EnerSys -- Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the quarterly period ended September 30, 2012

 

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

For the transition period from                      to                     

Commission File Number: 001-32253

 

 

EnerSys

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   23-3058564

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

2366 Bernville Road

Reading, Pennsylvania

  19605
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: 610-208-1991

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  YES    ¨  NO.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    ¨  YES    x  NO.

Common Stock outstanding at November 2, 2012: 48,483,321 shares

 

 

 


Table of Contents

ENERSYS

INDEX – FORM 10-Q

 

         Page  
PART I — FINANCIAL INFORMATION   
Item 1.  

Financial Statements

  
 

Consolidated Condensed Balance Sheets (Unaudited) As of September 30, 2012 and March 31, 2012

     3   
 

Consolidated Condensed Statements of Income (Unaudited) For the Quarters Ended September 30, 2012 and October 2, 2011

     4   
 

Consolidated Condensed Statements of Income (Unaudited) For the Six Months Ended September 30, 2012 and October 2, 2011

     5   
 

Consolidated Condensed Statements of Comprehensive Income (Unaudited) For the Quarters and Six Months Ended September 30, 2012 and October 2, 2011

     6   
 

Consolidated Condensed Statements of Cash Flows (Unaudited) For the Six Months Ended September 30, 2012 and October 2, 2011

     7   
 

Notes to Consolidated Condensed Financial Statements (Unaudited)

     8   
 

  1. Basis of Presentation

     8   
 

  2. Inventories

     8   
 

  3. Fair Value of Financial Instruments

     9   
 

  4. Derivative Financial Instruments

     10   
 

  5. Income Taxes

     13   
 

  6. Warranties

     13   
 

  7. Commitments, Contingencies and Litigation

     14   
 

  8. Restructuring Plans

     15   
 

  9. Debt

     16   
 

10. Retirement Plans

     17   
 

11. Stock-Based Compensation

     17   
 

12. Stockholders’ Equity

     18   
 

13. Earnings Per Share

     19   
 

14. Business Segments

     20   
 

15. Subsequent Events

     20   
Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     21   
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

     36   
Item 4.  

Mine Safety Disclosures

     36   
Item 6.  

Exhibits

     37   
SIGNATURES      38   

 

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Table of Contents

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

ENERSYS

Consolidated Condensed Balance Sheets (Unaudited)

(In Thousands, Except Share and Per Share Data)

 

     September 30,
2012
    March 31,
2012
 
Assets     

Current assets:

    

Cash and cash equivalents

   $ 212,342      $ 160,490   

Accounts receivable, net of allowance for doubtful accounts (September 30, 2012 - $9,406; March 31, 2012 - $10,022)

     472,775        466,769   

Inventories, net

     366,539        361,774   

Deferred taxes

     30,512        30,247   

Prepaid and other current assets

     59,308        52,393   
  

 

 

   

 

 

 

Total current assets

     1,141,476        1,071,673   

Property, plant, and equipment, net

     349,336        353,215   

Goodwill

     349,610        352,737   

Other intangible assets, net

     105,608        107,082   

Other assets

     39,360        40,248   
  

 

 

   

 

 

 

Total assets

   $ 1,985,390      $ 1,924,955   
  

 

 

   

 

 

 
Liabilities and Equity     

Current liabilities:

    

Short-term debt

   $ 21,019      $ 16,042   

Current portion of long-term debt and capital lease obligations

     329        2,949   

Accounts payable

     232,134        249,996   

Accrued expenses

     184,838        191,314   
  

 

 

   

 

 

 

Total current liabilities

     438,320        460,301   

Long-term debt and capital lease obligations

     227,644        237,110   

Deferred taxes

     83,682        84,479   

Other liabilities

     91,265        92,468   
  

 

 

   

 

 

 

Total liabilities

     840,911        874,358   

Commitments and contingencies

     —          —     

Redeemable noncontrolling interests

     8,598        9,782   

Equity:

    

Common Stock, $0.01 par value per share, 135,000,000 shares authorized; 52,930,206 shares issued and 48,483,321 outstanding at September 30, 2012; 52,247,014 shares issued and 47,800,129 shares outstanding at March 31, 2012

     529        522   

Additional paid-in capital

     496,610        474,924   

Treasury stock, at cost, 4,446,885 shares held as of September 30, 2012 and March 31, 2012

     (78,183     (78,183

Retained earnings

     650,433        560,839   

Accumulated other comprehensive income

     61,008        74,093   
  

 

 

   

 

 

 

Total EnerSys stockholders’ equity

     1,130,397        1,032,195   

Noncontrolling interests

     5,484        8,620   
  

 

 

   

 

 

 

Total equity

     1,135,881        1,040,815   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,985,390      $ 1,924,955   
  

 

 

   

 

 

 

See accompanying notes.

 

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Table of Contents

ENERSYS

Consolidated Condensed Statements of Income (Unaudited)

(In Thousands, Except Share and Per Share Data)

 

     Quarter Ended  
     September 30,
2012
    October 2,
2011
 

Net sales

   $ 554,212      $ 547,140   

Cost of goods sold

     415,873        432,745   
  

 

 

   

 

 

 

Gross profit

     138,339        114,395   

Operating expenses

     74,159        71,953   

Restructuring charges

     1,295        902   

Legal proceedings settlement income

     —          (900
  

 

 

   

 

 

 

Operating earnings

     62,885        42,440   

Interest expense

     4,942        4,083   

Other (income) expense, net

     (1,794     (33
  

 

 

   

 

 

 

Earnings before income taxes

     59,737        38,390   

Income tax expense

     16,726        10,101   
  

 

 

   

 

 

 

Net earnings

     43,011        28,289   

Net losses attributable to noncontrolling interests

     (779     —     
  

 

 

   

 

 

 

Net earnings attributable to EnerSys stockholders

   $ 43,790      $ 28,289   
  

 

 

   

 

 

 

Net earnings per common share attributable to EnerSys stockholders:

    

Basic

   $ 0.91      $ 0.57   
  

 

 

   

 

 

 

Diluted

   $ 0.90      $ 0.57   
  

 

 

   

 

 

 

Weighted average shares of common stock outstanding:

    

Basic

     48,188,331        49,469,694   
  

 

 

   

 

 

 

Diluted

     48,719,916        49,806,964   
  

 

 

   

 

 

 

See accompanying notes.

 

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ENERSYS

Consolidated Condensed Statements of Income (Unaudited)

(In Thousands, Except Share and Per Share Data)

 

     Six Months Ended  
     September 30,
2012
    October 2,
2011
 

Net sales

   $ 1,148,122      $ 1,116,369   

Cost of goods sold

     861,477        880,003   
  

 

 

   

 

 

 

Gross profit

     286,645        236,366   

Operating expenses

     151,840        144,799   

Restructuring charges

     1,665        1,312   

Legal proceedings settlement income

     —          (900
  

 

 

   

 

 

 

Operating earnings

     133,140        91,155   

Interest expense

     9,674        7,497   

Other (income) expense, net

     (544     1,194   
  

 

 

   

 

 

 

Earnings before income taxes

     124,010        82,464   

Income tax expense

     35,435        20,679   
  

 

 

   

 

 

 

Net earnings

     88,575        61,785   

Net losses attributable to noncontrolling interests

     (1,019     —     
  

 

 

   

 

 

 

Net earnings attributable to EnerSys stockholders

   $ 89,594      $ 61,785   
  

 

 

   

 

 

 

Net earnings per common share attributable to EnerSys stockholders:

    

Basic

   $ 1.86      $ 1.24   
  

 

 

   

 

 

 

Diluted

   $ 1.84      $ 1.23   
  

 

 

   

 

 

 

Weighted average shares of common stock outstanding:

    

Basic

     48,044,767        49,761,160   
  

 

 

   

 

 

 

Diluted

     48,573,454        50,237,620   
  

 

 

   

 

 

 

 

See accompanying notes.

 

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ENERSYS

Consolidated Condensed Statements of Comprehensive Income (Unaudited)

(In Thousands)

 

     Quarter ended     Six months ended  
     September 30,
2012
    October 2,
2011
    September 30,
2012
    October 2,
2011
 

Net earnings

   $ 43,011      $ 28,289      $ 88,575      $ 61,785   

Other comprehensive income (loss):

        

Net unrealized gain (loss) on derivative instruments, net of tax

     7,937        (10,825     2,591        (8,079

Pension funded status adjustment, net of tax

     (131     104        84        77   

Foreign currency translation adjustments

     15,794        (55,071     (16,181     (40,094
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

   $ 66,611      $ (37,503   $ 75,069      $ 13,689   

Comprehensive loss attributable to noncontrolling interests

     (676     —          (1,440     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to EnerSys stockholders

   $ 67,287      $ (37,503   $ 76,509      $ 13,689   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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ENERSYS

Consolidated Condensed Statements of Cash Flows (Unaudited)

(In Thousands)

 

     Six Months Ended  
     September 30,
2012
    October 2,
2011
 

Cash flows from operating activities

    

Net earnings

   $ 88,575      $ 61,785   

Adjustments to reconcile net earnings to net cash provided by operating activities:

    

Depreciation and amortization

     25,070        24,253   

Derivatives not designated in hedging relationships:

    

Net losses

     510        2,369   

Cash settlements

     (1,336     (1,727

Provision for doubtful accounts

     (120     1,751   

Deferred income taxes

     (902     42   

Non-cash interest expense

     4,310        3,790   

Stock-based compensation

     7,198        5,734   

Gain on disposal of property, plant, and equipment

     (74     (652

Changes in assets and liabilities, net of effects of acquisitions:

    

Accounts receivable

     (11,533     (24,950

Inventory

     (14,077     (21,471

Prepaid expenses and other current assets

     (1,228     (10,944

Other assets

     1,858        967   

Accounts payable

     (15,528     (9,922

Accrued expenses

     (2,557     (6,181

Other liabilities

     (1,396     2,378   
  

 

 

   

 

 

 

Net cash provided by operating activities

     78,770        27,222   

Cash flows from investing activities

    

Capital expenditures

     (26,674     (24,153

Purchases of businesses, net of cash acquired

     —          (1,110

Proceeds from disposal of property, plant, and equipment

     89        71   
  

 

 

   

 

 

 

Net cash used in investing activities

     (26,585     (25,192

Cash flows from financing activities

    

Net increase in short-term debt

     5,402        16,251   

Proceeds from revolving credit borrowings

     173,250        22,600   

Repayments of revolving credit borrowings

     (182,800     (3,600

Proceeds from long-term debt - other

     5,556        —     

Payments of long-term debt - other

     (10,638     —     

Capital lease obligations

     (282     (1,233

Net effect from exercising of stock options and vesting of equity awards

     8,922        (96

Excess tax benefits from exercise of stock options and vesting of equity awards

     4,965        3,099   

Purchase of treasury stock

     —          (49,888

Purchase of noncontrolling interests

     (2,131     —     

Proceeds from noncontrolling interests

     613        —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     2,857        (12,867

Effect of exchange rate changes on cash and cash equivalents

     (3,190     (2,438
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     51,852        (13,275

Cash and cash equivalents at beginning of period

     160,490        108,869   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 212,342      $ 95,594   
  

 

 

   

 

 

 

See accompanying notes.

