Delivers Record Gross Margin of 26.6%, Up 490 Basis Points
From Prior Year; EPS of $1.56, Up 86% From Prior Year
Second Quarter Fiscal 2024 Highlights
(All comparisons against the second quarter
of fiscal year 2023 unless otherwise noted)
- Delivered net sales of $901M, a record second quarter
- Achieved record GM of 26.6%, +490 bps, including $22M benefit
from Inflation Reduction Act IRC 45X tax credits
- Generated operating earnings of $89M, +63%, and adjusted
operating earnings(2) of $103M, +58%
- Realized diluted EPS of $1.56, +86%, and adjusted diluted
EPS(1) of $1.84, +66%
- Reduced net leverage(a) to 1.4X EBITDA on operating cash flow
of $111M
- Received initial order for 50 systems from our Fast Charge and
Storage (FC&S) launch customer
- Won Environmental Finance Energy Efficiency Initiative of the
Year award for EOS lean management energy and waste reduction
achievements
EnerSys (NYSE: ENS), the global leader in stored energy
solutions for industrial applications, announced today results for
its second quarter of fiscal 2024, which ended on October 1,
2023.
Message from the CEO
EnerSys delivered solid results in the second quarter driven by
strength in our Motive Power segment, partially offset by lower
performance in our Energy Systems and Specialty lines of business.
We saw record second quarter revenue, slightly up from prior year
which had been bolstered by COVID recovery. We benefited from
robust demand for maintenance-free products within our Motive Power
segment and were able to hold pricing, improving gross margin
significantly over the prior year and maintaining gross margin
sequentially against a record fiscal 2024 first quarter. We saw
solid demand trends in our Specialty business and expect improved
financial performance in the near-term as we rebalance our
production lines. Energy Systems results declined sequentially due
to a continued pause in communication networks customer capex
spend, which we view as temporary. As such, we are taking advantage
of the timing of this demand pause to invest in restructuring and
footprint rationalization within the Energy Systems segment. We are
pleased with our continued ability to generate robust operating
earnings and cash flow. Our healthy and flexible balance sheet
allows for reinvestment in our business while returning capital to
shareholders.
During the quarter, we progressed planning for our lithium
battery gigafactory in the United States. Our new factory will be a
key competitive advantage, providing innovative battery solutions
for both our commercial and US government customers with
independence from over-seas cell suppliers while delivering strong
returns for our shareholders. We are advancing our site selection
process and look forward to sharing the details of the project as
they progress.
We continue to execute our “Innovate, Optimize, Accelerate”
strategy. Subsequent to the quarter end, we were very pleased to
receive a new order for 50 of our proprietary and revolutionary
FC&S energy management systems, which includes applications for
demand charge reduction, utility back-up power, and dynamic fast
charging for EVs. We expect to deliver our first tranche of 15
units by mid-calendar year 2024 and look forward to accelerating
sales in future quarters.
As a global leader in stored energy solutions, we are proud to
be a critical player in the global energy transition. We remain
confident in medium- and long-term demand supported by megatrends
of digitization, automation, electrification and decarbonization.
We remain laser-focused on delivering for our customers and
achieving our long-term financial targets.
David M. Shaffer, President and Chief Executive Officer,
EnerSys
Key Financial Results and
Metrics
Second quarter ended
Six months ended
In millions, except per share amounts
October 1, 2023
October 2, 2022
Change
October 1, 2023
October 2, 2022
Change
Net Sales
$
901.0
$
899.4
0.2
%
$
1,809.6
$
1,798.4
0.6
%
Diluted EPS (GAAP)
$
1.56
$
0.84
$
0.72
$
3.17
$
1.59
$
1.58
Adjusted Diluted EPS
(Non-GAAP)(1)
$
1.84
$
1.11
$
0.73
$
3.72
$
2.26
$
1.46
Gross Profit (GAAP)
$
239.6
$
194.9
$
44.7
$
479.9
$
380.4
$
99.5
Operating Earnings (GAAP)
$
88.6
$
54.3
$
34.3
$
178.0
$
104.4
$
73.6
Adjusted Operating Earnings
(Non-GAAP)(2)
$
103.5
$
65.4
$
38.1
$
210.7
$
130.2
$
80.5
Net Earnings (GAAP)
$
65.2
$
34.5
$
30.7
$
132.0
$
65.5
$
66.5
EBITDA (Non-GAAP)(3)
$
108.2
$
78.5
$
29.7
$
219.5
$
150.5
$
69.0
Adjusted EBITDA (Non-GAAP)(3)
$
116.4
$
85.7
$
30.7
$
238.5
$
171.2
$
67.3
Share Repurchases
$
47.3
$
—
$
47.3
$
47.3
$
22.9
$
24.4
Dividend per share
$
0.225
$
0.175
$
0.05
$
0.40
$
0.350
$
0.05
Total Capital Returned to
Stockholders
$
56.5
$
7.1
$
49.4
$
63.7
$
37.1
$
26.6
(a) Net leverage ratio is a non-GAAP financial measure as
defined pursuant to our credit agreement and discussed under
Reconciliations of GAAP to Non-GAAP Financial Measures.
