NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
(In Thousands, Except Share and Per Share Data)
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments except those otherwise described herein) considered necessary for a fair presentation have been included, unless otherwise disclosed. Operating results for the three months ended July 4, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2022.
The Consolidated Condensed Balance Sheet at March 31, 2021 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
The financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s 2021 Annual Report on Form 10-K (SEC File No. 001-32253), which was filed on May 26, 2021 (the “2021 Annual Report”).
EnerSys (the “Company,”) reports interim financial information for 13-week periods, except for the first quarter, which always begins on April 1, and the fourth quarter, which always ends on March 31. The four quarters in fiscal 2022 end on July 4, 2021, October 3, 2021, January 2, 2022, and March 31, 2022, respectively. The four quarters in fiscal 2021 ended on July 5, 2020, October 4, 2020, January 3, 2021, and March 31, 2021, respectively.
The consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiaries and any partially owned subsidiaries that the Company has the ability to control. All intercompany transactions and balances have been eliminated in consolidation.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740)”: Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted the standard in the first quarter of fiscal 2022 and the adoption did not have a material impact on the Company's consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, including, but not limited to, the potential impacts arising from the coronavirus pandemic of 2019 (“COVID-19”) and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts of COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates.
Examples of significant estimates include the allowance for credit losses, the recoverability of property, plant and equipment, the incremental borrowing rate for lease liabilities, the recoverability of intangible assets and other long-lived assets, fair value measurements, including those related to financial instruments, goodwill and intangible assets, valuation allowances on tax assets, pension and postretirement benefit obligations, contingencies and the identification and valuation of assets acquired and liabilities assumed in connection with business combinations.
2. Revenue Recognition
The Company's revenues by reportable segments are presented in Note 17.
Service revenues related to the work performed for the Company’s customers by its maintenance technicians generally represent a separate and distinct performance obligation. Control for these services passes to the customer as the services are performed. Service revenues for the first quarter of fiscal 2022 and 2021 amounted to $82,518 and $68,758, respectively.
A small portion of the Company's customer arrangements oblige the Company to create customized products for its customers that require the bundling of both products and services into a single performance obligation because the individual products and services that are required to fulfill the customer requirements do not meet the definition for a distinct performance obligation. These customized products generally have no alternative use to the Company and the terms and conditions of these arrangements give the Company the enforceable right to payment for performance completed to date, including a reasonable profit margin. For these arrangements, control transfers over time and the Company measures progress towards completion by selecting the input or output method that best depicts the transfer of control of the underlying goods and services to the customer for each respective arrangement. Methods used by the Company to measure progress toward completion include labor hours, costs incurred and units of production. Revenues recognized over time for the first quarter of fiscal 2022 and 2021 amounted to $40,904 and $36,102, respectively.
On July 4, 2021, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $114,863, of which, the Company estimates that approximately $88,019 will be recognized as revenue in fiscal 2022, $26,033 in fiscal 2023, $774 in fiscal 2024, $37 in fiscal 2025 and $0 in fiscal 2026 .
Any payments that are received from a customer in advance, prior to the satisfaction of a related performance obligation and billings in excess of revenue recognized, are deferred and treated as a contract liability. Advance payments and billings in excess of revenue recognized are classified as current or non-current based on the timing of when recognition of revenue is expected. As of July 4, 2021, the current and non-current portion of contract liabilities were $18,150 and $1,686, respectively. As of March 31, 2021, the current and non-current portion of contract liabilities were $15,992 and $2,072, respectively. Revenues recognized during the first quarter of fiscal 2022 and 2021 that were included in the contract liability at the beginning of the quarter, amounted to $3,596 and $3,466, respectively.
Amounts representing work completed and not billed to customers represent contract assets and were $50,290 and $46,451 as of July 4, 2021 and March 31, 2021, respectively.
The Company uses historic customer product return data as a basis of estimation for customer returns and records the reduction of sales at the time revenue is recognized. At July 4, 2021, the right of return asset related to the value of inventory anticipated to be returned from customers was $4,274 and refund liability representing amounts estimated to be refunded to customers was $7,590.
3. Leases
The Company leases manufacturing facilities, distribution centers, office space, vehicles and other equipment under non-cancellable leases with initial terms typically ranging from 1 to 17 years.
Short term leases with an initial term of 12 months or less are not presented on the balance sheet and expense is recognized on a straight-line basis over the lease term.
