Delivers Gross Margin of 28.9%, Up 570 Basis Points From
Prior Year and EPS of $1.86, Up 72% From Prior Year
Third Quarter Fiscal 2024 Highlights
(All comparisons against the third quarter of
fiscal year 2023 unless otherwise noted)
- Delivered net sales of $862M, down 6%, primarily driven by
temporary spending pauses in telecom and broadband
- Achieved GM of 28.9%, +570 bps, including $59M benefit from
Inflation Reduction Act / IRC 45X tax credits
- Achieved adjusted GM(b) of 30.7%, +760 bps; excluding $59M
benefit from IRC 45X tax credits 23.9%, up 80 bps
- Generated operating earnings of $93M, +18%, and adjusted
operating earnings(2) of $130M, +53%
- Realized diluted EPS of $1.86, +72%, and adjusted diluted
EPS(1) of $2.56, +102%
- Reduced net leverage(a) to 1.1 X EBITDA on operating cash flow
of $135M
- Published second annual Task Force on Climate-Related Financial
Disclosure (TCFD) Report
- Subsequent to the quarter end, issued $300M aggregate principal
6.625% senior notes due 2032
EnerSys (NYSE: ENS), the global leader in stored energy
solutions for industrial applications, announced today results for
its third quarter of fiscal 2024, which ended on December 31,
2023.
Message from the CEO
We were pleased to deliver the third quarter of fiscal 2024 with
adjusted EPS above the midpoint of our guidance range. Sales were
lower versus the prior year as we continue to see demand pauses in
the telecom and broadband markets as well as a return to normalcy
in Motive Power orders, partially offset by strength in Specialty,
services, and data centers, particularly in the Americas. We
continue to hold price, a testament to the customer value we
deliver. Order rates improved in the quarter with book-to-bill of
1.0. Motive Power delivered strong operating earnings in the
quarter supported by ongoing increases in maintenance-free system
sales. We are making consistent progress towards delivering the
first 15 Fast Charge & Storage (FC&S) systems for our
launch customer with installations targeted to begin this summer
and our sales pipeline continues to grow as this new line of
business has begun to materialize. We are continuing to take
decisive actions to reduce our costs in the current lower telecom
and broadband demand environment and are rebalancing our production
lines to increase productivity.
During the quarter, based on additional proposed regulations
issued by the U.S. Department of Treasury regarding Section 45X of
the Internal Revenue Code, we concluded that more of our battery
sales than previously anticipated qualify for the related tax
credits, which supported our gross margin of 28.9%. As a result, we
recorded a benefit of $59 million, including $29 million of
retroactive credits. We now expect our estimated annual IRC 45X tax
credits to be in the range of $120 million to $160 million.
Our balance sheet was a highlight this quarter with operating
cash flow conversion of 177% and adjusted free cash flow
conversion(b) 106%, which lowered leverage to 1.1X EBITDA. We
reduced inventory through a targeted approach to specific raw
materials and products.
We continue to methodically execute on our strategic growth
plans. We remain highly confident in EnerSys’s position as a global
leader in electrification and energy storage applications, with
demand driven by critical global megatrends. With our
industry-leading system solutions and strong customer
relationships, we are well-positioned for growth in our diverse end
markets.
David M. Shaffer, President and Chief Executive Officer,
EnerSys
Key Financial Results and
Metrics
Third quarter ended
Nine months ended
In millions, except per share amounts
December 31, 2023
January 1, 2023
Change
December 31, 2023
January 1, 2023
Change
Net Sales
$
861.5
$
920.2
(6.4
)%
$
2,671.1
$
2,718.6
(1.7
)%
Diluted EPS (GAAP)
$
1.86
$
1.08
$
0.78
$
5.02
$
2.66
$
2.36
Adjusted Diluted EPS
(Non-GAAP)(1)
$
2.56
$
1.27
$
1.29
$
6.27
$
3.52
$
2.75
Gross Profit (GAAP)
$
248.6
$
213.7
$
34.9
$
728.5
$
594.1
$
134.4
Operating Earnings (GAAP)
$
92.6
$
78.5
$
14.1
$
270.6
$
182.9
$
87.7
Adjusted Operating Earnings
(Non-GAAP)(2)
$
130.3
$
84.9
$
45.4
$
341.0
$
215.1
$
125.9
Net Earnings (GAAP)
$
76.2
$
44.4
$
31.8
$
208.2
$
109.9
$
98.3
EBITDA (Non-GAAP)(3)
$
113.5
$
97.9
$
15.6
$
333.0
$
248.4
$
84.6
Adjusted EBITDA (Non-GAAP)(3)
$
144.3
$
98.1
$
46.2
$
382.3
$
269.3
$
113.0
Share Repurchases
$
35.0
$
—
$
35.0
$
82.3
$
22.9
$
59.4
Dividend per share
$
0.225
$
0.175
$
0.05
$
0.625
$
0.525
$
0.10
Total Capital Returned to
Stockholders
$
44.1
$
7.1
$
37
$
107.8
$
44.2
$
63.6
(a) Net leverage ratio is a non-GAAP financial measure as
defined pursuant to our credit agreement and discussed under
Reconciliations of GAAP to Non-GAAP Financial Measures.
(b) Adjusted gross margin, and adjusted free cash flow
conversion are non-GAAP financial measures defined and discussed
under Reconciliations of GAAP to Non-GAAP Financial Measures.
(1) Adjusted Diluted EPS is a non-GAAP financial measure and
discussed under Reconciliations of GAAP to Non-GAAP Financial
Measures.
