EnerSys(US:ENS)2024-08-07 20:16Acquisition and Investments - EnerSys completed the acquisition of Bren-Tronics Defense LLC for $208 million in cash on July 26, 2024[112]. - The Company issued $300 million in aggregate principal amount of 6.625% Senior Notes due 2032, with proceeds used to pay down the Fourth Amended Credit Facility[125]. - The Company purchased 129,433 shares for $11.6 million during the current quarter of fiscal 2025[125]. Financial Performance - Net sales decreased by $55.7 million or 6.1% in Q1 fiscal 2025 compared to Q1 fiscal 2024, attributed to a 3% decrease in organic volume, a 2% decrease in price/mix, and a 1% decrease in foreign currency translation[127]. - Energy Systems segment sales decreased by $63.6 million or 15.0% in Q1 fiscal 2025 compared to Q1 fiscal 2024, driven by an 11% decrease in organic volume[128]. - Motive Power segment sales increased by $15.4 million or 4.4% in Q1 fiscal 2025 compared to Q1 fiscal 2024, primarily due to a 6% increase in organic volume[129]. - Gross profit decreased by $1.9 million or 0.8% in Q1 fiscal 2025 compared to Q1 fiscal 2024, but gross profit margin increased by 160 basis points[130]. - Operating expenses increased by $3.4 million or 2.4% in Q1 fiscal 2025 compared to Q1 fiscal 2024, with operating expenses as a percentage of sales increasing by 60 basis points[132]. - Operating earnings increased by $1.9 million or 2.1% in Q1 fiscal 2025 compared to Q1 fiscal 2024, with operating earnings as a percentage of net sales rising by 90 basis points[144]. - Net earnings for Q1 fiscal 2025 were $70.1 million, compared to $66.8 million in Q1 fiscal 2024, reflecting a year-over-year increase of approximately 4.9%[154]. Cash Flow and Liquidity - EnerSys has $344 million of available cash and cash equivalents and undrawn committed credit lines of approximately $782 million at June 30, 2024[122]. - Operating activities provided cash of $10.4 million in Q1 fiscal 2025, a decrease from $74.9 million in Q1 fiscal 2024, primarily due to changes in accounts receivable and inventory[154]. - Investing activities used cash of $47.0 million in Q1 fiscal 2025, up from $24.3 million in Q1 fiscal 2024, mainly due to capital expenditures of $36.1 million[155]. - Financing activities provided cash of $50.9 million in Q1 fiscal 2025, with $65.0 million borrowed under the Second Amended Revolver[155]. - Total cash and cash equivalents increased by $10.7 million to $344.1 million in Q1 fiscal 2025, compared to a decrease of $88.3 million to $258.3 million in Q1 fiscal 2024[157]. - The company is in compliance with all covenants and conditions under its Fourth Amended Credit Facility and believes it has the financial resources for future growth and acquisitions[161]. Market Conditions and Pricing - The company anticipates inflationary pressures and elevated interest rates to continue through calendar 2024[113]. - Approximately 25% of EnerSys' revenue is now subject to agreements that adjust pricing to a market-based index for lead[116]. - The company expects selling prices to be higher in fiscal 2025 compared to fiscal 2024 due to inflationary cost increases[117]. - The market demand in the Motive Power segment remains healthy, but there was a decrease in demand in the Class 8 truck market impacting the Specialty segment[114]. - Approximately 46% of the cost of lead requirements is known for the remaining quarter of the fiscal year, with a potential $17 million increase in cost of goods sold if lead prices rise by 10%[169]. Interest and Taxation - Interest expense decreased to $11.0 million in Q1 fiscal 2025, down $4.2 million or 27.9% from $15.2 million in Q1 fiscal 2024, attributed to lower borrowing levels[146][147]. - Earnings before income taxes increased by $5.8 million or 7.9% in Q1 fiscal 2025, reaching $79.3 million compared to $73.5 million in Q1 fiscal 2024[148]. - Income tax expense rose to $9.2 million in Q1 fiscal 2025, an increase of $2.5 million or 36.9% from $6.7 million in Q1 fiscal 2024, with an effective tax rate of 11.6%[149][151]. - The consolidated effective income tax rate increased from 9.2% in Q1 fiscal 2024 to 11.6% in Q1 fiscal 2025, primarily due to a discrete foreign exchange tax benefit and the impact of Pillar 2[151]. - The foreign effective tax rates for Q1 fiscal 2025 and 2024 were 14% and 12%, respectively, with the increase attributed to the impact of Pillar 2[152]. Operational Changes - The Company recorded restructuring charges of $3.0 million in the Energy Systems segment and $0.8 million in the Motive Power segment during Q1 fiscal 2025[134]. - The Company plans to stop production of residential renewable energy products, estimating total charges of $24.5 million related to this decision[134]. - Energy Systems operating earnings decreased by 170 basis points in Q1 fiscal 2025 due to lower volumes and unfavorable price/mix, partially offset by lower freight and operating costs[144]. - Motive Power operating earnings increased by 90 basis points in Q1 fiscal 2025, driven by volume growth and favorable pricing/mix gains[144]. - Specialty operating earnings decreased by 350 basis points in Q1 fiscal 2025, primarily due to lower volumes in transportation OEMs[145]. Currency and Foreign Exchange - The company has entered into foreign currency forward contracts to hedge approximately 5% - 10% of its known annual foreign exchange transactional exposures[172]. - Currency translation negatively impacted cash balance by $3.6 million in Q1 fiscal 2025, compared to a $3.0 million impact in Q1 fiscal 2024[156]. - As of June 30, 2024, a 10% unfavorable movement in exchange rates would have adversely changed hedge valuations by approximately $28.2 million[174]. - As of July 2, 2023, a similar 10% unfavorable movement would have changed hedge valuations by approximately $27.7 million[174]. Internal Controls and Compliance - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures are effective as of the end of the reporting period[175]. - There were no changes in internal control over financial reporting during the quarter that materially affected the company's financial reporting[175].