~~ENERSYS~~

~~Consolidated Condensed Statements of Income (Unaudited)~~

~~(In Thousands, Except Share and Per Share Data)~~

Nine months ended
December 31, 2017 January 1, 2017
Net sales $ 1,898,849
$ 1,740,348
Cost of goods sold 1,408,913
1,254,678
Inventory adjustment relating to exit activities —
2,157
Gross profit 489,936
483,513
Operating expenses 283,478
277,512
Restructuring charges 4,417
5,037
Legal proceedings charge —
17,000
Operating earnings 202,041
183,964
Interest expense 18,712
16,820
Other (income) expense, net 4,736
(496 )
Earnings before income taxes 178,593
167,640
Income tax expense 112,899
43,133
Net earnings 65,694
124,507
Net earnings (losses) attributable to noncontrolling interests 118
(1,937 )
Net earnings attributable to EnerSys stockholders $ 65,576
$ 126,444
Net earnings per common share attributable to EnerSys stockholders:
Basic $ 1.53
$ 2.92
Diluted $ 1.51
$ 2.88
Dividends per common share $ 0.525
$ 0.525
Weighted-average number of common shares outstanding:
Basic 42,837,986
43,375,474
Diluted 43,345,926
43,943,010

~~See accompanying notes.~~

~~Table of Contents~~

~~ENERSYS~~EnerSys

Consolidated Condensed Statements of Comprehensive Income (Unaudited)

(In Thousands)

Quarter ended Nine months ended
December 31, 2017 January 1, 2017 December 31, 2017 January 1, 2017
Net (loss) earnings $ (25,779 ) $ 37,095
$ 65,694
$ 124,507
Other comprehensive (loss) income:
Net unrealized (loss) gain on derivative instruments, net of tax
(587 ) (2,017 ) 29
411
Pension funded status adjustment, net of tax 331
198
996
747
Foreign currency translation adjustment 14,053
(52,754 ) 86,901
(74,922 )
Total other comprehensive gain (loss), net of tax 13,797
(54,573 ) 87,926
(73,764 )
Total comprehensive (loss) income (11,982 ) (17,478 ) 153,620
50,743
Comprehensive income (loss) attributable to noncontrolling interests 156
648
237
(2,343 )
Comprehensive (loss) income attributable to EnerSys stockholders $ (12,138 ) $ (18,126 ) $ 153,383
$ 53,086


	Quarter ended
	July 2, 2023		July 3, 2022
Net earnings	$	66,797	$	30,978
Other comprehensive income (loss):
Net unrealized gain (loss) on derivative instruments, net of tax	$	1,786	(8,234)
Pension funded status adjustment, net of tax	$	20	89
Foreign currency translation adjustment	$	2,002	(52,220)
Total other comprehensive income (loss), net of tax	$	3,808	(60,365)
Total comprehensive income (loss)	$	70,605	(29,387)
Comprehensive income (loss) attributable to noncontrolling interests	$	(190)	(210)
Comprehensive income (loss) attributable to EnerSys stockholders	$	70,795	$	(29,177)

See accompanying notes.

Table of Contents

~~ENERSYS~~EnerSys

Consolidated Condensed Statements of Cash Flows (Unaudited)

(In Thousands)


	Nine months ended							Quarter ended
	December 31, 2017			January 1, 2017				July 2, 2023		July 3, 2022
Cash flows from operating activities							Cash flows from operating activities
Net earnings	$	65,694		$	124,507		Net earnings	$	66,797	$	30,978
Adjustments to reconcile net earnings to net cash provided by operating activities:							Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	40,320			40,468			Depreciation and amortization	22,693		23,624
Write-off of assets relating to restructuring charges	210			1,435
Non-cash write-off of property, plant and equipment	—			6,300
Write-off of assets relating to exit activities							Write-off of assets relating to exit activities	3,343		7,445

Derivatives not designated in hedging relationships:							Derivatives not designated in hedging relationships:
Net (gains) losses	(105		)	202
Cash settlements	(234		)	(646		)
Net (losses) gains							Net (losses) gains	503		(216)
Cash (settlements) proceeds							Cash (settlements) proceeds	657		(600)
Provision for doubtful accounts	775			1,952			Provision for doubtful accounts	504		(173)
Deferred income taxes	(7,228		)	(683		)	Deferred income taxes	42		20
Non-cash interest expense	1,289			1,041			Non-cash interest expense	410		487
Stock-based compensation	14,773			14,556			Stock-based compensation	7,933		5,330
Loss (gain) on disposal of property, plant, and equipment	69			(10		)
Legal proceedings accrual	—			17,000
Changes in assets and liabilities, net of effects of acquisitions:

(Gain) loss on disposal of property, plant, and equipment							(Gain) loss on disposal of property, plant, and equipment	43		(40)

Changes in assets and liabilities:							Changes in assets and liabilities:
Accounts receivable	12,987			22,843			Accounts receivable	73,198		5,538
Inventories	(44,389		)	(55,888		)	Inventories	(10,965)		(81,454)
Prepaid and other current assets	(1,241		)	(11,545		)	Prepaid and other current assets	(4,089)		(5,465)
Other assets	(1,142		)	857			Other assets	(484)		(886)
Accounts payable	(10,619		)	(14,701		)	Accounts payable	(39,307)		(33,073)
Accrued expenses	(30,485		)	13,856			Accrued expenses	(46,647)		(24,973)
Other liabilities	89,228			5,163			Other liabilities	315		1,567
Net cash provided by operating activities	129,902			166,707
Net cash provided by (used in) operating activities							Net cash provided by (used in) operating activities	74,946		(71,891)

Cash flows from investing activities							Cash flows from investing activities
Capital expenditures	(43,086		)	(36,008		)	Capital expenditures	(16,093)		(23,014)
Purchase of businesses	(2,964		)	(12,392		)
Purchase of business							Purchase of business	(8,270)		—

Proceeds from disposal of property, plant, and equipment	395			568			Proceeds from disposal of property, plant, and equipment	44		139
Net cash used in investing activities	(45,655		)	(47,832		)
Net cash (used in) investing activities							Net cash (used in) investing activities	(24,319)		(22,875)

Cash flows from financing activities							Cash flows from financing activities
Net (payments) borrowings on short-term debt	(1,376		)	13,639
Proceeds from 2017 Revolver borrowings	356,750			—
Proceeds from 2011 Revolver borrowings	147,050			191,300
Repayments of 2017 Revolver borrowings	(111,450		)	—
Repayments of 2011 Revolver borrowings	(312,050		)	(186,750		)
Proceeds from 2017 Term Loan	150,000			—
Repayments of 2011 Term Loan	(127,500		)	(11,250		)
Debt issuance costs	(2,677		)	—
Option proceeds	758			5
Net (repayments) borrowings on short-term debt							Net (repayments) borrowings on short-term debt	(404)		(8,022)
Proceeds from Second Amended Revolver borrowings							Proceeds from Second Amended Revolver borrowings	80,000		163,200

Repayments of Second Amended Revolver borrowings							Repayments of Second Amended Revolver borrowings	(216,380)		(27,200)

Option proceeds, net							Option proceeds, net	7,654		—
Payment of taxes related to net share settlement of equity awards	(7,477		)	(7,668		)	Payment of taxes related to net share settlement of equity awards	—		(633)
Purchase of treasury stock	(121,191		)	—			Purchase of treasury stock	—		(22,907)
Dividends paid to stockholders	(22,339		)	(22,800		)	Dividends paid to stockholders	(7,173)		(7,108)
Other	(19		)	(77		)	Other	354		207
Net cash used in financing activities	(51,521		)	(23,601		)
Net cash (used in) provided by financing activities							Net cash (used in) provided by financing activities	(135,949)		97,537
Effect of exchange rate changes on cash and cash equivalents	38,267			(25,432		)	Effect of exchange rate changes on cash and cash equivalents	(3,001)		(22,016)
Net increase in cash and cash equivalents	70,993			69,842
Net decrease in cash and cash equivalents							Net decrease in cash and cash equivalents	(88,323)		(19,245)
Cash and cash equivalents at beginning of period	500,329			397,307			Cash and cash equivalents at beginning of period	346,665		402,488
Cash and cash equivalents at end of period	$	571,322		$	467,149		Cash and cash equivalents at end of period	$	258,342	$	383,243

See accompanying notes.

~~ENERSYS~~

Table of Contents

EnerSys

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

(In Thousands, Except Share and Per Share Data)

1. Basis of Presentation

The accompanying 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 ~~accruals)~~adjustments except those otherwise described herein) considered necessary for a fair presentation have been included, unless otherwise disclosed. Operating results for the ~~three and nine-month periods~~current quarter ended ~~December 31, 2017~~July 2, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, ~~2018.~~2024.

The ~~consolidated condensed balance sheet~~Consolidated Condensed Balance Sheet at March 31, ~~2017~~2023 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 ~~2017~~2023 Annual Report on Form 10-K (SEC File No. 001-32253), which was filed on May ~~30, 2017~~25, 2023 (the ~~“2017~~“2023 Annual Report”).

~~The Company~~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 ~~2018~~2024 end on July 2, ~~2017,~~2023, October 1, ~~2017,~~2023, December 31, ~~2017,~~2023, and March 31, ~~2018,~~2024, respectively. The four quarters in fiscal ~~2017~~2023 ended on July 3, ~~2016,~~2022, October 2, ~~2016,~~2022, January 1, ~~2017,~~2023, and March 31, ~~2017,~~2023, 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.

~~Recently Issued Accounting Pronouncements~~

Use of Estimates

~~In May 2014,~~The preparation of financial statements in conformity with accounting principles generally accepted in the ~~Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, “Revenue~~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 ~~Contracts~~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, goodwill and intangible assets, valuation allowances on tax assets, pension and postretirement benefit obligations, contingencies and the identification and valuation of assets acquired and liabilities assumed in connection with ~~Customers (Topic 606)” providing guidance on revenue from contracts~~business combinations.

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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 ~~will supersede most current revenue recognition guidance,~~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 ~~industry-specific guidance. The underlying principle is~~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 ~~an entity will recognize revenue to depict~~best depicts the transfer of control of the underlying goods orand services to ~~customers at an amount that~~ the ~~entity expects~~customer for each respective arrangement. Methods used by the Company to ~~be entitled to in exchange for those goods or services. In July 2015, the FASB voted to delay the effective date for interim~~measure progress toward completion include labor hours, costs incurred and ~~annual reporting periods beginning after December 15, 2017, with early adoption permissible one year earlier. The standard permits the use~~units of either modified retrospective or full retrospective transition methods. The Company has substantially completed an impact assessment of the potential changes from adopting ASU 2014-09. The impact assessment included a review of customer arrangements across all of its global business units and an in-depth analysis of its global revenue processes and accounting policies to identify potential areas where change may be needed to comply with this guidance. The Company plans to apply the modified retrospective transition method. The Company assembled an implementation work team to assess and document the accounting conclusionsproduction. Revenues recognized over time for the ~~adoption~~first quarter of ~~ASU 2014-09. Based on this analysis,~~fiscal 2024 and 2023 amounted to $58,654 and $57,004, respectively.

On July 2, 2023, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $149,294, of which, the Company ~~does not believe the adoption of the ASU~~estimates that approximately $119,987 will ~~have~~be recognized as revenue in fiscal 2024, $29,242 in fiscal 2025, and $18 in fiscal 2026, $23 in fiscal 2027, and $24 thereafter.

Any payments that are received from a ~~material impact~~customer in advance, prior to the ~~consolidated financial statements. The Company continues to assess the potential impact on accounting policies, internal control processes~~satisfaction of a related performance obligation and ~~related disclosures required under the new guidance.~~

~~In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which sets out the principles for the recognition, measurement, presentation~~billings in excess of revenue recognized, are deferred and ~~disclosure of leases for both parties to~~treated as a contract ~~(i.e. lessees~~liability. Advance payments and ~~lessors). This update requires lessees to apply a dual approach, classifying leases~~billings in excess of revenue recognized are classified as ~~either finance~~current or ~~operating leases~~non-current based on the ~~principle~~timing of ~~whether or not~~when recognition of revenue is expected. As of July 2, 2023, the ~~lease is effectively a financed purchase~~current and non-current portion of contract liabilities were $29,822 and $974, respectively. As of March 31, 2023, the ~~leased asset by the lessee. This classification will determine whether the lease expense is~~current and non-current portion of contract liabilities were $34,594 and $1,437, respectively. Revenues recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. This update is effective for annual periods beginning after December 15, 2018, using a modified retrospective approach, with early adoption permitted. The Company is currently assessing the potential impact that the adoption will have on its consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740)”: Intra-Entity Transfers of Assets Other than Inventory. ASU 2016-16 requires that an entity recognize the income tax consequences of an intra-entity transfer of assets other than inventory when the transfer occurs. This update is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company early adopted the standard on a modified retrospective basis during the first quarter of fiscal ~~2018 through a cumulative-effect adjustment directly to retained earnings of $137, as of~~2024 and 2023 that were included in the contract liability at the beginning of the ~~period~~quarter, amounted to $12,391 and $4,590, respectively.