(2) Operating Earnings are adjusted for charges that the Company
incurs as a result of restructuring and exit activities, impairment
of goodwill and indefinite-lived intangibles and other assets,
acquisition activities and those charges and credits that are not
directly related to operating unit performance. A reconciliation of
operating earnings to Non-GAAP Adjusted Earnings are provided in
tables under the section titled Business Segment Operating
Results.
(3) Net Earnings are adjusted for depreciation, amortization,
interest and income taxes to arrive at Non-GAAP EBITDA. Non-GAAP
Adjusted EBITDA is further adjusted for certain charges such as
restructuring and exit activities, impairment of goodwill and
indefinite-lived intangibles and other assets, acquisition
activities and other charges and credits as discussed under
Reconciliations of GAAP to Non-GAAP Financial Measures.
Summary of Results
Third Quarter 2024
Net sales for the third quarter of fiscal 2024 were $861.5
million, a decrease of 6.4% from the prior year third quarter net
sales of $920.2 million. The decrease compared to prior year
quarter was the result of a 7% decrease in organic volume,
partially offset by a 1% increase in pricing.
Net earnings attributable to EnerSys stockholders (“Net
earnings”) for the third quarter of fiscal 2024 was $76.2 million,
or $1.86 per diluted share, which included an unfavorable
highlighted net of tax impact of $28.8 million, or $0.70 per
diluted share, from highlighted items described in further detail
in the tables shown below, reconciling non-GAAP adjusted financial
measures to reported amounts.
Net earnings for the third quarter of fiscal 2023 was $44.4
million, or $1.08 per diluted share, which included an unfavorable
highlighted net of tax impact of $7.9 million, or $0.19 per diluted
share, from highlighted items described in further detail in the
tables shown below, reconciling non-GAAP adjusted financial
measures to reported amounts.
Excluding these highlighted items, adjusted Net earnings per
diluted share for the third quarter of fiscal 2024, on a non-GAAP
basis, were $2.56, compared to the guidance of $2.50 to $2.60 per
diluted share for the third quarter given by the Company on
December 19, 2023. These earnings compare to the prior year third
quarter adjusted Net earnings of $1.27 per diluted share. Please
refer to the section included herein under the heading
“Reconciliations of GAAP to Non-GAAP Financial Measures” for a
discussion of the Company’s use of non-GAAP adjusted financial
information, which includes tables reconciling GAAP and non-GAAP
adjusted financial measures for the quarters ended December 31,
2023 and January 1, 2023.
In the first quarter of fiscal 2024, we introduced a new line of
business, New Ventures, that includes energy storage and management
systems for demand charge reduction, utility back-up power, and
dynamic fast charging for electric vehicles. The financial results
of the New Ventures segment includes start up operating expenses
and is included in the Corporate and other line in our operating
earnings.
Fiscal Year to Date 2024
Net sales for the nine months of fiscal 2024 were $2,671.1
million, a decrease of 1.7% from the prior year nine months net
sales of $2,718.6 million. This decrease was due to an 8% decrease
in organic volume, partially offset by a 5% increase in pricing and
a 1% increase in foreign currency translation.
Net earnings for the nine months of fiscal 2024 was $208.2
million, or $5.02 per diluted share, which included an unfavorable
highlighted net of tax impact of $51.9 million, or $1.25 per
diluted share, from highlighted items described in further detail
in the tables shown below, reconciling non-GAAP adjusted financial
measures to reported amounts.
Net earnings for the nine months of fiscal 2023 was $109.9
million, or $2.66 per diluted share, which included an unfavorable
highlighted net of tax impact of $35.5 million, or $0.86 per
diluted share, from highlighted items described in further detail
in the tables shown below, reconciling non-GAAP adjusted financial
measures to reported amounts.
Adjusted Net earnings per diluted share for the nine months of
fiscal 2024, on a non-GAAP basis, were $6.27. This compares to the
prior year nine months adjusted Net earnings of $3.52 per diluted
share. Please refer to the section included herein under the
heading “Reconciliations of GAAP to Non-GAAP Financial Measures”
for a discussion of the Company’s use of non-GAAP adjusted
financial information.
Fourth Quarter 2024 Outlook
In the fourth quarter of fiscal 2024, we expect:
- Adjusted diluted earnings per share in the range of $1.98 to
$2.08, inclusive of $0.80 to $0.90 from IRC 45X tax benefits under
the IRA. Note that the IRS has not yet finalized guidance related
to section 45X, which could materially increase or decrease the
quantity of our U.S. produced batteries that qualify for this
credit.
- Gross margin in the range of 26.0% to 28.0%, including 350bps
to 410bps from IRA credits.
- For the full year of fiscal 2024, we expect capital
expenditures to be in the range of $80 million to $100
million.
"We remain optimistic about the trajectory of our business and
are particularly pleased with our continued ability to maintain
pricing. While we are seeing healthy demand trends in the majority
of our end markets, we are managing our business prudently to
navigate the temporary spending pauses by our telecom and broadband
customers. We are well-positioned to capitalize on market
opportunities as we deliver innovative products that are
strategically aligned with secular trends," said Andrea Funk,
EnerSys Chief Financial Officer.
Please refer to the section included herein under the heading
“Reconciliations of GAAP to Non-GAAP Financial Measures” for a
discussion of the Company’s use of non-GAAP adjusted financial
information.