The following table presents lease assets and liabilities and their balance sheet classification:
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Classification
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As of
July 4, 2021
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As of
March 31, 2021
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Operating Leases:
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|
|
|
|
|
Right-of-use assets
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|
Other assets
|
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$
|
60,480
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|
|
$
|
62,159
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|
Operating lease current liabilities
|
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Accrued expenses
|
|
21,057
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|
|
21,774
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Operating lease non-current liabilities
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Other liabilities
|
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41,825
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|
42,528
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Finance Leases:
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|
|
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Right-of-use assets
|
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Property, plant, and equipment, net
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$
|
524
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|
|
$
|
573
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Finance lease current liabilities
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Accrued expenses
|
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235
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|
|
236
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Finance lease non-current liabilities
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Other liabilities
|
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382
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|
435
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The components of lease expense for the first quarter ended July 4, 2021 and July 5, 2020 were as follows:
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Quarter ended
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Classification
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July 4, 2021
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July 5, 2020
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Operating Leases:
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|
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Operating lease cost
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Operating expenses
|
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$
|
6,716
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|
|
$
|
6,936
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|
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|
|
Variable lease cost
|
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Operating expenses
|
|
2,573
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|
|
2,119
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|
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|
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Short term lease cost
|
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Operating expenses
|
|
1,817
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|
|
1,829
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|
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Finance Leases:
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|
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Depreciation
|
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Operating expenses
|
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$
|
60
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$
|
42
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Interest expense
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Interest expense
|
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8
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|
|
7
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Total
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$
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11,174
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$
|
10,933
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The following table presents the weighted average lease term and discount rates for leases as of July 4, 2021 and March 31, 2021:
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July 4, 2021
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March 31, 2021
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Operating Leases:
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Weighted average remaining lease term (years)
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5.6 years
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5.5 years
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Weighted average discount rate
|
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5.15%
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5.16%
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Finance Leases:
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Weighted average remaining lease term (years)
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2.9 years
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3.1 years
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Weighted average discount rate
|
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4.81%
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4.81%
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The following table presents future payments due under leases reconciled to lease liabilities as of July 4, 2021:
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Finance Leases
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Operating Leases
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Nine months ended March 31, 2022
|
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$
|
200
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$
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18,344
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Year ended March 31,
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2023
|
|
220
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|
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17,097
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2024
|
|
160
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|
|
11,142
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2025
|
|
47
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|
|
7,341
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2026
|
|
26
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|
|
5,428
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Thereafter
|
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—
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|
13,396
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Total undiscounted lease payments
|
|
653
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|
|
72,748
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Present value discount
|
|
36
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|
|
9,866
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Lease liability
|
|
$
|
617
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|
|
$
|
62,882
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The following table presents supplemental disclosures of cash flow information related to leases for the first quarter ended July 4, 2021 and July 5, 2020:
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Quarter ended
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July 4, 2021
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July 5, 2020
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Cash paid for amounts included in the measurement of lease liabilities:
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Operating cash flows from finance leases
|
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$
|
8
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$
|
7
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Operating cash flows from operating leases
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|
6,765
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|
|
6,921
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|
|
|
|
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Financing cash flows from finance leases
|
|
60
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|
|
41
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Supplemental non-cash information on lease liabilities arising from right-of-use assets:
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Right-of-use assets obtained in exchange for new finance lease liabilities
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$
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—
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$
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—
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Right-of-use assets obtained in exchange for new operating lease liabilities
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|
3,681
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|
6,177
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4. Goodwill and Other Intangible Assets
Other Intangible Assets
Information regarding the Company’s other intangible assets are as follows:
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Balance as of
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July 4, 2021
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March 31, 2021
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Gross Amount
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Accumulated Amortization
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Net Amount
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Gross Amount
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Accumulated Amortization
|
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Net Amount
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Indefinite-lived intangible assets:
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Trademarks
|
|
$
|
148,296
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|
|
$
|
(953)
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|
|
$
|
147,343
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|
|
$
|
148,164
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|
|
$
|
(953)
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|
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$
|
147,211
|
|
Finite-lived intangible assets:
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Customer relationships
|
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299,366
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|
|
(92,993)
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|
206,373
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|
|
298,576
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|
|
(87,308)
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|
|
211,268
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Non-compete
|
|
2,825
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|
|
(2,825)
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|
|
—
|
|
|
2,825
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|
|
(2,825)
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|
|
—
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Technology
|
|
97,542
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|
|
(31,887)
|
|
|
65,655
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|
|
97,349
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|
|
(29,561)
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|
|
67,788
|
|
Trademarks
|
|
8,012
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|
|
(3,789)
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|
|
4,223
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|
|
8,012
|
|
|
(3,381)
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|
|
4,631
|
|
Licenses
|
|
1,196
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|
|
(1,196)
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|
|
—
|
|
|
1,196
|
|
|
(1,196)
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|
|
—
|
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Total
|
|
$
|
557,237
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|
|
$
|
(133,643)
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|
|
$
|
423,594
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|
|
$
|
556,122
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|
|
$
|
(125,224)
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|
|
$
|
430,898
|
|
The Company’s amortization expense related to finite-lived intangible assets was $8,419 for the first quarter of fiscal 2022, compared to $8,555 for the first quarter of fiscal 2021. The expected amortization expense based on the finite-lived intangible assets as of July 4, 2021, is $24,205 for the remainder of fiscal 2022, $30,399 in fiscal 2023, $27,544 in fiscal 2024, $26,552 in fiscal 2025 and $25,618 in fiscal 2026.
Goodwill
The following table presents the amount of goodwill, as well as any changes in the carrying amount of goodwill by segment during the first quarter of fiscal 2022:
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Energy Systems
|
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Motive Power
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Specialty
|
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Total
|
Balance at March 31, 2021
|
|
$
|
279,676
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|
|
$
|
327,055
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|
|
$
|
98,862
|
|
|
$
|
705,593
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
5,788
|
|
|
1,300
|
|
|
196
|
|
|
7,284
|
|
Balance as of July 4, 2021
|
|
$
|
285,464
|
|
|
$
|
328,355
|
|
|
$
|
99,058
|
|
|
$
|
712,877
|
|
5. Inventories
|
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|
July 4, 2021
|
|
March 31, 2021
|
Raw materials
|
|
$
|
164,688
|
|
|
$
|
147,040
|
|
Work-in-process
|
|
103,855
|
|
|
97,715
|
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Finished goods
|
|
295,371
|
|
|
273,492
|
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Total
|
|
$
|
563,914
|
|
|
$
|
518,247
|
|
6. Fair Value of Financial Instruments
Recurring Fair Value Measurements
The following tables represent the financial assets and (liabilities) measured at fair value on a recurring basis as of July 4, 2021 and March 31, 2021, and the basis for that measurement:
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Total Fair Value Measurement July 4, 2021
|
|
Quoted Price in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Lead forward contracts
|
|
$
|
3,781
|
|
|
$
|
—
|
|
|
$
|
3,781
|
|
|
$
|
—
|
|
Foreign currency forward contracts
|
|
180
|
|
|
—
|
|
|
180
|
|
|
—
|
|
Total derivatives
|
|
$
|
3,961
|
|
|
$
|
—
|
|
|
$
|
3,961
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Total Fair Value
Measurement
March 31, 2021
|
|
Quoted Price in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Lead forward contracts
|
|
$
|
(1,980)
|
|
|
$
|
—
|
|
|
$
|
(1,980)
|
|
|
$
|
—
|
|
Foreign currency forward contracts
|
|
424
|
|
|
—
|
|
|
424
|
|
|
—
|
|
Total derivatives
|
|
$
|
(1,556)
|
|
|
$
|
—
|
|
|
$
|
(1,556)
|
|
|
$
|
—
|
|
The fair values of lead forward contracts are calculated using observable prices for lead as quoted on the London Metal Exchange (“LME”) and, therefore, were classified as Level 2 within the fair value hierarchy, as described in Note 1. Summary of Significant Accounting Policies to the Company's consolidated financial statements included in the 2021 Annual Report.
