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What changed in EnerSys's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of EnerSys's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+306 added−290 removedSource: 10-K (2024-05-22) vs 10-K (2023-05-24)

Top changes in EnerSys's 2024 10-K

306 paragraphs added · 290 removed · 230 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

62 edited+17 added−5 removed37 unchanged
Biggest changeThrough our established EnerSys Academy, we provide employees worldwide with resources to expand their knowledge on a broad scope of relevant topics to promote their growth and development. Compensation and Benefits : To attract, retain and recognize talent, we aim to ensure merit-based, compensation practices and strive to provide competitive compensation and benefit packages to our workforce.
Biggest changeWe encourage all our employees to engage in ongoing training, professional development and educational advancement programs. Through our established EnerSys Academy, we provide employees worldwide with resources to expand their skills and knowledge on a broad scope of relevant topics, to promote their growth and development.
Mr. O’Connell received his Master of Business Administration degree in International Business from the University of Redlands, CA and his Bachelor of Arts degree in English Literature from the California State University, San Bernardino. Mr. O’Connell is a veteran of the U.S.
O’Connell received his Master of Business Administration degree in International Business from the University of Redlands, CA and his Bachelor of Arts degree in English Literature from the California State University, San Bernardino. Mr. O’Connell is a veteran of the U.S.
We have implemented company-wide environmental, health and safety policies and practices, which includes monitoring, training and communication of these policies. Quality Systems We utilize a global strategy for quality management systems, policies and procedures, the basis of which is the ISO 9001:2015 standard, a worldwide recognized quality standard.
We have implemented company-wide environmental, health and safety policies and practices, which includes monitoring, training and communication of these policies. Quality Systems We utilize a global strategy for quality management systems, policies and procedures, the basis of which is ISO 9001:2015, a worldwide recognized quality standard.
Zogby received his Bachelor of Science degree in Industrial and Labor Relations from LeMoyne College, Syracuse, New York, and his Master of Business Administration degree from Duke University’s Fuqua School of Business. He is active in the US Chamber of Commerce, and serves on the C_TEC, Chamber Technology Engagement Center Committee.
Zogby received his Bachelor of Science degree in Industrial and Labor Relations from LeMoyne College, Syracuse, New York, and his Master of Business Administration degree from Duke University’s Fuqua School of Business. He is active in the US Chamber of Commerce, and serves on the C_TEC, Chamber Technology Engagement Center Committee. Chad C.
Prior thereto, from April 2019 through July 2020, he served as our President, Motive Power, our Vice President–Reserve Power Sales and Service for the Americas from February 2017, and Vice President of EnerSys Advanced Systems from December 2015 to January 2017. Mr. O’Connell joined EnerSys in 2011, serving in various sales and marketing capacities in several areas of our business.
From April 2019 through July 2020, he served as our President, Motive Power, our Vice President – Reserve Power Sales and Service for the Americas from February 2017, and Vice President, EnerSys Advanced Systems from December 2015 to January 2017. Mr. O’Connell joined EnerSys in 2011, serving in various sales and marketing capacities in several areas of our business. Mr.
Funk, age 53, Executive Vice President and Chief Financial Officer . Ms. Funk joined EnerSys in December 2018 and served as Vice President Finance, Americas. She was promoted to Executive Vice President & Chief Fin ancial Officer effective April 1, 2022. Ms.
Funk, age 54, Executive Vice President and Chief Financial Officer . Ms. Funk joined EnerSys in December 2018 and served as Vice President Finance, Americas. She was promoted to Executive Vice President & Chief Fin ancial Officer effective April 1, 2022. Ms.
Energy Systems, which combine power conversion, power distribution, energy storage, and thermally managed enclosures, are used in the telecommunication, broadband, data center, and utility industries, for uninterruptible power and numerous other applications requiring stored energy solutions. Motive Power batteries and chargers are utilized in electric forklift trucks, automated guided vehicles, and other industrial electric powered vehicles.
Energy Systems, which combine power conversion, power distribution, energy storage, and thermally managed enclosures, are used in the telecommunication, broadband, data center, and utility industries, uninterruptible power supplies, and numerous applications requiring stored energy solutions. Motive Power batteries and chargers are utilized in electric forklift trucks, automated guided vehicles (AGVs), and other industrial electric powered vehicles.
From time to time, we apply for patents on new inventions and designs, but we believe that the growth of our business will depend primarily upon the quality of our products and our relationships with our customers, rather than the extent of our patent protection. We believe we are the leader in TPPL technology.
From time to time, we apply for patents on new inventions and designs, but we believe that the growth of our business will depend primarily upon the quality of our products and our relationships with our customers, rather than the extent of our patent protection. 8 Table of Contents We believe we are the leader in TPPL technology.
Our Board of Directors oversees our programs related to matters of corporate responsibility and sustainability performance, including climate change, through the Nominating and Corporate Governance Committee. We publish an annual Sustainability Report, including ESG data, as well as a Task Force on Climate Related Financial Disclosures report and submission to the CDP.
Our Board of Directors oversees our programs related to matters of corporate responsibility and sustainability performance, including climate change, through the Nominating and Corporate Governance Committee. We publish an annual Sustainability Report, including environmental, social and governance data, as well as a Task Force on Climate Related Financial Disclosures report and submission to the CDP.
This commitment is reflected in a strong ethic for charitable contributions, endorsement of community activities, encouraging employees to give freely of their own time to serve on boards or committees in many organizations and supporting educational programs in schools and colleges.
This commitment is reflected in a strong ethic for charitable contributions, endorsement of community activities, encouraging employees to give freely of their own time to serve on boards or committees for non-profit organizations and supporting educational programs in schools and colleges.
Conversely, if climate change results in a greater amount of rainfall, snow, ice or other less accommodating weather 10 Table of Contents conditions, we could experience reduced productivity, which could negatively impact our revenues and gross margins.
Conversely, if climate change results in a greater amount of rainfall, snow, ice or other less accommodating weather conditions, we could experience reduced productivity, which could negatively impact our revenues and gross margins.
See Note 23 to the Consolidated Financial Statements for information on segment reporting. Fiscal Year Reporting In this Annual Report on Form 10-K, when we refer to our fiscal years, we state “fiscal” and the year, as in “fiscal 2023”, which refers to our fiscal year ended March 31, 2023.
See Note 23 to the Consolidated Financial Statements for information on segment reporting. Fiscal Year Reporting In this Annual Report on Form 10-K, when we refer to our fiscal years, we state “fiscal” and the year, as in “fiscal 2024”, which refers to our fiscal year ended March 31, 2024.
Individuals are evaluated based on merit, without concern for 11 Table of Contents race, color, religion, national origin, citizenship, marital status, gender (including pregnancy), gender identity, gender expression, sexual orientation, age, disability, veteran status, or other characteristics protected by law. We are committed to providing equal opportunities to every member of our workforce.
Individuals are evaluated based on merit, without concern for race, color, religion, national origin, citizenship, marital status, gender (including pregnancy), gender identity, gender expression, sexual orientation, age, disability, veteran status, or other characteristics protected by law. We are committed to providing equal and equitable opportunities to every member of our workforce.
We expect our suppliers will share and embrace our values, as well as our commitment to regulatory compliance. 12 Table of Contents We have an ESG steering committee, which includes members of senior management and funded additional staffing to further support the ongoing development of our ESG program.
We expect our suppliers will share and embrace our values, as well as our commitment to regulatory compliance. We have an ESG steering committee, which includes members of senior management and funded additional staffing to further support the ongoing development of our sustainability program.
The four quarters in fiscal 2022 ended on July 4, 2021, October 3, 2021, January 2, 2022, and March 31, 2022, respectively. History EnerSys and its predecessor companies have been manufacturers of industrial batteries for over 125 years.
The four quarters in fiscal 2023 ended on July 3, 2022, October 2, 2022, January 1, 2023, and March 31, 2023, respectively. History EnerSys and its predecessor companies have been manufacturers of industrial batteries for over 125 years.
Of these employees, approximately 26% were covered by collective bargaining agreements. Employees covered by collective bargaining agreements that expire in the next twelve months were approximately 9% of the total workforce. The average term of these agreements is 2 years, with the longest term being 4.0 years. We consider our employee relations to be good.
Of these employees, approximately 28% were covered by collective bargaining agreements. Employees covered by collective bargaining agreements that expire in the next twelve months were approximately 7% of the total workforce. The average term of these agreements is 2 years, with the longest term being 4 years. We consider our employee relations to be good.
The Company identifies the following as its three operating segments, based on lines of business: The Company's three reportable segments, based on lines of business, are as follows: • Energy Systems - uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems used in data centers, as well as telecommunications systems, switchgear and electrical control systems used in industrial facilities and electric utilities, large-scale energy storage and energy pipelines.
The Company identifies the following as its four operating segments, based on lines of business: • Energy Systems - uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems used in data centers, as well as telecommunications systems, switchgear and electrical control systems used in industrial facilities and electric utilities, large-scale energy storage and energy pipelines.
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 2023 ended on July 3, 2022, October 2, 2022, January 1, 2023, and March 31, 2023, respectively.
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 2024 ended on July 2, 2023, October 1, 2023, December 31, 2023, and March 31, 2024, respectively.
We allocate our resources to the following key areas: • the design and development of new products; • optimizing and expanding our existing product offering; • waste and scrap reduction; • production efficiency and utilization; • capacity expansion without additional facilities; and • quality attribute maximization. Employees At March 31, 2023, we had approximately 11,350 employees.
We allocate our resources to the following key areas: • the design and development of new products; • optimizing and expanding our existing product offering; • waste and scrap reduction; • production efficiency and utilization; • capacity expansion without additional facilities; and • quality attribute maximization. Employees At March 31, 2024, we had approximately 10,797 employees.
We did not experience any significant labor unrest or disruption of production during fiscal 2023. Information about Our Executive Officers As of May 24, 2023, our executive officers are: David M. Shaffer, age 58, President and Chief Executive Officer . Mr.
We did not experience any significant labor unrest or disruption of production during fiscal 2024. Information about Our Executive Officers As of May 22, 2024, our executive officers are: David M. Shaffer, age 59, President and Chief Executive Officer . Mr.
In some cases, our warranty period may include a pro rata period, which is typically based around the design life of the product and the application served. Our warranties generally cover defects in workmanship and materials and are limited to specific usage parameters.
The length of our warranties is varied to reflect regional characteristics and competitive influences. In some cases, our warranty period may include a pro rata period, which is typically based around the design life of the product and the application served. Our warranties generally cover defects in workmanship and materials and are limited to specific usage parameters.
Army’s 82nd Airborne Division (Paratroopers) where he served as a Signals Intelligence Analyst, Spanish Linguist, and held a Top-Secret security clearance. Andrew M. Zogby, age 63, President, Energy Systems Global. Mr. Zogby has served as President, Energy Systems Global since July 2020. Prior thereto, from April 2019, he served as President, Energy Systems–Americas.
Army’s 82nd Airborne Division (Paratroopers) where he served as a Signals Intelligence Analyst, Spanish Linguist, and held a Top-Secret security clearance. Andrew M. Zogby, age 64, Former President, Energy Systems Global. Mr. Zogby served as President, Energy Systems Global from July 2020 through November 2023. Prior thereto, from April 2019, he served as President, Energy Systems–Americas.
ITEM 1. BUSINESS Overview EnerSys (the “Company,” “we,” or “us”) is a world leader in energy storage and power solutions for industrial applications. We design, manufacture, and distribute energy systems solutions, motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories and outdoor thermal equipment enclosures solutions for a global customer base.
ITEM 1. BUSINESS Overview EnerSys (the “Company,” “we,” or “us”) is a world leader in stored energy solutions for industrial applications. We design, manufacture, and distribute energy systems solutions, and motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories and outdoor equipment enclosures solutions to customers worldwide.
Our competitors range from development stage companies to large domestic and international corporations. Certain of our competitors produce energy storage products utilizing technologies or chemistries different from our own. We compete primarily on the basis of reputation, product quality, reliability of service, delivery lead time and price. We believe that our products and services are competitively priced.
Certain of our competitors produce energy storage products utilizing technologies or chemistries different from our own. We compete primarily on the basis of reputation, product quality, reliability of service, delivery lead time and price. We believe that our products and services are competitively priced.
Our purchasing and quality teams strive to maintain the highest standards and principles of business ethics, courtesy and competence in dealings and transactions with suppliers. Our code of supplier conduct reflects our commitment to the values of honesty, integrity, respect, and responsibility.
Relationships between EnerSys and our suppliers must be based on mutual respect and integrity. Our purchasing and quality teams strive to maintain the highest standards and principles of business ethics, courtesy and competence in dealings and transactions with suppliers. Our code of supplier conduct reflects our commitment to the values of honesty, integrity, respect, and responsibility.
We believe in the principles of this standard and reinforce the same by requiring mandatory compliance for all manufacturing, sales and service locations globally that are registered to the ISO 9001 standard. We also focus on specific plant certifications such as AS9100 (Aerospace), ISO13485:2016 (Medical Devices), ISO/TS 22163:2017 (Rail), IATF16949:2018 (Automotive).
We believe in the principles of this standard and reinforce the same by requiring mandatory certification to the ISO 9001 standard for all manufacturing locations globally. We also focus on plant certifications that serve specific industries such as AS9100 (Aerospace), ISO13485:2016 (Medical Devices), ISO/TS 22163:2017 (Rail), IATF 16949:2016 (Automotive).
Energy Systems also includes highly integrated power solutions and services to broadband, telecom, renewable and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries. • Motive Power - power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications as well as mining equipment, diesel locomotive starting and other rail equipment; and • Specialty - premium batteries for starting, lighting and ignition applications in premium automotive and large over-the-road trucks, energy storage solutions for satellites, military land vehicles, aircraft, submarines, tactical vehicles, as well as medical devices and equipment.
Energy Systems also includes highly integrated power solutions and services to broadband, telecom, data center, and renewable and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries. • Motive Power - power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications, AGVs, as well as mining equipment, diesel locomotive starting and other rail equipment. • Specialty - premium batteries for starting, lighting and ignition applications in premium automotive and large over-the-road trucks, energy storage solutions for satellites, spacecraft, commercial aircraft, military land vehicles, aircraft, submarines, ships and other tactical vehicles, as well as medical devices and equipment; and • New Ventures - energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles.
Environmental and safety certifications Seventeen of our facilities in the Americas, EMEA and Asia are certified to ISO 14001 standards. ISO 14001 is a globally recognized, voluntary program that focuses on the implementation, maintenance and continual improvement of an environmental management system and the improvement of environmental performance. Seven facilities in EMEA and Asia are certified to ISO 45001 standards.
ISO 14001 is a globally recognized, voluntary program that focuses on the implementation, maintenance and continual improvement of an environmental management system and the improvement of environmental performance. Eight facilities in EMEA and Asia are certified to ISO 45001 standards. The ISO 45001 is a globally recognized occupational health and safety management systems standard.
We consider talent acquisition, development, engagement and retention critical key drivers of our business success. Our Board of Directors, through the Compensation Committee and the Nominating and Corporate Governance Committee, retains oversight of our human capital management process, including demographics, talent development, employee retention, material aspects of employee compensation, as well as diversity and inclusion and recruitment efforts.
Our Board of Directors, through the Compensation Committee and the Nominating and Corporate Governance Committee, retains oversight of our human capital management process, including demographics, talent development, employee retention, material aspects of employee compensation, as well as diversity, equity and inclusion, as well as talent recruitment, development and retention.