Amounts representing work completed and not billed to customers represent contract assets and were $56,177 and $48,616 as of ~~adoption.~~July 2, 2023 and March 31, 2023, 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 July 2, 2023, the right of return asset related to the value of inventory anticipated to be returned from customers was $4,748 and refund liability representing amounts estimated to be refunded to customers was $8,317.

3. Accounts Receivable


	July 2, 2023		March 31, 2023
Accounts receivable	$	575,531	$	646,592
Allowance for doubtful accounts	9,033		8,775
Accounts receivable, net	$	566,498	$	637,817

During the third quarter of 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 $150,000. In ~~March 2017,~~return for these sales, the ~~FASB issued ASU No. 2017-07, “Compensation—Retirement Benefits (Topic 715)”~~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"), ~~which requires~~ an entity ~~to report the service cost component of pension and other postretirement benefit costs in the same line item as other compensation costs. The other components of net (benefit) cost will be required~~structured to be ~~presented~~bankruptcy remote, and matures in ~~the income statement separately from the service cost component and outside a subtotal of income from operations. This standard is effective for interim and annual reporting periods beginning after~~ December

~~15, 2017, with early adoption permitted.~~ 2025. The Company is ~~currently assessing~~deemed the ~~potential~~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 ~~adoption will have on its consolidated financial statements.~~entity from the transfer of the trade accounts

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~~In August 2017,~~receivables into the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815)”: Targeted Improvements to Accounting for Hedging Activities, which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activitiesspecial purpose entity.Accordingly, EnerSys Finance is included in the Company’s Consolidated Condensed Financial Statements.

Receivables sold to unaffiliated financial ~~statements.~~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 ~~guidance eliminates~~purchase price is received in cash when the ~~requirement~~receivables are sold, and fees charged relating to ~~separately measure~~this balance are recorded to other (income) expense. Certain unsold receivables held by EnerSys Finance serve as collateral to unaffiliated financial institutions. These unsoldreceivablesareincludedin“Accountsreceivable,net”intheCompany’s Consolidated Balance Sheets. The Company continues servicing the receivables which were sold and ~~report hedge ineffectiveness and generally requires~~in exchange receives a servicing fee from EnerSys Finance under the ~~entire change~~program.

During the first quarter of 2024, the Company sold $182,391 of accounts receivables for approximately $182,391 in proceeds to an unaffiliated financial institution, of which $183,352 were collected as of July 2, 2023. Total collateralized accounts receivables of approximately $228,154 were held by EnerSys Finance at July 2, 2023.

Any accounts receivables held by EnerSys Finance would likely not be available to other creditors of the Company in the ~~fair value~~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 ~~hedging instrument~~result of the insolvency of EnerSys Finance or its inability to ~~be presented in~~pay the same income statement line as the hedged item. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim period or fiscal year before the effective date. The Company is currently assessing the potential impact that the adoption will have on its consolidated financial statements.account debtors.

~~2. Inventories~~

~~Inventories, net consist of:~~

December 31, 2017 March 31, 2017
Raw materials $ 96,666
$ 85,604
Work-in-process 138,540
107,177
Finished goods 186,764
167,913
Total $ 421,970
$ 360,694

4. Inventories


	July 2, 2023		March 31, 2023
Raw materials	$	316,477	$	323,418
Work-in-process	119,320		123,401
Finished goods	373,605		350,979
Total	$	809,402	$	797,798

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 ~~December 31, 2017~~July 2, 2023 and March 31, ~~2017~~,2023, and the basis for that measurement:


	Total Fair Value Measurement December 31, 2017			Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value Measurement July 2, 2023		Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Lead forward contracts	$	47		$	—	$	47		$	—	Lead forward contracts	$	409	$	—	$	409	$	—
Foreign currency forward contracts	(266		)	—		(266		)	—		Foreign currency forward contracts	(196)		—		(196)		—
Interest Rate Swaps											Interest Rate Swaps	3,057		—		3,057		—
Net investment hedges											Net investment hedges	(18,661)		—		(18,661)		—
Total derivatives	$	(219	)	$	—	$	(219	)	$	—	Total derivatives	$	(15,391)	$	—	$	(15,391)	$	—

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

Overview

EnerSys (the “Company,” “we,” or “us”) is ~~the world’s largest manufacturer, marketer and distributor of~~a world leader in stored energy solutions for industrial ~~batteries.~~applications. We ~~also~~design, manufacture, ~~market~~ and distribute ~~products such as~~energy systems solutions and motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories and outdoor ~~cabinet enclosures. Additionally, we~~equipment enclosure solutions to customers worldwide. Energy Systems, which combine power conversion, power distribution, energy storage, and enclosures, are used in the telecommunication, broadband, data center and utility industries, uninterruptible power supplies, and numerous applications requiring stored energy solutions. Motive Power batteries and chargers are utilized in electric forklift trucks, automated guided vehicles (AGVs), and other industrial electric powered vehicles. Specialty batteries are used in aerospace and defense applications, large over the road trucks, premium automotive and medical products. New Ventures provides energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles. We also provide ~~related~~ aftermarket and ~~customer-support~~customer support services ~~for our products. We market our products globally~~ to over 10,000 customers in more than 100 countries through a network of distributors, independent representatives and our internal sales ~~force.~~

~~We operate and manage our business in three geographic regions of the world—Americas, EMEA and Asia, as described below. Our business is highly decentralized with manufacturing locations throughout~~force around the world. ~~More than half of our manufacturing capacity is located outside the United States, and approximately 50% of our net sales were generated outside the United States.~~

The ~~Company has three reportable business~~Company's four operating segments, based on ~~geographic regions, defined as follows:~~


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


•	~~EMEA, which includes Europe, the Middle East and Africa, with our segment headquarters in Zug, Switzerland; and~~


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

~~We have two primary product lines: reserve power and motive power products. Net sales classifications by product line~~lines of business, are as follows:

•

~~Reserve power products~~

•Energy Systems - uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems, as well as telecommunications systems, switchgear and electrical control systems used in industrial facilities and electric utilities, large-scale energy storage and energy pipelines. Energy Systems also includes highly integrated power solutions and services to broadband, telecom, data center, and renewable and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries.

•Motive Power - power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications, AGVs, as well as mining equipment, diesel locomotive starting and other rail equipment.

•Specialty - premium starting, lighting and ignition applications in transportation, energy solutions for satellites, military aircraft, submarines, ships and other tactical vehicles as well as medical devices and equipment.

•New Ventures - energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles.

are used for backup power for the continuous operation of critical applications in telecommunications systems, uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems, and other specialty power applications, including medical and security systems, premium starting, lighting and ignition applications, in switchgear, electrical control systems used in electric utilities, large-scale energy storage, energy pipelines, in commercial aircraft, satellites, military aircraft, submarines, ships and tactical vehicles. Reserve power products also include thermally managed cabinets and enclosures for electronic equipment and batteries.


•	~~Motive power products~~ are used to provide power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications as well as mining equipment, diesel locomotive starting and other rail equipment.

Economic Climate

~~Recent indicators~~The economic climate in North America, China and EMEA slowed in calendar 2022 after experiencing strong growth during calendar 2021. All regions are experiencing a rise in inflation and are being negatively impacted by the war in Ukraine. We expect interest rates to continue to ~~suggest a mixed trend~~increase in ~~economic activity among~~ the ~~different geographical regions. North America~~U.S. and ~~EMEA~~the Euro zone. China’s slowing economy is facing further headwinds caused by continued high COVID-19 infection rates.

EnerSys is experiencing supply chain disruptions and cost spikes in certain materials such as plastic resins and electronic components along with transportation and related logistics challenges and broad-based cost increases. In addition, certain locations are experiencing ~~moderate economic growth. Our Asia region continues to grow faster than any other region in which we do business.~~difficulty meeting hiring and labor retention goals. Generally, our mitigation efforts and ongoing lean initiatives, have tempered the impact of the pandemic-related challenges. The overall market demand remains robust.

Volatility of Commodities and Foreign Currencies

Our most significant commodity and foreign currency exposures are related to lead and the Euro, respectively. Historically, volatility of commodity costs and foreign currency exchange rates have caused large swings in our production costs. AsSince the ~~global economic climate changes, we anticipate that our commodity costs and foreign currency exposures may continue to fluctuate as they have in the past several years. Over the past~~beginning of fiscal year ~~on a consolidated basis,~~2023, we have experienced ~~rising commodity~~a range in lead prices from just above $1.10 per pound to approximately $0.85 per pound. We are experiencing elevated costs in some of our other raw materials such as plastic resins, steel, copper, acid, separator paper and electronics and elevated freight and increased energy costs. However, these increased costs have moderated during fiscal year 2024.

Customer Pricing

Our selling prices fluctuated during the last several years to offset the volatile cost of commodities. Approximately ~~30%~~25% of our revenue is ~~currently~~now subject to agreements that adjust pricing to a market-based index for lead. ~~During~~Customer pricing changes generally lag movements in lead prices and other costs by approximately six to nine months. In fiscal 2023 and 2024, customer pricing has increased due to certain commodity prices and other costs having increased throughout the ~~nine months of~~year.

Based on current commodity markets, it is difficult to predict with certainty whether commodity prices will be higher or lower in fiscal ~~2018, we increased~~2024 versus fiscal 2023. However, given the lag related to increasing our selling prices for inflationary cost increase, on average our selling prices should be higher in ~~response~~fiscal 2024 versus fiscal 2023. As we concentrate more on energy systems and non-lead chemistries, the emphasis on lead is expected to ~~increased commodity costs.~~continue to decline.

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Primary Operating Capital

As part of managing the performance of our business, we monitor the level of primary operating capital, and its ratio to net sales. We define primary operating capital as accounts receivable, plus inventories, minus accounts payable. The resulting net amount is divided by the trailing three month net sales (annualized) to derive a primary operating capital percentage. We believe these three elements included in primary operating capital are most operationally driven, and this performance measure provides us with information about the asset intensity and operating efficiency of the business on a company-wide basis that management can monitor and analyze trends over time. Primary operating capital was $1,032.6 million (yielding a primary operating capital percentage of 28.4%) at July 2, 2023, $1,057.0 million (yielding a primary operating capital percentage of 26.7%) at March 31, 2023 and $1,131.5 million at July 3, 2022 (yielding a primary operating capital percentage of 31.5%). The primary operating capital percentage of 28.4% at July 2, 2023 worsened by 170 basis points compared to March 31, 2023 and improved 310 basis points compared to July 3, 2022. The increase in primary operating capital percentage at July 2, 2023 compared to March 31, 2023 was primarily due to a reduction in sales compared to the fourth fiscal quarter of the prior fiscal year. The decrease in primary operating capital percentage at July 2, 2023 compared to July 3, 2022 was primarily from the sale of $150.0 million in accounts receivables through a Receivables Purchase Agreement (RPA) entered into during the third quarter of fiscal 2023.

Primary operating capital and primary operating capital percentages at July 2, 2023, March 31, 2023 and July 3, 2022 are computed as follows:


($ in Millions)	July 2, 2023			March 31, 2023			July 3, 2022
Accounts receivable, net	$	566.5		$	637.8		$	697.1
Inventory, net	809.4			797.8			777.7
Accounts payable	(343.3)			(378.6)			(343.3)
Total primary operating capital	$	1,032.6		$	1,057.0		$	1,131.5
Trailing 3 months net sales	$	908.6		$	989.9		$	899.0
Trailing 3 months net sales annualized	$	3,634.4		$	3,959.6		$	3,595.9

Primary operating capital as a % of annualized net sales	28.4		%	26.7		%	31.5		%

Liquidity and Capital Resources

We believe that our financial position is strong, and we have substantial liquidity to cover short-term liquidity requirements and anticipated growth in the foreseeable future, with ~~$571~~$258 million of available cash and cash equivalents and available and undrawn committed credit lines of approximately ~~$504~~$733 million at ~~December 31, 2017~~July 2, 2023, availability subject to ~~cover short-term liquidity requirements and anticipated growth in the foreseeable future.~~credit agreement financial covenants.