The fair values for foreign currency forward contracts are based upon current quoted market prices and are classified as Level 2 based on the nature of the underlying market in which these derivatives are traded.
Financial Instruments
The fair values of the Company’s cash and cash equivalents approximate carrying value due to their short maturities.
The fair value of the Company’s short-term debt and borrowings under the Amended Credit Facility (as defined in Note 12), approximate their respective carrying value, as they are variable rate debt and the terms are comparable to market terms as of the balance sheet dates and are classified as Level 2.
In fiscal 2020, the Company issued its 4.375% Senior Notes due 2027 (the “2027 Notes”), with an original face value of $300,000. The Company's 5.00% Senior Notes due 2023 (the “2023 Notes”), with an original face value of $300,000, were issued in April 2015. The fair value of the Company's 2027 Notes and 2023 Notes, (collectively, the “Senior Notes”) represent the trading values based upon quoted market prices and are classified as Level 2. The 2027 Notes were trading at approximately 104% and 102% of face value on July 4, 2021 and March 31, 2021, respectively. The 2023 Notes were trading at approximately 104% and 105% of face value on July 4, 2021 and March 31, 2021, respectively.
The carrying amounts and estimated fair values of the Company’s derivatives and Senior Notes at July 4, 2021 and March 31, 2021 were as follows:
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|
|
|
|
|
|
|
|
|
|
July 4, 2021
|
|
March 31, 2021
|
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|
Carrying
Amount
|
|
Fair Value
|
|
Carrying
Amount
|
|
Fair Value
|
Financial assets:
|
|
|
|
|
|
|
|
|
Derivatives (1)
|
|
$
|
3,961
|
|
|
$
|
3,961
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
Senior Notes (2)
|
|
$
|
600,000
|
|
|
$
|
625,500
|
|
|
$
|
600,000
|
|
|
$
|
621,000
|
|
Derivatives (1)
|
|
—
|
|
|
—
|
|
|
1,556
|
|
|
1,556
|
|
(1)Represents lead and foreign currency forward contracts (see Note 7 for asset and liability positions of the lead and foreign currency forward contracts at July 4, 2021 and March 31, 2021).
(2)The fair value amount of the Senior Notes at July 4, 2021 and March 31, 2021 represent the trading value of the instruments.
7. Derivative Financial Instruments
The Company utilizes derivative instruments to reduce its exposure to fluctuations in commodity prices and foreign exchange rates under established procedures and controls. The Company does not enter into derivative contracts for speculative purposes. The Company’s agreements are with creditworthy financial institutions and the Company anticipates performance by counterparties to these contracts and therefore no material loss is expected.
Derivatives in Cash Flow Hedging Relationships
Lead Forward Contracts
The Company enters into lead forward contracts to fix the price for a portion of its lead purchases. Management considers the lead forward contracts to be effective against changes in the cash flows of the underlying lead purchases. The vast majority of such contracts are for a period not extending beyond one year. At July 4, 2021 and March 31, 2021, the Company has hedged the price to purchase approximately 50.0 million pounds and 54.5 million pounds of lead, respectively, for a total purchase price of $48,705 and $50,567, respectively.
Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts and options to hedge a portion of the Company’s foreign currency exposures for lead, as well as other foreign currency exposures so that gains and losses on these contracts offset changes in the underlying foreign currency denominated exposures. The vast majority of such contracts are for a period not extending beyond one year. As of July 4, 2021 and March 31, 2021, the Company had entered into a total of $26,495 and $26,033, respectively, of such contracts.
In the coming twelve months, the Company anticipates that $5,685 of pretax gain relating to lead and foreign currency forward contracts will be reclassified from AOCI (“Accumulated Other Comprehensive Income”) as part of cost of goods sold. This amount represents the current net unrealized impact of hedging lead and foreign exchange rates, which will change as market rates change in the future, and will ultimately be realized in the Consolidated Condensed Statements of Income as an offset to the corresponding actual changes in lead costs to be realized in connection with the variable lead cost and foreign exchange rates being hedged.
Derivatives not Designated in Hedging Relationships
Foreign Currency Forward Contracts
The Company also enters into foreign currency forward contracts to economically hedge foreign currency fluctuations on intercompany loans and foreign currency denominated receivables and payables. These are not designated as hedging instruments and changes in fair value of these instruments are recorded directly in the Consolidated Condensed Statements of Income. As of July 4, 2021 and March 31, 2021, the notional amount of these contracts was $29,262 and $28,995, respectively.
Presented below in tabular form is information on the location and amounts of derivative fair values in the Consolidated Condensed Balance Sheets and derivative gains and losses in the Consolidated Condensed Statements of Income:
Fair Value of Derivative Instruments
July 4, 2021 and March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives and Hedging Activities Designated as Cash Flow Hedges
|
|
Derivatives and Hedging Activities Not Designated as Hedging Instruments
|
|
|
July 4, 2021
|
|
March 31, 2021
|
|
July 4, 2021
|
|
March 31, 2021
|
Prepaid and other current assets:
|
|
|
|
|
|
|
|
|
Lead forward contracts
|
|
$
|
3,781
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts
|
|
271
|
|
|
524
|
|
|
—
|
|
|
—
|
|
Total assets
|
|
$
|
4,052
|
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Lead forward contracts
|
|
$
|
—
|
|
|
$
|
1,980
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts
|
|
—
|
|
|
—
|
|
|
91
|
|
|
100
|
|
Total liabilities
|
|
$
|
—
|
|
|
$
|
1,980
|
|
|
$
|
91
|
|
|
$
|
100
|
|
The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income
For the quarter ended July 4, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Designated as Cash Flow Hedges
|
|
Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
|
|
Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
|
|
Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
|
Lead forward contracts
|
|
$
|
7,572
|
|
|
Cost of goods sold
|
|
$
|
2,459
|
|
Foreign currency forward contracts
|
|
(189)
|
|
|
Cost of goods sold
|
|
(160)
|
|
Total
|
|
$
|
7,383
|
|
|
|
|
$
|
2,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
Location of Gain (Loss) Recognized in Income on Derivatives
|
|
Pretax Gain (Loss)
|
Foreign currency forward contracts
|
Other (income) expense, net
|
|
$
|
(6)
|
|
Total
|
|
|
$
|
(6)
|
|
The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income
For the quarter ended July 5, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Designated as Cash Flow Hedges
|
|
Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
|
|
Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
|
|
Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
|
Lead forward contracts
|
|
$
|
(1,274)
|
|
|
Cost of goods sold
|
|
$
|
(3,799)
|
|
Foreign currency forward contracts
|
|
261
|
|
|
Cost of goods sold
|
|
(283)
|
|
Total
|
|
$
|
(1,013)
|
|
|
|
|
$
|
(4,082)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
Location of Gain (Loss) Recognized in Income on Derivatives
|
|
Pretax Gain (Loss)
|
Foreign currency forward contracts
|
Other (income) expense, net
|
|
$
|
262
|
|
Total
|
|
|
$
|
262
|
|
8. Income Taxes
The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the first quarter of fiscal 2022 and 2021 was based on the estimated effective tax rates applicable for the full years ending March 31, 2022 and March 31, 2021, respectively, after giving effect to items specifically related to the interim periods. The Company’s effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which the Company operates, change in tax laws and the amount of the Company's consolidated earnings before taxes.
