except under the heading “—Lock-up Agreements”) will be replaced with references to “the Concurrent Offering” in the Mandatory Convertible Preferred Stock Prospectus;

 

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references to “the Concurrent Offering” contained in “Summary—Summary Historical Financial and Other Data,” “Use of Proceeds,” “Certain Relationships and Related Party Transactions,” “Description of Capital Stock” and “Shares Eligible for Future Sale” will be replaced with references to “this offering” in the Mandatory Convertible Preferred Stock Prospectus;

 

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references to the “concurrent issuance of             shares of the Mandatory Convertible Preferred Stock” will be replaced with references to “issuance of up to             shares of the Mandatory Convertible Preferred Stock in this offering” in the Mandatory Convertible Preferred Stock Prospectus;

 

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references to “common stock” or “our common stock” under the first paragraph under “Summary,” “Summary—Risks Related to Our Business and Our Industry, Regulation and Our Offering,” in the first paragraph under “Risk Factors,” “Legal Matters” and “Where You Can Find More Information” will be replaced with “the Mandatory Convertible Preferred Stock” in the Mandatory Convertible Preferred Stock Prospectus;

 

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the disclosure under “Summary—Concurrent Offering” will be replaced in its entirety with “Concurrently with this offering, we are offering, by means of a separate prospectus,             shares of our common stock (and up to an additional             shares of our common stock that the underwriters in the Concurrent Offering have the option to purchase from us solely to cover over-allotments). We estimate that the net proceeds to us from the sale of shares of our common stock in the Concurrent Offering will be approximately $             million (or approximately $             million if the underwriters

in the Concurrent Offering exercise their over-allotment option to purchase additional shares of our common stock in full), assuming an initial public offering price of $             per share (which is the midpoint of the estimated offering price range shown on the cover page of the prospectus relating to the Concurrent Offering), in each case after deducting estimated expenses and underwriting discounts and commissions. The closing of this offering is conditioned upon the closing of the Concurrent Offering, but the closing of the Concurrent Offering is not conditioned upon the closing of this offering, and there can be no assurance that the Concurrent Offering will be completed on the terms described in the prospectus relating to the Concurrent Offering or at all.” in the Mandatory Convertible Preferred Stock Prospectus;

 

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references to “midpoint of the estimated offering price range shown on the cover page of this prospectus” will be replaced with “midpoint of the estimated offering price range shown on the cover page of the prospectus relating to the Concurrent Offering” in the Mandatory Convertible Preferred Stock Prospectus;

 

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the fifth sentence of the second paragraph under “Principal Stockholders” will be replaced in its entirety by the following text, “At our request, the underwriters of the Concurrent Offering have reserved up to             shares of common stock, or     % of the shares of common stock to be offered in the Concurrent Offering, for sale at the Concurrent Offering initial public offering price, through a reserved share program for certain individuals associated with us. The table below does not reflect any shares of our common stock that may purchased through that reserved share program;”

 

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references to “assuming the number of shares offered by us, shown on the cover page of this prospectus” will be replaced with “assuming the number of shares of common stock offered by us, shown on the cover page of the prospectus relating to the Concurrent Offering” in the Mandatory Convertible Preferred Stock Prospectus; and

 

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the reference to “, if completed,” and the reference to “of that offering” will be removed from the third paragraph under the “Use of Proceeds” section in the Mandatory Convertible Preferred Stock Prospectus.

All words and phrases similar to those specified above that appear throughout the Common Stock Prospectus will be revised accordingly to make appropriate references in the Mandatory Convertible Preferred Stock Prospectus.

Each of the complete Common Stock Prospectus and Mandatory Convertible Preferred Stock Prospectus will be filed with the Securities and Exchange Commission in accordance with Rule 424 under the Securities Act of 1933, as amended. The closing of the offering of common stock is not conditioned upon the closing of the offering of Series A Mandatory Convertible Preferred Stock, but the closing of the offering of Series A Mandatory Convertible Preferred Stock is conditioned upon the closing of the offering of common stock.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion, Dated                     , 2023

Preliminary Prospectus

 

 

             Shares

Clarios International Inc.

Common Stock

 

 

Clarios International Inc. is offering              shares of its common stock.

This is our initial public offering and no public market exists for our common stock. We anticipate that the initial public offering price will be between $         and $         per share.

Our Sponsor (as defined herein) has indicated that it or its affiliates may purchase in this offering up to $        , or up to approximately                  of our shares of common stock (based on the midpoint of the price range set forth above), at the same price as the price paid by the underwriters in this offering. The shares acquired by our Sponsor or its affiliates will be subject to the lock-up restrictions described in “Underwriting.” The underwriters will not receive any underwriting discounts or commissions on any shares of common stock sold to our Sponsor or its affiliates. The number of shares of common stock available for sale to the general public will be reduced to the extent our Sponsor or its affiliates purchase such shares of common stock. See “Underwriting.” However, because indications of interest are not binding agreements or commitments to purchase, our Sponsor or its affiliates may determine to purchase fewer shares than it indicates an interest in purchasing or not to purchase any shares in this offering. It is also possible that our Sponsor or its affiliates could indicate an interest in purchasing more shares of our common stock or that the underwriters could elect to sell fewer shares to our Sponsor or its affiliates.

Our shares of common stock have been approved for listing on the New York Stock Exchange (“NYSE”) under the symbol “BTRY.”

Concurrently with this offering, we are also making a public offering (the “Concurrent Offering”) of              shares of our                 % Series A Mandatory Convertible Preferred Stock, par value $0.01 per share (the “Mandatory Convertible Preferred Stock”). The Concurrent Offering is being made by means of a separate prospectus and not by means of this prospectus. We have granted the underwriters of that offering an option for a period of 30 days to purchase up to an additional              shares of the Mandatory Convertible Preferred Stock, solely to cover overallotments. We cannot assure you that the Concurrent Offering will be completed or, if completed, on what terms it will be completed. The closing of this offering is not conditioned upon the closing of the Concurrent Offering, but the closing of the Concurrent Offering is conditioned upon the closing of this offering.

After the completion of this offering, certain entities affiliated with Brookfield Business Partners LP (“Brookfield”) and Caisse de dépôt et placement du Québec (collectively, our “Sponsor” or the “Sponsor Group”) will continue to own a majority of the voting power of shares eligible to vote in the election of our directors, representing approximately     % of the combined voting power of our outstanding common stock assuming no exercise of the underwriters’ option to purchase additional shares of common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE. See “Management—Controlled Company Exception” and “Principal Stockholders.” Following the completion of the offering, public investors will own approximately     %, representing approximately     % of the combined voting power, of our outstanding shares of common stock assuming no exercise of the underwriters’ option to purchase additional shares of common stock (excluding any shares of common stock our Sponsor purchases in this offering.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 24.

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

		Per Share				Total (2)
Initial public offering price		$				$
Underwriting discounts and commissions		$				$
Proceeds to us before expenses(1)		$				$

 

(1)	See “Underwriting” for a description of compensation to be paid to the underwriters.

(2)	Assumes our Sponsor or its affiliates have not purchased shares of common stock in this offering, for which the underwriters would not receive any underwriting discounts or commissions.

At our request, the underwriters have reserved up to              shares of common stock, or     % of the shares of common stock to be offered by this prospectus, for sale at the initial public offering price through a reserved share program for certain individuals associated with us. See “Underwriting—Reserved Share Program.”

We have granted the underwriters an option for a period of 30 days to purchase up to an additional              shares of common stock solely to cover over-allotments, if any. See “Underwriting.”

The underwriters expect to deliver the shares to purchasers on or about                 , 2023.

 

 

BMO Capital Markets

The date of this prospectus is                 , 2023

TABLE OF CONTENTS

 

 

 

		PAGE
Summary			1
Risk Factors			24
Cautionary Note Regarding Forward-Looking Statements			55
Use of Proceeds			57
Dividend Policy			58
Capitalization			59
Dilution			61
Management’s Discussion and Analysis of Financial Condition and Results of Operations			63
Business			89
Management			107
Executive Compensation			115
Certain Relationships and Related Party Transactions			132
Mandatory Convertible Preferred Stock Offering			136
Description of Material Indebtedness			140
Principal Stockholders			147
Description of Capital Stock			149
Material U.S. Federal Tax Considerations for Non-U.S. Holders of Common Stock			157
Shares Eligible for Future Sale			160
Underwriting			162
Legal Matters			172
Experts			172
Where You Can Find More Information			172
Index to Consolidated Financial Statements			F-1

 

 

In this prospectus, “Clarios,” the “Company,” “our company,” “we,” “us” and “our” refer to Clarios International Inc., together with its consolidated subsidiaries after giving effect to the consummation of the acquisition by the Sponsor Group of the power solutions business (the “Power Solutions Business”) of Johnson Controls International PLC (“JCI”) (the “Acquisition”) on April 30, 2019 (the “Acquisition Date”).

We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may provide you. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

 

 

Market and Industry Data

This prospectus includes industry and market data that we obtained from periodic industry publications, third-party studies and surveys, as well as from filings of public companies in our industry and internal company surveys. These sources include government and industry sources. Industry publications and surveys generally

state that the information contained therein has been obtained from sources believed to be reliable. Although we believe the industry and market data to be reliable as of the date of this prospectus, this information could prove

 

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to be inaccurate. Industry and market data could be wrong because of the method by which sources obtained their data and because information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein.

Trademarks and Trade Names

We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the ^® and ^™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.

Basis of Presentation and Other Information

On April 14, 2021, Clarios International Inc., a Delaware corporation (the “Company”) controlled by investment funds managed by Brookfield Business Partners L.P. (our “Sponsor” or the “Sponsor Group”), was formed. As a result of a reorganization of legal entities controlled by the Sponsor Group (the “Reorganization”), the Company became the sole ultimate equity holder of Clarios Global LP as of July 27, 2021 (the “Reorganization Date”), and consolidated Clarios Global LP within the Company’s financial statements as a transaction between entities under the common control of the Sponsor Group. The historical financial statements and data included herein are those of Clarios International Inc. and its consolidated subsidiaries after the Reorganization Date, and are those of Clarios Global LP and its consolidated subsidiaries prior to the Reorganization Date.

 

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all of the other information set forth in this prospectus before deciding to invest in shares of our common stock. If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. The risks discussed below are not the only risks we face. Additional risks or uncertainties not currently known to us, or that we currently deem immaterial may also have a material adverse effect on our business, financial condition, prospects, results of operations or cash flows.

Risks Relating to Our Business and Industry

A large portion of our profit is derived from a relatively small number of major customers. Decreased demand from our customers in the aftermarket retail channel and automotive industry, or the loss of any significant customer, may in the future adversely affect our results of operations.

Our North American aftermarket channel within our Americas segment is our largest market and is concentrated among four major transportation services customers. There can be no assurance that we will be able to retain these customers or that, if we were to lose one or more of these customers, we would be able to replace such customers with customers that generate a comparable amount of net sales. A number of factors could cause us to lose business or revenue from a customer, and some of these factors are not predictable and are beyond our control. For example, a customer may demand price reductions, engage in business with a competitor or reduce previously forecasted demand. Consequently, the loss of one of our major customers could have a materially adverse impact on our business, results of operations and financial condition.

Our financial performance also depends, in part, on conditions in the automotive industry. The automotive industry is highly cyclical and, in addition to general economic conditions, also depends on other factors, such as consumer confidence and consumer preferences. Lower global automotive sales could result in our OEM customers significantly lowering vehicle production schedules, which could adversely affect our earnings and cash flow. Sales to OEMs accounted for approximately 21% of our total unit sales during the year ended September 30, 2023. Declines in the North American, European and Asian automotive production levels as a result of the semiconductor shortage, the military conflicts between Russia and Ukraine and between Israel and Hamas, COVID-19, and other factors has reduced, and additional declines and pricing pressure from OEMs could further reduce, our sales and our profitability, and therefore adversely affect our results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Products produced by OEMs are subject to market acceptance and products that are perceived to be less desirable (whether in terms of price, quality, styling, safety, overall value, fuel efficiency, or other attributes) can exacerbate this risk. With increased consumer interconnectedness through the internet, social media and other media, mere allegations relating to quality, safety, fuel efficiency, corporate social responsibility or other key attributes can negatively impact the reputation or market acceptance of the products produced by OEMs on which our financial performance partially depends, even where such allegations prove to be inaccurate or unfounded or do not relate to the performance of our products. Further, advancements in technology, regulatory changes and other factors that are difficult to predict may significantly affect the demand for our products, including as a result of the vehicle industry moving to autonomous vehicles and other mobility services. Finally, if any OEMs reach a point where they cannot fund their operations, we may incur write-offs of accounts receivable, incur impairment charges or require additional restructuring actions beyond our current restructuring plans, which, if significant, would have a material adverse effect on our business and results of operations.

If we do not respond appropriately, the technological evolution of the battery and automotive industries could adversely affect our business.

We expect that the automotive industry, and as a result the battery industry, will experience significant and continued change in the coming years. In order to remain competitive, we must remain responsive to

 

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developments in the automotive industry. As technology continues to develop and the automotive industry changes, we face substantial pressure to remain competitive. Industry participants are seeking to disrupt the traditional business model of the industry through the introduction of new technologies, products, services, business models and methods of travel that focus on minimizing the environmental impact of automobiles. For example, there has been a shift in recent years from traditional gas-powered vehicles to a higher proportion of electric alternatives. Although we have made substantial investments in battery technologies and we believe our business is well-positioned to remain competitive, there can be no assurance that we will be able to keep pace with the rate of technological change, or that others will not acquire similar or superior technologies sooner than we do or that we will acquire technologies on an exclusive basis or at a significant price advantage. If we do not continue to innovate and develop or acquire new and compelling products that capitalize upon new technologies in response to OEM and consumer preferences, our business, results of operations and financial condition may be materially adversely affected. In addition, the global adoption of electric alternative vehicles may not occur as fast as we previously predicted, and therefore certain substantial investments that we have made in battery and other electric alternative technologies may take longer to provide the anticipated benefits to our results of our operations and financial condition.

Volatility in commodity prices may adversely affect our results of operations.

Lead is a major component of lead-acid batteries and the price of lead has been highly volatile. In the past, lead tollers have been able to exert significant price pressure due to shocks in lead supply. See “—Our reliance on certain significant suppliers subjects us to numerous risks, including possible interruptions in supply, which could adversely affect our business.” We attempt to manage the impact of changing lead prices through the recycling of used batteries returned to us by our aftermarket customers, commercial terms and commodity hedging programs. Our ability to mitigate the impact of lead price changes can be impacted by many factors, including customer negotiations, inventory level fluctuations and sales volume/mix changes, any of which could have an adverse effect on our results of operations.

Increases in other commodity costs can negatively impact our profitability if we are not able to recover commodity cost increases through price increases to our customers on new orders. In cases where commodity price risk cannot be naturally offset or hedged through supply based fixed price contracts, we use commodity hedge contracts to minimize overall price risk associated with our anticipated commodity purchases. Unfavorability in our hedging programs during a period of declining commodity prices could result in lower margins as we reduce prices to match the market on a fixed commodity cost level. Additionally, to the extent we do not or are unable to hedge certain commodities and commodity prices substantially increase, such increases will have an adverse effect on our results of operations.

Our liquidity is affected by the seasonality of our business, and warm winters and cool summers adversely affect our results of operations.

We sell a disproportionate share of our automotive aftermarket batteries during the fall and early winter. Resellers buy automotive batteries during these periods so that they will have sufficient inventory for cold weather periods. This seasonality increases our working capital requirements and makes our business more sensitive to fluctuations in the availability of liquidity. Unusually cold winters or hot summers may accelerate battery failure and increase demand for automotive replacement batteries. Mild winters and cool summers may have the opposite effect. As a result, if our sales are reduced by an unusually warm winter or cool summer, it may not be possible to recover these sales in later periods. Further, if our sales are adversely affected by the weather, we cannot make offsetting cost reductions to protect our liquidity and gross margins in the short-term because a large portion of our manufacturing and distribution costs are fixed. These circumstances could result in a material adverse effect on our business, financial condition and results of operations.

 

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Our future growth is dependent upon our ability to develop or acquire new technologies that achieve market acceptance with acceptable margins.

Our future success depends on our ability to develop or acquire and manufacture and make competitive, increasingly complex products and services to market quickly and cost-effectively. Our ability to develop or acquire new products and services requires the investment of significant resources. For example, in recent years we have made significant capital investments to expand our product offerings to include AGM and EFB technologies, which power vehicles that automatically shut down and restart the internal combustion engine to reduce the amount of time the engine spends idling, thereby reducing fuel consumption and emissions (“start-stop vehicles”), as well as investing in lithium-ion battery technology for certain hybrid and electric vehicles. These acquisitions and development efforts divert resources from other potential investments in our business and they may not lead to the development of new technologies, products or services on a timely basis. Moreover, as we introduce new products, we may be unable to detect and correct defects in the design of a product or in its application to a specified use, which could result in loss of sales or delays in market acceptance. Even after introduction, new or enhanced products may not satisfy customer preferences and product failures may cause customers to reject our products. As a result, these products may not achieve market acceptance and our brand image could suffer. In addition, the markets for our products and services may not develop or grow as we anticipate. As a result, the failure of our technology, products or services to gain market acceptance, the potential for product defects, product quality issues or the obsolescence of our products and services could significantly reduce our revenues, increase our operating costs or otherwise materially and adversely affect our business, financial condition, results of operations and cash flows.

Risks associated with our non-U.S. operations could adversely affect our business, financial condition and results of operations.

We have significant operations in a number of countries outside the U.S., some of which are located in emerging markets. Long-term economic uncertainty in some of the regions of the world in which we operate, such as Asia, South America, EMEA and emerging markets generally, could result in the disruption of markets and negatively affect cash flows from our operations to cover our capital needs and debt service requirements.

In addition, as a result of our global presence, a significant portion of our revenues and expenses is denominated in currencies other than the U.S. dollar. We are therefore subject to non-U.S. currency risks and non-U.S. exchange exposure. While we employ financial instruments to hedge some of our transactional foreign exchange exposure, these activities do not insulate us completely from those exposures. Exchange rates can be volatile and a substantial weakening of foreign currencies against the U.S. dollar could reduce our profitability in various locations outside of the U.S. and adversely impact the comparability of results from period to period.

There are other risks that are inherent in our non-U.S. operations, including the potential for changes in socio-economic conditions, laws and regulations, including, among others, competition, import, export, labor and environmental, health and safety laws and regulations, and monetary and fiscal policies, protectionist measures that may prohibit acquisitions or joint ventures, or impact trade volumes, unsettled political conditions; government-imposed plant or other operational shutdowns, backlash from foreign labor organizations related to our restructuring actions, corruption; natural and man-made disasters, hazards and losses, violence, civil and labor unrest, and possible terrorist attacks.

These and other factors may have a material adverse effect on our non-U.S. operations and therefore on our business and results of operations.

 

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The military conflicts between Russia and Ukraine and between Israel and Hamas have resulted in geopolitical instability. Our business, financial position, results of operations and cash flows could be adversely affected by the negative impacts on the global economy resulting from the conflicts in Ukraine and the Middle East.

In February 2022, Russian troops invaded Ukraine and the military conflict is ongoing. While the length and total impact of the military conflict is unpredictable, it has led to market disruptions, including volatility in raw material prices and credit and capital markets, and supply chain challenges. In response to the military conflict, governments in the U.S. and abroad have imposed sanctions against Russia and proposed or threatened additional potential sanctions. These sanctions could adversely affect the global economy and financial markets in which we operate.