Specialty batteries are used in aerospace and defense applications, large over the road trucks, and premium automotive and medical. We also provide aftermarket and customer support services to over 10,000 customers in more than 100 countries through a network of distributors, independent representatives, and our internal sales force around the world.
We also provide aftermarket and customer support services to over 10,000 customers in more than 100 countries through a network of distributors, independent representatives, and our internal sales force around the world.
We are aware of the proposed rules on climate disclosure released by the SEC in March of last year. While we are following the progression of the rule, we are pleased to note that we are preparing to meet many of its conditions in advance. We released our inaugural, comprehensive Sustainability Report, which was aligned with GRI and SASB standards.
We are aware of the proposed rules on climate disclosure released by the SEC in March of last year. While we are following the progression of the rule, we are pleased to note that we are preparing to meet many of its conditions in advance.
We provide employee wages that are consistent with employee positions, skill levels, experience, knowledge and geographic location. We align our executives’ and eligible employees’ annual bonus opportunity and long-term equity compensation with our stockholders’ interests by linking realizable pay with company financial performance. In addition, we perform annual pay equity studies to evaluate our global pay practices across the organization.
We align our executives’ and 12 Table of Contents eligible employees’ annual bonus opportunity and long-term equity compensation with our stockholders’ interests by linking realizable pay with company financial performance. In addition, we perform annual pay equity studies to evaluate our global pay practices across the organization.
Because lead is traded on the world’s commodity markets and its price fluctuates daily, we periodically enter into hedging arrangements for a portion of our projected requirements to reduce the volatility of our costs. 7 Table of Contents Competition The industrial energy storage market is highly competitive both among competitors who manufacture and sell industrial energy storage solutions and batteries and among customers who purchase industrial energy solutions.
Because lead is traded on the world’s commodity markets and its price 7 Table of Contents fluctuates daily, we periodically enter into hedging arrangements for a portion of our projected requirements to reduce the volatility of our costs.
In addition, private parties, including current or former employees, can bring personal injury or other claims against us due to the presence of, or their exposure to, hazardous substances used, stored, transported or disposed of by us or contained in our products.
In addition, private parties, including current or former employees, can bring personal injury or other claims against us due to the presence of, or their exposure to, hazardous substances used, stored, transported or disposed of by us or contained in our products. 10 Table of Contents Environmental and safety certifications Eighteen of our facilities in the Americas, EMEA and Asia are certified to ISO 14001 standards.
As discussed elsewhere in this Annual Report on Form 10-K, including in Item 1A. Risk Factors, our operating results are significantly influenced by weather, and major changes in historical weather patterns could have a notable impact on our future operating results.
Risk Factors, our operating results are significantly influenced by weather, and major changes in historical weather patterns could have a notable impact on our future operating results.
As part of our growing sustainability commitment, we announced during fiscal year 2022 that we joined the United Nations Global Compact, Alliance to Save Energy, the U.S.
We also issued our second Task Force of Climate Related Financial Disclosures (TCFD) Report in January 2024. As part of our growing sustainability commitment, we announced during fiscal year 2022 that we joined the United Nations Global Compact, Alliance to Save Energy, the U.S.
In 2022, we also submitted our CDP Climate Change disclosure to maintain transparency with our stakeholders and track our progress towards a low carbon society. We intend to continue to conduct a climate risk analysis in the coming year and have completed an analysis of our Scope 1 and 2 emissions.
In calendar 2023, we also submitted our CDP Climate Change disclosure to maintain transparency with our stakeholders and track our progress towards a low carbon society. We have conducted and published a climate risk analysis and have published our Scope 1, 2 and 3 emissions annually.
Our major competitors in AGM technology are Clarios, East Penn Manufacturing, Exide Technologies (Stryten), Fiamm, Banner and Atlas. In the Aerospace and Defense specialized markets our main competitors are Eagle Picher and SAFT. Warranties Warranties for our products vary geographically and by product type and are competitive with other suppliers of these types of products.
Our major competitors in AGM technology are Clarios, East Penn Manufacturing, Exide Technologies (Stryten), Fiamm, Banner and Atlas. In the Aerospace and Defense specialized markets our main competitors are Eagle Picher and SAFT.
To that end, we have been integrating the fundamental values of ESG into our everyday operations and future business strategies. Our Sustainability Team leads ESG our efforts with respect to climate change management, product sustainability, operations, supply chain management. Sustainability, reliability and resilience are at the core of who we are and what we do at EnerSys every day.
To that end, we have been integrating the fundamental values of sustainability into our everyday operations and future business strategies. Our Sustainability Team coordinates environmental, social and governance our efforts with respect to climate change management, product sustainability, operations, and supply chain management.
We believe that many such rights and licenses are important to our business by helping to develop strong brand-name recognition in the marketplace. 8 Table of Contents Seasonality Our business generally does not experience significant quarterly fluctuations in net sales as a result of weather or other trends that can be directly linked to seasonality patterns, although transportation and power electronics can experience seasonality in colder months.
Seasonality Our business generally does not experience significant quarterly fluctuations in net sales as a result of weather or other trends that can be directly linked to seasonality patterns, although transportation and power electronics can experience seasonality in colder months.
We have also acquired our first Lithium-Ion product certification in accordance with ISO 26262 (Product Safety). This strategy enables us to provide consistent quality products and services to meet our customers’ needs. Human Capital Management EnerSys is committed to a comprehensive, cohesive and positive employee experience.
We have also acquired our first Lithium-Ion product certification in accordance with ISO 26262 (Product Safety). This strategy enables us to provide consistent quality products and services to meet our customers’ needs. 11 Table of Contents Human Capital Management EnerSys believes that human capital management, including attracting, developing and retaining a high-quality workforce, is critical to our long-term success.
Our various trademark registrations currently have durations of approximately 10 to 20 years, varying by mark and jurisdiction of registration and may be renewable. We endeavor to keep all of our material registrations current.
Our various trademark registrations currently have durations of approximately 10 to 20 years, varying by mark and jurisdiction of registration and may be renewable. We endeavor to keep all of our material registrations current. We believe that many such rights and licenses are important to our business by helping to develop strong brand-name recognition in the marketplace.
We created several committees to assist the company in its philanthropic endeavors that support the communities in which we work. Additionally, we regularly sponsor volunteer events and fundraising campaigns, to encourage our employees to give back to our communities, a commitment that we further support by offering employees paid time off for charitable volunteering.
We established a Corporate Giving Committee to assist the Company in its philanthropic endeavors that support the communities in which we live and work. Additionally, we regularly sponsor volunteer events and fundraising campaigns, to encourage our employees to give back to our communities.
Joern Tinnemeyer , age 50, Senior Vice President and Chief Technology Officer. Mr. Tinnemeyer has served as Senior Vice President and Chief Technology Officer since October 2017. He joined EnerSys in August 2016 as its Vice President and Chief Technology Officer. Mr. Tinnemeyer is responsible for global engineering, global quality, and technology development.
Tinnemeyer has served as Senior Vice President and Chief Technology Officer since October 2017. He joined EnerSys in August 2016 as its Vice President and Chief Technology Officer. Mr. Tinnemeyer is responsible for global engineering, global quality, and technology development. His primary focus of expertise includes energy storage systems, system design optimization, safety topologies and control theory.
The ISO 45001 is a globally recognized occupational health and safety management systems standard. Climate change impacts The potential impact of climate change on our operations is uncertain. The changing climate may result in new and erratic weather patterns, increases in the frequency or severity of storms, increased and decreased temperatures and rising sea levels.
Climate change impacts The potential impact of climate change on our operations is uncertain. The changing climate may result in new and erratic weather patterns, increases in the frequency or severity of storms, increased and decreased temperatures and rising sea levels. As discussed elsewhere in this Annual Report on Form 10-K, including in Item 1A.
By taking a global view of our manufacturing requirements and capacity, we believe we are better able to anticipate potential capacity bottlenecks and equipment and capital funding needs. The primary raw materials used to manufacture our products include lead, plastics, steel and copper. We purchase lead from a number of leading suppliers throughout the world.
The primary raw materials used to manufacture our products include lead, plastics, steel and copper. We purchase lead from a number of leading suppliers throughout the world.
Environmental Matters and Climate Change Impacts We are committed to the protection of the environment and train our employees to perform their duties accordingly. In the manufacture of our products throughout the world, we process, store, dispose of and otherwise use large amounts of hazardous materials, especially lead and acid.
In the manufacture of our products throughout the world, we process, store, dispose of and otherwise use large amounts of hazardous materials, especially lead and acid.
Our products help tackle some of our world’s most significant challenges, be it addressing the impacts of climate change, decarbonization, efficient and affordable distribution of goods, grid reliability, telecommunications, and even medical safety. Our batteries and energy storage solutions are part of building a resilient, low-carbon future.
Sustainability, reliability and resilience are at the core of who we are and what we do at EnerSys every day. Our products help tackle some of our world’s most significant challenges, be it addressing the impacts of climate change, decarbonization, efficient and affordable distribution of goods, grid reliability, telecommunications, and even medical safety.
Sustainability at EnerSys is, however, about more than just the benefits and impacts of our products. Our commitment encompasses essential ESG issues fundamental to how we manage our own operations. Minimizing our environmental footprint and providing a safe and inclusive workplace for our employees are top priorities for EnerSys.
Our batteries and energy storage solutions are part of building a resilient, low-carbon future. Sustainability at EnerSys is, however, about more than just the benefits and impacts of our products. Our commitment encompasses essential environmental, social and governance issues fundamental to how we manage our own operations.
Generally, our Energy Systems product warranties range from one to twenty years, our Motive Power product warranties range from one to five years and from one to four years for Specialty transportation batteries. The length of our warranties is varied to reflect regional characteristics and competitive influences.
Warranties Warranties for our products vary geographically and by product type and are competitive with other suppliers of these types of products. Generally, our Energy Systems product warranties range from one to twenty years, our Motive Power product warranties range from one to five years and from one to four years for Specialty transportation batteries.
In addition to training and development opportunities, all new employees are required to participate in seminars to introduce them to the EnerSys business, our strategy, our culture and philosophies. We encourage all our employees to engage in ongoing training, professional development and educational advancement programs.
We encourage and train our leaders to facilitate effective conversations and measure the effectiveness of these conversations by surveying our employees to monitor leadership effectiveness. In addition to training and development opportunities, all new employees are required to participate in trainings to introduce them to the EnerSys business, our strategy, culture and philosophies.
His primary focus of expertise includes energy storage systems, system design optimization, safety topologies and control theory. He has worked on some of the most advanced lithium battery packs for major automotive OEMs. He currently also serves as Chairman of NaatBatt, North America’s foremost organization to foster advanced energy storage systems. Mr.
He has worked on some of the most advanced lithium battery packs for major automotive OEMs. He currently also serves as Chairman of NaatBatt, North America’s foremost organization to foster advanced energy storage systems. Mr. Tinnemeyer studied applied mathematics and electrical engineering at the University of Toronto and holds a MSc in Astronautics and Space Engineering. Shawn M.
Our company-owned network allows us to offer high-quality service, including preventative maintenance programs and customer support. Our warehouses and service locations enable us to respond quickly to customers in the markets we serve. We believe that the extensive industry experience of our sales organization results in strong long-term customer relationships.
Distribution and Services We distribute, sell and service our products throughout the world, principally through company-owned sales and service facilities, as well as through independent manufacturers’ representatives. Our company-owned network allows us to offer high-quality service, including preventative maintenance programs and customer support. Our warehouses and service locations enable us to respond quickly to customers in the markets we serve.
Included in this report, we announced key, measurable environmental, social, and governance (“ESG”) goals and objectives aimed at advancing progress in sustainability, reducing our environmental footprint and creating an inclusive and empowering workplace for all employees. We also issued our inaugural Task Force of Climate Related Financial Disclosures (TCFD) Report in December 2022.
We released comprehensive Sustainability Reports in both 2022 and 2023, which are aligned with GRI and SASB standards. Included in these reports, we announced key, measurable environmental, social, and governance (“ESG”) goals and objectives aimed at advancing progress in sustainability, reducing our environmental footprint and creating an inclusive and empowering workplace for all employees.
Prior, she served in positions of increasing responsibility at Carpenter Technology, Arrow International, Rhone-Poulenc Rorer, Bell Atlantic Corporation and Ernst & Young. Since July 2017, Ms. Funk has served on the Board of Directors of Crown Holdings Inc., whose shares are traded on the New York Stock Exchange, and is a member of their Audit and Compensation Committees.
Prior, she served in positions of increasing responsibility at Carpenter Technology, Arrow International, Rhone-Poulenc Rorer, Bell Atlantic Corporation and Ernst & Young. Since July 2017, Ms.
Being an excellent neighbor and good corporate citizen in the communities where we work and live is extremely important as well. Our products facilitate positive environmental, social and economic impacts around the world. We believe that the power systems and energy management sector have a key role to play in finding innovative solutions to address global climate change.
Minimizing our environmental footprint and providing a safe and inclusive workplace for our employees are top priorities for EnerSys. Being an excellent neighbor and good corporate citizen in the communities where we work and live is extremely important as well. Our products facilitate positive environmental, social and economic impacts around the world.
As one example of this, we offer a complete battery recycling program to assist our customers in preserving our environment and comply with recycling and waste disposal regulations. Relationships between EnerSys and our suppliers must be based on mutual respect and integrity.
Our Environmental Policy and practices aim to protect, conserve, and sustain the world’s natural resources, as well as to protect our customers and the communities in which we live and operate. As one example of this, we offer a complete battery recycling program to assist our customers in preserving our environment and comply with recycling and waste disposal regulations.
Philanthropy and Volunteerism : Over the past fiscal year we created an executive level committee dedicated to encouraging and supporting charitable efforts by EnerSys globally . EnerSys is strongly committed to being an outstanding corporate citizen on a global basis in all the countries and communities where we do business.
We have an executive DEI steering committee, are committed to the CEO Action for Diversity and Inclusion and cultivate our inclusive culture with robust business resource groups. Philanthropy and Volunteerism : Through our Charitable Giving Program, EnerSys is strongly committed to being an outstanding corporate citizen on a global basis in all the countries and communities where we do business.
Manufacturing and Raw Materials We manufacture and assemble our products at manufacturing facilities located in the Americas, EMEA and Asia. With a view toward projected demand, we strive to optimize and balance capacity at our battery manufacturing facilities globally, while simultaneously minimizing our product cost.
With a view toward projected demand, we strive to optimize and balance capacity at our battery manufacturing facilities globally, while simultaneously minimizing our product cost. By taking a global view of our manufacturing requirements and capacity, we believe we are better able to anticipate potential capacity bottlenecks and equipment and capital funding needs.
The products are sold globally to OEMs, distribution partners, vehicle fleets and directly to government entities such as the United States of America, Germany and the United Kingdom. Distribution and Services We distribute, sell and service our products throughout the world, principally through company-owned sales and service facilities, as well as through independent manufacturers’ representatives.
The products are sold globally to OEMs, distribution partners, vehicle fleets and directly to government entities such as the United States of America, Germany and the United Kingdom. Our New Ventures energy storage and management systems are sold to customers who own or manage commercial real estate and own or manage retail operations.
Training and Career Management: Employees receive regular development feedback through quarterly 1:1 reviews with their manager, which encourages open dialogues to identify and cultivate skills and opportunities. We encourage our leaders to facilitate effective conversations and measure the effectiveness of these conversations by regularly surveying our employees.
We encourage continuous feedback between employees and managers, and employees receive formal development feedback from their manager through a quarterly 1:1 review meeting. These discussions encourage an open dialogue to identify and cultivate skills and opportunities and plan for career growth .