On May 19, 2019, a public referendum held in Switzerland approved the Federal Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF) as adopted by the Swiss Federal Parliament on September 28, 2018. The Swiss tax reform measures were effective January 1, 2020. The Company recorded an income tax benefit of $1,883 during the first quarter of fiscal 2021.
The consolidated effective income tax rates for the first quarter of fiscal 2022 and 2021 were 16.0% and 15.4%, respectively. The rate increase in the first quarter of fiscal 2022 compared to the prior year quarter is primarily due to the Swiss tax reform, partially offset by Hagen, Germany exit charges and changes in the mix of earnings among tax jurisdictions.
Foreign income as a percentage of worldwide income is estimated to be 72% for fiscal 2022 compared to 67% for fiscal 2021. The foreign effective tax rate for both the first quarter of fiscal 2022 and 2021 was 9%. Income from the Company's Swiss subsidiary comprised a substantial portion of the Company's overall foreign mix of income for both fiscal 2022 and fiscal 2021 and is taxed at an effective income tax rate of approximately 8% and 6%, respectively.
9. Warranty
The Company provides for estimated product warranty expenses when products are sold, with related liabilities included within accrued expenses and other liabilities. As warranty estimates are forecasts that are based on the best available information, primarily historical claims experience, costs of claims may ultimately differ from amounts provided. An analysis of changes in the liability for product warranties is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
|
July 4, 2021
|
|
July 5, 2020
|
|
|
|
|
Balance at beginning of period
|
|
$
|
58,962
|
|
|
$
|
63,525
|
|
|
|
|
|
Current period provisions
|
|
5,330
|
|
|
6,974
|
|
|
|
|
|
Costs incurred
|
|
(5,252)
|
|
|
(11,310)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
127
|
|
|
582
|
|
|
|
|
|
Balance at end of period
|
|
$
|
59,167
|
|
|
$
|
59,771
|
|
|
|
|
|
10. Commitments, Contingencies and Litigation
Litigation and Other Legal Matters
In the ordinary course of business, the Company and its subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings are generally based on alleged violations of environmental, anticompetition, employment, contract and other laws. In some of these actions and proceedings, claims for substantial monetary damages are asserted against the Company and its subsidiaries. In the ordinary course of business, the Company and its subsidiaries are also subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations, and threatened legal actions and proceedings. In connection with formal and informal inquiries by federal, state, local and foreign agencies, the Company and its subsidiaries receive numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of their activities.
European Competition Investigations
Certain of the Company’s European subsidiaries had received subpoenas and requests for documents and, in some cases, interviews from, and have had on-site inspections conducted by, the competition authorities of Belgium, Germany and the Netherlands relating to conduct and anticompetitive practices of certain industrial battery participants. For additional information regarding these matters, see Note 19 - Commitments, Contingencies and Litigation to the consolidated financial
statements contained in the 2021 Annual Report. As of July 4, 2021 and March 31, 2021, the Company did not have a reserve balance related to these matters.
The precise scope, timing and time period at issue, as well as the final outcome of the investigations or customer claims, remain uncertain. Accordingly, the Company’s estimate may change from time to time, and actual losses could vary.
Environmental Issues
As a result of its operations, the Company is subject to various federal, state, and local, as well as international environmental laws and regulations and is exposed to the costs and risks of registering, handling, processing, storing, transporting, and disposing of hazardous substances, especially lead and acid. The Company’s operations are also subject to federal, state, local and international occupational safety and health regulations, including laws and regulations relating to exposure to lead in the workplace. The Company believes that it has adequate reserves to satisfy its environmental liabilities.
Lead and Foreign Currency Forward Contracts
To stabilize its lead costs and reduce volatility from currency movements, the Company enters into contracts with financial institutions. The vast majority of such contracts are for a period not extending beyond one year. Please refer to Note 7 - Derivative Financial Instruments for more details.
11. Restructuring and other Exit Charges
Restructuring Programs
As disclosed in the 2021 Annual Report, the Company committed to restructuring plans aimed at improving operational efficiencies across its lines of business. A substantial portion of these plans are complete with an estimated $4,666 remaining to be incurred by the end of fiscal 2022, mainly related to plans started in fiscal 2021 and 2022. Restructuring and exit charges for the first quarter of fiscal 2022 by reportable segments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended July 4, 2021
|
|
|
Energy Systems
|
|
Motive Power
|
|
Specialty
|
|
Total
|
Restructuring charges
|
|
$
|
858
|
|
|
$
|
432
|
|
|
$
|
36
|
|
|
$
|
1,326
|
|
Exit charges
|
|
(370)
|
|
|
8,101
|
|
|
(1,225)
|
|
|
6,506
|
|
Restructuring and other exit charges
|
|
$
|
488
|
|
|
$
|
8,533
|
|
|
$
|
(1,189)
|
|
|
$
|
7,832
|
|
A roll-forward of the restructuring reserve, excluding exit charges, is as follows:
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2021
|
|
$
|
2,595
|
|
Accrued
|
|
1,326
|
|
Costs incurred
|
|
(2,142)
|
|
Foreign currency impact
|
|
65
|
|
Balance as of July 4, 2021
|
|
$
|
1,844
|
|
Exit Charges
Fiscal 2021 Programs
Hagen, Germany
In fiscal 2021, the EnerSys’ Board of Directors approved a plan to substantially close its facility in Hagen, Germany, which produces flooded motive power batteries for forklifts. Management determined that future demand for the motive power batteries produced at this facility was not sufficient, given the conversion from flooded to maintenance free batteries by customers, the existing number of competitors in the market, as well as the near term decline in demand and increased
uncertainty from the pandemic. The Company plans to retain the facility with limited sales, service and administrative functions along with related personnel for the foreseeable future.