Conference Call and Webcast Details
The Company will host a conference call to discuss its third
quarter 2024 financial results at 9:00 AM (EST) Thursday, February
8, 2024. A live broadcast as well as a replay of the call can be
accessed via https://edge.media-server.com/mmc/p/ie42kc8w/ or the
Investor Relations section of the company’s website at
https://investor.enersys.com.
To join the live call, please register at
https://register.vevent.com/register/BI08ed58087c944a6ebf8d5ef243abafaa.
A dial-in and unique PIN will be provided upon registration.
About EnerSys
EnerSys is the global leader in stored energy solutions for
industrial applications and designs, manufactures and distributes
energy systems solutions and motive power batteries, specialty
batteries, battery chargers, power equipment, battery accessories
and outdoor equipment enclosure solutions to customers worldwide.
The company goes to market through four lines of business: Energy
Systems, Motive Power, Specialty and New Ventures. Energy Systems,
which combine power conversion, power distribution, energy storage,
and enclosures, are used in the telecommunication, broadband, and
utility industries, uninterruptible power supplies, and numerous
applications requiring stored energy solutions. Motive power
batteries and chargers are utilized in electric forklift trucks and
other industrial electric powered vehicles. Specialty batteries are
used in aerospace and defense applications, large over-the-road
trucks, premium automotive, medical and security systems
applications. New Ventures provides energy storage and management
systems for various applications including demand charge reduction,
utility back-up power, and dynamic fast charging for electric
vehicles. EnerSys also provides aftermarket and customer support
services to its customers in over 100 countries through its sales
and manufacturing locations around the world. More information
regarding EnerSys can be found at www.enersys.com.
Sustainability
Sustainability at EnerSys is about more than just the benefits
and impacts of our products. Our commitment to sustainability
encompasses many important environmental, social and governance
issues. Sustainability is a fundamental part of how we manage our
own operations. Minimizing our environmental footprint is a
priority. Sustainability is our commitment to our employees, our
customers and the communities we serve. Our products facilitate
positive environmental, social, and economic impacts around the
world. To learn more visit:
https://www.enersys.com/en/about-us/sustainability/.
Caution Concerning Forward-Looking Statements
This press release, and oral statements made regarding the
subjects of this release, contains forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act
of 1995, or the Reform Act, which may include, but are not limited
to, statements regarding EnerSys’ earnings estimates, intention to
pay quarterly cash dividends, return capital to stockholders,
plans, objectives, expectations and intentions and other statements
contained in this press release that are not historical facts,
including statements identified by words such as “believe,” “plan,”
“seek,” “expect,” “intend,” “estimate,” “anticipate,” “will,” and
similar expressions. All statements addressing operating
performance, events, or developments that EnerSys expects or
anticipates will occur in the future, including statements relating
to sales growth, earnings or earnings per share growth, order
intake, backlog, payment of future cash dividends, commodity
prices, execution of its stock buy back program, judicial or
regulatory proceedings, ability to identify and realize benefits in
connection with acquisition and disposition opportunities, and
market share, as well as statements expressing optimism or
pessimism about future operating results or benefits from its cash
dividend, its stock buy back programs, application of Section 45X
of the Internal Revenue Code, future responses to and effects of
the pandemic, adverse developments with respect to the economic
conditions in the U.S. in the markets in which we operate and other
uncertainties, including the impact of supply chain disruptions,
interest rate changes, inflationary pressures, geopolitical and
other developments and labor shortages on the economic recovery and
our business are forward-looking statements within the meaning of
the Reform Act. The forward-looking statements are based on
management's current views and assumptions regarding future events
and operating performance, and are inherently subject to
significant business, economic, and competitive uncertainties and
contingencies and changes in circumstances, many of which are
beyond the Company’s control. The statements in this press release
are made as of the date of this press release, even if subsequently
made available by EnerSys on its website or otherwise. EnerSys does
not undertake any obligation to update or revise these statements
to reflect events or circumstances occurring after the date of this
press release.
Although EnerSys does not make forward-looking statements unless
it believes it has a reasonable basis for doing so, EnerSys cannot
guarantee their accuracy. The foregoing factors, among others,
could cause actual results to differ materially from those
described in these forward-looking statements. For a list of other
factors which could affect EnerSys’ results, including earnings
estimates, see EnerSys’ filings with the Securities and Exchange
Commission, including “Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations,” and
“Forward-Looking Statements,” set forth in EnerSys’ Annual Report
on Form 10-K for the fiscal year ended March 31, 2023. No undue
reliance should be placed on any forward-looking statements.