 

 

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Table of Contents

ENERSYS

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

(In Thousands, Except Share and Per Share Data)

1. Basis of Presentation

The accompanying interim unaudited consolidated condensed financial statements of EnerSys (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States 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 the information and notes required for complete financial statements. In the opinion of management, the unaudited consolidated condensed financial statements include all normal recurring adjustments considered necessary for the fair presentation of the financial position, results of operations, and cash flows for the interim periods presented. The financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s 2012 Annual Report on Form 10-K (SEC File No. 001-32253), which was filed on May 25, 2012.

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 2013 end on July 1, 2012, September 30, 2012, December 30, 2012, and March 31, 2013, respectively. The four quarters in fiscal 2012 ended on July 3, 2011, October 2, 2011, January 1, 2012, and March 31, 2012, 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.

The Company also consolidates certain subsidiaries in which the noncontrolling interest party has within their control the right to require the Company to redeem all or a portion of its interest in the subsidiary. The redeemable noncontrolling interests are reported at their estimated redemption value. Any adjustment to the redemption value impacts retained earnings but does not impact net income or comprehensive income. Noncontrolling interests which are redeemable only upon future events, the occurrence of which is not currently probable, are recorded at carrying value.

Certain amounts in the prior year’s financial statements have been reclassified to conform to the current-year presentation for redeemable noncontrolling interests.

Recently Adopted Accounting Pronouncements

In the first quarter of fiscal 2013, the Company conformed its presentation of results of operations, in accordance with new guidance on the presentation of comprehensive income (loss). The guidance requires total comprehensive income (loss) for interim periods to be presented in single continuous statement or in two separate, but consecutive, statements. The new guidance does not change where the components of comprehensive income (loss) are recognized. During the current quarter, no new accounting standards were adopted or pending adoption that would have a significant impact on the Company’s consolidated financial position and results of operations.

2. Inventories

Inventories, net consist of:

 

     September 30,
2012
     March 31,
2012
 

Raw materials

   $ 99,708       $ 100,538   

Work-in-process

     110,832         111,629   

Finished goods

     155,999         149,607   
  

 

 

    

 

 

 

Total

   $ 366,539       $ 361,774   
  

 

 

    

 

 

 

 

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3. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the following valuation techniques to measure fair value for its financial assets and financial liabilities:

 

Level 1

   Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2

   Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.

Level 3

   Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

The following tables represent the financial assets and (liabilities), measured at fair value on a recurring basis as of September 30, 2012 and March 31, 2012 and the basis for that measurement:

 

     Total Fair  Value
Measurement

September 30,
2012
    Quoted Price in
Active  Markets
for Identical
Assets (Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
    Significant
Unobservable
Inputs
(Level 3)
 

Interest rate swap agreements

   $ (2,339   $ —         $ (2,339   $ —     

Lead forward contracts

     7,736        —           7,736        —     

Foreign currency forward contracts

     (717     —           (717     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total derivatives

   $ 4,680      $ —         $ 4,680      $ —     
  

 

 

   

 

 

    

 

 

   

 

 

 

 

     Total Fair Value
Measurement
March 31, 2012
    Quoted Price in
Active Markets

for Identical
Assets

(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
    Significant
Unobservable
Inputs
(Level 3)
 

Interest rate swap agreements

   $ (3,872   $ —         $ (3,872   $ —     

Lead forward contracts

     (851     —           (851     —     

Foreign currency forward contracts

     782        —           782        —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Total derivatives

   $ (3,941 )   $ —         $ (3,941 )   $ —     
  

 

 

   

 

 

    

 

 

   

 

 

 

The fair value of interest rate swap agreements are based on observable prices as quoted for receiving the variable three month LIBOR and paying fixed interest rates and, therefore, were classified as Level 2.

The fair value 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.

The fair value 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 value of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate carrying value due to their short maturities.

The fair value of the Company’s 2011 Credit Facility, the China Term Loan, the India Term Loan and short-term debt approximate their 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.

 

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The Company’s $172,500 senior unsecured 3.375% convertible notes (“Convertible Notes”), with a face value of $172,500, were issued when the Company’s stock price was trading at $30.19 per share. On September 30, 2012, the Company’s stock price closed at $35.29 per share. The Convertible Notes have a conversion option at $40.60 per share. The fair value of these notes represent the trading values based upon quoted market prices and are classified as Level 2. The Convertible Notes were trading at 114% of face value on September 30, 2012, and 116% of face value on March 31, 2012.

The carrying amounts and estimated fair values of the Company’s derivatives and Convertible Notes at September 30, 2012 and March 31, 2012 were as follows:

 

     September 30,
2012
    March 31,
2012
 
     Carrying
Amount
    Fair Value     Carrying
Amount
    Fair Value  

Financial assets:

        

Derivatives (1)

   $ 7,736      $ 7,736      $ 782      $ 782   

Financial liabilities:

        

Convertible Notes

   $ 151,699  (2)    $ 196,650  (3)    $ 148,272  (2)    $ 200,100  (3) 

Derivatives (1)

     3,056        3,056        4,723        4,723   

 

(1)

Represents interest rate swap agreements, lead and foreign currency hedges (see Note 4 for asset and liability positions of the interest rate swap agreements, lead and foreign currency hedges at September 30, 2012 and March 31, 2012).

(2)

The carrying amounts of the Convertible Notes at September 30, 2012 and March 31, 2012 represent the $172,500 principal value, less the unamortized debt discount (see Note 9).

(3)

The fair value amounts of the Convertible Notes at September 30, 2012 and March 31, 2012 represent the trading values of the Convertible Notes with a principal value of $172,500.

4. Derivative Financial Instruments

The Company utilizes derivative instruments to reduce its exposure to fluctuations in commodity prices, foreign exchange rates and interest 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 Hedge Forward Contracts

The Company enters into lead hedge forward contracts to fix the price for a portion of the lead purchases. Management considers the lead hedge forward contracts to be effective against changes in the cash flows of the underlying lead purchases based on the criteria under the Financial Accounting Standards Board (“FASB”) guidance. The vast majority of such contracts are for a period not extending beyond one year and the notional amounts at September 30, 2012 and March 31, 2012 were 46.8 million and 60.0 million pounds, respectively.

Foreign Currency Forward Contracts

The Company purchases lead and other commodities in certain countries where the foreign currency exposure is different from the functional currency of that country. The Company uses foreign currency forward contracts 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 September 30, 2012 and March 31, 2012, the Company had entered into a total of $45,753 and $42,121, respectively, of such contracts.

In the coming twelve months, the Company anticipates that $6,996 of pretax gain relating to lead and foreign currency forward contracts will be reclassified from accumulated other comprehensive income (“AOCI”) as part of cost of goods sold. This amount represents the current 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 income statement 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.

 

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Table of Contents

Derivatives not Designated in Hedging Relationships

Interest Rate Swap Agreements

As of September 30, 2012 and March 31, 2012, the Company maintained interest rate swap agreements that converted $85,000 of variable-rate debt to a fixed-rate basis, utilizing the three-month LIBOR, as a floating rate reference. These agreements expire between February 2013 and May 2013. The Company recorded expense relating to changes in the fair value of these agreements in the consolidated condensed statements of income, within other (income) expense, of $77 and $171 during the second quarter of fiscal 2013 and 2012, respectively, and of $92 and $881 for the six months ended September 30, 2012 and October 2, 2011, respectively.