The Company currently estimates that the total charges for these actions will amount to approximately $60,000, the majority of which are expected to be recorded by the end of calendar 2021. Cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses are estimated to be $40,000 and non-cash charges from inventory and equipment write-offs are estimated to be $20,000. These actions resulted in the reduction of approximately 200 employees.
During fiscal 2021, the Company recorded cash charges relating to severance of $23,331 and non-cash charges of $7,946 primarily relating to fixed asset write-offs.
During the first quarter of fiscal 2022, the Company recorded charges, primarily relating to severance of $8,471.
Targovishte, Bulgaria
During fiscal 2019, the Company committed to a plan to close its facility in Targovishte, Bulgaria, which produced diesel-electric submarine batteries. Management determined that the future demand for batteries of diesel-electric submarines was not sufficient given the number of competitors in the market. Of the estimated total charges of $26,000 for this plan, the Company had recorded charges amounting to $20,242 in fiscal 2019, relating to severance and inventory and fixed asset write-offs and an additional $5,123 relating to cash and non-cash charges during fiscal 2020. During fiscal 2021, in keeping with its strategy of
exiting the manufacture of batteries for diesel-electric submarines, the Company completed further actions which resulted in
$220 relating to cash and non-cash charges. During the current quarter of fiscal 2022, the Company sold this facility for $1,489. A net gain of $1,225 was recorded as a credit to exit charges in the Consolidated Condensed Statement of Income.
Zamudio, Spain
During the first quarter of fiscal 2022, the Company closed a minor assembling plant in Zamudio, Spain and sold the same for $1,779. A net gain of $740 was recorded as a credit to exit charges in the Consolidated Condensed Statement of Income.
Richmond, Kentucky Plant Fire
During fiscal 2021, the Company settled its claims with its insurance carrier relating to the fire that broke out in the battery formation area of the Company's Richmond, Kentucky motive power production facility in fiscal 2020.
During the first quarter of fiscal 2021, the Company recorded a charge of $9,274 as receivable for cleanup and received $10,000 from the insurance carrier. In addition to the property damage claim, the Company also received $3,700 in business interruption claims and was credited to cost of goods sold.
12. Debt
The following summarizes the Company’s long-term debt as of July 4, 2021 and March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 4, 2021
|
|
March 31, 2021
|
|
|
Principal
|
|
Unamortized Issuance Costs
|
|
Principal
|
|
Unamortized Issuance Costs
|
Senior Notes
|
|
$
|
600,000
|
|
|
$
|
4,806
|
|
|
$
|
600,000
|
|
|
$
|
5,106
|
|
Amended Credit Facility, due 2022
|
|
426,319
|
|
|
1,097
|
|
|
376,039
|
|
|
1,315
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,026,319
|
|
|
$
|
5,903
|
|
|
$
|
976,039
|
|
|
$
|
6,421
|
|
Less: Unamortized issuance costs
|
|
5,903
|
|
|
|
|
6,421
|
|
|
|
Long-term debt, net of unamortized issuance costs
|
|
$
|
1,020,416
|
|
|
|
|
$
|
969,618
|
|
|
|
The Company's Senior Notes comprise the following:
4.375% Senior Notes due 2027
On December 11, 2019, the Company issued $300,000 in aggregate principal amount of its 4.375% Senior Notes due December 15, 2027 (the “2027 Notes”). Proceeds from this offering, net of debt issuance costs were $296,250 and were utilized to pay down the Amended 2017 Revolver (defined below). The 2027 Notes bear interest at a rate of 4.375% per annum accruing from December 11, 2019. Interest is payable semiannually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020. The 2027 Notes mature on December 15, 2027, unless earlier redeemed or repurchased in full and are unsecured and
unsubordinated obligations of the Company. They are fully and unconditionally guaranteed, jointly and severally, by certain of its subsidiaries that are guarantors under the Amended Credit Facility. These guarantees are unsecured and unsubordinated obligations of such guarantors.
The Company may redeem, prior to September 15, 2027, all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest and a “make whole” premium to, but excluding, the redemption date. The Company may redeem, on or after September 15, 2027, all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of the 2027 Notes, plus accrued and unpaid interest to, but excluding, the redemption date. If a change of control triggering event occurs, the Company will be required to offer to repurchase the 2027 Notes at a price in cash equal to 101% of the aggregate principal amount of the 2027 Notes, plus accrued and unpaid interest to, but excluding, the date of repurchase. The 2027 Notes rank pari passu with the 2023 Notes (defined below).
5.00% Senior Notes due 2023
The 5% Senior Notes due April 30, 2023 (the “2023 Notes”) bear interest at a rate of 5.00% per annum and have an original face value of $300,000. Interest is payable semiannually in arrears on April 30 and October 30 of each year and commenced on October 30, 2015. The 2023 Notes will mature on April 30, 2023, unless earlier redeemed or repurchased in full. The 2023 Notes are unsecured and unsubordinated obligations of the Company. The 2023 Notes are fully and unconditionally guaranteed, jointly and severally, by certain of its subsidiaries that are guarantors under the Amended Credit Facility. These guarantees are unsecured and unsubordinated obligations of such guarantors.
