EnerSys [ENS] Filings

10-Q 1 ens-20240630.htm 10-Q ens-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2024


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

For the transition period from to

Commission File Number: 001-32253

EnerSys

(Exact name of registrant as specified in its charter)


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

2366 Bernville Road

Reading, Pennsylvania 19605

(Address of principal executive offices) (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value per share

ENS

New York Stock Exchange

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

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

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

Large Accelerated Filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). ☐ Yes ý No.

Common Stock outstanding at August 2, 2024: 40,244,751 shares

EnerSys

INDEX – FORM 10-Q


			Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Condensed Balance Sheets (Unaudited) as of June 30 , 202 4 and March 31, 2024		3

	Consolidated Condensed Statements of Income (Unaudited) for the Quarters Ended June 30 , 202 4 and July 2, 2023		4



	Consolidated Condensed Statements of Comprehensive Income (Unaudited) for the Quarters Ended June 30, 2024 and July 2, 2023		5

	Consolidated Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended June 30, 202 4 and July 2, 2023		6

	Notes to Consolidated Condensed Financial Statements (Unaudited)		7
	1	Basis of Presentation	7
	2	Revenue Recognition	8

	3	Accounts Receivable	8

	4	Inventories	9
	5	Fair Value of Financial Instruments	9
	6	Derivative Financial Instruments	10
	7	Income Taxes	13
	8	Warranty	14
	9	Commitments, Contingencies and Litigation	14
	10	Restructuring and Other Exit Charges	14
	11	Debt	14
	12	Retirement Plans	17
	13	Stock-Based Compensation	17
	14	Stockholders’ Equity and Noncontrolling Interests	17
	15	Earnings Per Share	21
	16	Business Segments	22
	17	Subsequent Events	22

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		23

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		35

Item 4.	Controls and Procedures		37

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		38

Item 1A.	Risk Factors		38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		39

Item 4.	Mine Safety Disclosures		39

Item 5.	Other Information		39

Item 6.	Exhibits		40

SIGNATURES			41

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PART I –			FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS

EnerSys

Consolidated Condensed Balance Sheets (Unaudited)

(In Thousands, Except Share and Per Share Data)


	June 30, 2024		March 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	344,069	$	333,324
Accounts receivable, net of allowance for doubtful accounts: June 30, 2024 - $8,447; March 31, 2024 - $8,107	507,925		524,725
Inventories, net	713,698		697,698
Prepaid and other current assets	283,407		226,949
Total current assets	1,849,099		1,782,696
Property, plant, and equipment, net	547,071		532,450
Goodwill	679,164		682,934
Other intangible assets, net	312,237		319,407
Deferred taxes	48,512		49,798
Other assets	121,164		98,721
Total assets	$	3,557,247	$	3,466,006
Liabilities and Equity
Current liabilities:
Short-term debt	$	29,960	$	30,444
Accounts payable	354,729		369,456
Accrued expenses	301,104		323,957
Total current liabilities	685,793		723,857
Long-term debt, net of unamortized debt issuance costs	867,104		801,965
Deferred taxes	33,602		30,583
Other liabilities	159,559		152,529
Total liabilities	1,746,058		1,708,934
Commitments and contingencies
Equity:
Preferred Stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding at June 30, 2024 and at March 31, 2024	—		—
Common Stock, $0.01 par value per share, 135,000,000 shares authorized, 56,455,353 shares issued and 40,237,053 shares outstanding at June 30, 2024; 56,363,924 shares issued and 40,271,936 shares outstanding at March 31, 2024	565		564
Additional paid-in capital	644,155		629,879
Treasury stock at cost, 16,218,300 shares held as of June 30, 2024 and 16,091,988 shares held as of March 31, 2024	(847,283)		(835,827)
Retained earnings	2,224,720		2,163,880

Accumulated other comprehensive loss	(214,373)		(204,851)
Total EnerSys stockholders’ equity	1,807,784		1,753,645
Nonredeemable noncontrolling interests	3,405		3,427
Total equity	1,811,189		1,757,072
Total liabilities and equity	$	3,557,247	$	3,466,006

See accompanying notes.

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EnerSys

Consolidated Condensed Statements of Income (Unaudited)

(In Thousands, Except Share and Per Share Data)


	Quarter ended
	June 30, 2024		July 2, 2023
Sales from products	$	758,531	$	807,647
Sales from services	94,385		100,922
Net sales	852,916		908,569
Cost of goods sold	535,766		587,203
Cost of services	78,779		77,962
Inventory adjustment relating to exit activities	—		3,098
Gross profit	238,371		240,306
Operating expenses	141,102		144,552
Restructuring and other exit charges	5,938		6,309

Operating earnings	91,331		89,445
Interest expense	10,987		15,244
Other expense (income), net	1,015		668
Earnings before income taxes	79,329		73,533
Income tax expense	9,218		6,736


Net earnings attributable to EnerSys stockholders	$	70,111	$	66,797
Net earnings per common share attributable to EnerSys stockholders:
Basic	$	1.74	$	1.63
Diluted	$	1.71	$	1.60
Dividends per common share	$	0.225	$	0.175
Weighted-average number of common shares outstanding:
Basic	40,204,013		40,937,334
Diluted	40,986,116		41,698,324

See accompanying notes.

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EnerSys

Consolidated Condensed Statements of Comprehensive Income (Unaudited)

(In Thousands)


	Quarter ended
	June 30, 2024		July 2, 2023
Net earnings	$	70,111	$	66,797
Other comprehensive income (loss):
Net unrealized gain (loss) on derivative instruments, net of tax	3,662		1,786
Pension funded status adjustment, net of tax	110		20
Foreign currency translation adjustment	(13,316)		2,002
Total other comprehensive income (loss), net of tax	(9,544)		3,808
Total comprehensive income (loss)	60,567		70,605
Comprehensive income (loss) attributable to noncontrolling interests	(22)		(190)
Comprehensive income (loss) attributable to EnerSys stockholders	$	60,589	$	70,795

See accompanying notes.