(1) Adjusted Diluted EPS is a non-GAAP financial measure and
discussed under Reconciliations of GAAP to Non-GAAP Financial
Measures.
(2) Operating Earnings are adjusted for charges that the Company
incurs as a result of restructuring and exit activities, impairment
of goodwill and indefinite-lived intangibles and other assets,
acquisition activities and those charges and credits that are not
directly related to operating unit performance. A reconciliation of
operating earnings to Non-GAAP adjusted earnings are provided in
tables under the section titled Business Segment Operating
Results.
(3) Net Earnings are adjusted for depreciation, amortization,
interest and income taxes to arrive at Non-GAAP EBITDA. Non-GAAP
Adjusted EBITDA is further adjusted for certain charges such as
restructuring and exit activities, impairment of goodwill and
indefinite-lived intangibles and other assets, acquisition
activities and other charges and credits as discussed under
Reconciliations of GAAP to Non-GAAP Financial Measures.
Summary of Results
Second Quarter 2024
Net sales for the second quarter of fiscal 2024 were $901.0
million, an increase of 0.2% from the prior year second quarter net
sales of $899.4 million. The increase compared to prior year
quarter was the result of a 6% increase in price/mix, and a 1%
increase in foreign currency translation impact, offset by an 7%
decrease in organic growth.
Net earnings attributable to EnerSys stockholders (“Net
earnings”) for the second quarter of fiscal 2024 was $65.2 million,
or $1.56 per diluted share, which included an unfavorable
highlighted net of tax impact of $11.3 million, or $0.28 per
diluted share, from highlighted items described in further detail
in the tables shown below, reconciling non-GAAP adjusted financial
measures to reported amounts.
Net earnings for the second quarter of fiscal 2023 was $34.5
million, or $0.84 per diluted share, which included an unfavorable
highlighted net of tax impact of $11.1 million, or $0.27 per
diluted share, from highlighted items described in further detail
in the tables shown below, reconciling non-GAAP adjusted financial
measures to reported amounts.
Excluding these highlighted items, adjusted Net earnings per
diluted share for the second quarter of fiscal 2024, on a non-GAAP
basis, were $1.84, compared to the guidance of $1.77 to $1.87 per
diluted share for the second quarter given by the Company on August
9, 2023. These earnings compare to the prior year second quarter
adjusted Net earnings of $1.11 per diluted share. Please refer to
the section included herein under the heading “Reconciliations of
GAAP to Non-GAAP Financial Measures” for a discussion of the
Company’s use of non-GAAP adjusted financial information, which
includes tables reconciling GAAP and non-GAAP adjusted financial
measures for the quarters ended October 1, 2023 and October 2,
2022.
In the first quarter of fiscal 2024 we introduced a new line of
business, New Ventures, that includes energy storage and management
systems for demand charge reduction, utility back-up power, and
dynamic fast charging for electric vehicles. The financial results
of the New Ventures segment includes start up operating expenses
and is included in the Corporate and other line in our operating
earnings.
Fiscal Year to Date 2024
Net sales for the six months of fiscal 2024 were $1,809.6
million, an increase of 0.6% from the prior year six months net
sales of $1,798.4 million. This increase was due to an 8% increase
in pricing, and a 1% increase in foreign currency translation
impact, partially offset by an 8% decrease in organic growth.
Net earnings for the six months of fiscal 2024 was $132.0
million, or $3.17 per diluted share, which included an unfavorable
highlighted net of tax impact of $23.1 million, or $0.55 per
diluted share, from highlighted items described in further detail
in the tables shown below, reconciling non-GAAP adjusted financial
measures to reported amounts.
Net earnings for the six months of fiscal 2023 was $65.5
million, or $1.59 per diluted share, which included an unfavorable
highlighted net of tax impact of $27.6 million, or $0.67 per
diluted share, from highlighted items described in further detail
in the tables shown below, reconciling non-GAAP adjusted financial
measures to reported amounts.
Adjusted Net earnings per diluted share for the six months of
fiscal 2024, on a non-GAAP basis, were $3.72. This compares to the
prior year six months adjusted Net earnings of $2.26 per diluted
share. Please refer to the section included herein under the
heading “Reconciliations of GAAP to Non-GAAP Financial Measures”
for a discussion of the Company’s use of non-GAAP adjusted
financial information.
Third Quarter 2024 Outlook
In the third quarter of fiscal 2024, we expect:
- Adjusted diluted earnings per share in the range of $1.80 to
$1.90, inclusive of $0.50 to $0.60 from IRC 45X tax benefits under
the IRA. Note that the IRS has not yet issued additional
clarification guidance related to section 45X which could
materially increase or decrease the quantity of our U.S. produced
batteries that qualify for this credit.
- Gross margin in the range of 25.0% to 27.0%, including 150bps
to 250bps from IRA credits.
- For the full year of fiscal 2024, we expect capital
expenditures to be in the range of $100 million to $120
million.