In addition, on October 7, 2023, Hamas, a terrorist group in control of Gaza, carried out a surprise attack on Israeli cities and towns near the Gaza strip. Following this terrorist attack, Israel declared war on Hamas and other terrorist organizations in Gaza. The military conflict is ongoing, and its length and outcome are highly unpredictable. Further escalation of this conflict could lead to significant market and other disruptions, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

We do not have manufacturing operations in Ukraine, Russia or Israel nor any significant business relationships within those countries. To date, we have not experienced any material impacts of the ongoing military conflicts. We are monitoring the situation and its impact on the global markets, which may, in turn, impact our business. For example, it is possible that the conflicts could result in lower automotive production if supply parts and raw materials for OEMs become less available or if there are continued significant increases in energy and fuel prices. In addition, the threat of cyberattacks on the global supply chain may increase, which could directly or indirectly impact our operations.

Based on the continued, and more recently increased market volatility and geopolitical unrest pertaining to the military conflicts, the European energy crisis and a highly inflationary environment, and corresponding macro-economic uncertainty, we cannot reasonably estimate the full impact the conflicts will have on our long-term financial condition, results of operations, liquidity and cash flows. It is not possible to predict the extent and duration of the military conflicts, sanctions, and any associated market disruptions, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

Our operations in China subject us to increased risks, including risks related to evolving economic, political and social conditions.

Our business is subject to risks inherent in doing business internationally. In particular, we face risks relating to our business in China, as the volume growth in our business has been driven by increasing volume in our Asia segment. Approximately 10% of our net sales were from our Asia segment for the year ended September 30, 2023. The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, the level of development, the growth rate, the control of foreign exchange and the allocation of resources. The Chinese government exercises significant control over China’s economic growth through the allocation of resources, control of the incurrence and payment of foreign currency-denominated obligations, setting of monetary policy and provision of preferential treatment to particular industries or companies. In recent years, the Chinese government has been reforming its economic and political systems, and we expect this to continue. Although we believe that these reforms have had a positive effect on our ability to do business in China, we cannot assure you that these reforms will continue or that the Chinese government will not take actions that impair our platform in China. In addition, recent international unrest involving mounting trade tension between China and the United States and domestic unrest within China in response to the imposition of restrictive policies instituted by the Chinese government presents additional risks and uncertainties. If our ability to do business in China is adversely impacted, our business, results of operations and financial condition could be materially adversely affected.

 

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General economic, credit and capital market conditions could adversely affect our financial performance, our ability to grow or sustain our business and our ability to access the capital markets.

We compete around the world in various geographic regions and global economic conditions affect our business. Any future financial distress in the industries and/or markets where we compete could negatively affect our revenues and financial performance in future periods, result in future restructuring charges, and adversely impact our ability to grow or sustain our business.

The capital and credit markets provide us with liquidity to operate and grow our business beyond the liquidity that operating cash flows provide. A worldwide economic downturn and/or disruption of the capital and credit markets could reduce our access to capital necessary for our operations and executing our strategic plan. If our access to capital were to become significantly constrained, or if costs of capital increased significantly due to lowered credit ratings, prevailing industry conditions, the volatility of the capital markets or other factors; then our financial condition, results of operations and cash flows could be adversely affected.

Additionally, our business is sensitive to interest rate movements and the performance of the capital markets. We rely on access to the capital markets to fund our operations and to grow our business. Our ability to borrow from financial institutions or to engage in funding transactions on favorable terms or at all could be adversely affected by disruptions, uncertainty or volatility in the capital markets or other events, including changing credit rating agency requirements. For example, a credit rating downgrade could affect our ability to access the capital markets, increase our funding costs and have a negative impact on our results of operations.

In response to inflationary pressures, the Federal Reserve has reversed its policy of maintaining the low benchmark federal funds interest rate over the last several years. In March 2022, the Federal Reserve began increasing the benchmark federal funds interest rate which previously had been reduced to near zero in response to the economic downturn caused by the outbreak of the COVID-19 pandemic and has signaled that it may be appropriate to continue to raise interest rates in an effort to tame inflation, with the federal funds interest rate approaching 5.50% as of September 2023. Thus, the amount of interest that we pay on the unhedged portion of certain borrowings has increased and could increase further, which could have a negative impact on our financial condition.

Our businesses operate in regulated industries and are subject to a variety of complex and continually changing laws and regulations.

Our operations and employees are subject to various U.S. federal, state and local licensing laws, codes and standards and regulations and similar foreign laws, codes, standards and regulations. Changes in laws or regulations could require us to change the way we operate or to utilize resources to maintain compliance, which could increase costs or otherwise disrupt operations. In addition, failure to comply with any applicable U.S. or foreign laws or regulations could result in substantial fines, damages or revocation of our operating permits and licenses. Competition, antitrust or other regulatory investigations can continue for several years, be costly to defend and can result in substantial fines and private damages in jurisdictions around the world. We have in the past been subject to and cooperated with such investigations. If we are subject to such an investigation, the fact that we may decide to cooperate with regulators or settle with private plaintiffs standing alone may not improve our risk profile or reduce our potential liability as a result of such investigation. In addition, any obstruction of any investigation, including any noncompliance with any confidentiality agreements in connection with any such investigation, could result in additional liability and materially impact our business. Moreover, if laws and regulations were to change or if we or our products failed to comply with the laws described above or other applicable U.S. or foreign laws or regulations, our business, financial condition and results of operations could be adversely affected.

Due to the international scope of our operations, the system of laws and regulations to which we are subject is complex and includes regulations issued by the U.S. Customs and Border Protection, the U.S. Department of

 

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Commerce’s Bureau of Industry and Security, the U.S. Treasury Department’s Office of Foreign Assets Control and various non-U.S. governmental agencies, including applicable export controls, anti-trust, customs, data privacy restrictions, currency exchange control and transfer pricing regulations, laws regulating the foreign ownership of assets and laws governing certain materials that may be in our products. No assurances can be made that we will continue to be found to be operating in compliance with, or be able to detect violations of, any such laws or regulations. For example, some foreign data privacy regulations are more stringent than those in the U.S. and continue to evolve. Further, existing free trade laws and regulations, such as the United States-Mexico-Canada Agreement, or any successor agreement, provide certain beneficial duties and tariffs for qualifying imports and exports, subject to compliance with the applicable classification and other requirements. Changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products or from where we import products or raw materials (either directly or through our suppliers) could have an impact on our competitive position, business and financial results.

We cannot predict the nature, scope or effect of future regulatory requirements to which our operations might be subject or the manner in which existing laws might be administered or interpreted.

Failure to comply with evolving privacy, data protection and cybersecurity laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation or adverse publicity and could have a material adverse effect on our business.

Privacy, data protection and cybersecurity have become significant issues in the United States, Europe and in many other jurisdictions where we conduct our operations. Our collection, processing, distribution and storage of personal information is subject to a variety of laws and regulations both in the United States and abroad (including China, Mexico, Germany, and other foreign jurisdictions), which could limit the way we market and provide our products and services. In some cases, privacy and data protection laws, regulations and rules impose obligations directly on us as both a data controller and a data processor (or the equivalents thereof), as well as on many of our customers. Certain jurisdictions have also enacted data localization laws mandating that certain types of data collected in a particular country be stored and/or processed primarily within that country. Compliance with these privacy, data protection and cybersecurity requirements is rigorous and time-intensive and may increase our cost of doing business and, despite these efforts, there is a risk that we fail to comply and may become subject to government enforcement actions, fines and penalties, litigation and reputational harm, which could materially and adversely affect our business, financial condition and results of operations. In addition, the regulatory framework for the handling of personal and confidential information is rapidly evolving and is likely to remain uncertain for the foreseeable future as new data protection and privacy laws are being enacted globally and existing laws are being updated and strengthened.

For example, in May 2018, the General Data Protection Regulation (“GDPR”) superseded prior European Union data protection legislation, and it imposes more stringent European Union data protection requirements and provides for greater penalties for noncompliance. Under the GDPR, fines of up to 20 million euro or up to 4% of the annual global turnover of the infringer, whichever is greater, could be imposed, and European data protection authorities have already imposed fines for GDPR violations up to, in some cases, hundreds of millions of euros. The GDPR is wide-ranging in scope and imposes numerous additional requirements on companies that process personal data, including imposing special requirements in respect of the processing of personal data, requiring that the consent of individuals to whom the personal data relates is obtained in certain circumstances, requiring additional disclosures to individuals regarding data processing activities, requiring that safeguards are implemented to protect the security and confidentiality of personal data, creating mandatory data breach notification requirements in certain circumstances and requiring that certain measures (including contractual requirements) are put in place when engaging third-party processors. The GDPR also provides individuals with various rights in respect of their personal data, including rights of access, erasure, portability, rectification, restriction, and objection.

 

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Additionally, the U.K. General Data Protection Regulation (“U.K. GDPR”) (i.e., a version of the GDPR as implemented into United Kingdom law) went into effect following Brexit. While the GDPR and the U.K. GDPR are substantially the same, going forward there is increasing risk for divergence in application, interpretation and enforcement of the data privacy and cybersecurity laws and regulations as between the European Union and the United Kingdom, which may result in greater operational burdens, costs and compliance risks. For example, in 2021, the European Commission announced an adequacy decision concluding that the United Kingdom ensures an equivalent level of data protection to the GDPR, which provides some relief regarding the legality of continued personal data flows from the European Union to the United Kingdom. This adequacy determination will automatically expire in June 2025 unless the European Commission renews or extends it and may be modified or revoked in the interim. We cannot predict how the U.K. GDPR and other privacy and data protection laws, regulations or rules in the United Kingdom may develop, including as compared to the GDPR, nor can we predict the effects of divergent laws and related guidance. Moreover, the United Kingdom’s government has publicly announced plans to reform the U.K. GDPR in ways that, if formalized, are likely to create a risk of divergent parallel regimes and related uncertainty, along with the potential for increased compliance costs and risks for affected business.

Additionally, the GDPR and the U.K. GDPR include certain limitations and stringent obligations with respect to the transfer of personal data from the European Union and the United Kingdom to certain third countries (including the United States), and the mechanisms to comply with such obligations are also in considerable flux and may lead to greater operational burdens, costs and compliance risks. Ongoing legal challenges in Europe to the mechanisms allowing companies to transfer personal information to such third countries could result in further limitations on the ability to transfer data across borders, particularly if governments are unable or unwilling to reach new agreements that support cross-border data transfers. While the European Commission adopted on July 10, 2023 an adequacy decision for the EU-U.S. Data Privacy Framework, enabling U.S. companies who certify to the EU-U.S. Data Privacy Framework to rely on it as a valid data transfer mechanism, such adequacy decision is likely to face challenge, including at the Court of Justice of the European Union. While the EU-U.S. Data Privacy Framework does not apply to the United Kingdom, on October 12, 2023, a U.K.-U.S. Data Bridge came into force, to facilitate transfers of personal data from the United Kingdom to the United States. Such Data Bridge could not only be challenged but also may be affected by any challenges to the EU-U.S. Data Privacy Framework.

Other jurisdictions outside the European Union and the United Kingdom are similarly introducing or enhancing privacy, data protection and cybersecurity laws, rules and regulations, which could increase our compliance costs and the risks associated with noncompliance. For example, California enacted the California Consumer Privacy Act (as amended by the California Privacy Rights Act (the “CPRA”) (the “CCPA”), which created new individual privacy rights for California consumers (as defined in the law) and placed increased privacy and security obligations on companies handling personal information of consumers or households. The CCPA, which went into effect on January 1, 2020 (and was amended by the CPRA as of January 1, 2023), requires covered companies to provide specific disclosure to consumers about such companies’ data collection, use and sharing practices, provide methods for such consumers to know, access, correct and delete their personal information, with exceptions, as well as allowing consumers to opt-out of certain sales or transfers of their personal information and limit use and disclosure of their sensitive personal information. The CCPA broadly defines personal information, provides for civil penalties and statutory damages for violations and further provides consumers with a private right of action in the event of a data breach involving certain sensitive information as a result of the business’ failure to implement reasonable security measures. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. As currently written, the CCPA impacts certain of our business activities and exemplifies the vulnerability of our business to the evolving regulatory environment related to personal information. The CCPA is enforced by both the Office of the Attorney General of California and the newly-established California Privacy Protection Agency, and failure to fully comply can result in regulatory fines of up to $2,500 per violation (which has been interpreted to mean per impacted individual) and up to $7,500 for knowing/willful violations. In addition, all 50 states (along with Washington D.C. and Puerto Rico) have laws including obligations to provide notification of security breaches of

 

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computer databases that contain personal information to affected individuals, state officers and others, and several states, including Virginia, Colorado, Connecticut, Utah, Florida, Texas, Montana, Iowa, Tennessee and Indiana have enacted, or are in the process of enacting or considering, their own separate, comprehensive privacy laws (which are now effective or soon-to-become effective) to protect consumers. Moreover, there is discussion in Congress of a new comprehensive federal privacy and data protection law to which we would become subject if it is enacted. Aspects of the CCPA and other laws and regulations relating to data protection, privacy and information security, as well as their enforcement, remain unclear and we may be required to modify our practices in an effort to comply with them. Revising our practices to comply with these requirements could result in increased costs for our products, reduce demand for our services or, in some cases, impact our ability or our customers’ ability to offer our services in certain locations, to deploy our products, to reach current and prospective customers, or to derive insights from customer data globally.

There also has been increasing regulatory scrutiny from the SEC with respect to adequately disclosing risks concerning cybersecurity. On July 26, 2023, the SEC adopted new cybersecurity disclosure rules for public companies that require disclosure regarding cybersecurity risk management, strategy and governance (including the corporate board’s role in overseeing cybersecurity risks, management’s role and expertise in assessing and managing cybersecurity risks, and processes for assessing, identifying and managing cybersecurity risks) in annual reports. These new cybersecurity disclosure rules also require the disclosure of material cybersecurity incidents in a Form 8-K, generally within four days of determining an incident is material. We will be subject to such annual report disclosure requirements starting with our next Form 10-K and we will be subject to such Form 8-K disclosure requirements starting December 18, 2023 or later, depending on the date of publication of the adopting release in the Federal Register. Such scrutiny from the SEC increases the risk of investigations into the cybersecurity practices, and related disclosures, of companies within its jurisdiction, which at a minimum can result in distraction of management and diversion of resources for targeted businesses.

Moreover, we make public statements about our collection, use, disclosure and other processing of personal information through our privacy policies and information on our website. Although we endeavor to comply with our public statements and documentation, we may at times be found or alleged to have failed to do so. The publication of our privacy policies and other statements that provide promises and assurances about privacy and data protection can subject us to potential government or legal action if they are found to be deceptive, unfair or misrepresentative of our actual practices. Any concerns about our privacy and data protection practices, even if unfounded, could damage our reputation and adversely affect our business.

We cannot yet fully determine the impact these or future laws, rules and regulations concerning privacy, data protection and cybersecurity may have on our business or operations. These laws, rules and regulations may be inconsistent from one jurisdiction to another, subject to differing interpretations and may be interpreted to conflict with our practices. Additionally, we may be bound by contractual requirements applicable to our collection, use, processing and disclosure of various types of data, including personal information, and may be bound by, or voluntarily comply with, self-regulatory or other industry standards relating to these matters. Compliance with U.S. and international privacy, data protection, privacy and cybersecurity laws and regulations could require us to take on more onerous obligations in our contracts and restrict our ability to collect, use and disclose data. Because the interpretation and application of data protection and privacy laws, regulations, standards and other obligations are still uncertain, and often contradictory and in flux, it is possible that the scope and requirements of these laws may be interpreted and applied in a manner that is inconsistent with our practices and our efforts to comply with the evolving data protection and privacy rules may be unsuccessful. Failure to comply with U.S. and international privacy, data protection and cybersecurity laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation or adverse publicity and could negatively affect our results of operations and business. Claims that we have violated individuals’ privacy rights, failed to comply with privacy, data protection and cybersecurity laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend and could result in adverse publicity that could increase our operation costs and impact our financial performance. Furthermore, the uncertain and shifting regulatory environment and trust climate may cause

 

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concerns regarding privacy and data protection and may cause our customers or their customers to resist providing the data necessary to allow our customers to use our services effectively. Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services and could limit adoption of our products.

We cannot assure you that any third-party partners with access to our employees’ personally identifiable and other sensitive or confidential information for which we are responsible will not breach contractual obligations imposed by us, or that they will not experience cybersecurity breaches or attempts thereof, which could have a corresponding effect on our business, including putting us in breach of our obligations under privacy and data protection laws, regulations, rules, standards and other obligations, which could in turn adversely affect our business, results of operations and financial condition. We also cannot assure you that our contractual measures and our own privacy, data protection and cybersecurity-related safeguards will protect us from the risks associated with the third-party processing, storage and transmission of such information.

From time to time, we may utilize artificial intelligence, machine learning, data analytics and similar tools that collect, aggregate and analyze data (collectively, “Data Tools”) in connection with our business. There are significant risks involved in utilizing Data Tools and no assurance can be provided that the usage or reliance on of such Data Tools will enhance our business or assist our business in being more efficient or profitable. Data Tools may have errors or inadequacies that are not easily detectable. For example, certain Data Tools may utilize historical market or sector data in their analytics. To the extent that such historical data is not indicative of the current or future conditions in the applicable market or sector, or the Data Tools fail to filter biases in the underlying data or collection methods, the usage of Data Tools may lead us to make determinations on behalf of our business, including potentially purchase and sale decisions, that may have an adverse effect. Data Tools may also be subject to data herding and interconnectedness (i.e., multiple market participants utilizing the same data), which may adversely impact our business. If Data Tools are incorrectly designed or the data used to train them is incomplete, inadequate or biased in some way, our use of Data Tools may inadvertently reduce our efficiency or cause unintentional or unexpected outputs that are incorrect, do not match our business goals, do not comply with our policies or standards or interfere with the performance of our products, services, business and reputation. Additionally, our reliance on Data Tools could pose ethical concerns and lead to a lack of human oversight and control, which could have negative implications for our organization.

In addition, the use of Data Tools may enhance intellectual property, privacy, cybersecurity, operational and technological risks. The technologies underlying Data Tools and their use cases are subject to a variety of laws and regulations, including intellectual property, privacy, publicity, consumer protection and federal equal opportunity laws. If we do not have sufficient rights to use the data on which Data Tools rely, we may incur liability through the violation of such laws, third-party intellectual property, publicity or privacy rights or other rights or contracts to which we are a party. Furthermore, the technologies underlying Data Tools are complex and rapidly developing, and as a result, it is not possible to predict all of the legal, operational or technological risks related to the use of Data Tools. Moreover, Data Tools are the subject of evolving review by various governmental and regulatory agencies, including the SEC and the U.S. Federal Trade Commission, and changes in laws, rules, directives and regulations governing the use of Data Tools may adversely affect the ability of our business to use or rely on Data Tools.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery laws around the world.

The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials or other persons for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement activity, with more frequent and aggressive investigations and enforcement proceedings by both U.S. and non-U.S. regulators, and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with these anti-bribery

 

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laws. We operate in many parts of the world that are recognized as having governmental and commercial corruption and local customs and practices that can be inconsistent with anti-bribery laws. We cannot assure you that our internal control policies and procedures will always protect us from reckless or criminal acts committed by our employees or third-party intermediaries. In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, or if we are subject to allegations of any such violations, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. Violations of these laws may result in criminal or civil sanctions, which could disrupt our business and result in a material adverse effect on our reputation, business, financial condition, results of operations and cash flows. In addition, we could be subject to commercial impacts such as lost revenue from customers who decline to do business with us as a result of such compliance matters, or we could be subject to lawsuits brought by private litigants, each of which could have a material adverse effect on our reputation, business, financial condition, results of operations and cash flows.