Our climate change policy underscores our goal to carry out all business activities in a sustainable manner. Our environmental policies and practices aim to protect, conserve, and sustain the world’s natural resources, as well as to protect our customers and the communities in which we live and operate.
We believe that the power systems and energy management sector have a key role to play in finding innovative solutions to address global climate change. Our Climate Change policy underscores our goal to carry out all business activities in a sustainable manner.
Removed
Between fiscal years 2003 through 2023, we made thirty-four acquisitions around the globe. There were no acquisitions in fiscal 2023, 2022 and 2021 but we completed the acquisition of NorthStar, headquartered in Stockholm, Sweden in fiscal 2020 and of Alpha in fiscal 2019.
Added
Specialty batteries are used in aerospace and defense applications, large over the road trucks, premium automotive, and medical products. New Ventures provides energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles.
Removed
Tinnemeyer studied applied mathematics and electrical engineering at the University of Toronto and holds a MSc in Astronautics and Space Engineering. 9 Table of Contents Shawn M. O’Connell, age 50, President, Motive Power Global. Mr. O’Connell has served as our President, Motive Power Global since July 2020.
Added
Between fiscal years 2003 through 2024, we made thirty-five acquisitions around the globe. There were no significant acquisitions in fiscal 2024, 2023, and 2022. On May 2, 2024, EnerSys announced that the Company has entered into a definitive agreement to acquire Bren-Tronics, Inc. for approximately $208 million, subject to adjustments.
Removed
Additionally, we have taken the initial steps to quantify our Scope 3 emissions as we understand that identifying the impacts associated with our production, distribution, and use of our products is critical for further climate risk mitigation.
Added
Bren-Tronics, Inc is a leading manufacturer of highly reliable portable power solutions, including small and large lithium batteries and charging solutions, for military and defense applications. The acquisition is expected to close by the end of the second quarter of fiscal 2025, subject to the satisfaction of customary closing conditions.
Removed
Above all else, we are dedicated to the safety and well-being of our employees. Diversity, Equity, Inclusion and Belonging: We strive to create a work environment that emphasizes respect, fairness and dignity and that does not tolerate discrimination or harassment.
Added
The systems are sold globally through our direct sales channel. We received our first system orders in fiscal year 2024 from our launch customer in Canada and other customers based in the United States.
Removed
In addition to following all applicable local laws and regulations, for fiscal year 2022, we have also formed an executive steering committee, joined, among other things, the CEO Action for Diversity and Inclusion, and funded additional staffing to further support these efforts.
Added
We believe that the extensive industry experience of our sales organization results in strong long-term customer relationships. Manufacturing and Raw Materials We manufacture and assemble our products at manufacturing facilities located in the Americas, EMEA and Asia.
Added
Competition The industrial energy storage market is highly competitive both among competitors who manufacture and sell industrial energy storage solutions and batteries, energy management solutions, dynamic fast chargers for EVs, and among customers who purchase these solutions. Our competitors range from development stage companies to large domestic and international corporations.
Added
New Ventures We compete globally within the energy storage system and DC fast charging market with specialized lithium technologies offering solutions that combine energy management for commercial and retail buildings and dynamic fast charging for EVs. Our primary competitors are Jule, Tritium, and ABB.
Added
Funk has served on the Board of Directors of Crown Holdings Inc., whose shares are traded on the New York Stock Exchange, and is a member of their Audit and Compensation Committees. 9 Table of Contents Joern Tinnemeyer , age 51, Senior Vice President and Chief Technology Officer. Mr.
Added
O’Connell, age 51, President, Energy Systems Global. Since November 2023, Mr. O’Connell serves as our President, Energy Systems Global. Prior thereto, Mr. O’Connell served as President, Motive Power Global since July 2020.
Added
Uplinger , age 52, President Motive Power Global. Mr. Uplinger has served as our President, Motive Power Global since November 2023. Prior to that, he served as Vice President, Motive Power, Americas since November 2017, General Manager of Motive Power Specialty Markets since April 2013, and District Manager in the Mid-Atlantic Region since April 2002. Mr.
Added
Uplinger began his career with EnerSys in 1999 and has held various roles in sales and marketing throughout the Motive Power business. Mr. Uplinger earned a Bachelor of Science in Marketing Management from PennWest California. Environmental Matters and Climate Change Impacts We are committed to the protection of the environment and train our employees to perform their duties accordingly.
Added
We have set net-neutral goals for Scopes 1 (2040) and 2 (2050) and have marked consistent decreases in both overall carbon emissions as well as carbon intensity. For FY24 sustainability metrics were incorporated into the annual goals of our CEO and certain elements of employee compensation.
Added
We are committed to fostering a culture of innovation, collaboration and continuous learning, driving sustainable growth and long-term value creation for our shareholders, employees and stakeholders alike. We consider our talent management lifecycle and creating a positive employee experience key to a highly stable and engaged workforce and a critical element to meet strategic business goals.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

46 edited+21 added−11 removed170 unchanged
Biggest changeThis level of debt could: • increase our vulnerability to adverse general economic and industry conditions, including interest rate fluctuations, because a portion of our borrowings bear, and will continue to bear, interest at floating rates; • require us to dedicate a substantial portion of our cash flow from operations to debt service payments, which would reduce the availability of our cash to fund working capital, capital expenditures or other general corporate purposes, including acquisitions; • limit our flexibility in planning for, or reacting to, changes in our business and industry; • restrict our ability to introduce new products or technologies or exploit business opportunities; • place us at a disadvantage compared with competitors that have proportionately less debt; • limit our ability to borrow additional funds in the future, if we need them, due to financial and restrictive covenants in our debt agreements; • limit our operating and financial flexibility due to financial and restrictive covenants in our debt agreements; and • have a material adverse effect on us if we fail to comply with the financial and restrictive covenants in our debt agreements. 21 Table of Contents In addition, our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory and other factors, some of which are beyond our control.
Biggest changeThis level of debt could: • increase our vulnerability to adverse general economic and industry conditions, including interest rate fluctuations, because a portion of our borrowings bear, and will continue to bear, interest at floating rates; • require us to dedicate a substantial portion of our cash flow from operations to debt service payments, which would reduce the availability of our cash to fund working capital, capital expenditures or other general corporate purposes, including acquisitions; • limit our flexibility in planning for, or reacting to, changes in our business and industry; • restrict our ability to introduce new products or technologies or exploit business opportunities; • place us at a disadvantage compared with competitors that have proportionately less debt; • limit our ability to borrow additional funds in the future, if we need them, due to financial and restrictive covenants in our debt agreements; • limit our operating and financial flexibility due to financial and restrictive covenants in our debt agreements; and • have a material adverse effect on us if we fail to comply with the financial and restrictive covenants in our debt agreements.
In the UK and Europe, the General Data Protection Regulation (the “GDPR”), which came into effect in 2018, places stringent requirements on companies when handling personal data and there continues to be a growing trend of other countries adopting similar laws, including Canada.
In Europe, the General Data Protection Regulation (the “GDPR”), which came into effect in 2018, places stringent requirements on companies when handling personal data and there continues to be a growing trend of other countries adopting similar laws, including Canada.
Operating in different regions and countries exposes us to a number of risks, including: • multiple and potentially conflicting laws, regulations and policies that are subject to change; • changes in international treaties or trade unions, which may make our products or our customers' products more costly to export or import; • imposition of currency restrictions, restrictions on repatriation of earnings or other restraints imposition of burdensome import duties, tariffs or quotas, which may make our products more costly to export or import; • changes in trade agreements; • disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the FCPA; • compliance with data protection regulations; • imposition of new or additional trade and economic sanctions laws imposed by the U.S. or foreign governments; • war or terrorist acts; and • political and economic instability or civil unrest that may severely disrupt economic activity in affected countries.
Operating in different regions and countries exposes us to a number of risks, including: • multiple and potentially conflicting laws, regulations and policies that are subject to change; • changes in international treaties or trade unions, which may make our products or our customers' products more costly to export or import; • imposition of currency restrictions, restrictions on repatriation of earnings or other restraints imposition of burdensome import duties, tariffs or quotas, which may make our products more costly to export or import; • changes in trade agreements; • disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the FCPA; • compliance with data protection regulations; • imposition of new or additional trade and economic sanctions laws imposed by the U.S. or foreign governments; • war or terrorist acts; and 20 Table of Contents • political and economic instability or civil unrest that may severely disrupt economic activity in affected countries.
However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or may be reduced or terminated as a matter of regulatory or legislative policy. The IRA expanded and extended the tax credits and other tax benefits available to energy systems projects and the battery supply chain.
However, these incentives may expire on a particular date, end when the allocated funding is exhausted, or may be reduced or terminated as a matter of regulatory or legislative policy. For example, the IRA expanded and extended the tax credits and other tax benefits available to energy systems projects and the battery supply chain.
“Pillar 1” focuses on nexus and profit allocation, and “Pillar 2” focuses on a minimum global effective tax rate of 15%. On December 15, 2022, the European Union adopted the Pillar Two directive and EU member states are expected to implement Pillar Two into domestic law by December 31, 2023.
“Pillar 1” focuses on nexus and profit allocation, and “Pillar 2” focuses on a minimum global effective tax rate of 15%. On December 15, 2022, the European Union adopted the Pillar Two directive and EU member states were expected to implement Pillar Two into domestic law by December 31, 2023.
If our internal controls are found to be ineffective, our results of operations or our stock price may be adversely affected. Our most recent evaluation resulted in our conclusion that, as of March 31, 2023, our internal control over financial reporting was effective.
If our internal controls are found to be ineffective, our results of operations or our stock price may be adversely affected. Our most recent evaluation resulted in our conclusion that, as of March 31, 2024, our internal control over financial reporting was effective.
Public health epidemics or outbreaks could adversely impact our global operations. The COVID-19 pandemic caused disruption to the global economy, including economic slowdowns and supply chain disruptions that adversely affected our business, financial position and results of operations.
Public health epidemics or outbreaks could adversely impact our global operations. For example, the COVID-19 pandemic caused disruption to the global economy, including economic slowdowns and supply chain disruptions that adversely affected our business, financial position and results of operations.
These costs have been primarily composed of employee separation costs, including severance payments, and asset impairments or losses from disposal. We also undertake restructuring activities and 15 Table of Contents programs to improve our cost structure in connection with our business acquisitions, which can result in significant charges, including charges for severance payments to terminated employees and asset impairment charges.
These costs have been primarily composed of employee separation costs, including severance payments, and asset impairments or losses from disposal. We also undertake restructuring activities and programs to improve our cost structure in connection with our business acquisitions, which can result in significant charges, including charges for severance payments to terminated employees and asset impairment charges.
We also may not achieve the benefits that we anticipate from any new system or technology and a failure to do so could result in higher than anticipated costs and adversely affect our results of operations. 18 Table of Contents Work stoppages or similar difficulties could significantly disrupt our operations, reduce our revenues and materially adversely affect our business.
We also may not achieve the benefits that we anticipate from any new system or technology and a failure to do so could result in higher than anticipated costs and adversely affect our results of operations. Work stoppages or similar difficulties could significantly disrupt our operations, reduce our revenues and materially adversely affect our business.
In addition, many countries in Europe, as well as a number of other countries and organizations, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could significantly increase our tax obligations in many countries where we do business or require us to change the manner in which we operate our business.
In addition, many countries in Europe, as well as a number of other 22 Table of Contents countries and organizations, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could significantly increase our tax obligations in many countries where we do business or require us to change the manner in which we operate our business.
We cannot assure you that our customers will not experience quality problems with our products. Warranty, recall or product liability claims could also materially adversely affect our business and 16 Table of Contents reputation. In our business, we are exposed to warranty and product liability claims. In addition, we may be required to participate in the recall of a product.
We cannot assure you that our customers will not experience quality problems with our products. Warranty, recall or product liability claims could also materially adversely affect our business and reputation. In our business, we are exposed to warranty and product liability claims. In addition, we may be required to participate in the recall of a product.
Government reviews, inquiries, investigations and actions could harm our business or reputation. 19 Table of Contents As we operate in various locations around the world, our operations in certain countries are subject to significant governmental scrutiny and may be adversely impacted by the results of such scrutiny.
Government reviews, inquiries, investigations and actions could harm our business or reputation. As we operate in various locations around the world, our operations in certain countries are subject to significant governmental scrutiny and may be adversely impacted by the results of such scrutiny.
We cannot guarantee that our share repurchase programs will be fully consummated or that they will enhance long-term stockholder value. Share repurchases could also increase the volatility of the market price of our stock and diminish our cash reserves. Our Board of Directors has authorized two share repurchase programs.
We cannot guarantee that our share repurchase programs will be fully consummated or that they will enhance long-term stockholder value. Share repurchases could also increase the volatility of the market price of our stock and diminish our cash reserves. Our Board of Directors has authorized one share repurchase program.
Moreover, Federal Reserve Bank of the United States policy, including with respect to rising interest rates and the decision to end its quantitative easing policy, may also result in market volatility or a return to unfavorable economic conditions.
Moreover, Federal Reserve Bank of the United States policy, including with 19 Table of Contents respect to rising interest rates and the decision to end its quantitative easing policy, may also result in market volatility or a return to unfavorable economic conditions.
A work stoppage at one or more of our facilities, whether caused by fire, flooding, epidemics, pandemics (including the COVID-19 outbreak), military hostilities, government-imposed shutdowns, severe weather, including that caused by climate change, other natural disaster or otherwise, could have a material adverse effect on our business, financial condition and results of operations.
A work stoppage at one or more of our facilities, whether caused by fire, flooding, epidemics, pandemics, military hostilities, government-imposed shutdowns, severe weather, including that caused by climate change, other natural disaster or otherwise, could have a material adverse effect on our business, financial condition and results of operations.
We cannot assure you that we will be able to compete effectively with our competitors located in those territories, whether by establishing or expanding our manufacturing operations in those territories or acquiring existing manufacturers in those territories. Quality problems with our products could harm our reputation and erode our competitive position.
We cannot assure you that we will be able to compete effectively with our competitors located in 16 Table of Contents those territories, whether by establishing or expanding our manufacturing operations in those territories or acquiring existing manufacturers in those territories. Quality problems with our products could harm our reputation and erode our competitive position.
U.S. legislation included disclosure requirements regarding the use of conflict minerals mined from the Democratic Republic of Congo and adjoining countries and procedures regarding a manufacturer’s efforts to prevent the sourcing of such conflict minerals.
U.S. legislation included disclosure requirements regarding the use of conflict minerals mined from the Democratic Republic of Congo and adjoining countries and 24 Table of Contents procedures regarding a manufacturer’s efforts to prevent the sourcing of such conflict minerals.
Our ongoing compliance with environmental, health and safety laws, regulations and permits could require us to incur significant expenses, limit our ability to modify or expand our facilities or continue production and require us to install additional pollution control equipment and make other capital improvements.
Our ongoing compliance with environmental, health and safety laws, regulations and permits could require us to incur significant expenses, limit our ability to modify or expand our facilities or continue production and require us to 23 Table of Contents install additional pollution control equipment and make other capital improvements.
In addition, the credit and default risk or bankruptcy of customers or suppliers as a result of work stoppages could likewise materially and adversely affect our business, financial condition and results of operations. Global Operations Risks Our results of operations may be negatively impacted by public health epidemics or outbreaks, including the novel coronavirus (“COVID-19”).
In addition, the credit and default risk or bankruptcy of customers or suppliers as a result of work stoppages could likewise materially and adversely affect our business, financial condition and results of operations. Global Operations Risks Our results of operations may be negatively impacted by public health epidemics or outbreaks.