"We remain very optimistic about the trajectory of our business,
and are particularly pleased with our ability to maintain pricing
during the quarter. We have officially launched our New Ventures
business. We received our initial order for Fast Charge and Storage
systems from our launch customer, and our order pipeline is gaining
momentum. In the near term, while we are seeing pockets of strong
demand, we expect to continue to operate in a dynamic macro
environment and we are managing our business prudently to mitigate
risk. We are well-positioned to capitalize on market opportunities
and benefit from strong growth as the near-term macro headwinds
stabilize," said Andrea Funk, EnerSys Chief Financial Officer.
Please refer to the section included herein under the heading
“Reconciliations of GAAP to Non-GAAP Financial Measures” for a
discussion of the Company’s use of non-GAAP adjusted financial
information.
Conference Call and Webcast Details
The Company will host a conference call to discuss its second
quarter 2024 financial results at 9:00 AM (EST) Thursday, November
9, 2023. A live broadcast as well as a replay of the call can be
accessed through the Investor Relations section of the company’s
website at https://investor.enersys.com.
To join the live call, please register through the events
section of our Investor Relations webpage at
https://register.vevent.com/register/BIee7733f23742443a93be34544c0a6fce.
A dial-in and unique PIN will be provided upon registration.
About EnerSys
EnerSys is the global leader in stored energy solutions for
industrial applications, designs, manufactures and distributes
energy systems solutions and motive power batteries, specialty
batteries, battery chargers, power equipment, battery accessories
and outdoor equipment enclosure solutions to customers worldwide.
The company goes to market through four lines of business: Energy
Systems, Motive Power, Specialty and New Ventures. Energy Systems,
which combine power conversion, power distribution, energy storage,
and enclosures, are used in the telecommunication, broadband, and
utility industries, uninterruptible power supplies, and numerous
applications requiring stored energy solutions. Motive power
batteries and chargers are utilized in electric forklift trucks and
other industrial electric powered vehicles. Specialty batteries are
used in aerospace and defense applications, large over-the-road
trucks, premium automotive, medical and security systems
applications. New Ventures provides energy storage and management
systems for various applications including demand charge reduction,
utility back-up power, and dynamic fast charging for electric
vehicles. EnerSys also provides aftermarket and customer support
services to its customers in over 100 countries through its sales
and manufacturing locations around the world. More information
regarding EnerSys can be found at www.enersys.com.
Sustainability
Sustainability at EnerSys is about more than just the benefits
and impacts of our products. Our commitment to sustainability
encompasses many important environmental, social and governance
issues. Sustainability is a fundamental part of how we manage our
own operations. Minimizing our environmental footprint is a
priority. Sustainability is our commitment to our employees, our
customers and the communities we serve. Our products facilitate
positive environmental, social and economic impacts around the
world. To learn more visit:
https://www.enersys.com/en/about-us/sustainability/.
Caution Concerning Forward-Looking Statements
This press release, and oral statements made regarding the
subjects of this release, contains forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act
of 1995, or the Reform Act, which may include, but are not limited
to, statements regarding EnerSys’ earnings estimates, intention to
pay quarterly cash dividends, return capital to stockholders,
plans, objectives, expectations and intentions and other statements
contained in this press release that are not historical facts,
including statements identified by words such as “believe,” “plan,”
“seek,” “expect,” “intend,” “estimate,” “anticipate,” “will,” and
similar expressions. All statements addressing operating
performance, events, or developments that EnerSys expects or
anticipates will occur in the future, including statements relating
to sales growth, earnings or earnings per share growth, order
intake, backlog, payment of future cash dividends, commodity
prices, execution of its stock buy back program, judicial or
regulatory proceedings, and market share, as well as statements
expressing optimism or pessimism about future operating results or
benefits from its cash dividend, its stock buy back programs,
application of Section 45X of the Internal Revenue Code, future
responses to and effects of the COVID-19 pandemic, adverse
developments with respect to the economic conditions in the U.S. in
the markets in which we operate and other uncertainties, including
the impact of supply chain disruptions, interest rate changes,
inflationary pressures, geopolitical and other developments and
labor shortages on the economic recovery and our business are
forward-looking statements within the meaning of the Reform Act.
The forward-looking statements are based on management's current
views and assumptions regarding future events and operating
performance, and are inherently subject to significant business,
economic, and competitive uncertainties and contingencies and
changes in circumstances, many of which are beyond the Company’s
control. The statements in this press release are made as of the
date of this press release, even if subsequently made available by
EnerSys on its website or otherwise. EnerSys does not undertake any
obligation to update or revise these statements to reflect events
or circumstances occurring after the date of this press
release.
Although EnerSys does not make forward-looking statements unless
it believes it has a reasonable basis for doing so, EnerSys cannot
guarantee their accuracy. The foregoing factors, among others,
could cause actual results to differ materially from those
described in these forward-looking statements. For a list of other
factors which could affect EnerSys’ results, including earnings
estimates, see EnerSys’ filings with the Securities and Exchange
Commission, including “Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations,” and
“Forward-Looking Statements,” set forth in EnerSys’ Annual Report
on Form 10-K for the fiscal year ended March 31, 2023. No undue
reliance should be placed on any forward-looking statements.