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. These are not designated as hedging instruments. As of September 30, 2012 and March 31, 2012, the notional amount of these contracts was $44,610 and $11,410, respectively. The Company recorded expense in the consolidated condensed statements of income within other (income) expense, of $304 and $1,407 during the second quarter of fiscal 2013 and 2012, respectively, and of $418 and $1,487 for the six months ended September 30, 2012 and October 2, 2011, 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

September 30, 2012 and March 31, 2012

 

     Derivatives and Hedging Activities
Designated as Cash Flow Hedges
     Derivatives and Hedging Activities Not
Designated as Hedging Instruments
 
     September 30,
2012
     March 31,
2012
     September 30,
2012
     March 31,
2012
 

Prepaid and other current assets

           

Foreign currency forward contracts

   $ —         $ 670       $ —         $ 112   

Lead hedge forward contracts

     7,566         —           —           —     

Other assets

           

Lead hedge forward contracts

     170         30         —           —     

Foreign currency forward contracts

     —           —           12         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 7,736       $ 700       $ 12       $ 112   
  

 

 

    

 

 

    

 

 

    

 

 

 

Accrued expenses

           

Interest rate swap agreements

   $ —         $ —         $ 2,339       $ 3,628   

Lead hedge forward contracts

     —           881         —           —     

Foreign currency forward contracts

     122         —           607         —     

Other liabilities

           

Interest rate swap agreements

     —           —           —           244   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 122       $ 881       $ 2,946       $ 3,872   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income

For the quarter ended September 30, 2012

 

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 hedge contracts

   $ 12,476      Cost of goods sold    $ (1,967

Foreign currency forward contracts

     (706   Cost of goods sold      1,094   
  

 

 

      

 

 

 

Total

   $ 11,770         $ (873
  

 

 

      

 

 

 

 

Derivatives Not Designated as Hedging Instruments

  

Location of (Gain) Loss

Recognized in Income

on Derivative

   (Gain) Loss  
        

 

 

 

Interest rate swap contracts

   Other (income) expense, net    $ 77   

Foreign currency forward contracts

   Other (income) expense, net      304   
        

 

 

 

Total

      $ 381   
        

 

 

 

 

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Table of Contents

The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income

For the quarter ended October 2, 2011

 

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 hedge contracts

   $ (10,723     Cost of goods sold       $ 3,697   

Foreign currency forward contracts

     (2,084     Cost of goods sold         (2,175
  

 

 

      

 

 

 

Total

   $ (12,807      $ 1,522   
  

 

 

      

 

 

 

 

Derivatives Not Designated as Hedging Instruments

  

Location of (Gain) Loss

Recognized in Income

on Derivative

   (Gain) Loss  

Interest rate swap contracts

   Other (income) expense, net    $ 171   

Foreign currency forward contracts

   Other (income) expense, net      1,407   
     

 

 

 

Total

      $ 1,578   
     

 

 

 

The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income

For the six months ended September 30, 2012

 

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 hedge contracts

   $ 6,063         Cost of goods sold       $ (469

Foreign currency forward contracts

     1         Cost of goods sold         2,372   
  

 

 

       

 

 

 

Total

   $ 6,064          $ 1,903   
  

 

 

       

 

 

 

 

Derivatives Not Designated as Hedging Instruments

  

Location of (Gain) Loss

Recognized in Income

on Derivative

   (Gain) Loss  

Interest rate swap contracts

   Other (income) expense, net    $ 92   

Foreign currency forward contracts

   Other (income) expense, net      418   
     

 

 

 

Total

      $ 510   
     

 

 

 

The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income

For the six months ended October 2, 2011

 

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 hedge contracts

   $ (12,145     Cost of goods sold       $ 2,802   

Foreign currency forward contracts

     (1,928     Cost of goods sold         (4,110
  

 

 

      

 

 

 

Total

   $ (14,073      $ (1,308
  

 

 

      

 

 

 

 

Derivatives Not Designated as Hedging Instruments

  

Location of (Gain) Loss

Recognized in Income

on Derivative

   (Gain) Loss  

Interest rate swap contracts

   Other (income) expense, net    $ 881   

Foreign currency forward contracts

   Other (income) expense, net      1,487   
     

 

 

 

Total

      $ 2,368   
     

 

 

 

 

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Table of Contents

5. Income Taxes

The Company’s income tax provisions for all periods consist of federal, state and foreign income taxes. The tax provisions for the second quarters of fiscal 2013 and 2012 were based on the estimated effective tax rates applicable for the full years ending March 31, 2013 and March 31, 2012, respectively, after giving effect to items specifically related to the interim periods.

The effective income tax rates for the second quarters of fiscal 2013 and 2012 were 28.0% and 26.3%, respectively. The effective income tax rates for the first six months of fiscal 2013 and 2012 were 28.6% and 25.1%, respectively. The increase in the rates compared to the prior year periods are primarily due to changes in the mix of earnings among tax jurisdictions and the expiration of certain U.S. corporate tax exemptions.

6. Warranties

The Company provides for estimated product warranty expenses when the related products are sold, with related liabilities included within accrued expenses and other liabilities. Warranty estimates are forecasts that are based on the best available information, primarily historical claims experience, and claims costs may differ from amounts provided. An analysis of changes in the liability for product warranties is as follows:

 

     Quarter ended     Six months ended  
     September 30,
2012
    October 2,
2011
    September 30,
2012
    October 2,
2011
 

Balance at beginning of period

   $ 42,488      $ 38,185      $ 42,067      $ 36,006   

Current period provisions

     5,892        5,945        11,488        12,130   

Costs incurred

     (6,083     (4,988     (10,578     (9,429

Foreign exchange and other

     342        (1,117     (338     (682
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 42,639      $ 38,025      $ 42,639      $ 38,025   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

7. Commitments, Contingencies and Litigation

Litigation and Other Legal Matters

The Company is involved in litigation incidental to the conduct of its business, the results of which, in the opinion of management, are not likely to be material to the Company’s financial condition, results of operations, or cash flows. See Note 19 to the Consolidated Financial Statements included in the Company’s 2012 Annual Report on Form 10-K. There have been no significant changes since March 31, 2012.

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 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. See Note 19 to the Consolidated Financial Statements included in the Company’s 2012 Annual Report on Form 10-K for a full description of environmental issues. There have been no significant changes since March 31, 2012.

Lead Contracts

To stabilize its costs, the Company has entered into contracts with financial institutions to fix the price of lead. The vast majority of such contracts are for a period not extending beyond one year. Under these contracts, at September 30, 2012 and March 31, 2012, the Company has hedged the price to purchase 46.8 million and 60.0 million pounds of lead, respectively, for a total purchase price of $40,683 and $56,610, respectively.

Foreign Currency Forward Contracts

The Company quantifies and monitors its global foreign currency exposures. On a selective basis, the Company will enter into foreign currency forward and option contracts to reduce the volatility from currency movements that affect the Company. The maturity period for substantially all these contracts is less than one year. The Company’s largest exposure is from the purchase and conversion of U.S. dollar based lead costs into local currencies in Europe. Additionally, the Company has currency exposures from intercompany and third party trade transactions. To hedge these exposures, the Company has entered into a total of $90,363 and $53,531, respectively, of foreign currency forward contracts with financial institutions as of September 30, 2012 and March 31, 2012.

Interest Rate Swap Agreements

The Company is exposed to changes in variable U.S. interest rates on borrowings under its credit agreements. On a selective basis, from time to time, the Company enters into interest rate swap agreements to reduce the negative impact that increases in interest rates could have on its outstanding variable rate debt. At September 30, 2012 and March 31, 2012, such agreements which expire between February 2013 and May 2013, converted $85,000 of variable-rate debt to a fixed-rate basis, utilizing the three-month LIBOR, as a floating rate reference. Fluctuations in LIBOR and fixed rates affect both the Company’s net financial investment position and the amount of cash to be paid or received under these agreements.

 

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Table of Contents

8. Restructuring Plans

During fiscal 2011, the Company announced a restructuring of its European operations, which will result in the reduction of approximately 60 employees upon completion across its operations. The Company estimates that the total charges for these actions will amount to approximately $5,200, primarily from cash expenses for employee severance-related payments and site closure costs. Based on commitments incurred to date, the Company recorded restructuring charges of $5,178 in fiscal 2011 through 2012, with no additional charges in the first six months of fiscal 2013. The Company incurred $4,579 of costs against the accrual during fiscal 2011 through 2012, with an additional $503 of costs incurred during the first six months of fiscal 2013. As of September 30, 2012, the reserve balance associated with these actions is $48. The Company does not expect to be committed to significant additional restructuring charges in fiscal 2013 related to these actions and expects to complete the program in fiscal 2013.

During fiscal 2012, the Company announced restructuring plans related to its operations in Europe, primarily consisting of the transfer of manufacturing of select products between certain of its manufacturing operations and restructuring of its selling, general and administrative operations, which is expected to result in the reduction of approximately 85 employees upon completion. The Company estimates that the total charges for these actions will amount to approximately $4,200, primarily from cash expenses for employee severance-related payments. The Company recorded restructuring charges of $3,070 in fiscal 2012 with an additional $474 of charges during the first six months of fiscal 2013. The Company incurred $2,433 of costs against the accrual during fiscal 2012, with an additional $773 of costs incurred during the first six months of fiscal 2013. As of September 30, 2012, the reserve balance associated with these actions is $323. The Company expects to be committed to an additional $700 of restructuring charges in fiscal 2013 related to these actions, and expects to complete the program in fiscal 2014.

During fiscal 2013, the Company announced a further restructuring related to improving the efficiency of its manufacturing operations in Europe. The Company estimates that the total charges for these actions will amount to approximately $4,500, primarily from cash expenses for employee severance-related payments and non-cash expenses associated with the write-off of certain fixed assets and inventory. The Company estimates that these actions will result in the reduction of approximately 45 employees upon completion. During the first six months of fiscal 2013, the Company recorded restructuring charges of $1,191, consisting of a non-cash charge of $965 related to the write-off of fixed assets and inventory, along with cash charges related to employee severance and other charges of $194. During the first six months of fiscal 2013, the Company incurred $32 of costs against the accrual. As of September 30, 2012, the reserve balance associated with these actions is $226. The Company expects to be committed to an additional $1,100 of restructuring charges in fiscal 2013 related to these actions, and expects to complete the program during fiscal 2015.