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EnerSys

Consolidated Condensed Statements of Cash Flows (Unaudited)

(In Thousands)


	Quarter ended
	June 30, 2024		July 2, 2023
Cash flows from operating activities
Net earnings	$	70,111	$	66,797
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	23,550		22,693
Write-off of assets relating to exit activities	118		3,343


Derivatives not designated in hedging relationships:
Net losses (gains)	(354)		503
Cash (settlements) proceeds	(190)		657
Provision for doubtful accounts	628		504
Deferred income taxes	31		42
Non-cash interest expense	490		410
Stock-based compensation	7,062		7,933

(Gain) loss on disposal of property, plant, and equipment	(10)		43

Changes in assets and liabilities:
Accounts receivable	12,183		73,198
Inventories	(16,484)		(10,965)
Prepaid and other current assets	(9,889)		(4,089)
Other assets	(2,437)		(484)
Accounts payable	(10,349)		(39,307)
Accrued expenses	(64,251)		(46,647)
Other liabilities	189		315
Net cash provided by (used in) operating activities	10,398		74,946

Cash flows from investing activities
Capital expenditures	(36,137)		(16,093)
Purchase of business	—		(8,270)


Proceeds from disposal of property, plant, and equipment	5		44
Investment in Equity Securities	(10,852)		—
Net cash (used in) provided by investing activities	(46,984)		(24,319)

Cash flows from financing activities
Net (repayments) borrowings on short-term debt	(195)		(404)
Proceeds from Second Amended Revolver borrowings	65,000		80,000

Repayments of Second Amended Revolver borrowings	—		(216,380)





Finance lease obligations	5		—
Option proceeds, net	6,958		7,654
Payment of taxes related to net share settlement of equity awards	(46)		—
Purchase of treasury stock	(11,641)		—
Issuance of treasury stock- ESPP	261		—
Dividends paid to stockholders	(9,043)		(7,173)
Debt issuance costs	(351)		—
Other	(2)		354
Net cash (used in) financing activities	50,946		(135,949)
Effect of exchange rate changes on cash and cash equivalents	(3,615)		(3,001)
Net decrease in cash and cash equivalents	10,745		(88,323)
Cash and cash equivalents at beginning of period	333,324		346,665
Cash and cash equivalents at end of period	$	344,069	$	258,342

See accompanying notes.

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EnerSys

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

(In Thousands, Except Share and Per Share Data)

1. Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments except those otherwise described herein) considered necessary for a fair presentation have been included, unless otherwise disclosed. Operating results for the current quarter ended June 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2025.

The Consolidated Condensed Balance Sheet at March 31, 2024 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s 2024 Annual Report on Form 10-K (SEC File No. 001-32253), which was filed on May 22, 2024 (the “2024 Annual Report”).

EnerSys (the “Company”) reports interim financial information for 13-week periods, except for the first quarter, which always begins on April 1, and the fourth quarter, which always ends on March 31. The four quarters in fiscal 2025 end on June 30, 2024, September 29, 2024, December 29, 2024, and March 31, 2025, respectively. The four quarters in fiscal 2024 ended on July 2, 2023, October 1, 2023, December 31, 2023, and March 31, 2024, respectively.

The consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiaries and any partially owned subsidiaries that the Company has the ability to control. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, and the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ from those estimates.

Examples of significant estimates include the allowance for credit losses, the recoverability of property, plant and equipment, the incremental borrowing rate for lease liabilities, the recoverability of intangible assets and other long-lived assets, fair value measurements, including those related to financial instruments, fair value of goodwill and intangible assets, valuation allowances on tax assets, production tax credits under the Inflation Reduction Act, pension and postretirement benefit obligations, contingencies and the identification and valuation of assets acquired and liabilities assumed in connection with business combinations.

Recently Issued Accounting Standards

In November 2023, the Financial Accounting Standards Board issued new guidance that requires incremental disclosures related to reportable segments. That standard requires disclosure, on an annual and interim basis, of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of profit or loss. The title and position of the CODM and how the reported measure of segment profit or loss is used by the CODM to assess segment performance and allocate resources is also required to be disclosed. The standard also permits disclosure of additional measures of segment profit. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The guidance impacts disclosure only and will not have an impact on the Company's financial results. These changes in disclosure will initially be reflected in the annual financial statement footnotes for the year ended March 31, 2025.

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In December 2023, the Financial Accounting Standards Board issued a final standard on improvements to income tax disclosures. The standard requires disclosure of specific categories within the effective tax rate reconciliation and details about significant reconciling items, subject to a quantitative threshold. The standard also requires information on income taxes paid disaggregated by federal, state and foreign based on a quantitative threshold. The standard is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The standard is applied prospectively with an option for retrospective adoption. The Company is currently evaluating the impact of adopting this standard on its disclosures.

2. Revenue Recognition

The Company’s revenues by reportable segments are presented in Note 16 and are consistent with how we organize and manage our operations, as well as product line net sales information.

Service revenues related to the work performed for the Company’s customers by its maintenance technicians generally represent a separate and distinct performance obligation. Control for these services passes to the customer as the services are performed.

A small portion of the Company's customer arrangements oblige the Company to create customized products for its customers that require combining both products and services into a single performance obligation because the individual products and services that are required to fulfill the customer requirements do not meet the definition for a distinct performance obligation. These customized products generally have no alternative use to the Company and the terms and conditions of these arrangements give the Company the enforceable right to payment for performance completed to date, including a reasonable profit margin. For these arrangements, control transfers over time and the Company measures progress towards completion by selecting the input or output method that best depicts the transfer of control of the underlying goods and services to the customer for each respective arrangement. Methods used by the Company to measure progress toward completion include labor hours, costs incurred and units of production. Revenues recognized over time for the first quarter of fiscal 2025 and 2024 amounted to $52,332 and $58,654, respectively.

On June 30, 2024, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $125,905, of which, the Company estimates that approximately $70,569 will be recognized as revenue in fiscal 2025, $52,218 in fiscal 2026, and $3,118 in fiscal 2027.

Any payments that are received from a customer in advance, prior to the satisfaction of a related performance obligation and billings in excess of revenue recognized, are deferred and treated as a contract liability. Advance payments and billings in excess of revenue recognized are classified as current or non-current based on the timing of when recognition of revenue is expected. As of June 30, 2024, the current and non-current portion of contract liabilities were $30,047 and $791, respectively. As of March 31, 2024, the current and non-current portion of contract liabilities were $27,649 and $960, respectively. Revenues recognized during the first quarter of fiscal 2025 and 2024 that were included in the contract liability at the beginning of the quarter, amounted to $6,100 and $12,391, respectively.

Amounts representing work completed and not billed to customers represent contract assets and were $67,065 and $55,363 as of June 30, 2024 and March 31, 2024, respectively.

The Company uses historic customer product return data as a basis of estimation for customer returns and records the reduction of sales at the time revenue is recognized. At June 30, 2024, the right of return asset related to the value of inventory anticipated to be returned from customers was $4,276 and refund liability representing amounts estimated to be refunded to customers was $7,230.

3. Accounts Receivable


	June 30, 2024		March 31, 2024
Accounts receivable	$	516,372	$	532,832
Allowance for doubtful accounts	8,447		8,107
Accounts receivable, net	$	507,925	$	524,725

During the third quarter of fiscal 2023, the Company entered into a Receivables Purchase Agreement (RPA), under which the Company continuously sells its interest in designated pools of trade accounts receivables, at a discount, to a special purpose entity, which in turn sells certain of the receivables to an unaffiliated financial institution ("unaffiliated financial institution") on a monthly basis. The Company may sell certain US-originated accounts receivable balances up to a maximum amount of

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$150,000. In return for these sales, the Company receives a cash payment equal to the face value of the receivables and is charged a fee of Secured Overnight Financing Rate (“SOFR”) plus 85 basis points against the sold receivable balance. The program is conducted through EnerSys Finance LLC ("EnerSys Finance"), an entity structured to be bankruptcy remote, and matures in December 2025. The Company is deemed the primary beneficiary of EnerSys Finance as the Company has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivables into the special purpose entity. Accordingly, EnerSys Finance is included in the Company’s Consolidated Condensed Financial Statements.

