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Enersys (ENS) SEC Filing 10-Q Quarterly report for the period ending Sunday, October 4, 2020

Enersys

CIK: 1289308 Ticker: ENS

Exhibit 99.1 PRESS RELEASE, DATED NOVEMBER 11, 2020, OF ENERSYS REGARDING FINANCIAL
RESULTS FOR THE SECOND QUARTER FISCAL 2021
enersys_logo1a.jpg
EnerSys Reports Second Quarter Fiscal 2021 Results 

Reading, PA, USA, November 11, 2020 – EnerSys (NYSE: ENS), the global leader in stored energy solutions for industrial applications, announced today results for its second quarter of fiscal 2021, which ended on October 4, 2020.

Second Quarter FY 21 Highlights
Net sales of $708M down 7% YoY
Gross Profit Margins steady at 25%
Operating Expenses flexed with volume
YTD Operating Cash Flow of $217M remains strong **
Operating earnings up 60 bps sequentially due to better volume
Net Earnings per Diluted Share at $0.83
Credit facility leverage ratio improved to 2.1x
TPPL capacity expansion on schedule for H2
Transportation demand fueling surge in Specialty segment

Message from the CEO
We exited our 2nd quarter with a renewed sense of optimism as our incoming order rate approached pre-pandemic levels. COVID-19 adversely impacted our revenue in Q2, but lower costs including commodities led to another quarter of strong cash flow. We generated $217M of operating cash flows in H1. We continue to flex manufacturing capacity to match demand, minimizing manufacturing inefficiency while benefiting from raw material cost reductions. The company remains vigilant about employee safety and is monitoring globally any potentially worsening impacts from the pandemic.

Of our three lines of business, Motive Power remains most affected by COVID-19, but is improving rapidly. Our Energy Systems business held up well as telecommunications operators continue to expand their capacity and continue their 5G rollouts in a measured fashion. Cable operators have remained sluggish related to power supply purchases, but have been very active in recent spectrum auctions boding well for the future. Our Specialty business has benefited from several new aftermarket transportation contracts and renewed demand from over-the-road truck manufacturers. Specialty’s defense unit also won several large multi-year development contracts for batteries on guided munitions again this quarter.

To offset the year over year reduction in revenue, we have taken multiple initiatives to flex our operational expenses. These expenses not only decreased by nearly $13 million for the quarter from the prior year, but as a percentage of sales it improved by 60 bps. As a result, in our second fiscal quarter, we halved the decrease in operating earnings as a percentage of sales from the prior year while posting a sequential improvement of 60 bps. In addition, we have announced the restructuring of our Motive Power business in EMEA with the closure of our Hagen, Germany manufacturing facility. We expect this restructuring will allow the company to save nearly $20 million per year, with an anticipated 3.5 year cash payback.

Our new products and other strategic initiatives will soon become significant sources of additional profitability in addition to improved market conditions. This has occurred through tremendous efforts and sacrifices made by EnerSys colleagues during these trying times. We have strengthened measures to protect ourselves against COVID-19, implementing enhanced health and safety protocols at our facilities around the world. Our employees have responded very well to these challenges.

This second quarter closes out a trying first half of our fiscal year 2021. We have weathered significant headwinds while remaining focused on our strategy and execution. We now have the confidence to resume providing guidance for our upcoming fiscal quarter and we expect to achieve as-adjusted earnings of between $1.17 to $1.23 per share in our third fiscal quarter.

David M. Shaffer, President and Chief Executive Officer, EnerSys



The following information was filed by Enersys (ENS) on Thursday, November 12, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 4, 2020
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-32253 
 EnerSys
(Exact name of registrant as specified in its charter) 
Delaware 23-3058564
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
2366 Bernville Road
Reading, Pennsylvania 19605
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 610-208-1991 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading SymbolName of each exchange on which registered
Common Stock, $0.01 par value per share ENSNew York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934. 
Large Accelerated Filerý  Accelerated filer¨
Non-accelerated filer
  Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).      Yes    ý  No.
Common Stock outstanding at November 6, 2020: 42,577,285 shares
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ENERSYS
INDEX – FORM 10-Q
 
  Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 4.
Item 6.

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PART I –FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS

ENERSYS
Consolidated Condensed Balance Sheets (Unaudited)
(In Thousands, Except Share and Per Share Data) 
October 4, 2020March 31, 2020
Assets
Current assets:
Cash and cash equivalents$414,232 $326,979 
Accounts receivable, net of allowance for doubtful accounts: October 4, 2020 - $13,317; March 31, 2020 - $15,246499,781 595,873 
Inventories, net516,589 519,460 
Prepaid and other current assets133,473 120,593 
Total current assets1,564,075 1,562,905 
Property, plant, and equipment, net498,662 480,014 
Goodwill689,048 663,936 
Other intangible assets, net443,998 455,685 
Deferred taxes59,122 55,803 
Other assets78,317 83,355 
Total assets$3,333,222 $3,301,698 
Liabilities and Equity
Current liabilities:
Short-term debt$31,813 $46,544 
Accounts payable252,667 281,873 
Accrued expenses282,374 271,902 
Total current liabilities566,854 600,319 
Long-term debt, net of unamortized debt issuance costs1,039,208 1,104,731 
Deferred taxes79,491 78,363 
Other liabilities212,589 214,223 
Total liabilities1,898,142 1,997,636 
Commitments and contingencies
Equity:
Preferred Stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding at October 4, 2020 and at March 31, 2020— — 
Common Stock, 0.01 par value per share, 135,000,000 shares authorized, 55,361,826 shares issued and 42,575,193 shares outstanding at October 4, 2020; 55,114,808 shares issued and 42,323,305 shares outstanding at March 31, 2020554 551 
Additional paid-in capital537,092 529,100 
Treasury stock at cost, 12,786,633 shares held as of October 4, 2020 and 12,791,503 shares held as of March 31, 2020(563,853)(564,376)
Retained earnings1,612,640 1,556,980 
Contra equity - indemnification receivable(5,273)(6,724)
Accumulated other comprehensive loss(149,769)(215,006)
Total EnerSys stockholders’ equity1,431,391 1,300,525 
Nonredeemable noncontrolling interests3,689 3,537 
Total equity1,435,080 1,304,062 
Total liabilities and equity$3,333,222 $3,301,698 
See accompanying notes.
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ENERSYS
Consolidated Condensed Statements of Income (Unaudited)
(In Thousands, Except Share and Per Share Data)
 Quarter ended
 October 4, 2020September 29, 2019
Net sales$708,402 $762,137 
Cost of goods sold530,842 564,820 
Gross profit177,560 197,317 
Operating expenses119,026 132,325 
Restructuring and other exit charges 3,119 6,282 
Operating earnings55,415 58,710 
Interest expense9,829 10,097 
Other (income) expense, net4,110 199 
Earnings before income taxes41,476 48,414 
Income tax expense (benefit)5,745 (14,284)
Net earnings attributable to EnerSys stockholders$35,731 $62,698 
Net earnings per common share attributable to EnerSys stockholders:
Basic$0.84 $1.48 
Diluted$0.83 $1.47 
Dividends per common share $0.175 $0.175 
Weighted-average number of common shares outstanding:
Basic42,521,659 42,392,039 
Diluted43,087,455 42,708,082 
See accompanying notes.



4

ENERSYS
Consolidated Condensed Statements of Income (Unaudited)
(In Thousands, Except Share and Per Share Data)
Six months ended
October 4, 2020September 29, 2019
Net sales$1,413,326 $1,542,367 
Cost of goods sold1,060,789 1,143,538 
Gross profit352,537 398,829 
Operating expenses239,396 263,129 
Restructuring and other exit charges4,506 8,654 
Operating earnings108,635 127,046 
Interest expense19,994 20,995 
Other (income) expense, net5,572 (953)
Earnings before income taxes83,069 107,004 
Income tax expense (benefit)12,155 (4,330)
Net earnings$70,914 $111,334 
Net earnings per common share attributable to EnerSys stockholders:
Basic$1.67 $2.62 
Diluted$1.65 $2.59 
Dividends per common share $0.35 $0.35 
Weighted-average number of common shares outstanding:
Basic42,453,774 42,524,189 
Diluted43,009,755 42,913,258 
See accompanying notes.
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ENERSYS
Consolidated Condensed Statements of Comprehensive Income (Unaudited)
(In Thousands)
 Quarter endedSix months ended
 October 4, 2020September 29, 2019October 4, 2020September 29, 2019
Net earnings$35,731 $62,698 $70,914 $111,334 
Other comprehensive income (loss):
Net unrealized gain on derivative instruments, net of tax1,470 3,586 3,813 1,257 
Pension funded status adjustment, net of tax305 237 596 474 
Foreign currency translation adjustment32,833 (32,199)60,980 (35,410)
Total other comprehensive income (loss), net of tax34,608 (28,376)65,389 (33,679)
Total comprehensive income 70,339 34,322 136,303 77,655 
Comprehensive gain (loss) attributable to noncontrolling interests144 (131)152 (214)
Comprehensive income attributable to EnerSys stockholders$70,195 $34,453 $136,151 $77,869 
See accompanying notes.

6

ENERSYS
Consolidated Condensed Statements of Cash Flows (Unaudited)
(In Thousands)
 Six months ended
 October 4, 2020September 29, 2019
Cash flows from operating activities
Net earnings$70,914 $111,334 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization47,059 41,053 
Write-off of assets relating to exit activities 1,753 9,969 
Derivatives not designated in hedging relationships:
Net (gains) losses(372)696 
Cash proceeds (settlements)846 (821)
Provision for doubtful accounts182 3,245 
Deferred income taxes(1,820)(20,973)
Non-cash interest expense1,036 752 
Stock-based compensation10,586 8,868 
Loss (gain) on disposal of property, plant, and equipment156 (119)
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable106,581 26,763 
Inventories21,080 (11,687)
Prepaid and other current assets7,369 (18,214)
Other assets3,132 4,699 
Accounts payable(49,557)(22,005)
Accrued expenses1,282 (18,576)
Other liabilities(2,954)(9,922)
Net cash provided by operating activities217,273 105,062 
Cash flows from investing activities
Capital expenditures(39,905)(43,378)
Proceeds from disposal of property, plant, and equipment81 2,645 
Net cash used in investing activities(39,824)(40,733)
Cash flows from financing activities
Net repayments on short-term debt(16,502)(20,019)
Proceeds from 2017 Revolver borrowings45,000 285,000 
Repayments of 2017 Revolver borrowings(100,000)(135,000)
Repayments of 2017 Term Loan(16,837)(5,645)
Option proceeds1,766 25 
Payment of taxes related to net share settlement of equity awards(4,602)(6,250)
Purchase of treasury stock— (34,561)
Dividends paid to stockholders(14,879)(14,898)
Other255 161 
Net cash (used in) provided by financing activities(105,799)68,813 
Effect of exchange rate changes on cash and cash equivalents15,603 (7,508)
Net increase in cash and cash equivalents87,253 125,634 
Cash and cash equivalents at beginning of period326,979 299,212 
Cash and cash equivalents at end of period$414,232 $424,846 
See accompanying notes.
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ENERSYS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
(In Thousands, Except Share and Per Share Data)


1. Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments except those otherwise described herein) considered necessary for a fair presentation have been included, unless otherwise disclosed. Operating results for the three and six months ended October 4, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021.

The Consolidated Condensed Balance Sheet at March 31, 2020 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 2020 Annual Report on Form 10-K (SEC File No. 001-32253), which was filed on June 1, 2020 (the “2020 Annual Report”).

EnerSys (the “Company,”) reports interim financial information for 13-week periods, except for the first quarter, which always begins on April 1, and the fourth quarter, which always ends on March 31. The four quarters in fiscal 2021 end on July 5, 2020, October 4, 2020, January 3, 2021, and March 31, 2021, respectively. The four quarters in fiscal 2020 ended on June 30, 2019, September 29, 2019, December 29, 2019, and March 31, 2020, 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 Adopted Accounting Pronouncements

In June 2016, the FASB, issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)”: Measurement of Credit Losses on Financial Instruments, which changes the recognition model for the impairment of financial instruments, including accounts receivable, loans and held-to-maturity debt securities, among others. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In contrast to current guidance, which considers current information and events and utilizes a probable threshold, (an “incurred loss” model), ASU 2016–13 mandates an “expected loss” model. The expected loss model: (i) estimates the risk of loss even when risk is remote, (ii) estimates losses over the contractual life, (iii) considers past events, current conditions and reasonable supported forecasts and (iv) has no recognition threshold. The Company adopted the standard effective April 1, 2020 and the adoption did not have a material impact on the Company's operating results, financial position or cash flows. However, the adoption resulted in the modification of the Company's policies for accounts receivable.

The Company estimates the allowance for credit losses in relation to accounts receivable based on relevant qualitative and quantitative information about historical events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported accounts receivable. Subsequent to April 1, 2020, accounts receivable are recorded at amortized cost less an allowance for expected credit losses. The Company maintains an allowance for credit losses for the expected failure or inability of its customers to make required payments. The Company recognizes the allowance for expected credit losses at inception and reassesses quarterly, based on management’s expectation of the asset’s collectability. The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, as well as management’s expectations of conditions in the future. The Company’s allowance for uncollectible accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics. The Company then adjusts the historical credit loss percentage by current and forecasted economic conditions. The Company then includes a baseline credit loss percentage into the historical credit loss percentage for each aging category to reflect the potential impact of the current and economic conditions. Such a baseline calculation will be adjusted further if changes in the economic environment impacts the Company's expectation for future credit losses.
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The following table sets forth the quarterly changes in the Company's allowance for doubtful accounts:

Allowance for doubtful accounts:Balance at Beginning of PeriodProvision
for doubtful
debts
Write-offs, net of recoveries and otherBalance at
End of
Period
First quarter ended July 5, 2020$15,246 $96 $(2,113)$13,229 
Second quarter ended October 4, 2020$13,229 $86 $$13,317 

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”: Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (LIBOR) to an alternative reference rate such as Secured Overnight Financing Rate (SOFR). The Company’s agreements with respect to its borrowings already contain comparable alternative reference rates that would automatically take effect upon the phasing out of LIBOR. The Company has adopted the standard and the adoption did not have a material impact on the Company's consolidated financial statements.

Accounting Pronouncements Issued But Not Adopted as of October 4, 2020

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740)”: Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the potential impact that the adoption will have on its consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, including, but not limited to, the potential impacts arising from the coronavirus pandemic of 2019 (“COVID-19”) and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts of COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates.

Examples of significant estimates include the allowance for credit losses, the recoverability of property, plant and equipment, the incremental borrowing rate for lease liabilities, the recoverability of intangible assets and other long-lived assets, fair value measurements, including those related to financial instruments, 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 business combinations.

2. Revenue Recognition

The Company's revenues by reportable segments are presented in Note 17.

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. Service revenues for the second quarter of fiscal 2021 and 2020 amounted to $74,327 and $61,282, respectively. Service revenues for the six months of fiscal 2021 and 2020 amounted to $143,085 and $122,000, respectively.