A roll-forward of the restructuring reserve is as follows:

 

     Employee
Severance
    Other     Total  

Balance at March 31, 2012

   $ 1,186      $ —        $ 1,186   

Accrued

     668        32        700   

Costs incurred

     (1,276     (32     (1,308

Foreign currency impact and other

     (13     —          (13
  

 

 

   

 

 

   

 

 

 

Balance at September 30, 2012

   $ 565      $ —        $ 565   
  

 

 

   

 

 

   

 

 

 

 

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Table of Contents

9. Debt

The following summarizes the Company’s long-term debt including capital lease obligations:

 

     September 30,
2012
     March 31,
2012
 

3.375% Convertible Notes, net of discount, due 2038

   $ 151,699       $ 148,272   

2011 Credit Facility due 2016

     69,850         79,400   

China Term Loan due 2017

     4,931         6,034   

India Term Loan due 2017

     881         5,383   

Capital lease obligations and other

     612         970   
  

 

 

    

 

 

 
     227,973         240,059   

Less current portion

     329         2,949   
  

 

 

    

 

 

 

Total long-term debt and capital lease obligations

   $ 227,644       $ 237,110   
  

 

 

    

 

 

 

The Convertible Notes are represented by a liability component, which is reported herein as long-term debt, net of discount and an equity component representing the convertible feature, which is included in additional paid-in-capital in EnerSys stockholders’ equity.

The following represents the principal amount of the liability component, the unamortized discount, and the net carrying amount of the Convertible Notes as of September 30, 2012 and March 31, 2012, respectively:

 

     September 30,
2012
    March 31,
2012
 

Principal

   $ 172,500      $ 172,500   

Unamortized discount

     (20,801     (24,228
  

 

 

   

 

 

 

Net carrying amount

   $ 151,699      $ 148,272   
  

 

 

   

 

 

 

Carrying amount of equity component

   $ 29,850      $ 29,850   
  

 

 

   

 

 

 

As of September 30, 2012, the remaining discount will be amortized over a period of 32 months. The conversion price of the $172,500 in aggregate principal amount of the Convertible Notes is $40.60 per share and the number of shares on which the aggregate consideration to be delivered upon conversion is 4,248,761.

The effective interest rate on the liability component of the Convertible Notes was 8.50%. The amount of interest cost recognized for the amortization of the discount on the liability component of the Convertible Notes was $1,731 and $1,592, respectively, during the quarters ended September 30, 2012 and October 2, 2011 and $3,427 and $3,150, respectively, during the six months ended September 30, 2012 and October 2, 2011.

Available Lines of Credit

As of September 30, 2012 and March 31, 2012, the Company had available and undrawn, under all its lines of credit, $393,023 and $377,230, respectively. Included in the September 30, 2012 and March 31, 2012 amounts are $107,694 and $95,340, respectively, of uncommitted lines of credit.

As of September 30, 2012 and March 31, 2012, the Company had $8,012 and $9,108, respectively, of standby letters of credit.

 

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Table of Contents

10. 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  
   September 30,
2012
    October 2,
2011
    September 30,
2012
    October 2,
2011
 

Service cost

   $ 81      $ 70      $ 176      $ 172   

Interest cost

     163        166        591        635   

Expected return on plan assets

     (188     (176     (465     (449

Amortization and deferral

     101        58        51        6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 157      $ 118      $ 353      $ 364   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     United States Plans     International Plans  
   Six months Ended     Six months Ended  
   September 30,
2012
    October 2,
2011
    September 30,
2012
    October 2,
2011
 

Service cost

   $ 162      $ 140      $ 353      $ 353   

Interest cost

     327        332        1,185        1,288   

Expected return on plan assets

     (377     (352     (929     (907

Amortization and deferral

     201        116        103        13   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 313      $ 236      $ 712      $ 747   
  

 

 

   

 

 

   

 

 

   

 

 

 

11. Stock-Based Compensation

As of September 30, 2012, the Company maintains the EnerSys 2010 Equity Incentive Plan (“2010 EIP”). The 2010 EIP reserved 3,177,477 shares of common stock for the grant of various types of equity awards including nonqualified stock options, restricted stock, restricted stock units, market share units and other forms of equity-based compensation.

The Company recognized equity-based compensation expense associated with its equity incentive plans of $3,825 for the second quarter of fiscal 2013 and $3,016 for the second quarter of fiscal 2012. The Company recognized equity-based compensation expense associated with its equity incentive plans of $7,198 for the six months of fiscal 2013 and $5,734 for the six months of fiscal 2012.

In the six months of fiscal 2013, the Company granted to management, directors and other key employees 226,167 restricted stock units that vest 25% each year over four years from the date of grant, and 303,942 market share units that vest three years from the date of grant. In the six months of fiscal 2012, the Company granted to management and other key employees 134,263 restricted stock units and 224,397 market share units with similar vesting as in the fiscal 2013 grants.

Common stock activity for the six months of fiscal 2013 included the exercise of 512,900 options and the vesting of 230,743 restricted stock units and for the comparable period in fiscal 2012 included the exercise of 93,760 options and the vesting of 257,290 restricted stock units.

As of September 30, 2012 there were 120,763 non-qualified stock options, 605,971 restricted stock units and 641,446 market share units outstanding. At March 31, 2012, there were 633,663 non-qualified stock options, 617,240 restricted stock units and 346,563 market share units outstanding.

 

17


Table of Contents

12. Stockholders’ Equity

Common Stock

The following demonstrates the change in the number of shares of Common Stock outstanding during the first six months of fiscal 2013:

 

Shares outstanding as of March 31, 2012

     47,800,129   

Shares issued as part of equity-based compensation plans, net of equity awards surrendered for option price and taxes

     683,192   
  

 

 

 

Shares outstanding as of September 30, 2012

     48,483,321   
  

 

 

 

Treasury Stock

There were no stock repurchases during the six months of fiscal 2013. During the six months of fiscal 2012, the Company purchased 2,646,885 shares of its common stock from institutional shareholders. At September 30, 2012 and March 31, 2012, the Company held 4,446,885 shares as treasury stock.

Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income are as follows:

 

     March 31,
2012
    Before-Tax
Amount
    Tax  Benefit
(Expense)
     Net-of-Tax
Amount
    September 30,
2012
 

Pension funded status adjustment

   $ (8,982   $ 84      $ —         $ 84      $ (8,898

Unrealized gain on derivative instruments

     1,175        4,161        1,570         2,591        3,766   

Foreign currency translation adjustment

     81,900        (15,760     —           (15,760     66,140   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Accumulated other comprehensive income

   $ 74,093      $ (11,515   $ 1,570       $ (13,085   $ 61,008   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

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Table of Contents

13. Earnings Per Share

The following table sets forth the reconciliation from basic to diluted average common shares and the calculations of net earnings per common share:

 

     Quarter ended      Six months ended  
     September 30,
2012
     October 2,
2011
     September 30,
2012
     October 2,
2011
 

Net earnings attributable to EnerSys stockholders

   $ 43,790       $ 28,289       $ 89,594       $ 61,785   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares of common stock outstanding:

           

Basic

     48,188,331         49,469,694         48,044,767         49,761,160   

Dilutive potential common shares from exercise and lapse of equity awards, net of shares assumed reacquired

     531,585         337,270         528,687         476,460   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     48,719,916         49,806,964         48,573,454         50,237,620   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per common share attributable to EnerSys stockholders

   $ 0.91       $ 0.57       $ 1.86       $ 1.24   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per common share attributable to EnerSys stockholders

   $ 0.90       $ 0.57       $ 1.84       $ 1.23   
  

 

 

    

 

 

    

 

 

    

 

 

 

Anti-dilutive equity awards not included in weighted average common shares—diluted

     287,566         526,808         197,392         422,122   
  

 

 

    

 

 

    

 

 

    

 

 

 

The aggregate number of common shares that the Company could be obligated to issue upon conversion of its Convertible Notes that the Company sold in May 2008 is 4,248,761. It is the Company’s current intent to settle the principal amount of any conversions in cash, and any additional conversion consideration in cash, shares of the Company’s common stock or a combination of cash and shares. No contingent shares were included in diluted shares outstanding during fiscal 2013 and 2012, as the specified conversion price exceeded the average market price of the Company’s common stock, and the inclusion of contingent shares would have been anti-dilutive.

 

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Table of Contents

14. Business Segments

The Company has three reportable business segments based on geographic regions, defined as follows:

 

   

Americas, which includes North and South America, with segment headquarters in Reading, Pennsylvania, USA,

 

   

Europe, which includes Europe, the Middle East and Africa, with segment headquarters in Zurich, Switzerland, and

 

   

Asia, which includes Asia, Australia and Oceania, with segment headquarters in Singapore.

The following table provides selected financial data for the Company’s reportable business segments and product lines:

 

     Quarter ended     Six months ended  
     September 30,
2012
    October 2,
2011
    September 30,
2012
    October 2,
2011
 

Net sales by segment to unaffiliated customers

        

Europe

   $ 215,453      $ 245,337      $ 452,504      $ 498,329   

Americas

     276,704        252,250        565,628        511,478   

Asia

     62,055        49,553        129,990        106,562   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net sales

   $ 554,212      $ 547,140      $ 1,148,122      $ 1,116,369   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net sales by product line

        

Reserve power

   $ 285,286      $ 267,294      $ 574,580      $ 533,232   

Motive power

     268,926        279,846        573,542        583,137   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net sales

   $ 554,212      $ 547,140      $ 1,148,122      $ 1,116,369   
  

 

 

   

 

 

   

 

 

   

 

 

 

Intersegment sales

        

Europe

   $ 23,222      $ 13,287      $ 45,384      $ 29,419   

Americas

     9,143        10,054        19,697        20,200   

Asia

     7,785        4,001        14,144        7,055   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total intersegment sales (1)

   $ 40,150      $ 27,342      $ 79,225      $ 56,674   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings by segment

        

Europe

   $ 14,021      $ 14,597      $ 31,241      $ 28,734   

Americas

     43,572        27,396        88,086        59,014   

Asia

     6,587        449        15,478        3,819   

Restructuring charges (Europe)

     (1,295     (902     (1,665     (1,312

Legal proceedings settlement income (Europe)

     —          900        —          900   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating earnings (2)

   $ 62,885      $ 42,440      $ 133,140      $ 91,155   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Intersegment sales are presented on a cost plus basis which takes into consideration the effect of transfer prices between legal entities.
(2) The Company does not allocate interest expense or other (income) expense to the reportable segments.