Receivables sold to unaffiliated financial institutions under the program are excluded from “Accounts receivable, net” on the Company’s Consolidated Condensed Balance Sheets, and cash receipts are reflected as cash provided by operating activities on the Consolidated Condensed Statements of Cash Flows. The purchase price is received in cash when the receivables are sold, and fees charged relating to this balance are recorded to other (income) expense. Certain unsold receivables held by EnerSys Finance serve as collateral to unaffiliated financial institutions. These unsold receivables are included in “Accounts receivable, net” in the Company’s Consolidated Condensed Balance Sheets. The Company continues servicing the receivables which were sold and in exchange receives a servicing fee from EnerSys Finance under the program.

During the first quarter of fiscal 2025, the Company sold $189,736 of accounts receivables for approximately $189,736 in proceeds to an unaffiliated financial institution, of which $189,736 were collected as of June 30, 2024. During the first quarter of fiscal 2024, the Company sold $182,391 of accounts receivables for approximately $182,391 in net proceeds to an unaffiliated financial institution, of which $183,352 were collected as of July 2, 2023. Total collateralized accounts receivables of approximately $318,647 were held by EnerSys Finance at June 30, 2024.

Any accounts receivables held by EnerSys Finance would likely not be available to other creditors of the Company in the event of bankruptcy or insolvency proceedings relating to the Company until the outstanding balances under the RPA are satisfied. Additionally, the financial obligations of EnerSys Finance to the unaffiliated financial institutions under the program are limited to the assets it owns and there is no recourse to the Company for receivables that are uncollectible as a result of the insolvency of EnerSys Finance or its inability to pay the account debtors.

4. Inventories


	June 30, 2024		March 31, 2024
Raw materials	$	287,378	$	284,773
Work-in-process	119,097		115,191
Finished goods	307,223		297,734
Total	$	713,698	$	697,698

5. Fair Value of Financial Instruments

Recurring Fair Value Measurements

The following tables represent the financial assets and (liabilities) measured at fair value on a recurring basis as of June 30, 2024 and March 31, 2024, and the basis for that measurement:


	Total Fair Value Measurement June 30, 2024		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Lead forward contracts	$	(168)	$	—	$	(168)	$	—
Foreign currency forward contracts	471		—		471		—
Interest Rate Swaps	2,960		—		2,960		—
Net investment hedges	(17,173)		—		(17,173)		—
Total derivatives	$	(13,910)	$	—	$	(13,910)	$	—

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	Total Fair Value Measurement March 31, 2024		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Lead forward contracts	$	(835)	$	—	$	(835)	$	—
Foreign currency forward contracts	5		—		5		—
Interest Rate Swaps	2,696		—		2,696		—
Net investment hedges	(19,167)		—		(19,167)		—
Total derivatives	$	(17,301)	$	—	$	(17,301)	$	—

The fair values of lead forward contracts are calculated using observable prices for lead as quoted on the London Metal Exchange (“LME”) and, therefore, were classified as Level 2 within the fair value hierarchy, as described in Note 1- Summary of Significant Accounting Policies to the Company's Consolidated Financial Statements included in the 2024 Annual Report.

The fair values for foreign currency forward contracts and net investment hedges are based upon current quoted market prices and are classified as Level 2 based on the nature of the underlying market in which these derivatives are traded.

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

Financial Instruments

The fair values of the Company’s cash and cash equivalents approximate carrying value due to their short maturities.

The fair value of the Company’s short-term debt and borrowings under the Fourth Amended Credit Facility (as defined in Note 11), approximate their respective carrying value, as they are variable rate debt and the terms are comparable to market terms as of the balance sheet dates and are classified as Level 2.

The fair value of the Company's 2032 Notes and 2027 Notes, (each as defined in Note 11 and collectively, the "Senior Notes"), represent the trading values based upon quoted market prices and are classified as Level 2. The 2032 Notes were trading at approximately 102% and 100% of face value on June 30, 2024 and March 31, 2024, respectively. The 2027 Notes were trading at approximately 94% and 94% of the face value on June 30, 2024 and March 31, 2024, respectively.

The carrying amounts and estimated fair values of the Company’s derivatives and Senior Notes at June 30, 2024 and March 31, 2024 were as follows:


	June 30, 2024				March 31, 2024
	Carrying Amount		Fair Value		Carrying Amount		Fair Value


Financial liabilities:
Senior Notes (2)	$	600,000	$	587,700	$	600,000	$	582,750
Derivatives (1)	$	(13,910)	$	(13,910)	$	(17,301)	$	(17,301)

(1)Represents lead, foreign currency forward contracts, interest rate swaps, and net investment hedges (see Note 6 for asset and liability positions of the lead, foreign currency forward contracts, interest rate swaps, and net investment hedges at June 30, 2024 and March 31, 2024).

(2)The fair value amount of the Senior Notes at June 30, 2024 and March 31, 2024 represent the trading value of the instruments.

6. Derivative Financial Instruments

The Company utilizes derivative instruments to reduce its exposure to fluctuations in commodity prices, foreign exchange rates and interest, under established procedures and controls. The Company does not enter into derivative contracts for speculative purposes. The Company’s agreements are with creditworthy financial institutions and the Company anticipates performance by counterparties to these contracts and therefore no material loss is expected.

Derivatives in Cash Flow Hedging Relationships

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Lead Forward Contracts

The Company enters into lead forward contracts to fix the price for a portion of its lead purchases. Management considers the lead forward contracts to be effective against changes in the cash flows of the underlying lead purchases. The vast majority of such contracts are for a period not extending beyond one year. At June 30, 2024 and March 31, 2024, the Company hedged the price to purchase approximately 45.0 million pounds and 53.0 million pounds of lead, respectively, for a total purchase price of $45,237 and $49,977, respectively.

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts and options to hedge a portion of the Company’s foreign currency exposures for lead, as well as other foreign currency exposures so that gains and losses on these contracts offset changes in the underlying foreign currency denominated exposures. The vast majority of such contracts are for a period not extending beyond one year. As of June 30, 2024 and March 31, 2024, the Company had entered into a total of $42,676 and $46,159, respectively, of such contracts.