A small portion of the Company's customer arrangements obligate the Company to create customized products for its customers that require the bundling of both products and services into a single performance obligation because the individual products and services that are required to fulfill the customer requirements do not meet the definition for a distinct performance obligation. These customized products generally have no alternative use to the Company and the terms and conditions of these arrangements give the Company the enforceable right to payment for performance completed to date, including a reasonable profit margin. For these arrangements, control transfers over time and the Company measures progress towards completion by selecting the input or output method that best depicts the transfer of control of the underlying goods and services to the customer for each respective arrangement. Methods used by the Company to measure progress toward completion include labor
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hours, costs incurred and units of production. Revenues recognized over time for the second quarter of fiscal 2021 and 2020 amounted to $35,074 and $33,595, respectively. Revenues recognized over time for the six months of fiscal 2021 and 2020 amounted to $71,176 and $75,090, respectively.

On October 4, 2020, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $104,552, of which, the Company estimates that approximately $53,781 will be recognized as revenue in fiscal 2021, $36,990 in fiscal 2022, $12,388 in fiscal 2023, $1,359 in fiscal 2024 and $34 in fiscal 2025.

Any payments that are received from a customer in advance, prior to the satisfaction of a related performance obligation and billings in excess of revenue recognized, are deferred and treated as a contract liability. Advance payments and billings in excess of revenue recognized are classified as current or non-current based on the timing of when recognition of revenue is expected. As of October 4, 2020, the current and non-current portion of contract liabilities were $17,871 and $6,383, respectively. As of March 31, 2020, the current and non-current portion of contract liabilities were $17,342 and $8,356, respectively. Revenues recognized during the second quarter of fiscal 2021 and 2020 that were included in the contract liability at the beginning of the year, amounted to $4,175 and $3,690, respectively. Revenues recognized during the six months of fiscal 2021 and 2020 that were included in the contract liability at the beginning of the year, amounted to $7,641 and $8,157, respectively.

Amounts representing work completed and not billed to customers represent contract assets and were $49,769 and $39,048 as of October 4, 2020 and March 31, 2020, 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 October 4, 2020, the right of return asset related to the value of inventory anticipated to be returned from customers was $4,267 and refund liability representing amounts estimated to be refunded to customers was $7,034.

3. Leases

The Company leases manufacturing facilities, distribution centers, office space, vehicles and other equipment under non-cancellable leases with initial terms typically ranging from 1 to 17 years.

Short term leases with an initial term of 12 months or less are not presented on the balance sheet and expense is recognized as incurred.

The following table presents lease assets and liabilities and their balance sheet classification:
ClassificationAs of
October 4, 2020
As of
March 31, 2020
Operating Leases:
Right-of-use assetsOther assets$67,072 $70,045 
Operating lease current liabilitiesAccrued expenses21,511 21,128 
Operating lease non-current liabilitiesOther liabilities47,787 51,215 
Finance Leases:
Right-of-use assetsProperty, plant, and equipment, net$574 $540 
Finance lease current liabilitiesAccrued expenses193 162 
Finance lease non-current liabilitiesOther liabilities415 407 













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The components of lease expense for the second quarter and six months ended October 4, 2020 and September 29, 2019 were as follows:
Quarter endedSix months ended
ClassificationOctober 4, 2020September 29, 2019October 4, 2020September 29, 2019
Operating Leases:
Operating lease costOperating expenses$6,745 $7,260 $13,681 $14,555 
Variable lease costOperating expenses1,613 2,122 3,732 3,828 
Short term lease costOperating expenses1,578 1,927 3,406 4,111 
Finance Leases:
DepreciationOperating expenses$46 $138 $88 $281 
Interest expenseInterest expense10 14 22 
Total$9,989 $11,457 $20,921 $22,797 

The following table presents the weighted average lease term and discount rates for leases as of October 4, 2020:
Operating Leases:
Weighted average remaining lease term6 years
Weighted average discount rate5.35%
Finance Leases:
Weighted average remaining lease term3.3 years
Weighted average discount rate4.95%

The following table presents future payments due under leases reconciled to lease liabilities as of October 4, 2020:
Finance LeasesOperating Leases
Six months ended March 31, 2021$109 $12,839 
Year ended March 31,
2022217 21,638 
2023174 14,669 
2024120 9,190 
202525 5,828 
Thereafter14 16,654 
Total undiscounted lease payments659 80,818 
Present value discount51 11,520 
Lease liability$608 $69,298 















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The following table presents supplemental disclosures of cash flow information related to leases for the second quarter and six months ended October 4, 2020 and September 29, 2019:
Quarter endedSix months ended
October 4, 2020September 29, 2019October 4, 2020September 29, 2019
Operating cash flows from finance leases$$10 $14 $22 
Operating cash flows from operating leases6,739 7,170 13,660 14,383 
Financing cash flows from finance leases45 138 86 281 
Supplemental non-cash information on lease liabilities arising from right-of-use assets:
Right-of-use assets obtained in exchange for new finance lease liabilities$87 $— $87 $— 
Right-of-use assets obtained in exchange for new operating lease liabilities955 2,318 7,132 4,946 

4. Acquisition

NorthStar

In fiscal 2020, the Company completed the acquisition of N Holding, AB (“NorthStar”) for $77,777 in cash consideration and the assumption of $107,018 in debt, which was funded using existing cash and credit facilities. NorthStar, through its direct and indirect subsidiaries, manufactures and distributes thin plate pure lead (TPPL) batteries and battery enclosures. NorthStar has two large manufacturing facilities in Springfield, Missouri. The Company acquired tangible and intangible assets, including trademarks, technology, customer relationships and goodwill. Based on valuations performed, trademarks were valued at $6,000, technology at $19,000, customer relationships at $9,000, and goodwill was recorded at $76,784. As a result of the change in operating and reportable segments discussed in Note 17, goodwill associated with the acquisition of NorthStar has been allocated to the Energy Systems and Specialty segments on a relative fair value basis. The useful lives of technology were estimated at 10 years, customer relationships were estimated at 15 to 18 years and trademarks were estimated at 5 years. Goodwill deductible for tax purposes is $75,436.