Furthermore, since 2020, several other U.S. states have enacted (and 24 Table of Contents additional U.S. states are considering) stringent consumer privacy laws, which may impose varying standards and requirements on our data collection, use and processing activities.
Furthermore, since 2020, several other U.S. states have enacted (and additional U.S. states are considering) stringent consumer privacy laws, which may impose varying standards and requirements on our data collection, use and processing activities.
We must continue to recruit, retain and motivate senior management 25 Table of Contents and other key employees sufficient to maintain our current business and support our future projects. We are vulnerable to attrition among our current senior management team and other key employees.
We must continue to recruit, retain and motivate senior management and other key employees sufficient to maintain our current business and support our future projects. We are vulnerable to attrition among our current senior management team and other key employees.
Our indebtedness could adversely affect our business, financial condition and results of operations and restrict us in ways that limit our flexibility in operating our business. As of March 31, 2023, we had $1,073 million of total consolidated debt (including finance leases).
Our indebtedness could adversely affect our business, financial condition and results of operations and restrict us in ways that limit our flexibility in operating our business. As of March 31, 2024, we had $833 million of total consolidated debt (including finance leases).
We depend on our senior management team and other key employees, and significant attrition within our management team or unsuccessful succession planning could adversely affect our business. Our success depends in part on our ability to attract, retain and motivate senior management and other key employees.
In addition, these programs could diminish our cash reserves. We depend on our senior management team and other key employees, and significant attrition within our management team or unsuccessful succession planning could adversely affect our business. Our success depends in part on our ability to attract, retain and motivate senior management and other key employees.
The other program authorizes the repurchase of up to such number of shares as shall equal the dilutive effects of any equity-based award granted during such fiscal year and the number of shares exercised through stock option awards during such fiscal year.
This program authorizes the repurchase of up to $150 million of our common stock, of which authority. The other program authorizes the repurchase of up to such number of shares as shall equal the dilutive effects of any equity-based award granted during such fiscal year and the number of shares exercised through stock option awards during such fiscal year.
There can be no assurance that we will be able to recoup increasing costs of our components by increasing prices, which in turn could damage our brand, business, prospects, financial condition and operating results.
There can be no assurance that we will be able to recoup increasing costs of our components by increasing prices, which in turn could damage our brand, business, prospects, financial condition and operating results. Volatile raw material costs can significantly affect our operating results and make period-to-period comparisons difficult.
This data relates to all aspects of our business, including current products and services and future products and services under development. This data also contains certain customer, supplier, partner and employee information. We maintain systems and processes designed to protect this data.
We and our business partners maintain significant amounts of data electronically in locations around the world. This data relates to all aspects of our business, including current products and services and future products and services under development. This data also contains certain customer, supplier, partner and employee information. We maintain systems and processes designed to protect this data.
We translate our non-U.S. assets and liabilities into U.S. dollars using current exchange rates as of the balance sheet dates. Approximately 40% of net sales were generated outside of the United States in fiscal 2023.
We invoice our foreign sales and service transactions in local and foreign currencies and translate net sales using actual exchange rates during the period. We translate our non-U.S. assets and liabilities into U.S. dollars using current exchange rates as of the balance sheet dates. Approximately 40% of net sales were generated outside of the United States in fiscal 2024.
Any acquisitions that involve the issuance of our equity securities may dilute our stockholder ownership interests, reduce the market price of our stock, or both, and as a result our business, financial condition and results of operations could be adversely affected.
Any acquisitions that involve the issuance of our equity securities may dilute our stockholder ownership interests, reduce the market price of our stock, or both, and as a result our business, financial condition and results of operations could be adversely affected. 17 Table of Contents Future acquisitions may involve the issuance of our equity securities as payment, in part or in full, for the businesses or assets acquired.
The failure to successfully implement efficiency and cost reduction initiatives, including restructuring activities, could materially adversely affect our business, financial position and results of operations, and we may not realize some or all of the anticipated benefits of those initiatives.
The failure to successfully implement efficiency and cost reduction initiatives, including restructuring activities, could materially adversely affect our business, financial position and results of operations, and we may not realize some or all of the anticipated benefits of those initiatives. 15 Table of Contents From time to time, we have implemented efficiency and cost reduction initiatives intended to improve our profitability and to respond to changes impacting our business and industry.
From time to time, we may experience increases in the cost or a sustained interruption in the supply or shortage of our components. For example, a global shortage and component supply disruptions of electronic and other battery components is currently being reported, and the full impact to us is not yet known.
For example, a global shortage and component supply disruptions of electronic and other battery components is currently being reported, and the full impact to us is not yet known.
Our inability to raise the price of our products in response to increases in prices of raw materials due to pricing pressure, contract terms or other factors or to maintain a proper supply of raw materials could have an adverse effect on our business, financial position and results of operations. 14 Table of Contents Cost increases, supply disruptions or shortages of any of our battery components, such as electronic and mechanical parts, or the raw materials used in the production of such parts could adversely affect our business.
Our inability to raise the price of our products in response to increases in prices of raw materials due to pricing pressure, contract terms or other factors or to maintain a proper supply of raw materials could have an adverse effect on our business, financial position and results of operations.
The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles and energy storage products. Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges.
The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles and energy storage products.
Additionally, we cannot assure you that we have been or at all times will be in compliance with environmental laws and regulations or that we will not be required to expend significant funds to comply with, or discharge liabilities arising under, environmental laws, regulations and permits, or that we will not be exposed to material environmental, health or safety litigation. 23 Table of Contents We are subject to a wide variety of domestic and foreign laws and regulations that could adversely affect our business, financial condition and results of operations.
Additionally, we cannot assure you that we have been or at all times will be in compliance with environmental laws and regulations or that we will not be required to expend significant funds to comply with, or discharge liabilities arising under, environmental laws, regulations and permits, or that we will not be exposed to material environmental, health or safety litigation.
Financial and Accounting Risks We may not be able to maintain adequate credit facilities, which could materially adversely affect our business, financial condition and results of operations.
Any reduction, elimination, or discriminatory application or expiration of the IRA may materially adversely affect our future operating results and liquidity. We may not be able to maintain adequate credit facilities, which could materially adversely affect our business, financial condition and results of operations.
General Risk Factors There can be no assurance that we will continue to declare cash dividends at all or in any particular amounts, and any reduction in or elimination of our dividend payment could reduce the market price of our stock.
Our ability to successfully penetrate new geographic markets may depend on new countries adopting, to the extent such incentives are not currently in place and maintaining such incentives. 25 Table of Contents General Risk Factors There can be no assurance that we will continue to declare cash dividends at all or in any particular amounts, and any reduction in or elimination of our dividend payment could reduce the market price of our stock.
In addition, the benefits derived by us from an acquisition might not outweigh or exceed the dilutive effect of any issuance of equity securities in connection with the acquisition. We cannot predict or estimate the amount or timing of any future acquisitions or related issuances of equity securities.
Any future issuances of equity securities may dilute our stockholders’ proportionate ownership interests in EnerSys. In addition, the benefits derived by us from an acquisition might not outweigh or exceed the dilutive effect of any issuance of equity securities in connection with the acquisition.
Our stockholders bear the risk of any such future offerings reducing the market price of our stock and diluting their proportionate ownership interests in EnerSys. If our electronic data is compromised, our business could be materially adversely affected. 17 Table of Contents We and our business partners maintain significant amounts of data electronically in locations around the world.
We cannot predict or estimate the amount or timing of any future acquisitions or related issuances of equity securities. Our stockholders bear the risk of any such future offerings reducing the market price of our stock and diluting their proportionate ownership interests in EnerSys. If our electronic data is compromised, our business could be materially adversely affected.
These systems and technologies must be refined, updated and replaced with more advanced systems on a regular basis in order for us to meet our customers’ demands and expectations. We expect that new technologies applicable to our business will continue to emerge and may be superior to, or render obsolete, the technologies we currently use in our products and services.
These systems and technologies must be refined, updated and replaced with more advanced systems on a regular basis in order for us to meet our customers’ demands and expectations.
The occurrence of one or more of these events may adversely affect our business, financial condition and results of operations.
The occurrence of one or more of these events may adversely affect our business, financial condition and results of operations. We are exposed to exchange rate and inflation risks, and our net earnings and financial condition may suffer due to currency translations.
The programs could affect the trading price of our stock and increase volatility, and any announcement of a termination of these programs may result in a decrease in the market price of our stock. In addition, these programs could diminish our cash reserves.
We cannot guarantee that the programs will be fully consummated or that they will enhance long-term stockholder value. The programs could affect the trading price of our stock and increase volatility, and any announcement of a termination of these programs may result in a decrease in the market price of our stock.
The IRA also includes a 1% excise tax on certain stock repurchases beginning in 2023. We do not expect to meet the CAMT threshold in the near term.
The IRA also includes a 1% excise tax on certain stock repurchases beginning in 2023. We do not expect to meet the CAMT threshold in the near term. However, we expect a material portion of our U.S. produced batteries and battery cells, including our proprietary TPPL batteries, will qualify for production tax credits under Section 45X of the IRA.
Changes in the cost and availability of raw materials could adversely affect our business, financial position and results of operations. Lead is our most significant raw material and is used along with significant amounts of plastics, steel, copper and other materials in our manufacturing processes.
Lead is our most significant raw material and is used along with significant amounts of plastics, steel, copper and other materials in our manufacturing processes. We estimate that raw material costs account for over half of our cost of goods sold.
Any of these results could adversely affect our business.
Any of these results could adversely affect our business. 26 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Although our Board of Directors has authorized these share repurchase programs, the programs do not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. We cannot guarantee that the programs will be fully consummated or that they will enhance long-term stockholder value.
As of March 31, 2024, approximately $98.9 million remains available under the two programs. Although our Board of Directors has authorized these share repurchase programs, the programs do not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.
However, we expect a material portion of our U.S. produced batteries and battery cells, including our proprietary TPPL batteries, will qualify for production tax credits under Section 45X of the IRA. • In 2021, the Organization for Economic Cooperation Development (the “OECD”), through an association of more than 140 countries, announced a consensus around a two-pillar approach to address tax challenges presented by digital commerce.
The Company's ability to benefit from Section 45X production tax credits is not guaranteed and is dependent upon the federal government's ongoing implementation, guidance, regulations, and/or rulemakings that have been the subject of substantial public interest and debate.” above. • In 2021, the Organization for Economic Cooperation Development (the “OECD”), through an association of more than 140 countries, announced a consensus around a two-pillar approach to address tax challenges presented by digital commerce.
Furthermore, the cost of raw materials may also be influenced by transportation costs. Volatile raw material costs can significantly affect our operating results and make period-to-period comparisons difficult. To reduce the volatility of our costs, we periodically enter into hedging arrangements for a portion of our projected requirements.
To reduce the volatility of our costs, we periodically enter into hedging arrangements for a portion of our projected lead requirements.
Removed
We estimate that raw material costs account for over half of our cost of goods sold. The costs of these raw materials, particularly lead, are volatile and beyond our control. Additionally, availability of the raw materials used to manufacture our products may be limited at times, resulting in higher prices or the need to find alternative suppliers.
Added
We may experience issues with lithium-ion cells or other components manufactured at our proposed gigafactory, which may harm the production and profitability of our energy storage products. Our plan to grow the volume and profitability of our energy storage products depends on significant lithium-ion battery cell production, including by our partner Verkor SAS at a proposed gigafactory in South Carolina.
Removed
From time to time, we have implemented efficiency and cost reduction initiatives intended to improve our profitability and to respond to changes impacting our business and industry.
Added
If we are unable to commence, or, when opened, otherwise do not maintain and grow, our respective operations, or if we are unable to do so cost-effectively or hire and retain highly-skilled personnel there, our ability to manufacture our products profitably would be limited, which may harm our business and operating results.
Removed
Future acquisitions may involve the issuance of our equity securities as payment, in part or in full, for the businesses or assets acquired. Any future issuances of equity securities may dilute our stockholders’ proportionate ownership interests in EnerSys.
Added
Additionally, the start-up of operations after such project has been completed is also subject to risk. In addition, in order to complete the construction of the proposed gigafactory, we are relying upon, among other things, short-term and long-term incentive packages through South Carolina and Greenville County, federal funding and benefits under Section 45X of the Inflation Reduction Act.
Removed
We are exposed to exchange rate and inflation risks, and our net earnings and financial condition may suffer due to currency translations. 20 Table of Contents We invoice our foreign sales and service transactions in local and foreign currencies and translate net sales using actual exchange rates during the period.
Added
Our ability to realize and procure these benefits is subject to a variety of market, operational, regulatory and labor-related factors. Any failure to complete these projects, or any delays or failure to achieve the anticipated results from the implementation of this project, could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Removed
In relation to the IRA, we expect to receive production tax credits for certain of our products produced in the US, however, the exact impact of these changes is not fully known and may, in some circumstances, depend on guidance issued by the U.S. Department of the Treasury (“Treasury”) regarding the interpretation and implementation of the IRA.
Added
Cost increases, supply disruptions or shortages of any of our battery components, such as electronic and mechanical parts, or the raw materials used in the production of such parts could adversely affect our business. 14 Table of Contents From time to time, we may experience increases in the cost or a sustained interruption in the supply or shortage of our components.
Removed
Treasury has issued only limited interpretations and additional guidance may be forthcoming. If and when issued, such guidance may impose further requirements or limitations.
Added
Additionally, our suppliers may not be willing or able to reliably meet our timelines or our cost and quality needs, which may require us to replace them with other sources. Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges and other transportation costs.
Removed
These and any other changes to government incentives that impose additional restrictions could increase costs, limit our ability to utilize tax benefits, or adversely impact our growth, which could have a material adverse effect on our business, financial condition and results of operations.
Added
We expect that new technologies applicable to our business will continue to emerge and may be superior to, 18 Table of Contents or render obsolete, the technologies we currently use in our products and services.
Removed
There can be no assurance that our products will meet the 22 Table of Contents requirements for the tax credits and compliance with such requirements could increase our labor and other costs. Any reduction in rebates, tax credits or other financial incentives available to manufacturers could negatively affect the market and adversely impact our business operations and expansion potential.
Added
Financial and Accounting Risks The Inflation Reduction Act of 2022 ("IRA") contains production tax credits for certain battery cells and battery modules. The Company's ability to benefit from Section 45X production tax credits is not guaranteed and is dependent upon the federal government's ongoing implementation, guidance, regulations, and/or rulemakings that have been the subject of substantial public interest and debate.
Removed
In addition, there is no assurance we will have the necessary tax attributes to utilize any such credits that are available and may not be able to monetize such credits on favorable terms.
Added
In August 2022, President Biden signed the IRA into law. The IRA provides for substantial tax credits and incentives for the development of critical minerals, renewable energy, clean fuels, electric vehicles, and supporting infrastructure, among other provisions.
Removed
Our ability to successfully penetrate new geographic markets may depend on new countries adopting, to the extent such incentives are not currently in place and maintaining such incentives.
Added
Section 45X of the IRA contains a production tax credit equal to 10% of certain eligible production costs, including, without limitation, labor, energy, depreciation and amortization and overhead expenses. On December 14, 2023, the U.S.
Removed
These programs authorize the repurchase of up to a combined $250 million of our common stock, of which authority, as of March 31, 2023, approximately $185 million remains available.
Added
Department of the Treasury and the Internal Revenue Service released proposed rules to provide guidance on the production tax credit requirements under Internal Revenue Code Section 45X (the "Proposed Regulations"). The Proposed Regulations provide guidance on rules that taxpayers must satisfy to qualify for the Section 45X tax credit.