2017 Credit Facility and Subsequent Amendment
In fiscal 2018, the Company entered into a credit facility (the “2017 Credit Facility”). The 2017 Credit Facility scheduled to mature on September 30, 2022, initially comprised a $600,000 senior secured revolving credit facility (“2017 Revolver”) and a $150,000 senior secured term loan (“2017 Term Loan”). The Company utilized the borrowings from the 2017 Credit Facility to repay its pre-existing credit facility.
In fiscal 2019, the Company amended the 2017 Credit Facility (as amended, the “Amended Credit Facility”) to fund the Alpha acquisition. The Amended Credit Facility consists of $449,105 senior secured term loans (the “Amended 2017 Term Loan”), including a CAD 133,050 ($99,105) term loan and a $700,000 senior secured revolving credit facility (the “Amended 2017 Revolver”). The amendment resulted in an increase of the 2017 Term Loan and the 2017 Revolver by $299,105 and $100,000, respectively.
Subsequent to the amendment, the quarterly installments payable on the Amended 2017 Term Loan are $5,645 beginning December 31, 2018, $8,468 beginning December 31, 2019 and $11,290 beginning December 31, 2020 with a final payment of $320,000 on September 30, 2022. The Amended Credit Facility may be increased by an aggregate amount of $325,000 in revolving commitments and / or one or more new tranches of term loans, under certain conditions. Both the Amended 2017 Revolver and the Amended 2017 Term Loan bear interest, at the Company's option, at a rate per annum equal to either (i) the London Interbank Offered Rate (“LIBOR”) or Canadian Dollar Offered Rate (“CDOR”) plus (i) LIBOR plus between 1.25% and 2.00% (currently 1.25% and based on the Company's consolidated net leverage ratio) or (ii) the U.S. Dollar Base Rate (which equals, for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate plus 0.50%, (b) Bank of America “Prime Rate” and (c) the Eurocurrency Base Rate plus 1%; provided that, if the Base Rate shall be less than zero, such rate shall be deemed zero) (iii) the CDOR Base Rate equal to the higher of (a) Bank of America “Prime Rate” and (b) average 30-day CDOR rate plus 0.50%. Obligations under the Amended Credit Facility are secured by substantially all of the Company’s existing and future acquired assets, including substantially all of the capital stock of the Company’s United States subsidiaries that are guarantors under the Amended Credit Facility and up to 65% of the capital stock of certain of the Company’s foreign subsidiaries that are owned by the Company’s United States subsidiaries.
The Amended Credit Facility allows for up to two temporary increases in the maximum leverage ratio from 3.50x to 4.00x for a four quarter period following an acquisition larger than $250,000. Effective December 7, 2018 through December 28, 2019, the maximum leverage ratio was increased to 4.00x. On December 29, 2019, the maximum leverage ratio returned to 3.50x.
On July 15, 2021, the Company entered into an amendment to the Amended Credit Facility. See Note 18 for more details.
As of July 4, 2021, the Company had $60,000 outstanding under the Amended 2017 Revolver and $366,319 under the Amended 2017 Term Loan.
The current portion of the Amended 2017 Term Loan of $45,790 is classified as long-term debt as the Company expects to refinance the future quarterly payments with revolver borrowings under the Amended Credit Facility.
Short-Term Debt
As of July 4, 2021 and March 31, 2021, the Company had $40,260 and $34,153, respectively, of short-term borrowings. The weighted average interest rate on these borrowings was approximately 2% at both July 4, 2021 and at March 31, 2021.
Letters of Credit
As of July 4, 2021 and March 31, 2021, the Company had $2,959 of standby letters of credit.
Debt Issuance Costs
Amortization expense, relating to debt issuance costs, included in interest expense was $518 for both the quarters ended July 4, 2021 and July 5, 2020. Debt issuance costs, net of accumulated amortization, totaled $5,903 and $6,421, respectively, at July 4, 2021 and March 31, 2021.
Available Lines of Credit
As of July 4, 2021 and March 31, 2021, the Company had available and undrawn, under all its lines of credit, $745,809 and $697,875, respectively, including $107,934 and $122,303, respectively, of uncommitted lines of credit.
13. Retirement Plans
The following tables present the components of the Company’s net periodic benefit cost related to its defined benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Plans
|
|
International Plans
|
Quarter ended
|
|
Quarter ended
|
July 4, 2021
|
|
July 5, 2020
|
|
July 4, 2021
|
|
July 5, 2020
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
299
|
|
|
$
|
235
|
|
Interest cost
|
|
130
|
|
|
132
|
|
|
366
|
|
|
327
|
|
Expected return on plan assets
|
|
(128)
|
|
|
(65)
|
|
|
(563)
|
|
|
(447)
|
|
Amortization and deferral
|
|
5
|
|
|
133
|
|
|
303
|
|
|
244
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
7
|
|
|
$
|
200
|
|
|
$
|
405
|
|
|
$
|
359
|
|
14. Stock-Based Compensation
As of July 4, 2021, the Company maintains the 2017 Equity Incentive Plan as amended from time to time (“2017 EIP”). The 2017 EIP reserved 4,173,554 shares of common stock for the grant of various classes of nonqualified stock options, restricted stock units, market condition-based on total shareholder return (“TSR”) and performance condition-based share units (“PSU”) and other forms of equity-based compensation.
The Company recognized stock-based compensation expense associated with its equity incentive plans of $3,659 for the first quarter of fiscal 2022 and $5,053 for the first quarter of fiscal 2021. The Company recognizes compensation expense using the straight-line method over the vesting period of the awards.
During the first quarter of fiscal 2022, the Company granted to non-employee directors 1,053 restricted stock units, under the deferred compensation plan for non-employee directors. The awards vest immediately upon the date of grant and are settled in shares of common stock.
Common stock activity during the first quarter of fiscal 2022 included the exercise of 19,652 stock options and the vesting of 65,213 restricted stock units and 45,216 TSRs.
As of July 4, 2021, there were 776,144 non-qualified stock options, 811,983 restricted stock units including non-employee director restricted stock units, 80,893 TSRs and 98,528 PSUs outstanding.