During the second quarter of fiscal 2021, the Company finalized the measurement of all provisional amounts recognized in connection with the NorthStar business combination. The purchase accounting adjustments resulted in an increase to goodwill during the current quarter, by $2,996 as a result of finalizing income tax accounting.

Other Intangible Assets

Information regarding the Company’s other intangible assets are as follows:

Balance as of
October 4, 2020March 31, 2020
Gross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet Amount
Indefinite-lived intangible assets:
Trademarks$148,000 $(957)$147,043 $147,356 $(953)$146,403 
Finite-lived intangible assets:
Customer relationships295,840 (76,274)219,566 292,155 (64,855)227,300 
Non-compete3,029 (2,824)205 3,021 (2,817)204 
Technology96,765 (25,027)71,738 96,047 (20,349)75,698 
Trademarks8,008 (2,562)5,446 8,008 (1,928)6,080 
Licenses1,196 (1,196)— 1,196 (1,196)— 
Total$552,838 $(108,840)$443,998 $547,783 $(92,098)$455,685 

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The Company’s amortization expense related to finite-lived intangible assets was $8,187 and $16,742 for the second quarter and six months of fiscal 2021, compared to $7,309 and $14,625 for the second quarter and six months of fiscal 2020. The expected amortization expense based on the finite-lived intangible assets as of October 4, 2020, is $15,917 for the remainder of fiscal 2021, $32,420 in fiscal 2022, $31,122 in fiscal 2023, $27,725 in fiscal 2024 and $26,494 in fiscal 2025.

5. Inventories

Inventories, net consist of:
October 4, 2020March 31, 2020
Raw materials$144,627 $141,906 
Work-in-process98,580 91,520 
Finished goods273,382 286,034 
Total$516,589 $519,460 

6. 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 October 4, 2020 and March 31, 2020, and the basis for that measurement:
 
Total Fair Value Measurement
October 4, 2020
Quoted Price in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Lead forward contracts$(3,229)$— $(3,229)$— 
Foreign currency forward contracts(213)— (213)— 
Total derivatives$(3,442)$— $(3,442)$— 
 
Total Fair Value
Measurement
March 31, 2020
Quoted Price in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Lead forward contracts$(2,433)$— $(2,433)$— 
Foreign currency forward contracts— — 
Total derivatives$(2,432)$— $(2,432)$— 

The fair values of lead forward contracts are calculated using observable prices for lead as quoted on the London Metal Exchange (“LME”) and, therefore, were classified as Level 2 within the fair value hierarchy, as described in Note 1. Summary of Significant Accounting Policies to the Company's consolidated financial statements included in its 2020 Annual Report.

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

Financial Instruments

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

The fair value of the Company’s short-term debt and borrowings under the Amended Credit Facility (as defined in Note 12), approximate their respective carrying value, as they are variable rate debt and the terms are comparable to market terms as of the balance sheet dates and are classified as Level 2.

In fiscal 2020, the Company issued its 4.375% Senior Notes due 2027 (the “2027 Notes”), with an original face value of $300,000. The Company's 5.00% Senior Notes due 2023 (the “2023 Notes”), with an original face value of $300,000, were issued in April 2015. The fair value of the 2027 Notes and 2023 Notes, (collectively, the “Senior Notes”) represent the trading
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values based upon quoted market prices and are classified as Level 2. The 2027 Notes were trading at approximately 102% and 94% of face value on October 4, 2020 and March 31, 2020, respectively. The 2023 Notes were trading at approximately 103% and 97% of face value on October 4, 2020 and March 31, 2020, respectively.

The carrying amounts and estimated fair values of the Company’s derivatives and Senior Notes at October 4, 2020 and March 31, 2020 were as follows:
 October 4, 2020March 31, 2020
 Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
Financial assets:
Derivatives (1)
$— $— $— $— 
Financial liabilities:
 Senior Notes (2)
$600,000 $614,625 $600,000 $573,000 
Derivatives (1)
3,442 3,442 2,432 2,432 
(1)Represents lead and foreign currency forward contracts (see Note 7 for asset and liability positions of the lead and foreign currency forward contracts at October 4, 2020 and March 31, 2020).
(2)The fair value amount of the Senior Notes at October 4, 2020 and March 31, 2020 represent the trading value of the instruments.

7. Derivative Financial Instruments

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

Derivatives in Cash Flow Hedging Relationships

Lead Forward Contracts

The Company enters into lead forward contracts to fix the price for a portion of its lead purchases. Management considers the lead forward contracts to be effective against changes in the cash flows of the underlying lead purchases. The vast majority of such contracts are for a period not extending beyond one year. At October 4, 2020 and March 31, 2020, the Company has hedged the price to purchase approximately 50.0 million pounds and 35.0 million pounds of lead, respectively, for a total purchase price of $43,228 and $30,078, respectively.