EnerSys
Consolidated Condensed
Statements of Income (Unaudited)
(In millions, except share and
per share data)
Quarter ended
Six months ended
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net sales
$
901.0
$
899.4
$
1,809.6
$
1,798.4
Gross profit
239.6
194.9
479.9
380.4
Operating expenses
143.8
137.3
288.4
264.4
Restructuring and other exit charges
7.2
3.3
13.5
11.6
Operating earnings
88.6
54.3
178.0
104.4
Earnings before income taxes
73.4
40.3
146.9
77.1
Income tax expense
8.2
5.8
14.9
11.6
Net earnings attributable to EnerSys
stockholders
$
65.2
$
34.5
$
132.0
$
65.5
Net reported earnings per common share
attributable to EnerSys stockholders:
Basic
$
1.59
$
0.85
$
3.23
$
1.61
Diluted
$
1.56
$
0.84
$
3.17
$
1.59
Dividends per common share
$
0.225
$
0.175
$
0.40
$
0.35
Weighted-average number of common shares
used in reported earnings per share calculations:
Basic
40,922,959
40,740,989
40,930,146
40,763,663
Diluted
41,684,634
41,167,622
41,691,479
41,260,134
EnerSys
Consolidated Condensed Balance
Sheets (Unaudited)
(In Thousands, Except Share
and Per Share Data)
October 1, 2023
March 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
327,751
$
346,665
Accounts receivable, net of allowance for
doubtful accounts: October 1, 2023 - $9,688; March 31, 2023 -
$8,775
536,501
637,817
Inventories, net
776,503
797,798
Prepaid and other current assets
145,497
113,601
Total current assets
1,786,252
1,895,881
Property, plant, and equipment, net
510,524
513,283
Goodwill
677,349
676,715
Other intangible assets, net
346,324
360,412
Deferred taxes
47,416
49,152
Other assets
125,128
121,231
Total assets
$
3,492,993
$
3,616,674
Liabilities and Equity
Current liabilities:
Short-term debt
$
30,544
$
30,642
Accounts payable
322,805
378,641
Accrued expenses
311,918
309,037
Total current liabilities
665,267
718,320
Long-term debt, net of unamortized debt
issuance costs
949,934
1,041,989
Deferred taxes
60,547
61,118
Other liabilities
153,864
191,366
Total liabilities
1,829,612
2,012,793
Commitments and contingencies
Equity:
Preferred Stock, $0.01 par value,
1,000,000 shares authorized, no shares issued or outstanding at
October 1, 2023 and at March 31, 2023
—
—
Common Stock, $0.01 par value per share,
135,000,000 shares authorized, 56,347,317 shares issued and
40,771,015 shares outstanding at October 1, 2023; 56,004,613 shares
issued and 40,901,059 shares outstanding at March 31, 2023
563
560
Additional paid-in capital
612,490
596,464
Treasury stock at cost, 15,576,302 shares
held as of October 1, 2023 and 15,103,554 shares held as of March
31, 2023
(787,888
)
(740,956
)
Retained earnings
2,045,416
1,930,148
Contra equity - indemnification
receivable
(1,988
)
(2,463
)
Accumulated other comprehensive loss
(208,607
)
(183,474
)
Total EnerSys stockholders’ equity
1,659,986
1,600,279
Nonredeemable noncontrolling interests
3,395
3,602
Total equity
1,663,381
1,603,881
Total liabilities and equity
$
3,492,993
$
3,616,674
Nonredeemable noncontrolling interests
3,395
3,602
Total equity
1,663,381
1,603,881
Total liabilities and equity
$
3,492,993
$
3,616,674
EnerSys
Consolidated Condensed
Statements of Cash Flows (Unaudited)
(In Thousands)
Six months ended
October 1, 2023
October 2, 2022
Cash flows from operating
activities
Net earnings
$
132,026
$
65,450
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
45,214
46,405
Write-off of assets relating to exit
activities
4,146
9,081
Derivatives not designated in hedging
relationships:
Net (losses) gains
1,204
472
Cash (settlements) proceeds
695
(2,015
)
Provision for doubtful accounts
1,456
206
Deferred income taxes
46
(126
)
Non-cash interest expense
820
974
Stock-based compensation
13,077
11,864
(Gain) loss on disposal of property,
plant, and equipment
158
(135
)
Changes in assets and liabilities:
Accounts receivable
93,368
(18,409
)
Inventories
10,529
(138,327
)
Prepaid and other current assets
(13,891
)
(17,544
)
Other assets
(1,306
)
(266
)
Accounts payable
(57,233
)
(21,417
)
Accrued expenses
(44,803
)
(9,443
)
Other liabilities
217
2,929
Net cash provided by (used in) operating
activities
185,723
(70,301
)
Cash flows from investing
activities
Capital expenditures
(35,854
)
(39,653
)
Purchase of business
(8,270
)
—
Proceeds from termination of net
investment hedges
—
43,384
Proceeds from disposal of property, plant,
and equipment
2,007
376
Net cash (used in) investing
activities
(42,117
)
4,107
Cash flows from financing
activities
Net (repayments) borrowings on short-term
debt
(61
)
(17,067
)
Proceeds from Second Amended Revolver
borrowings
172,500
244,100
Repayments of Second Amended Revolver
borrowings
(252,500
)
(184,100
)
Repayments of Second and Third Amended
Term Loans
(12,736
)
—
Financing costs for debt modification
—
(1,096
)
Option proceeds, net
9,668
114
Payment of taxes related to net share
settlement of equity awards
(7,348
)
(6,257
)
Purchase of treasury stock
(47,340
)
(22,907
)
Dividends paid to stockholders
(16,341
)
(14,246
)
Other
690
568
Net cash (used in) provided by financing
activities
(153,468
)
(891
)
Effect of exchange rate changes on cash
and cash equivalents
(9,052
)
(40,980
)
Net decrease in cash and cash
equivalents
(18,914
)
(108,065
)