Our business may be adversely affected if we are unable to adequately establish, maintain, protect and enforce our intellectual property and proprietary rights or prevent third parties from making unauthorized use of such rights.

Our intellectual property is an essential asset of our business. Failure to adequately protect our intellectual property rights could result in our competitors offering similar products and services, potentially resulting in the loss of our competitive advantage and a decrease in our revenue, which would adversely affect our business prospects, financial condition and results of operations. Our success depends in part on our ability to protect our proprietary rights and intellectual property. We rely on a combination of intellectual property rights, such as trademarks, trade secrets (including know-how), patents and copyrights, in addition to confidentiality provisions and licensing arrangements to establish, maintain, protect and enforce our proprietary rights. For example, we rely on trademark protection to protect our rights to various marks as well as distinctive logos and other marks associated with our products and services. We also rely on agreements under which we contract to own, or license rights to use, intellectual property developed by employees, contractors and other third parties. In addition, while we generally enter into confidentiality agreements with our employees and third parties to protect our trade secrets, know-how, business strategy and other proprietary information, such confidentiality agreements could be breached or otherwise may not provide meaningful protection for our trade secrets and know-how related to the design, manufacture or operation of our products. Similarly, while we seek to enter into agreements with all of our employees who develop intellectual property during their employment to assign the rights in such intellectual property to us, we may fail to enter into such agreements with all relevant employees, such agreements may be breached or may not be self-executing, and we may be subject to claims that such employees misappropriated relevant rights from their previous employers. Accordingly, we cannot guarantee that the steps we have taken to protect our intellectual property will be adequate to prevent infringement of our rights or misappropriation of our technology, trade secrets or know-how, that we have secured, or will be able to secure, appropriate permissions or protections for all of the intellectual property rights we use or claim rights to, or that third parties will not terminate our license rights. For example, effective patent, trademark, copyright and trade secret protection may be unavailable or limited in some of the countries in which we operate. Furthermore, intellectual property laws and our procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.

If we fail to protect our intellectual property rights adequately, we may lose an important advantage in the markets in which we compete. Our efforts to protect these rights may be insufficient or ineffective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. Other parties may also independently develop technologies, products and services that are substantially similar or superior to ours. We also may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. If it became necessary for us to resort to litigation to protect our intellectual property rights, any proceedings could be burdensome and costly, and we may not prevail. Further, adequate remedies may not

 

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be available in the event of an unauthorized use or disclosure of our trade secrets and manufacturing expertise. Finally, for those products in our portfolio that rely on patent protection, once a patent has expired, the product is generally open to competition. Products under patent protection usually generate significantly higher revenues than those not protected by patents. If we fail to successfully enforce our intellectual property rights, our competitive position could suffer, which could harm our business, financial condition, results of operations and cash flows.

From time to time, we are party to intellectual property-related litigations and proceedings that are expensive and time consuming to defend, and, if resolved adversely, could materially adversely impact our business, financial condition and results of operations.

Our commercial success depends in part on avoiding infringement, misappropriation or other violations of the intellectual property and proprietary rights of third parties and other intellectual property-related disputes. Some third-party intellectual property rights may prove to be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid violating those intellectual property rights. As we face increasing competition, the possibility of intellectual property rights claims against us grows. Such claims and litigation may involve patent holding companies or other adverse intellectual property rights holders who have no relevant product revenue, and, therefore, our own issued and pending patents and other intellectual property rights may provide little or no deterrence to these rights holders in bringing intellectual property rights claims against us. There may be intellectual property rights held by others, including issued or pending patents and registered trademarks, that cover significant aspects of our technologies, products or services, and we cannot assure that we are not infringing or violating, and have not infringed or violated, any third-party intellectual property rights, or that we will not be held to have done so or be accused of doing so in the future. In addition, we are party to a number of complex intellectual property agreements with our licensing partners and certain provisions in such agreements may be susceptible to multiple interpretations. Any disputes with our licensing partners with respect to such agreements could narrow what we believe to be the scope of our rights to the relevant intellectual property or increase our obligations under such agreements, either of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are, from time to time, subject to claims of intellectual property infringement by third parties, including practicing entities and non-practicing entities. Regardless of the merit of such claims, any claim that we have violated intellectual property or other proprietary rights of third parties, whether or not it results in litigation, is settled out of court or is determined in our favor, could be expensive and time-consuming, and could divert the time and attention of management and technical personnel from our business. The litigation process is subject to inherent uncertainties, and we may not prevail in litigation matters regardless of the merits of our position. Further, our liability insurance may not cover potential claims of this type adequately or at all. Intellectual property lawsuits or claims may become extremely disruptive if plaintiffs were to succeed in blocking the trade of our products and services. Furthermore, an adverse outcome of a dispute may result in an injunction and could require us to pay substantial monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s intellectual property rights. Any settlement or adverse judgment resulting from such a claim could (i) require us to enter into a licensing agreement to continue using the technology, content or other intellectual property that is the subject of the claim; (ii) restrict or prohibit our use of such technology, content or other intellectual property; (iii) require us to expend significant resources to alter the design and operation of our systems and technology or the content of our courses; and (iv) require us to indemnify third parties. Royalty or licensing agreements, if required or desirable, may be unavailable on terms acceptable to us, or at all, and may require significant royalty payments and other expenditures. We may also be required to develop alternative non-infringing technology, which could require significant time and expense. There also can be no assurance that we would be able to develop or license suitable alternative technology, content or other intellectual property to permit us to continue offering the affected technology, content or services to our partners. If we cannot develop or license technology for any allegedly infringing aspect of our business, we would be forced to limit our battery technologies, products and services and may be unable to compete effectively. Any of these events could have a material adverse effect on our business, financial condition, results of operations and cash flows.

 

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We are subject to requirements and liabilities relating to environmental, health and safety laws and regulations and environmental remediation matters, including those related to the manufacturing and recycling of lead-acid batteries, which could adversely affect our business, financial condition, results of operation and reputation.

We are subject to numerous federal, foreign, international, state and local environmental, health and safety laws and regulations governing, among other matters, emissions to air, water and land, solid and hazardous waste storage, treatment, recycling, disposal and transportation, chemical exposure, worker and public health and safety, and remediation of the presence or releases of hazardous materials, including as they pertain to decommissioning our facilities, lead/lead compounds and sulfuric acid, the primary materials used in the manufacture of lead-acid batteries, and to solvents and metal compounds used in the manufacture or repair of lithium-ion batteries. There are significant capital, operating and other costs associated with compliance with or liability under environmental, health and safety laws and regulations. We have been subject to allegations, litigation, notices of violation, consent decrees and orders with governmental authorities, and failures to comply, particularly to the extent such noncompliance is determined to be part of a continuing pattern of noncompliance, with respect to such laws and regulations, including obtaining and complying with any permits required to conduct our operations, could subject us to civil or criminal liability, monetary damages, reputational damages, fines and/or a cessation or interruption of operations or an increase in costs to continue such operations in the future. Certain environmental laws, including the U.S. Superfund law and state equivalents, make us potentially liable on a strict, joint and several basis for the investigation and remediation of contamination at, or originating from, facilities that are currently or formerly owned or operated by us and third-party sites to which we send or have sent materials for disposal or materials for recycling, along with related natural resources damages. Such liability may not be limited to the cleanup of contamination, particularly when such contamination is present in residential areas. We are and have been involved in investigation and remediation activities at our current and former, and third-party sites. We cannot provide any assurance that we will not incur liability relating to the investigation or remediation of contamination or natural resources damages in the future, including contamination we did not cause, which could adversely affect our business, financial condition, results of operations and reputation. As an example, in December 2020, we were named in a lawsuit filed by the state of California seeking relief associated with environmental contamination generated by a former Exide lead recycling facility in Vernon, California to which we had sent lead bearing battery scrap and spent lead-acid batteries for the purpose of recycling, reimbursement of costs incurred to date by the plaintiff related to its investigation and clean up and potentially the costs of future investigation and remediation. This lawsuit proceeded to a bench trial from May 11 to 13, 2022 to determine the scope of the area needing remediation, and a ruling was issued on October 21, 2022 concluding that the state of California failed to establish that certain offsite residential areas were in fact impacted by the Vernon facility, thus narrowing the range of damages that may be claimed by the plaintiffs. In May 2023, a trial was held to determine the scope of the defendants’ liability and in an August 22, 2023 decision the court determined that the Company, although not wholly exempt from liability, is not liable for its shipments of whole spent lead-acid batteries, which comprise the overwhelming majority of what it sent to the site thereby limiting the Company’s exposure to other materials it sent to the site, such as dross, baghouse dust and lead oxide pastes, and narrowed the scope of the plaintiffs’ claims in other respects. A subsequent trial phase (in August 2023) determined that the defendants failed to establish that their respective liability was divisible. The state of California has since announced that it will now only seek reimbursement in this legal action for expenses paid to date for monitoring and testing, estimated at approximately $10 million, which will be the focus of the trial phase expected to occur in early 2024. However, the state retains the right to seek recovery of costs to remediate the site. We are currently unable to reasonably estimate the potential loss or range of potential losses as a result of this lawsuit.

Environmental, health and safety laws and regulations may also become more stringent in the future, which could increase costs of compliance, require us to manufacture with alternative technologies and materials or otherwise make material changes to our operations, resulting in significant increases to the cost of production. For example, we benefit from an exemption for lead-acid batteries from the European Union’s End-of-Life Vehicle Directive (Directive 2000/53/EC). If the European Union removes the exemption or declines to grant

 

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extensions of the exemption, and therefore makes it unlawful to use lead-acid batteries in light-duty vehicles, our business, financial condition and results of operations may be adversely affected. Similarly, there is a possibility that lead/lead compounds for use in lead-acid batteries and/or components of lithium-ion batteries could be added to the EU’s Registration, Evaluation, Authorisation, and Restriction of Chemicals (“REACH”) authorization list, the U.S.’s Toxic Substances Control Act (“TSCA”) high priority list, and/or the California Safer Consumer Products Priority Product list, which, in any of these cases, could result in litigation, cause us to incur significant costs in order to comply and adversely affect our business, financial condition and results of operations. In addition, costs, including capital and operating costs, relating to compliance with existing, modified or new environmental, health and safety laws and regulations can be material, and in the future we may be unable to generate sufficient funds or access other sources of capital to fund unforeseen environmental liabilities or expenditures. If we or our business partners fail to adhere to environmental, health and safety requirements, including obtaining and complying with any permits required to conduct operations, it could adversely affect our business, financial condition, results of operations and reputation.

In addition, increased public awareness and concern regarding environmental and social corporate responsibility and any concerns or allegations around our environmental, health and safety practices and compliance with laws and regulations in connection with the manufacturing, use, collection and recycling of our products could negatively impact the reputation of our company and products and our business could be materially and adversely affected by any reduction in the market acceptance of our products, even where such

concerns or allegations prove to be inaccurate or unfounded or do not relate to the performance of our products or the safety of our manufacturing, collection and recycling processes.

Global climate change (and related laws) could negatively affect our business, financial condition and results of operation. Increased public awareness and concern regarding global climate change may result in more regional and/or federal requirements to reduce or mitigate the effects of greenhouse gas emissions.

There continues to be a lack of consistency between states, the U.S. federal government and other countries regarding legislation and regulations relating to climate change, which creates economic and regulatory uncertainty. Such regulatory uncertainty extends to incentives, that if discontinued, could adversely impact the demand for batteries for energy efficient vehicles. These factors may impact the demand for our products, obsolescence of our products and our results of operations.

There is a growing consensus that greenhouse gas emissions are linked to global climate change. Climate change, such as extreme weather conditions, create financial risk to our business. For example, as described above, the demand for our products and services, such as automotive replacement batteries, may be affected by unseasonable weather conditions. Climate changes could also disrupt our operations by impacting the availability and cost of materials needed for manufacturing and could increase insurance and other operating costs. These factors may impact our decisions to construct new facilities or maintain existing facilities in areas most prone to physical climate risks. We could also face indirect financial risks passed through the supply chain and process disruptions due to physical climate changes that could result in price modifications for our products and the resources needed to produce them. In addition, increased public awareness and concern regarding climate change may impact the demand for our products or obsolescence of our products.

Failure to keep up with evolving trends, regulations and shareholder expectations relating to ESG issues or reporting could adversely impact our reputation, access to and cost of capital and financial results.

Certain institutional investors, investor advocacy groups, investment funds, creditors, influential financial markets participants and other stakeholders have become increasingly focused on companies’ ESG issues in evaluating their investments and business relationships, including the impact of greenhouse gas emissions on climate change. Certain organizations also provide ESG ratings, scores and benchmarking studies that assess companies’ ESG practices. Although there are no universally accepted standards for such ratings, scores or benchmarking studies, they are used by some investors to inform their investment and voting decisions. It is

 

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possible that our future investors or organizations that report on, rate or score ESG practices will not be satisfied with our ESG strategy or performance. Unfavorable press about or ratings or assessments of our ESG strategies or practices, regardless of whether or not we comply with applicable legal requirements, may lead to negative investor sentiment toward us, which could have a negative impact on our access to and cost of capital.

In addition, the adoption of new ESG-related regulations applicable to our business, or pressure from key stakeholders to comply with additional voluntary ESG-related initiatives or frameworks, could require us to make substantial investments in ESG matters, which could impact the results of our operations and cash flows. Decisions or related investments in this regard could affect consumer perceptions as to our brand. Furthermore, if our competitors’ corporate responsibility or ESG performance is perceived to be better than ours, potential or current investors may elect to invest with our competitors instead. In the event that we publicize certain initiatives or goals regarding ESG matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we fail to satisfy the expectations of investors and other key stakeholders or our initiatives are not executed as planned, our reputation and financial results could be materially and adversely affected. In addition, our access to and cost of capital, could be adversely affected.

We may also be required to increase our disclosure of ESG-related information over coming years, whether due to increased stakeholder demand, changes to voluntary disclosure frameworks that we have adopted or the development of legislation such as the EU’s Corporate Sustainability Reporting Directive, the SEC’s proposed new rules relating to the disclosure of climate-related risks or California’s climate-related disclosure laws. To the extent we elect or are required to report more ESG information, and regulators, investors, customers, supply chain partners or other stakeholders view this information as lagging or inadequate, this may have a negative impact on our business, whether from a reputational perspective, through a reduction in interest in purchasing our stock or products, or otherwise.

In addition, developing regulations regarding the ESG-impacts of companies’ own operations and those of their supply chains, particularly in the EU, may require us to conduct additional diligence procedures and collect further information in relation to the ESG performance of our operations and the entities in our supply chain. This may lead to an increased cost of our raw materials, which may in turn lead to a reduction in our business prospects, and may also lead to risks to our reputation to the extent that we or our supply chain partners are determined to not meet standards of ESG conduct expected by our customers, investors and other stakeholders.

Our business has been negatively impacted by the COVID-19 pandemic, and could be negatively impacted by similar outbreaks of disease or pandemics in the future.

The COVID-19 pandemic has had a material impact on the global economy. In 2020, COVID-19 spread rapidly around the world, including the United States and throughout EMEA, resulting in a rapid deterioration of the political, socio-economic and financial situation globally. In 2021, progress was made in containing the COVID-19 pandemic, however the disease continues to affect global macroeconomic conditions, including among others, disruptions in the global supply chain and the need to continuously implement enhanced safety and other measures in an effort to further combat the spread and virulence of the disease, contributing to increased volatility in prices and rising inflation. In response to the COVID-19 pandemic, the governments of many countries, states and cities have taken preventative or protective actions, such as imposing restrictions on travel and business operations, and advising or requiring individuals to limit or forego their time outside of their homes. The continuing surges of COVID-19 cases, along with the emergence of new strains and variants and challenges associated with the roll out and availability of vaccines have resulted in the reimposition of certain restrictions in certain states and countries and may lead to other restrictions being implemented in response to efforts to reduce the spread of COVID-19. Accordingly, the COVID-19 pandemic has severely restricted the level of economic activity in many countries, continues to adversely impact global economic activity and has contributed to significant volatility in financial markets.

 

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The Company’s operating performance is subject to global economic and market conditions, including their impacts on the aftermarket retail channel and global automotive industry. In fiscal year 2023, the impact of lockdowns in China and the resulting slowdown in general economic activity following the reversal of these policies unfavorably affected volumes. In fiscal year 2022, we experienced higher transportation and purchasing costs and overall higher operating costs, in part as a result of such price volatility and rising inflation. During the year ended September 30, 2021, the COVID-19 pandemic impacted the Company’s operational and financial performance, primarily due to higher transportation rates and operational inefficiencies as we adjusted production levels to align with changing market demand and implemented enhanced safety measures to protect the health of our employees. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Continuing Operations” for further discussion regarding the impact of the COVID-19 pandemic and inflation on the Company and its operations.

Because of the impacts COVID-19 had on the Company’s operations, the Company assessed certain accounting matters that require consideration of forecasted financial information using the information reasonably available to the Company, which does not include the unknown future impacts of COVID-19. Such accounting matters include, but are not limited to, its allowance for doubtful accounts, the carrying value of the Company’s goodwill, intangible assets and other long-lived assets and valuation allowances on deferred tax assets. As a result of these assessments, there were no impairments or material increases in allowance for doubtful accounts or valuation allowances that impacted the Company’s consolidated financial statements. Although the Company’s operations have resumed, there is no guarantee that COVID-19 will not require additional assessments in the future and these assessments will not result in material impacts to the consolidated financial statements in future reporting periods. Events and changes in circumstances arising after the date hereof, including those resulting from the impacts of COVID-19, could affect future periods and management’s planning for future periods.

The extent of the impact of the COVID-19 pandemic or the outbreak of other pandemics on the Company’s operational and financial performance will depend on certain developments, including the duration, intensity and continued spread of the pandemic, the impact and effectiveness of vaccination efforts, the emergence of new strains of the virus and any future resurgences of COVID-19 or variant strains, regulatory and private sector responses, which may be precautionary, and the impact to the Company’s customers, workforce and vendors, all of which are uncertain and cannot be predicted. As COVID-19 vaccines are available and being distributed and as operations begin to return to pre-pandemic levels, new potential legal liabilities may be created regarding workplace safety and employee rights. The Company’s financial condition and results could also be impacted by significant changes in commodity prices, foreign currency exchange rates and interest rates that may result from volatility in the economic and financial markets as a result of the COVID-19 pandemic. Changing market conditions may also affect the estimates and assumptions made by management. Such estimates and assumptions affect, among other things, the Company’s goodwill, long-lived asset and indefinite-lived intangible asset valuations, equity investment valuations, valuation of deferred income taxes and income tax contingencies, measurement of compensation cost for certain cash bonus plans and pension plan assumptions.

An extended period of global supply chain and economic disruption as a result of the COVID-19 or other pandemics could have a material negative impact on our business, results of operations, access to sources of liquidity and financial condition, though the full extent and duration is uncertain. To the extent that a pandemic adversely impacts our business, results of operations, liquidity or financial condition, it may also have the effect of increasing many of the other risks described in this “Risk Factors” section.

A variety of other factors could adversely affect our results of operations.