Foreign Currency Forward Contracts

The Company uses foreign currency forward contracts and options to hedge a portion of the Company’s foreign currency exposures for lead, as well as other foreign currency exposures so that gains and losses on these contracts offset changes in the underlying foreign currency denominated exposures. The vast majority of such contracts are for a period not extending beyond one year. As of October 4, 2020 and March 31, 2020, the Company had entered into a total of $23,726 and $34,008, respectively, of such contracts.

In the coming twelve months, the Company anticipates that $2,640 of pretax loss relating to lead and foreign currency forward contracts will be reclassified from AOCI (“Accumulated Other Comprehensive Income”) as part of cost of goods sold. This amount represents the current net unrealized impact of hedging lead and foreign exchange rates, which will change as market rates change in the future, and will ultimately be realized in the Consolidated Condensed Statements of Income as an offset to the corresponding actual changes in lead costs to be realized in connection with the variable lead cost and foreign exchange rates being hedged.

Derivatives not Designated in Hedging Relationships

Foreign Currency Forward Contracts

The Company also enters into foreign currency forward contracts to economically hedge foreign currency fluctuations on intercompany loans and foreign currency denominated receivables and payables. These are not designated as hedging
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instruments and changes in fair value of these instruments are recorded directly in the Consolidated Condensed Statements of Income. As of October 4, 2020 and March 31, 2020, the notional amount of these contracts was $26,769 and $42,232, respectively.

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

Fair Value of Derivative Instruments
October 4, 2020 and March 31, 2020
 
 Derivatives and Hedging Activities Designated as Cash Flow HedgesDerivatives and Hedging Activities Not Designated as Hedging Instruments
 October 4, 2020March 31, 2020October 4, 2020March 31, 2020
Prepaid and other current assets:
Foreign currency forward contracts$— $— $— $375 
Total assets$— $— $— $375 
Accrued expenses:
Lead forward contracts$3,229 $2,433 $— $— 
Foreign currency forward contracts114 374 99 — 
Total liabilities$3,343 $2,807 $99 $— 


The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income
For the quarter ended October 4, 2020
Derivatives Designated as Cash Flow HedgesPretax Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)Location of Gain (Loss)  Reclassified from AOCI into Income (Effective Portion)Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Lead forward contracts$(2,219)Cost of goods sold$(4,854)
Foreign currency forward contracts(454)Cost of goods sold257 
Total$(2,673)$(4,597)
Derivatives Not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized in Income on DerivativesPretax Gain (Loss)
Foreign currency forward contractsOther (income) expense, net$260 
Total$260 


The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income
For the quarter ended September 29, 2019
Derivatives Designated as Cash Flow HedgesPretax Gain (Loss) Recognized in AOCI on Derivatives (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$1,526 Cost of goods sold$(3,173)
Foreign currency forward contracts62 Cost of goods sold63 
Total$1,588 $(3,110)
Derivatives Not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized in Income on DerivativesPretax Gain (Loss)
Foreign currency forward contractsOther (income) expense, net$(730)
Total$(730)
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The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income
For the six months ended October 4, 2020
Derivatives Designated as Cash Flow HedgesPretax Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion)Location of Gain (Loss)  Reclassified from AOCI into Income (Effective Portion)Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Lead forward contracts$(3,493)Cost of goods sold$(8,653)
Foreign currency forward contracts(193)Cost of goods sold(26)
Total$(3,686)$(8,679)
Derivatives Not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized in Income on DerivativesPretax Gain (Loss)
Foreign currency forward contractsOther (income) expense, net$372 
Total$372 


The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income
For the six months ended September 29, 2019
Derivatives Designated as Cash Flow HedgesPretax Gain (Loss) Recognized in AOCI on Derivatives (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$(968)Cost of goods sold$(2,732)
Foreign currency forward contracts165 Cost of goods sold280 
Total$(803)$(2,452)
Derivatives Not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized in Income on DerivativesPretax Gain (Loss)
Foreign currency forward contractsOther (income) expense, net$(696)
Total$(696)

8. Income Taxes

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the second quarter of fiscal 2021 and 2020 was based on the estimated effective tax rates applicable for the full years ending March 31, 2021 and March 31, 2020, respectively, after giving effect to items specifically related to the interim periods. The Company’s effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which the Company operates, change in tax laws and the amount of the Company's consolidated earnings before taxes.

On May 19, 2019, a public referendum held in Switzerland approved the Federal Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF) as adopted by the Swiss Federal Parliament on September 28, 2018. The Company recorded a deferred tax asset of $22,500 during fiscal 2020 related to the amortizable goodwill. Based on further evaluation with the Swiss tax authority, the Company recorded an additional income tax benefit of $1,883 during the six months of fiscal 2021.

The consolidated effective income tax rates for the second quarter of fiscal 2021 and 2020 were 13.9% and (29.5)% and for the six months of fiscal 2021 and 2020 were 14.6% and (4.0)%, respectively. The rate increase in the second quarter and six months of fiscal 2021 compared to the comparable prior year quarter is primarily due to Swiss tax reform and changes in the mix of earnings among tax jurisdictions.