In the second quarter of fiscal 2018, we entered into a new credit facility (“2017 Credit Facility”) that comprises a $600 million senior secured revolving credit facility (“2017 Revolver”) and a $150 million senior secured term loan (“2017 Term Loan”) with a maturity date of September 30, 2022. We repaid the existing facility (“2011 Credit Facility”), which comprised a $500 million senior secured revolving credit facility (“2011 Revolver”) and a $150 million senior secured incremental term loan (the “2011 Term Loan”) with the proceeds of the new facility. We believe that the 2017 Credit Facility provides us with sufficient liquidity to fund acquisitions and stock repurchase programs.

In the nine months of fiscal 2018, we repurchased $121 million of treasury stock through an accelerated share repurchase (“ASR”) agreement with a major financial institution and through open market purchases. Share repurchases and a decline in our share price helped offset the dilutive impact of stock awards in the nine months of fiscal 2018.

A substantial majority of the Company’s cash and investments are held by foreign subsidiaries and are considered to be indefinitely reinvested and expected to be utilized to fund local operating activities, capital expenditure requirements and acquisitions. The Company believes that it has sufficient sources of domestic and foreign liquidity.

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During the second quarter of fiscal 2022, we entered into a second amendment to the Amended Credit Facility (as amended, the “Second Amended Credit Facility”). As a result, the Second Amended Credit Facility, now scheduled to mature on September 30, 2026, consists of a $130.0 million senior secured term loan (the “Second Amended Term Loan”), a CAD 106.4 million ($84.2 million) term loan and an $850.0 million senior secured revolving credit facility (the “Second Amended Revolver”). This amendment resulted in a decrease of the Amended Term Loan by $150.0 million and an increase of the Amended Revolver by $150.0 million.

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 provided new incremental delayed-draw senior secured term loan up to $300 million (the “Third Amended Term Loan”), which was available to draw until March 15, 2023. During the fourth quarter, the Company drew $300 million in the form of the Third Amended Term Loan. The funds will mature on September 30, 2026, the same as the Company's Second Amended Term loan and Second Amended Revolver. In connection with the agreement, the Company incurred $1.2 million in third party administrative and legal fees recognized in interest expense and capitalized $1.1 million in charges from existing lenders as a deferred asset. Additionally, the Company derecognized the capitalized deferred asset and recognized the $1.1 million as 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.

We believe that our strong capital structure and liquidity affords us access to capital for future ~~acquisition and~~acquisitions, stock repurchase opportunities and continued dividend payments.

Results of Operations

Net Sales

~~Segment sales~~

Quarter ended
December 31, 2017 Quarter ended
January 1, 2017 Increase (Decrease)
In
Millions Percentage
of Total
Net Sales In
Millions Percentage
of Total
Net Sales In
Millions %
Americas $ 353.2
53.6 % $ 314.0
55.7 % $ 39.2
12.5 %
EMEA 224.9
34.1
186.1
33.0
38.8
20.9
Asia 80.8
12.3
63.6
11.3
17.2
26.9
Total net sales $ 658.9
100.0 % $ 563.7
100.0 % $ 95.2
16.9 %

Nine months ended
December 31, 2017 Nine months ended
January 1, 2017 Increase (Decrease)
In
Millions Percentage
of Total
Net Sales In
Millions Percentage
of Total
Net Sales In
Millions %
Americas $ 1,049.3
55.3 % $ 968.5
55.6 % $ 80.8
8.3 %
EMEA 621.9
32.7
563.8
32.4
58.1
10.3
Asia 227.6
12.0
208.0
12.0
19.6
9.4
Total net sales $ 1,898.8
100.0 % $ 1,740.3
100.0 % $ 158.5
9.1 %

Net sales increased ~~$95.2~~$9.6 million or ~~16.9%~~1.1% in the ~~third~~first quarter of fiscal ~~2018~~2024 as compared to the ~~third~~first quarter of fiscal ~~2017.~~2023. This increase was the result of an 8%9% increase in pricing offset by an 8% decrease in organic ~~volume,~~growth.

Segment sales


	Quarter ended July 2, 2023				Quarter ended July 3, 2022				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Energy Systems	$	424.6	46.7	%	$	408.6	45.5	%	$	16.0	3.9	%
Motive Power	350.8		38.6		367.9		40.9		(17.1)		(4.6)
Specialty	133.2		14.7		122.5		13.6		10.7		8.7
Total net sales	$	908.6	100.0	%	$	899.0	100.0	%	$	9.6	1.1	%

Net sales of our Energy Systems segment in the first quarter of fiscal 2024 increased $16.0 million or 3.9% compared to the first quarter of fiscal 2023. This increase was due to a 5%12% increase in pricing/mix partially offset by a 7% decrease in organic growth and a 1% decrease in foreign currency translation ~~impact and a 4%~~impact. This increase in ~~pricing.~~sales was driven by improvement in pricing partially offset by soft volumes in Europe and Asia.

Net sales ~~increased $158.5 million or 9.1%~~of our Motive Power segment in the nine months of fiscal 2018 from the comparable period in fiscal 2017. This increase was the result of a 4% increase in pricing, a 3% increase in organic volume and a 2% increase in foreign currency translation impact.

~~The Americas segment’s net sales increased $39.2 million or 12.5% in the third~~first quarter of fiscal ~~2018 as~~2024 decreased by $17.1 million or 4.6% compared to the ~~third~~first quarter of fiscal ~~2017,~~2023. This decrease was primarily due to a 9%14% decrease in organic growth partially offset by an 8% increase in organic volume and a 3% increase in pricing. Net sales increased $80.8 million or 8.3% in the nine months of fiscal 2018, as compared to the nine months of fiscal 2017, primarily due to a 5% increase in organic volume and a 3% increase in pricing.

The EMEA segment’s net sales increased $38.8 million or 20.9% in the third quarter of fiscal 2018 as compared to the third quarter of fiscal 2017, primarily due to a 13% increase due to foreign currency translation impact, a 5% increase in pricing and a 3% increase in organic volume. Net sales increased $58.1 million or 10.3% in the nine months of fiscal 2018, as compared to the nine months of fiscal 2017, primarily due to a 5% increase each in pricing and foreign currency translation impact.

The Asia segment’s net sales increased $17.2 million or 26.9% in the third quarter of fiscal 2018 as compared to the third quarter of fiscal 2017, primarily due to a 17% increase in organic volume and a 5% increase each in pricing and foreign currency translation impact. Net sales increased $19.6 million or 9.4% in the nine months of fiscal 2018, as compared to the nine months of fiscal 2017, primarily due to a 4% increase each in pricing and organic volumepricing/mix and a 1% increase ~~due~~from an acquisition. We continue to ~~foreign currency translation impact.~~

~~Product line~~benefit from improved pricing and favorable sales

Quarter ended
December 31, 2017 Quarter ended
January 1, 2017 Increase (Decrease)
In
Millions Percentage
of Total
Net Sales In
Millions Percentage
of Total
Net Sales In
Millions %
Reserve power $ 327.0
49.6 % $ 271.3
48.1 % $ 55.7
20.5 %
Motive power 331.9
50.4
292.4
51.9
39.5
13.5
Total net sales $ 658.9
100.0 % $ 563.7
100.0 % $ 95.2
16.9 %

Nine months ended
December 31, 2017 Nine months ended
January 1, 2017 Increase (Decrease)
In
Millions Percentage
of Total
Net Sales In
Millions Percentage
of Total
Net Sales In
Millions %
Reserve power $ 924.4
48.7 % $ 844.7
48.5 % $ 79.7
9.4 %
Motive power 974.4
51.3
895.6
51.5
78.8
8.8
Total net sales $ 1,898.8
100.0 % $ 1,740.3
100.0 % $ 158.5
9.1 %

mix, partially offset by a return to normal sales patterns to pre-COVID-19 levels.

Net sales of our ~~reserve power products~~Specialty segment in the ~~third~~first quarter of fiscal ~~2018~~2024 increased ~~$55.7~~by $10.7 million or ~~20.5%~~8.7% compared to the ~~third~~first quarter of fiscal ~~2017~~.2023. The increase was primarily due to a ~~11%~~7% increase in ~~organic volume and a 5% increase each in pricing and foreign currency translation impact. Net sales of our reserve power products in the nine months of~~ ~~fiscal 2018~~ ~~increased $79.7 million or 9.4% compared to the nine months of~~ ~~fiscal 2017, primarily due to a 4% increase each in organic volume and pricing~~pricing/mix and a 1% increase ~~due to foreign currency translation impact.~~

~~Net sales of our motive power products~~ in ~~the~~ ~~third~~ ~~quarter of~~ ~~fiscal 2018~~ ~~increased by $39.5 million or 13.5% compared to the~~ ~~third~~ ~~quarter of~~ ~~fiscal 2017. The increase was primarily due to a 5% increase each in~~both organic volume and foreign currency ~~translation impact and a 4%~~translation. This increase in ~~pricing. Net~~net sales ~~of our motive power products in the nine months of~~ ~~fiscal 2018~~ ~~increased $78.8 million or 8.8% compared to the nine months of~~ ~~fiscal 2017. The increase~~ was primarily ~~due to a 4% increase~~driven by improved pricing/mix and strong demand in ~~pricing, a 3% increase due to organic volume and a 2% increase due to foreign currency translation impact.~~primarily the transportation sector, limited by TPPL capacity in our Missouri plants.

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Gross Profit


	Quarter ended July 2, 2023				Quarter ended July 3, 2022				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Gross Profit	$	240.3	26.4	%	$	185.5	20.6	%	$	54.8	29.5	%

Gross profit increased ~~$11.0~~$54.8 million or ~~7.1%~~29.5% in the ~~third~~first quarter ~~and $6.4 million or 1.3% in~~compared to the ~~nine months~~comparable period of fiscal ~~2018 compared to comparable prior year periods of fiscal 2017.~~2023. Gross profit, as a percentage of net sales, ~~decreased 240 basis points and 200~~increased 580 basis points in the ~~third~~first quarter ~~and nine months of fiscal 2018 as~~ compared to the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2017, respectively.~~2023. The ~~decrease~~increase in the gross profit margin in ~~both~~ the ~~third~~current quarter reflects a strong performance in our price/mix, which significantly offset year on year cost increases. This step forward, combined IRA benefits and ~~nine months is primarily due to an increase~~lower freight costs, more than offset higher inflationary pressures in ~~commodity costs of approximately $34 million~~raw materials, labor, supplies and ~~$102 million, respectively, partially offset by an increase in organic volume and pricing.~~utilities.

Operating Items


	Quarter ended July 2, 2023				Quarter ended July 3, 2022				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Operating expenses	$	144.6	15.9	%	$	127.1	14.1	%	$	17.5	13.8	%
Restructuring and other exit charges	$	6.3	0.7	%	$	8.3	0.9	%	$	(2.0)	(24.2)	%

Quarter ended
December 31, 2017 Quarter ended
January 1, 2017 Increase (Decrease)
In
Millions Percentage
of Total
Net Sales In
Millions Percentage
of Total
Net Sales In
Millions %
Operating expenses $ 96.7
14.7 % $ 85.0
15.1 % $ 11.7
13.8 %
Restructuring charges $ 1.8
0.2 % $ (1.2 ) (0.2 )% $ 3.0
NM
Legal proceedings charge $ —
— % $ 17.0
3.0 % $ (17.0 ) NM

Nine months ended
December 31, 2017 Nine months ended
January 1, 2017 Increase (Decrease)
In
Millions Percentage
of Total
Net Sales In
Millions Percentage
of Total
Net Sales In
Millions %
Operating expenses $ 283.5
14.9 % $ 277.5
15.9 % $ 6.0
2.1 %
Restructuring charges $ 4.4
0.2 % $ 5.0
0.3 % $ (0.6 ) (12.3 )%
Legal proceedings charge $ —
— % $ 17.0
1.0 % $ (17.0 ) NM

~~NM = not meaningful~~

Operating expenses, ~~for the third quarter of fiscal 2018, increased $11.7 million but decreased~~ as a percentage of ~~net~~ sales, ~~by 40~~increased 180 basis ~~points. The impact~~points in the first quarter and of foreign currency translation resulted in an increase of $2.4 million. Excluding this impact of the foreign currency translation, the increase in dollars was primarily due to payroll related expenses and our investment relatingfiscal 2024, compared to the ~~development of our digital core and new products, which were partially offset by our cost saving initiatives.~~

~~Operating expenses for the nine months~~comparable period of fiscal 2018 increased $6.0 million but decreased as a percentage of net sales by 100 basis points. The impact of foreign currency translation resulted in an increase of $2.8 million. Excluding this impact of the foreign currency translation, the increase in dollars was primarily due to the aforementioned investment in our digital core and new products, partially offset by cost saving initiatives.2023.