Any of the following could materially and adversely impact our results of operations: loss of, or changes in, automobile battery supply contracts with our large original equipment and aftermarket customers; contracts, or the interruption or cessation of operations of, with certain of our suppliers including long-term tolling agreements; the increasing quality and useful life of batteries or use of alternative battery technologies, both of

 

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which may adversely impact the lead-acid battery market, including replacement cycle; delays or cancellations of new vehicle programs; market and financial consequences of any recalls that may be required on our products; delays or difficulties in new product development, including lithium-ion technology; impact of potential increases in lithium-ion battery volumes on established lead-acid battery volumes as lithium-ion battery technology grows and costs become more competitive; financial instability or market declines of our customers or suppliers; slower than projected market development in emerging markets; interruption of supply of certain single-source components; changing nature of our joint ventures and relationships with our strategic business partners; unseasonable weather conditions in various parts of the world; transportation delays within our plant network or increased prices for logistics services; our ability to secure sufficient tolling capacity to recycle batteries; price and availability of battery cores used in recycling; and the pace of the development of the market for hybrid and electric vehicles.

Our reliance on certain significant suppliers subjects us to numerous risks, including possible interruptions in supply, which could adversely affect our business.

Our ability to maintain consistent quality throughout our operations depends in part upon our ability to acquire certain products in sufficient quantities. Our suppliers are subject to environmental, health and safety laws and regulations and failure to comply with such laws and regulations could result in a cessation or interruption of their operations or increased costs which are passed on to their customers, including us. Supply shortages for a particular component can delay production and thus delay shipments to customers and our receipt of related net sales. This could cause us to experience a reduction in sales, increased costs and could adversely affect relationships with existing and prospective customers. In particular, a disruption to lead supply could adversely impact our business, financial condition and results of operations.

Negative or unexpected tax consequences could adversely affect our results of operations.

Adverse changes in the underlying profitability and financial outlook of our operations in several jurisdictions could lead to additional changes in our valuation allowances against deferred tax assets and other tax reserves on our statement of financial position, and the future sale of certain businesses could potentially result in the reversal of outside basis differences that could adversely affect our results of operations and cash flows. Additionally, changes in tax laws in the U.S. or in other countries where we have significant operations could materially affect deferred tax assets and liabilities on our consolidated statements of financial position and our income tax provision in our consolidated statements of income (loss). We are also subject to tax audits by governmental authorities. Negative unexpected results from one or more such tax audits could adversely affect our results of operations.

In addition, changes in tax laws in the U.S. could materially affect the amount of payments the Company is obligated to make under the tax receivable agreement (the “TRA”) entered into with the Sponsor Group in September 2021 (as amended from time to time). Refer to Note 16, “Commitments and Contingencies,” of the notes to the financial statements included elsewhere in this prospectus for further information.

Future changes in applicable U.S. federal and state and foreign tax law could adversely affect us or our affiliates.

Future changes in tax laws or regulations, or the interpretation thereof, tax policy initiatives and reforms under consideration and the practices of tax authorities in the United States and other jurisdictions where we do business regularly could adversely affect us. We are unable to predict what tax reform may be proposed or enacted in the future or what effect such changes would have on our business, but such changes could affect our financial position and overall or effective tax rates in the future, reduce after-tax returns to our stockholders, and increase the complexity, burden and cost of tax compliance. For example, the Organisation for Economic Co-operation and Development and numerous jurisdictions have had an increased focus on issues concerning the taxation of multinational businesses and several related reforms have been put forth (including the

 

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implementation of a global minimum tax rate of at least 15% for large multinational businesses), which could have a negative effect on our business, financial condition and results of operations. If our effective tax rate increases, our operating results and cash flow could be adversely affected. Our effective income tax rate can vary significantly between periods due to a few complex factors including, but not limited to, projected levels of taxable income, tax audits conducted and settled by tax authorities, and adjustments to income taxes upon finalization of income tax returns.

Legal proceedings in which we are, or may be, a party may adversely affect us.

We are currently, and may in the future, become subject to legal proceedings and commercial or contractual disputes. These are typically claims that arise in the normal course of business including, without limitation, commercial or contractual disputes with our suppliers or customers, intellectual property matters and third-party liability, including product liability claims and employment claims. We are currently, and may in the future be named as a defendant in tort exposure claims and other actions where the third-party use of our products or where our operations (including those involving the collection, recycling, transportation and storage of lead bearing materials as well as those involving the assembly, manufacture, storage and transportation of components, work in process and finished products) have allegedly resulted in contamination to the soil, groundwater and drinking water supplies or elevated concentrations of lead in individuals. Plaintiffs in these cases are generally seeking damages for personal injuries, medical monitoring and diminution in property values, and are also seeking punitive damages and injunctive relief to address the alleged injury or remediation of the alleged contamination. Furthermore, we are currently, and may in the future, be named as a defendant in other claims relating to environmental, health and safety laws and regulations we are subject to. See “—We are subject to requirements and liabilities relating to environmental, health and safety laws and regulations and environmental remediation matters, including those related to the manufacturing and recycling of lead-acid batteries, which could adversely affect our business, financial condition, results of operation and reputation.” For example, in December 2020, we were named in a lawsuit filed by the state of California seeking relief associated with environmental contamination generated by a former Exide lead recycling facility in Vernon, California to which we have sent lead bearing battery scrap and spent lead acid batteries for the purpose of recycling, reimbursement of costs incurred to date by the plaintiff related to its investigation and clean up and potentially the costs of future investigation and remediation. This lawsuit proceeded to a bench trial from May 11 to 13, 2022 to determine the scope of the area needing remediation, and a ruling was issued on October 21, 2022, concluding that the state of California failed to establish that certain offsite residential areas were in fact impacted by the Vernon facility, thus narrowing the range of damages that may be claimed by the plaintiffs. In May 2023, a trial was held to determine the scope of the defendants’ liability and in an August 22, 2023 decision the court determined that the Company, although not wholly exempt from liability, is not liable for its shipments of whole spent lead-acid batteries, which comprise the overwhelming majority of what it sent to the site thereby limiting the Company’s exposure to other materials it sent to the site, such as dross, baghouse dust and lead oxide pastes, and narrowed the scope of the plaintiffs’ claims in other respects. A subsequent trial phase (in August 2023) determined that the defendants failed to establish that their respective liability was divisible. The state of California has since announced that it will now only seek reimbursement in this legal action for expenses paid to date for monitoring and testing, estimated at approximately $10 million, which will be the focus of the trial phase expected to occur in early 2024. However, the state retains the right to seek recovery of costs to remediate the site. We are currently unable to reasonably estimate the potential loss or range of potential losses as a result of this lawsuit. There is a possibility that litigation in which we are involved may have an adverse impact on our results of operations and cash flows that is greater than we anticipate and/or negatively affect our reputation.

The potential insolvency or financial distress of third parties could adversely impact our business and results of operations.

We are exposed to the risk that third parties to various arrangements who owe us money or goods and services, or who purchase goods and services from us, will not be able to perform their obligations or continue to place orders due to insolvency or financial distress. If third parties fail to perform their obligations under

 

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arrangements with us, we may be forced to replace the underlying commitment at current or above market prices or on other terms that are less favorable to us. In such events, we may incur losses, or our results of operations, financial condition or liquidity could otherwise be adversely affected.

We may be unable to complete or integrate acquisitions or joint ventures effectively, which may adversely affect our growth, profitability and results of operations.

Acquisitions of businesses and assets, as well as joint ventures (or other strategic arrangements), may play a role in our future growth. We cannot be certain that we will be able to identify attractive acquisition or joint venture targets, obtain financing for acquisitions on satisfactory terms, successfully acquire identified targets, form joint ventures or manage the timing of acquisitions with capital obligations. Acquisitions, partnerships, alliances and subsequent integrations thereof would require significant managerial, operational and financial resources and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our growth and business operations. Additionally, we may not be successful in integrating acquired businesses or joint ventures into our existing operations and achieving projected synergies which could result in impairment of assets, including goodwill and acquired intangible assets. We must necessarily base any assessment of potential acquisitions, partnerships or alliances on assumptions with respect to operations, profitability and other matters that may subsequently prove to be incorrect. Future acquisitions and alliances, as well as other investments, may not produce anticipated synergies or perform in accordance with our expectations. The cost and duration of integrating newly acquired businesses could also materially exceed our expectations.

Competition for acquisition opportunities in the industry in which we operate may rise, thereby increasing our costs of making acquisitions or causing us to refrain from making further acquisitions. If we were to use equity securities to finance a future acquisition, our then-current stockholders would experience dilution. We are also subject to applicable antitrust laws and must avoid anticompetitive behavior. These and other factors related to acquisitions and joint ventures may negatively and adversely impact our growth, profitability and results of operations.

Risks associated with joint venture investments may adversely affect our business and financial results.

We have entered into several joint ventures and we may enter into additional joint ventures in the future. Our joint venture partners may at any time have economic, business or legal interests or goals that are inconsistent with our goals or with the goals of the joint venture. In addition, we may compete against our joint venture partners in certain of our other markets. Disagreements with our business partners may impede our ability to maximize the benefits of our partnerships. Our joint venture arrangements may require us, among other matters, to pay certain costs or to make certain capital investments or to seek our joint venture partner’s consent to take certain actions. In addition, our joint venture partners may be unable or unwilling to meet their economic or other obligations under the operative documents, and we may be required to either fulfill those obligations alone to ensure the ongoing success of a joint venture or to dissolve and liquidate a joint venture. These risks could result in a material adverse effect on our business and financial results.

A failure of our information technology (IT) and cybersecurity infrastructure could adversely impact our business and operations.

We rely upon the capacity, reliability and security of our IT and cybersecurity infrastructure and our ability to expand and continually update this infrastructure in response to the changing needs of our business. As we implement new systems or integrate existing systems, they may not perform as expected. We also face the challenge of supporting our older systems and implementing necessary upgrades. If we experience a problem with the functioning of an important IT system or a security breach of our IT systems, including during system upgrades and/or new system implementations, the resulting disruptions could have an adverse effect on our business. Furthermore, we collect and maintain information in digital form that is necessary to conduct our business, and we are increasingly dependent on our IT and cybersecurity infrastructure to operate our business. In

 

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the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information and personal information. It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We have established physical, electronic and organizational measures to safeguard and secure our systems to prevent a data compromise, and rely on commercially available systems, software, tools, and monitoring to provide security for our IT systems and the processing, transmission and storage of digital information. We have also outsourced elements of our IT systems, and as a result a number of third-party vendors may or could have access to our confidential information.

Despite our implementation of security measures, our IT systems, like those of other companies, are vulnerable to damage or interruption from a variety of sources, including physical damage, telecommunications or network failures or interruptions, system malfunction, natural disasters, malicious human acts, terrorism and war. Such IT systems, including our servers, are additionally vulnerable to physical or electronic break-ins, security breaches from inadvertent or intentional actions by our employees, third-party service providers, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering, and other means to affect service reliability and threaten the confidentiality, integrity, and availability of information). The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. We can provide no assurance that our current IT systems, or those of the third parties upon which we rely, are fully protected against cyber security threats. We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments or agencies. It is possible that we or our third-party vendors may experience cybersecurity and other breach incidents that remain undetected for an extended period. Even when a security breach is detected, the full extent of the breach may not be determined immediately. The costs to us to mitigate network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant and, while we have implemented security measures to protect our IT and cybersecurity infrastructure, our efforts to address these problems may not be successful.

Any system failure, accident or security breach could result in disruptions to our operations or those of our customers. A material network breach in the security of our IT systems could include the theft of our intellectual property (including our trade secrets), customer information, human resources information or other confidential matter or the theft of the confidential information of our customers. To the extent that any disruption or security breach results in a loss or damage to our or our customers’ data, or an inappropriate disclosure of confidential, proprietary or customer information, it could cause significant damage to our reputation, affect our relationships with our customers, lead to claims against the Company and ultimately harm our business. In addition, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future. If our IT systems fail and our redundant systems or disaster recovery plans are not adequate to address such failures, or if our business interruption insurance does not sufficiently compensate us for any losses that we may incur, our revenues and profits could be reduced and the reputation of our brand and our business could be materially and adversely affected.

We are also reliant on the security practices of our third-party service providers, which may be outside of our direct control. The services provided by these third parties are subject to the same risk of outages, other failures and security breaches described above. If these third parties fail to adhere to adequate security practices, or experience a breach of their systems, the data of our employees, customers and business associates may be improperly accessed, used or disclosed. In addition, our providers have broad discretion to change and interpret the terms of service and other policies with respect to us, and those actions may be unfavorable to our business operations. Our providers may also take actions beyond our control that could harm our business, including

 

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discontinuing or limiting our access to one or more services, increasing pricing terms, terminating or seeking to terminate our contractual relationship altogether, or altering how we are able to process data in a way that is unfavorable or costly to us. Although we expect that we could obtain similar services from other third parties, if our arrangements with our current providers were terminated, we could experience interruptions in our business, as well as delays and additional expenses in arranging for alternative cloud infrastructure services. Any loss or interruption to our systems or the services provided by third parties would adversely affect our business, financial condition and results of operations.

A material disruption of our operations, particularly at our manufacturing or recycling facilities, could adversely affect our business.

If our operations, particularly at our manufacturing or recycling facilities, were to be disrupted as a result of significant equipment failures, natural disasters, power outages, fires, explosions, terrorism, sabotage, adverse weather conditions, public health crises, labor disputes, regulatory changes or other reasons, we may be unable to effectively fill customer orders and otherwise meet obligations to or demand from our customers, which could adversely affect our financial performance. For example, in May 2023, workers at our facility in Toledo, Ohio went on strike and resumed work in June 2023 upon the Company reaching an agreement with the workers’ union. The Company’s performance was adversely impacted during this period due to decreased productivity and unplanned costs. In addition, should we be unable to resume operations at any facility, we may incur unplanned costs, including restructuring and/or impairment costs, as well as revisions to our asset retirement obligations for those facilities.

Interruptions in production could increase our costs and reduce our sales. Any interruption in production capability could require us to make substantial capital expenditures or purchase alternative material at higher costs to fill customer orders, which could negatively affect our profitability and financial condition. We maintain property damage insurance that we believe to be adequate to provide for reconstruction of facilities and equipment, as well as business interruption insurance to mitigate losses resulting from significant production interruption or shutdown caused by an insured loss. However, any recovery under our insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations, which could adversely affect our business, financial condition, results of operations and cash flow.

Our business success depends on attracting and retaining qualified personnel.

Our ability to sustain and grow our business requires us to hire, retain and develop a highly skilled and diverse management team and workforce. Failure to ensure that we have the leadership capacity with the necessary skill set and experience could impede our ability to deliver our growth objectives and execute our strategic plan. Organizational and reporting changes as a result of any future leadership transition or corporate initiatives could result in increased turnover. Additionally, any unplanned turnover or inability to attract and retain key employees could have a negative effect on our results of operations.

Our business may be adversely affected by work stoppages, union negotiations, labor disputes and other matters associated with our labor force, our customers’ labor force and our suppliers’ labor force.

As of September 30, 2023, we employed approximately 17,284 people worldwide. Approximately 67% of these employees are covered by collective bargaining agreements or works council. Although we believe that our relations with the labor unions and works councils that represent our employees are generally good, no assurances can be made that we will not experience in the future material strikes or work stoppages, and other types of conflicts with labor unions, works council, other groups representing employees or our employees generally, or that any future negotiations with our labor unions will not result in significant increases in our cost of labor. Additionally, a work stoppage at one of our suppliers could materially and adversely affect our operations if an alternative source of supply were not readily available. Stoppages by employees of our customers could also result in reduced demand for our products.

 

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We may be unable to successfully implement our business strategy, which could adversely affect our business, financial condition, cash flows or results of operations.

Our ability to achieve our business and financial objectives is subject to a variety of factors, many of which are beyond our control. For example, we may not be successful in increasing our manufacturing and distribution efficiency through productivity, process improvements and cost reduction initiatives. Further, we may not be able to realize the benefits of these improvements and initiatives within the time frames we currently expect. We may incur costs related to the closure including workforce reductions and non-cash asset impairments, among others. Any failure to successfully implement our business strategy could adversely affect our business, financial condition, cash flows, or results of operations, and could further impair our ability to make certain strategic capital expenditures.

We provide warranties with respect to certain of our products that may require us to bear the costs of product repair or replacement.

We provide warranties with respect to certain of our products. Our management is required to make assumptions and to apply judgment regarding a number of factors, including anticipated rate of warranty claims, the durability and reliability of our products, and after-care costs in negotiating warranties and estimating warranty expenses. Our assumptions could prove to be materially different from the actual performance of our batteries, which could result in substantial expense to repair or replace defective products in the future and may exceed expected levels against which we have established reserves.

In addition, with new products and products that remain under development, we will be required to base our warranty estimates on our historical experience with similar products, testing of the batteries under laboratory conditions and limited performance information obtained through testing activities with customers. As a result, actual warranty claims may be significantly different from our estimates.

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business.

Following the completion of this offering, we will be required to comply with various regulatory and reporting requirements, including those required by the Securities and Exchange Commission (the “SEC”). Complying with these reporting and other regulatory requirements will be time-consuming and will result in increased costs to us and could have a negative effect on our business, financial condition and results of operations.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) and requirements of the Sarbanes-Oxley Act of 2002 (as amended, the “Sarbanes-Oxley Act”). These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and improve the effectiveness of our disclosure controls and procedures, we may need to commit significant resources, hire additional staff and provide additional management oversight. We will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join Clarios and to maintain appropriate operational and financial systems to adequately support expansion. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.

 

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Conditions in the banking system and financial markets, including the failure of banks and financial institutions, could have an adverse effect on our operations and financial results.

On March 10, March 12 and May 1, 2023, the Federal Deposit Insurance Corporation (“FDIC”) took control and was appointed receiver of Silicon Valley Bank (“SVB”), Signature Bank and First Republic Bank, respectively, after each bank was unable to continue their operations. These events exposed vulnerabilities in the banking sector, including legal uncertainties, significant volatility and contagion risk, and caused market prices of regional bank stocks to plummet. As of the date hereof, our exposure to SVB, Signature Bank and First Republic Bank is immaterial, however, we are unable to predict the extent or nature of the impacts of these evolving circumstances at this time. If, for example, other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents, investments, and draw under the Revolving Facility and/or our ABL Facility, may be threatened. While it is not possible at this time to predict the extent of the impact that the failure of SVB and Signature Bank or the high market volatility and instability of the banking sector could have on economic activity and our business in particular, the failure of other banks and financial institutions and the measures taken by governments, businesses and other organizations in response to these events could adversely impact our business, financial condition and results of operations.

Risks Relating to our Indebtedness

We have a substantial amount of indebtedness, which could adversely affect our financial condition and ability to operate our business.

As of September 30, 2023, we had approximately $8.4 billion of long-term debt outstanding, including deferred financing costs and finance leases, and approximately $1.5 billion of additional borrowing capacity under the ABL Facility and the Revolving Facility (including undrawn letters of credit), subject to borrowing base availability and other customary conditions. Our substantial indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences for our business. For example, it could:

 

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make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under the agreements governing such indebtedness;

 

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require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, business development and other purposes;

 

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compromise our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, due to our high level of debt and the restrictive covenants in the credit agreements that govern our Senior Secured Credit Facilities and the ABL Facility and the indentures governing our outstanding notes;

 

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limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;

 

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limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions and other corporate purposes;

 

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prevent us from raising the funds necessary to repurchase all the notes tendered to us upon the occurrence of certain changes of control, which would constitute a default under the agreements governing such indebtedness; and

 

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limit our ability to redeem, repurchase, defease or otherwise acquire or retire for value any subordinated indebtedness we may incur.