Added
While Section 45X of the IRA provides for substantial tax benefits for us, the Proposed Regulations have not been finalized and remain subject to public comment. There is uncertainty as to how the provisions under the IRA will be interpreted and implemented.
Added
The Company's ability to ultimately benefit from IRA tax credits is not guaranteed and is dependent to a large degree upon the final scope, terms and conditions of the Proposed Regulations.
Added
Certain provisions of the IRA have been the subject of substantial public interest and have been subject to debate, and there are divergent views on potential implementation, guidance, rules, and regulatory principles by a diverse group of interested parties.
Added
There can be no assurance that our domestic production of battery cells and battery modules with an energy density of not less than 100 watt-hours per 21 Table of Contents liter will fully qualify for the benefits under the IRA.
Added
As a result, the final interpretation and implementation of the provisions in the IRA could have a material adverse impact us. Furthermore, future legislative enactments or administrative actions could limit, amend, repeal, or terminate IRA policies or other incentives that we currently hope to leverage.
Added
In addition, our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to financial, business, legislative, regulatory and other factors, some of which are beyond our control.
Added
For more information, see “ The Inflation Reduction Act of 2022 ("IRA") contains production tax credits for certain battery cells and battery modules.
Added
We are subject to a wide variety of domestic and foreign laws and regulations that could adversely affect our business, financial condition and results of operations.
Added
For more information, see “ The Inflation Reduction Act of 2022 ("IRA") contains production tax credits for certain battery cells and battery modules.
Added
The Company's ability to benefit from Section 45X production tax credits is not guaranteed and is dependent upon the federal government's ongoing implementation, guidance, regulations, and/or rulemakings that have been the subject of substantial public interest and debate.” above.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−2 removed1 unchanged
Biggest changeITEM 2. PROPERTIES The Company’s worldwide headquarters is located in Reading, Pennsylvania, U.S.A. Headquarters for our Americas and EMEA operations are located in Reading, Pennsylvania, U.S.A., and Zug, Switzerland, respectively. The Company owns approximately 80% of its manufacturing facilities and distribution centers worldwide.
Biggest changeITEM 2. PROPERTIES The Company’s worldwide headquarters is located in Reading, Pennsylvania, U.S.A. Headquarters for our Americas and EMEA operations are located in Reading, Pennsylvania, U.S.A., and Zug, Switzerland, respectively.
Removed
The following sets forth the Company’s principal owned or leased facilities: Americas: Sylmar, California; Longmont, Colorado; Tampa, Florida; Suwanee, Georgia; Hays, Kansas; Richmond, Kentucky; Springfield and Warrensburg, Missouri; Horsham, Pennsylvania; Sumter, South Carolina; Ooltewah, Tennessee; Spokane and Bellingham, Washington in the United States. Burnaby, Canada; Monterrey and Tijuana, Mexico; Buenos Aires, Argentina and São Paulo, Brazil.
Added
The following sets forth the Company’s principal owned or leased facilities: Region and Property Use Motive Power Energy Systems Specialty Shared (1) Americas: Industrial (2) 3 3 3 5 Warehouse 4 3 — 3 APAC: Industrial (2) — — — 2 EMEA : Industrial (2) 1 1 — 4 Total 8 7 3 14 (1) Certain properties are shared between the different segments (2) Industrial Includes manufacturing and assembly properties We consider our plants and facilities, whether owned or leased, to be in satisfactory condition and adequate to meet the needs of our current businesses and projected growth.
Removed
EMEA: Hostomice, Czech Republic; Arras, France; Bielsko-Biala, Poland; Stockholm, Sweden; Newport and Culham, United Kingdom. Asia: Chongqing and Yangzhou, the PRC. We consider our plants and facilities, whether owned or leased, to be in satisfactory condition and adequate to meet the needs of our current businesses and projected growth.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+1 added−1 removed3 unchanged
Biggest changePurchases 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)(3) January 2 - January 31, 2023 — $ — — $ 185,545,418 February 1 - March 1, 2023 49,934 75.92 — 185,545,418 March 2 - March 31, 2023 62 74.60 — 185,545,418 Total 49,996 $ 75.92 — (1) The Company's Board of Directors has authorized the Company to repurchase up to such number of shares as shall equal the dilutive effects of any equity based award granted, approximately $25.0 million, during such fiscal year under the 2017 Equity Incentive Plan and the number of shares exercised through stock option awards during such fiscal year.
Biggest changePurchases 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) January 1 - January 31, 2024 12,939 $ 99.08 — $ 112,213,965 February 1 - March 1, 2024 115,071 90.85 111,930 102,046,065 March 2 - March 31, 2024 35,451 90.01 35,451 98,855,224 Total 163,461 $ 91.32 147,381 (1) The Company's Board of Directors has authorized the Company to repurchase up to such number of shares as shall equal the dilutive effects of any equity based awards issued during such fiscal year under the 2017 Equity Incentive Plan and the 2023 Equity Incentive Plan and the number of shares exercised through stock option awards during such fiscal year, approximately $34.0 million.
Risk Factors for additional information. 28 Table of Contents 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.
Risk Factors for additional information. 30 Table of Contents 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.
The Company determined that the DJUSEC index provides a publicly available index of industry peers with similar market capitalization. *$100 invested on March 31, 2018 in stock or index, including reinvestment of dividends.
The Company determined that the DJUSEC index provides a publicly available index of industry peers with similar market capitalization. *$100 invested on March 31, 2019 in stock or index, including reinvestment of dividends.
Holders of Record As of May 19, 2023, there were approximately 600 record holders of common stock of the Company. Because many of these shares are held by brokers and other institutions on behalf of stockholders, the Company is unable to estimate the total number of stockholders represented by these record holders.
Holders of Record As of May 17, 2024, there were approximately 617 record holders of common stock of the Company. Because many of these shares are held by brokers and other institutions on behalf of stockholders, the Company is unable to estimate the total number of stockholders represented by these record holders.
The Company anticipates that it will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon the Company's future earnings, financial condition, capital requirements, restrictions under existing or future credit facilities or debt and other factors.
However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon the Company's future earnings, financial condition, capital requirements, restrictions under existing or future credit facilities or debt and other factors.
(3) On November 10, 2021, the Company announced the establishment of a $100 million stock repurchase authorization, with no expiration date. 29 Table of Contents STOCK PERFORMANCE GRAPH The following graph compares the changes in cumulative total returns on EnerSys’ common stock with the changes in cumulative total returns of the New York Stock Exchange Composite Index, a broad equity market index; the Dow Jones US Electrical Components and Equipment index ("DJUSEC"); and the peer group standard industrial classification codes (“SIC Codes”), which was used as a comparable index in fiscal 2022.
(2) On March 9, 2022, the Company announced the establishment of a $150.0 million stock repurchase authorization, with no expiration date. 31 Table of Contents STOCK PERFORMANCE GRAPH The following graph compares the changes in cumulative total returns on EnerSys’ common stock with the changes in cumulative total returns of the New York Stock Exchange Composite Index, a broad equity market index; and the Dow Jones US Electrical Components and Equipment index ("DJUSEC").
Recent Sales of Unregistered Securities During the fourth quarter of fiscal 2023, we did not issue any unregistered securities. Dividends During fiscal 2023, the Company’s quarterly dividend was $0.175 per share. The Company declared aggregate regular cash dividends of $0.70 per share in each of the years ended March 31, 2023, March 31, 2022 and 2021.
Recent Sales of Unregistered Securities During the fourth quarter of fiscal 2024, we did not issue any unregistered securities. Dividends During fiscal 2024, the Company’s quarterly dividend was $0.175 per share in the first quarter and $0.225 in the second, third, and fourth quarter.
Removed
(2) On March 9, 2022, the Company announced the establishment of a $150.0 million stock repurchase authorization, with no expiration date.
Added
The Company declared aggregate regular cash dividends of $0.85, $0.70, and $0.70 per share in each of the years ended March 31, 2024, March 31, 2023 and 2022 respectfully. The Company anticipates that it will continue to pay quarterly cash dividends in the future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

105 edited+35 added−41 removed83 unchanged
Biggest changeWe also recorded a non-cash write off relating to inventories of $0.8 million, which was reported in cost of goods sold. 42 Table of Contents Operating Earnings Operating earnings by segment were as follows: Fiscal 2023 Fiscal 2022 Increase (Decrease) In Millions As % Net Sales (1) In Millions As % Net Sales (1) In Millions % Energy Systems $ 62.2 3.6 % $ 18.6 1.2 % $ 43.6 NM Motive Power 178.8 12.3 169.7 12.5 9.1 7.8 Specialty 37.5 7.2 43.5 9.5 (6.0) 4.3 Subtotal 278.5 7.5 231.8 6.9 46.7 27.7 Production tax credits from IRA 45X 17.3 0.5 — — 17.3 NM Inventory adjustment relating to exit activities - Energy Systems 0.2 — (0.2) — 0.4 NM Inventory adjustment relating to exit activities - Motive Power (0.8) (0.1) (2.4) (0.2) 1.6 (63.1) Restructuring and other exit charges - Energy Systems (1.5) (0.1) (2.8) (0.2) 1.3 (46.9) Restructuring and other exit charges - Motive Power (12.8) (0.9) (17.1) (1.3) 4.3 (24.6) Restructuring and other exit charges - Specialty (2.1) (0.4) 1.1 0.2 (3.2) NM Impairment of indefinite-lived intangibles - Energy Systems (0.1) — (0.5) — 0.4 NM Impairment of indefinite-lived intangibles - Motive Power — — (0.7) — 0.7 (80.0) Impairment of indefinite-lived intangibles - Specialty (0.4) (0.1) — — (0.4) NM Loss on assets held for sale - Motive Power — (3.0) (0.2) 3.0 NM Total operating earnings $ 278.3 7.5 % $ 206.2 6.1 % $ 72.1 35.0 % NM = not meaningful (1) The percentages shown for the segments are computed as a percentage of the applicable segment’s net sales.
Biggest changeOperating Earnings Operating earnings by segment were as follows: Fiscal 2024 Fiscal 2023 Increase (Decrease) In Millions As % Net Sales (1) In Millions As % Net Sales (1) In Millions % Energy Systems $ 87.0 5.5 % $ 90.4 5.2 % $ (3.4) (3.8) % Motive Power 214.6 14.7 179.9 12.4 34.7 19.3 Specialty 31.4 5.9 40.5 7.8 (9.1) (22.5) Corporate and other (2) 117.2 3.3 17.3 0.5 99.9 NM Subtotal 450.2 12.6 328.1 8.8 122.1 37.2 Inventory adjustment relating to exit activities - Energy Systems (17.1) (1.1) 0.2 — (17.3) NM Inventory adjustment relating to exit activities - Motive Power — — (0.8) (0.1) 0.8 NM Inventory adjustment relating to exit activities - Specialty (3.1) (0.6) — — (3.1) NM Restructuring and other exit charges - Energy Systems (8.9) (0.6) (1.5) (0.1) (7.4) NM Restructuring and other exit charges - Motive Power (11.6) (0.8) (12.8) (0.9) 1.2 (9.1) Restructuring and other exit charges - Specialty (7.6) (1.4) (2.1) (0.4) (5.5) NM Total Amortization - Energy Systems (24.5) (1.5) (27.4) (1.6) 2.9 (10.5) Total Amortization - Motive Power (0.7) — (0.5) — (0.2) 54.9 Total Amortization - Specialty (2.8) (0.5) (2.8) (0.6) — (3.9) Impairment of indefinite-lived intangibles - Energy Systems (13.6) (0.9) (0.1) — (13.5) NM Impairment of indefinite-lived intangibles - Specialty — — (0.4) (0.1) 0.4 NM Legal proceedings charge, net - Energy Systems (3.7) (0.2) — — (3.7) NM Other - Energy Systems (3.7) (0.2) (0.8) — (2.9) NM Other - Motive Power (1.1) (0.1) (0.6) — (0.5) NM Other - Specialty (0.3) (0.1) (0.2) — (0.1) NM Total operating earnings $ 351.5 9.8 % $ 278.3 7.5 % $ 73.2 26.3 % NM = not meaningful (1) The percentages shown for the segments are computed as a percentage of the applicable segment’s net sales.
The funds will mature on September 30, 2026, the same as the Company's Second Amended Term loan and Second Amended Revolver. In connection with the agreement, the Company incurred $1.2 million in third party administrative and legal fees recognized in interest expense and capitalized $1.1 million in charges from existing lenders as a deferred asset.
The funds will mature on September 30, 2026, the same as the Company's Second Amended Term loan and Second Amended Revolver. In connection with the agreement, the Company incurred $1.2 million in third party administrative and legal fees recognized in interest expense and capitalized $1.1 million in charges from existing lenders as a deferred asset.
Additionally, the Company derecognized the capitalized deferred asset and recognized the $1.1 million as a deferred financing costs. During the fourth quarter of fiscal 2023, the Company entered into a fourth amendment to the 2017 Credit Facility (as amended, the “Fourth Amended Credit Facility”).
Additionally, the Company derecognized the capitalized deferred asset and recognized the $1.1 million as a deferred financing costs. During the fourth quarter of fiscal 2023, the Company entered into a fourth amendment to the 2017 Credit Facility (as amended, the “Fourth Amended Credit Facility”).
As a result, the Second Amended Credit Facility, now scheduled to mature on September 30, 2026, consists of a $130.0 million senior secured term loan (the “Second Amended Term Loan”), a CAD 106.4 million ($84.2 million) term loan and an $850.0 million senior secured revolving credit facility (the “Second Amended Revolver”).
As a result, the Second Amended Credit Facility, now scheduled to mature on September 30, 2026, consists of a $130.0 million senior secured term loan (the “Second Amended Term Loan”), a CAD 106.4 million ($84.2 million) term loan and an $850.0 million senior secured revolving credit facility (the “Second Amended Revolver”).
Inventory increased or used cash of $96.4 million. All components of inventory increased due to strategic investment, supply chain delays, new products and higher inventory costs from higher raw material costs, manufacturing, and to address the high backlog of customer orders. Accounts payable decreased or used cash of $4.2 million due to timing of payments for strategic inventory.
All components of inventory increased due to strategic investment, supply chain delays, new products and higher inventory costs from higher raw material costs, manufacturing, and to address the high backlog of customer orders. Accounts payable decreased or used cash of $4.2 million due to timing of payments for strategic inventory.
The Third Amended Credit Facility provided new incremental delayed-draw senior secured term loan up to $300 million (the “Third Amended Term Loan”), which was available to draw until March 15, 2023. During the fourth quarter, the Company drew $300 million in the form of the Third Amended Term Loan.
The Third Amended Credit Facility provided new incremental delayed-draw senior secured term loan up to $300 million (the “Third Amended Term Loan”), which was available to draw until March 15, 2023. During the fourth quarter of fiscal 2023, the Company drew $300 million in the form of the Third Amended Term Loan.
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 operating capital levels. Our management structure, financial reporting systems, and associated internal controls and procedures, are all consistent with our three lines of business.
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 operating capital levels. Our management structure, financial reporting systems, and associated internal controls and procedures, are all consistent with our four lines of business.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022. Our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, opinions, expectations, anticipations and intentions and beliefs.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2023. Our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, opinions, expectations, anticipations and intentions and beliefs.
The Company identifies the following as its three operating segments, based on lines of business: • Energy Systems - uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems used in data centers, as well as telecommunications systems, switchgear and electrical control systems used in industrial facilities and electric utilities, large-scale energy storage and energy pipelines.