Selling expenses, our main component of operating expenses, ~~were 51.9% and 52.4% of total operating expenses~~increased $2.9 million or 5.2% in the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2018, respectively,~~2024 compared to ~~56.9% and 54.5% of total operating expenses in~~ the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2017, respectively.~~2023, and increased 25 basis points as a percentage of net sales.

Restructuring and Other Exit Charges

Restructuring Programs

Included in our ~~third~~first quarter of fiscal ~~2018~~2024 operating results ~~are~~of Energy Systems were restructuring charges of $1.0 million in the Americas and $0.8 million in EMEA. The charges in the Americas relate to improving efficiencies of our general operations, while charges in EMEA relate to restructuring programs to improve efficiencies in our motive power production, supply chain and general operations.$0.5 million.

Included in our ~~third~~first quarter of fiscal ~~2017~~2023 operating results isof Energy Systems were restructuring charges of $0.2 million.

Exit Charges

Fiscal 2023 Programs

Sylmar

In November 2022, the Company committed to a ~~credit~~plan to close its facility in Sylmar, California, which manufactures specialty lithium batteries for aerospace and medical applications. Management determined to close the site upon the expiration of ~~$1.2 million relating~~its lease on the property and to ~~restructuring and other exit~~redirect production through consolidation into existing locations. The Company currently estimates total charges in ~~EMEA consisting of cash~~the exit to amount to $9.5 million. Cash charges ~~of $0.5~~are estimated to total $5.7 million primarily relating to severance and ~~a credit of $1.7~~other costs to leave the site. Non-cash charges are estimated to be $3.8 million relating to ~~South Africa joint venture exit activities. In addition,~~fixed assets, inventory, and contract assets. The plan is expected to be completed in fiscal 2024.

Table of Contents

During fiscal 2023, the Company recorded $1.7 million primarily related to severance costs and non-cash charges totaling $0.4 million primarily relating to contract assets.

During the current quarter of fiscal 2024, the Company recorded cash charges of $4.0 million primarily related to severance costs, relocation expenses, and manufacturing variances and non-cash charges totaling $0.3 million. The Company also recorded a non-cash write off relating to inventories of $3.1 million, which was reported in cost of goods ~~sold also includes~~sold.

Ooltewah

On June 29, 2022, the Company committed to a ~~$0.5~~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 $18.5 million.Cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses are estimated to be $9.2 million ~~credit~~and non-cash charges from inventory and fixed asset write-offs are estimated to be $9.3 million. These actions will result in the reduction of ~~inventory adjustment~~approximately 165 employees. The plan is expected to be completed in calendar 2023.

During fiscal 2023, the Company recorded cash charges relating primarily to severance and manufacturing variances of $2.8 million and non-cash charges of $7.3 million relating to ~~the South Africa joint venture. Included~~fixed asset write-offs. The Company also recorded a non-cash write-off relating to inventories of $1.6 million, which was reported in our nine months of fiscal 2017 operating results is a $5.0 million charge consisting of restructuring and other exit charges in EMEA of $3.7 million, restructuring charges of $0.9 million in the Americas and $0.4 million in Asia. Of the restructuring and exit charges in EMEA of $3.7 million, $2.5 million of restructuring charges related to European manufacturing operations and $1.2 million of exit charges related to our joint venture in South Africa. In addition, cost of goods ~~sold also includes a $2.1 million inventory adjustment charge~~sold.

During the current quarter of fiscal 2024, the Company recorded cash charges relating to ~~the South Africa joint venture.~~site clean up and decommissioning equipment of $0.9 million.

Fiscal ~~2017 - Legal Proceedings Charge~~2021 Programs

Hagen, Germany

In ~~connection with previously disclosed matters involving European anticompetition authorities, included~~fiscal 2021, we committed to a plan to close substantially all of our 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 ~~operating results~~market, as well as the near term decline in demand and increased uncertainty from the pandemic. We plan to retain the facility with limited sales, service and administrative functions along with related personnel for the ~~third~~foreseeable future.

We currently estimate that the total charges for these actions will amount to approximately $60.0 million of which cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses were estimated to be $40.0 million and non-cash charges from inventory and equipment write-offs were estimated to be $20.0 million. The majority of these charges have been recorded as of October 2, 2022. These actions resulted in the reduction of approximately 200 employees.

During fiscal 2021, the Company recorded cash charges relating to severance of $23.3 million and non-cash charges of $7.9 million primarily relating to fixed asset write-offs.

During fiscal 2022, the Company recorded cash charges, primarily relating to severance of $8.1 million and non-cash charges of $3.5 million primarily relating to fixed asset write-offs. The Company also recorded a non-cash write off relating to inventories of $1.0 million, which was reported in cost of goods sold.

During fiscal 2023, the Company recorded cash charges of $2.2 million relating primarily to site cleanup and $0.6 million of non-cash charges relating to accelerated depreciation of fixed assets.

During the current quarter ~~and nine months~~ of fiscal ~~2017 were $17.0~~2024, the Company recorded cash charges of $0.5 million relating primarily to site cleanup and $0.1 million of non-cash charges ~~involving the German competition authority. In July 2017, we paid a fine of $14.8 million~~ relating to conduct involving our motive power business. We are currently appealing the German competition authority’s fining decision related to our reserve power battery business. For more detailed information, see Note 7 to the Consolidated Condensed Financial Statements.accelerated depreciation of fixed assets.

Table of Contents

Operating Earnings


	Quarter ended July 2, 2023				Quarter ended July 3, 2022				Increase (Decrease)
	In Millions		Percentage of Total Net Sales (1)		In Millions		Percentage of Total Net Sales (1)		In Millions		%
Energy Systems	$	29.7	7.0	%	$	15.0	3.7	%	$	14.7	97.5	%
Motive Power	50.3		14.4		42.3		11.5		8.0		18.8
Specialty	9.8		7.4		9.2		7.5		0.6		6.3
Corporate and other (2)	17.4		1.9		—		—		17.4		NM
Subtotal	107.2		11.8		66.5		7.4		40.7		60.9


Inventory adjustment relating to exit activities -Specialty	(3.1)		(2.3)		—		—		(3.1)		NM
Restructuring and other exit charges - Energy Systems	(0.5)		(0.1)		(0.2)		—		(0.3)		NM
Restructuring and other exit charges - Motive Power	(1.5)		(0.4)		(8.1)		(2.2)		6.6		(80.9)
Restructuring and other exit charges - Specialty	(4.3)		(3.2)		—		—		(4.3)		NM
Amortization of intangible assets - Energy Systems	(6.2)		(1.5)		(7.3)		(1.8)		1.1		(15.2)
Amortization of intangible assets - Motive Power	(0.1)		—		(0.1)		—		—		0.9
Amortization of intangible assets - Specialty	(0.7)		(0.5)		(0.7)		(0.6)		—		(4.5)
Other - Energy Systems	(0.8)		(0.2)		—		—		(0.8)		NM
Other - Motive Power	(0.5)		(0.1)		—		—		(0.5)		NM
Other - Specialty	(0.1)		(0.1)		—		—		(0.1)		NM


Total operating earnings	$	89.4	9.8	%	50.1		5.6	%	$	39.3	78.4	%

Quarter ended
December 31, 2017 Quarter ended
January 1, 2017 Increase (Decrease)
In
Millions
Percentage
of Total
Net Sales (1)
In
Millions
Percentage
of Total
Net Sales (1)
In
Millions %
Americas $ 43.1
12.2 % $ 46.0
14.6 % $ (2.9 ) (6.1 )%
EMEA 23.8
10.6
20.4
11.0
3.4
16.4
Asia 3.3
4.1
4.0
6.3
(0.7 ) (16.7 )
Subtotal 70.2
10.7
70.4
12.5
(0.2 ) (0.2 )
Restructuring charges - Americas (1.0 ) (0.3 ) —

—
(1.0 ) NM
Inventory adjustment relating to exit activities - EMEA —
—
0.5
0.3
(0.5 ) NM
Restructuring charges - EMEA (0.8 ) (0.4 ) 1.2
0.6
(2.0 ) NM
Legal proceedings charge - EMEA —
—
(17.0 ) (9.1 ) 17.0
NM
Total operating earnings $ 68.4
10.4 % $ 55.1
9.8 % $ 13.3
24.4 %

NM = not meaningful

(1(1) )The percentages shown for the segments are computed as a percentage of the applicable segment’s net ~~sales.~~sales; Corporate and other is computed based on total consolidated net sales

~~NM =~~(2) Corporate and other includes amounts managed on a company-wide basis and not ~~meaningful~~

Nine months ended
December 31, 2017 Nine months ended
January 1, 2017 Increase (Decrease)
In
Millions
Percentage
of Total
Net Sales (1)
In
Millions
Percentage
of Total
Net Sales (1)
In
Millions %
Americas $ 140.8
13.4 % $ 139.2
14.4 % $ 1.6
1.2 %
EMEA 54.9
8.8
57.1
10.2
(2.2 ) (4.2 )
Asia 10.7
4.7
11.8
5.6
(1.1 ) (8.5 )
Subtotal 206.4
10.9
208.1
12.0
(1.7 ) (0.8 )
Restructuring charges - Americas (1.3 ) (0.1 ) (0.9 ) (0.1 ) (0.4 ) 39.7
Inventory adjustment relating to exit activities - EMEA —
—
(2.1 ) (0.4 ) 2.1
NM
Restructuring charges - EMEA (3.1 ) (0.5 ) (3.7 ) (0.6 ) 0.6
(13.4 )
Restructuring charges - Asia —
—
(0.4 ) (0.2 ) 0.4
NM
Legal proceedings charge - EMEA —
—
(17.0 ) (3.0 ) 17.0
NM
Total operating earnings $ 202.0
10.7 % $ 184.0
10.6 % $ 18.0
9.8 %

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.

(1
) ~~The percentages shown for the segments are computed as a percentage of the applicable segment’s net sales.~~

~~NM = not meaningful~~

Operating earnings increased ~~$13.3~~$39.3 million or ~~24.4% and increased $18.0 million or 9.8%~~78.4% in the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2018,~~2024, respectively, compared to the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2017.~~2023. Operating earnings, as a percentage of net sales, increased 60420 basis points in the first quarter of fiscal 2024, respectively, compared to the first quarter of fiscal 2023.

The Energy Systems operating earnings, as a percentage of sales, increased 330 basis points in the first quarter of fiscal 2024, respectively, compared to the first quarter of fiscal 2023. This increase in operating earnings was primarily as a result significant pricing/mix gains and lower freight costs partially offset by lower volumes and higher inflationary costs.

The Motive Power operating earnings, as a percentage of sales, increased 290 basis points in the first quarter of fiscal 2024, respectively, compared to the first quarter of fiscal 2023. This increase was driven by significant pricing/mix gains partially offset by lower volumes and higher selling general and administrative costs.

The Specialty operating earnings, as a percentage of sales, decreased 10 basis points in the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2018,~~2024, respectively, compared to the third quarter and nine months of fiscal 2017. Excluding the impact of the $6.3 million write-off of previously capitalized costs relating to the ERP system implementation in our Americas region during the first quarter of fiscal ~~2017,~~2023. This increase in operating earnings infrom the ~~current nine months decreased 30 basis points due to an increase in lead~~comparable period was a result of improved price/mix and higher volumes more than offsetting inflationary cost ~~partially offset by price recoveries~~pressures and ~~cost saving initiatives.~~

operating expenses.

~~The Americas segment's operating earnings, excluding restructuring charges, decreased 240 basis points and 100 basis points, in the third quarter and nine months~~

Table of ~~fiscal 2018, respectively, when compared to the third quarter and nine months of~~ ~~fiscal 2017~~, primarily due to higher commodity costs partially offset by price recoveries and cost saving initiatives. Excluding the impact of the $6.3 million write-off of previously capitalized costs relating to the ERP system implementation during the nine months of fiscal 2017, operating earnings in the nine months of fiscal 2018 decreased by 160 basis points compared to the prior year period.Contents

The EMEA segment's operating earnings, excluding restructuring charges and legal proceedings charge discussed above, decreased 40 and 140 basis points in the third quarter and nine months of fiscal 2018, respectively, compared to the third quarter and nine months of fiscal 2017, primarily due to an increase in lead cost, partially offset by price recoveries and cost saving initiatives.