15. Subsequent Events

The Company evaluated all subsequent events through the date that the Consolidated Condensed Financial Statements were issued. No material subsequent events have occurred since September 30, 2012 that required recognition or disclosure in the Consolidated Condensed Financial Statements.

 

20


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

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor for forward-looking statements made by or on behalf of EnerSys. EnerSys and its representatives may, from time to time, make written or verbal forward-looking statements, including statements contained in our filings with the Securities and Exchange Commission and its reports to stockholders. Generally, the inclusion of the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “will,” and similar expressions identify statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. All statements addressing operating performance, events, or developments that EnerSys expects or anticipates will occur in the future, including statements relating to sales growth, earnings or earnings per share growth, and market share, as well as statements expressing optimism or pessimism about future operating results, are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are and will be based on management’s then-current views and assumptions regarding future events and operating performance, and are applicable only as of the dates of such statements.

Forward-looking statements involve risks, uncertainties and assumptions. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Actual results may differ materially from those expressed in these forward-looking statements due to a number of uncertainties and risks, including the risks described in the Company’s 2012 Annual Report on Form 10-K and other unforeseen risks. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available on our website or otherwise, and we undertake no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Our actual results may differ materially from those contemplated by the forward-looking statements for a number of reasons, including the following factors:

 

   

general cyclical patterns of the industries in which our customers operate;

 

   

the extent to which we cannot control our fixed and variable costs;

 

   

the raw materials in our products may experience significant fluctuations in market price and availability;

 

   

certain raw materials constitute hazardous materials that may give rise to costly environmental and safety claims;

 

   

legislation regarding the restriction of the use of certain hazardous substances in our products;

 

   

risks involved in our operations such as disruption of markets, changes in import and export laws, environmental regulations, currency restrictions and currency exchange rate fluctuations;

 

   

our ability to raise our selling prices to our customers when our product costs increase;

 

   

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

 

   

general economic conditions in the markets in which we operate;

 

   

competitiveness of the battery markets throughout the world;

 

   

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

 

   

our ability to adequately protect our proprietary intellectual property, technology and brand names;

 

   

litigation and regulatory proceedings to which we might be subject;

 

   

changes in our market share in the geographic business segments where we operate;

 

   

our ability to implement our cost reduction initiatives successfully and improve our profitability;

 

21


Table of Contents
   

quality problems associated with our products;

 

   

our ability to implement business strategies, including our acquisition strategy, manufacturing expansion and restructuring plans;

 

   

our acquisition strategy may not be successful in locating advantageous targets;

 

   

our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames;

 

   

our debt and debt service requirements which may restrict our operational and financial flexibility, as well as imposing unfavorable interest and financing costs;

 

   

our ability to maintain our existing credit facilities or obtain satisfactory new credit facilities;

 

   

adverse changes in our short and long-term debt levels under our credit facilities;

 

   

our exposure to fluctuations in interest rates on our variable-rate debt;

 

   

our ability to attract and retain qualified personnel;

 

   

our ability to maintain good relations with labor unions;

 

   

credit risk associated with our customers, including risk of insolvency and bankruptcy;

 

   

our ability to successfully recover in the event of a disaster affecting our infrastructure;

 

   

terrorist acts or acts of war, could cause damage or disruption to our operations, our suppliers, channels to market or customers, or could cause costs to increase, or create political or economic instability; and

 

   

the operation, capacity and security of our information systems and infrastructure.

This list of factors that may affect future performance is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

In the following discussion and analysis of results of operations and financial condition, certain financial measures may be considered “non-GAAP financial measures” under Securities and Exchange Commission rules. These rules require supplemental explanation and reconciliation, which is provided in this Quarterly Report on Form 10-Q. EnerSys’ management uses the non-GAAP measures “primary working capital”, “primary working capital percentage” (see definitions in “Liquidity and Capital Resources” below) and capital expenditures in its evaluation of business segment cash flow and financial position performance. These disclosures have limitations as an analytical tool, should not be viewed as a substitute for cash flow determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management believes that this non-GAAP supplemental information is helpful in understanding the Company’s ongoing operating results.

 

22


Table of Contents

Overview

EnerSys (the “Company,” “we,” or “us”) is the world’s largest manufacturer, marketer and distributor of industrial batteries. We also manufacture, market and distribute related products such as chargers, power equipment and battery accessories, and we provide related after-market and customer-support services for industrial batteries. We market and sell our products globally to over 10,000 customers in more than 100 countries through a network of distributors, independent representatives and our internal sales force.

We operate and manage our business in three geographic regions of the world—Americas, Europe and Asia, as described below. Our business is highly decentralized with manufacturing locations throughout the world. More than half of our manufacturing capacity is located outside of the United States, and approximately 60% of our net sales were generated outside of the United States. The Company has three reportable business segments based on geographic regions, defined as follows:

 

   

Americas, which includes North and South America, with our segment headquarters in Reading, Pennsylvania, USA,

   

Europe, which includes Europe, the Middle East and Africa, with our segment headquarters in Zurich, Switzerland, and

   

Asia, which includes Asia, Australia and Oceania, with our segment headquarters in Singapore.

We evaluate business segment performance based primarily upon operating earnings exclusive of highlighted items. Highlighted items are those that the Company deems are not indicative of ongoing operating results, including those charges that the Company incurs as a result of restructuring activities and those charges and credits that are not directly related to ongoing business segment performance. All corporate and centrally incurred costs are allocated to the business segments based principally on net sales. We evaluate business segment cash flow and financial position performance based primarily upon capital expenditures and primary working capital levels (see definition of primary working capital in “Liquidity and Capital Resources” below). Although we monitor the three elements of primary working capital (receivables, inventory and payables), our primary focus is on the total amount due to the significant impact it has on our cash flow.

 

23


Table of Contents

Our management structure, financial reporting systems, and associated internal controls and procedures, are all consistent with our three geographic business segments. We report on a March 31 fiscal year-end. Our financial results are largely driven by the following factors:

 

   

global economic conditions and general cyclical patterns of the industries in which our customers operate;

 

   

changes in our selling prices and, in periods when our product costs increase, our ability to raise our selling prices to pass such cost increases through to our customers;

 

   

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

 

   

the extent to which we can control our fixed and variable costs, including those for our raw materials, manufacturing, distribution and operating activities;

 

   

changes in our level of debt and changes in the variable interest rates under our credit facilities; and

 

   

the size and number of acquisitions and our ability to achieve their intended benefits.

We have two primary industrial battery product lines: reserve power products and motive power products. Net sales classifications by product line are as follows:

 

   

Reserve power products are used for backup power for the continuous operation of critical applications in telecommunications systems, uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems, and other specialty power applications, including security systems, premium starting, lighting and ignition applications, in switchgear, electrical control systems used in electric utilities and energy pipelines, in commercial aircraft, satellites, military aircraft, submarines, ships, tactical vehicles and portable energy packs.

 

   

Motive power products are used to provide power for manufacturing, warehousing and other material handling equipment, primarily electric industrial forklift trucks, mining equipment, and for diesel locomotive starting and other rail equipment.

 

 

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Table of Contents

Economic Climate

Recent indicators continue to suggest a mixed trend in economic activity among our different geographical regions. The Americas region continued its economic recovery which has been in place since fiscal 2010. Asia’s economic expansion continues but at a slower rate. The ongoing financial crisis and austerity measures in Europe are a factor in slowing overall economic growth in this region and leading to declining economic growth in many of the Western European countries.

Volatility of Commodities and Foreign Currencies

Our most significant commodity and foreign currency exposures are related to lead and the euro. Historically, volatility of commodity costs and foreign currency exchange rates have caused large swings in our production costs. As the global economic climate changes, we anticipate that our commodity costs may continue to fluctuate significantly as they have in the past several years. The decrease in our cost of lead due to a decrease in average lead prices was approximately $20 million and $41 million in the current quarter and six months of fiscal 2013, respectively, compared to the comparable prior year periods.

Customer Pricing

Our selling prices fluctuated during the last several years to offset the volatile cost of commodities. During the current quarter and six months of fiscal 2013, our selling prices declined slightly to reflect declining lead costs. Approximately 35% of our revenue is currently subject to agreements that adjust pricing to a market-based index for lead.

Liquidity and Capital Resources

Our capital structure and liquidity remain strong. As of September 30, 2012, we had $212.3 million of cash and cash equivalents, approximately $285 million of undrawn, committed credit lines, and approximately $108 million of available and uncommitted credit lines. A substantial majority of the Company’s cash and investments are held by foreign subsidiaries and are considered to be indefinitely reinvested and expected to be utilized to fund local operating activities, capital expenditure requirements and acquisitions. The Company believes that it has sufficient sources of domestic and foreign liquidity.

 

25


Table of Contents

Results of Operations

Net Sales

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
Current quarter by segment    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
    %  

Europe

   $ 215.4         38.9   $ 245.3         44.8   $ (29.9     (12.2 )% 

Americas

     276.7         49.9        252.3         46.1        24.4        9.7   

Asia

     62.1         11.2        49.6         9.1        12.5        25.2   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total net sales

   $ 554.2         100.0   $ 547.2         100.0   $ 7.0        1.3
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     Six months ended
September 30, 2012
    Six months ended
October 2, 2011
    Increase (Decrease)  
Year to date by segment    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
    %  

Europe

   $ 452.5         39.4   $ 498.3         44.6   $ (45.8     (9.2 )% 

Americas

     565.6         49.3        511.5         45.8        54.1        10.6   

Asia

     130.0         11.3        106.6         9.6        23.4        22.0   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total net sales

   $ 1,148.1         100.0   $ 1,116.4         100.0   $ 31.7        2.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net sales increased $7.0 million or 1.3% in the second quarter of fiscal 2013 from the comparable period in fiscal 2012. This increase for the quarter was the result of a 2% increase in organic volume, a 4% increase from acquisitions, a 4% decrease due to foreign currency translation impact and a 1% decrease due to pricing. Net sales increased $31.7 million or 2.8% in the six months of fiscal 2013 from the comparable period in fiscal 2012. This increase for the six months of fiscal 2013 was the result of a 4% increase in both organic volume and acquisitions, partially offset by a 5% decrease from foreign currency translation impact.