Cash and cash equivalents at beginning of
period
346,665
402,488
Cash and cash equivalents at end of
period
$
327,751
$
294,423
Reconciliations of GAAP to Non-GAAP
Financial Measures
This press release contains financial information determined by
methods other than in accordance with U.S. Generally Accepted
Accounting Principles, ("GAAP"). EnerSys' management uses the
non-GAAP measures “adjusted Net earnings”, “adjusted Diluted EPS”,
“adjusted operating earnings”, “adjusted EBITDA”, "adjusted EBITDA
per credit agreement", "net debt", "net leverage ratio", “net sales
at constant currency”, and "net sales growth rate at constant
currency” as applicable, in their analysis of the Company's
performance. Adjusted Net earnings and adjusted operating earnings
measure, as used by EnerSys in past quarters and years, adjusts Net
earnings and operating earnings determined in accordance with GAAP
to reflect changes in financial results associated with the
Company's restructuring initiatives and other highlighted charges
and income items. Adjusted EBITDA is a key performance measure that
our management uses to assess our operating performance. Because
Adjusted EBITDA facilitates internal comparisons of our historical
operating performance on a more consistent basis, we use this
measure as an overall assessment of our performance, to evaluate
the effectiveness of our business strategies and for business
planning purposes. We calculate Adjusted EBITDA as net income
before interest income, interest expense, other (income) expense
net, provision (benefit) for income taxes, depreciation and
amortization, further adjusted to exclude restructuring and exit
activities, impairment of goodwill, indefinite-lived intangibles
and other assets, acquisition activities and those charges and
credits that are not directly related to operating unit
performance. EBITDA is calculated as net income before interest
income, interest expense, other (income) expense net, provision
(benefit) for income taxes, depreciation and amortization. We
define non-GAAP adjusted EBITDA per credit agreement as net
earnings determined in accordance with GAAP for interest, taxes,
depreciation and amortization, and certain charges or credits as
permitted by our credit agreements, that were recorded during the
periods presented. We define non-GAAP net debt as total debt,
finance lease obligations and letters of credit, net of all cash
and cash equivalents, as defined in the Fourth Amended Credit
Facility on the balance sheet as of the end of the most recent
fiscal quarter. We define non-GAAP net leverage ratio as non-GAAP
net debt divided by last twelve months non-GAAP adjusted EBITDA per
credit agreement. We define non-GAAP free cash flow as net cash
provided by or used in operating activities less capital
expenditures. Free cash flow is used by investors, financial
analysts, rating agencies and management to help evaluate the
Company’s ability to generate cash to pursue incremental
opportunities aimed toward enhancing shareholder value. We define
non-GAAP constant currency net sales as total net sales excluding
the effect of foreign exchange rate movements, and we use it to
determine the constant currency growth rate on a year-on-year
basis. Non-GAAP constant currency revenues are calculated by
translating current period revenues using the prior comparative
periods’ actual exchange rates, rather than the actual exchange
rates in effect during the current period. Constant currency net
sales growth rate is calculated by determining the difference
between current period non-GAAP constant currency net sales and
current period reported net sales divided by prior period as
reported net sales. Management believes the presentation of these
financial measures reflecting these non-GAAP adjustments provides
important supplemental information in evaluating the operating
results of the Company as distinct from results that include items
that are not indicative of ongoing operating results and overall
business performance; in particular, those charges that the Company
incurs as a result of restructuring activities, impairment of
goodwill and indefinite-lived intangibles and other assets,
acquisition activities and those charges and credits that are not
directly related to operating unit performance, such as significant
legal proceedings, amortization of Alpha and NorthStar related
intangible assets (and, beginning in fiscal 2024, amortization of
all intangible assets) and tax valuation allowance changes,
including those related to the AHV (Old-Age and Survivors
Insurance) Financing (TRAF) in Switzerland. Because these charges
are not incurred as a result of ongoing operations, or are incurred
as a result of a potential or previous acquisition, they are not as
helpful a measure of the performance of our underlying business,
particularly in light of their unpredictable nature and are
difficult to forecast. Although we exclude the amortization of
purchased intangibles from these non-GAAP measures, management
believes that it is important for investors to understand that such
intangible assets were recorded as part of purchase accounting and
contribute to revenue generation.