EnerSys
Consolidated Condensed
Statements of Income (Unaudited)
(In millions, except share and
per share data)
Quarter ended
Nine months ended
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Net sales
$
861.5
$
920.2
$
2,671.1
$
2,718.6
Gross profit
248.6
213.7
728.5
594.1
Operating expenses
143.9
134.4
432.3
398.8
Restructuring and other exit charges
6.1
0.8
19.6
12.4
Impairment of indefinite-lived
intangibles
6.0
—
6.0
—
Operating earnings
92.6
78.5
270.6
182.9
Earnings before income taxes
78.7
57.8
225.6
134.9
Income tax expense
2.5
13.4
17.4
25.0
Net earnings attributable to EnerSys
stockholders
$
76.2
$
44.4
$
208.2
$
109.9
Net reported earnings per common share
attributable to EnerSys stockholders:
Basic
$
1.88
$
1.09
$
5.11
$
2.69
Diluted
$
1.86
$
1.08
$
5.02
$
2.66
Dividends per common share
$
0.225
$
0.175
$
0.625
$
0.525
Weighted-average number of common shares
used in reported earnings per share calculations:
Basic
40,451,279
40,835,636
40,770,524
40,787,654
Diluted
41,047,893
41,281,693
41,476,950
41,267,320
EnerSys
Consolidated Condensed Balance
Sheets (Unaudited)
(In Thousands, Except Share
and Per Share Data)
December 31, 2023
March 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
332,714
$
346,665
Accounts receivable, net of allowance for
doubtful accounts: December 31, 2023 - $10,312; March 31, 2023 -
$8,775
498,499
637,817
Inventories, net
755,163
797,798
Prepaid and other current assets
185,901
113,601
Total current assets
1,772,277
1,895,881
Property, plant, and equipment, net
523,558
513,283
Goodwill
691,172
676,715
Other intangible assets, net
334,972
360,412
Deferred taxes
53,406
49,152
Other assets
127,253
121,231
Total assets
$
3,502,638
$
3,616,674
Liabilities and Equity
Current liabilities:
Short-term debt
$
30,937
$
30,642
Accounts payable
342,066
378,641
Accrued expenses
289,892
309,037
Total current liabilities
662,895
718,320
Long-term debt, net of unamortized debt
issuance costs
880,833
1,041,989
Deferred taxes
60,065
61,118
Other liabilities
168,818
191,366
Total liabilities
1,772,611
2,012,793
Commitments and contingencies
Equity:
Preferred Stock, $0.01 par value,
1,000,000 shares authorized, no shares issued or outstanding at
December 31, 2023 and at March 31, 2023
—
—
Common Stock, $0.01 par value per share,
135,000,000 shares authorized, 56,347,317 shares issued and
40,399,131 shares outstanding at December 31, 2023; 56,004,613
shares issued and 40,901,059 shares outstanding at March 31,
2023
563
560
Additional paid-in capital
620,408
596,464
Treasury stock at cost, 15,948,186 shares
held as of December 31, 2023 and 15,103,554 shares held as of March
31, 2023
(822,658
)
(740,956
)
Retained earnings
2,112,259
1,930,148
Contra equity - indemnification
receivable
(1,988
)
(2,463
)
Accumulated other comprehensive loss
(182,050
)
(183,474
)
Total EnerSys stockholders’ equity
1,726,534
1,600,279
Nonredeemable noncontrolling interests
3,493
3,602
Total equity
1,730,027
1,603,881
Total liabilities and equity
$
3,502,638
$
3,616,674
EnerSys
Consolidated Condensed
Statements of Cash Flows (Unaudited)
(In Thousands)
Nine months ended
December 31, 2023
January 1, 2023
Cash flows from operating
activities
Net earnings
$
208,184
$
109,860
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
68,304
68,998
Write-off of assets relating to exit
activities
21,506
8,360
Impairment of indefinite-lived
intangibles
6,020
—
Derivatives not designated in hedging
relationships:
Net losses (gains)
666
(1,383
)
Cash (settlements) proceeds
(203
)
40
Provision for doubtful accounts
1,912
(720
)
Deferred income taxes
(258
)
(716
)
Non-cash interest expense
1,229
1,461
Stock-based compensation
22,894
18,770
(Gain) loss on disposal of property,
plant, and equipment
644
(193
)
Changes in assets and liabilities:
Accounts receivable
139,508
123,398
Inventories
27,401
(135,905
)
Prepaid and other current assets
(3,602
)
(8,323
)
Other assets
(1,343
)
(899
)
Accounts payable
(45,650
)
(31,614
)
Accrued expenses
(126,857
)
(17,149
)
Other liabilities
(108
)
1,858
Net cash provided by (used in) operating
activities
320,247
135,843
Cash flows from investing
activities
Capital expenditures
(59,005
)
(57,512
)
Purchase of business
(8,270
)
—
Proceeds from termination of net
investment hedges
—
43,384
Proceeds from disposal of property, plant,
and equipment
2,037
452
Net cash (used in) provided by investing
activities
(65,238
)
(13,676
)
Cash flows from financing
activities
Net (repayments) borrowings on short-term
debt
(440
)
(20,317
)
Proceeds from Second Amended Revolver
borrowings
182,500
291,100
Repayments of Second Amended Revolver
borrowings
(327,500
)
(422,082
)
Repayments of Second and Third Amended
Term Loans
(19,116
)
(1,625
)
Financing costs for debt modification
—
(1,096
)
Option proceeds, net
9,668
1,060
Payment of taxes related to net share
settlement of equity awards
(9,492
)
(6,385
)
Purchase of treasury stock
(82,331
)
(22,907
)
Dividends paid to stockholders
(25,423
)
(21,386
)
Other
910
842
Net cash (used in) financing
activities
(271,224
)
(202,796
)
Effect of exchange rate changes on cash
and cash equivalents
2,264
(23,778
)
Net decrease in cash and cash
equivalents
(13,951
)
(104,407
)
Cash and cash equivalents at beginning of
period
346,665
402,488
Cash and cash equivalents at end of
period
$
332,714
$
298,081
Reconciliations of GAAP to Non-GAAP
Financial Measures
This press release contains financial information determined by
methods other than in accordance with U.S. Generally Accepted
Accounting Principles, ("GAAP"). EnerSys' management uses the
non-GAAP measures “adjusted Net earnings”, “adjusted Diluted EPS”,
“adjusted operating earnings”, "adjusted gross margin", “adjusted
EBITDA”, "adjusted EBITDA per credit agreement", "net debt", "net
leverage ratio", " adjusted free cash flow conversion", “net sales
at constant currency”, and "net sales growth rate at constant
currency” as applicable, in their analysis of the Company's
performance. Adjusted Net earnings, adjusted gross margin, and
adjusted operating earnings measures, as used by EnerSys in past
quarters and years, adjusts Net earnings and operating earnings
determined in accordance with GAAP to reflect changes in financial
