EnerSys 10-Q for FY2023 Q1

EnerSys (ENS)

10-Q 2022-08-10 For: 2022-07-03

Added on April 12, 2026

About this 10-Q

EnerSys filed this 10-Q on August 10, 2022, covering the quarter ended July 3, 2022 (FY2023 Q1).

Headline figures

Quarter ended July 3, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $898.97M; up 10.3% from $814.89M a year earlier
Net income: $30.98M; down 29.5% from net income of $43.93M a year earlier
Diluted EPS: $0.75; down 25.7% from $1.01 a year earlier

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Delaware						23-3058564
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


			Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Condensed Balance Sheets (Unaudited) as of July 3, 2022 and March 31, 2022		3

	Consolidated Condensed Statements of Income (Unaudited) for the Quarter s Ended J uly 3 , 2022 and J uly 4 , 2021		4



	Consolidated Condensed Statements of Comprehensive Income (Unaudited) for the Quarters ended July 3, 2022 and July 4, 2021		5

	Consolidated Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended July 3, 2022 and July 4, 2021		6

	Notes to Consolidated Condensed Financial Statements (Unaudited)		7
	1	Basis of Presentation	7
	2	Revenue Recognition	8
	3	Leases	8
	4	Goodwill and Other Intangible Assets	10
	5	Inventories	11
	6	Fair Value of Financial Instruments	11
	7	Derivative Financial Instruments	12
	8	Income Taxes	14
	9	Warranty	15
	10	Commitments, Contingencies and Litigation	15
	11	Restructuring and Other Exit Charges	16
	12	Debt	16
	13	Retirement Plans	18
	14	Stock-Based Compensation	18
	15	Stockholders’ Equity and Noncontrolling Interests	19
	16	Earnings Per Share	22
	17	Business Segments	23
	18	Subsequent Events	23

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		33

Item 4.	Controls and Procedures		35

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		36

Item 1A.	Risk Factors		36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		37

Item 4.	Mine Safety Disclosures		37

Item 6.	Exhibits		38

SIGNATURES			39


	July 3, 2022		March 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	383,243	$	402,488
Accounts receivable, net of allowance for doubtful accounts: July 3, 2022 - $11,229; March 31, 2022 - $12,219	697,116		719,434
Inventories, net	777,660		715,712
Prepaid and other current assets	154,175		155,559
Total current assets	2,012,194		1,993,193
Property, plant, and equipment, net	489,294		503,264
Goodwill	682,113		700,640
Other intangible assets, net	385,449		396,202
Deferred taxes	54,108		60,479
Other assets	98,753		82,868
Total assets	$	3,721,911	$	3,736,646
Liabilities and Equity
Current liabilities:
Short-term debt	$	45,628	$	55,084
Accounts payable	343,340		393,096
Accrued expenses	266,463		289,950
Total current liabilities	655,431		738,130
Long-term debt, net of unamortized debt issuance costs	1,376,694		1,243,002
Deferred taxes	77,528		78,228
Other liabilities	173,488		184,011
Total liabilities	2,283,141		2,243,371
Commitments and contingencies
Equity:
Preferred Stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding at July 3, 2022 and at March 31, 2022	—		—
Common Stock, $0.01 par value per share, 135,000,000 shares authorized, 55,770,404 shares issued and 40,652,871 shares outstanding at July 3, 2022; 55,748,924 shares issued and 40,986,658 shares outstanding at March 31, 2022	558		557
Additional paid-in capital	576,294		571,464
Treasury stock at cost, 15,117,533 shares held as of July 3, 2022 and 14,762,266 shares held as of March 31, 2022	(741,786)		(719,119)
Retained earnings	1,807,282		1,783,586
Contra equity - indemnification receivable	(3,620)		(3,620)
Accumulated other comprehensive loss	(203,650)		(143,495)
Total EnerSys stockholders’ equity	1,435,078		1,489,373
Nonredeemable noncontrolling interests	3,692		3,902
Total equity	1,438,770		1,493,275
Total liabilities and equity	$	3,721,911	$	3,736,646


	Quarter ended
	July 3, 2022		July 4, 2021
Net sales	$	898,971	$	814,893
Cost of goods sold	713,436		621,674

Gross profit	185,535		193,219
Operating expenses	127,078		124,487
Restructuring and other exit charges	8,328		7,832

Operating earnings	50,129		60,900
Interest expense	11,597		9,107
Other (income) expense, net	1,773		(496)
Earnings before income taxes	36,759		52,289
Income tax expense	5,781		8,360