Operating earnings decreased 220 basis points and 90 basis points in the Asia segment in the third quarter and nine months of fiscal 2018, respectively, compared to the third quarter and nine months of fiscal 2017 primarily due to higher commodity costs, partially offset by price recoveries and a slow down in telecom spending during the first half of fiscal 2018 in the People's Republic of China.

Interest Expense


	Quarter ended July 2, 2023				Quarter ended July 3, 2022				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Interest expense	$	15.2	1.7	%	$	11.6	1.3	%	$	3.6	31.5	%

Interest expense of ~~$6.5~~$15.2 million in the ~~third~~first quarter of fiscal ~~2018~~2024 (net of interest income of ~~$0.8~~$0.7 million) was ~~$0.9~~$3.6 million higher than the interest expense of ~~$5.6~~$11.6 million in the ~~third~~first quarter of fiscal ~~2017~~2023 (net of interest income of $0.5 million). Interest expense of $18.7 million in the nine months of fiscal 2018 (net of interest income of $2.2 million) was $1.9 million higher than the interest expense of $16.8 million in the nine months of fiscal 2017 (net of interest income of $1.3$0.4 million).

The increase in interest expense in ~~both~~ the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2018~~2024 is primarily due to higher variable interest rates, partially offset lower average ~~debt outstanding.~~borrowing levels. Our average debt outstanding was ~~$727.1 million and $674.2~~$1,040.7 million in the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2018, respectively,~~2024, compared to ~~$626.4 million and $629.2~~$1,311.4 million in the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2017, respectively. The increase in our average debt was primarily to fund treasury repurchase activity as discussed in Note 12 to the Consolidated Condensed Financial Statements.~~2023.

Included in interest expense are non-cash charges for deferred financing fees of ~~$0.3~~ $0.4 million the first quarter of fiscal 2024 and ~~$1.3~~$0.5 million in the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2018, respectively, and $0.3 million and $1.0 million, in the third quarter and nine months of fiscal 2017, respectively.~~2023.

Other (Income) Expense, Net


	Quarter ended July 2, 2023				Quarter ended July 3, 2022				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Other expense (income), net	$	0.7	0.1	%	$	1.7	0.2	%	$	(1.0)	(62.3)%

NM = not meaningful

Other expense (income) ~~expense,~~, net in the ~~third~~first quarter of fiscal ~~2018~~2024 was ~~income~~expense of ~~$0.6~~$0.7 million compared to ~~income~~expense of ~~$1.1~~$1.7 million in the ~~third~~first quarter of fiscal ~~2017. Other (income) expense, net in the nine months of~~ ~~fiscal 2018~~ ~~was expense of $4.7 million compared to income of $0.4 million in the nine months of~~ ~~fiscal 2017~~.2023. Foreign currency impact resulted in a gain of ~~$0.7~~$2.3 million in the ~~third~~first quarter of fiscal ~~2018, and~~2024 compared to a foreign currency loss of $1.3 million in the first quarter of fiscal 2023. Included in the first quarter of fiscal 2023 foreign currency impact is a loss of ~~$4.4~~$5.2 million ~~in nine months~~relating to the remeasurement of ~~fiscal 2018, compared to foreign currency gain~~monetary assets from the exit of ~~$1.6 million and $1.2 million, respectively, in the comparable prior year periods.~~our Russia operations.

Earnings Before Income Taxes


	Quarter ended July 2, 2023				Quarter ended July 3, 2022				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Earnings before income taxes	$	73.5	8.1	%	$	36.8	4.1	%	$	36.7	100.0	%

As a result of the above, earnings before income taxes in the ~~third~~first quarter of fiscal ~~2018~~2024 increased ~~$11.9~~$36.7 million, or ~~23.5%~~100.0%, compared to the ~~third~~first quarter of fiscal ~~2017~~ ~~and increased $11.0 million, or 6.5%, in the nine months of~~ ~~fiscal 2018~~ ~~compared to the nine months of~~ ~~fiscal 2017~~.2023.

Income Tax Expense


	Quarter ended July 2, 2023				Quarter ended July 3, 2022				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Income tax expense	$	6.7	0.7	%	$	5.8	0.6	%	$	0.9	16.5	%
Effective tax rate	9.2%				15.7%				(6.5)%

Quarter ended
December 31, 2017 Quarter ended
January 1, 2017 Increase (Decrease)
In
Millions Percentage
of Total
Net Sales In
Millions Percentage
of Total
Net Sales In
Millions %
Income tax expense $ 88.3
13.4 % $ 13.5
2.4 % $ 74.8
NM
Effective tax rate 141.2% 26.7% 114.5%

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Nine months ended
December 31, 2017 Nine months ended
January 1, 2017 Increase (Decrease)
In
Millions Percentage
of Total
Net Sales In
Millions Percentage
of Total
Net Sales In
Millions %
Income tax expense $ 112.9
6.0 % $ 43.1
2.4 % $ 69.8
NM
Effective tax rate 63.2% 25.7% 37.5%

~~NM = not meaningful~~

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the ~~third quarters~~first quarter of fiscal ~~2018~~2024 and ~~2017~~2023 was based on the estimated effective tax rates applicable for the full years ending March 31, ~~2018~~2024 and March 31, ~~2017,~~2023, respectively, after giving effect to items specifically related to the interim periods. Our effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions, in which we operate, ~~change~~changes in tax laws and the amount of our consolidated ~~income~~earnings before taxes.

On ~~December 22, 2017,~~August 16, 2022, the ~~Tax Cuts and Jobs~~Inflation Reduction Act of 2022 (“~~Tax Act”~~IRA”) was ~~enacted into law. Among~~enacted. The IRA includes multiple incentives to promote clean energy, and energy storage manufacturing among other provisions with tax credits available from 2023 to 2032, subject to phase down beginning in 2030. In particular the ~~significant changes resulting from~~IRA creates a refundable tax credit, pursuant to Section 45X of the ~~law,~~Internal Revenue Code (“IRC”), for battery cells and battery modules manufactured or assembled in the ~~Tax Act reduces~~United States and sold to third parties. In the ~~U.S. federal~~first quarter of fiscal 2024, the IRA impact resulted in a reduction of our costs of goods sold and income tax ~~rate from 35%~~payable. There is a possibility that additional clarification guidance is issued with respect to ~~21% effective January 1, 2018,~~the Section 45X credit qualifications. Amounts recognized in the Consolidated Condensed Financial Statements are based on Management's judgement and ~~requires companies~~best estimate utilizing the most current guidance. The Company will continue to pay a one-time transition tax on unrepatriated cumulative non-U.S. earnings of foreign subsidiaries and creates new taxes on certain foreign sourced earnings. In accordance with ASC 740, “Income Taxes,” we are required to recordevaluate the effects of ~~tax law changes in the period enacted. The rate change~~IRA as more guidance is ~~administratively effective at the beginning of our fiscal year, using a blended rate for the annual period. As a result, our blended U.S. statutory tax rate for fiscal 2018 is 31.5%.~~

As of December 31, 2017, we have not completed our accounting for the tax effects of enactment of the Tax Act; however, in certain cases, as described below, we have made a reasonable estimate of the effects on our existing deferred tax balancesissued and the ~~one-time transition tax. Our~~relevant implications to our Consolidated Condensed Financial Statements. Actual results for the three and nine months ended December 31, 2017, contain estimates of the impact of the Tax Act as permitted by Staff Accounting Bulletin 118 “SAB 118” issued by the Securities and Exchange Commission on December 22, 2017. These amounts are considered provisional and may be affected by future guidance if and when issued.could differ from management’s current estimate.

~~As a result of the Tax Act, the third quarter fiscal 2018 financial statements include a provisional net tax expense of $77.3 million which is comprised of the following:~~

Foreign tax effects: The one-time transition tax is based on our total post-1986 earnings and profits (E&P) that we previously deferred from U.S. income taxes. We recorded a provisional amount for our one-time transition tax liability for our foreign subsidiaries, resulting in an increase in income tax expense of $94.0 million. The estimated transition tax of $94.0 million is recorded under current income tax payable and non-current income tax payable, at $7.5 million and $86.5 million, respectively, and is payable over eight years. Further, the transition tax is based in part on the amount of those earnings held in cash and other

specified assets. This amount may change when we finalize both the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation and the amounts held in cash or other specified assets. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.

Deferred tax assets and liabilities: We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the Tax Act and refining our calculations, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of our deferred tax balance was a tax benefit of $14.7 million.

~~Finally, we recorded a provisional tax benefit of $2.0 million related to the reduction of the fiscal 2018 federal tax rate to 31.5%.~~

In all cases, we may adjust these provisional amounts which could potentially affect the measurement and impact on tax expense as we refine our calculations within a reasonable period not to exceed one year from the enactment date.

The consolidated effective income tax rates ~~were 141.2% and 26.7%, respectively,~~ for the ~~third quarters~~first quarter of fiscal ~~2018~~2024 and ~~2017~~2023 were 9.2% and ~~63.2% and 25.7%~~15.7%, ~~respectively, for~~respectively. The rate decrease in the ~~nine months~~first quarter of fiscal ~~2018 and 2017. The rate increase in the third quarter and nine months of fiscal 2018~~2024 compared to the ~~comparable~~ prior year ~~periods of fiscal 2017~~period is primarily due to the impact of the ~~Tax Act in the third quarter of fiscal 2018,~~IRA. In addition, there was a discrete foreign exchange tax benefit related to undistributed earnings which was offset by ~~the German regulatory proceedings charge of $17.0 million (with no associated tax benefit) recorded in the third quarter of fiscal 2017 and changes in~~ the mix of earnings among tax jurisdictions.

Foreign income as a percentage of worldwide income is estimated to be ~~64%~~51% for fiscal ~~2018~~2024 compared to ~~60%~~77% for fiscal ~~2017. The foreign effective income tax rates for the nine months of fiscal 2018 and 2017 were 11.4% and 15.9%, respectively. The rate decrease compared to the prior year period~~2023. This reduction is primarily due to the ~~German regulatory proceedings charge~~impact of ~~$17.0 million (with no associated~~the IRA. The foreign effective tax ~~benefit) recorded in~~rates for the ~~third~~first quarter of fiscal ~~2017~~2024 and ~~changes in the mix of earnings among tax jurisdictions.~~2023 were 12.0% and 11.0%, respectively. Income from ~~our~~the Company's Swiss subsidiary comprised a substantial portion of ~~our~~the Company's overall foreign mix of income for both fiscal 2024 and isfiscal 2023 and were taxed at an effective income tax rate of approximately ~~6%.~~8% and 9%, respectively.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies from those discussed under the caption “Critical Accounting Policies and Estimates” in ~~“Item~~Item 7. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations in our ~~2017~~2023 Annual Report.

Liquidity and Capital Resources

Cash Flow and Financing Activities

Operating activities provided cash of ~~$129.9~~$74.9 million in the ~~nine months~~first quarter of fiscal ~~2018~~2024 compared to ~~$166.7~~$71.9 million of cash used in the ~~comparable period~~first quarter of fiscal ~~2017~~.2023, with the increase in operating cash resulting mainly due to net earnings and activity in accounts receivable, inventory, and accounts payable. Accounts receivable decreased or provided cash of $73.2 million due to lower sales in the current quarter compared to the previous quarter. Inventory increased or used cash of $11.0 million due to lower inventory turns as compared to the previous quarter. Accounts payable decreased or used cash of $39.3 million due to seasonal reduction. In the ~~nine months~~current quarter of fiscal ~~2018, cash provided by operating activities was primarily from~~2024, net earnings ~~of $65.7~~were $66.8 million, depreciation and amortization ~~of $40.3~~$22.7 million, stock-based compensation $7.9 million, non-cash charges relating to exit charges $3.3 million, derivative gains of ~~$14.8~~$0.5 million, ~~deferred taxes benefit~~derivatives cash proceeds of ~~$7.2~~$0.7 million, non-cash interest of ~~$1.3~~$0.4 million, and ~~provision~~allowance for doubtful ~~accounts~~debts of ~~$0.8~~$0.5 million. ~~Cash provided by earnings as adjusted for non-cash items was improved by~~Prepaid and other current assets were a use of funds of $4.1 million, primarily from an increase of ~~$89.2~~$7.3 million in ~~long term~~contract assets partially offset by a decrease of $3.2 million in other prepaid expenses, such as taxes, insurance and other advances. Accrued expenses were a use of funds of $46.6 million primarily from tax payments net of accruals of $15.8 million, including $19.4 million relating to the IRA production tax credits, payroll related payments of $13.2 million net of accruals, decrease to sales related accruals of $8.0 million, interest payments net of accruals of $5.5 million, deferred income and contract liabilities of $4.8 million, other miscellaneous accruals of $1.5 million partially offset by warranty accruals of $1.8 million and freight charges of $1.6 million.