Interest Rate Swap Agreements

The Company is exposed to changes in variable interest rates on borrowings under our credit agreement. On a selective basis, from time to time, it enters into interest rate swap agreements to reduce the negative impact that increases in interest rates could have on our outstanding variable rate debt. At June 30, 2024 and March 31, 2024 such agreements effectively convert $200,000 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.

Derivatives in Net Investment Hedging Relationships

Net Investment Hedges

The Company uses cross currency fixed interest rate swaps to hedge its net investments in foreign operations against future volatility in the exchange rates between the U.S. Dollar and Euro.

On September 29, 2022, the Company entered into cross-currency fixed interest rate swap contracts with an aggregate notional amount of $150,000, maturing on December 15, 2027. Additionally, on July 2, 2024, the Company entered into cross-currency fixed interest rate swap contracts with an aggregate notional amount of $150,000, maturing on January 15, 2029. The cross-currency fixed interest rate swap contracts qualify for hedge accounting as a net investment hedging instrument, which allows for them to be remeasured to foreign currency translation adjustment within AOCI (“Accumulated Other Comprehensive Income”) to offset the translation risk from those investments. Balances in the foreign currency translation adjustment accounts remain until the sale or substantially complete liquidation of the foreign entity, upon which they are recognized as a component of other income (expense).

Impact of Hedging Instruments on AOCI

In the coming twelve months, the Company anticipates that $6,293 of pretax (gain) relating to lead, foreign currency forward contracts and net investment hedges will be reclassified from AOCI as part of cost of goods sold and interest expense. This amount represents the current net unrealized impact of hedging lead, foreign exchange rates and interest rates, which will change as market rates change in the future. This amount will ultimately be realized in the Consolidated Condensed Statements of Income as an offset to the corresponding actual changes in lead, foreign exchange rates and interest costs resulting from variable lead cost, foreign exchange and interest rates hedged.

Derivatives not Designated in Hedging Relationships

Foreign Currency Forward Contracts

The Company also enters into foreign currency forward contracts to economically hedge foreign currency fluctuations on intercompany loans and foreign currency denominated receivables and payables. These are not designated as hedging instruments and changes in fair value of these instruments are recorded directly in the Consolidated Condensed Statements of Income. As of June 30, 2024 and March 31, 2024, the notional amount of these contracts was $69,415 and $69,319, respectively.

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Presented below in tabular form is information on the location and amounts of derivative fair values in the Consolidated Condensed Balance Sheets and derivative gains and losses in the Consolidated Condensed Statements of Income:

Fair Value of Derivative Instruments

June 30, 2024 and March 31, 2024


	Derivatives and Hedging Activities Designated as Cash Flow Hedges				Derivatives and Hedging Activities Designated as Net Investment Hedges				Derivatives and Hedging Activities Not Designated as Hedging Instruments
	June 30, 2024		March 31, 2024		June 30, 2024		March 31, 2024		June 30, 2024		March 31, 2024
Prepaid and other current assets:
Lead forward contracts	$	—	$	—	$	—	$	—	$	—	$	—
Foreign currency forward contracts	318		396		—		—		153		—
Net investment hedges	—		—		—		—		—		—
Other assets:
Interest rate swaps	2,960		2,696		—		—		—		—
Net investment hedges	—		—		—		—		—		—
Total assets	$	3,278	$	3,092	$	—	$	—	$	153	$	—
Accrued expenses:
Lead forward contracts	$	168	$	835	$	—	$	—	$	—	$	—
Foreign currency forward contracts	—		—		—		—		—		391
Other liabilities:
Interest rate swaps	—		—		—		—		—		—
Net investment hedges	—		—		17,173		19,167		—		—
Total liabilities	$	168	$	835	$	17,173	$	19,167	$	—	$	391

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

For the quarter ended June 30, 2024


Derivatives Designated as Cash Flow Hedges	Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)		Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Lead forward contracts	$	2,731	Cost of goods sold	$	(1,486)
Foreign currency forward contracts	347		Cost of goods sold	49
Interest rate swaps	1,082		Interest expense	818
Total	$	4,160		$	(619)


Derivatives Designated as Net Investment Hedges	Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)		Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Cross currency fixed interest rate swaps	$	2,258	Interest expense	$	264
Total	$	2,258		$	264


Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Pretax Gain (Loss)
Foreign currency forward contracts	Other (income) expense, net	$	354
Total		$	354

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

For the quarter ended July 2, 2023


Derivatives Designated as Cash Flow Hedges	Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)		Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Lead forward contracts	$	475	Cost of goods sold	$	630
Foreign currency forward contracts	899		Cost of goods sold	3,095
Interest rate swaps	4,849		Interest expense	171
Total	$	6,223		$	3,896

Derivatives Designated as Net Investment Hedges	Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)		Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Cross currency fixed interest rate swaps	$	(2,790)	Interest expense	$	112
Total	$	(2,790)		$	112


Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Pretax Gain (Loss)
Foreign currency forward contracts	Other (income) expense, net	$	(503)
Total		$	(503)

7. Income Taxes

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the first quarter of fiscal 2025 and 2024 was based on the estimated effective tax rates applicable for the full years ending March 31, 2025 and March 31, 2024, respectively, after giving effect to items specifically related to the interim periods. The Company’s effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions, in which the Company operates, changes in tax laws and the amount of the Company's consolidated earnings before taxes.

The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective for taxable years beginning after December 31, 2023. While it is uncertain whether the U.S. will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. The impact of the enacted legislation is identified below. The Company will continue to monitor and evaluate as new legislation and guidance is issued.

The consolidated effective income tax rates for the first quarter of fiscal 2025 and 2024 were 11.6% and 9.2%. The effective tax rate increase in the first quarter compared to the first quarter of the prior year is primarily due to a discrete foreign exchange tax benefit related to undistributed earnings in first quarter of fiscal 2024, impact of Pillar 2, and mix of earnings among tax jurisdictions.

Foreign income as a percentage of worldwide income is estimated to be 49% for fiscal 2025 compared to 51% for fiscal 2024. The foreign effective tax rates for the current quarter of fiscal 2025 and 2024 were 14% and 12%, respectively. The foreign effective tax rate increase in the first quarter compared to the first quarter of the prior year is primarily due to the impact of Pillar 2. Income from the Company's Swiss subsidiary comprised a substantial portion of the Company's overall foreign mix of income for both fiscal 2025 and fiscal 2024 and were taxed at an effective income tax rate of approximately 11% and 8%, respectively.

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8. Warranty

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


	Quarter ended
	June 30, 2024		July 2, 2023
Balance at beginning of period	$	60,819	$	56,630
Current period provisions	7,147		8,685
Costs incurred	(5,865)		(7,446)

Foreign currency translation adjustment	(368)		569
Balance at end of period	$	61,733	$	58,438

9. Commitments, Contingencies and Litigation

Litigation and Other Legal Matters

In the ordinary course of business, the Company and its subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings are generally based on alleged violations of environmental, anticompetition, employment, contract and other laws. In some of these actions and proceedings, claims for substantial monetary damages are asserted against the Company and its subsidiaries. In the ordinary course of business, the Company and its subsidiaries are also subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations, and threatened legal actions and proceedings. In connection with formal and informal inquiries by federal, state, local and foreign agencies, the Company and its subsidiaries receive numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of their activities.