Foreign income as a percentage of worldwide income is estimated to be 73% for fiscal 2021 compared to 75% for fiscal 2020. The foreign effective tax rates for the six months of fiscal 2021 and 2020 were 10.6% and (2.4)%, respectively. The rate increase compared to the prior year period is primarily due to Swiss tax reform and changes in the mix of earnings among tax
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jurisdictions. Income from the Company's Swiss subsidiary comprised a substantial portion of the Company's overall foreign mix of income for both fiscal 2021 and fiscal 2020 and is taxed at an effective income tax rate of approximately 8% and 6%, respectively.

9. Warranty

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

 Quarter endedSix months ended
 October 4, 2020September 29, 2019October 4, 2020September 29, 2019
Balance at beginning of period$59,771 $56,179 $63,525 $54,568 
Current period provisions7,683 6,475 14,657 13,994 
Costs incurred(8,662)(7,227)(19,972)(13,175)
Foreign currency translation adjustment1,520 (491)2,102 (451)
Balance at end of period$60,312 $54,936 $60,312 $54,936 


10. Commitments, Contingencies and Litigation

Litigation and Other Legal Matters

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

European Competition Investigations

Certain of the Company’s European subsidiaries had received subpoenas and requests for documents and, in some cases, interviews from, and have had on-site inspections conducted by, the competition authorities of Belgium, Germany and the Netherlands relating to conduct and anticompetitive practices of certain industrial battery participants. For additional information regarding these matters, see Note 19 - Commitments, Contingencies and Litigation to the consolidated financial statements contained in the Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

The Company settled the Belgian regulatory proceeding in February 2016 by acknowledging certain anticompetitive practices and conduct and agreeing to pay a fine of $1,962, which was paid in March 2016. With respect to the Belgian regulatory matter, during fiscal 2019, the Company paid $2,402 towards certain aspects related to this matter, which are under appeal. As of October 4, 2020 and March 31, 2020, the Company did not have a reserve balance related to these matters.

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

Environmental Issues

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

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The Company is responsible for certain cleanup obligations at the former Yuasa battery facility in Sumter, South Carolina, that predates its ownership of this facility. This manufacturing facility was closed in 2001 and the Company established a reserve for this facility, which was $1,060 as of October 4, 2020 and March 31, 2020. Based on current information, the Company’s management believes this reserve is adequate to satisfy the Company’s environmental liabilities at this facility. This facility is separate from the Company’s current metal fabrication facility in Sumter.

Lead and Foreign Currency Forward Contracts

To stabilize its lead costs and reduce volatility from currency movements, the Company enters into contracts with financial institutions. The vast majority of such contracts are for a period not extending beyond one year. Please refer to Note 7 - Derivative Financial Instruments for more details.

11. Restructuring and other Exit Charges

Restructuring Plans

As disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2020, the Company committed to restructuring plans aimed at improving operational efficiencies across its lines of business. A substantial portion of these plans are complete with an estimated $5,500 remaining to be incurred by the end of fiscal 2021. Restructuring and exit charges for the second quarter and six months of fiscal 2021 by reportable segments are as follows:
Quarter ended October 4, 2020
Energy SystemsMotive PowerSpecialtyTotal
Restructuring charges$1,331 $172 $— $1,503 
Exit charges— 1,509 107 1,616 
Restructuring and other exit charges$1,331 $1,681 $107 $3,119 
Six months ended October 4, 2020
Energy SystemsMotive PowerSpecialtyTotal
Restructuring charges$1,843 $934 $129 $2,906 
Exit charges— 1,509 91 1,600 
Restructuring and other exit charges$1,843 $2,443 $220 $4,506 

A roll-forward of the restructuring reserve is as follows:
Balance as of March 31, 2020$3,325 
Accrued2,906 
Costs incurred(4,068)
Foreign currency impact 293 
Balance as of October 4, 2020$2,456 

Exit Charges

During fiscal 2021, the Company committed to a plan to close its facility in Vijayawada, India to align with its strategic vision for the new line of business structure and footprint. The Company recorded exit charges of $1,509, primarily relating to asset write-offs.

During fiscal 2019, the Company committed to a plan to close its facility in Targovishte, Bulgaria, which produced diesel-electric submarine batteries. Management determined that the future demand for batteries of diesel-electric submarines was not sufficient given the number of competitors in the market. Of the estimated total charges of $30,000 for all these actions, the Company had recorded charges amounting to $20,242 in fiscal 2019, relating to severance and inventory and fixed asset write-offs and an additional $5,123 relating to cash and non-cash charges during fiscal 2020. During the six months of fiscal 2021, in keeping with its strategy of exiting the manufacture of batteries for diesel-electric submarines, the Company continued to execute further actions which resulted in a non-material net impact from the cash and non-cash charges.


During the second quarter of fiscal 2020, in keeping with its strategy of exiting the manufacture of batteries for diesel-electric submarines, the Company also sold certain licenses and assets for $2,031 and recorded a net gain of $892, which were reported as other exit charges in our Specialty segment.

During the second quarter of fiscal 2020, the Company also wrote off $5,441 of assets at its Kentucky and Tennessee Motive Power plants, as a result of its strategic product mix shift from traditional flooded batteries to maintenance free lead acid and lithium batteries.