results associated with the Company's restructuring initiatives and
other highlighted charges and income items. Adjusted EBITDA is a
key performance measure that our management uses to assess our
operating performance. Because Adjusted EBITDA facilitates internal
comparisons of our historical operating performance on a more
consistent basis, we use this measure as an overall assessment of
our performance, to evaluate the effectiveness of our business
strategies and for business planning purposes. We calculate
Adjusted EBITDA as net income before interest income, interest
expense, other (income) expense net, provision (benefit) for income
taxes, depreciation and amortization, further adjusted to exclude
restructuring and exit activities, impairment of goodwill,
indefinite-lived intangibles and other assets, acquisition
activities and those charges and credits that are not directly
related to operating unit performance. EBITDA is calculated as net
income before interest income, interest expense, other (income)
expense net, provision (benefit) for income taxes, depreciation and
amortization. We define non-GAAP adjusted EBITDA per credit
agreement as net earnings determined in accordance with GAAP for
interest, taxes, depreciation and amortization, and certain charges
or credits as permitted by our credit agreements, that were
recorded during the periods presented. We define non-GAAP net debt
as total debt, finance lease obligations and letters of credit, net
of all cash and cash equivalents, as defined in the Fourth Amended
Credit Facility on the balance sheet as of the end of the most
recent fiscal quarter. We define non-GAAP net leverage ratio as
non-GAAP net debt divided by last twelve months non-GAAP adjusted
EBITDA per credit agreement. We define non-GAAP free cash flow as
net cash provided by or used in operating activities less capital
expenditures. We define non-GAAP adjusted free cash flow conversion
as free cash flow divided by adjusted net earnings. Free cash flow
and adjusted free cash flow conversion are used by investors,
financial analysts, rating agencies and management to help evaluate
the Company’s ability to generate cash to pursue incremental
opportunities aimed toward enhancing shareholder value. We define
non-GAAP constant currency net sales as total net sales excluding
the effect of foreign exchange rate movements, and we use it to
determine the constant currency growth rate on a year-on-year
basis. Non-GAAP constant currency revenues are calculated by
translating current period revenues using the prior comparative
periods’ actual exchange rates, rather than the actual exchange
rates in effect during the current period. Constant currency net
sales growth rate is calculated by determining the difference
between current period non-GAAP constant currency net sales and
current period reported net sales divided by prior period as
reported net sales. Management believes the presentation of these
financial measures reflecting these non-GAAP adjustments provides
important supplemental information in evaluating the operating
results of the Company as distinct from results that include items
that are not indicative of ongoing operating results and overall
business performance; in particular, those charges that the Company
incurs as a result of restructuring activities, impairment of
goodwill and indefinite-lived intangibles and other assets,
acquisition activities and those charges and credits that are not
directly related to operating unit performance, such as significant
legal proceedings, amortization of Alpha and NorthStar related
intangible assets (and, beginning in fiscal 2024, amortization of
all intangible assets) and tax valuation allowance changes,
including those related to the AHV (Old-Age and Survivors
Insurance) Financing (TRAF) in Switzerland. Because these charges
are not incurred as a result of ongoing operations, or are incurred
as a result of a potential or previous acquisition, they are not as
helpful a measure of the performance of our underlying business,
particularly in light of their unpredictable nature and are
difficult to forecast. Although we exclude the amortization of
purchased intangibles from these non-GAAP measures, management
believes that it is important for investors to understand that such
intangible assets were recorded as part of purchase accounting and
contribute to revenue generation.
Income tax effects of non-GAAP adjustments are calculated using
the applicable statutory tax rate for the jurisdictions in which
the charges (benefits) are incurred, while taking into
consideration any valuation allowances. For those items which are
non-taxable, the tax expense (benefit) is calculated at 0%.
EnerSys does not provide a quantitative reconciliation of the
company’s projected range for adjusted diluted earnings per share
for the fourth quarter of fiscal 2024 to diluted earnings per
share, which is the most directly comparable GAAP measure, in
reliance on the unreasonable efforts exception provided under Item
10(e)(1)(i)(B) of Regulation S-K. EnerSys' adjusted diluted
earnings per share guidance for the fourth quarter of fiscal 2024
excludes certain items, including but not limited to certain
non-cash, large and/or unpredictable charges and benefits, charges
from restructuring and exit activities, impairment of goodwill and
indefinite-lived intangibles, acquisition and disposition
activities, legal judgments, settlements, or other matters, and tax
positions, that are inherently uncertain and difficult to predict,
can be dependent on future events that are less capable of being
controlled or reliably predicted by management and are not part of
the Company's routine operating activities can be dependent on
future events that are less capable of being controlled or reliably
predicted by management and are not part of the Company's routine
operating activities. Due to the uncertainty of the occurrence or
timing of these future excluded items, management cannot accurately
forecast many of these items for internal use and therefore cannot
create a quantitative adjusted diluted earnings per share for the
fourth quarter of fiscal 2024 to diluted earnings per share
reconciliation without unreasonable efforts.