Income tax effects of non-GAAP adjustments are calculated using
the applicable statutory tax rate for the jurisdictions in which
the charges (benefits) are incurred, while taking into
consideration any valuation allowances. For those items which are
non-taxable, the tax expense (benefit) is calculated at 0%.
EnerSys does not provide a quantitative reconciliation of the
company’s projected range for adjusted diluted earnings per share
for the second quarter of fiscal 2024 to diluted earnings per
share, which is the most directly comparable GAAP measure, in
reliance on the unreasonable efforts exception provided under Item
10(e)(1)(i)(B) of Regulation S-K. EnerSys' adjusted diluted
earnings per share guidance for the second quarter of fiscal 2024
excludes certain items, including but not limited to certain
non-cash, large and/or unpredictable charges and benefits, charges
from restructuring and exit activities, impairment of goodwill and
indefinite-lived intangibles, acquisition and disposition
activities, legal judgments, settlements, or other matters, and tax
positions, that are inherently uncertain and difficult to predict,
can be dependent on future events that are less capable of being
controlled or reliably predicted by management and are not part of
the Company's routine operating activities can be dependent on
future events that are less capable of being controlled or reliably
predicted by management and are not part of the Company's routine
operating activities. Due to the uncertainty of the occurrence or
timing of these future excluded items, management cannot accurately
forecast many of these items for internal use and therefore cannot
create a quantitative adjusted diluted earnings per share for the
second quarter of fiscal 2024 to diluted earnings per share
reconciliation without unreasonable efforts.
These non-GAAP disclosures have limitations as an analytical
tool, should not be viewed as a substitute for operating earnings,
Net earnings or net income determined in accordance with GAAP, and
should not be considered in isolation or as a substitute for
analysis of the Company's results as reported under GAAP, nor are
they necessarily comparable to non-GAAP performance measures that
may be presented by other companies. Management believes that this
non-GAAP supplemental information will be helpful in understanding
the Company's ongoing operating results. This supplemental
presentation should not be construed as an inference that the
Company's future results will be unaffected by similar adjustments
to Net earnings determined in accordance with GAAP.
A reconciliation of non-GAAP net sales and growth rates in
constant currency are set forth in the table below, providing a
reconciliation of non-GAAP constant currency net sales to the
Company’s reported net sales for its business segments.
Quarter ended
Six months ended
($ millions)
($ millions)
October 1, 2023
October 2, 2022
Growth rate
October 1, 2023
October 2, 2022
Growth rate
Energy Systems reported net
sales
$
422.5
$
437.0
(3.3
)%
$
847.1
$
845.6
0.2
%
Exchange rate effect
(0.7
)
2.4
Energy Systems constant currency net
sales
421.8
(3.5
)
849.5
0.5
Motive Power reported net sales
$
355.2
$
338.0
5.1
%
$
706.0
$
705.9
—
%
Exchange rate effect
(3.9
)
(4.3
)
Motive Power constant currency net
sales
351.3
3.9
701.7
(0.6
)
Specialty reported net sales
$
123.3
$
124.4
(0.9
)%
$
256.5
$
246.9
3.9
%
Exchange rate effect
(1.4
)
(2.0
)
Specialty constant currency net
sales
121.9
(2.1
)
254.5
3.1
Total reported net sales
$
901.0
$
899.4
0.2
%
$
1,809.6
$
1,798.4
0.6
%
Exchange rate effect
(6.0
)
(3.9
)
Total constant currency net
sales
895.0
(0.5
)
1,805.7
0.4
A reconciliation of non-GAAP adjusted operating earnings is set
forth in the table below, providing a reconciliation of non-GAAP
adjusted operating earnings to the Company’s reported operating
results for its business segments. Corporate and other includes
amounts managed on a company-wide basis and not directly allocated
to any reportable segments, primarily relating to IRA production
tax credits. Also, included are start up costs for exploration of a
new lithium plant as well as start-up operating expenses from the
New Ventures operating segment.