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In the first quarter of fiscal 2023, operating activities used cash of $71.9 million primarily from the activity in accounts receivable, inventory, and accounts payable. Inventory increased or used cash of $81.5 million due to the ~~one-time transition tax liability the Tax Act and was partially offset by the~~ increase in ~~primary working capital~~all components of ~~$42.0~~inventory resulting from strategic investment, supply chain delays, new products and higher inventory costs from higher raw material costs, manufacturing and freight costs and to address the high backlog of customer orders. Accounts receivable decreased or provided cash of $5.5 million. Accounts payable decreased or used cash of $33.1 million ~~net of currency translation changes, and a decrease in accrued expenses of $30.5 million, comprising primarily of legal proceedings related payments, payroll related expenses and income taxes.~~

due to seasonal reduction. In the ~~nine months~~first quarter of fiscal ~~2017, cash provided by operating activities was primarily from~~2023, net earnings ~~of $124.5~~were $31.0 million, depreciation and amortization ~~of $40.5~~$23.6 million, stock-based compensation $5.3 million, non-cash charges ~~consisting of write-offs~~ relating to ~~restructuring and other~~ exit charges ~~and ERP implementation~~$7.4 million, primarily relating to the Ooltewah, Tennessee plant closure, allowance for doubtful debts of ~~$7.7 million, stock-based compensation of $14.6 million, provision of doubtful accounts of $2.0~~$0.2 million and non-cash interest of ~~$1.0~~$0.5 million. Cash provided by operating activities were partially offset by the increase in primary working capital of $47.7 million, net of currency translation changes. Cash provided by operating activities were positively impacted by legal proceedings accrual of $17.0 million and accrued expenses of $13.9 million, comprising primarily of income and other taxes, while prepaidPrepaid and other current assets ~~comprising primarily of prepaid taxes, resulted in an outflow of $11.5 million.~~

~~As explained in the discussion of our~~were a use of ~~“non-GAAP financial measures,” we monitor the level~~funds of $5.5 million, primarily from an increase of $7.2 million of contract assets, partially offset by a decrease of $1.7 million in other prepaid expenses, such as taxes, insurance and ~~percentage~~other advances. Accrued expenses were a use of ~~primary working capital to sales. Primary working capital for this purpose is trade accounts receivable, plus inventories, minus trade accounts payable. The resulting~~funds of $25.0 million primarily from payroll related payments of $13.1 million, selling and other expenses of $10.9 million, interest payments net ~~amount is divided~~of accrual of $5.7 million, and other miscellaneous payments of $4.0 million, partially offset by ~~the trailing three month net sales (annualized) to derive a primary working capital percentage. Primary working capital was $689.6 million (yielding a primary working capital percentage~~tax accruals of ~~26.2%) at December 31, 2017, $624.8 million (yielding a primary working capital percentage of 24.9%) at~~ $8.7 million.

~~March 31, 2017~~ ~~and $611.6 million at~~ ~~January 1, 2017~~ ~~(yielding a primary working capital percentage of 27.1%). The primary working capital percentage of~~ ~~26.2%~~ at ~~December 31, 2017~~ ~~is 130 basis points higher than that for~~ ~~March 31, 2017~~, and is 90 basis points lower than that for the prior year period. Primary working capital percentage increased during the nine months of fiscal 2018 largely due to higher inventory levels. The reason for the increase in inventory is due to rising lead costs, a longer supply chain on selective products and to meet rising fourth quarter demand.

~~Primary working capital and primary working capital percentages at~~ ~~December 31, 2017~~, ~~March 31, 2017~~ ~~and~~ ~~January 1, 2017~~ ~~are computed as follows:~~

($ in Millions)
Balance At
Trade
Receivables
Inventory
Accounts
Payable
Total
Quarter
Revenue
Annualized

Primary
Working
Capital %
December 31, 2017 $ 494.9
$ 422.0
$ (227.3 ) $ 689.6
$ 2,635.7
26.2 %
March 31, 2017 486.6
360.7
(222.5 ) 624.8
2,507.2
24.9
January 1, 2017 444.3
370.2
(202.9 ) 611.6
2,254.8
27.1

Investing activities used cash of ~~$45.7~~$24.3 million in the ~~nine months~~first quarter of fiscal ~~2018~~ ~~and~~2024, which primarily consisted of capital expenditures of ~~$43.1~~$16.1 million relating to plant improvements and $8.3 million relating to the purchase of a ~~$3.0 million acquisition.~~business.

Investing activities used cash of ~~$47.8~~$22.9 million in the ~~nine months~~first quarter of fiscal ~~2017 and~~2023, which primarily consisted of capital expenditures of ~~$36.0~~$23.0 million ~~and acquisitions of $12.4 million.~~

relating to plant improvements.

Financing activities used cash of ~~$51.5~~$135.9 million in the ~~nine months~~first quarter of fiscal ~~2018~~.2024. During the ~~second~~first quarter of fiscal ~~2018, we entered into a 2017 Credit Facility. During the nine months of~~ ~~fiscal 2018~~,2024, we borrowed ~~$356.8~~$80.0 million under the ~~2017~~Second Amended Revolver and ~~$150.0~~repaid $216.4 million of the Second Amended Revolver. Net repayments on short-term debt were $0.4 million. We paid cash dividends to our stockholders totaling $7.2 million and received proceeds from stock options of $7.7 million.

Financing activities provided cash of $97.5 million in the first quarter of fiscal 2023. During the first quarter of fiscal 2023, we borrowed $163.2 million under the ~~2018 Term loan. Repayments on~~Second Amended Revolver and repaid $27.2 million of the ~~2017 Revolver during the nine months of~~ ~~fiscal 2018~~ ~~were $111.5 million. Borrowings and~~Second Amended Revolver. Net repayments on ~~the 2011 Revolver during the nine months of~~ ~~fiscal 2018~~short-term debt were ~~$147.1 million and $312.1 million, respectively, and repayment of the 2011 Term loan was $127.5~~$8.0 million. On August 4, 2017, the outstanding balance on the 2011 Revolver and the 2011 Term Loan of $240.0 million and $123.0 million, respectively, was repaid utilizing the proceeds from the 2017 Credit Facility. We also paid $100.0 million under the ASR agreement, which was settled on January 9, 2018. Treasury stock open market purchases were ~~$21.2~~$22.9 million, payment of cash dividends to our stockholders were $22.3 million, payment of taxes related to net share settlement of equity awards were $7.5 million and debt issuance costs were $2.7 million. Net repayments on short-term debt were $1.4 million and proceeds from stock options were $0.8 million.

Financing activities used cash of $23.6 million in the nine months of fiscal 2017 primarily due to revolver borrowings of $191.3 million and repayments of $186.8 million, repayment of our Term Loan of $11.3 million, payment of cash dividends to our stockholders of $22.8$7.1 million and payment of taxes related to net share settlement of equity awards ~~of $7.7 million. Net borrowings on short-term debt~~ were ~~$13.6~~$0.6 million.

Currency translation had a ~~positive~~negative impact of ~~$38.3~~$3.0 million on our cash balance in the ~~nine months~~first quarter of fiscal ~~2018~~2024 compared to athe negative impact of ~~$25.4~~$22.0 million in the ~~nine months~~first quarter of fiscal ~~2017. During~~2023. In the ~~nine months~~first quarter of fiscal ~~2018,~~2024, principal currencies in which we do business such as the Euro, Polish zloty, Swiss ~~franc,~~Franc and British pound ~~Polish zloty, Chinese renminbi and Mexican peso~~generally strengthened versus the U.S. dollar.

As a result of the above, total cash and cash equivalents ~~increased~~decreased by ~~$71.0~~$88.3 million to ~~$571.3~~$258.3 million, in the ~~nine months~~first quarter of fiscal ~~2018~~2024 compared to ~~an increase~~a decrease by ~~$69.8~~$19.2 million to ~~$467.1~~$383.2 million, in the ~~comparable period~~first quarter of fiscal ~~2017.~~2023.

Compliance with Debt Covenants

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(“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.

All obligations under our ~~2017~~Fourth Amended Credit Facility are secured by, among other things, substantially all of our U.S. assets. The ~~2017~~Fourth Amended Credit Facility contains various covenants which, absent prepayment in full of the indebtedness and other obligations, or the receipt of waivers, limit our ability to conduct certain specified business transactions, buy or sell assets out of the ordinary course of business, engage in sale and leaseback transactions, pay dividends and take certain other actions. There are no prepayment penalties on loans under this credit facility.

We are in compliance with all covenants and conditions under our ~~credit agreement~~Fourth Amended Credit Facility and ~~our 5.00%~~ Senior ~~Notes due 2023.~~Notes. We believe that we will continue to comply with these covenants and conditions, and that we have the financial resources and the capital available to fund the foreseeable organic growth in our business and to remain active in pursuing further acquisition opportunities. See Note 810 to the Consolidated Financial Statements included in our ~~2017~~2023 Annual Report and Note 911 to the Consolidated Condensed Financial Statements included in this Quarterly Report on Form 10-Q for a detailed description of our debt.

Contractual Obligations and Commercial Commitments

A table of our obligations is contained in Part II, Item 7,7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations of our ~~2017~~2023 Annual ~~Report for the year ended March 31, 2017.~~Report. As of ~~December 31, 2017,~~July 2, 2023, we entered into the new 2017 Credit Facility, comprising a $600 million senior secured revolving credit facility (“2017 Revolver”) and a $150 million senior secured term loan (“2017 Term Loan”) with a maturity date of September 30, 2022. We repaid all outstanding balances onhad no significant changes to our ~~2011 Credit Facility as of August 4, 2017.~~contractual obligations table contained in our 2023 Annual Report.

As of December 31, 2017, principal and interest payments due under the 2017 Credit Facility are as follows: $5.4 million in fiscal 2018, $14.6 million in fiscal 2019, $20.1 million in fiscal 2020, $23.5 million in fiscal 2021, $25.1 million in fiscal 2022 and $398.9 million in fiscal 2023.

As of December 31, 2017, the estimated transition tax of $94.0 million which is recorded under current income tax payable and non-current income tax payable, at $7.5 million and $86.5 million, respectively, is payable over eight years. The payment schedule is as follows:

~~$7.5 million payable in the first five years, beginning fiscal 2019 through fiscal 2024, $14.1 million in fiscal 2025, $18.9 in fiscal 2026 and the final payment of $23.5 million in fiscal 2027.~~



ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks

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

Counterparty Risks

We have entered into lead forward purchase contracts, ~~and~~ foreign exchange forward and purchased option contracts, interest rate swaps, and cross currency fixed interest rate swaps to manage the risk associated with our exposures to fluctuations resulting from changes in raw material costs, ~~and~~ foreign currency exchange rates and interest rates. The Company’s agreements are with creditworthy financial institutions. Those contracts that result in a liability position at ~~December 31, 2017~~July 2, 2023 are ~~$1.1~~$20.4 million (pre-tax). Those contracts that result in an asset position at ~~December 31, 2017~~July 2, 2023 are ~~$0.9~~$5.0 million (pre-tax) ~~and the vast majority of these will settle within one year.~~. The impact on the Company due to nonperformance by the counterparties has been evaluated and not deemed material.

We hedge our net investments in foreign operations against future volatility in the exchange rates between the U.S. dollar and Euro. On September 29, 2022, we terminated our cross-currency fixed interest rate swap contracts with an aggregate notional amount of $300 million and executed cross-currency fixed interest rate swap contracts with an aggregate notional amount of $150 million, maturing on December 15, 2027. Depending on the movement in the exchange rates between the U.S. dollar and Euro at maturity, the Company may owe the counterparties an amount that is different from the notional amount of $150 million.

Excluding our cross currency fixed interest rate swap agreements, the vast majority of these contracts will settle within one year.

Interest Rate Risks

We are exposed to changes in variable U.S. interest rates on borrowings under our credit agreements as well as short-term borrowings in our foreign subsidiaries.

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A 100 basis point increase in interest rates would have increased annual interest expense, ~~on an annualized basis,~~ by approximately ~~$4.1~~$4.5 million on the variable rate portions of our debt.