Net earnings attributable to EnerSys stockholders	$	30,978	$	43,929
Net earnings per common share attributable to EnerSys stockholders:
Basic	$	0.76	$	1.03
Diluted	$	0.75	$	1.01
Dividends per common share	$	0.175	$	0.175
Weighted-average number of common shares outstanding:
Basic	40,786,336		42,700,329
Diluted	41,352,646		43,537,344


	Quarter ended
	July 3, 2022		July 4, 2021
Net earnings	$	30,978	$	43,929
Other comprehensive (loss) income:
Net unrealized (loss) gain on derivative instruments, net of tax	(8,234)		3,897
Pension funded status adjustment, net of tax	89		240
Foreign currency translation adjustment	(52,220)		15,321
Total other comprehensive (loss) income, net of tax	(60,365)		19,458
Total comprehensive (loss) income	(29,387)		63,387
Comprehensive (loss) income attributable to noncontrolling interests	(210)		49
Comprehensive (loss) income attributable to EnerSys stockholders	$	(29,177)	$	63,338


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Classification	As of July 3, 2022		As of March 31, 2022
Operating Leases:
Right-of-use assets	Other assets	$	68,504	$	71,085
Operating lease current liabilities	Accrued expenses	21,303		20,086
Operating lease non-current liabilities	Other liabilities	49,475		52,904
Finance Leases:
Right-of-use assets	Property, plant, and equipment, net	$	279	$	344
Finance lease current liabilities	Accrued expenses	164		185
Finance lease non-current liabilities	Other liabilities	180		231


	Finance Leases		Operating Leases
Nine months ended March 31, 2023	$	143	$	18,345
Year ended March 31,
2024	145		18,311
2025	44		13,009
2026	24		9,296
2027	—		7,196
Thereafter	—		16,446
Total undiscounted lease payments	356		82,603
Present value discount	12		11,825
Lease liability	$	344	$	70,778


	Balance as of
	July 3, 2022						March 31, 2022
	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Indefinite-lived intangible assets:
Trademarks	$	145,188	$	(953)	$	144,235	$	145,808	$	(953)	$	144,855
Finite-lived intangible assets:
Customer relationships	296,853		(115,309)		181,544		298,577		(109,820)		188,757
Non-compete	2,825		(2,825)		—		2,825		(2,825)		—
Technology	97,054		(40,947)		56,107		97,367		(38,712)		58,655
Trademarks	8,933		(5,370)		3,563		8,947		(5,012)		3,935
Licenses	1,196		(1,196)		—		1,196		(1,196)		—
Total	$	552,049	$	(166,600)	$	385,449	$	554,720	$	(158,518)	$	396,202


	Energy Systems		Motive Power		Specialty		Total
Balance at March 31, 2022	$	279,461	$	323,303	$	97,876	$	700,640

Foreign currency translation adjustment	(11,735)		(5,440)		(1,352)		(18,527)
Balance as of July 3, 2022	$	267,726	$	317,863	$	96,524	$	682,113


	July 3, 2022		March 31, 2022
Raw materials	$	295,354	$	260,604
Work-in-process	118,762		109,441
Finished goods	363,544		345,667
Total	$	777,660	$	715,712


	Total Fair Value Measurement July 3, 2022		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Lead forward contracts	$	(5,431)	$	—	$	(5,431)	$	—
Foreign currency forward contracts	244		—		244		—
Net investment hedges	22,635		—		22,635		—
Total derivatives	$	17,448	$	—	$	17,448	$	—


	Total Fair Value Measurement March 31, 2022		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Lead forward contracts	$	2,520	$	—	$	2,520	$	—
Foreign currency forward contracts	(256)		—		(256)		—
Net investment hedges	298		—		298		—
Total derivatives	$	2,562	$	—	$	2,562	$	—


	July 3, 2022				March 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Derivatives (1)	$	17,448	$	17,448	$	2,562	$	2,562
Financial liabilities:
Senior Notes (2)	$	600,000	$	560,250	$	600,000	$	585,750


ITEM 1.			FINANCIAL STATEMENTS


	Quarter ended
	July 3, 2022		July 4, 2021
Cash flows from operating activities
Net earnings	$	30,978	$	43,929
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	23,624		24,433
Write-off of assets relating to exit activities	7,445		2,141

Derivatives not designated in hedging relationships:
Net (losses) gains	(216)		6
Cash (settlements) proceeds	(600)		(14)
Provision for doubtful accounts	(173)		1,039
Deferred income taxes	20		145
Non-cash interest expense	487		518
Stock-based compensation	5,330		3,659