15. Stockholders’ Equity and Noncontrolling Interests
Common Stock
The following demonstrates the change in the number of shares of common stock outstanding during the first quarter ended July 4, 2021:
|
|
|
|
|
|
|
|
|
Shares outstanding as of March 31, 2021
|
|
42,753,020
|
|
Purchase of treasury stock
|
|
(329,008)
|
|
|
|
|
Shares issued under equity-based compensation plans, net of equity awards surrendered for option price and taxes
|
|
87,124
|
|
Shares outstanding as of July 4, 2021
|
|
42,511,136
|
|
Treasury Stock
During the first quarter ended July 4, 2021, the Company purchased 329,008 shares for $31,512 and did not purchase any shares during the first quarter ended July 5, 2020. At July 4, 2021 and March 31, 2021, the Company held 13,103,838 and 12,799,790 shares as treasury stock, respectively. During the first quarter ended July 4, 2021, the Company also issued 4,960 shares out of its treasury stock, valued at $62.55 per share, on a LIFO basis, to participants under the Company's Employee Stock Purchase Plan.
Accumulated Other Comprehensive Income (“AOCI ”)
The components of AOCI, net of tax, as of July 4, 2021 and March 31, 2021, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
Before Reclassifications
|
|
Amounts Reclassified from AOCI
|
|
July 4, 2021
|
Pension funded status adjustment
|
|
$
|
(20,947)
|
|
|
$
|
—
|
|
|
$
|
240
|
|
|
$
|
(20,707)
|
|
Net unrealized gain (loss) on derivative instruments
|
|
360
|
|
|
5,657
|
|
|
(1,760)
|
|
|
4,257
|
|
Foreign currency translation adjustment
|
|
(95,296)
|
|
|
15,272
|
|
|
—
|
|
|
(80,024)
|
|
Accumulated other comprehensive (loss) income
|
|
$
|
(115,883)
|
|
|
$
|
20,929
|
|
|
$
|
(1,520)
|
|
|
$
|
(96,474)
|
|
The following table presents reclassifications from AOCI during the first quarter ended July 4, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of AOCI
|
|
Amounts Reclassified from AOCI
|
|
Location of (Gain) Loss Recognized on Income Statement
|
Derivatives in cash flow hedging relationships:
|
|
|
|
|
Net unrealized gain on derivative instruments
|
|
$
|
(2,299)
|
|
|
Cost of goods sold
|
Tax expense
|
|
539
|
|
|
|
Net unrealized gain on derivative instruments, net of tax
|
|
$
|
(1,760)
|
|
|
|
|
|
|
|
|
Defined benefit pension costs:
|
|
|
|
|
Prior service costs and deferrals
|
|
$
|
308
|
|
|
Net periodic benefit cost, included in other (income) expense, net - See Note 13
|
Tax benefit
|
|
(68)
|
|
|
|
Net periodic benefit cost, net of tax
|
|
$
|
240
|
|
|
|
The following table presents reclassifications from AOCI during the first quarter ended July 5, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of AOCI
|
|
Amounts Reclassified from AOCI
|
|
Location of (Gain) Loss Recognized on Income Statement
|
Derivatives in cash flow hedging relationships:
|
|
|
|
|
Net unrealized loss on derivative instruments
|
|
$
|
4,082
|
|
|
Cost of goods sold
|
Tax benefit
|
|
(966)
|
|
|
|
Net unrealized loss on derivative instruments, net of tax
|
|
$
|
3,116
|
|
|
|
|
|
|
|
|
Defined benefit pension costs:
|
|
|
|
|
Prior service costs and deferrals
|
|
$
|
377
|
|
|
Net periodic benefit cost, included in other (income) expense, net - See Note 13
|
Tax benefit
|
|
(86)
|
|
|
|
Net periodic benefit cost, net of tax
|
|
$
|
291
|
|
|
|
The following demonstrates the change in equity attributable to EnerSys stockholders and nonredeemable noncontrolling interests during the first quarter ended July 4, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands, Except Per Share Data)
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Additional Paid-in
Capital
|
|
Treasury
Stock
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Contra-Equity
|
|
Total
EnerSys
Stockholders’
Equity
|
|
Non-
redeemable
Non-
Controlling
Interests
|
|
Total
Equity
|
Balance at March 31, 2021
|
|
$
|
—
|
|
|
$
|
555
|
|
|
$
|
554,168
|
|
|
$
|
(563,481)
|
|
|
$
|
1,669,751
|
|
|
$
|
(115,883)
|
|
|
$
|
(5,355)
|
|
|
$
|
1,539,755
|
|
|
$
|
3,821
|
|
|
$
|
1,543,576
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
3,659
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,659
|
|
|
—
|
|
|
3,659
|
|
Exercise of stock options
|
|
—
|
|
|
1
|
|
|
386
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
387
|
|
|
—
|
|
|
387
|
|
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net
|
|
—
|
|
|
—
|
|
|
(4,803)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,803)
|
|
|
—
|
|
|
(4,803)
|
|
Purchase of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,512)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,512)
|
|
|
—
|
|
|
(31,512)
|
|
Other
|
|
—
|
|
|
—
|
|
|
44
|
|
|
170
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
214
|
|
|
—
|
|
|
214
|
|
Net earnings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,929
|
|
|
—
|
|
|
—
|
|
|
43,929
|
|
|
—
|
|
|
43,929
|
|
Dividends ($0.175 per common share)
|
|
—
|
|
|
—
|
|
|
173
|
|
|
—
|
|
|
(7,608)
|
|
|
—
|
|
|
—
|
|
|
(7,435)
|
|
|
—
|
|
|
(7,435)
|
|
Dissolution of joint venture
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47)
|
|
|
(47)
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension funded status adjustment (net of tax benefit of $68)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
240
|
|
|
—
|
|
|
240
|
|
|
—
|
|
|
240
|
|
Net unrealized gain (loss) on derivative instruments (net of tax expense of $1,187)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,897
|
|
|
—
|
|
|
3,897
|
|
|
—
|
|
|
3,897
|
|
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,272
|
|
|
—
|
|
|
15,272
|
|
|
49
|
|
|
15,321
|
|
Balance at July 4, 2021
|
|
$
|
—
|
|
|
$
|
556
|
|
|
$
|
553,627
|
|
|
$
|
(594,823)
|
|
|
$
|
1,706,072
|
|
|
$
|
(96,474)
|
|
|
$
|
(5,355)
|
|
|
$
|
1,563,603
|
|
|
$
|
3,823
|
|
|
$
|
1,567,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