European Competition Investigations

Certain of the Company’s European subsidiaries had received subpoenas and requests for documents and, in some cases, interviews from, and have had on-site inspections conducted by, the competition authorities of Belgium, Germany and the Netherlands relating to conduct and anticompetitive practices of certain industrial battery participants. As of June 30, 2024 and March 31, 2024, the Company did not have a reserve balance related to these matters.

The precise scope, timing and time period at issue, as well as the final outcome of the investigations or customer claims, remain uncertain. Accordingly, the Company’s estimate may change from time to time, and actual losses could vary.

Environmental Issues

As a result of its operations, the Company is subject to various federal, state, and local, as well as international environmental laws and regulations and is exposed to the costs and risks of registering, handling, processing, storing, transporting, and disposing of hazardous substances, especially lead and acid. The Company’s operations are also subject to federal, state, local and international occupational safety and health regulations, including laws and regulations relating to exposure to lead in the workplace. The Company believes that it has adequate reserves to satisfy its environmental liabilities.

Lead, Foreign Currency Forward Contracts and Swaps

To stabilize its lead costs and reduce volatility from currency and interest rate movements, the Company entered into contracts with financial institutions. The vast majority of lead and foreign currency contracts are for a period not extending beyond one year. The Company also entered into a cross currency fixed interest rate swap agreement, maturing on December 15, 2027, to hedge its net investments in foreign operations against future volatility in the exchange rates between the U.S. Dollar and Euro. The Company also entered into floating to fixed interest rate swap agreements maturing on September 30, 2026, to hedge its exposure to variable interest rates. Please refer to Note 6 - Derivative Financial Instruments for more details.

10. Restructuring and Other Exit Charges

Restructuring Programs

As disclosed in the 2024 Annual Report, the Company committed to restructuring plans aimed at improving operational efficiencies across its lines of business primarily incurring severance payments and other related charges. A substantial portion of these plans are complete with an estimated $2,154 remaining to be incurred by the end of fiscal 2025, mainly related to new plans started in fiscal 2024. Restructuring and exit charges for the first quarter of fiscal 2025 by reportable segments are as follows:


	Quarter ended June 30, 2024
	Energy Systems		Motive Power		Specialty		Total
Restructuring charges	$	2,938	$	829	$	289	$	4,056
Exit charges	839		566		477		1,882
Restructuring and other exit charges	$	3,777	$	1,395	$	766	$	5,938

A roll-forward of the restructuring reserve, excluding exit charges, is as follows:


Balance as of March 31, 2024	$	2,408
Accrued	4,056
Costs incurred	(4,391)
Foreign currency impact	(15)
Balance as of June 30, 2024	$	2,058

Exit Charges

Fiscal 2024 Program

Renewables

On November 8, 2023, the Company's Board of Directors approved a plan to stop production and operations of residential renewable energy products, which include our OutBack and Mojave brands. Management determined that residential renewable energy products no longer fit with the Company’s core strategy and resources will be better allocated toward commercial energy solutions for enterprise customers. The Company currently estimates that the total charges for these actions will amount to approximately $24,500. Non-cash charges for inventory and fixed assets write-offs, and impairment of an indefinite-lived intangible asset are estimated to be $23,600, and cash charges for employee severance and retention payments are estimated to be $900. The plan was substantially complete as the end of fiscal 2024.

During fiscal 2024, the Company recorded non-cash charges totaling $551 primarily related to fixed assets and cash charges of $689 related to severance costs. The Company also recorded a non-cash write-offs relating to inventories of $17,075, which was reported in cost of goods sold, and impairment of indefinite lived intangible asset of $6,020.

Spokane

On November 8, 2023, the Company committed to a plan to close its facility in Spokane, Washington, which primarily manufactures enclosure systems for telecommunications and related end markets. Management determined that existing manufacturing locations have the capacity to satisfy demand for these products and will execute more efficient distribution to customers. The Company currently estimates that the total charges for these actions will amount to approximately $3,600 relating to $1,400 in cash charges for employee severance, and non-cash charges of $2,200 relating to fixed assets, facility lease, and inventory. The plan was substantially complete as the end of fiscal 2024.

During fiscal 2024, the Company recorded cash charges of $1,343 primarily related to severance costs and non-cash charges totaling $2,066 related to lease right of use asset and fixed asset write-offs.

During the current quarter of fiscal 2025, the Company recorded cash charges of $839 primarily related to manufacturing variances.

Fiscal 2023 Programs

Sylmar

In November 2022, the Company committed to a plan to close its facility in Sylmar, California, which manufactured 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. The Company currently estimates total charges in the exit to amount to $13,206. Cash charges are estimated to total $9,314 primarily relating to severance and other costs to leave the site. Non-cash charges are estimated to be $3,892 relating to fixed assets, inventory, and contract assets. The plan was substantially complete as the end of fiscal 2024.

During fiscal 2023, the Company recorded cash charges of $1,682 related primarily related to severance costs and non-cash charges totaling $417 primarily relating to contract assets.

During fiscal 2024, the Company recorded cash charges of $7,155 related primarily related to severance costs, relocation expenses, and manufacturing variances, and non-cash charges totaling $377. The Company also recorded a non-cash write-off relating to inventories of $3,098, which was reported in cost of goods sold.

During the current quarter of fiscal 2025, the Company recorded cash charges of $477 primarily related to relocation expenses.

Ooltewah

On June 29, 2022, the Company committed to a plan to close its facility in Ooltewah, Tennessee, which produced flooded motive power batteries for electric forklifts. Management determined that future demand for traditional motive power flooded cells will decrease as customers transition to maintenance free product solutions in lithium and TPPL. The Company currently estimates that the total charges for these actions will amount to approximately $18,500. Cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses are estimated to be $9,200 and non-cash charges from inventory and fixed asset write-offs are estimated to be $9,300. These actions will result in the reduction of approximately 165 employees. The plan was substantially complete as the end of fiscal 2024.

During fiscal 2023, the Company recorded cash charges relating to severance and manufacturing variances of $2,735 and non-cash charges of $7,261 relating to fixed asset write-offs. The Company also recorded a non-cash write-off relating to inventories of $1,613, which was reported in cost of goods sold.

During fiscal 2024, the Company recorded cash charges relating to site cleanup and decommissioning equipment of $4,399.