The Company identifies the following as its four operating segments, based on lines of business: • Energy Systems - uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems used in data centers, as well as telecommunications systems, switchgear and electrical control systems used in industrial facilities and electric utilities, large-scale energy storage and energy pipelines.
Our Fourth Amended Credit Facility is committed through September 30, 2026, as long as we continue to comply with the covenants and conditions of the credit facility agreement. 46 Table of Contents Compliance with Debt Covenants All obligations under our Fourth Amended Credit Facility are secured by, among other things, substantially all of our U.S. assets.
Our Fourth Amended Credit Facility is committed 47 Table of Contents through September 30, 2026, as long as we continue to comply with the covenants and conditions of the credit facility agreement. Compliance with Debt Covenants All obligations under our Fourth Amended Credit Facility are secured by, among other things, substantially all of our U.S. assets.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Our discussion and analysis of our results of operations and financial condition for the fiscal years ended March 31, 2022 and 2021, has been omitted from this Form 10-K and can be found in Part II, "Item 7.
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Our discussion and analysis of our results of operations and financial condition for the fiscal years ended March 31, 2023 and 2022, has been omitted from this Form 10-K and can be found in Part II, "Item 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our results of operations and financial condition for the fiscal years ended March 31, 2023 and 2022, should be read in conjunction with our audited Consolidated Financial Statements and the notes to those statements included in Item 8.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our results of operations and financial condition for the fiscal years ended March 31, 2024 and 2023, should be read in conjunction with our audited Consolidated Financial Statements and the notes to those statements included in Item 8.
The change in the operating cash flows in fiscal 2023 was primarily due to the decreases in primary operating capital dollars, compared to the prior year, reflecting the impact sold receivables as a part of our asset securitization agreement and less of an increase in inventory compared to the prior year.
The change in the operating cash flows in fiscal 2024 was primarily due to the decreases in primary operating capital dollars, compared to the prior year, reflecting the impact sold receivables as a part of our asset securitization agreement and less of an increase in inventory compared to the prior year.
We would be unable to continue our operations at current levels if we lost the liquidity provided under our credit agreements. Depreciation and amortization in this table excludes the amortization of deferred financing fees, which is included in interest expense.
We would be unable to continue our operations at current levels if we lost the liquidity provided under our credit 49 Table of Contents agreements. Depreciation and amortization in this table excludes the amortization of deferred financing fees, which is included in interest expense.
(2) The $51.7 million adjustment to EBITDA in fiscal 2023 primarily related to $26.4 million of non-cash stock compensation, $22.4 million of restructuring and other exit charges, impairment of indefinite-lived intangibles of $0.5 million, and $1.4 million for swap termination fees.
The $51.7 million adjustment to EBITDA in fiscal 2023 primarily related to $26.4 million of non-cash stock compensation, $22.4 million of restructuring and other exit charges, indefinite-lived intangibles of $0.5 million, and $1.4 million for swap termination fees.
This amendment resulted in a decrease of the Amended Term Loan by $150.0 million and an increase of the Amended Revolver by $150.0 million. Shown below are the leverage ratios at March 31, 2023 and 2022, in connection with the Fourth Amended Credit Facility.
This amendment resulted in a decrease of the Amended Term Loan by $150.0 million and an increase of the Amended Revolver by $150.0 million. Shown below are the leverage ratios at March 31, 2024 and 2023, in connection with the Fourth Amended Credit Facility.
For additional information see Note 1 of Notes to the Consolidated Financial Statements. 34 Table of Contents Asset Impairment Determinations We test for the impairment of our goodwill and indefinite-lived trademarks at least annually and whenever events or circumstances occur indicating that a possible impairment has been incurred. We assess whether goodwill impairment exists using both qualitative and quantitative assessments.
For additional information see Note 1 of Notes to the Consolidated Financial Statements. Asset Impairment Determinations We test for the impairment of our goodwill and indefinite-lived trademarks at least annually and whenever events or circumstances occur indicating that a possible impairment has been incurred. We assess whether goodwill impairment exists using both qualitative and quantitative assessments.
The Fourth Amended Credit Facility replaces the London Interbank Offered Rate 33 Table of Contents (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) in the calculation of interest for both the Second Amended Revolver and the Second Amended Term Loan.
The Fourth Amended Credit Facility replaces the London Interbank Offered Rate 48 Table of Contents (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) in the calculation of interest for both the Second Amended Revolver and the Second Amended Term Loan.
In the twelve months of fiscal 2023, principal currencies in which we do business such as the Euro, Polish zloty, and British pound generally weakened and Swiss franc strengthened versus the U.S. dollar.
In the twelve months of fiscal 2024, principal currencies in which we do business such as the Swiss Franc, Polish zloty, and British pound generally strengthened and Euro weakened versus the U.S. dollar.
Cash charges of approximately $40.0 million are primarily for employee severance 41 Table of Contents related payments, but also include payments for cleanup related to the facility, contractual releases and legal expenses. Non-cash charges from inventory and equipment write-offs are estimated to be $20.0 million. These actions resulted in the reduction of approximately 200 employees.
Cash charges of approximately $40.0 million are primarily for employee severance related payments, but also include payments for cleanup related to the facility, contractual releases and legal expenses. Non-cash charges from inventory and equipment write-offs are estimated to be $20.0 million. These actions resulted in the reduction of approximately 200 employees.
(5) As defined in the Second Amended Credit Facility, interest expense used in the consolidated interest coverage ratio excludes non-cash interest of $3.1 million and $2.1 million for fiscal 2023 and fiscal 2022, respectively.
(5) As defined in the Second Amended Credit Facility, interest expense used in the consolidated interest coverage ratio excludes non-cash interest of $2.5 million and $3.1 million for fiscal 2024 and fiscal 2023, respectively.
Determining the fair value of assets acquired and liabilities assumed often involves estimates based on third-party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses and may include estimates of attrition, inflation, asset growth rates, discount rates, multiples of earnings or other 35 Table of Contents relevant factors.
Determining the fair value of assets acquired and liabilities assumed often involves estimates based on third-party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses and may include estimates of attrition, inflation, asset growth rates, discount rates, multiples of earnings or other relevant factors.
We show both our current ratios and the maximum ratio permitted or minimum ratio required under our Fourth Amended Credit Facility, for fiscal 2023 and fiscal 2022, respectively.
We show both our current ratios and the maximum ratio permitted or minimum ratio required under our Fourth Amended Credit Facility, for fiscal 2024 and fiscal 2023, respectively.
The indefinite-lived trademarks are tested for impairment by comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief from royalty method. Any excess carrying value over the amount of fair value is recognized as impairment.
The indefinite-lived trademarks are tested for impairment by comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief from royalty method. Any excess carrying value over the amount 37 Table of Contents of fair value is recognized as impairment.
Any impairment would be recognized in full in the reporting period in which it has been identified. Based on the results of the annual impairment test as of January 2, 2023, we determined that there were impairments to two indefinite-lived trademarks. For additional information see Note 7 Notes to the Consolidated Financial Statements.
Any impairment would be recognized in full in the reporting period in which it has been identified. Based on the results of the annual impairment test as of January 1, 2024, we determined that there were impairments to two indefinite-lived trademarks. For additional information see Note 7 Notes to the Consolidated Financial Statements.
The rate decrease in fiscal 2023 compared to fiscal 2022 is primarily due to the impact of the IRA and changes in the mix of earnings among tax jurisdictions.
The rate decrease in fiscal 2024 compared to fiscal 2023 is primarily due to the impact of the IRA and changes in the mix of earnings among tax jurisdictions.
Assumptions utilized are highly judgmental, especially given the role technology plays in driving the demand for products in the telecommunications and aerospace markets. Based on the results of the annual impairment test as of January 2, 2023, we determined that there was no goodwill impairment.
Assumptions utilized are highly judgmental, especially given the role technology plays in driving the demand for products in the telecommunications and aerospace markets. Based on the results of the annual impairment test as of January 1, 2024, we determined that there was no goodwill impairment.
Due to the uncertainty of future cash outflows, uncertain tax positions have been excluded from the above table. Under our Fourth Amended Credit Facility and other credit arrangements, we had outstanding standby letters of credit of $3.6 million as of March 31, 2023.
Due to the uncertainty of future cash outflows, uncertain tax positions have been excluded from the above table. Under our Fourth Amended Credit Facility and other credit arrangements, we had outstanding standby letters of credit of $3.9 million as of March 31, 2024.
Included in interest expense were non-cash charges related to amortization of deferred financing fees of $2.0 million and $2.1 million in fiscal 2023 and fiscal 2022, respectively.
Included in interest expense were non-cash charges related to amortization of deferred financing fees of $1.7 million and $2.0 million in fiscal 2024 and fiscal 2023, respectively.
The nominal amount of credit available is subject to a leverage ratio maximum of 4.25x EBITDA, as discussed in Liquidity and Capital Resources. During the second quarter of fiscal 2023, the Company entered into a third amendment to the 2017 Credit Facility (as amended, the “Third Amended Credit Facility”).
The nominal amount of credit available is subject to a leverage ratio maximum of 4.0x EBITDA, as discussed in Liquidity and Capital Resources. 35 Table of Contents During the second quarter of fiscal 2023, the Company entered into a third amendment to the 2017 Credit Facility (as amended, the “Third Amended Credit Facility”).
During fiscal 2023, we entered into the Third Amended Credit Facility providing additional borrowing through the Third Amended Term Loan. The proceeds of $300.0 million from the new Third Amended Term Loan were used to repay our 2023 Senior notes for the same amount.
Financing activities used cash of $270.5 million in fiscal 2023. During fiscal 2023, we entered into the Third Amended Credit Facility providing additional borrowing through the Third Amended Term Loan. The proceeds of $300.0 million from the new Third Amended Term Loan were used to repay our 2023 Senior notes for the same amount.
For both fiscal 2023 and fiscal 44 Table of Contents 2022, the difference in the foreign effective tax rate versus the U.S. statutory rate of 21% is primarily attributable to lower tax rates in the foreign countries in which we operate.
For both fiscal 2024 and fiscal 2023, the difference in the foreign effective tax rate versus the U.S. statutory rate of 21% is primarily attributable to lower tax rates in the foreign countries in which we operate.
We have substantial liquidity with $347 million of available cash and cash equivalents and available and undrawn, under all its lines of credit of approximately $693 million at March 31, 2023 to cover short-term liquidity requirements and anticipated growth in the foreseeable future.
We have substantial liquidity with $333 million of available cash and cash equivalents and available and undrawn, under all its lines of credit of approximately $938 million at March 31, 2024 to cover short-term liquidity requirements and anticipated growth in the foreseeable future.
The Company also recorded a non-cash write off relating to inventories of $1.0 million, which was reported in cost of goods sold. During fiscal 2021, the Company recorded charges relating to severance of $23.3 million and $7.9 million primarily relating to fixed asset write-offs.
During fiscal 2022, the Company recorded cash charges, primarily relating to severance of $8.1 million and non-cash charges of $3.5 million primarily relating to fixed asset write-offs. The Company also recorded a non-cash write off relating to inventories of $1.0 million, which was reported in cost of goods sold.
Historically, the volatility of commodity costs and foreign currency exchange rates have caused large swings in our production costs. Since the beginning of fiscal year 2023, we have experienced a range in lead prices from just above $1.10 per pound to approximately $0.85 per pound.
Historically, the volatility of commodity costs and foreign currency exchange rates have caused large swings in our production costs. Since the beginning of fiscal year 2024, we have experienced a range in lead prices from approximately $1.05 per pound to approximately $0.90 per pound.
The total net debt, as defined under the Fourth Amended Credit Facility is $736.0 million for fiscal 2023 and is 1.8 times adjusted EBITDA (non-GAAP), compared to total net debt of $905.9 million and 2.5 times adjusted EBITDA (non-GAAP) for fiscal 2022.
The total net debt, as defined under the Fourth Amended Credit Facility is $511.1 million for fiscal 2024 and is 1.0 times adjusted EBITDA (non-GAAP), compared to total net debt of $736.0 million and 1.8 times adjusted EBITDA (non-GAAP) for fiscal 2023.
The following table provides a reconciliation of net earnings to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) for March 31, 2023 and 2022, in connection with the Second Amended Credit Facility: Fiscal 2023 Fiscal 2022 (in millions, except ratios) Net earnings as reported $ 175.8 $ 143.9 Add back: Depreciation and amortization 91.2 95.9 Interest expense 59.5 37.8 Income tax expense 34.8 30.0 EBITDA (non GAAP) (1) $ 361.3 $ 307.6 Adjustments per credit agreement definitions (2) 51.7 51.5 Adjusted EBITDA (non-GAAP) per credit agreement (1) $ 413.0 $ 359.1 Total net debt (3) $ 736.0 $ 905.9 Leverage ratios (4) : Total net debt/adjusted EBITDA ratio 1.8 X 2.5 X Maximum ratio permitted 4.25 X 3.5 X Consolidated interest coverage ratio (5) 7.3 X 10.0 X Minimum ratio required 3.0 X 3.0 X (1) We have included EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) because our lenders use them as key measures of our performance.
The following table provides a reconciliation of net earnings to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) for March 31, 2024 and 2023, in connection with the Second Amended Credit Facility: Fiscal 2024 Fiscal 2023 (in millions, except ratios) Net earnings as reported $ 269.1 $ 175.8 Add back: Depreciation and amortization 92.0 91.2 Interest expense 49.9 59.5 Income tax expense 23.1 34.8 EBITDA (non GAAP) (1) $ 434.1 $ 361.3 Adjustments per credit agreement definitions (2) 85.8 51.7 Adjusted EBITDA (non-GAAP) per credit agreement (1) $ 519.9 $ 413.0 Total net debt (3) $ 511.1 $ 736.0 Leverage ratios (4) : Total net debt/adjusted EBITDA ratio 1.0 X 1.8 X Maximum ratio permitted 4.00 X 4.25 X Consolidated interest coverage ratio (5) 11.0 X 7.3 X Minimum ratio required 3.0 X 3.0 X (1) We have included EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) because our lenders use them as key measures of our performance.
In fiscal 2023, the amounts deducted in the 48 Table of Contents calculation of net debt were U.S. cash and cash equivalents and foreign cash investments of $346.7 million, and in fiscal 2022, were $402.5 million. (4) These ratios are included to show compliance with the leverage ratios set forth in our credit facilities.
In fiscal 2024, the amounts deducted in the calculation of net debt were U.S. cash and cash equivalents and foreign cash investments of $333.3 million, and in fiscal 2023, were $346.7 million. (4) These ratios are included to show compliance with the leverage ratios set forth in our credit facilities.
Energy Systems also includes highly integrated power solutions and services to broadband, telecom, renewable and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries. • Motive Power - power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications as well as mining equipment, diesel locomotive starting and other rail equipment; and • Specialty - premium batteries for starting, lighting and ignition applications in premium automotive and large over-the-road trucks, energy storage solutions for satellites, military land vehicles, aircraft, submarines, tactical vehicles, as well as medical devices and equipment. 31 Table of Contents We evaluate business segment performance based primarily upon operating earnings exclusive of highlighted items.
Energy Systems also includes highly integrated power solutions and services to broadband, telecom, data center, and renewable and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries. • Motive Power - power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications, AGVs, as well as mining equipment, diesel locomotive starting and other rail equipment. 33 Table of Contents • Specialty - premium batteries for starting, lighting and ignition applications in premium automotive and large over-the-road trucks, energy storage solutions for satellites, spacecraft, commercial aircraft, military land vehicles, aircraft, submarines, ships and other tactical vehicles, as well as medical devices and equipment; and • New Ventures - energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles We evaluate business segment performance based primarily upon operating earnings exclusive of highlighted items.