These restrictions could adversely affect our financial condition and limit our ability to successfully implement our growth strategy.

 

 

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In addition, we may need additional financing to support our business and pursue our growth strategy, including for strategic acquisitions. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets and other factors. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to those of our common stock, and, in the case of equity and equity-linked securities, our existing stockholders may experience dilution.

The credit agreements that govern the Senior Secured Credit Facilities and the ABL Facility and the indentures governing our outstanding notes each impose significant operating and financial restrictions on our company, which may prevent us from capitalizing on business opportunities.

The credit agreements that govern the Senior Secured Credit Facilities and the ABL Facility and indentures governing our outstanding notes each impose significant operating and financial restrictions on our company. These restrictions limit our ability and the ability of certain of our subsidiaries to, among other things:

 

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incur or guarantee additional debt or issue disqualified stock or preferred stock;

 

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pay dividends and make other distributions on, or redeem or repurchase, capital stock;

 

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make certain investments;

 

•

incur certain liens;

 

•

enter into transactions with affiliates;

 

•

merge or consolidate;

 

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enter into agreements that prohibit the ability of restricted subsidiaries to make dividends or other payments to us and certain of our other subsidiaries;

 

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designate restricted subsidiaries as unrestricted subsidiaries;

 

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prepay, redeem or repurchase certain indebtedness that is subordinated in right of payment to the notes;

 

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and transfer or sell assets.

In addition, we are required to comply with, based on level of utilization of the ABL Facility or certain events of default thereunder, a fixed-charge coverage ratio financial maintenance covenant under the ABL Facility and, based on level of utilization of the Revolving Facility, a leverage-based financial maintenance covenant under the Revolving Facility. See “Description of Material Indebtedness.”

As a result of the restrictions described above, we will be limited as to how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.

Our failure to comply with the restrictive covenants described above as well as other terms of our indebtedness and/or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected.

 

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We are a holding company and all of our operations are conducted through our subsidiaries. Our ability to pay dividends to you will depend on cash flow generated by our subsidiaries, which may be subject to limitations beyond our control.

As a holding company, our subsidiaries own all of our assets and conduct all of our operations. Accordingly, our ability to pay dividends to you will depend upon our receipt of dividends and other distributions from our subsidiaries. Furthermore, we have certain existing indebtedness, and may incur additional indebtedness or enter into other arrangements in the future, that contain terms that restrict or prohibit our subsidiaries from paying dividends, making other distributions and making loans to us. The restrictions on these subsidiaries’ ability to pay dividends to us have not to date had a material impact on our liquidity or our ability to pay dividends to our shareholders. However, we cannot assure you that the agreements governing our existing or future indebtedness will permit our subsidiaries to provide us with sufficient dividends or distributions or permit us to loan money or enter into other similar arrangements to fund dividend payments. To the extent our subsidiaries do not have funds available or are otherwise restricted from paying dividends to us, our ability to pay dividends to our stockholders will be adversely affected.

Interest rate fluctuations may have a material adverse effect on our business, results of operations, financial condition and cash flows.

Indebtedness under the Senior Secured Credit Facilities and the ABL Facility bears interest at variable rates and we may incur additional variable interest rate indebtedness in the future. This exposes us to interest rate risk, and any interest rate swaps we enter into in order to reduce interest rate volatility may not fully mitigate our interest rate risk. If interest rates were to increase, our debt service obligations on the variable rate indebtedness would increase even if the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

Risks Related to Our Common Stock and this Offering

There may not be an active, liquid trading market for our common stock.

Prior to this offering, there has been no public market for shares of our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on the NYSE or how liquid that market may become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you purchase. The initial public offering price of shares of our common stock is, or will be, determined by negotiation between us and the underwriters and may not be indicative of prices that will prevail following the completion of this offering. The market price of shares of our common stock may decline below the initial public offering price, and you may not be able to resell your shares of our common stock at or above the initial public offering price.

We expect that our stock price will fluctuate significantly, and you may not be able to resell your shares at or above the initial public offering price.

The trading price of our common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including:

 

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market conditions in the broader stock market in general, or in our industry in particular;

 

•

actual or anticipated fluctuations in our quarterly financial and operating results;

 

•

introduction of new products and services by us or our competitors;

 

•

issuance of new or changed securities analysts’ reports or recommendations;

 

•

sales of large blocks of our stock;

 

•

additions or departures of key personnel;

 

•

regulatory developments;

 

•

litigation and governmental investigations; and

 

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economic and political conditions or events.

 

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These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

If securities or industry analysts do not publish research or reports about our business, or they publish inaccurate or unfavorable reports about our business, the price of our common stock and trading volume could decline.

The trading market for our common stock will also be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.

If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our common stock could decline.

If our existing stockholders sell substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decrease significantly. The perception in the public market that our existing stockholders might sell shares of common stock could also depress our market price. Upon completion of this offering, we will have outstanding                  shares of common stock. Our directors, executive officers and additional other holders of our common stock will be subject to the lock-up agreements described in “Underwriting” and the Rule 144 holding period requirements described in “Shares Eligible for Future Sale.” After all of these lock-up periods have expired and the holding periods have elapsed,                  additional shares will be eligible for sale in the public market. The market price of shares of our common stock may drop significantly when the restrictions on resale by our existing stockholders lapse. A decline in the price of shares of our common stock might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities.

Insiders will continue to have substantial control over us after this offering and could limit your ability to influence the outcome of key transactions and significant corporate matters.

As of                     , 2023, the Sponsor Group, our controlling shareholder, held approximately     % of our outstanding equity interests. Following the completion of this offering, our controlling shareholder will own approximately     % of our shares, and as such, will continue to be our controlling shareholder following the completion of this offering. As a result of its ownership of     % of our shares, the Sponsor Group will have the power to, among other matters, elect the members of our board of directors and decide upon certain major corporate transactions. Other matters requiring approval by the Sponsor Group pursuant to the Stockholders Agreement we will enter into in connection with this offering (the “Stockholders Agreement”) include certain amendments to our certificate of incorporation and bylaws, increasing or decreasing the size of our board of directors, removing and appointing our chief executive officer and chief financial officer and material changes to our lines of business. In addition, the Stockholders Agreement will provide that for so long as the Sponsor Group continues to own or control at least 25% of our issued and outstanding common stock, the Company shall not (and shall cause each of the Company’s subsidiaries not to), in each case, without the prior written consent of the Sponsor Group: (i) agree to or consummate any acquisition, whether by purchase, contribution, merger, consolidation or otherwise, of any property, assets or equity interests for consideration with a fair market value, as determined in good faith by the Board, of greater than $250 million in any single transaction or series of related transactions; (ii) issue any equity-based security of the Company or any of its subsidiaries in excess of $75 million in any single transaction or series of related transactions, other than (x) any issuance of equity

 

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securities of the Company to service providers, employees or directors pursuant to any employee benefit plan or compensatory plan or arrangement of the Company or any of its subsidiaries or (y) by any subsidiary of the Company to the Company or another subsidiary of the Company; or (iii) create, incur or assume any Indebtedness that would result in aggregate Indebtedness of the Company and its subsidiaries exceeding $400 million, other than any intercompany borrowings.

The Stockholders Agreement will require us to, among other things, for so long as the Sponsor Group is controlled by Brookfield and the Sponsor Group owns or controls at least: (i) 25% of the aggregate number of outstanding shares of our common stock, nominate a number of individuals designated by the Sponsor Group for election as directors (each a “Sponsor Director”) such that, upon the election of each such individual, the number of Sponsor Directors serving as directors of our company will be equal to a majority of the board of directors (including the chair of the board of directors), and (ii) between 15% and 24.99% of the aggregate number of outstanding shares of our common stock, nominate a number of Sponsor Directors such that, upon the election of each such individual, the number of Sponsor Directors serving as directors of our company will be equal to the greater of (x) 25% of the board of directors and (y) three directors.

In addition, certain of our directors may be employed by or otherwise affiliated with one or more entities forming the Sponsor Group. Although these directors attempt to perform their duties within each entity independently, such employment relationships and affiliations could give rise to potential conflicts of interest when a director is faced with a decision that could have different implications for the applicable entities. These potential conflicts could arise, for example, over matters such as the desirability of changes to our business and operations, funding and capital matters, regulatory matters, matters arising with respect to agreements with the Sponsor Group, board composition, employee retention or recruiting, labor, tax, employee benefit, indemnification and our dividend policy and declarations of dividends, among other matters.

Furthermore, our principal stockholders, directors and executive officers and entities affiliated with them will own approximately     % of the outstanding shares of our common stock after this offering. As a result, these stockholders, if acting together, would be able to influence or control matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. The concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

We have opted out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), which prohibits a publicly held Delaware corporation from engaging in a business combination transaction with an interested stockholder for a period of three years after the interested stockholder became such unless the transaction fits within an applicable exemption, such as board approval of the business combination or the transaction which resulted in such stockholder becoming an interested stockholder. However, our amended certificate of incorporation will contain similar provisions providing that we may not engage in such transactions, provided that the Sponsor Group and its affiliates and any of their respective direct or indirect transferees and any group as to which such persons are a party will not constitute “interested stockholders” for purposes of this provision. Therefore, the Sponsor Group will be able to transfer control of us to a third-party by transferring their shares of our common stock (subject to certain restrictions and limitations), which would not require the approval of our board of directors or our other stockholders.

We will be a “controlled company” within the meaning of the rules of the NYSE and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Upon closing of this offering, the Sponsor Group will continue to control a majority of the voting power of

 

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our outstanding common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE. Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

•

the requirement that a majority of the board of directors consist of independent directors; and

 

•

the requirement that our compensation and governance committee be composed entirely of independent directors.

While the Sponsor Group controls a majority of the voting power of our outstanding common stock, we intend to rely on these exemptions and, as a result, will not have a majority of independent directors on our board of directors. In addition, we have opted to have a governance and compensation committee and such committee will not be fully independent. Upon the closing of this offering, we expect that seven of our 11 directors will not qualify as “independent directors” under the applicable rules of the NYSE.

Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

Some provisions of Delaware law and our amended and restated certificate of incorporation and bylaws may deter third parties from acquiring us.

Our amended and restated certificate of incorporation and bylaws will provide for, among other things:

 

•

division of our board of directors into three classes of directors, with each class as equal in number as possible, serving staggered three-year terms;

 

•

at any time after the Sponsor Group, together permitted transferees, owns less than a majority of our outstanding common stock (the “Majority Ownership Requirement”), there will be:

 

•

restrictions on the ability of our stockholders to call a special meeting and the business that can be conducted at such meeting or to act by written consent;

 

•

supermajority approval requirements for amending or repealing provisions in the certificate of incorporation and bylaws including (i) the provision requiring a 662⁄3% supermajority vote for stockholders to amend our amended and restated bylaws, (ii) the provisions providing for a classified board of directors (the election and term of our directors), (iii) the provisions regarding resignation and removal of directors, (iv) the provisions regarding competition and corporate opportunities, (v) the provisions regarding entering into business combinations with interested stockholders, (vi) the provisions regarding stockholder action by written consent, (vii) the provisions regarding calling special meetings of stockholders, (viii) the provisions regarding filling vacancies on our board of directors and newly created directorships, (ix) the provisions eliminating monetary damages for breaches of fiduciary duty by a director, (x) the provision regarding forum selection and (xi) the amendment provision requiring that the above provisions be amended only with a 662⁄3% supermajority vote; and

 

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the removal of directors for cause only upon the affirmative vote of the holders of at least 662⁄3% of the shares of common stock entitled to vote generally in the election of directors;

 

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the authorization of undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

 

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the absence of cumulative voting in the election of directors; and

 

•

advance notice requirements for stockholder proposals.

These anti-takeover defenses could discourage, delay or prevent a transaction involving a change in control of our company. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts. These provisions could also make it more difficult for stockholders to nominate directors for election to our board of directors and take other corporate actions.

 

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Our amended and restated certificate of incorporation will require exclusive forum in certain courts in the State of Delaware or the federal district courts of the United States for certain types of lawsuits that may have the effect of discouraging lawsuits against our directors and officers.

Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or stockholders to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our bylaws or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought in a state court located within the State of Delaware (or if no state court of the State of Delaware has jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. The foregoing provision will not apply to claims arising under the Securities Act, the Exchange Act or other federal securities laws for which there is exclusive federal or concurrent federal and state jurisdiction.

In addition, our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers or stockholders, which may discourage lawsuits with respect to such claims. Further, in the event a court finds either exclusive forum provision contained in our amended and restated certificate of incorporation to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

We do not anticipate paying any cash dividends in the foreseeable future.

We currently intend to retain our future earnings, if any, for the foreseeable future, to fund the development and growth of our business. We do not intend to pay any dividends to holders of our common stock. Any future determination to pay dividends will be at the discretion of our board of directors, subject to applicable laws, and will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by our board of directors. If we issue any Mandatory Convertible Preferred Stock, no dividends may be declared or paid on our common stock unless accumulated and unpaid dividends on the Mandatory Convertible Preferred Stock have been declared and paid, or set aside for payment, on all outstanding shares of the Mandatory Convertible Preferred Stock for all preceding dividend periods. See “Dividend Policy.” As a result, capital appreciation in the price of our common stock, if any, will be your only source of gain on an investment in our common stock.

New investors in our common stock will experience immediate and substantial book value dilution after this offering.

The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of our common stock. Dilution is the difference between the initial public offering price per share of common stock and the pro forma net tangible book value per share of common stock after this offering. If you purchase shares of common stock in this offering, you will incur immediate and substantial

 

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dilution in the amount of approximately $             per share per share of common stock, based on the midpoint of the price range set forth on the cover of this prospectus. In addition, if we issue additional equity securities in the future, including to our employees and directors under our equity incentive plan, investors purchasing shares of common stock in this offering will experience additional dilution. See “Dilution.”

Concurrently with this offering, we are offering                  shares of the Mandatory Convertible Preferred Stock, plus up to an additional                  shares of the Mandatory Convertible Preferred Stock if the underwriters in that offering exercise their over-allotment option to purchase additional shares of Mandatory Convertible Preferred Stock in full.

Unless converted earlier as described below, each share of the Mandatory Convertible Preferred Stock will automatically and mandatorily convert on the mandatory conversion date into between                           and                 shares of our common stock, subject to certain anti-dilution and other adjustments. The number of shares of common stock issuable upon conversion will be determined based on the Average VWAP (as defined below) per share of our common stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day immediately preceding the mandatory conversion date in accordance with the certificate of designations setting forth the terms of the Mandatory Convertible Preferred Stock (the “Certificate of Designations”). Assuming mandatory conversion based on an applicable market value of our common stock equal to the assumed initial public offering price of $             per share of common stock, which is the midpoint of the estimated offering price range shown on the cover page of this prospectus,                  shares of our common stock (or                  shares if the underwriters in the Concurrent Offering exercise their over-allotment option in full) are issuable upon conversion of the Mandatory Convertible Preferred Stock being offered in the Concurrent Offering, subject to anti-dilution, make-whole and other adjustments. At any time prior to the mandatory conversion date, holders of Mandatory Convertible Preferred Stock may elect to convert each share of the Mandatory Convertible Preferred Stock into shares of our common stock at the minimum conversion rate of shares of our common stock per share of the Mandatory Convertible Preferred Stock, subject to anti-dilution adjustments. If holders elect to convert any shares of the Mandatory Convertible Preferred Stock during a specified period beginning on the effective date of a fundamental change (as defined in the Certificate of Designations), such shares of the Mandatory Convertible Preferred Stock will be converted into shares of our common stock at an increased conversion rate and subject to additional payments and/or deliveries in respect of a fundamental change dividend make-whole amount and an accumulated dividend amount.

We may also choose to pay dividends on the Mandatory Convertible Preferred Stock in shares of our common stock, and the number of shares of common stock issued for such purpose will be based on the Average VWAP per share of our common stock over a certain period, subject to certain limitations described in the Certificate of Designations. See “Mandatory Convertible Preferred Stock Offering.”

Any of these issuances may dilute your ownership interest in us and any of these events or the perception that these conversions and/or issuances could occur may have an adverse impact on the price of our common stock.

The Mandatory Convertible Preferred Stock may adversely affect the market price of our common stock.

The market price of our common stock is likely to be influenced by the Mandatory Convertible Preferred Stock. For example, the market price of our common stock could become more volatile and could be depressed by:

 

•

investors’ anticipation of the potential resale in the market of a substantial number of additional shares of our common stock received upon conversion of the Mandatory Convertible Preferred Stock;

 

•

possible sales of our common stock by investors who view the Mandatory Convertible Preferred Stock as a more attractive means of equity participation in us than owning shares of our common stock; and

 

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hedging or arbitrage trading activity that may develop involving the Mandatory Convertible Preferred Stock and our common stock.

 

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Certain rights of the holders of the Mandatory Convertible Preferred Stock, if issued, could delay or prevent an otherwise beneficial takeover or takeover attempt of us.

Certain rights of the holders of the Mandatory Convertible Preferred Stock could make it more difficult or more expensive for a third party to acquire us. For example, if a fundamental change were to occur on or prior to                     , holders of the Mandatory Convertible Preferred Stock, if issued, may have the right to convert their Mandatory Convertible Preferred Stock, in whole or in part, at an increased conversion rate and will also be entitled to receive a fundamental change dividend make-whole amount and an accumulated dividend amount as described in the Certificate of Designations. These features of the Mandatory Convertible Preferred Stock could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management.

Our common stock will rank junior to the Mandatory Convertible Preferred Stock, if issued, with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs.

Our common stock will rank junior to the Mandatory Convertible Preferred Stock, if issued, with respect to the payment of dividends and amounts payable in the event of our liquidation, dissolution or winding-up of our affairs. Unless accumulated and unpaid dividends have been declared and paid, or set aside for payment, on all outstanding shares of the Mandatory Convertible Preferred Stock, if issued, for all preceding dividend periods, no dividends may be declared or paid on our common stock and we will not be permitted to purchase, redeem or otherwise acquire any of our common stock, subject to limited exceptions. In the event of our voluntary or involuntary liquidation, dissolution or winding-up of our affairs, no distribution of our assets may be made to holders of our common stock until we have paid to holders of the Mandatory Convertible Preferred Stock, if issued, a liquidation preference equal to $50.00 per share plus accumulated and unpaid dividends.

Holders of the Mandatory Convertible Preferred Stock, if issued, will have the right to elect two directors in the case of certain dividend arrearages.

Whenever dividends on any shares of the Mandatory Convertible Preferred Stock have not been declared and paid for the equivalent of six or more dividend periods, whether or not for consecutive dividend periods, the authorized number of directors on our board of directors will, at the next annual meeting of stockholders or at a special meeting of stockholders, if any, automatically be increased by two and the holders of such shares of the Mandatory Convertible Preferred Stock, if issued, voting together as a single class with holders of any and all of other series of our Voting Preferred Stock (as defined under “Mandatory Convertible Preferred Stock Offering”) then outstanding will be entitled, at our next annual meeting of stockholders or at a special meeting of stockholders, if any, to vote for the election of a total of two additional members of our board of directors, subject to certain terms and limitations. This right to elect directors will dilute the representation of the holders of our common stock on our board of directors and may adversely affect the market price of our common stock.

Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

As a public company, we will be required to comply with SEC rules that implement Section 404 of the Sarbanes-Oxley Act and make a formal assessment of the effectiveness of our internal controls over financial reporting.

When evaluating our internal controls over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404 of the Sarbanes-Oxley Act. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls

 

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over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting, and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our results of operations and cash flows.

We are required to pay the Sponsor Group for certain tax benefits, and the amounts of such payments are expected to be material.