Fiscal 2021 Program

Hagen, Germany

In fiscal 2021, the Company's Board of Directors approved a plan to close substantially all of its facility in Hagen, Germany, which produced flooded motive power batteries for electric forklifts. Management determined that future demand for the motive power batteries produced at this facility was not sufficient, given the conversion from flooded to maintenance free batteries by customers, the existing number of competitors in the market, as well as the near term decline in demand and increased uncertainty from the pandemic. The Company plans to retain the facility with limited sales, service and administrative functions along with related personnel for the foreseeable future.

The Company currently estimates that the total charges for these actions will amount to approximately $60,000, of which cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses were estimated to be $40,000 and non-cash charges from inventory and equipment write-offs were estimated to be $20,000. The majority of these charges were recorded as of January 1, 2023. These actions resulted in the reduction of approximately 200 employees.

During fiscal 2021, the Company recorded cash charges relating to severance of $23,331 and non-cash charges of $7,946 primarily relating to fixed asset write-offs.

During fiscal 2022, the Company recorded cash charges primarily relating to severance of $8,069 and non-cash charges of $3,522 primarily relating to fixed asset write-offs. The Company also recorded a non-cash write-off relating to inventories of $960, which was reported in cost of goods sold.

During fiscal 2023, the Company recorded cash charges of $2,207 relating to primarily to site cleanup and $562 of non-cash charges relating to accelerated depreciation of fixed assets.

During fiscal 2024, the Company recorded cash charges of $2,118 relating primarily to site cleanup and $526 of non-cash charges relating to accelerated depreciation of fixed assets.

During the current quarter of fiscal 2025, the Company recorded cash charges of $449 relating primarily to site cleanup and $118 of non-cash charges relating to accelerated depreciation of fixed assets.

11. Debt

The following summarizes the Company’s long-term debt as of June 30, 2024 and March 31, 2024:


	June 30, 2024				March 31, 2024
	Principal		Unamortized Issuance Costs		Principal		Unamortized Issuance Costs
Senior Notes	$	600,000	$	6,122	$	600,000	$	6,064
Fourth Amended Credit Facility, due 2026	275,000		1,774		210,000		1,971

	$	875,000	$	7,896	$	810,000	$	8,035
Less: Unamortized issuance costs	7,896				8,035
Long-term debt, net of unamortized issuance costs	$	867,104			$	801,965

The Company's Senior Notes comprise the following:

4.375% Senior Notes due 2027

On December 11, 2019, the Company issued $300,000 in aggregate principal amount of its 4.375% Senior Notes due December 15, 2027 (the “2027 Notes”). Proceeds from this offering, net of debt issuance costs were $296,250 and were utilized to pay down the Amended 2017 Revolver (defined below). The 2027 Notes bear interest at a rate of 4.375% per annum accruing from December 11, 2019. Interest is payable semiannually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020. The 2027 Notes mature on December 15, 2027, unless earlier redeemed or repurchased in full and are unsecured and unsubordinated obligations of the Company. They are fully and unconditionally guaranteed, jointly and severally, by certain of its subsidiaries that are guarantors under the Fourth Amended Credit Facility (defined below). These guarantees are unsecured and unsubordinated obligations of such guarantors.

The Company may redeem, prior to September 15, 2027, all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest and a “make whole” premium to, but excluding, the redemption date. The Company may redeem, on or after September 15, 2027, all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of the 2027 Notes, plus accrued and unpaid interest to, but excluding, the redemption date. If a change of control triggering event occurs, the Company will be required to offer to repurchase the 2027 Notes at a price in cash equal to 101% of the aggregate principal amount of the 2027 Notes, plus accrued and unpaid interest to, but excluding, the date of repurchase.

6.625% Senior Notes due 2032

On January 11, 2024, the Company issued $300,000 in aggregate principal amount of its 6.625% Senior Notes due January 15, 2032 (the “2032 Notes”). Proceeds from this offering, net of debt issuance costs were $297,000 and were utilized to pay down the Fourth Amended Credit Facility. The 2032 Notes bear interest at a rate of 6.625% per annum accruing from January 11, 2024. Interest is payable semiannually in arrears on January 15 and July 15 of each year, commencing on July 15, 2024. The 2032 Notes mature on January 15, 2032, unless earlier redeemed or repurchased in full and are unsecured and unsubordinated obligations of the Company. They are fully and unconditionally guaranteed, jointly and severally, by certain of its subsidiaries that are guarantors under the Fourth Amended Credit Facility (defined below). These guarantees are unsecured and unsubordinated obligations of such guarantors.

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The Company may redeem, prior to January 15, 2027, all or a portion of the 2032 Notes at a price equal to 100% of the aggregate principal amount of the 2032 Notes to be redeemed, plus accrued and unpaid interest and a “make whole” premium to, but excluding, the redemption date. The Company may redeem, on or after January 15, 2027, all or a portion of the 2032 Notes at a price equal to 100% of the principal amount of the 2032 Notes, plus accrued and unpaid interest and a redemption premium to, but excluding, the redemption date. The Company may, in compliance with certain conditions, on any one or more occasions redeem up to 40% of the original aggregate principal amount of the 2032 Notes, with the net cash proceeds of one or more equity offerings at a price equal to 106.625% of the aggregate principal amount of the 2032 Notes, plus accrued and unpaid interest to, but excluding, the redemption date. If a change of control triggering event occurs, the Company will be required to offer to repurchase the 2032 Notes at a price in cash equal to 101% of the aggregate principal amount of the 2032 Notes, plus accrued and unpaid interest to, but excluding, the date of repurchase.

2017 Credit Facility and Subsequent Amendments

In fiscal 2018, the Company entered into a credit facility (the “2017 Credit Facility”). The 2017 Credit Facility was scheduled to mature on September 30, 2022, initially comprised a $600,000 senior secured revolving credit facility (“2017 Revolver”) and a $150,000 senior secured term loan (“2017 Term Loan”). The Company utilized the borrowings from the 2017 Credit Facility to repay its pre-existing credit facility.

In fiscal 2019, the Company amended the 2017 Credit Facility (as amended, the “Amended Credit Facility”) to fund the Alpha acquisition. The Amended Credit Facility consisted of $449,105 senior secured term loans (the “Amended Term Loan”), including a CAD 133,050 ($99,105) senior secured term loan and a $700,000 senior secured revolving credit facility (the “Amended Revolver”). The amendment resulted in an increase of the 2017 Term Loan and the 2017 Revolver by $299,105 and $100,000, respectively.

During the second quarter of fiscal 2022, the Company entered into a second amendment to the 2017 Credit Facility (as amended, the “Second Amended Credit Facility”). The Second Amended Credit Facility, scheduled to mature on September 30, 2026, consists of a $130,000 senior secured term loan (the “Second Amended Term Loan”), a CAD 106,440 ($84,229) senior secured term loan and an $850,000 senior secured revolving credit facility (the “Second Amended Revolver”). The second amendment resulted in a decrease of the Amended Term Loan by $150,000 and an increase of the Amended Revolver by $150,000.