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|
|
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|
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|
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|
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|
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|
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|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following demonstrates the change in equity attributable to EnerSys stockholders and nonredeemable noncontrolling interests during the first quarter and current quarter ended July 5, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands, Except Per Share Data)
|
|
Preferred
Stock
|
|
Common
Stock
|
|
Additional Paid-in
Capital
|
|
Treasury
Stock
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Contra-Equity
|
|
Total
EnerSys
Stockholders’
Equity
|
|
Non-
redeemable
Non-
Controlling
Interests
|
|
Total
Equity
|
Balance at March 31, 2020
|
|
$
|
—
|
|
|
$
|
551
|
|
|
$
|
529,100
|
|
|
$
|
(564,376)
|
|
|
$
|
1,556,980
|
|
|
$
|
(215,006)
|
|
|
$
|
(6,724)
|
|
|
$
|
1,300,525
|
|
|
$
|
3,537
|
|
|
$
|
1,304,062
|
|
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
5,053
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,053
|
|
|
—
|
|
|
5,053
|
|
Exercise of stock options
|
|
—
|
|
|
2
|
|
|
479
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
481
|
|
|
—
|
|
|
481
|
|
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net
|
|
—
|
|
|
—
|
|
|
(3,135)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,135)
|
|
|
—
|
|
|
(3,135)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
(123)
|
|
|
299
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
176
|
|
|
—
|
|
|
176
|
|
Net earnings
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35,183
|
|
|
—
|
|
|
—
|
|
|
35,183
|
|
|
—
|
|
|
35,183
|
|
Dividends ($0.175 per common share)
|
|
—
|
|
|
—
|
|
|
172
|
|
|
—
|
|
|
(7,600)
|
|
|
—
|
|
|
—
|
|
|
(7,428)
|
|
|
—
|
|
|
(7,428)
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension funded status adjustment (net of tax benefit of $86)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
291
|
|
|
—
|
|
|
291
|
|
|
—
|
|
|
291
|
|
Net unrealized gain (loss) on derivative instruments (net of tax expense of $726)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,343
|
|
|
—
|
|
|
2,343
|
|
|
—
|
|
|
2,343
|
|
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,139
|
|
|
—
|
|
|
28,139
|
|
|
8
|
|
|
28,147
|
|
Balance at July 5, 2020
|
|
$
|
—
|
|
|
$
|
553
|
|
|
$
|
531,546
|
|
|
$
|
(564,077)
|
|
|
$
|
1,584,563
|
|
|
$
|
(184,233)
|
|
|
$
|
(6,724)
|
|
|
$
|
1,361,628
|
|
|
$
|
3,545
|
|
|
$
|
1,365,173
|
|
16. Earnings Per Share
The following table sets forth the reconciliation from basic to diluted weighted-average number of common shares outstanding and the calculations of net earnings per common share attributable to EnerSys stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
July 4, 2021
|
|
July 5, 2020
|
Net earnings attributable to EnerSys stockholders
|
|
$
|
43,929
|
|
|
$
|
35,183
|
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
Basic
|
|
42,700,329
|
|
|
42,385,888
|
|
Dilutive effect of:
|
|
|
|
|
Common shares from exercise and lapse of equity awards, net of shares assumed reacquired
|
|
837,015
|
|
|
546,166
|
|
Diluted weighted-average number of common shares outstanding
|
|
43,537,344
|
|
|
42,932,054
|
|
Basic earnings per common share attributable to EnerSys stockholders
|
|
$
|
1.03
|
|
|
$
|
0.83
|
|
Diluted earnings per common share attributable to EnerSys stockholders
|
|
$
|
1.01
|
|
|
$
|
0.82
|
|
Anti-dilutive equity awards not included in diluted weighted-average common shares
|
|
165,386
|
|
|
386,263
|
|
17. Business Segments
Summarized financial information related to the Company's reportable segments for the first quarter ended July 4, 2021 and July 5, 2020, is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
|
July 4, 2021
|
|
July 5, 2020
|
|
|
|
|
Net sales by segment to unaffiliated customers (1)
|
|
|
|
|
|
|
|
|
Energy Systems
|
|
$
|
371,206
|
|
|
$
|
353,387
|
|
|
|
|
|
Motive Power
|
|
336,116
|
|
|
262,834
|
|
|
|
|
|
Specialty
|
|
107,571
|
|
|
88,703
|
|
|
|
|
|
Total net sales
|
|
$
|
814,893
|
|
|
$
|
704,924
|
|
|
|
|
|
Operating earnings by segment
|
|
|
|
|
|
|
|
|
Energy Systems
|
|
$
|
7,106
|
|
|
$
|
22,085
|
|
|
|
|
|
Motive Power
|
|
50,634
|
|
|
27,276
|
|
|
|
|
|
Specialty
|
|
10,992
|
|
|
5,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other exit charges - Energy Systems
|
|
(488)
|
|
|
(512)
|
|
|
|
|
|
Restructuring and other exit charges - Motive Power
|
|
(8,533)
|
|
|
(762)
|
|
|
|
|
|
Restructuring and other exit charges - Specialty
|
|
1,189
|
|
|
(113)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating earnings (2)
|
|
$
|
60,900
|
|
|
$
|
53,220
|
|
|
|
|
|
(1) Reportable segments do not record inter-segment revenues and accordingly there are none to report.
(2) The Company does not allocate interest expense or other (income) expense, net, to the reportable segments.
18. Subsequent Events
On July 15, 2021, the Company entered into a second amendment to its existing Amended Credit Facility (as defined in Note 12) that resulted in the extension of the maturity date for the Amended Credit Facility to September 30, 2026, resetting of the principal amortization with respect to the Amended 2017 Term Loan, refinancing the existing term loan, increasing the revolving line of credit limit, and certain other modifications to the existing credit agreement.
On August 5, 2021, the Board of Directors approved a quarterly cash dividend of $0.175 per share of common stock to be paid on September 24, 2021, to stockholders of record as of September 10, 2021.