These non-GAAP disclosures have limitations as an analytical
tool, should not be viewed as a substitute for operating earnings,
Net earnings or net income determined in accordance with GAAP, and
should not be considered in isolation or as a substitute for
analysis of the Company's results as reported under GAAP, nor are
they necessarily comparable to non-GAAP performance measures that
may be presented by other companies. Management believes that this
non-GAAP supplemental information will be helpful in understanding
the Company's ongoing operating results. This supplemental
presentation should not be construed as an inference that the
Company's future results will be unaffected by similar adjustments
to Net earnings determined in accordance with GAAP.
A reconciliation of non-GAAP net sales and growth rates in
constant currency are set forth in the table below, providing a
reconciliation of non-GAAP constant currency net sales to the
Company’s reported net sales for its business segments.
Quarter ended
Nine months ended
($ millions)
($ millions)
December 31, 2023
January 1, 2023
Growth rate
December 31, 2023
January 1, 2023
Growth rate
Energy Systems reported net
sales
$
373.5
$
434.3
(14.0
)%
$
1,220.6
$
1,279.9
(4.6
)%
Exchange rate effect
1.2
3.6
Energy Systems constant currency net
sales
374.7
(13.7
)
1,224.2
(4.4
)
Motive Power reported net sales
$
355.4
$
361.8
(1.8
)%
$
1,061.4
$
1,067.7
(0.6
)%
Exchange rate effect
(0.9
)
(5.2
)
Motive Power constant currency net
sales
354.5
(2.0
)
1,056.2
(1.1
)
Specialty reported net sales
$
132.6
$
124.1
6.8
%
$
389.1
$
371.0
4.9
%
Exchange rate effect
(1.1
)
(3.0
)
Specialty constant currency net
sales
131.5
6.0
386.1
4.0
Total reported net sales
$
861.5
$
920.2
(6.4
)%
$
2,671.1
$
2,718.6
(1.7
)%
Exchange rate effect
(0.8
)
(4.6
)
Total constant currency net
sales
860.7
(6.5
)
2,666.5
(1.9
)
A reconciliation of non-GAAP adjusted operating earnings is set
forth in the table below, providing a reconciliation of non-GAAP
adjusted operating earnings to the Company’s reported operating
results for its business segments. Corporate and other includes
amounts managed on a company-wide basis and not directly allocated
to any reportable segments, primarily relating to IRA production
tax credits. Also, included are start up costs for exploration of a
new lithium plant as well as start-up operating expenses from the
New Ventures operating segment.
Business Segment Operating Results
Quarter ended
($ millions)
December 31, 2023
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
$
373.5
$
355.4
$
132.6
$
—
$
861.5
Operating Earnings
$
(18.6
)
$
49.5
$
6.0
$
55.7
$
92.6
Inventory adjustment relating to exit
activities
16.1
—
—
—
$
16.1
Restructuring and other exit charges
2.4
2.9
0.8
—
6.1
Impairment of indefinite-lived
intangibles
6.0
—
—
—
6.0
Amortization of intangible assets
6.0
0.2
0.7
—
6.9
Other
2.4
0.2
—
—
2.6
Adjusted Operating Earnings
$
14.3
$
52.8
$
7.5
$
55.7
$
130.3
Quarter ended
($ millions)
January 1, 2023
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
$
434.3
$
361.8
$
124.1
$
—
$
920.2
Operating Earnings
$
20.5
$
47.1
$
10.9
$
—
$
78.5
Inventory adjustment relating to exit
activities
(0.2
)
(0.7
)
—
—
(0.9
)
Restructuring and other exit charges
0.2
0.6
—
—
0.8
Amortization of intangible assets
5.9
—
0.4
6.3
Other
0.1
0.1
—
0.2
Adjusted Operating Earnings
$
26.5
$
47.1
$
11.3
$
—
$
84.9
Increase (Decrease) as a % from prior
year quarter
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
(14.0
)%
(1.8
)%
6.8
%
NM
(6.4
)%
Operating Earnings
(190.1
)
5.4
(45.3
)
NM
17.9
Adjusted Operating Earnings
(46.0
)
11.9
(33.7
)
NM
53.4
NM = Not Meaningful
Nine months ended
($ millions)
December 31, 2023
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
$
1,220.6
$
1,061.4
$
389.1
$
—
$
2,671.1
Operating Earnings
$
20.4
$
147.3
$
10.9
$
92.0
$
270.6
Inventory adjustment relating to exit
activities
16.1
—
3.1
—
19.2
Restructuring and other exit charges
5.1
7.9
6.6
—
19.6
Impairment of indefinite-lived
intangibles
6.0
—
—
—
6.0
Amortization of intangible assets
18.5
0.5
2.1
—
21.1
Other
3.5
0.8
0.2
—
4.5
Adjusted Operating Earnings
$
69.6
$
156.5
$
22.9
$
92.0
$
341.0
Nine months ended
($ millions)
January 1, 2023
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
$
1,279.9
$
1,067.7
$
371.0
$
—
$
2,718.6
Operating Earnings
$
37.8
$
116.8
$
28.3
$
—
$
182.9
Inventory adjustment relating to exit
activities
(0.2
)
0.8
—
—
0.6
Restructuring and other exit charges
1.2
11.2
—
—
12.4
Amortization of intangible assets
17.7
—
1.2
—
18.9
Other
0.1
0.2
—
—
0.3
Adjusted Operating Earnings
$
56.6
$
129.0
$
29.5
$
—
$
215.1
Increase (Decrease) as a % from prior
year
Energy Systems
Motive Power
Specialty
Corporate and other
Total
Net Sales
(4.6
)%
(0.6
)%
4.9
%
NM
(1.7
)%