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 Third Amended Credit Facility provides a new incremental delayed-draw senior secured term loan up to $300,000 (the “Third Amended Term Loan”), which shall be available to draw at any time until March 15, 2023. Once drawn, 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 $1,161 in third party administrative and legal fees recognized in interest expense and capitalized $1,096 in charges from existing lenders as a deferred asset. During the fourth quarter of fiscal 2023, the Company drew $300,000 in the form of the Third Amended Term Loan. Additionally, the Company derecognized the capitalized deferred asset and recognized the $1,096 as 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”). 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.

In the fourth quarter of fiscal year 2024, we received proceeds from the issuance of the 2032 Senior Notes and paid down $86,488 and $188,750 towards the Second and Third Amended Term loans and wrote off $753 in deferred finance costs.

Subsequent to the fourth amendment, the quarterly installments payable on the Second Amended Term Loan are $2,598 beginning December 31, 2022, $3,897 beginning December 31, 2024 and $5,196 beginning December 31, 2025 with a final payment of $155,873 on September 30, 2026. The Fourth Amended Credit Facility may be increased by an aggregate amount of $350,000 in revolving commitments and /or one or more new tranches of term loans, under certain conditions. Both the Second Amended Revolver and the Second Amended Term Loan bear interest, at the Company's option, at a rate per annum equal to either (i) the SOFR plus 10 basis points plus (i) between 1.125% and 2.25% (currently 1.125% and based on the Company's consolidated net leverage ratio) or (ii) the U.S. Dollar Base Rate or Canadian Prime Rate plus between 0.125% and 1.25%, which equals, for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate plus 0.50%, (b) Bank of America “Prime Rate” and (c) the Eurocurrency Base Rate plus 1%; provided that, if the Base Rate shall be less than zero, such rate shall be deemed zero) (iii) the CDOR Base Rate equal to the higher of (a) Bank of America “Prime Rate” and (b) average 30-day CDOR rate plus 0.50%.

The quarterly installments payable on the Third Amended Term Loan were $3,750 beginning June 30, 2023, $5,625 beginning December 31, 2024 and $7,500 beginning December 31, 2025 with a final payment of $232,500 on September 30, 2026. The

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Third Amended Term Loan bears interest, at the Company's option, at a rate per annum equal to either (i) SOFR plus 10 basis points plus (i) between 1.375% and 2.50% (currently 1.375% and based on the Company's consolidated net leverage ratio) or (ii) the U.S. Dollar Base Rate plus between 0.375% and 1.50%, which equals, for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate plus 0.50%, (b) Bank of America “Prime Rate” and (c) the Term SOFR plus 1%; provided that, if the Base Rate shall be less than zero, such rate shall be deemed zero). Until the funds were drawn on March 13, 2023, the Company paid a commitment fee of 0.175% to 0.35% at a rate per annum on the unused portion.

Obligations under the Fourth Amended Credit Facility are secured by substantially all of the Company’s existing and future acquired assets, including substantially all of the capital stock of the Company’s United States subsidiaries that are guarantors under the Fourth Amended Credit Facility and up to 65% of the capital stock of certain of the Company’s foreign subsidiaries that are owned by the Company’s United States subsidiaries.

The Fourth Amended Credit Facility allows for up to two temporary increases in the maximum leverage ratio to 4.50x from 4.00x to 4.25x for a four quarter period following an acquisition larger than $250,000. Effective with the Fourth Amended Credit Facility, the maximum leverage ratio increased from 3.50x to 4.25x effective to the last day of the second quarter of fiscal year 2024 and decreasing subsequently to 4.00x.

As of June 30, 2024, the Company had $65,000 outstanding under the Second Amended Revolver, $110,000 under the Second Amended Term Loan, and $100,000 outstanding under the Third Amended Term Loan.

Current Portion of Debt

The scheduled repayments within the next twelve months, relating to the Second Amended Term Loan, is $2,438 and is classified as long-term debt, as the Company expects to refinance the future quarterly payments with revolver borrowings under the Second Amended Credit Facility.

Short-Term Debt

As of June 30, 2024 and March 31, 2024, the Company had $29,960 and $30,444, respectively, of short-term borrowings. The weighted average interest rate on these borrowings was approximately 6.5% and 6.7%, respectively, at June 30, 2024 and March 31, 2024.

Letters of Credit

As of June 30, 2024 and March 31, 2024, the Company had $3,901 and $3,919 of standby letters of credit, respectively.

Debt Issuance Costs

In connection with the Senior Notes, the Company capitalized $4,412 in debt issuance costs and wrote off $753 of unamortized debt issuance costs. Amortization expense, relating to debt issuance costs, included in interest expense was $490 and $410, respectively, for the first quarter ended June 30, 2024 and July 2, 2023. Debt issuance costs, net of accumulated amortization, totaled $7,896 and $8,035, respectively, at June 30, 2024 and March 31, 2024.

Available Lines of Credit

As of June 30, 2024 and March 31, 2024, the Company had available and undrawn, under all its lines of credit, $873,127 and $938,334, respectively, including $90,659 and $90,866, respectively, of uncommitted lines of credit.

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12. Retirement Plans

The following tables present the components of the Company’s net periodic benefit cost related to its defined benefit pension plans:


	United States Plans				International Plans
	Quarter ended				Quarter ended
	June 30, 2024		July 2, 2023		June 30, 2024		July 2, 2023
Service cost	$	—	$	—	$	239	$	220
Interest cost	166		166		621		585
Expected return on plan assets	(47)		(76)		(351)		(406)
Amortization and deferral	(17)		—		144		29

Net periodic benefit cost	$	102	$	90	$	653	$	428

13. Stock-Based Compensation

As of June 30, 2024, the Company maintains the 2023 Equity Incentive Plan (“2023 EIP”). The 2023 EIP reserved 3,614,500 shares of common stock for the grant of various classes of nonqualified stock options, restricted stock units, market condition-based on total shareholder return (“TSR”) and performance condition-based share units (“PSU”) and other forms of equity-based compensation.

The Company recognized stock-based compensation expense associated with its equity incentive plans of $7,062 for the first quarter of fiscal 2025 and $7,933 for the first quarter of fiscal 2024. The Company recognizes compensation expense using the straight-line method over the vesting period of the awards.

During the current quarter of fiscal 2025, the Company granted to non-employee directors 4,023 restricted stock units, under the deferred compensation plan for non-employee directors. The awards vest immediately upon the date of grant and are settled in shares of common stock.

Common stock activity during the current quarter of fiscal 2025 included the exercise of 98,555 stock options and the vesting of 2,664 restricted stock units.

As of June 30, 2024, there were 1,091,554 non-qualified stock options, 1,011,036 restricted stock units including non-employee director restricted stock units and 1,134 TSRs outstanding.