We have entered into the TRA with the Sponsor Group, which provides for the payment by us to the Sponsor Group of 85% of the amount of the tax savings that we and our subsidiaries are deemed to realize (which may exceed our actual tax savings) as a result of the utilization of certain tax attributes of the Company existing immediately after the completion of Reorganization (the “Covered Tax Benefits”). The Covered Tax Benefits include net operating losses and tax basis in certain of our assets as of the Reorganization Date, and imputed interest on TRA payments subsequently made.

We expect that the payments we make under the TRA will be material. Assuming no material changes in the relevant tax law, and that we and our subsidiaries earn sufficient income to realize the full tax benefits subject to the TRA, we expect that future payments under the TRA will aggregate to approximately $634 million. Payments in accordance with the terms of the tax receivable agreement could have an adverse effect on our liquidity and financial condition.

To the extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest until paid, which could adversely affect our results of operations and could also affect our liquidity in periods in which such payments are made.

For additional information related to the TRA, see “Certain Relationships and Related Party Transactions—Tax Receivable Agreement.”

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements under the captions “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Industry Overview” and in other sections of this prospectus that are forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. Forward-looking statements contained in this prospectus include, among other things, statements relating to:

 

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risks associated with general economic, credit and capital market conditions;

 

•

the potential impact of decreased demand from customers in the aftermarket retail channel and automotive industry;

 

•

the technological evolution of the battery and automotive industries;

 

•

commodity prices;

 

•

the seasonality of our business;

 

•

our ability to timely develop competitive new products and product enhancements in a changing environment and the acceptance of such products and product enhancements by customers;

 

•

the potential impact of financial, economic, political and other risks related to conducting business internationally, including disruption of markets, changes in import and export laws, environmental, health and safety laws and regulations, currency restrictions and currency exchange rate fluctuations, interest rate fluctuations, inflation and the risk of recession;

 

•

the potential impact of geopolitical instability resulting from military conflicts, including between Russia and Ukraine and in the Middle East, relating to results of operations and cash flows;

 

•

risks related to doing business in China given evolving economic, political and social conditions;

 

•

risks associated with operating in regulated industries, including our ability to comply with, and liabilities related to, applicable laws, including environmental, health and safety laws and regulations and competition laws, as well as our ability to successfully adapt to any changes in such laws and regulations;

 

•

risks associated with evolving data privacy and cybersecurity laws and regulations;

 

•

risks associated with any potential violation of anti-bribery laws around the world;

 

•

risks associated with maintaining, protecting and enforcing our intellectual property and proprietary rights;

 

•

risks associated with any potential intellectual property-related litigation;

 

•

requirements and liabilities relating to environmental, health and safety laws and regulations and environmental remediation matters;

 

•

risks associated with global climate change and related laws;

 

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risks associated with evolving trends, regulations and shareholder expectations relating to ESG issues or reporting;

 

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•

the impact of COVID-19 and its collateral consequences, including production and supply chain slowdowns, extended disruption of economic activity in our business, rising inflation and lower economic expectations;

 

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competitiveness of the automotive battery market, the availability and market prices of raw materials and component products, legislation restricting the use of certain hazardous substances in our products and our ability to respond to rapid technological changes;

 

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our reliance on third parties for important products and services;

 

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risks associated with potential conflicts of interests due to current ownership structure;

 

•

risks associated with negative or unexpected tax consequences;

 

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risks associated with future changes in tax law;

 

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the potential impact of any legal proceedings;

 

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the extent to which potential insolvency or financial distress of third parties could impact our business;

 

•

risks associated with our acquisition strategy and integrating acquisitions;

 

•

risks associated with future acquisitions and new investments;

 

•

any potential failure or compromise of our information technology and cybersecurity infrastructure;

 

•

the extent to which we are able to efficiently utilize our global manufacturing facilities and optimize our capacity;

 

•

our ability to attract and retain qualified personnel;

 

•

the potential impact of work stoppages, union negotiations and labor disputes with our labor force, our customers’ labor force and our suppliers’ labor force;

 

•

risks associated with being unable to successfully implement our business strategy;

 

•

warranties with respect to certain of our products that may require us to bear the cost of product repair or replacement;

 

•

the requirements of being a public company which may strain our resources;

 

•

conditions in the banking system and financial markets, including the failure of banks and financial institutions, could have an adverse effect on our operations and financial results; and

 

•

our ability to service our substantial indebtedness.

These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Risk Factors.” In addition, even if results, level of activity, performance or achievements are consistent with the forward-looking statements contained in this prospectus, those results, level of activity, performance or achievements may not be indicative of results or developments in subsequent periods.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this prospectus to conform our prior statements to actual results or revised expectations.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $                , or approximately $                 if the underwriters exercise their over-allotment option in full, assuming an initial public offering price of $        per share (the midpoint of the range set forth on the cover page of this prospectus), after deducting estimated underwriting discounts and commissions.

We estimate that the net proceeds to us from the Concurrent Offering of the Mandatory Convertible Preferred Stock, if completed, will be approximately $                , or approximately $                 if the underwriters exercise their over-allotment option to purchase additional shares of the Mandatory Convertible Preferred Stock in full, after deducting estimated underwriting discounts and commissions.

We intend to use the net proceeds to us from this offering and the Concurrent Offering of the Mandatory Convertible Preferred Stock, if it is completed, to repay certain existing debt.

Each $1.00 increase (decrease) in the public offering price per share would increase (decrease) our net proceeds, after deducting estimated underwriting discounts and commissions, by $                 (assuming no exercise of the underwriters’ over-allotment option).

 

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DIVIDEND POLICY

Following the consummation of this offering, we do not currently intend to pay dividends on our common stock. We currently intend to retain any future earnings to fund the development and expansion of our business, including further acquisitions, and, therefore, we do not anticipate paying cash dividends on our common stock in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, subject to applicable laws, and will depend on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant by our board of directors. If we issue any Mandatory Convertible Preferred Stock, no dividends may be declared or paid on our common stock unless accumulated and unpaid dividends on the Mandatory Convertible Preferred Stock have been declared and paid, or set aside for payment, on all outstanding shares of the Mandatory Convertible Preferred Stock for all preceding dividend periods. See “Mandatory Convertible Preferred Stock Offering.”

 

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CAPITALIZATION

The following table sets forth our cash, cash equivalents and capitalization as of September 30, 2023 (in millions, except share data):

 

•

on an actual basis; and

 

•

on an as adjusted basis to give effect to:

 

•

(i) the sale by us of                  shares of common stock in this offering, at an assumed initial public offering price of $         per share, the midpoint of the range set forth on the cover page of this prospectus and (ii) the concurrent issuance of                  shares of the Mandatory Convertible Preferred Stock, assuming such offering is completed as described in this prospectus; and

 

•

the application of the net proceeds as described in “Use of Proceeds.”

This table should be read in conjunction with “Use of Proceeds” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included elsewhere in this prospectus.

 

		September 30, 2023
		Actual				As adjusted
Cash and cash equivalents		$	235			$
Long-term debt:
Dollar secured notes (1)		$	897			$
Euro secured notes (1)(2)			742
Unsecured notes (1)			1,589
Secured notes due 2025 (3)			450
Euro term loan (4)			1,262
Revolving facility (4)			—
ABL facility (4)			—
New USD term loan (5)			2,750
Secured notes due 2028 (5)			750
Other (6)			1
Total long-term debt (7)			8,441
Mezzanine equity:
Mandatory Convertible Preferred Stock, $0.01 par value per share; zero shares outstanding actual;                  shares outstanding as adjusted (8)			—
Stockholders’ equity:
Common stock, $0.01 par value per share; 1,000 shares outstanding actual;                  outstanding as adjusted			—
Additional paid-in capital			—
Total equity		$	1,818			$
Total capitalization		$	10,259			$

 

(1)

In connection with the Acquisition, our wholly-owned subsidiaries, Clarios Global LP (the “Borrower”) and Clarios US Finance Company, Inc. (the “Co-Borrower” and, together with the Borrower, the “Borrowers”) issued $1,000 million aggregate principal amount of the dollar secured notes, €700 million aggregate principal amount of the euro secured notes and $1,950 million aggregate principal amount of the unsecured notes. We used the net proceeds from the issuance of the notes to finance the Acquisition. See “Description of Material Indebtedness.”

 

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(2)	Represents the U.S. dollar equivalent of the €700 million aggregate principal amount of euro secured notes. Euro secured notes are shown in U.S. dollars at an exchange rate of $ 1.0604 per €1.00, which was the exchange rate in effect on September 30, 2023.

(3)	On May 20, 2020, the Company issued $500 million aggregate principal amount of the 6.750% Senior Secured Notes due 2025.

(4)

In connection with the Acquisition, the Borrowers also entered into (i) senior secured credit facilities (the “Senior Secured Credit Facilities”), initially consisting of (x) borrowings of $6,409 million equivalent principal amount under a first lien term loan facility (the “Term Loan Facility”) consisting of (1) borrowings of $4,200 million under a U.S. Dollar denominated tranche (the “USD Term Loan”) with an effective interest rate of 8.796% as of May 4, 2023 and (2) borrowings of €1,955 million under a Euro denominated tranche (the “Euro Term Loan”) with an effective interest rate of 7.108% as of September 30, 2023 and (y) $750 million in aggregate commitments under a first lien revolving credit facility (the “Revolving Facility”) and (ii) $500 million in aggregate commitments under an asset based revolving credit facility (the “ABL Facility”). We used the proceeds of the borrowings under the Term Loan Facility and the ABL Facility to pay the cash consideration for the Acquisition and pay related fees and expenses. On March 5, 2020, the parties thereto entered into an incremental amendment to the ABL Facility pursuant to which the aggregate commitments were increased by $250 million to $750 million in the aggregate. On March 5, 2021, the parties thereto entered into a repricing amendment to the Term Loan Facility pursuant to which effective interest rates on the USD Term Loan and Euro Term Loan were lowered. On March 14, 2023, the Borrowers entered into a refinancing and incremental amendments to the ABL Facility and Revolving Facility pursuant to which the commitments thereunder were refinanced and replaced each by $800 million in aggregate commitments under each facility. As of September 30, 2023, there were no outstanding borrowings under either the Revolving Facility or the ABL Facility, and approximately $800 million of additional borrowings would have been available under the Revolving Facility and $745 million of additional borrowings would have been available under the ABL Facility (after giving effect to $55 million of outstanding letters of credit), in each case, subject to customary borrowing conditions. See “Description of Material Indebtedness.”

(5)

On May 4, 2023, the Borrowers entered into a senior secured U.S. dollar denominated term loan credit facility of $2,750 million due in 2030 (the “New USD Term Loan”) with an effective interest rate of 9.066% as of September 30, 2023, and issued $750 million aggregate principal amount of 6.750% senior secured notes due 2028 (the “2028 Secured Notes”). The Company utilized the combined proceeds to repay all of our obligations under the USD Term Loan and for general corporate purposes.

(6)	Related to the VIE Transaction described in Note 8, “Debt and Financing Arrangements,” of the notes to the financial statements included elsewhere in this prospectus.

(7)	Total debt excludes $(109) million of capitalized debt issuance costs and $47 million of finance leases.

(8)	Assuming the Concurrent Offering is completed as described in this prospectus.

Each $1.00 increase (decrease) in the assumed initial public offering price of $         per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors and total consideration paid by all stockholders by approximately $                , assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) the total consideration paid by new investors and total consideration paid by all stockholders by $                , assuming the assumed initial public offering price of $         per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions. The table above assumes that our Sponsor or its affiliates do not purchase in this offering up to $                , or up to approximately                  of our shares of common stock (based on the midpoint of the price range set forth on the cover page of this prospectus), at the same price as the price paid by the underwriters in this offering.

 

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DILUTION

Our net tangible book value (deficit) as of             , 2023 was $                 or $             per share of common stock. Net tangible book value (deficit) per share represents tangible assets, less liabilities, divided by the aggregate number of shares of common stock outstanding. After giving effect to the sale by us of                  and                  shares of common stock in this offering, respectively, at an assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus, and the concurrent issuance of                  shares of the Mandatory Convertible Preferred Stock, assuming the Concurrent Offering is completed as described in this prospectus, and the receipt and application of the net proceeds, our pro forma net tangible book value (deficit) as of             , 2023 would have been $                 or $             per share. This represents an immediate increase in pro forma net tangible book value (deficit) to existing stockholders of $             per share and an immediate dilution to new investors by $             per share. Dilution per share represents the difference between the price per share to be paid by new investors for the shares of common stock sold in this offering and the pro forma net tangible book value (deficit) per share immediately after this offering. The following table illustrates this per share dilution:

 

Assumed initial public offering price						$
Net tangible book value (deficit) per share		$
Increase in pro forma net tangible book value (deficit) per share attributable to new investors
Pro forma net tangible book value (deficit) per share after offering
Dilution per share to new investors						$

The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. A $1.00 increase (decrease) in the assumed initial public offering price of $             per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma net tangible book value (deficit) after this offering by $             and increase (decrease) the immediate dilution to new investors by $             per share, in each case assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and early repayment premiums incurred to repay debt with the proceeds from this offering. Similarly, each increase (decrease) of                  shares in the number of shares of common stock offered by us would increase (decrease) our pro forma net tangible book value (deficit) by approximately $                 and decrease the dilution to new investors by approximately $             per share, in each case assuming the assumed initial public offering price of $             per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions and early repayment premiums incurred to repay debt with the proceeds from this offering.

The following table sets forth, on a pro forma basis, as of                 , 2023, the number of shares of common stock purchased from us, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by existing stockholders and by the new investors, at an assumed initial public offering price of $             per share, the midpoint of the range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and offering expenses payable by us (in millions, except per share data):

 

Shares Purchased

Total Consideration

Average Price Per Share

Number

Percent

Amount

Percent

Existing stockholders

%

$

%

$

New investors

%

$

%

$

Total

%

$

%

$

If the underwriters’ option to purchase additional shares is exercised in full, existing shareholders would own approximately         % and new investors would own approximately         % of the total numbers of shares of

 

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our common stock outstanding after this offering. If the underwriters exercise their option to purchase additional shares in full, the proforma as adjusted net tangible book value (deficit) per share to new investors would be $             per share, and the dilution in the proforma as adjusted net tangible book value (deficit) per share to the new investors by $             per share.

The discussion and tables above does not contemplate the conversion of the shares of Mandatory Convertible Preferred Stock, including additional shares of Mandatory Convertible Preferred Stock which may be purchased pursuant to the underwriters’ option to purchase additional shares of Mandatory Convertible Preferred Stock, into shares of our common stock at such future date and at conversion rate as described in “Mandatory Convertible Preferred Stock Offering”, or the issuance of any shares of common stock authorized under this registration statement to raise additional capital or settle future obligations, such as the Company’s obligations under the 2023 Long-Term Incentive Plan, among others. To the extent we issue share of our common stock for these matters or issue any additional securities including convertible securities in the future, investors will experience further dilution which may be material.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read together with the information under the headings “Basis of Presentation and Other Information,” “Summary—Summary Historical Consolidated Financial and Other Data” and “Capitalization” and our consolidated financial statements and the notes related thereto included elsewhere in this prospectus. The following discussion and analysis of our financial condition and results of operations contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those set forth under “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Actual results may differ materially from those contained in any forward-looking statement. The terms “Clarios International Inc.”, the “Reorganization”, the “Reorganization Date”, “Clarios Global LP”, the “Sponsor Group”, the “Acquisition”, and “Power Solutions” have been defined in the notes to the financial statements included elsewhere in this prospectus. In the following text, the terms “Company,” “we,” “us and “our” may refer, as the context requires, to Clarios International Inc. and its consolidated subsidiaries after giving effect to the Acquisition and the subsequent Reorganization of the legal entities commonly controlled by the Sponsor Group or to Clarios Global LP and its consolidated subsidiaries after giving effect to the Acquisition and prior to the Reorganization Date.

Overview

Clarios is one of the world’s largest suppliers of energy storage solutions. We design and manufacture advanced, low-voltage battery technologies for global mobility and industrial applications, offering reliability, safety and comfort to everyday lives. Our batteries power cars, commercial vehicles, motorcycles, marine vehicles, powersports vehicles and industrial products. In our core low-voltage mobility battery markets, we are the only global manufacturer and are significantly larger than our nearest competitor by revenue. We believe we are unique in terms of our global capabilities, with the number one market position in both the Americas and EMEA, and the number three market position in Asia. The majority of demand for our products comes from the aftermarket, driven by consumer replacements. We sell more than 150 million batteries annually that are distributed to OEM and aftermarket customers in over 100 countries. Our scale, global footprint and vertical integration allow us to operate with a best-in-class cost structure, lead the industry in technological innovation and deliver greater value to customers and consumers. We estimate that we supply a third of the global automotive low-voltage battery volume. We have established one of the world’s most successful examples of a circular economy. We design, manufacture, transport, recycle and recover the materials in vehicle batteries using a closed-loop system. Our batteries are designed so that up to 99% of the materials can be responsibly recovered, recycled and repurposed directly into new batteries.

Our batteries provide reliable, essential, low-voltage power to a full range of propulsion technologies and will remain critical with the transition of the global transportation network from ICE to hybrid and EV. Our batteries support a range of functions critical to vehicle performance ranging from the more traditional roles of engine starting and ignition and supporting key-off loads, to more demanding emerging functions such as start-stop, ADAS, over-the-air software updates and autonomous driving. Importantly, our batteries provide the fail-safe power required to support electric and AV. Our advanced products are well-positioned to enable the increasing electrical load requirements seen in nearly all vehicles entering the market today, and especially the technologies of start-stop, EV and AV, which require more robust, advanced energy solutions. We believe the battery mix shift towards higher-margin advanced products represents a significant opportunity for Clarios as we deliver a compelling value proposition to our consumers by combining advanced technology solutions for mission critical systems with a lower cost solution than competing technologies.

Our product portfolio includes SLI and Advanced Batteries, which include EFB and AGM. We believe our products have differentiating factors, such as PowerFrame, which reduces lead usage and bolsters corrosion resistance, our patented EFB design and our certified non-spillable AGM battery technology. Leveraging over 15 years of lithium-ion expertise in battery design and integration, we also develop and manufacture low-voltage

 

63

lithium-ion battery technologies for select markets. We distribute our products primarily through the aftermarket and OEM channels. We sell our products through a number of well-recognized global and regional brands such as VARTA^®, LTH^®, Heliar^®, OPTIMA^®, Delkor^® and MAC^®. Principally outside of North America we go to market with these owned brands which, based on consumer awareness studies, are consistently #1 or #2 in nearly every major market in which we participate. We also provide private label brands to our aftermarket customers including DieHard, Interstate, Duralast, Bosch and EverStart.

For the twelve months ended September 30, 2023, approximately 79% of our unit volume and an even larger share of our gross profit was generated through the replacement aftermarket channel. In the automotive market, our batteries have an average life of three to six years and the battery is replaced, on average, two to four times over a vehicle’s useful life, depending on the battery technology, application, driving habits and geography. Given aftermarket customers require not only a high-quality product but also outstanding service and support, we deliver value far beyond the supply of batteries. We have developed deep channel partnerships and have longstanding relationships with large domestic and international aftermarket customers such as Interstate, AutoZone, Bosch, Advance Auto Parts, Walmart and LKQ, serving as a critical partner in one of their largest and most important sales categories. We operate an entire logistics network for battery delivery (in some cases, direct to store) and for the return of spent batteries to be recycled, often through our owned recycling network. We benefit from our scale and technology developed with OEMs, which allow us to deliver a high level of expertise to the replacement channel, including training, technical and system expertise and category management. Our scale also allows us to fulfill store level demand in a timely fashion and at competitive cost. These differentiators are increasingly important as the complexity of monitoring and installing Advanced Batteries continues to rise. Additionally, we continue to innovate around aftermarket distribution through point of sale and digital channels, particularly in China.