Segment sales

The Americas and Asia segments experienced improved year over year economic and market conditions, which led to organic volume improvements in the second quarter and first half of fiscal 2013 compared to the prior year periods. Our Europe segment experienced sales declines in the second quarter and first half of fiscal 2013 from lower organic volume, unfavorable pricing and foreign currency translation impact, partially offset by acquisitions, compared to the comparable periods of fiscal 2012. The declines in European volume growth and currency rates reflect the economic conditions facing that region.

Our Europe segment’s net sales decreased $29.9 million or 12.2% in the second quarter of fiscal 2013, as compared to the second quarter of fiscal 2012, primarily due to a decrease of approximately 8% related to currency translation impact, 6% decrease in organic volume and 1% decrease due to pricing. Acquisitions contributed an increase of approximately 3%. Revenue decreased $45.8 million or 9.2% in the six months of fiscal 2013, as compared to the six months of fiscal 2012, primarily due to a decrease of approximately 10% related to currency translation impact, organic volume and pricing each with a 1% decrease, while acquisitions contributed an increase of approximately 3%.

Our Americas segment’s net sales increased $24.4 million or 9.7% in the second quarter of fiscal 2013, as compared to the second quarter of fiscal 2012, primarily due to higher organic volume, which contributed approximately 6% of the increased revenue. Acquisitions contributed an increase of approximately 5% partially offset by currency translation impact of approximately 1%. Revenue increased $54.1 million or 10.6% in the six months of fiscal 2013, as compared to the six months of fiscal 2012, primarily due to higher organic volume which contributed approximately 7%. Acquisitions and pricing contributed an increase of approximately 4% and 1%, respectively, partially offset by currency translation impact of 1%.

Our Asia segment’s net sales increased $12.5 million or 25.2% in the second quarter of fiscal 2013, as compared to the second quarter of fiscal 2012, primarily due to higher organic volume and acquisitions, which contributed approximately 20% and 8%, respectively. Currency translation impact and pricing partially offset this increase by approximately 2% and 1%, respectively. Revenue increased $23.4 million or 22.0% in the six months of fiscal 2013, as compared to the six months of fiscal 2012, primarily due to organic volume growth and acquisitions, which contributed approximately 18% and 7%, partially offset by currency translation impact and pricing of approximately 2% and 1%, respectively.

 

26


Table of Contents

Product line sales

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
    %  

Reserve power

   $ 285.3         51.5   $ 267.3         48.9   $ 18.0        6.7

Motive power

     268.9         48.5        279.9         51.1        (11.0     (3.9
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total net sales

   $ 554.2         100.0   $ 547.2         100.0   $ 7.0        1.3
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     Six months ended
September 30, 2012
    Six months ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
    %  

Reserve power

   $ 574.6         50.0   $ 533.2         47.8   $ 41.4        7.8

Motive power

     573.5         50.0        583.2         52.2        (9.7     (1.6
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total net sales

   $ 1,148.1         100.0   $ 1,116.4         100.0   $ 31.7        2.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Sales of our reserve power products in the second quarter of fiscal 2013 increased $18.0 million or 6.7% compared to the second quarter of fiscal 2012. Organic volume and acquisitions contributed approximately 6% each to the increased revenue, partially offset by lower currency translation impact and pricing of approximately 4% and 1%, respectively. Sales in the six months of fiscal 2013 increased $41.4 million or 7.8% compared to the six months of fiscal 2012. Organic volume and acquisitions contributed approximately 8% and 5%, respectively, to the increased revenue, partially offset by currency translation impact of approximately 5%.

Sales of our motive power products in the second quarter of fiscal 2013 decreased $11.0 million or 3.9% compared to the second quarter of fiscal 2012. The second quarter decrease was primarily due to decrease in organic volume of approximately 3% and currency translation impact of approximately 4% partially offset by an increase of approximately 3% from acquisitions. The lower volumes in motive power for the quarter were in our Europe segment. Sales in the six months of fiscal 2013 decreased $9.7 million or 1.6% compared to the six months of fiscal 2012, primarily due to currency translation impact of approximately 5% partially offset by an increase of approximately 3% from acquisitions and 1% due to organic volume.

 

27


Table of Contents

Gross Profit

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Gross Profit

   $ 138.3         25.0   $ 114.4         20.9   $ 23.9         20.9
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

     Six months ended
September 30, 2012
    Six months ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Gross Profit

   $ 286.6         25.0   $ 236.4         21.2   $ 50.2         21.3
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit increased $23.9 million or 20.9% in the second quarter of fiscal 2013 and increased $50.2 million or 21.3% in the six months of fiscal 2013, compared to the comparable periods of fiscal 2012. Gross profit, as a percentage of net sales increased 410 basis points in the second quarter and 380 points in the six month period of fiscal 2013, when compared to the comparable periods of fiscal 2012. This increase is primarily attributed to higher sales volume and lower commodity costs. Pricing held relatively constant in the six month period.

We estimate that the cost of lead alone, our most significant raw material, decreased our cost of sales by approximately $20 million and $41 million, respectively, in the second quarter and six months of fiscal 2013, compared to the comparable periods in fiscal 2012 while selling prices decreased sales by approximately $3 million and $4 million, respectively, in the second quarter and in the six months of fiscal 2013.

Our gross profit initiatives will continue to emphasize cost reduction activities to improve gross profit and continue to focus on improving product mix to higher margin products.

Operating Items

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
    Percentage
of Total
Net Sales
    In
Millions
    %  

Operating expenses

   $ 74.1         13.4   $ 71.9        13.1   $ 2.2        3.1
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Restructuring charges

   $ 1.3         0.2   $ 0.9        0.2   $ 0.4        43.6
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Legal proceedings settlement income

   $ —           —     $ (0.9     (0.2 )%    $ (0.9     NM   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Six months ended
September 30, 2012
    Six months ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
    Percentage
of Total
Net Sales
    In
Millions
    %  

Operating expenses

   $ 151.8         13.2   $ 144.8        13.0   $ 7.0        4.9
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Restructuring charges

   $ 1.7         0.1   $ 1.3        0.1   $ 0.4        26.9
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Legal proceedings settlement income

   $ —           —     $ (0.9 )     (0.1 )%    $ (0.9     NM   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NM = not meaningful

 

28


Table of Contents

Operating expenses as a percentage of net sales increased 30 basis points in the second quarter of fiscal 2013 compared to the second quarter of fiscal 2012 and 20 basis points in the six months of fiscal 2013 compared to the six months of fiscal 2012. Operating expenses, excluding the effect of foreign currency translation, increased $6.3 million or 8.9% in the second quarter of fiscal 2013 compared to the second quarter of fiscal 2012 and increased $15.6 million or 10.9% in the six months of fiscal 2013 compared to the six months of fiscal 2012, due primarily to higher sales volume and the higher operating costs of recent acquisitions. Selling expenses, our main component of operating expenses, were 59.5% and 60.1% of total operating expenses in the second quarter and six months of fiscal 2013, respectively, compared to 58.6% and 59.2% of total operating expenses in the second quarter and six months of fiscal 2012, respectively.

Restructuring charges

Included in our second quarter and six months of fiscal 2013 operating results are $1.3 million and $1.7 million of restructuring charges, respectively, primarily for staff reductions and write-off of fixed assets and inventory in Europe. Included in our second quarter and six months of fiscal 2012 operating results are $0.9 million and $1.3 million of restructuring charges, respectively, for staff reductions in Europe.

Operating Earnings

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
Current quarter by segment    In
Millions
    Percentage
of Total
Net Sales (1)
    In
Millions
    Percentage
of Total
Net Sales (1)
    In
Millions
    %  

Europe

   $ 14.1        6.5   $ 14.7        6.0   $ (0.6     (3.9 )% 

Americas

     43.5        15.7        27.3        10.9        16.2        59.1   

Asia

     6.6        10.6        0.5        0.9        6.1        NM   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     64.2        11.6        42.5        7.8        21.7        51.2   

Legal proceedings settlement income-Europe

     —          —          0.9        0.4        (0.9     NM   

Restructuring charges-Europe

     (1.3     (0.6     (0.9     (0.4     (0.4     43.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating earnings

   $ 62.9        11.4   $ 42.5        7.8   $ 20.4        48.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

The percentages shown for the segments are computed as a percentage of the applicable segment’s net sales.

NM = not meaningful

 

     Six months ended
September 30, 2012
    Six months ended
October 2, 2011
    Increase (Decrease)  
Year to date by segment    In
Millions
    Percentage
of Total
Net Sales (1)
    In
Millions
    Percentage
of Total
Net Sales (1)
    In
Millions
    %  

Europe

   $ 31.3        6.9   $ 28.8        5.8   $ 2.5        8.7

Americas

     88.0        15.6        58.9        11.5        29.1        49.3   

Asia

     15.5        11.9        3.9        3.6        11.6        NM   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     134.8        11.7        91.6        8.2        43.2        47.2   

Legal proceedings settlement income-Europe

     —          —          0.9        0.2        (0.9     NM   

Restructuring charges-Europe

     (1.7     (0.4     (1.3     (0.3     (0.4     26.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating earnings

   $ 133.1        11.6   $ 91.2        8.2   $ 41.9        46.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

The percentages shown for the segments are computed as a percentage of the applicable segment’s net sales.