Operating Earnings
(46.3
)
26.2
(61.5
)
NM
48.0
Adjusted Operating Earnings
23.0
21.2
(22.5
)
NM
58.4
NM = Not Meaningful
Reconciliations of GAAP to Non-GAAP
Financial Measures (Unaudited)
The table below presents a reconciliation of Net Earnings to
EBITDA and Adjusted EBITDA:
Quarter ended
Nine months ended
($ millions)
($ millions)
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Net Earnings
$
76.2
$
44.4
208.2
$
109.9
Depreciation
16.2
14.8
47.2
45.1
Amortization
6.9
7.8
21.1
23.9
Interest
11.7
17.5
39.1
44.5
Income Taxes
2.5
13.4
17.4
25.0
EBITDA
113.5
97.9
333.0
248.4
Non-GAAP adjustments
30.8
0.2
49.3
20.9
Adjusted EBITDA
$
144.3
$
98.1
$
382.3
$
269.3
The following table provides the non-GAAP adjustments shown in
the reconciliation above:
Quarter ended
Nine months ended
($ millions)
($ millions)
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Inventory adjustment relating to exit
activities
$
16.1
$
(0.9
)
$
19.2
$
0.6
Restructuring and other exit charges
6.1
0.8
19.6
12.4
Impairment of indefinite-lived
intangibles
6.0
—
6.0
0.0
Other
2.6
0.4
4.5
1.5
Remeasurement of monetary assets included
in other (income) expense relating to exit from Russia
operations
—
(0.6
)
—
4.5
Asset Securitization Transaction Fees
—
0.5
—
0.5
Cost of funding to terminate net
investment hedges
—
—
—
1.4
Non-GAAP adjustments
$
30.8
$
0.2
$
49.3
$
20.9
The table below presents a reconciliation of Gross Profit and
Gross Margin to Adjusted Gross Profit and Adjusted Gross
Margin:
Quarter ended
Nine months ended
($ millions)
($ millions)
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Gross Profit as reported
$
248.6
$
213.7
$
728.5
$
594.1
Inventory adjustment relating to exit
activities
16.1
(0.9
)
19.2
0.7
Adjusted Gross Profit
264.7
212.8
747.7
594.8
Gross Margin
28.9
%
23.2
%
27.3
%
21.9
%
Adjusted Gross Margin
30.7
%
23.1
%
28.0
%
21.9
%
The table below presents a reconciliation of Operating Cash Flow
to Free Cash Flow and Adjusted Free Cash Flow Conversion
percentages:
Quarter ended
Nine months ended
($ millions)
($ millions)
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Net cash provided by (used in) operating
activities
$
134.5
$
206.1
$
320.2
$
135.8
Less Capital Expenditures
(23.1
)
(17.8
)
(59.0
)
(57.5
)
Free Cash Flow
111.4
188.3
261.2
78.3
Quarter ended
Nine months ended
($ millions)
($ millions)
December 31, 2023
January 1, 2023
December 31, 2023
January 1, 2023
Net cash provided by (used in) operating
activities
$
134.5
$
206.1
$
320.2
$
135.8
Net earnings
76.2
44.4
208.2
109.9
Operating cash flow conversion %
176.5
%
464.2
%
153.8
%
123.6
%
Free cash flow
111.4
188.3
261.2
78.3
Adjusted net earnings
105.0
52.3
260.1
145.4
Adjusted free cash flow conversion %
106.1
%
360.0
%
100.4
%
53.9
%
The following table provides a reconciliation of Net earnings to
EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) per credit
agreement for December 31, 2023 and January 1, 2023, in connection
with the Fourth Amended Credit Facility:
Last twelve months
December 31, 2023
January 1, 2023
(in millions, except ratios)
Net earnings as reported
$
274.1
$
137.9
Add back:
Depreciation and amortization
90.5
92.6
Interest expense
54.1
53.9
Income tax expense
27.3
35.8
EBITDA (non-GAAP)
446.0
320.2
Adjustments per credit agreement
definitions(1)
78.6
59.8
Adjusted EBITDA (non-GAAP) per credit
agreement(1)
$
524.6
$
380.0
Total net debt(2)
586.9
858.9
Leverage ratios:
Total net debt/credit adjusted EBITDA
ratio
1.1 X
2.3 X
(1)
The $78.6 million adjustment to EBITDA in the last twelve months
ending December 31, 2023 primarily related to $30.5 million of
non-cash stock compensation, $37.9 million of restructuring and
other exit charges, impairment of indefinite-lived intangibles and
write-down of other current assets of $9.6 million. The $59.8
million adjustment to EBITDA in the last twelve months ending
January 1, 2023 primarily related to $27.2 million of non-cash
stock compensation, $29.1 million of restructuring and other exit
charges, impairment of indefinite-lived intangibles of $2.1 million
and a swap termination fee of $1.4 million.
(2)
Debt includes finance lease obligations and letters of credit and
is net of all U.S. cash and cash equivalents and foreign cash and
investments, as defined in the Fourth Amended Credit Facility. In
the last twelve months ending December 31, 2023 and January 1,
2023, the amounts deducted in the calculation of net debt were U.S.
cash and cash equivalents and foreign cash investments of $332.7
million, and in fiscal 2023, were $298.1 million.
Included below is a reconciliation of historical non-GAAP
adjusted Net earnings to reported amounts. Non-GAAP adjusted
operating earnings and historical Net earnings are calculated
excluding restructuring and other highlighted charges and credits.