Our average debt outstanding was $1,303.4 million in fiscal 2023, compared to our average debt outstanding of $1,150.7 million in fiscal 2022. Our average cash interest rate incurred in fiscal 2023 and fiscal 2022 was 4.6% and 3.3%, respectively.
Our average debt outstanding was $977.7 million in fiscal 2024, compared to our average debt outstanding of $1,303.4 million in fiscal 2023. Our average cash interest rate incurred in fiscal 2024 and fiscal 2023 was 4.9% and 4.6%, respectively.
Primary Operating Capital and Primary Operating Capital percentages at March 31, 2023, 2022 and 2021 are computed as follows: ($ in Millions) March 31, 2023 March 31, 2022 March 31, 2021 Accounts receivable, net $ 637.8 $ 719.4 $ 603.6 Inventory, net 797.8 715.7 518.2 Accounts payable (378.6) (393.1) (323.9) Total primary operating capital $ 1,057.0 $ 1,042.0 $ 797.9 Trailing 3 months net sales $ 989.9 $ 907.0 $ 813.5 Trailing 3 months net sales annualized $ 3,959.6 $ 3,628.1 $ 3,254.2 Primary operating capital as a % of annualized net sales 26.7 % 28.7 % 24.5 % Liquidity and Capital Resources We believe that our financial position is strong.
Primary Operating Capital and Primary Operating Capital percentages at March 31, 2024, 2023 and 2022 are computed as follows: ($ in Millions) March 31, 2024 March 31, 2023 March 31, 2022 Accounts receivable, net $ 524.7 $ 637.8 $ 719.4 Inventory, net 697.7 797.8 715.7 Accounts payable (369.5) (378.6) (393.1) Total primary operating capital $ 852.9 $ 1,057.0 $ 1,042.0 Trailing 3 months net sales $ 910.7 $ 989.9 $ 907.0 Trailing 3 months net sales annualized $ 3,642.8 $ 3,959.6 $ 3,628.1 Primary operating capital as a % of annualized net sales 23.4 % 26.7 % 28.7 % Liquidity and Capital Resources We believe that our financial position is strong.
The Company’s income tax provision consists of federal, state and foreign income taxes. The effective income tax rate was 16.5% in fiscal 2023 compared to the fiscal 2022 effective income tax rate of 17.3%.
The Company’s income tax provision consists of federal, state and foreign income taxes. The effective income tax rate was 7.9% in fiscal 2024 compared to the fiscal 2023 effective income tax rate of 16.5%.
This increase was due to a 9% increase in organic volume and an 8% increase in pricing, partially offset by a 4% decrease in foreign currency translation impact.
This decrease was due to a 13% decrease in organic volume and an 1% decrease in foreign currency translation impact, partially offset by a 5% increase in pricing.
During fiscal 2023, the Company recorded cash charges of $2.2 million relating primarily to site cleanup and $0.6 million of non-cash charges relating to accelerated depreciation of fixed assets. During fiscal 2022, the Company recorded cash charges, primarily relating to severance of $8.1 million and non-cash charges of $3.5 million primarily relating to fixed asset write-offs.
During fiscal 2024, the Company recorded cash charges of $2.1 million relating primarily to site cleanup and $0.5 million of non-cash charges relating to accelerated depreciation of fixed assets. During fiscal 2023, the Company recorded cash charges of $2.2 million relating primarily to site cleanup and $0.6 million of non-cash charges relating to accelerated depreciation of fixed assets.
As a result of the above, total cash and cash equivalents decreased by $55.8 million from $402.5 million at March 31, 2022 to $346.7 million at March 31, 2023. In addition to cash flows from operating activities, we had available committed and uncommitted credit lines of approximately $693.4 million at March 31, 2023 to cover short-term liquidity requirements.
As a result of the above, total cash and cash equivalents decreased by $13.3 million from $346.7 million at March 31, 2023 to $333.3 million at March 31, 2024. In addition to cash flows from operating activities, we had available committed and uncommitted credit lines of approximately $938.3 million at March 31, 2024 to cover short-term liquidity requirements.
The fiscal 2023 foreign effective income tax rate was 16.8% on foreign pre-tax income of $171.9 million compared to an effective income tax rate of 11.0% on foreign pre-tax income of $152.1 million in fiscal 2022.
The fiscal 2024 foreign effective income tax rate was 13.8% on foreign pre-tax income of $193.0 million compared to an effective income tax rate of 16.8% on foreign pre-tax income of $171.9 million in fiscal 2023.
In fiscal 2023 and 2022, we repurchased 358,365 and 1,996,334 shares of common stock for $22.9 million and $156.4 million, respectively. In fiscal 2021, we did not repurchase any shares. A substantial majority of the Company’s cash and investments are held by foreign subsidiaries.
In fiscal 2024 and 2023, we repurchased 1,002,415 and 358,365 shares of common stock for $95.7 million and $22.9 million, respectively. In fiscal 2022, we repurchased 1,966,334 shares of common stock for $156.4 million. A substantial majority of the Company’s cash and investments are held by foreign subsidiaries.
Approximately 30% of our revenue is now subject to agreements that adjust pricing to a market-based index for lead. Customer pricing changes generally lag movements in lead prices and other costs by approximately six to nine months.
Approximately 25% of our revenue is now subject to agreements that adjust pricing to a market-based index for lead. Customer pricing changes generally lag movements in lead prices and other costs by approximately six to nine months. In fiscal 2024, customer pricing has increased due to certain commodity prices and other costs having increased throughout the year.
Accrued expenses were a use of funds of $38.6 million primarily from Hagen severance payments of $19.6 million, income tax payments of $17.3 million net of tax provisions, payroll related payments of $10.1 million, partially offset by customer advances of $8.9 million. During fiscal 2021, accounts receivable decreased or provided cash of $8.7 million due to improved collections.
Accrued expenses were a use of funds of $38.6 million primarily from Hagen severance payments of $19.6 million, income tax payments of $17.3 million net of tax provisions, payroll related payments of $10.1 million, partially offset by customer advances of $8.9 million.
During fiscal 2023, the Company sold inventory previously written off resulting in the reversal of $0.9 million in cost of goods sold and reversal of $0.7 million of cash charges primarily relating to lease obligations. Zamudio, Spain During fiscal 2022, the Company closed a minor assembling plant in Zamudio, Spain and sold the same for $1.8 million.
During fiscal 2023, the Company sold inventory previously written off resulting in the reversal of $0.9 million in cost of goods sold and reversal of $0.7 million of cash charges primarily relating to lease obligations.
Other (Income) Expense, Net Fiscal 2023 Fiscal 2022 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Other (income) expense, net $ 8.2 0.2 % $ (5.5) (0.2) % $ 13.7 NM NM = not meaningful Other (income) expense, net was expense of $8.2 million in fiscal 2023 compared to income of $5.5 million in fiscal 2022.
Other (Income) Expense, Net Fiscal 2024 Fiscal 2023 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Other (income) expense, net $ 9.4 0.3 % $ 8.2 0.2 % $ 1.2 15.1 % NM = not meaningful Other (income) expense, net was expense of $9.4 million in fiscal 2024 compared to expense of $8.2 million in fiscal 2023.
The majority of that cash and investments is 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.
The majority of that cash and investments is 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. The Federal Reserve Bank has discontinued quantitative easing, raised interest rates in response to inflation concerns.
In fiscal 2023, we received proceeds from termination of a net investment hedge of $43.4 million, and we received $3.3 million from the sale of two of our facilities in Europe during fiscal 2022. Financing activities used cash of $270.5 million in fiscal 2023.
In fiscal 2023, we received proceeds from termination of a net investment hedge of $43.4 million, and we received $3.3 million from the sale of two of our facilities in Europe during fiscal 2022. Financing activities used cash of $370.6 million in fiscal 2024. During fiscal 2024, the Company issued $300 million in Senior Notes, due January 15 2032.
Primary operating capital was $1,057.0 million (yielding a primary operating capital percentage of 26.7%) at March 31, 2023 and $1,042.0 million (yielding a primary working operating percentage of 28.7%) at March 31, 2022.
Primary operating capital was $852.9 million (yielding a primary operating capital percentage of 23.4%) at March 31, 2024 and $1,057.0 million (yielding a primary operating capital percentage of 26.7%) at March 31, 2023.
We are experiencing increasing costs in some of our other raw materials such as steel, copper, plastic resins, acid, separator paper and electronics. We also experienced increased freight costs through most of the year, but saw a decline in the fourth quarter. Customer Pricing Our selling prices fluctuated during the last several years to offset the volatile cost of commodities.
We are experiencing elevated costs in some of our other raw materials such as plastic resins, steel, copper, acid, separator paper and electronics. However, these increased costs have moderated during fiscal year 2024. Customer Pricing Our selling prices fluctuated during the last several years to offset the volatile cost of commodities.
In preparing our financial statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts in the Consolidated Financial Statements and accompanying notes.
Critical Accounting Policies and Estimates Our significant accounting policies are described in Note 1 - Summary of Significant Accounting Policies to the Consolidated Financial Statements in Item 8. In preparing our financial statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts in the Consolidated Financial Statements and accompanying notes.
Operating Items Fiscal 2023 Fiscal 2022 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Operating expenses $ 544.9 14.7 % $ 520.8 15.5 % $ 24.1 4.6 % Restructuring, exit and other charges 16.4 0.4 18.8 0.6 (2.4) (12.4) Impairment of indefinite-lived intangibles 0.5 0.1 1.2 — (0.7) (59.3) Operating Expenses Operating expenses increased $24.1 million or 4.6% in fiscal 2023 from fiscal 2022 and decreased as a percentage of net sales by 80 basis points.
Operating Items Fiscal 2024 Fiscal 2023 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Operating expenses $ 589.6 16.5 % $ 544.9 14.7 % $ 44.7 8.2 % Restructuring, exit and other charges 28.1 0.8 16.4 0.4 11.7 71.0 Impairment of indefinite-lived intangibles 13.6 0.4 0.5 0.1 13.1 NM 41 Table of Contents Operating Expenses Operating expenses increased $44.7 million or 8.2% in fiscal 2024 from fiscal 2023 and increased as a percentage of net sales by 180 basis points.
Accrued expenses provided funds of $5.7 million primarily from increases to contract liabilities of $6.3 million, freight of $2.4 million, warranties of $2.2 million, and other miscellaneous accruals of $5.2 million partially offset by decreases to tax related liabilities of $7.8 million, including the decrease in income taxes payable of $17.3 million related to the IRA production credits, and interest payments net of accruals of $3.2 million.
Accrued expenses provided funds of $5.7 million primarily from increases to contract liabilities of $6.3 million, freight of $2.4 million, warranties of $2.2 million, and other miscellaneous accruals of $5.2 million partially offset by decreases to tax related liabilities of $7.8 million, including the decrease in income taxes payable of $17.3 million related to the IRA production credits, and interest payments net of accruals of $3.2 million. 46 Table of Contents During fiscal 2022, accounts receivable increased or used cash of $129.0 million due to higher revenue during fiscal 2022, as compared to a COVID-19 restricted revenue in fiscal 2021.
Cash provided by operating activities for fiscal 2023 was $279.9 million. Cash used by operating activities for 2022 was $65.6 million and cash provided by operating activities in 2021 was $358.4 million. During fiscal 2023, accounts receivable decreased or provided cash of $67.6 million due to sale of $150.0 million accounts receivable under the RPA entered into December 21, 2022.
During fiscal 2023, accounts receivable decreased or provided cash of $67.6 million due to sale of $150.0 million accounts receivable under the RPA entered into December 21, 2022. Inventory increased or used cash of $96.4 million.
Gross Profit Fiscal 2023 Fiscal 2022 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Gross profit $ 840.1 22.7 % $ 750.0 22.3 % $ 90.1 12.0 % Gross profit increased $90.1 million or 12.0% in fiscal 2023 compared to fiscal 2022.
Gross Profit Fiscal 2024 Fiscal 2023 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Gross profit $ 982.8 27.4 % $ 840.1 22.7 % $ 142.7 17.0 % Gross profit increased $142.7 million or 17.0% in fiscal 2024 compared to fiscal 2023.
Revenue Recognition In accordance with ASC 606, we recognize revenue only when we have satisfied a performance obligation through transferring control of the promised good or service to a customer.
If actual results were to differ materially from the estimates made, the reported results could be materially affected. 36 Table of Contents Revenue Recognition In accordance with ASC 606, we recognize revenue only when we have satisfied a performance obligation through transferring control of the promised good or service to a customer.
The Fourth Amended Credit Facility replaces the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) in the calculation of interest for both the Second Amended Revolver and the Second Amended Term Loan. 47 Table of Contents During the second quarter of fiscal 2022, we entered into a second amendment to the Amended Credit Facility (as amended, the “Second Amended Credit Facility”).
The Fourth Amended Credit Facility replaces the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) in the calculation of interest for both the Second Amended Revolver and the Second Amended Term Loan.
However, if economic conditions change materially, we may change our assumptions, and the resulting change could have a material impact on the Consolidated Statements of Income and on the Consolidated Balance Sheets.
However, if economic conditions change materially, we may change our assumptions, and the resulting change could have a material impact on the Consolidated Statements of Income and on the Consolidated Balance Sheets. Income Taxes Our effective tax rate is based on pretax income and statutory tax rates available in the various jurisdictions in which we operate.
A net gain of $0.7 million was recorded as a credit to exit charges in the Consolidated Statements of Income. Fiscal 2021 Programs Hagen, Germany In fiscal 2021, we committed to a plan to close substantially all of our facility in Hagen, Germany, which produces flooded motive power batteries for forklifts.
Fiscal 2021 Programs Hagen, Germany In fiscal 2021, we committed to a plan to close substantially all of our facility in Hagen, Germany, which produces flooded motive power batteries for forklifts.
Contractual Obligations and Commercial Commitments At March 31, 2023, we had certain cash obligations, which are due as follows: Total Less than 1 year 2 to 3 years 4 to 5 years After 5 years (in millions) Debt obligations $ 1,048.4 $ 25.4 $ 76.3 $ 946.7 $ — Short-term debt 30.6 30.6 — — — Interest on debt (1) 218.0 65.6 120.8 31.6 — Operating leases 101.7 24.8 36.3 22.9 17.7 Tax Act - Transition Tax 46.3 11.6 34.7 — — Pension benefit payments and profit sharing 40.2 3.0 6.6 8.5 22.1 Purchase commitments 13.9 13.9 — — — Total $ 1,499.1 $ 174.9 $ 274.7 $ 1,009.7 $ 39.8 (1) Interest payments for variable rate debt was calculated using the current applicable rate.
Contractual Obligations and Commercial Commitments At March 31, 2024, we had certain cash obligations, which are due as follows: Total Less than 1 year 2 to 3 years 4 to 5 years After 5 years (in millions) Debt obligations $ 810.0 $ — $ 14.6 $ 495.4 $ 300.0 Short-term debt 30.4 30.4 — — — Interest on debt (1) 206.7 44.2 67.2 39.8 55.5 Operating leases 94.0 22.9 36.9 21.0 13.2 Tax Act - Transition Tax 29.8 10.5 19.3 — — Pension benefit payments and profit sharing 42.7 3.3 6.7 8.8 23.9 Purchase commitments 20.7 20.7 — — — Total $ 1,234.3 $ 132.0 $ 144.7 $ 565.0 $ 392.6 (1) Interest payments for variable rate debt was calculated using the current applicable rate.