NM = not meaningful

Operating earnings increased $20.4 million or 48.2% in the second quarter of fiscal 2013 in comparison to the second quarter of fiscal 2012. Operating earnings as a percentage of net sales, as shown in the table above, increased 360 basis points in the second quarter of fiscal 2013 when compared to the second quarter of fiscal 2012.

We experienced a decrease in operating earnings in our Europe segment in the second quarter of fiscal 2013 in comparison to the comparable quarter in the prior year, although the operating margin increased 50 basis points to 6.5%. Operating earnings increased in the six months of fiscal 2013 in comparison to the comparable period in the prior year, with the operating margin increasing 110 basis points to 6.9%. This improvement in Europe earnings is primarily attributable to lower commodity costs and the benefits of the restructuring programs.

Our Americas segment had an increase in operating earnings in the second quarter of fiscal 2013 in comparison to the second quarter of fiscal 2012, with the operating margin increasing 480 basis points to 15.7%. Operating earnings increased in the six months of fiscal 2013 in comparison to the comparable period in the prior year, with the operating margin increasing 410 basis points to 15.6%. The operating margin increase in the second quarter and six months of fiscal 2013 is primarily attributable to higher organic volume and lower commodity costs.

 

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Table of Contents

Operating earnings increased in our Asia segment in the second quarter and six months of fiscal 2013 in comparison to the second quarter of fiscal 2012, with the operating margin increasing 970 basis points and 830 basis points, respectively. The improvement in the second quarter and six months of fiscal 2013 in comparison to the prior year periods is primarily due to increased volume and a better mix of higher margin products in the region.

Interest Expense

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Interest expense

   $ 5.0         0.9   $ 4.1         0.8   $ 0.9         21.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

     Six months ended
September 30, 2012
    Six months ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Interest expense

   $ 9.7         0.8   $ 7.5         0.7   $ 2.2         29.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Interest expense of $5.0 million in the second quarter of fiscal 2013 (net of interest income of $0.2 million) was $0.9 million higher than the interest expense of $4.1 million in the second quarter of fiscal 2012 (net of interest income of $0.2 million). Interest expense of $9.7 million in the six months of fiscal 2013 (net of interest income of $0.4 million) was $2.2 million higher than the interest expense of $7.5 million in the six months of fiscal 2012 (net of interest income of $0.5 million).

The increase in interest expense in the second quarter and six months of fiscal 2013 compared to the comparable prior year periods is primarily attributable to higher interest rates in Asia and South America where we made recent acquisitions.

Included in interest expense are non-cash charges for deferred financing fees of $0.3 million and $0.6 million, respectively, in the second quarter and six months of fiscal 2013 and $0.3 million and $0.6 million, respectively, in the second quarter and six months of fiscal 2012.

Included in interest expense is non-cash, accreted interest on the Convertible Notes of $1.7 million and $3.4 million, respectively, in the second quarter and six months of fiscal 2013 and $1.6 million and $3.2 million, respectively, in the second quarter and six months of fiscal 2012. (See Note 9 to the Consolidated Condensed Financial Statements.)

Our average debt outstanding (reflecting the reduction of the Convertible Notes discount) was $262.3 million and $262.8 million in the second quarter and six months of fiscal 2013, respectively, compared to $273.2 million and $266.2 million in the second quarter and six months of fiscal 2012, respectively. The average Convertible Notes discount excluded from our average debt outstanding was $21.7 million and $22.6 million, respectively, in the second quarter and six months of fiscal 2013 and $28.3 million and $29.1 million, respectively, in the second quarter and six months of fiscal 2012.

Other (Income) Expense, Net

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
    Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Other (income) expense, net

   $ (1.8     (0.3 )%    $ —           —     $ 1.8         NM
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

     Six months ended
September 30, 2012
    Six months ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
    Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Other (income) expense, net

   $ (0.6     —     $ 1.2         0.1   $ 1.8         NM
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

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Table of Contents

Other (income) expense, net for the second quarter as well as the six months of fiscal 2013 increased by $1.8 million compared to the comparable prior year periods primarily on account of insurance recoveries.

Earnings Before Income Taxes

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Earnings before income taxes

   $ 59.7         10.8   $ 38.4         7.0   $ 21.3         55.6
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
     Six months ended
September 30, 2012
    Six months ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Earnings before income taxes

   $ 124.0         10.8   $ 82.5         7.4   $ 41.5         50.4
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

As a result of the above, earnings before income taxes in the second quarter of fiscal 2013 increased $21.3 million or 55.6% compared to the second quarter of fiscal 2012 and earnings before income taxes in the six months of fiscal 2013 increased $41.5 million or 50.4% compared to the six months of fiscal 2012. Earnings before income taxes as a percentage of net sales were 10.8% for both the second quarter and six months of fiscal 2013 compared to 7.0% and 7.4%, respectively, in the second quarter and six months of fiscal 2012.

Income Tax Expense

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Income tax expense

   $ 16.7         3.0   $ 10.1         1.8   $ 6.6         65.6
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Effective tax rate

     28.0%        26.3%        1.7%   
  

 

 

   

 

 

   

 

 

 

 

     Six months ended
September 30, 2012
    Six months ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Income tax expense

   $ 35.4         3.1   $ 20.7         1.9   $ 14.7         71.4
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Effective tax rate

     28.6%        25.1%        3.5%   
  

 

 

   

 

 

   

 

 

 

The Company’s income tax provisions for both periods consist of federal, state and foreign income taxes. The tax provisions for the second quarters of fiscal 2013 and fiscal 2012 were based on the estimated effective tax rates applicable for the full years ending March 31, 2013 and March 31, 2012, respectively, after giving effect to items specifically related to the interim periods.

The effective income tax rates for the second quarters of fiscal 2013 and fiscal 2012 were 28.0% and 26.3%, respectively. The effective income tax rates for the six months of fiscal 2013 and fiscal 2012 were 28.6% and 25.1%, respectively. The rate increase in the second quarter and six months of fiscal 2013 as compared to the comparable prior year periods are primarily due to changes in the mix of earnings among tax jurisdictions and the expiration of certain U.S. corporate tax exemptions.

 

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Table of Contents

Net Earnings Attributable to EnerSys Stockholders

 

     Quarter ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Net earnings attributable to EnerSys stockholders

   $ 43.8         7.9   $ 28.3         5.2   $ 15.5         54.8
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

     Six Months ended
September 30, 2012
    Quarter ended
October 2, 2011
    Increase (Decrease)  
     In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     Percentage
of Total
Net Sales
    In
Millions
     %  

Net earnings attributable to EnerSys stockholders

   $ 89.6         7.8   $ 61.8         5.5   $ 27.8         45.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

As a result of the above, net earnings attributable to EnerSys Stockholders in the second quarter of fiscal 2013 were $43.8 million or 7.9% of net sales, compared to the second quarter of fiscal 2012 of $28.3 million or 5.2% of net sales. Net earnings attributable to EnerSys Stockholders in the six months of fiscal 2013 were $89.6 million or 7.8% of net sales, compared to the six months of fiscal 2012 of $61.8 million or 5.5% of net sales.

Net earnings attributable to EnerSys Stockholders per common share in the second quarter of fiscal 2013 were $0.91 per basic share and $0.90 per diluted share, compared to $0.57 per basic share and diluted share in the second quarter of fiscal 2012. Net earnings attributable to EnerSys Stockholders per common share in the six months of fiscal 2013 were $1.86 per basic share and $1.84 per diluted share, compared to $1.24 per basic share and $1.23 per diluted share in the six months of fiscal 2012.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies from those discussed under the caption “Critical Accounting Policies and Estimates” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2012 Annual Report on Form 10-K.

Liquidity and Capital Resources

Operating activities provided cash of $78.8 million in the six months of fiscal 2013 compared to $27.2 million in the comparable period of fiscal 2012. In the six months of fiscal 2013, net earnings of $88.6 million and depreciation and amortization of $25.1 million were offset by cash used for the increase in primary working capital of $41.1 million, net of currency translation changes. In the six months of fiscal 2012, net earnings of $61.8 million and depreciation and amortization of $24.3 million were offset by cash used for the increase in primary working capital of $56.3 million, net of currency translation changes.

Primary working capital for this purpose is trade accounts receivable, plus inventories, minus trade accounts payable. The resulting net amount is divided by the trailing three month net sales (annualized) to derive a primary working capital percentage. Primary working capital was $607.2 million (yielding a primary working capital percentage of 27.4%) at September 30, 2012, $578.6 million (yielding a primary working capital percentage of 24.4%) at March 31, 2012 and $576.1 million at October 2, 2011 (yielding a primary working capital percentage of 26.3%). The primary working capital percentage of 27.4% at September 30, 2012 is 3.0 percentage points higher than that for March 31, 2012, and 1.1 percentage points higher than that for the prior year quarter.

Primary working capital increased during the six months of fiscal 2013, largely due to an increase in accounts receivable and inventories and a decrease in accounts payable.

Primary working capital and primary working capital percentages at September 30, 2012, March 31, 2012 and October 2, 2011 are computed as follows:

 

(In Millions)

 

Balance At

  Trade Receivables      Inventory      Accounts Payable     Total      Quarter Revenue
Annualized
     Primary Working
Capital %
 

September 30, 2012

  $ 472.8       $ 366.5       $ (232.1   $ 607.2       $ 2,216.8         27.4

March 31, 2012

    466.8         361.8         (250.0     578.6         2,371.0         24.4   

October 2, 2011

    474.3         345.5         (243.7     576.1         2,188.6         26.3   

 

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Table of Contents

Investing activities used cash of $26.6 million in the six months of fiscal 2013, compared to $25.2 million in the comparable period in fiscal 2012, primarily comprised of capital expenditures.