Commodity Cost Risks – Lead Contracts

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

Date
$’s Under
Contract
(in millions)

# Pounds
Purchased
(in millions)

Average
Cost/Pound

Approximate %
of Lead
Requirements (1)
December 31, 2017 $ 60.8
54.0
$ 1.13
9 %
March 31, 2017 46.6
45.0
1.03
8
January 1, 2017 34.4
34.5
1.00
8


Date	$’s Under Contract (in millions)		# Pounds Purchased (in millions)	Average Cost/Pound		Approximate % of Lead Requirements (1)
July 2, 2023	$	52.1	55.0	$	0.95	9	%
March 31, 2023	47.9		50.0	0.96		8
July 3, 2022	54.1		55.5	0.97		8

(1(1) )Based on ~~approximate annual~~the fiscal year lead requirements for the periods then ended.

For the remaining ~~quarter~~quarters of this fiscal year, we believe approximately ~~100%~~46% of the cost of our lead requirements is known. This takes into account the hedge contracts in place at ~~December 31, 2017~~,July 2, 2023, lead purchased by ~~December 31, 2017~~July 2, 2023 that will be reflected in future costs under our FIFO accounting policy, and the benefit from our lead tolling program.

We estimate that a 10% increase in our cost of lead would have increased our cost of goods sold by approximately ~~$18~~$19 million ~~and $52 million, respectively,~~ in the ~~third~~first quarter ~~and nine months~~ of fiscal ~~2018~~.2024.

Foreign Currency Exchange Rate Risks

We manufacture and assemble our products globally in the Americas, EMEA and Asia. Approximately ~~50%~~40% of our sales and related expenses are transacted in foreign currencies. Our sales revenue, production costs, profit margins and competitive position are affected by the strength of the currencies in countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our products are sold. Additionally, as we report our financial statements in U.S. dollars, our financial results are affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. dollar. The principal foreign currencies in which we conduct business are the Euro, Swiss franc, British pound, Polish zloty, Chinese renminbi, Canadian dollar, Brazilian real and Mexican peso.

We quantify and monitor our global foreign currency exposures. Our largest foreign currency exposure is from the purchase and conversion of U.S. dollar based lead costs into local currencies in Europe. Additionally, we have currency exposures from intercompany financing and

intercompany and third party trade transactions. On a selective basis, we enter into foreign currency forward contracts and purchase option contracts to reduce the impact from the volatility of currency movements; however, we cannot be certain that foreign currency fluctuations will not impact our operations in the future.

We hedge approximately ~~10%~~5% - ~~15%~~10% of the nominal amount of our known foreign exchange transactional exposures. We primarily enter into foreign currency exchange contracts to reduce the earnings and cash flow impact of the variation of non-functional currency denominated receivables and payables. The vast majority of such contracts are for a period not extending beyond one year.

Gains and losses resulting from hedging instruments offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged. The maturities of the forward exchange contracts generally coincide with the settlement dates of the related transactions. Realized and unrealized gains and losses on these contracts are recognized in the same period as gains and losses on the hedged items. We also selectively hedge anticipated transactions that are subject to foreign exchange exposure, primarily with foreign currency exchange contracts, which are designated as cash flow hedges in accordance with Topic 815 - Derivatives and Hedging. During the third quarter of fiscal year 2022, we also entered into cross-currency fixed interest rate swap agreements, to hedge our net investments in foreign operations against future volatility in the exchange rates between the U.S. dollar and Euro.

At ~~December 31, 2017~~July 2, 2023 and ~~January 1, 2017,~~July 3, 2022, we estimate that an unfavorable 10% movement in the exchange rates would have adversely changed our hedge valuations by approximately ~~$2.8~~$27.7 million and ~~$3.6~~$36.7 million, respectively.

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ITEM 4.			CONTROLS AND PROCEDURES

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

(b) Internal Control Over Financial Reporting. ~~There have not been~~The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated any ~~changes~~change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) and determined that there was no change in our internal control over financial reporting during the quarter to which this report relates that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

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PART II			OTHER INFORMATION



Item 1.			Legal Proceedings

From time to time, we are involved in litigation incidental to the conduct of our business. See Litigation and Other Legal Matters in Note 711 - Commitments, Contingencies and Litigation to the Consolidated Condensed Financial Statements, which is incorporated herein by reference.



Item 1A.			Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our ~~2017~~2023 Annual Report, ~~for the year ended March 31, 2017~~ which could materially affect our business, financial condition or future ~~results, and the following:~~

~~Future changes in U.S. tax law could adversely affect us or our affiliates.~~

On December 22, 2017, the U.S. President signed into law a sweeping tax reform bill known as the “Tax Cuts and Jobs Act” (“Tax Act”). The effects of the Tax Act are not yet entirely clear and will depend on, among other things, additional regulatory and administrative guidance, as well as any statutory technical corrections that are subsequently enacted. While the Tax Act reduces the statutory U.S. federal income tax rate generally applicable to U.S. corporations, the Tax Act could nevertheless have a significant adverse effect on the U.S. federal income taxation of our and our subsidiaries’ operations, including by limiting or eliminating various deductions or credits (including interest expense deductions and deductions relating to employee compensation), imposing taxes with respect to certain accumulated earnings of non-U.S. entities on a current basis, changing the timing of the recognition of income or its character and imposing additional corporate taxes under certain circumstances to combat perceived base erosion issues, among other changes.

The Tax Act, or any related, similar or amended legislation or other changes in U.S. federal income tax laws, could adversely affect the U.S. federal income taxation of our and our affiliates’ ongoing operations and may also adversely affect the integration efforts relating to, and potential synergies from, past strategic transactions. Any such changes and related consequences could have a material adverse impact on our financial results.

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

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table summarizes the number of shares of common stock we purchased from participants in our equity incentive plans, as well as repurchases of common stock authorized by the Board of Directors. As provided by the Company’s equity incentive plans, (a) vested options outstanding may be exercised through surrender to the Company of option shares or vested options outstanding under the Company’s equity incentive plans to satisfy the applicable aggregate exercise price (and any withholding tax) required to be paid upon such exercise and (b) the withholding tax requirements related to the vesting and settlement of restricted stock units and market and performance condition-based share units may be satisfied by the surrender of shares of the Company’s common stock.

Purchases of Equity Securities


Period	(a) Total number of shares (or units) purchased	(b) Average price paid per share (or unit)		(c) Total number of shares (or units) purchased as part of publicly announced plans or programs	(d) Maximum number (or approximate dollar value) of shares (or units) that may be purchased under the plans or programs (1) (2) (3)
April 1 - April 30, 2023	—	$	—	—	$	194,545,418
May 1 - May 31, 2023	15,897	95.43		—	194,545,418
June 1 - June 30, 2023	105,122	104.48		—	194,545,418
Total	121,019	$	103.29	—

Period
(a)
Total number of shares (or units) purchased

(b)
Average price paid per share (or unit)

(c)
Total number of shares (or units) purchased as part of publicly announced plans or programs

(d)
Maximum number (or approximate dollar value) of shares (or units) that may be purchased under the plans or
programs (1) (2) (3)
October 2 – October 29, 2017 179
$ 68.41
—
$ 24,738,883
October 30 – November 26, 2017 1,851
67.14
—
24,738,883
November 27 – December 31, 2017 —
—
—
24,738,883
Total 2,030
$ 67.25
—

(1) The Company's Board of Directors has authorized the Company to repurchase up to such number of shares as shall equal the dilutive effects of any equity based awards issued during such fiscal year under the 2017 Equity Incentive Plan and the number of shares exercised through stock option awards during such fiscal year, approximately $34.0 million.


~~(1)~~	The Company's Board of Directors has authorized the Company to repurchase up to such number of shares as shall equal the dilutive effects of any equity based award granted during such fiscal year under the 2010 Equity Incentive Plan and the number of shares exercised through stock option awards during such fiscal year. These amounted to 2,030 shares, repurchased at an average price of $67.25.


~~(2)~~	On August 24, 2017, the Company prepaid $100 million, pursuant to an ASR agreement with a major financial institution, and received on August 29, 2017, an initial delivery of 1,278,976 shares. No shares were received pursuant to the ASR during the current quarter. On January 9, 2018, the ASR was settled, and the Company received an additional 216,738 shares.


~~(3)~~	On November 8, 2017, the Company announced the establishment of a $100 million stock repurchase authorization, with no expiration date. The authorization is in addition to the existing stock repurchase programs.

(2)On March 9, 2022, the Company announced the establishment of a $150.0 million stock repurchase authorization, with no

expiration date.

(3) On November 10, 2021, the Company announced the establishment of a $100.0 million stock repurchase authorization, with no expiration date.



Item 4.			Mine Safety Disclosures

Not applicable.


Item 5.			Other Information

During the quarter ended July 2, 2023, none of our directors or officers (as defined in Section 16 of the Securities Exchange Act of 1934, as amended) adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (each as defined in Item 408(a) and (c) of Regulation S-K).

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ITEM 6.			EXHIBITS


Exhibit Number		Description of Exhibit

Exhibit Number3.1		~~Description of Exhibit~~

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

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

~~31.1~~10.1		Voluntary Deferred Compensation Plan For Non-Employee Directors(filed herewith).

10.2		EnerSys Voluntary Deferred Compensation Plan for Executives(filed herewith).

10.3		Award Agreement for Employees - Restricted Stock Units under the 2023 Equity Incentive Plan(filed herewith).

10.4		Employee Stock Option Agreement under the 2023 Equity Incentive Plan(filed herewith).

10.5		Award Agreement for Non-Employee Directors Deferred Stock Units(filed herewith).





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

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

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

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

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

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


ENERSYS (Registrant)

~~ENERSYS (Registrant)~~By		/s/ Andrea J. Funk
			Andrea J. Funk
By		~~/s/ Michael J. Schmidtlein~~
	~~Michael J. Schmidtlein~~
	Chief Financial Officer

~~Date: February 7, 2018~~

Date: August 9, 2023



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


	July 2, 2023		March 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	258,342	$	346,665
Accounts receivable, net of allowance for doubtful accounts: July 2, 2023 - $9,033; March 31, 2023 - $8,775	566,498		637,817
Inventories, net	809,402		797,798
Prepaid and other current assets	118,804		113,601
Total current assets	1,753,046		1,895,881
Property, plant, and equipment, net	512,970		513,283
Goodwill	688,442		676,715
Other intangible assets, net	354,662		360,412
Deferred taxes	49,153		49,152
Other assets	122,704		121,231
Total assets	$	3,480,977	$	3,616,674
Liabilities and Equity
Current liabilities:
Short-term debt	$	30,962	$	30,642
Accounts payable	343,336		378,641
Accrued expenses	261,353		309,037
Total current liabilities	635,651		718,320
Long-term debt, net of unamortized debt issuance costs	907,768		1,041,989
Deferred taxes	60,767		61,118
Other liabilities	193,612		191,366
Total liabilities	1,797,798		2,012,793
Commitments and contingencies
Equity:
Preferred Stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding at July 2, 2023 and at March 31, 2023	—		—
Common Stock, $0.01 par value per share, 135,000,000 shares authorized, 56,129,710 shares issued and 41,030,034 shares outstanding at July 2, 2023; 56,004,613 shares issued and 40,901,059 shares outstanding at March 31, 2023	565		560
Additional paid-in capital	612,295		596,464
Treasury stock at cost, 15,099,676 shares held as of July 2, 2023 and 15,103,554 shares held as of March 31, 2023	(740,742)		(740,956)
Retained earnings	1,989,588		1,930,148
Contra equity - indemnification receivable	(2,463)		(2,463)
Accumulated other comprehensive loss	(179,476)		(183,474)
Total EnerSys stockholders’ equity	1,679,767		1,600,279
Nonredeemable noncontrolling interests	3,412		3,602
Total equity	1,683,179		1,603,881
Total liabilities and equity	$	3,480,977	$	3,616,674



	December 31, 2017			March 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	571,322		$	500,329
Accounts receivable, net of allowance for doubtful accounts: December 31, 2017 - $13,032; March 31, 2017 - $12,662	494,934			486,646
Inventories, net	421,970			360,694
Prepaid and other current assets	73,588			71,246
Total current assets	1,561,814			1,418,915
Property, plant, and equipment, net	374,736			348,549
Goodwill	348,878			328,657
Other intangible assets, net	149,368			153,960
Deferred taxes	34,730			31,587
Other assets	12,476			11,361
Total assets	$	2,482,002		$	2,293,029
Liabilities and Equity
Current liabilities:
Short-term debt	$	16,842		$	18,359
Accounts payable	227,294			222,493
Accrued expenses	206,032			226,579
Total current liabilities	450,168			467,431
Long-term debt, net of unamortized debt issuance costs	689,021			587,609
Deferred taxes	39,670			45,923
Other liabilities	177,169			83,697
Total liabilities	1,356,028			1,184,660
Commitments and contingencies
Equity:
Preferred Stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding at December 31, 2017 and at March 31, 2017	—			—
Common Stock, $0.01 par value per share, 135,000,000 shares authorized; 54,590,184 shares issued and 42,126,817 shares outstanding at December 31, 2017; 54,370,810 shares issued and 43,447,536 shares outstanding at March 31, 2017	546			544
Additional paid-in capital	452,248			464,092
Treasury stock, at cost, 12,463,367 shares held as of December 31, 2017; 10,923,274 shares held as of March 31, 2017	(540,991		)	(439,800		)
Retained earnings	1,274,038			1,231,444
Accumulated other comprehensive loss	(65,017		)	(152,824		)
Total EnerSys stockholders’ equity	1,120,824			1,103,456
Nonredeemable noncontrolling interests	5,150			4,913
Total equity	1,125,974			1,108,369
Total liabilities and equity	$	2,482,002		$	2,293,029