14. Stockholders’ Equity and Noncontrolling Interests

Common Stock

The following demonstrates the change in the number of shares of common stock outstanding during the current quarter ended June 30, 2024:


Shares outstanding as of March 31, 2024						40,271,936
Purchase of treasury stock						(129,433)
Shares issued under equity-based compensation plans, net of equity awards surrendered for option price and taxes						94,550
Shares outstanding as of June 30, 2024						40,237,053

Treasury Stock

During the current quarter ended June 30, 2024, the Company purchased 129,433 shares for $11,641 and did not purchase any shares for the first quarter ended July 2, 2023. At June 30, 2024 and March 31, 2024, the Company held 16,218,300 and

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16,091,988 shares as treasury stock, respectively. During the current quarter ended June 30, 2024, the Company also issued 3,121 shares out of its treasury stock, valued at $62.55 per share to participants under the Company's Employee Stock Purchase Plan. During the prior quarter ended July 2, 2023, the Company issued 3,878 shares out of its treasury stock, valued at $62.55 per share, to participants under the Company's Employee Stock Purchase Plan.

Accumulated Other Comprehensive Income (“AOCI ”)

The components of AOCI, net of tax, as of June 30, 2024 and March 31, 2024, are as follows:


	March 31, 2024		Before Reclassifications		Amounts Reclassified from AOCI		June 30, 2024
Pension funded status adjustment	$	(9,798)	$	—	$	110	$	(9,688)
Net unrealized gain (loss) on derivative instruments	755		3,188		474		4,417
Foreign currency translation adjustment (1)	(195,808)		(13,294)		—		(209,102)
Accumulated other comprehensive (loss) income	$	(204,851)	$	(10,106)	$	584	$	(214,373)

(1) Foreign currency translation adjustment for the current quarter ended June 30, 2024 includes a $1,528 gain (net of taxes of $466) related to the Company's $150,000 cross-currency fixed interest rate swap contract.

Table of Contents

The following table presents reclassifications from AOCI during the first quarter ended June 30, 2024:


Components of AOCI	Amounts Reclassified from AOCI		Location of (Gain) Loss Recognized on Income Statement
Derivatives in cash flow hedging relationships:
Net unrealized loss on derivative instruments	$	619	Cost of goods sold
Tax benefit	(145)
Net unrealized loss on derivative instruments, net of tax	$	474

Derivatives in net investment hedging relationships:
Net unrealized gain on derivative instruments	$	(264)	Interest expense
Tax expense	62
Net unrealized gain on derivative instruments, net of tax	$	(202)

Defined benefit pension costs:
Prior service costs and deferrals	$	127	Net periodic benefit cost, included in other (income) expense, net - See Note 12
Tax benefit	(17)
Net periodic benefit cost, net of tax	$	110

The following table presents reclassifications from AOCI during the first quarter ended July 2, 2023:


Components of AOCI	Amounts Reclassified from AOCI		Location of (Gain) Loss Recognized on Income Statement
Derivatives in cash flow hedging relationships:
Net unrealized gain on derivative instruments	$	(3,896)	Cost of goods sold
Tax expense	911
Net unrealized loss on derivative instruments, net of tax	$	(2,985)

Derivatives in net investment hedging relationships:
Net unrealized gain on derivative instruments	$	(112)	Interest expense
Tax expense	26
Net unrealized gain on derivative instruments, net of tax	$	(86)

Defined benefit pension costs:
Prior service costs and deferrals	$	29	Net periodic benefit cost, included in other (income) expense, net - See Note 12
Tax benefit	(9)
Net periodic benefit cost, net of tax	$	20

Table of Contents

The following demonstrates the change in equity attributable to EnerSys stockholders and nonredeemable noncontrolling interests during the first quarter ended June 30, 2024:


(In Thousands, Except Per Share Data)	Preferred Stock		Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Contra-Equity		Total EnerSys Stockholders’ Equity		Non- redeemable Non- Controlling Interests		Total Equity
Balance at March 31, 2024	$	—	$	564	$	629,879	$	(835,827)	$	2,163,880	$	(204,851)	$	—	$	1,753,645	$	3,427	$	1,757,072
Stock-based compensation	—		—		7,062		—		—		—		—		7,062		—		7,062
Exercise of stock options	—		1		6,963		—		—		—		—		6,964		—		6,964
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net	—		—		—		—		—		—		—		—		—		—
Purchase of common stock	—		—		—		(11,641)		—		—		—		(11,641)		—		(11,641)
Other	—		—		24		185		—		—		—		209		—		209
Net earnings	—		—		—		—		70,111		—		—		70,111		—		70,111
Dividends ($0.225 per common share)	—		—		227		—		(9,271)		—		—		(9,044)		—		(9,044)
Dissolution of joint venture	—		—		—		—		—		—		—		—		—		—
Other comprehensive income:
Pension funded status adjustment (net of tax benefit of $17)	—		—		—		—		—		110		—		110		—		110
Net unrealized gain (loss) on derivative instruments (net of tax benefit of $1,117)	—		—		—		—		—		3,662		—		3,662		—		3,662
Foreign currency translation adjustment	—		—		—		—		—		(13,294)		—		(13,294)		(22)		(13,316)
Balance at June 30, 2024	$	—	$	565	$	644,155	$	(847,283)	$	2,224,720	$	(214,373)	$	—	$	1,807,784	$	3,405	$	1,811,189

The following demonstrates the change in equity attributable to EnerSys stockholders and nonredeemable noncontrolling interests during the first quarter and current quarter ended July 2, 2023:


(In Thousands, Except Per Share Data)	Preferred Stock		Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Contra-Equity		Total EnerSys Stockholders’ Equity		Non- redeemable Non- Controlling Interests		Total Equity
Balance at March 31, 2023	$	—	$	560	$	596,464	$	(740,956)	$	1,930,148	$	(183,474)	$	(2,463)	$	1,600,279	$	3,602	$	1,603,881
Stock-based compensation	—		—		7,933		—		—		—		—		7,933		—		7,933
Exercise of stock options	—		5		7,649		—		—		—		—		7,654		—		7,654

Purchase of common stock	—		—		—		—		—		—		—		—		—		—
Other	—		—		65		214		—		—		—		279		—		279
Net earnings	—		—		—		—		66,797		—		—		66,797		—		66,797
Dividends ( $0.175per common share)	—		—		184		—		(7,357)		—		—		(7,173)		—		(7,173)
Dissolution of joint venture	—		—		—		—		—		—		—		—		—		—
Other comprehensive income:
Pension funded status adjustment (net of tax benefit of $9)	—		—		—		—		—		20		—		20		—		20
Net unrealized gain (loss) on derivative instruments (net of tax benefit of $544)	—		—		—		—		—		1,786		—		1,786		—		1,786
Foreign currency translation adjustment	—		—		—