The remaining roughly 21% of our unit volume is generated through the OEM channel, which is comprised of sales to major car, commercial vehicle, motorcycle, marine, powersports vehicle and industrial manufacturers globally. Our capabilities and expertise have also positioned us as the partner of choice for our OEM customers, including Ford Motor Company, General Motors Company, Stellantis, Renault-Nissan, Volkswagen, Mercedes Benz, BMW, Hyundai-Kia, Great Wall, Toyota Motor Corporation, Honda, PACCAR Inc., Polaris, and Caterpillar Inc. Our OEM business is driven by global demand for new vehicles and equipment but serves as a key driver of our future aftermarket replacement business. Our focus is to be sourced as “first fit” with both leading traditional OEMs and emerging EV OEMs globally, which in turn bolsters our replacement business in the aftermarket channel. Our customers look to us as key partners to provide low-voltage systems integration expertise and drive technological innovation. We work closely with OEMs during development and advanced phases of future platform launches, designing energy storage technologies that will cost-effectively help them meet increasing environmental, safety, vehicle electrification requirements, and digitalization requirements. Our leading global position in the OEM channel allows us to collaborate with a wide range of customers in bringing to market new technologies that can support and accelerate advancements in propulsion technologies, functional safety, autonomy, and circularity. In addition, our global footprint allows us to serve OEMs with the same product in multiple regions with localized production, which simplifies their procurement processes on global vehicle platforms.

Material Trends Affecting Our Results of Operations

COVID-19

In December 2019, a novel strain of coronavirus SARS-CoV-2, causing a disease referred to as COVID-19, was reported in Wuhan, China. The coronavirus has since spread to, and infections have been found in, the vast majority of countries around the world, including the United States and throughout EMEA. In March 2020, the World Health Organization recognized the COVID-19 outbreak as a pandemic based on the global spread of the disease, the severity of illnesses it causes and its effects on society. In response to the COVID-19 outbreak, the governments of many countries, states and cities have imposed and re-imposed from time to time preventative or protective actions, such as imposing restrictions on travel and business operations, and advising or requiring individuals to limit or forego their time outside of their homes. The continuing surges of COVID-19 cases, along

 

64

with new strains and variants being discovered and challenges associated with the roll out and availability of vaccines have resulted in the reimposition of certain restrictions in certain states and countries and may lead to other restrictions being implemented in response to efforts to reduce the spread of COVID-19. Accordingly, the COVID-19 outbreak has severely restricted the level of economic activity in many countries, continues to adversely impact global economic activity and has contributed to significant volatility in financial markets.

The Company’s operating performance is subject to global economic and market conditions, including their impacts on the aftermarket retail channel and global automotive industry. During the disruption caused by COVID-19, we have managed our balance sheet prudently and have maintained appropriate liquidity; refer to “Liquidity and Capital Resources” and “Liquidity Outlook” for further information.

The extent of the future impact of the COVID-19 outbreak on the Company’s operational and financial performance will depend on certain developments, including the duration, intensity and continued spread of the pandemic, including new variants and virus strains, regulatory and private sector responses, which may be precautionary, the development and availability of vaccines and the impact to the Company’s customers, workforce and vendors, all of which are uncertain and cannot be predicted. The Company’s financial condition and results could also be impacted by significant changes in commodity prices, foreign currency exchange rates and interest rates that may result from volatility in the economic and financial markets as a result of the COVID-19 pandemic. The COVID-19 pandemic may negatively impact our financial condition and results of operations in future periods. While we have seen positive trends of recovery as the easing of mobility restrictions progresses across our geographies, such trends could reverse as COVID-19 outbreaks recur in certain areas. Changing market conditions may also affect the estimates and assumptions made by management. Such estimates and assumptions affect, among other things, the Company’s goodwill, long-lived asset and indefinite-lived intangible asset valuations; equity investment valuations; valuation of deferred income taxes and income tax contingencies; measurement of compensation cost for certain cash bonus plans; and pension plan assumptions. Events and changes in circumstances arising in future periods, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods.

Macroeconomic Developments

Our business is sensitive to interest rate movements and the performance of the capital markets. We rely on access to the capital markets to fund our operations and to grow our business. Our ability to borrow from financial institutions or to engage in funding transactions on favorable terms or at all could be adversely affected by disruptions, uncertainty or volatility in the capital markets or other events, including changing credit rating agency requirements. For example, a credit rating downgrade could affect our ability to access the capital markets, increase our funding costs and have a negative impact on our results of operations.

In response to inflationary pressures, the Federal Reserve has reversed its policy of maintaining the low benchmark federal funds interest rate over the last several years. In March 2022, the Federal Reserve began increasing the benchmark federal funds interest rate and in November 2023 announced that it is maintaining the target federal funds rate of 5.25 to 5.50 percent at this time and that it may be appropriate to continue to raise interest rates somewhat further by the end of the calendar year in order to return inflation to the Federal Reserve’s target of 2% over time. However, the Federal Reserve cautioned that it will continue monitoring conditions and determine whether additional policy changes, which may include further increases in the Federal Funds Rate, may be appropriate. Thus, the amount of interest that we pay on the unhedged portion of certain borrowings has increased and could increase further.

Technological Changes

Our business is impacted by technological changes in the battery and automotive markets in the geographic segments in which we operate. Increasing electrical loads in new vehicles have led to a shift from conventional

 

65

flooded batteries to advanced lead-acid batteries. In turn, we have invested in new product and process technologies and have expanded product offerings to AGM and EFB technologies that power start-stop vehicles, as well as lithium-ion battery technology for certain hybrid and EVs. Advanced lead-acid batteries have represented an increasing portion of our product mix over time with two primary effects to our results: (i) net sales and gross profit have improved faster than volume growth as these batteries offer both price and profitability advantages compared to conventional flooded batteries, and (ii) our capital expenditures have increased in order to increase production capacity for AGM and EFB batteries to meet increased demand. In November 2022, the Company announced its plan to invest approximately $550 million to expand global production of AGM batteries, which will nearly double existing AGM capacity in the Americas and further expand on the Company’s AGM capacity in EMEA. Between September 30, 2014 and September 30, 2023, our capital expenditures related to AGM and EFB batteries totaled approximately $825 million. As a result, we have experienced increasing depreciation costs. We currently expect elevated capital expenditures related to AGM batteries to continue, particularly in the Americas segment in response to the increase in the demand for Advanced Batteries within the segment.

Growth in Asia

Over two billion people in Asia are expected to enter the middle class by 2030 according to The Brookings Institution. For the year ended September 30, 2023, approximately 10% of our net sales were in Asia. We expect this business to grow as more customers in Asia enter the middle class and purchase vehicles, as growth in our business has historically been driven by increasing volume in these markets. In response to this trend, we have invested approximately $379 million between September 30, 2016 and September 30, 2023 in an effort to expand our capacity in the region, and launched our new plant in Binzhou, China in October 2022 to support the increase in demand for Advanced Batteries within the segment.

Seasonality

Our business is impacted by seasonal factors, as aftermarket replacements are highest in the winter months. Our net sales reflect our channel partners’ stocking patterns to meet this increased demand, and have historically been greatest between our fourth and first fiscal quarters (late summer through early winter). Global climate change may impact the seasonality of our business as the demand for our products, such as automotive replacement batteries, may be affected by unseasonable weather conditions.

Lead Price Volatility

The price volatility of lead as traded on the London Metal Exchange has several impacts on our business:

 

•

In the Americas aftermarket, we operate a closed-loop system through which we typically collect one spent battery core for every new battery we sell. This effectively minimizes the impact of lead pricing on our margins.

 

•

In other segments and channels, we typically treat lead as a pass-through cost to our customers with a lag between the price we charge our customers and the market price of lead to match the cost of lead reflected in our cost of sales. This practice minimizes, but does not eliminate, the impact of lead price volatility on our profits in these geographic segments and channels. When lead prices are particularly volatile, we experience volatility in our net sales and margins.

 

•

In addition, during periods of high lead price volatility, some customers may shift buying patterns, pulling ahead purchases in anticipation of higher lead prices in the future or delaying purchases in anticipation of lower lead prices in the future. If lead prices continue to be volatile and our customers shift buying patterns in this manner, our quarterly results may be volatile and, consequently, it may be difficult to compare results on a quarter-to-quarter basis.

 

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How We Assess Our Performance

We use Total Adjusted EBITDA to analyze and evaluate the performance of our business and to provide a greater understanding with respect to our results of operations, including within each of our segments. We believe that Total Adjusted EBITDA is an important measure that excludes many of the costs associated with our existing capital structure and excludes costs that management believes do not reflect our ongoing operating performance. Accordingly, Total Adjusted EBITDA is a key metric that management uses to assess the period-to-period performance of our core business operations and our segments.

Total Adjusted EBITDA helps to identify trends in the performance of our core ongoing operations by excluding the effects related to (i) non-cash items, (ii) costs and charges that do not relate to our ongoing operations, and (iii) certain other adjustments. We believe that presenting Total Adjusted EBITDA enables investors to assess our performance from period to period using the same metric utilized by management and to evaluate our performance relative to other companies that are not subject to such factors. See “—Total Adjusted EBITDA and Indenture EBITDA” for a reconciliation of Total Adjusted EBITDA to net income (loss) for the given period.

Total Adjusted EBITDA may not be comparable to similar measures used by other companies. Total Adjusted EBITDA is a non-U.S. GAAP financial measure. It has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our financial performance as reported under U.S. GAAP and should not be considered as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP as a measure of operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

Because of these limitations, Total Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Total Adjusted EBITDA only for supplemental purposes.

Components of Results of Operations

Net Sales

Net sales consist of gross sales less sales adjustments related to provisions for customer returns, allowances and rebates. Net sales are derived from sales of lead-acid and lithium-ion batteries to customers globally. We have generally been able to increase the average prices of our products in the low single digit percentages on an annual basis. During economic downturns, the annual increase in such prices has generally been in the mid-single digit percentages.

The Company services both automotive OEM and the battery aftermarket by providing Advanced Battery technology. The Company’s revenue is generated through the manufacture and sale of automotive battery products, of which the delivery of goods ordered typically represents the Company’s sole performance obligation with respect to distinct goods and services offered to customers. The Company recognizes revenue at the point in time when control over the goods transfers to the customer as specified by the shipping terms agreed upon with the customer.

Cost of Sales

Our cost of sales consists of costs relating to battery production, battery recycling and logistics. Battery production costs consist of the costs of (i) procuring raw materials (primarily lead, tin, polypropylene, separators and sulfuric acid), (ii) component manufacturing and (iii) direct and indirect conversion costs. Battery recycling costs consist of costs associated with recycling used batteries, including those relating to collecting used batteries, tolling contracts with secondary lead smelting companies, breaking and separation, and smelting. Logistics costs consist of costs related to shipping (i) raw materials to component plants, assembly plants and smelters, (ii) components to assembly plants and dry unformed batteries to fill and form facilities (primarily in North America), and (iii) finished batteries to distribution centers and to customers.

 

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Selling, General and Administrative Expenses

Selling, General and Administrative (“SG&A”) expenses include salaries and benefits of our commercial organizations and administrative functions, marketing and commission costs, engineering and product development costs, and administrative costs at the regional and global headquarter level.

Equity Income

Equity income primarily relates to our share of non-consolidated, partially-owned affiliates (“POAs”). Investments in POAs for which the Company exercises significant influence but does not have control are accounted for by the equity method. We own portions of battery manufacturers in countries and regions where we do not own plants, and businesses engaged in the distribution of lead-acid batteries.

Restructuring and Impairment Costs

To better align its resources with its growth strategies and reduce the cost structure of its global operations to address dynamics in certain underlying markets, the Company commits to restructuring plans as necessary, which may include workforce reductions, global plant closures and consolidations, asset impairments and other cost-reduction initiatives.

Net Financing Charges

Net financing charges primarily relate to net interest expense, banking and factoring fees, deferred financing cost amortization, net unrealized gains and losses on forward starting interest rate swaps not designated as hedges, and net foreign exchange results for financing activities.

Income Tax Provision

The income tax provision, deferred taxes and uncertain tax positions reflect management’s best estimate of current and future taxes to be paid. As discussed in Note 1, “Summary of the Business and Significant Accounting Policies,” of the notes to the financial statements included elsewhere in this prospectus, prior to the Reorganization Date, financial information includes certain pass-through entities under Clarios Global LP for purposes of Canadian and U.S. income taxation and, therefore, no income taxes are reflected in the financial statements for those entities. Subsequent to the Reorganization Date, financial information reflects the U.S. income tax effects of certain pass-through entities under Clarios Global LP.

The Company is subject to income taxes in numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense. The income tax provision, deferred taxes and uncertain tax positions reflect management’s best estimate of current and future taxes to be paid. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations.

Refer to Note 13, “Income Taxes,” of the notes to the financial statements included elsewhere in this prospectus for further information.

 

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Results of Continuing Operations

Year Ended September 30, 2023 Compared to Year Ended September 30, 2022 (in millions)

 

Consolidated Statements of Income (Loss)		Year Ended September 30
		2023				2022				Change				% Change
Net sales		$	10,031			$	9,260			$	771				8	%
Cost of sales			8,033				7,647				386				5	%
Gross profit			1,998				1,613				385				24	%
Selling, general and administrative expenses			(808	)			(918	)			110				(12	)%
Equity income			59				55				4				7	%
Restructuring and impairment costs			—				(22	)			22				*
Net financing charges			(820	)			(626	)			(194	)			31	%
Income before income taxes			429				102				327				*
Income tax provision			83				101				(18	)			(18	)%
Net income			346				1				345				*
Income attributable to noncontrolling interests			10				6				4				67	%
Net income (loss) attributable to the Company		$	336			$	(5	)		$	341				*

 

*	Metric not meaningful

Net Sales

Net sales increased $771 million to $10,031 million for the year ended September 30, 2023 from $9,260 million for the year ended September 30, 2022 primarily due to favorable pricing and product mix of $806 million, and higher volumes of $189 million, partially offset by unfavorable impacts of foreign currency translation of $144 million, and lower pass-through lead costs of $80 million. In the year ended September 30, 2023, pricing actions, favorable product mix driven by strong demand for Advanced Batteries, and higher volumes within the OEM channel as the channel recovers from the semiconductor shortage resulted in an overall increase in net sales. Refer to the “Segment Analysis” below for a discussion of net sales by segment.

Gross Profit

Gross profit increased $385 million, or 24%, to $1,998 million for the year ended September 30, 2023 from $1,613 million for the year ended September 30, 2022. The increase was primarily due to favorable pricing and product mix, and higher volumes, partially offset by higher operating costs including production inefficiencies, higher purchasing costs, and the unfavorable impacts of foreign currency translation. The change in value of battery cores due to the change in the value of lead had a positive non-cash impact of $51 million in the year ended September 30, 2023, compared to a negative non-cash impact of $69 million in the year ended September 30, 2022. Net mark-to-market adjustments on pension and postretirement plans resulted in a non-cash gain of $18 million in the year ended September 30, 2023, which was primarily due to changes in lump sum payment and other experience-based assumptions, compared to a non-cash gain of $34 million in the year ended September 30, 2022, which was primarily due to changes in discount rates.

Selling, General and Administrative Expenses

SG&A expenses decreased $110 million to $808 million for the year ended September 30, 2023 from $918 million for the year ended September 30, 2022. There were $19 million of certain net gain items in the year ended September 30, 2023, including, among others, the gain on investments in marketable common stock, partially offset by consulting costs related to operational improvement and strategic initiatives and other items,

 

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and an increase in the Company’s estimate of future TRA payments. There were $125 million of certain net expense items in the year ended September 30, 2022, including, among others, the loss on investments in marketable common stock, and consulting costs related to operational improvement and strategic initiatives. Net mark-to-market adjustments on pension and postretirement plans resulted in a non-cash gain of $8 million in the year ended September 30, 2023, which was primarily due to changes in lump sum payment and other experience-based assumptions, compared to a non-cash gain of $19 million in the year ended September 30, 2022, which was primarily due to changes in discount rates. The remaining increase in SG&A expenses was primarily driven by higher compensation accruals, partially offset by lower charitable contributions and amortization expense in the year ended September 30, 2023.

Equity Income

Equity income increased $4 million to $59 million for the year ended September 30, 2023 compared to $55 million for the year ended September 30, 2022 due to favorable operational results of certain equity method investments.

Restructuring and Impairment Costs

The Company incurred no restructuring and impairment costs for the year ended September 30, 2023 and $22 million for the year ended September 30, 2022. Refer to Note 15, “Restructuring and Impairment Costs,” of the notes to the financial statements included elsewhere in this prospectus for further information related to the Company’s restructuring plans and impairment costs.

Upon completion of the workforce reduction plan announced in September 2022, the Company estimates that annual operating costs will decrease by approximately $24 million, which is primarily the result of lower SG&A expenses and cost of sales due to reduced employee-related costs. The benefit of these actions was substantially realized in fiscal 2023. Outstanding restructuring reserves at September 30, 2023 related to this restructuring action were approximately $3 million.

Upon cessation of the Company’s lead recycling operations in its North America recycling plant in March 2021, the Company estimates that annual cost of sales in the Americas segment will decrease by approximately $50 million by optimizing our supply chain network. The annual benefit of these actions were fully realized in fiscal 2022 consistent with initial estimates. Remaining decommissioning activities and additional costs, which we are not yet obligated as of September 30, 2023, are preliminarily estimated to be as much as $30 million and are anticipated to be substantially incurred by the end of fiscal 2024. The Company’s preliminary estimate of additional plan costs are subject to further refinement, which may be material, based upon changes in the facts and circumstances regarding closure activities undertaken.

Net Financing Charges

Net financing charges increased $194 million to $820 million for the year ended September 30, 2023 from $626 million for the year ended September 30, 2022. In the year ended September 30, 2023, the Company recorded $48 million of expense to write-off unamortized deferred financing costs associated with the extinguishment of our obligations under the USD Term Loan, $8 million of expense to write-off unamortized deferred financing costs associated with voluntary principal payments on the Euro Term Loan, and a net loss of $3 million associated with the voluntary retirement of a portion of the Unsecured Notes. In the year ended September 30, 2022, the Company recorded a $4 million net gain on the voluntary retirements of a portion of the Unsecured Notes, partially offset by $2 million of accelerated deferred financing cost amortization associated with voluntary principal payments on the Euro Term Loan. The remaining increase was primarily due to higher interest rates and higher factoring fees. Refer to Note 8, “Debt and Financing Arrangements,” of the notes to the financial statements included elsewhere in this prospectus for further information.

 

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Income Tax Provision

For the year ended September 30, 2023 the provision for income taxes was $83 million compared to a provision for income taxes of $101 million for the year ended September 30, 2022. The decrease in the provision for income taxes was primarily due to valuation allowance impacts and income tax impacts of foreign exchange fluctuations, partially offset by increased income before income taxes and changes in global mix of income. Refer to Note 13, “Income Taxes,” of the notes to the financial statements included elsewhere in this prospectus for further information.

Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 (in millions)

 

Consolidated Statements of Income (Loss)		Year Ended September 30,
		2022				2021				Change				% Change
Net sales		$	9,260			$	8,869			$	391				4	%
Cost of sales			7,647				7,018				629				9	%
Gross profit			1,613				1,851				(238	)			(13	)%
Selling, general and administrative expenses			(918	)			(927	)			9				(1	)%
Equity income			55				71				(16	)			(23	)%
Restructuring and impairment costs			(22	)			(253	)			231				(91	)%
Net financing charges			(626	)			(709	)			83				(12	)%
Income before income taxes			102				33				69				*
Income tax provision			101				74				27				36	%
Net income (loss)			1				(41	)			42				*
Income attributable to noncontrolling interests			6				3				3				*
Net loss attributable to the Company		$	(5	)		$	(44	)		$	39				(89	)%

 

*	Metric not meaningful

Net Sales

Net sales increased $391 million to $9,260 million for the year ended September 30, 2022 from $8,869 million for the year ended September 30, 2021 primarily due to higher pass-through lead costs of $459 million, and favorable pricing and product mix of $442 million, partially offset by the unfavorable impacts of foreign currency translation of $292 million, and the effect of decreased volumes of $218 million. In the year ended September 30, 2022, pricing actions and strong demand for Advanced Batteries favorably impacted pricing and product mix. Refer to “Segment Analysis” below for a discussion of net sales by segment.

Gross Profit

Gross profit decreased $238 million, or 13%, to $1,613 million for the year ended September 30, 2022 from $1,851 million for the year ended September 30, 2021. The decrease was primarily due to higher transportation and purchasing costs, higher operating costs, a decrease in volumes, and the unfavorable impacts of foreign currency translation, partially offset by favorable pricing and product mix. The change in value of battery cores due to the change in the value of lead had a negative non-cash impact of $69 million in the year ended September 30, 2022, compared to a positive non-cash impact of $106 million in the year ended September 30, 2021. Net mark-to-market adjustments on pension and postretirement plans resulted in a non-cash gain of $34 million in the year ended September 30, 2022, compared to a non-cash gain of $37 million in the year ended September 30, 2021, primarily due to changes in discount rates in the respective years. In the year ended September 30, 2021, the negative impact to our cost structure from the COVID-19 pandemic was approximately

 

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$38 million, which was primarily comprised of higher transportation rates and other additional expenses as we implemented enhanced safety measures to protect the health of our employees. See “Material Trends Affecting Our Results of Operations – COVID-19.”

Selling, General and Administrative Expenses

SG&A expenses decreased $9 million to $918 million for the year ended September 30, 2022 from $927 million for the year ended September 30, 2021. Net mark-to-market adjustments on pension and postretirement plans resulted in a non-cash gain of $19 million in the year ended September 30, 2022, compared to a non-cash gain of $15 million in the year ended September 30, 2021, primarily due to changes in discount rates in the respective years. There were $125 million of certain net expense items in the year ended September 30, 2022, including, among others, the negative non-cash impact of revaluing investments in marketable common stock, and consulting costs related to operational improvement and strategic initiatives, which were up on a comparative basis from $66 million of certain net expense items in the year ended September 30, 2021, including, among others, incremental stand up costs, and consulting costs related to operational improvement and strategic initiatives, partially offset by the positive non-cash impact of revaluing investments in marketable common stock. The Company received approximately $2 million of COVID-19 related recoveries in the year ended September 30, 2021. The net increase in certain net expense items year-over-year was offset by decreases in amortization expense, compensation accruals and discretionary spend, as well as a comparative decrease in the allowance for credit losses in the year ended September 30, 2022.

Equity Income

Equity income decreased $16 million to $55 million for the year ended September 30, 2022 from $71 million for the year ended September 30, 2021 primarily due to $12 million of a pretax gain on sale of a portion of an equity method investment within the Asia segment in the year ended September 30, 2021, the absence of equity income from the equity investment in the year ended September 30, 2022 as the investment was accounted for as an investment in marketable common stock following the partial sale, and $6 million in remeasurement gains related to the consolidation of certain POAs recorded in the year ended September 30, 2021, partially offset by favorable operational results of certain equity method investments in the year ended September 30, 2022.

Restructuring and Impairment Costs

The Company incurred $22 million and $253 million of restructuring and impairment costs in the years ended September 30, 2022 and 2021, respectively. Refer to Note 15, “Restructuring and Impairment Costs,” of the notes to the financial statements for further information related to the Company’s restructuring plans and impairment costs.

Net Financing Charges

Net financing charges decreased $83 million to $626 million for the year ended September 30, 2022 from $709 million for the year ended September 30, 2021. The change in net financing charges was primarily due to net foreign exchange results for financing activities, and lower interest expense in the year ended September 30, 2022 due to lower debt levels, partially offset by higher factoring fees in the year ended September 30, 2022 due to increased discount rates. In the year ended September 30, 2022, the Company recorded a $4 million net gain on the voluntary retirements of the Unsecured Notes, partially offset by $2 million of accelerated deferred financing cost amortization associated with the voluntary principal payments of the Euro Term Loan. In the year ended September 30, 2021, the Company incurred $16 million of expense associated with the repricing of the Term Loan Facility (including $12 million of expense to write-off unamortized deferred financing costs on the extinguishment of debt), and $19 million of expense associated with the voluntary principal payments of the Secured Notes and Term Loan Facility (including $14 million of accelerated deferred financing cost amortization and $5 million of early redemption costs). Refer to Note 8, “Debt and Financing Arrangements,” of the notes to the financial statements included elsewhere in this prospectus for further information.

 

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Income Tax Provision

For the year ended September 30, 2022 the provision for income taxes was $101 million compared to an income tax provision of $74 million for the year ended September 30, 2021. The increase in the provision for income taxes was primarily due to changes in global mix of income and valuation allowance impacts, partially offset by changes in the deferred tax liability related to basis differences of certain subsidiaries and equity method investments, and income tax impacts of foreign exchange fluctuations. Refer to Note 13, “Income Taxes,” of the notes to the financial statements included elsewhere in this prospectus for further information.

Segment Analysis

Management evaluates the performance of its business segments primarily on segment earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which represents net income before income taxes and noncontrolling interest, depreciation, intangible asset amortization, net financing charges, restructuring and impairment costs, net periodic benefit cost (credit) related to pension and postretirement plans, deal and stand up costs, impacts of purchase accounting, core valuation changes and other items. See Note 18, “Segment Information,” of the notes to the financial statements included elsewhere in this prospectus for further information.

Year Ended September 30, 2023 Compared to Year Ended September 30, 2022 (in millions)

Net Sales

 

		Year Ended September 30,
		2023				2022				Change				% Change
Americas		$	6,359			$	5,824			$	535				9	%
EMEA			2,719				2,433				286				12	%
Asia			953				1,003				(50	)			(5	)%
		$	10,031			$	9,260			$	771				8	%

Americas: Net sales increased $535 million to $6,359 million for the year ended September 30, 2023 from $5,824 million for the year ended September 30, 2022 primarily due to favorable pricing and product mix of $532 million, and higher volumes of $47 million, partially offset by lower pass-through lead costs of $39 million, and the unfavorable impacts of foreign currency translation of $5 million. In the year ended September 30, 2023, pricing actions, favorable product mix driven by strong demand for Advanced Batteries, and higher volumes within the OEM channel as the channel recovers from the semiconductor shortage resulted in an overall increase in net sales.

EMEA: Net sales increased $286 million to $2,719 million for the year ended September 30, 2023 from $2,433 million for the year ended September 30, 2022 primarily due to favorable pricing and product mix of $214 million, higher volumes of $131 million, and higher pass-through lead costs of $15 million, partially offset by the unfavorable impacts of foreign currency translation of $74 million. In the year ended September 30, 2023, pricing actions, favorable product mix driven by a strong demand for Advanced Batteries, and higher volumes within the OEM channel as the channel recovers from the semiconductor shortage resulted in an overall increase in net sales.

Asia: Net sales decreased $50 million to $953 million for the year ended September 30, 2023 from $1,003 million for the year ended September 30, 2022 primarily due to the unfavorable impacts of foreign currency translation of $65 million, lower pass-through lead costs of $56 million, and lower volumes of $10 million, partially offset by favorable pricing and product mix of $81 million. In the year ended September 30, 2023, the

 

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impact of lockdown policies in China and the resulting slowdown in general economic activity following the reversal of these policies unfavorably affected volumes, partially offset by favorable product mix driven by a strong demand for Advanced Batteries.

Adjusted EBITDA

 

		Year Ended September 30,
		2023				2022				Change				% Change
Americas		$	1,267			$	1,122			$	145				13	%
EMEA			486				432				54				13	%
Asia			152				169				(17	)			(10	)%
Corporate expenses			(95	)			(125	)			30				(24	)%
		$	1,810			$	1,598			$	212				13	%

Americas: Adjusted EBITDA increased $145 million to $1,267 million for the year ended September 30, 2023 from $1,122 million for the year ended September 30, 2022 primarily due to favorable pricing and product mix of $317 million, higher volumes of $17 million, and higher equity income of $4 million, partially offset by higher net operating costs of $170 million including production inefficiencies and higher transportation and purchasing costs, and higher SG&A expenses of $23 million.

EMEA: Adjusted EBITDA increased $54 million to $486 million for the year ended September 30, 2023 from $432 million for the year ended September 30, 2022 primarily due to favorable pricing and product mix of $160 million, and higher volumes of $16 million, partially offset by higher net operating costs of $98 million including higher purchasing and transportation costs, the unfavorable impacts of foreign currency translation of $16 million, and higher SG&A expenses of $8 million.

Asia: Adjusted EBITDA decreased $17 million to $152 million for the year ended September 30, 2023 from $169 million for the year ended September 30, 2022 primarily due to unfavorable pricing and product mix of $10 million, the unfavorable impacts of foreign currency translation of $8 million, higher SG&A expenses of $4 million, and lower volumes of $3 million, partially offset by lower net operating costs of $7 million and higher equity income of $1 million.

Corporate expenses: Corporate expenses decreased $30 million to $95 million for the year ended September 30, 2023 from $125 million for the year ended September 30, 2022 primarily due to decreases in charitable contributions and discretionary spend.

Year Ended September 30, 2022 Compared to Year Ended September 30, 2021 (in millions)

Net Sales

 

		Year Ended September 30,
		2022				2021				Change				% Change
Americas		$	5,824			$	5,376			$	448				8	%
EMEA			2,433				2,507				(74	)			(3	)%
Asia			1,003				986				17				2	%
		$	9,260			$	8,869			$	391				4	%

Americas: Net sales increased $448 million to $5,824 million for the year ended September 30, 2022 from $5,376 million for the year ended September 30, 2021 primarily due to favorable pricing and product mix of

 

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$352 million, and higher pass-through lead costs of $143 million, partially offset by the effect of decreased volumes of $42 million, and the unfavorable impacts of foreign currency translation of $5 million. In the year ended September 30, 2022, pricing actions and strong demand for Advanced Batteries favorably impacted pricing and product mix.

EMEA: Net sales decreased $74 million to $2,433 million for the year ended September 30, 2022 from $2,507 million for the year ended September 30, 2021 primarily due to the unfavorable impacts of foreign currency translation of $242 million, and the effect of decreased volumes of $156 million, partially offset by higher pass-through lead costs of $235 million, and favorable pricing and product mix of $89 million. In the year ended September 30, 2022, the impact of the semiconductor shortage on our OEM customers as well as disruptions in the OEM supply chain caused by the Russia/Ukraine conflict unfavorably affected volumes, partially offset by pricing actions and Advanced Batteries making up a higher percentage of volumes sold to our aftermarket customers which contributed to favorable product mix.

Asia: Net sales increased $17 million to $1,003 million for the year ended September 30, 2022 from $986 million for the year ended September 30, 2021 primarily due to higher pass-through lead costs of $81 million, partially offset by unfavorable impacts of foreign currency translation of $44 million, the effect of decreased volumes of $14 million, and unfavorable pricing and product mix of $6 million. In the year ended September 30, 2022, the impact of the semiconductor shortage on our OEM customers and the impact of COVID-19-related lockdowns in China unfavorably affected volumes, partially offset by Advanced Batteries making up a higher percentage of volumes sold to our aftermarket customers which contributed to favorable product mix.

Adjusted EBITDA

 

		Year Ended September 30,
		2022				2021				Change				% Change
Americas		$	1,122			$	1,106			$	16				1	%
EMEA			432				506				(74	)			(15	)%
Asia			169				166				3				2	%
Corporate expenses			(125	)			(114	)			(11	)			10	%
		$	1,598			$	1,664			$	(66	)			(4	)%

Americas: Adjusted EBITDA increased $16 million to $1,122 million for the year ended September 30, 2022 from $1,106 million for the year ended September 30, 2021 primarily due to favorable pricing and product mix of $126 million, higher equity income of $12 million, and lower SG&A of $3 million, partially offset by higher operating costs of $152 million including higher transportation and purchasing costs, and lower volumes of $11 million. In the year ended September 30, 2021, the negative impact to our earnings from the COVID-19 pandemic was approximately $38 million, which was primarily comprised of higher transportation rates and other additional expenses as we implemented enhanced safety measures to protect the health of our employees. See “Material Trends Affecting Our Results of Operations – COVID-19.”

EMEA: Adjusted EBITDA decreased $74 million to $432 million for the year ended September 30, 2022 from $506 million for the year ended September 30, 2021 primarily due to higher operating costs of $95 million including higher transportation and purchasing costs, unfavorable impact of foreign currency translation of $42 million, lower volumes of $27 million, and lower equity income of $1 million, partially offset by favorable pricing and product mix of $70 million, and lower SG&A of $21 million.

Asia: Adjusted EBITDA increased $3 million to $169 million for the year ended September 30, 2022 from $166 million for the year ended September 30, 2021 primarily due to favorable pricing and product mix of

 

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$30 million, and lower SG&A of $13 million, partially offset by higher operating costs of $19 million, lower equity income of $15 million, and the unfavorable impact of foreign currency translation of $6 million.

Corporate expenses: Corporate expenses increased $11 million to $(125) million for the year ended September 30, 2022 from $(114) million for the year ended September 30, 2021 primarily due to increased charitable contributions partially offset by decreases in compensation accruals.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations and bank borrowings. At September 30, 2023, we had cash and cash equivalents of $235 million to fund our general working capital needs.

Managing our balance sheet prudently and maintaining appropriate liquidity are high priorities. We have taken a number of actions to preserve liquidity. As of September 30, 2023, there were no outstanding borrowings under the Revolving Facility or the ABL Facility, and approximately $800 million of additional borrowings would have been available under the Revolving Facility and $745 million of additional borrowings would have been available under the ABL Facility (after giving effect to $55 million of outstanding letters of credit), in each case, subject to customary borrowing conditions.

Our primary cash needs are for working capital, capital expenditures, operating expenses, acquisitions, the repayment of principal and the payment of interest on our indebtedness. Our capital expenditures have been primarily related to investments in capacity for Advanced Battery production, environmental upgrades, continuous improvement and maintenance, and were $428 million, $299 million, and $231 million for the years ended September 30, 2023, 2022 and 2021, respectively.

Refer to Note 16, “Commitments and Contingencies,” Note 8, “Debt and Financing Arrangements,” and Note 7, “Leases,” of the notes to the financial statements included elsewhere in this prospectus for further information regarding the Company’s purchase obligations, long-term debt obligations and lease obligations, respectively.

Cash Flows

The following table presents a summary of cash flows from operating, investing and financing activities for the periods presented:

For the Year Ended September 30, 2023 compared to the Year Ended September 30, 2022 (in millions)

 

		Year Ended September 30,
		2023				2022				Change
Net cash provided by (used by):
Operating activities		$	1,086			$	649			$	437
Investing activities			(274	)			(347	)			73
Financing activities			(804	)			(330	)			(474	)
Capital expenditures (included in investing activities)			(428	)			(299	)			(129	)

Cash provided by operating activities increased by $437 million to a $1,086 million inflow for the year ended September 30, 2023 compared to a $649 million inflow for the year ended September 30, 2022. The increase in cash provided by operations was primarily due to fluctuations in working capital, including changes in inventory levels based on customer demand and production levels, timing of accounts receivable and accounts payable, and dividends received from equity method investments, partially offset by higher interest payments on the Company’s debt and payments related to restructuring plans.

 

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Cash used by investing activities decreased by $73 million to a $274 million outflow for the year ended September 30, 2023 compared to a $347 million outflow for the year ended September 30, 2022. The decrease in cash used by investing activities was primarily related to the sale of investments in marketable common stock in the year ended September 30, 2023, and a usage of cash to fund the Battery Recycling Plant Transaction in the year ended September 30, 2022, partially offset by an increase in capital expenditures.

Cash used by financing activities increased by $474 million to a $804 million outflow for the year ended September 30, 2023 compared to a $330 million outflow for the year ended September 30, 2022. In the year ended September 30, 2023, we made $636 million in voluntary principal payments on the Euro Term Loan, used $156 million of cash to redeem a portion of the Acquisition Financing Notes, had $13 million of net usage of cash related to the refinancing of the USD Term Loan, and received a $21 million equity contribution. In the year ended September 30, 2022, we used $200 million of cash to redeem a portion of the Unsecured Notes, made $98 million in voluntary principal payments on the Euro Term Loan, and made a $21 million TRA payment. See Note 8, “Debt and Financing Arrangements,” of the notes to the financial statements included elsewhere in this prospectus for further information.

For the Year Ended September 30, 2022 compared to the Year Ended September 30, 2021 (in millions)

 

		Year Ended September 30,
		2022				2021				Change
Net cash provided by (used by):
Operating activities		$	649			$	608			$	41
Investing activities			(347	)			(99	)			(248	)
Financing activities			(330	)			(947	)			617
Capital expenditures (included in investing activities)			(299	)			(231	)			(68	)

Cash provided by operating activities increased by $41 million to a $649 million inflow for the year ended September 30, 2022 compared to a $608 million inflow for the year ended September 30, 2021. The increase in cash provided by operations for the year ended September 30, 2022 compared to the year ended September 30, 2021 was primarily due to timing of income tax payments and lower interest payments on the Company’s debt, partially offset by fluctuations in working capital, including timing of accounts receivable and accounts payable, and changes in inventory levels to support customer demand and safety and cycle stock requirements for key materials and components in response to supply chain pressures.

Cash used by investing activities increased by $248 million to a $347 million outflow for the year ended September 30, 2022 compared to a $99 million outflow for the year ended September 30, 2021. The increase in cash used by investing activities primarily related to an increase in capital expenditures and the usage of cash to fund the Battery Recycling Plant Transaction in the year ended September 30, 2022, compared to cash proceeds from the sale of a portion of an equity method investment within the Asia segment, and the usage of cash to fund the China Transaction in the year ended September 30, 2021. See Note 2, “Acquisitions,” of the notes to the financial statements included elsewhere in this prospectus for further information.

Cash used by financing activities decreased by $617 million to a $330 million outflow for the year ended September 30, 2022 compared to a $947 million outflow for the year ended September 30, 2021. The change in cash used by financing activities was primarily due to a $200 million usage of cash for the retirement of the Unsecured Notes, $98 million voluntary principal payments of the Euro Term Loan, and $21 million TRA payment in the year ended September 30, 2022, compared to approximately $630 million voluntary principal payments of the Term Loan Facility, $100 million principal payment related to Debt Repricing, $100 million principal payment of the 2026 USD Secured Notes, and $50 million principal payment of the 2025 Secured Notes in the year ended September 30, 2021. See Note 8, “Debt and Financing Arrangements,” of the notes to the financial statements included elsewhere in this prospectus for further information.

 

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