The following tables provide additional information regarding
certain non-GAAP measures:
Quarter ended
(in millions, except share and
per share amounts)
December 31, 2023
January 1, 2023
Net earnings reconciliation
As reported Net Earnings
$
76.2
$
44.4
Non-GAAP adjustments:
Inventory adjustment relating to exit
activities
16.1
(1)
(0.9
)
(1)
Restructuring and other exit charges
6.1
(1)
0.8
(1)
Impairment of indefinite-lived
intangibles
6.0
(2)
—
(2)
Amortization of identified intangible
assets
6.9
(3)
6.3
(3)
Remeasurement of monetary assets included
in other (income) expense relating to exit from Russia
operations
—
(0.6
)
Asset Securitization Transaction Fees
—
0.5
Other
2.6
(4)
0.4
Income tax effect of above non-GAAP
adjustments
(8.9
)
1.4
Non-GAAP adjusted Net earnings
$
105.0
$
52.3
Outstanding shares used in per share
calculations
Basic
40,451,279
40,835,636
Diluted
41,047,893
41,281,693
Non-GAAP adjusted Net earnings per
share:
Basic
$
2.59
$
1.28
Diluted
$
2.56
$
1.27
Reported Net earnings (Loss) per
share:
Basic
$
1.88
$
1.09
Diluted
$
1.86
$
1.08
Dividends per common share
$
0.225
$
0.175
The following table provides the line of business allocation of
the non-GAAP adjustments of items relating operating earnings (that
are allocated to lines of business) shown in the reconciliation
above:
Quarter ended
($ millions)
December 31, 2023
January 1, 2023
Pre-tax
Pre-tax
(1) Inventory adjustment relating to exit
activities - Energy Systems
$
16.1
$
(0.2
)
(1) Inventory adjustment relating to exit
activities - Motive Power
$
—
$
(0.7
)
(1) Restructuring and other exit charges -
Energy Systems
2.4
0.2
(1) Restructuring and other exit charges -
Motive Power
2.9
0.6
(1) Restructuring and other exit charges -
Specialty
0.8
—
(2) Impairment of indefinite-lived
intangibles - Energy Systems
6.0
—
(3) Amortization of identified intangible
assets - Energy Systems
6.0
5.9
(3) Amortization of identified intangible
assets - Motive Power
0.2
—
(3) Amortization of identified intangible
assets - Specialty
0.7
0.4
(4) Other - Energy Systems
2.4
—
(4) Other - Motive Power
0.2
—
Total Non-GAAP adjustments
$
37.7
$
6.2
Nine months ended
(in millions, except share and
per share amounts)
December 31, 2023
January 1, 2023
Net Earnings reconciliation
As reported Net Earnings
$
208.2
$
109.9
Non-GAAP adjustments:
Inventory adjustment relating to exit
activities
19.2
(1)
0.6
(1)
Restructuring and other exit charges
19.6
(1)
12.4
(1)
Impairment of indefinite-lived
intangibles
6.0
(2)
—
(2)
Amortization of identified intangible
assets
21.1
(2)
18.9
(2)
Remeasurement of monetary assets included
in other (income) expense relating to exit from Russia
Operations
—
4.5
Asset Securitization Transaction Fees
—
0.5
Acquisition activity expense
—
—
Cost of funding to terminate net
investment hedges
—
1.4
Financing fees related to debt
modification
—
1.2
Other
4.5
(3)
1.5
Income tax effect of above non-GAAP
adjustments
(18.5
)
(5.5
)
Non-GAAP adjusted Net Earnings
$
260.1
$
145.4
Outstanding shares used in per share
calculations
Basic
40,770,524
40,787,654
Diluted
41,476,950
41,267,320
Non-GAAP adjusted Net Earnings per
share:
Basic
$
6.38
$
3.56
Diluted
$
6.27
$
3.52
Reported Net Earnings (Loss) per
share:
Basic
$
5.11
$
2.69
Diluted
$
5.02
$
2.66
Dividends per common share
$
0.625
$
0.525
The following table provides the line of business allocation of
the non-GAAP adjustments of items relating operating earnings (that
are allocated to lines of business) shown in the reconciliation
above:
Nine months ended
($ millions)
December 31, 2023
January 1, 2023
Pre-tax
Pre-tax
(1) Inventory adjustment relating to exit
activities - Energy Systems
16.1
(0.2
)
(1) Inventory adjustment relating to exit
activities - Motive Power
—
0.8
(1) Inventory Adjustment relating to exit
activities - Specialty
3.1
—
(1) Restructuring and other exit charges -
Energy Systems
5.1
1.2
(1) Restructuring and other exit charges -
Motive Power
7.9
11.2
(1) Restructuring and other exit charges -
Specialty
6.6
—
(2) Impairment of indefinite-lived
intangibles - Energy Systems
6.0
—
(2) Amortization of identified intangible
assets - Energy Systems
18.5
17.7
(2) Amortization of identified intangible
assets - Motive Power
0.5
—
(2) Amortization of identified intangible
assets - Specialty
2.1
1.2
(3) Other - Energy Systems
3.5
—
(3) Other - Motive Power
0.8
—
(3) Other - Specialty
0.2
—
Total Non-GAAP adjustments
$
70.4
$
31.9
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240207265587/en/
Lisa Hartman V.P., Investor Relations and Corporate
Communications EnerSys 610-236-4040 E-mail:
investorrelations@enersys.com
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