Monday morning a reader sent me a link to a December 23rd press release announcing that the OM Group, Inc. (OMG) had agreed to buy EaglePicher Technologies LLC, a well regarded name in the battery industry, for 1.9 million, or roughly 1.4x sales. While I overlooked the release during the build-up to Christmas, the transaction is important because it provides a current bright-line reference point for energy storage investors on the difficult question, "what is a battery company worth?"

EaglePicher was previously a unit of Eagle Picher Holdings, a public company that filed a voluntary petition under Chapter 11 of the Bankruptcy Code in April 2005. While I can’t find detailed disclosures on the reorganized company’s lines of business and profitability, EaglePicher’s website describes a variety of battery chemistries ranging from lead-acid to lithium-ion. The company’s press release indicates that approximately 60% of revenue comes from its defense business, 31% comes from its aerospace business and the balance comes from medical and commercial battery systems. The EaglePicher acquisition seems to be a logical step in OMG’s vertical integration and diversification strategy.

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Macro Background

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The markets have seen some significant gains since their March lows. Each time this occurs there is a new round of experts calling the bottom. Time and time again the market throws them a cruel twist and heads lower. Will this time be different?

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While it’s also a fantastic ditty by Def Leppard, Rock of Ages (ROAC) is a very old company specializing in "memorial" products - think headstones, mausoleum products, etc.

Rock of Ages reported a dramatic increase in earnings this morning, with earnings per share of 19 cents versus 10 cents a year ago. Shares are up 12% today, to 2.71. The company reports in two segments - quarry and manufacturing, with manufacturing being the higher-margin of the two

I just got off the phone with CFO Laura Plude, who graciously answered a few of my questions. Quarry segment results were greatly improved (see below), thanks to strong Chinese demand. I asked if the improvement in results at their Bethel White Quarry (which they cited as the big boost to earnings) could continue, and was told that not only would it continue but we might see even better improvement due to equipment repairs/upgrades and other efforts.

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China Medicine (CHME) is scheduled to report 2Q’09 earnings this Thursday morning, August 13. While there is no consensus estimates or management guidance for investors to base expectations on, we believe the company’s balance sheet offers some important clues as it pertains to ball-parking China Medicine’s results. And these clues lead us to believe that China Medicine is going to report a remarkably and unexpectedly strong quarter.

Our logic is as follows: in order to meet customer demand China Medicine carries inventory and also makes advanced payments to its suppliers in order to secure product. Both of these are recorded as current assets on its balance sheet and are indicative of the next quarter’s sales. The exhibit below captures the relationship between the balance sheet amounts it records as inventory plus advances to suppliers and the company’s next quarter’s sales.

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