								Quarter ended
	Quarter ended							July 2, 2023		July 3, 2022
	December 31, 2017			January 1, 2017
Sales from products							Sales from products	$	807,647	$	799,147
Sales from services							Sales from services	100,922		99,824
Net sales	$	658,935		$	563,697		Net sales	908,569		898,971
Cost of goods sold	491,970			408,315			Cost of goods sold	587,203		635,859
Cost of services							Cost of services	77,962		77,577
Inventory adjustment relating to exit activities	—			(502		)	Inventory adjustment relating to exit activities	3,098		—
Gross profit	166,965			155,884			Gross profit	240,306		185,535
Operating expenses	96,717			85,014			Operating expenses	144,552		127,078
Restructuring charges and other exit charges (credits)	1,808			(1,153		)
Legal proceedings charge	—			17,000
Restructuring and other exit charges							Restructuring and other exit charges	6,309		8,328

Operating earnings	68,440			55,023			Operating earnings	89,445		50,129
Interest expense	6,469			5,646			Interest expense	15,244		11,597
Other (income) expense, net	(557		)	(1,247		)
Other expense (income), net							Other expense (income), net	668		1,773
Earnings before income taxes	62,528			50,624			Earnings before income taxes	73,533		36,759
Income tax expense	88,307			13,529			Income tax expense	6,736		5,781
Net (loss) earnings	(25,779		)	37,095
Net earnings attributable to noncontrolling interests	68			860
Net (loss) earnings attributable to EnerSys stockholders	$	(25,847	)	$	36,235
Net (loss) earnings per common share attributable to EnerSys stockholders:

Net earnings attributable to EnerSys stockholders							Net earnings attributable to EnerSys stockholders	$	66,797	$	30,978
Net earnings per common share attributable to EnerSys stockholders:							Net earnings per common share attributable to EnerSys stockholders:
Basic	$	(0.61	)	$	0.83		Basic	$	1.63	$	0.76
Diluted	$	(0.61	)	$	0.82		Diluted	$	1.60	$	0.75
Dividends per common share	$	0.175		$	0.175		Dividends per common share	$	0.175	$	0.175
Weighted-average number of common shares outstanding:							Weighted-average number of common shares outstanding:
Basic	42,125,745			43,429,525			Basic	40,937,334		40,786,336
Diluted	42,125,745			44,049,674			Diluted	41,698,324		41,352,646


	July 2, 2023				March 31, 2023
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Derivatives (1)	$	—	$	—	$	—	$	—
Financial liabilities:
Senior Notes (2)	$	300,000	$	276,750	$	300,000	$	276,000
Derivatives (1)	$	(15,391)	$	(15,391)	$	(16,088)	$	(16,088)



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



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


			Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Condensed Balance Sheets (Unaudited) as of July 2, 2023 and March 31, 2023		3

	Consolidated Condensed Statements of Income (Unaudited) for the Quarters Ended July 2, 2023 and July 3, 2022		4



	Consolidated Condensed Statements of Comprehensive Income (Unaudited) for the Quarters ended J uly 2, 2023 and July 3, 2022		5

	Consolidated Condensed Statements of Cash Flows (Unaudited) for the Three Months Ended J uly 2 , 2023 and July 3, 2022		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	11
	7	Income Taxes	14
	8	Warranty	15
	9	Commitments, Contingencies and Litigation	15
	10	Restructuring and Other Exit Charges	16
	11	Debt	16
	12	Retirement Plans	19
	13	Stock-Based Compensation	19
	14	Stockholders’ Equity and Noncontrolling Interests	19
	15	Earnings Per Share	23
	16	Business Segments	24
	17	Subsequent Events	24

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		36

Item 4.	Controls and Procedures		38

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		39

Item 1A.	Risk Factors		39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		40

Item 4.	Mine Safety Disclosures		40

Item 6.	Exhibits		41

SIGNATURES			42



	Total Fair Value Measurement March 31, 2017			Quoted Price in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Lead forward contracts	$	1,163		$	—	$	1,163		$	—
Foreign currency forward contracts	(313		)	—		(313		)	—
Total derivatives	$	850		$	—	$	850		$	—


~~(1)~~	~~Represents lead and foreign currency forward contracts (see Note 4 for asset and liability positions of the lead and foreign currency forward contracts at December 31, 2017 and March 31, 2017).~~


~~(2)~~	~~The fair value amount of the Notes at December 31, 2017 and March 31, 2017 represent the trading value of the instruments.~~


	Derivatives and Hedging Activities Designated as Cash Flow Hedges				Derivatives and Hedging Activities Designated as Net Investment Hedges				Derivatives and Hedging Activities Not Designated as Hedging Instruments
	July 2, 2023		March 31, 2023		July 2, 2023		March 31, 2023		July 2, 2023		March 31, 2023
Prepaid and other current assets:
Lead forward contracts	$	409	$	—	$	—	$	—	$	—	$	—
Foreign currency forward contracts	764		723		—		—		—		200
Net investment hedges	—		—		—		—		—		—
Other assets:
Interest Rate Swaps	3,057		—		—		—		—		—
Net investment hedges	—		—		—		—		—		—
Total assets	$	4,230	$	723	$	—	$	—	$	—	$	200
Accrued expenses:
Lead forward contracts	$	—	$	89	$	—	$	—	$	—	$	—
Foreign currency forward contracts	—		—		—		—		960		—
Other liabilities:
Interest Rate Swaps	—		1,162		—		—		—		—
Net investment hedges	—		—		18,661		15,760		—		—
Total liabilities	$	—	$	1,251	$	18,661	$	15,760	$	960	$	—


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)


	Quarter ended July 2, 2023
	Energy Systems		Motive Power		Specialty		Total
Restructuring charges	$	488	$	—	$	—	$	488
Exit charges	—		1,559		4,262		5,821
Restructuring and other exit charges	$	488	$	1,559	$	4,262	$	6,309


Balance as of March 31, 2023	$	445
Accrued	488
Costs incurred	(505)
Foreign currency impact	4
Balance as of July 2, 2023	$	432



	Employee Severance			Other			Total
Balance as of March 31, 2017	$	2,668		$	144		$	2,812
Accrued	3,890			317			4,207
Costs incurred	(3,421		)	(462		)	(3,883		)
Foreign currency impact	249			1			250
Balance as of December 31, 2017	$	3,386		$	—		$	3,386


	July 2, 2023				March 31, 2023
	Principal		Unamortized Issuance Costs		Principal		Unamortized Issuance Costs
Senior Notes	$	300,000	$	2,561	$	300,000	$	2,705
Fourth Amended Credit Facility, due 2026	613,782		3,453		748,413		3,719

	$	913,782	$	6,014	$	1,048,413	$	6,424
Less: Unamortized issuance costs	6,014				6,424
Long-term debt, net of unamortized issuance costs	$	907,768			$	1,041,989


	United States Plans				International Plans
	Quarter ended				Quarter ended
	July 2, 2023		July 3, 2022		July 2, 2023		July 3, 2022
Service cost	$	—	$	—	$	220	$	235
Interest cost	166		145		585		440
Expected return on plan assets	(76)		(119)		(406)		(517)
Amortization and deferral	—		—		29		123

Net periodic benefit cost	$	90	$	26	$	428	$	281



Shares outstanding as of March 31, ~~2017~~2023	~~43,447,536~~40,901,059
~~Purchase of treasury stock~~	~~(1,540,093~~	)

Shares issued ~~towards~~under equity-based compensation plans, net of equity awards surrendered for option price and taxes	~~219,374~~128,975
Shares outstanding as of ~~December 31, 2017~~July 2, 2023	~~42,126,817~~41,030,034



	March 31, 2017			Before Reclassifications			Amounts Reclassified from AOCI		December 31, 2017
Pension funded status adjustment	$	(25,555	)	$	—		$	996	$	(24,559	)
Net unrealized gain (loss) on derivative instruments	1,975			(309		)	338		2,004
Foreign currency translation adjustment	(129,244		)	86,782			—		(42,462		)
Accumulated other comprehensive (loss) income	$	(152,824	)	$	86,473		$	1,334	$	(65,017	)



Components of AOCI	Amounts Reclassified from AOCI			Location of (Gain) Loss Recognized on Income Statement
Derivatives in cash flow hedging relationships:
Net gain on cash flow hedging derivative instruments	$	(455	)	Cost of goods sold
Tax expense	168
Net gain on derivative instruments, net of tax	$	(287	)

Defined benefit pension costs:
Prior service costs and deferrals	$	434		Net periodic benefit cost, included in cost of goods sold and operating expenses - See Note 10
Tax benefit	(103		)
Net periodic benefit cost, net of tax	$	331


(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
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net	—		—		—		—		—		—		—		—		—		—
Purchase of common stock	—		—		—		—		—		—		—		—		—		—
Other	—		—		65		214		—		—		—		279		—		279
Net earnings	—		—		—		—		66,797		—		—		66,797		—		66,797
Dividends ($0.175 per common share)	—		—		184		—		(7,357)		—		—		(7,173)		—		(7,173)

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 expense of $544)	—		—		—		—		—		1,786		—		1,786		—		1,786
Foreign currency translation adjustment	—		—		—		—		—		2,192		—		2,192		(190)		2,002
Balance at July 2, 2023	$	—	$	565	$	612,295	$	(740,742)	$	1,989,588	$	(179,476)	$	(2,463)	$	1,679,767	$	3,412	$	1,683,179



	Equity Attributable to EnerSys Stockholders			Nonredeemable Noncontrolling Interests		Total Equity
Balance as of March 31, 2017	$	1,103,456		$	4,913	$	1,108,369
Total comprehensive income:
Net earnings	65,576			118		65,694
Net unrealized gain on derivative instruments, net of tax	29			—		29
Pension funded status adjustment, net of tax	996			—		996
Foreign currency translation adjustment	86,782			119		86,901
Total other comprehensive gain, net of tax	87,807			119		87,926
Total comprehensive income	153,383			237		153,620
Other changes in equity:
Purchase of treasury stock including ASR	(121,191		)	—		(121,191		)
Cash dividends - common stock ($0.525 per share)	(22,339		)	—		(22,339		)
Other, including activity related to equity awards	7,515			—		7,515
Balance as of December 31, 2017	$	1,120,824		$	5,150	$	1,125,974


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



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



	Quarter ended December 31, 2017				Quarter ended January 1, 2017				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Americas	$	353.2	53.6	%	$	314.0	55.7	%	$	39.2	12.5	%
EMEA	224.9		34.1		186.1		33.0		38.8		20.9
Asia	80.8		12.3		63.6		11.3		17.2		26.9
Total net sales	$	658.9	100.0	%	$	563.7	100.0	%	$	95.2	16.9	%



	Nine months ended December 31, 2017				Nine months ended January 1, 2017				Increase (Decrease)
	In Millions		Percentage of Total Net Sales		In Millions		Percentage of Total Net Sales		In Millions		%
Americas	$	1,049.3	55.3	%	$	968.5	55.6	%	$	80.8	8.3	%
EMEA	621.9		32.7		563.8		32.4		58.1		10.3
Asia	227.6		12.0		208.0		12.0		19.6		9.4
Total net sales	$	1,898.8	100.0	%	$	1,740.3	100.0	%	$	158.5	9.1	%



($ in Millions)
Balance At	Trade Receivables		Inventory		Accounts Payable			Total		Quarter Revenue Annualized		Primary Working Capital %
December 31, 2017	$	494.9	$	422.0	$	(227.3	)	$	689.6	$	2,635.7	26.2	%
March 31, 2017	486.6		360.7		(222.5		)	624.8		2,507.2		24.9
January 1, 2017	444.3		370.2		(202.9		)	611.6		2,254.8		27.1