(Gain) loss on disposal of property, plant, and equipment	(40)		4

Changes in assets and liabilities:
Accounts receivable	5,538		24,834
Inventories	(81,454)		(46,307)
Prepaid and other current assets	(5,465)		(15,595)
Other assets	(886)		344
Accounts payable	(33,073)		(36,746)
Accrued expenses	(24,973)		(50,314)
Other liabilities	1,567		(219)
Net cash used in operating activities	(71,891)		(48,143)

Cash flows from investing activities
Capital expenditures	(23,014)		(16,435)

Proceeds from disposal of facility	—		3,268

Proceeds from disposal of property, plant, and equipment	139		49
Net cash used in investing activities	(22,875)		(13,118)

Cash flows from financing activities
Net (repayments) borrowings on short-term debt	(8,022)		5,512
Proceeds from Second Amended Revolver borrowings	163,200		65,700


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	$	(10,862)	Cost of goods sold	$	695
Foreign currency forward contracts	1,255		Cost of goods sold	446
Total	$	(9,607)		$	1,141


Derivatives Designated as Net Investment 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)
Cross currency fixed interest rate swaps	$	23,595	Interest expense	$	1,258
Total	$	23,595		$	1,258


	Derivatives and Hedging Activities Designated as Cash Flow Hedges				Derivatives and Hedging Activities Designated as Net Investment Hedges				Derivatives and Hedging Activities Not Designated as Hedging Instruments
	July 3, 2022		March 31, 2022		July 3, 2022		March 31, 2022		July 3, 2022		March 31, 2022
Prepaid and other current assets:
Lead forward contracts	$	—	$	2,520	$	—	$	—	$	—	$	—
Foreign currency forward contracts	475		256		—		—		—		—
Net investment hedges	—		—		5,041		4,388		—		—
Other assets:
Net investment hedges	—		—		17,594		—		—		—
Total assets	$	475	$	2,776	$	22,635	$	4,388	$	—	$	—
Accrued expenses:
Lead forward contracts	$	5,431	$	—	$	—	$	—	$	—	$	—
Foreign currency forward contracts	—		—		—		—		231		512
Other liabilities:
Net investment hedges	—		—		—		4,090		—		—
Total liabilities	$	5,431	$	—	$	—	$	4,090	$	231	$	512


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	$	216
Total		$	216


	Quarter ended July 3, 2022
	Energy Systems		Motive Power		Specialty		Total
Restructuring charges	$	162	$	—	$	—	$	162
Exit charges	—		8,166		—		8,166
Restructuring and other exit charges	$	162	$	8,166	$	—	$	8,328


Balance as of March 31, 2022	$	1,030
Accrued	162
Costs incurred	(417)
Foreign currency impact	(58)
Balance as of July 3, 2022	$	717


	July 3, 2022				March 31, 2022
	Principal		Unamortized Issuance Costs		Principal		Unamortized Issuance Costs
Senior Notes	$	600,000	$	3,605	$	600,000	$	3,905
Second Amended Credit Facility, due 2026	783,473		3,174		650,268		3,361

	$	1,383,473	$	6,779	$	1,250,268	$	7,266
Less: Unamortized issuance costs	6,779				7,266
Long-term debt, net of unamortized issuance costs	$	1,376,694			$	1,243,002


	United States Plans				International Plans
	Quarter ended				Quarter ended
	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Service cost	$	—	$	—	$	235	$	299
Interest cost	145		130		440		366
Expected return on plan assets	(119)		(128)		(517)		(563)
Amortization and deferral	—		5		123		303

Net periodic benefit cost	$	26	$	7	$	281	$	405


Shares outstanding as of March 31, 2022						40,986,658
Purchase of treasury stock						(358,365)

Shares issued under equity-based compensation plans, net of equity awards surrendered for option price and taxes						24,578
Shares outstanding as of July 3, 2022						40,652,871


	March 31, 2022		Before Reclassifications		Amounts Reclassified from AOCI		July 3, 2022
Pension funded status adjustment	$	(12,637)	$	—	$	89	$	(12,548)
Net unrealized gain (loss) on derivative instruments	2,963		(7,360)		(874)		(5,271)
Foreign currency translation adjustment (1)	(133,821)		(52,010)		—		(185,831)
Accumulated other comprehensive (loss) income	$	(143,495)	$	(59,370)	$	(785)	$	(203,650)


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	$	(1,141)	Cost of goods sold
Tax expense	267
Net unrealized gain on derivative instruments, net of tax	$	(874)