Financing activities provided cash of $2.9 million in the six months of fiscal 2013. Borrowings and repayments on our revolver were $173.3 million and $182.8 million, respectively, while borrowings on long-term debt and short-term debt were $5.6 million and

$5.4 million, respectively, which were partially offset by repayments of long-term debt of $10.6 million in Asia. Exercise of stock options and the related tax benefits contributed $13.9 million. In the six months of fiscal 2012, financing activities utilized cash of $12.9 million, primarily reflecting the repurchase of common stock of $49.9 million. Borrowings and repayments on our revolver were $22.6 million and $3.6 million, respectively, while borrowings on short-term debt were $16.3 million partially offset by capital lease payments of $1.2 million. Exercise of stock options and the related tax benefits contributed $3.0 million.

As a result of the above, total cash and cash equivalents increased by $51.9 million to $212.3 million in the six months of fiscal 2013 compared to a decrease of $13.3 million to $95.6 million in the comparable period of fiscal 2012.

All obligations under our 2011 Senior Secured Revolving Credit Facility are secured by, among other things, substantially all of our U.S. assets. This credit agreement contains various covenants which, absent prepayment in full of the indebtedness and other obligations, or the receipt of waivers, limit our ability to conduct certain specified business transactions, buy or sell assets out of the ordinary course of business, engage in sale and leaseback transactions, pay dividends and take certain other actions. There are no prepayment penalties on loans under this credit facility.

We are in compliance with all covenants and conditions under our credit agreements. Since we believe that we will continue to comply with these covenants and conditions, we believe that we have the financial resources and the capital available to fund the foreseeable organic growth in our business and to remain active in pursuing further acquisition opportunities. See Note 8 to the Consolidated Financial Statements included in our 2012 Annual Report on Form 10-K for a detailed description of debt.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks

Our cash flows and earnings are subject to fluctuations resulting from changes in interest rates, foreign currency exchange rates and raw material costs. We manage our exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Our policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposures. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe that we can modify or adapt our hedging strategies as needed.

Counterparty Risks

We have entered into interest rate swap agreements to manage risk on a portion of our long-term floating-rate debt. We have entered into lead forward purchase contracts to manage risk on the cost of lead. We have entered into foreign exchange forward contracts to manage risk on foreign currency exposures. The Company’s agreements are with creditworthy financial institutions. Those contracts that result in a liability position at September 30, 2012 are $3.8 million (pre-tax), therefore there is no risk of nonperformance by the counterparties. Those contracts that result in an asset position at September 30, 2012 are $8.4 million (pre-tax) and the impact on the Company due to nonperformance by the counterparties has been evaluated and not deemed material.

Interest Rate Risks

We are exposed to changes in variable U.S. interest rates on borrowings under our credit agreements. On a selective basis, from time to time, we enter into interest rate swap agreements to reduce the negative impact that increases in interest rates could have on our outstanding variable rate debt. Changes in the fair value of these contracts for the quarters ended September 30, 2012 and October 2, 2011 have been recorded in the income statement in other (income) expense, net.

At September 30, 2012 and March 31, 2012, the aggregate notional amount of interest rate swap agreements is $85.0 million. These agreements expire between February – May 2013.

Under the interest rate swaps, the Company receives three-month LIBOR and pays a fixed interest rate which averaged 4.28% on September 30, 2012 and October 2, 2011.

A 100 basis point increase in interest rates would increase annual interest expense by approximately $0.9 million on the variable rate portions of our debt.

 

33


Table of Contents

Commodity Cost Risks—Lead Contracts

We have a significant risk in our exposure to certain raw materials. Our largest single raw material cost is for lead, for which the cost remains volatile. In order to hedge against increases in our lead cost, we have entered into contracts with financial institutions to fix the price of lead. A vast majority of such contracts are for a period not extending beyond one year. We had the following contracts outstanding at the dates shown below:

 

Date

   $’s  Under
Contract
(in millions)
     #  Pounds
Purchased
(in millions)
     Average
Cost/Pound
     Approximate %
of Lead
Requirements (1)
 

September 30, 2012

   $ 40.7         46.8       $ 0.87         10

March 31, 2012

     56.6         60.0         0.94         12   

October 2, 2011

     63.2         62.3         1.01         14   

 

(1) 

Based on approximate annual lead requirements for the periods then ended.

For the remaining two quarters of this fiscal year, we believe approximately 43% of the cost of our lead requirement is known. This takes into account the hedge contracts in place at September 30, 2012, lead purchased by September 30, 2012 that will be reflected in future costs under our FIFO accounting treatment, and the benefit from our lead tolling program.

We estimate that a 10% increase in our cost of lead would increase our cost of goods sold by approximately $14 million and $28 million in the second quarter and six months of fiscal 2013, respectively.

Foreign Currency Exchange Rate Risks

We manufacture and assemble our products globally in the Americas, Europe and Asia. Approximately 60% of our sales and expenses are transacted in foreign currencies. Our sales revenue, production costs, profit margins and competitive position are affected by the strength of the currencies in countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our products are sold. Additionally, as we report our financial statements in U.S. dollars, our financial results are affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. dollar. The principal foreign currencies in which we conduct business are the Euro, Swiss franc, British pound, Polish zloty, Chinese renminbi and Mexican peso.

We quantify and monitor our global foreign currency exposures. Our largest foreign currency exposure is from the purchase and conversion of U.S. dollar based lead costs into local currencies in Europe. Additionally, we have currency exposures from intercompany financing and trade transactions. On a selective basis, we enter into foreign currency forward contracts and option contracts to reduce the impact from the volatility of currency movements; however, we cannot be certain that foreign currency fluctuations will not impact our operations in the future.

 

34


Table of Contents

To hedge these exposures, we have entered into forward contracts with financial institutions to fix the value at which we will buy or sell certain currencies. The vast majority of such contracts are for a period not extending beyond one year. Forward contracts outstanding as of September 30, 2012 and March 31, 2012 were $90.4 million and $53.5 million, respectively. The details of contracts outstanding as of September 30, 2012 were as follows:

 

  

 

 

 

Transactions Hedged

   $US
Equivalent
(in millions)
     Average
Rate
Hedged
     Approximate
% of Annual
Requirements (1)
 

Sell Euros for U.S. dollars

   $ 12.9         $/€  1. 23         7

Sell Euros for Polish zloty

     14.4         PLN/€   4.26         21   

Sell Euros for British pounds

     27.2         £/€  0.80         33   

Sell Japanese yen for U.S. dollars

     26.0         ¥/$  79.98         70   

Sell Australian dollars for U.S. dollars

     2.0         $/AUD  1.01         20   

Sell U.S. dollars for Mexican pesos

     2.5         MXN/$  13.38         50   

Sell Australian dollars for Euros

     1.9         €/AUD  1.19         15   

Other

     3.5         
  

 

 

       

Total

   $ 90.4         
  

 

 

       

 

(1) 

Based on the fiscal year currency requirements.

Foreign exchange translation adjustments are recorded in the consolidated condensed statements of comprehensive income.

Based on changes in the timing and amount of interest rate and foreign currency exchange rate movements and our actual exposures and hedges, actual gains and losses in the future may differ from our historical results.

 

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.

(b) Internal Control Over Financial Reporting. There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

35


Table of Contents

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

From time to time, we are involved in litigation incidental to the conduct of our business. We do not expect that any of this litigation, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flow.

 

Item 1A. Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended March 31, 2012, which could materially affect our business, financial condition or future results.

 

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

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes the number of shares of common stock we purchased from participants in our equity incentive plans as well as repurchases of common stock authorized by the Board of Directors. As provided by our equity incentive plans, vested options outstanding may be exercised through surrender to the Company of option shares or vested options outstanding under the Plan to satisfy the applicable aggregate exercise price (and any withholding tax) required to be paid upon such exercise.

Purchases of Equity Securities

 

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)
 

July 2 – July 29, 2012

     —         $ —           —         $ 57,973,315   

July 30 – August 26, 2012

     —           —           —           66,164,803   

August 27 – September 30, 2012

     —           —           —           74,746,440   
  

 

 

    

 

 

    

 

 

    

Total

     —         $ —           —        
  

 

 

    

 

 

    

 

 

    

 

(1) 

On May 26, 2011, the Company’s Board of Directors authorized the Company to repurchase up to the number of shares exercised through previous stock option awards and common stock issued under the 2010 Equity Incentive Plan. As of July 29, 2012, August 26, 2012 and September 30, 2012, this repurchase limit amounted to a total 220,592 shares, 447,220 shares, and 684,642 shares, respectively, that may be repurchased under this program. For purposes of presenting the approximate dollar value of shares that may be purchased under this program, we multiplied the remaining balance under this program by $36.15 per share, which is the average closing price of the Company’s common stock during the period.

 

(2) 

On May 24, 2012, the Company’s Board of Directors authorized the Company to repurchase up to $50 million of its common stock.

 

Item 4. Mine Safety Disclosures

Not applicable.

 

36


Table of Contents
ITEM 6. EXHIBITS

 

Exhibit
Number

  

Description of Exhibit

3.1    Fifth Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 3 to EnerSys’ Registration Statement on Form S-1 (File No. 333-115553) filed on July 13, 2004).
3.2    Bylaws (incorporated by reference to Exhibit 3.2 to EnerSys’ Quarterly Report on Form 10-Q (File No. 001-32253) filed on August 8, 2012).
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
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

 

37


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

ENERSYS (Registrant)
By   /s/ Michael J. Schmidtlein
  Michael J. Schmidtlein
  Senior Vice President Finance & Chief Financial Officer

Date: November 5, 2012

 

38


Table of Contents

EnerSys

EXHIBIT INDEX

 

Exhibit
Number

  

Description of Exhibit

3.1    Fifth Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 3 to EnerSys’ Registration Statement on Form S-1 (File No. 333-115553) filed on July 13, 2004).
3.2    Bylaws (incorporated by reference to Exhibit 3.2 to EnerSys’ Quarterly Report on Form 10-Q (File No. 001-32253) filed on August 8, 2012).
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
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

 

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