Business Segment Operating Results
Quarter ended
($ millions)
October 1, 2023
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
$
422.5
$
355.2
$
123.3
$
—
$
901.0
Operating Earnings
$
16.8
$
49.6
$
3.3
$
18.9
$
88.6
Restructuring and other exit charges
2.2
3.5
1.5
—
7.2
Amortization of intangible assets
6.3
0.2
0.7
—
7.2
Other
0.3
0.1
0.1
—
0.5
Adjusted Operating Earnings
$
25.6
$
53.4
$
5.6
$
18.9
$
103.5
Quarter ended
($ millions)
October 2, 2022
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
$
437.0
$
338.0
$
124.4
$
—
$
899.4
Operating Earnings
$
9.8
$
35.6
$
8.9
$
—
$
54.3
Inventory adjustment relating to exit
activities
—
1.5
—
—
1.5
Restructuring and other exit charges
0.8
2.5
—
—
3.3
Amortization of intangible assets
5.8
—
0.4
6.2
Other
—
0.1
—
0.1
Adjusted Operating Earnings
$
16.4
$
39.7
$
9.3
$
—
$
65.4
Increase (Decrease) as a % from prior
year quarter
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
(3.3
)%
5.1
%
(0.9
)%
NM
0.2
%
Operating Earnings
72.2
39.2
(62.8
)
NM
63.3
Adjusted Operating Earnings
55.8
34.4
(39.9
)
NM
58.1
NM = Not Meaningful
Six months ended
($ millions)
October 1, 2023
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
$
847.1
$
706.0
$
256.5
$
—
$
1,809.6
Operating Earnings
$
39.0
$
97.8
$
4.9
$
36.3
$
178.0
Inventory adjustment relating to exit
activities
—
—
3.1
—
3.1
Restructuring and other exit charges
2.7
5.0
5.8
—
13.5
Amortization of identified intangible
assets from recent acquisitions
12.5
0.3
1.4
—
14.2
Other
1.1
0.6
0.2
—
1.9
Adjusted Operating Earnings
$
55.3
$
103.7
$
15.4
$
36.3
$
210.7
Six months ended
($ millions)
October 2, 2022
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
$
845.6
$
705.9
$
246.9
$
—
$
1,798.4
Operating Earnings
$
17.3
$
69.7
$
17.4
$
0.0
$
104.4
Inventory adjustment relating to exit
activities
—
1.5
—
—
1.5
Restructuring and other exit charges
1.0
10.6
—
—
11.6
Amortization of identified intangible
assets from recent acquisitions
11.8
—
0.8
—
12.6
Other
—
0.1
—
—
0.1
Adjusted Operating Earnings
$
30.1
$
81.9
$
18.2
$
0.0
$
130.2
Increase (Decrease) as a % from prior
year
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
0.2
%
NM
3.9
%
NM
0.6
%
Operating Earnings
NM
40.2
(71.7
)
NM
70.6
Adjusted Operating Earnings
83.9
26.5
(15.5
)
NM
61.7
NM = Not Meaningful
Reconciliations of GAAP to Non-GAAP
Financial Measures (Unaudited)
The table below presents a reconciliation of
Net Earnings to EBITDA and Adjusted EBITDA:
Quarter ended
Six months ended
($ millions)
($ millions)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Net Earnings
$
65.2
$
34.5
132.0
$
65.5
Depreciation
15.4
14.8
31.0
30.3
Amortization
7.2
8.0
14.2
16.1
Interest
12.2
15.4
27.4
27.0
Income Taxes
8.2
5.8
14.9
11.6
EBITDA
108.2
78.5
219.5
150.5
Non-GAAP adjustments
8.2
7.2
19.0
20.7
Adjusted EBITDA
$
116.4
$
85.7
$
238.5
$
171.2
The following table provides the non-GAAP adjustments shown in
the reconciliation above:
Quarter ended
Six months ended
($ millions)
($ millions)
October 1, 2023
October 2, 2022
October 1, 2023
October 2, 2022
Restructuring and other exit charges
7.2
4.8
16.6
13.1
Other
1.0
1.1
2.4
1.1
Remeasurement of monetary assets included
in other (income) expense relating to exit from Russia
operations
—
(0.1
)
—
5.1
Cost of funding to terminate net
investment hedges
—
1.4
—
1.4
Non-GAAP adjustments
$
8.2
$
7.2
$
19.0
$
20.7
The table below presents a reconciliation of
Operating Cash Flow to Free Cash Flow:
Six Months Ended
October 1, 2023
October 2, 2022
Net cash provided by (used in) operating
activities
185,723
(70,301
)
Less Capital Expenditures
(35,854
)
(39,653
)
Free Cash Flow
$
149,869
$
(109,954
)
The following table provides a reconciliation of Net earnings to
EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) per credit
agreement for October 1, 2023 and October 2, 2022, in connection
with the Third Amended Credit Facility:
Last twelve months
October 1, 2023
October 2, 2022
(in millions, except
ratios)
Net earnings as reported
$
242.4
$
129.9
Add back:
Depreciation and amortization
90.0
92.0
Interest expense
59.9
46.1
Income tax expense
38.2
28.9
EBITDA (non-GAAP)
430.5
296.9
Adjustments per credit agreement
definitions(1)
48.9
62.3
Adjusted EBITDA (non-GAAP) per credit
agreement(1)
$
479.4
$
359.2
Total net debt(2)
662.0
1,045.5
Leverage ratios:
Total net debt/credit adjusted EBITDA
ratio
1.4 X
2.9 X
(1)
The $48.9 million adjustment to EBITDA in
the last twelve months ending October 1, 2023 primarily related to
$27.6 million of non-cash stock compensation, $17.6 million of
restructuring and other exit charges, impairment of
indefinite-lived intangibles and write-down of other current assets
of $3.6 million. The $62.3 million adjustment to EBITDA in the last
twelve months ending October 2, 2022 primarily related to $26.7
million of non-cash stock compensation, $28.0 million of
discontinuing operations, $4.0 million of restructuring and other
exit charges, $1.4 million related to termination of a swap
agreement, indefinite-lived intangibles of $1.2 million and $1.0
million write-down of non-current assets.