This increase was due to a 9% increase in pricing and a 3% increase in organic volume partially offset by a 5% decrease in foreign currency translation impact. We continue to benefit from continued improved pricing and favorable sales mix as we grow our maintenance free products.
This increase was due to a 3% increase in pricing and a 1% increase due to acquisitions offset by a 4% decrease in organic volume. We continue to benefit from continued improved pricing and favorable sales mix as a result of ongoing maintenance-free conversions.
The Company currently estimates that the total charges for these actions will amount to approximately $18.5 million. Cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses are estimated to be $9.2 million and non-cash charges from inventory and fixed asset write-offs are estimated to be $9.3 million.
Cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses are estimated to be $9.2 million and non-cash charges from inventory and fixed asset write-offs are estimated to be $9.3 million. These actions will result in the reduction of approximately 165 employees. The plan is substantially complete as the end of fiscal 2024.
Operating earnings increased $72.1 million or 35.0% in fiscal 2023, compared to fiscal 2022 . Operating earnings, as a percentage of net sales, increased 140 basis points in fiscal 2023, compared to fiscal 2022. The Energy Systems operating earnings percentage of net sales increased 240 basis points in fiscal 2023 compared to fiscal 2022.
Operating earnings increased $73.2 million or 26.3% in fiscal 2024, compared to fiscal 2023 . Operating earnings, as a percentage of net sales, increased 230 basis points in fiscal 2024, compared to fiscal 2023. The Energy Systems operating earnings percentage of net sales increased 30 basis points in fiscal 2024 compared to fiscal 2023.
Interest Expense Fiscal 2023 Fiscal 2022 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Interest expense $ 59.5 1.6 % $ 37.8 1.1 % $ 21.7 57.6 % 43 Table of Contents Interest expense of $59.5 million in fiscal 2023 (net of interest income of $1.7 million) was $21.7 million higher than the $37.8 million in fiscal 2022 (net of interest income of $2.1 million).
Interest Expense Fiscal 2024 Fiscal 2023 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Interest expense $ 49.9 1.4 % $ 59.5 1.6 % $ (9.6) (16.1) % Interest expense of $49.9 million in fiscal 2024 (net of interest income of $3.2 million) was $9.6 million lower than the $59.5 million in fiscal 2023 (net of interest income of $1.7 million).
In fiscal 2023, the Company capitalized $1.2 million in debt issuance costs in connection with the Third and Fourth Amended Credit Facilities. In fiscal 2022, in connection with the Second Amended Credit Facility, we capitalized $3.0 million in debt issuance costs and wrote off $0.1 million of unamortized debt issuance costs.
In fiscal 2024, the Company capitalized $4.1 million in debt issuance costs in connection with the 2032 Senior Notes and wrote off $0.8 million in issuance costs relating to our Second and Third Amended Term Loans. In fiscal 2023, the Company capitalized $1.2 million in debt issuance costs in connection with the Third and Fourth amended Credit Facilities.
Income Tax Expense Fiscal 2023 Fiscal 2022 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Income tax expense $ 34.8 0.9 % $ 30.0 0.9 % $ 4.8 16.0 % Effective tax rate 16.5 % 17.3 % (0.8) % Our effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which we operate and the amount of our consolidated income before taxes.
Earnings Before Income Taxes Fiscal 2024 Fiscal 2023 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Earnings before income taxes $ 292.2 8.2 % $ 210.6 5.7 % $ 81.6 38.7 % As a result of the factors discussed above, fiscal 2024 earnings before income taxes were $292.2 million, an increase of $81.6 million or 38.7% compared to fiscal 2023. 45 Table of Contents Income Tax Expense Fiscal 2024 Fiscal 2023 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Income tax expense $ 23.1 0.6 % $ 34.8 0.9 % $ (11.7) (33.7) % Effective tax rate 7.9 % 16.5 % (8.6) % Our effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which we operate and the amount of our consolidated income before taxes.
We discuss below the more significant estimates and related assumptions used in the preparation of our Consolidated Financial Statements. If actual results were to differ materially from the estimates made, the reported results could be materially affected.
We discuss below the more significant estimates and related assumptions used in the preparation of our Consolidated Financial Statements.
Net sales of our Specialty segment in fiscal 2023 increased by $59.6 million, or 13%, compared to fiscal 2022. The increase was due to a 9% increase in organic volume and a 6% increase in pricing, partially offset by a 2% decrease in foreign currency translation impact.
Net sales of our Specialty segment in fiscal 2024 increased by $16.5 million, or 3.2%, compared to fiscal 2023. The increase was due to a 1% increase in organic volume, a 1% increase in pricing, and a 1% increase in foreign currency translation impact. This increase in net sales was primarily driven by strong demand constrained by capacity limitations.
Additionally, we incurred $1.4 million in costs to terminate our net investment hedges and $0.6 million in transaction fees relating to the asset securitization agreement.
Included in the fiscal 2023 foreign currency impact is a loss of $4.5 million relating to the remeasurement of monetary assets from the exit of our Russia operations. Additionally, we incurred $1.4 million in costs to terminate our net investment hedges and $0.6 million in transaction fees relating to the asset securitization agreement.
To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our effective tax rate in a given financial statement period could be materially affected. 38 Table of Contents Results of Operations—Fiscal 2023 Compared to Fiscal 2022 The following table presents summary Consolidated Statements of Income data for fiscal year ended March 31, 2023, compared to fiscal year ended March 31, 2022: Fiscal 2023 Fiscal 2022 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Net sales $ 3,708.5 100.0 % $ 3,357.3 100.0 % $ 351.2 10.5 % Cost of goods sold 2,867.8 77.3 2,604.7 77.6 263.1 10.1 Inventory adjustment relating to exit activities 0.6 — 2.6 0.1 (2.0) (73.8) Gross profit 840.1 22.7 750.0 22.3 90.1 12.0 Operating expenses 544.9 14.7 520.8 15.5 24.1 4.6 Restructuring and other exit charges 16.4 0.4 18.8 0.6 (2.4) (12.4) Impairment of indefinite-lived intangibles 0.5 0.1 1.2 — (0.7) (59.3) Loss on assets held for sale — — 3.0 0.1 (3.0) NM Operating earnings 278.3 7.5 206.2 6.1 72.1 35.0 Interest expense 59.5 1.6 37.8 1.1 21.7 57.6 Other (income) expense, net 8.2 0.2 (5.5) (0.2) 13.7 NM Earnings before income taxes 210.6 5.7 173.9 5.2 36.7 21.1 Income tax expense 34.8 0.9 30.0 0.9 4.8 16.0 Net earnings attributable to EnerSys stockholders $ 175.8 4.8 % $ 143.9 4.3 % $ 31.9 22.2 % NM = not meaningful Overview Our sales in fiscal 2023 were $3.7 billion, a 10.5% increase from prior year's sales.
Results of Operations—Fiscal 2024 Compared to Fiscal 2023 The following table presents summary Consolidated Statements of Income data for fiscal year ended March 31, 2024, compared to fiscal year ended March 31, 2023: Fiscal 2024 Fiscal 2023 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Net sales $ 3,581.8 100.0 % $ 3,708.5 100.0 % $ (126.7) (3.4) % Cost of goods sold 2,578.8 72.0 2,867.8 77.3 (289.0) (10.1) Inventory adjustment relating to exit activities 20.2 0.6 0.6 — 19.6 NM Gross profit 982.8 27.4 840.1 22.7 142.7 17.0 Operating expenses 589.6 16.5 544.9 14.7 44.7 8.2 Restructuring and other exit charges 28.1 0.8 16.4 0.4 11.7 71.0 Impairment of indefinite-lived intangibles 13.6 0.4 0.5 0.1 13.1 NM Operating earnings 351.5 9.8 278.3 7.5 73.2 26.3 Interest expense 49.9 1.4 59.5 1.6 (9.6) (16.1) Other (income) expense, net 9.4 0.3 8.2 0.2 1.2 15.1 Earnings before income taxes 292.2 8.2 210.6 5.7 81.6 38.7 Income tax expense 23.1 0.6 34.8 0.9 (11.7) (33.7) Net earnings attributable to EnerSys stockholders $ 269.1 7.5 % $ 175.8 4.8 % $ 93.3 53.1 % NM = not meaningful Overview Our sales in fiscal 2024 were $3.6 billion, a 3.4% decrease from prior year's sales.
Restructuring, exit and other charges 40 Table of Contents Exit Charges Fiscal 2023 Programs Sylmar In November 2022, the Company committed to a plan to close its facility in Sylmar, California, which manufactures specialty lithium batteries for aerospace and medical applications.
Fiscal 2023 Programs Sylmar In November 2022, the Company committed to a plan to close its facility in Sylmar, California, which manufactures specialty lithium batteries for aerospace and medical applications. Management determined to close the site upon the expiration of its lease on the property and to redirect production through consolidation into existing locations.
These actions will result in the reduction of approximately 165 employees. The plan is expected to be completed in calendar 2023. During fiscal 2023, the Company recorded cash charges relating primarily to severance and manufacturing variances of $2.8 million and non-cash charges of $7.3 million relating to fixed asset write-offs.
During fiscal 2024, the Company recorded cash charges relating to site cleanup and decommissioning equipment of $4.4 million. During fiscal 2023, the Company recorded cash charges relating primarily to severance and manufacturing variances of $2.8 million and non-cash charges of $7.3 million relating to fixed asset write-offs.
Primary Operating Capital As part of managing the performance of our business, we monitor the level of primary operating capital, and its ratio to net sales. We define primary operating capital as accounts receivable, plus inventories, minus accounts payable. The resulting net amount is divided by the trailing three month net sales (annualized) to derive a primary operating capital percentage.
As we concentrate more on energy systems and non-lead chemistries, the emphasis on lead will continue to decline. Primary Operating Capital As part of managing the performance of our business, we monitor the level of primary operating capital, and its ratio to net sales. We define primary operating capital as accounts receivable, plus inventories, minus accounts payable.
The $51.5 million adjustment to EBITDA in fiscal 2022 primarily related to $24.3 million of non-cash stock compensation, $26.0 million of restructuring and other exit charges, indefinite-lived intangibles of $1.2 million.
(2) The $85.8 million adjustment to EBITDA in fiscal 2024 primarily related to $30.6 million of non-cash stock compensation, $40.7 million of restructuring and other exit charges, impairment of indefinite-lived intangibles and write-down of other current assets of $13.6 million.
We also manufacture and distribute energy systems solutions and motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories and outdoor equipment enclosure solutions to customers worldwide. Energy Systems which combine enclosures, power conversion, power distribution and energy storage are used in the telecommunication and broadband, utility industries, uninterruptible power supplies, and numerous applications requiring stored energy solutions.
Energy Systems, which combine power conversion, power distribution, energy storage, and enclosures, are used in the telecommunication, broadband, data center and utility industries, uninterruptible power supplies, and numerous applications requiring stored energy solutions. Motive Power batteries and chargers are utilized in electric forklift trucks, automated guided vehicles (AGVs), and other industrial electric powered vehicles.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risks We are exposed to changes in variable U.S. interest rates on borrowings under our credit agreements, as well as short term borrowings in the U.S. and our foreign subsidiaries.
Biggest changeExcluding the cross currency fixed interest rate swap agreements, the vast majority of these contracts will settle within one year. 50 Table of Contents Interest Rate Risks We are exposed to changes in variable U.S. interest rates on borrowings under our credit agreements, as well as short term borrowings in the U.S. and our foreign subsidiaries.
A 100 basis point increase in interest rates would have increased annual interest expense by approximately $5.8 million on the variable rate portions of our debt. 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.
A 100 basis point increase in interest rates would have increased annual interest expense by approximately $0.4 million on the variable rate portions of our debt. 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.
We estimate that a 10% increase in our cost of lead would have increased our cost of goods sold by approximately $81 million for the fiscal year ended March 31, 2023. Foreign Currency Exchange Rate Risks We manufacture and assemble our products globally in the Americas, EMEA and Asia.
We estimate that a 10% increase in our cost of lead would have increased our cost of goods sold by approximately $72 million for the fiscal year ended March 31, 2024. Foreign Currency Exchange Rate Risks We manufacture and assemble our products globally in the Americas, EMEA and Asia.
At March 31, 2023 such agreements effectively convert $200 million of our variable-rate debt to a fixed-rate basis, utilizing the one-month Term SOFR as a floating rate reference. 49 Table of Contents Fluctuations in SOFR and fixed rates affect both our net financial investment position and the amount of cash to be paid or received by us under these agreements.
At March 31, 2024 such agreements effectively convert $200 million of our variable-rate debt to a fixed-rate basis, utilizing the one-month Term SOFR as a floating rate reference. Fluctuations in SOFR and fixed rates affect both our net financial investment position and the amount of cash to be paid or received by us under these agreements.
We had the following contracts outstanding at the dates shown below: Date $’s Under Contract # Pounds Purchased Average Cost/Pound Approximate % of Lead Requirements (1) (in millions) (in millions) March 31, 2023 $47.9 50.0 $0.96 8% March 31, 2022 56.8 54.0 1.05 8 March 31, 2021 50.6 54.5 0.93 10 (1) Based on the fiscal year lead requirements for the periods then ended.
We had the following contracts outstanding at the dates shown below: Date $’s Under Contract # Pounds Purchased Average Cost/Pound Approximate % of Lead Requirements (1) (in millions) (in millions) March 31, 2024 $50.0 53.0 $0.94 8% March 31, 2023 47.9 50.0 0.96 8 March 31, 2022 56.8 54.0 1.05 8 (1) Based on the fiscal year lead requirements for the periods then ended.
Those contracts that result in a liability position at March 31, 2023 are $18.9 million (pre-tax). Those contracts that result in an asset position at March 31, 2023 are $2.9 million (pre-tax). The impact on the Company due to nonperformance by the counterparties has been evaluated and not deemed material.
Those contracts that result in a liability position at March 31, 2024 are $20.9 million (pre-tax). Those contracts that result in an asset position at March 31, 2024 are $3.6 million (pre-tax). The impact on the Company due to nonperformance by the counterparties has been evaluated and not deemed material.
At March 31, 2023 and 2022, we estimate that an unfavorable 10% movement in the exchange rates would have adversely changed our hedge valuations by approximately $32.7 million and $36.6 million, respectively. 50 Table of Contents
At March 31, 2024 and 2023, we estimate that an unfavorable 10% movement in the exchange rates would have adversely changed our hedge valuations by approximately $29.5 million and $32.7 million, respectively. 52 Table of Contents
Realized and unrealized gains and losses on these contracts are recognized in the same period as gains and losses on the hedged items. We also selectively hedge anticipated transactions that are subject to foreign exchange exposure, primarily with foreign currency exchange contracts, which are designated as cash flow hedges in accordance with Topic 815 - Derivatives and Hedging.
We also selectively hedge anticipated transactions that are subject to foreign exchange exposure, primarily with foreign currency exchange contracts, which are designated as cash flow hedges in accordance with Topic 815 - Derivatives and Hedging.
Depending on the movement in the exchange rates between the U.S. dollar and Euro at maturity, the Company may owe the counterparties an amount that is different from the notional amount of $150 million. Excluding the cross currency fixed interest rate swap agreements, the vast majority of these contracts will settle within one year.
Depending on the movement in the exchange rates between the U.S. dollar and Euro at maturity, the Company may owe the counterparties an amount that is different from the notional amount of $150 million.
Added
Realized and unrealized gains and losses on these contracts are recognized in the same period as gains and 51 Table of Contents losses on the hedged items.

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