Derivatives in net investment hedging relationships:
Net unrealized gain on derivative instruments	$	(1,258)	Interest expense
Tax expense	294
Net unrealized gain on derivative instruments, net of tax	$	(964)

Defined benefit pension costs:
Prior service costs and deferrals	$	123	Net periodic benefit cost, included in other (income) expense, net - See Note 13
Tax benefit	(34)
Net periodic benefit cost, net of tax	$	89


(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, 2022	$	—	$	557	$	571,464	$	(719,119)	$	1,783,586	$	(143,495)	$	(3,620)	$	1,489,373	$	3,902	$	1,493,275
Stock-based compensation	—		—		5,330		—		—		—		—		5,330		—		5,330
Exercise of stock options	—		1		—		—		—		—		—		1		—		1
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net	—		—		(633)		—		—		—		—		(633)		—		(633)
Purchase of common stock	—		—		—		(22,907)		—		—		—		(22,907)		—		(22,907)
Other	—		—		(41)		240		—		—		—		199		—		199
Net earnings	—		—		—		—		30,978		—		—		30,978		—		30,978
Dividends ($0.175 per common share)	—		—		174		—		(7,282)		—		—		(7,108)		—		(7,108)

Other comprehensive income:
Pension funded status adjustment (net of tax benefit of $34)	—		—		—		—		—		89		—		89		—		89
Net unrealized gain (loss) on derivative instruments (net of tax benefit of $2,514)	—		—		—		—		—		(8,234)		—		(8,234)		—		(8,234)
Foreign currency translation adjustment	—		—		—		—		—		(52,010)		—		(52,010)		(210)		(52,220)
Balance at July 3, 2022	$	—	$	558	$	576,294	$	(741,786)	$	1,807,282	$	(203,650)	$	(3,620)	$	1,435,078	$	3,692	$	1,438,770


ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


	Quarter ended July 3, 2022				Quarter ended July 4, 2021				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Energy Systems	$	408.6	45.5	%	$	371.2	45.6	%	$	37.4	10.1	%
Motive Power	367.9		40.9		336.1		41.2		31.8		9.4
Specialty	122.5		13.6		107.6		13.2		14.9		13.9
Total net sales	$	899.0	100.0	%	$	814.9	100.0	%	$	84.1	10.3	%


($ in Millions)
Balance At	Trade Receivables		Inventory		Accounts Payable		Total		Quarter Revenue Annualized		Primary Working Capital %
July 3, 2022	$	697.1	$	777.7	$	(343.3)	$	1,131.5	$	3,595.9	31.5	%
March 31, 2022	719.4		715.7		(393.1)		1,042.0		3,628.1		28.7
July 4, 2021	581.0		563.9		(293.4)		851.5		3,259.6		26.1


Date	$’s Under Contract (in millions)		# Pounds Purchased (in millions)	Average Cost/Pound		Approximate % of Lead Requirements (1)
July 3, 2022	$	54.1	55.5	$	0.97	8	%
March 31, 2022	56.8		54.0	1.05		8
July 4, 2021	48.7		50.0	0.97		9


Period	(a) Total number of shares (or units) purchased	(b) Average price paid per share (or unit)		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs	(d) Maximum number (or approximate dollar value) of shares (or units) that may be purchased under the plans or programs (1) (2)
April 1 – May 1, 2022	39,576	$	73.45	39,576	$	180,545,374
May 2 – May 29, 2022	328,846	62.72		318,789	310,545,418
May 30 – July 3, 2022	2,079	68.58		—	310,545,418
Total	370,501	$	63.90	358,365


Exhibit Number						Description of Exhibit

3.1						Fifth Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-115553) filed on July 13, 2004).

3.2						Third Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-32253) filed on August 3, 2016).

10.1						Form of Stock Option Agreement – Employees – Amended and Restated 2017 Equity Incentive Plan (filed herewith).

10.2						Form of Restricted Stock Unit Agreement – Employees – Amended and Restated 2017 Equity Incentive Plan (filed herewith).

31.1						Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) Under the Securities Exchange Act of 1934 (filed herewith).

31.2						Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) Under the Securities Exchange Act of 1934 (filed herewith).

32.1						Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS						XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document


ENERSYS (Registrant)

By			/s/ Andrea J. Funk
			Andrea J. Funk
			Chief Financial Officer



ENERSYS

By:
Name:						David M. Shaffer
Title:						President & Chief Executive Officer

PARTICIPANT


Name:
Address:




By						/s/ David M. Shaffer

						David M. Shaffer
						Chief Executive Officer