(2)
Debt includes finance lease obligations
and letters of credit and is net of all U.S. cash and cash
equivalents and foreign cash and investments, as defined in the
Fourth Amended Credit Facility. last twelve months ending October
1, 2023 and October 2, 2022, the amounts deducted in the
calculation of net debt were U.S. cash and cash equivalents and
foreign cash investments of $327.8 million, and in fiscal 2022,
were $294.4 million.
Included below is a reconciliation of historical non-GAAP
adjusted Net earnings to reported amounts. Non-GAAP adjusted
operating earnings and historical Net earnings are calculated
excluding restructuring and other highlighted charges and credits.
The following tables provide additional information regarding
certain non-GAAP measures:
Quarter ended
(in millions, except share and
per share amounts)
October 1, 2023
October 2, 2022
Net earnings reconciliation
As reported Net Earnings
$
65.2
$
34.5
Non-GAAP adjustments:
Restructuring and other exit charges
7.2
(1)
4.8
(1)
Amortization of identified intangible
assets
7.2
(2)
6.2
(2)
Remeasurement of monetary assets included
in other (income) expense relating to exit from Russia
operations
—
(0.1
)
Cost of funding to terminate net
investment hedges
—
1.4
Financing fees related to debt
modification
—
1.2
Other
1.0
1.1
Income tax effect of above non-GAAP
adjustments
(4.1
)
(3.5
)
Non-GAAP adjusted Net earnings
$
76.5
$
45.6
Outstanding shares used in per share
calculations
Basic
40,922,959
40,740,989
Diluted
41,684,634
41,167,622
Non-GAAP adjusted Net earnings per
share:
Basic
$
1.87
$
1.12
Diluted
$
1.84
$
1.11
Reported Net earnings (Loss) per
share:
Basic
$
1.59
$
0.85
Diluted
$
1.56
$
0.84
Dividends per common share
$
0.225
$
0.175
The following table provides the line of business allocation of
the non-GAAP adjustments of items relating operating earnings (that
are allocated to lines of business) shown in the reconciliation
above:
Quarter ended
($ millions)
October 1, 2023
October 2, 2022
Pre-tax
Pre-tax
(1) Inventory adjustment relating to exit
activities - Motive Power
$
—
$
1.5
(1) Restructuring and other exit charges -
Energy Systems
2.2
0.8
(1) Restructuring and other exit charges -
Motive Power
3.5
2.5
(1) Restructuring and other exit charges -
Specialty
1.5
—
(2) Amortization of identified intangible
assets - Energy Systems
6.3
5.8
(2) Amortization of identified intangible
assets - Motive
0.2
—
(2) Amortization of identified intangible
assets acquisitions - Specialty
0.7
0.4
Total Non-GAAP adjustments
$
14.4
$
11.0
Six months ended
(in millions, except share and
per share amounts)
October 1, 2023
October 2, 2022
Net Earnings reconciliation
As reported Net Earnings
$
132.0
$
65.5
Non-GAAP adjustments:
Restructuring and other exit charges
16.6
(1)
13.1
(1)
Amortization of identified intangible
assets from recent acquisitions
14.2
(2)
12.6
(2)
Remeasurement of monetary assets included
in other (income) expense relating to exit from Russia
Operations
—
5.1
Other
2.4
1.1
Cost of funding to terminate net
investment hedges
—
1.4
Financing fees related to debt
modification
—
1.2
Income tax effect of above non-GAAP
adjustments
(10.1
)
(6.9
)
Non-GAAP adjusted Net Earnings
$
155.1
$
93.1
Outstanding shares used in per share
calculations
Basic
40,930,146
40,763,663
Diluted
41,691,479
41,260,134
Non-GAAP adjusted Net Earnings per
share:
Basic
$
3.79
$
2.28
Diluted
$
3.72
$
2.26
Reported Net Earnings (Loss) per
share:
Basic
$
3.23
$
1.61
Diluted
$
3.17
$
1.59
Dividends per common share
$
0.40
$
0.35
The following table provides the line of business allocation of
the non-GAAP adjustments of items relating operating earnings (that
are allocated to lines of business) shown in the reconciliation
above:
Six months ended
($ millions)
October 1, 2023
October 2, 2022
Pre-tax
Pre-tax
(1) Inventory adjustment relating to exit
activities - Motive Power
$
—
$
1.5
(1) Inventory Adjustment relating to exit
activities - Specialty
3.1
—
(1) Restructuring and other exit charges -
Energy Systems
2.7
1.0
(1) Restructuring and other exit charges -
Motive Power
5.0
10.6
(1) Restructuring and other exit charges -
Specialty
5.8
—
(2) Amortization of identified intangible
assets from recent acquisitions - Energy Systems
12.5
11.8
(2) Amortization of identified intangible
assets from recent acquisitions - Motive Power
0.3
—
(2) Amortization of identified intangible
assets from recent acquisitions - Specialty
1.4
0.8
Total Non-GAAP adjustments
$
30.8
$
25.7
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231108098792/en/
Lisa Hartman Investor Relations and Financial Media
EnerSys 610-236-4040 E-mail:
investorrelations@enersys.com
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