Richmond, Kentucky Plant Fire

In fiscal 2020, a fire broke out in the battery formation area of the Company's Richmond, Kentucky motive power production facility. The Company maintains insurance policies for both property damage and business interruption and are finishing cleanup and repair. The Company is nearing completion of the reconstruction of the facility and estimates that the total claim, including the replacement of inventory and equipment, the cleanup and repairs to the building, as well as the claim for business interruption is approximately $45,000.

In fiscal 2020, the Company recorded $17,037 of write-offs for damages caused to its fixed assets and inventories, as well as for cleanup, asset replacement and other ancillary activities directly associated with the fire and received $12,000 in advances related to its initial claims for recovery from its property and casualty insurance carriers.

During the six months of fiscal 2021, the Company recorded a further charge of $15,316 for cleanup and received $18,144 in advances from the insurance carriers. Accumulated charges relating to the fire through October 4, 2020 were $32,353 and advances received from the property and casualty insurance carriers were $30,144.

The Company also received $10,156 through October 4, 2020, of which $5,156 was recorded in the six months of fiscal 2021 and $5,000 in fiscal 2020, relating to a partial settlement of its claim for business interruption which was recorded as a reduction to cost of goods sold. The Company expects to receive $2,000 in its third quarter of fiscal 2021 which would complete the settlement of its business interruption claim.

12. Debt

The following summarizes the Company’s long-term debt as of October 4, 2020 and March 31, 2020:
 
October 4, 2020March 31, 2020
PrincipalUnamortized Issuance CostsPrincipalUnamortized Issuance Costs
Senior Notes$600,000 $5,706 $600,000 $6,306 
Amended Credit Facility, due 2022446,665 1,751 513,224 2,187 
$1,046,665 $7,457 $1,113,224 $8,493 
Less: Unamortized issuance costs 7,457 8,493 
Long-term debt, net of unamortized issuance costs$1,039,208 $1,104,731 

The Company's Senior Notes comprise the following:

4.375% Senior Notes due 2027

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

The Company may redeem, prior to September 15, 2027, all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest and a “make whole” premium to, but
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excluding, the redemption date. The Company may redeem, on or after September 15, 2027, all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of the 2027 Notes, plus accrued and unpaid interest to, but excluding, the redemption date. If a change of control triggering event occurs, the Company will be required to offer to repurchase the 2027 Notes at a price in cash equal to 101% of the aggregate principal amount of the 2027 Notes, plus accrued and unpaid interest to, but excluding, the date of repurchase. The 2027 Notes rank pari passu with the 2023 Notes.

5.00% Senior Notes due 2023

The 5% Senior Notes due April 30, 2023 (the “2023 Notes”) bear interest at a rate of 5.00% per annum and have an original face value of $300,000. Interest is payable semiannually in arrears on April 30 and October 30 of each year and commenced on October 30, 2015. The 2023 Notes will mature on April 30, 2023, unless earlier redeemed or repurchased in full. The 2023 Notes are unsecured and unsubordinated obligations of the Company. The 2023 Notes are fully and unconditionally guaranteed, jointly and severally, by certain of its subsidiaries that are guarantors under the Amended Credit Facility. These guarantees are unsecured and unsubordinated obligations of such guarantors.

2017 Credit Facility and Subsequent Amendment

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

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

As of October 4, 2020, the Company had $53,000 outstanding under the Amended 2017 Revolver and $393,665 under the Amended 2017 Term Loan.

Subsequent to the amendment, the quarterly installments payable on the Amended 2017 Term Loan are $5,645 beginning December 31, 2018, $8,468 beginning December 31, 2019 and $11,290 beginning December 31, 2020 with a final payment of $320,000 on September 30, 2022. The Amended Credit Facility may be increased by an aggregate amount of $325,000 in revolving commitments and / or one or more new tranches of term loans, under certain conditions. Both the Amended 2017 Revolver and the Amended 2017 Term Loan bear interest, at the Company's option, at a rate per annum equal to either (i) the London Interbank Offered Rate (“LIBOR”) or Canadian Dollar Offered Rate (“CDOR”) plus (i) LIBOR plus between 1.25% and 2.00% (currently 1.50% and based on the Company's consolidated net leverage ratio) or (ii) the U.S. Dollar Base Rate (which equals, for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate plus 0.50%, (b) Bank of America “Prime Rate” and (c) the Eurocurrency Base Rate plus 1%; provided that, if the Base Rate shall be less than zero, such rate shall be deemed zero) (iii) the CDOR Base Rate equal to the higher of (a) Bank of America “Prime Rate” and (b) average 30-day CDOR rate plus 0.50%. Obligations under the Amended Credit Facility are secured by substantially all of the Company’s existing and future acquired assets, including substantially all of the capital stock of the Company’s United States subsidiaries that are guarantors under the Amended Credit Facility and up to 65% of the capital stock of certain of the Company’s foreign subsidiaries that are owned by the Company’s United States subsidiaries.

The Amended Credit Facility allows for up to two temporary increases in the maximum leverage ratio from 3.50x to 4.00x for a four quarter period following an acquisition larger than $250,000. Effective December 7, 2018 through December 28, 2019, the maximum leverage ratio was increased to 4.00x. On December 29, 2019, the maximum leverage ratio returned to 3.50x.

The current portion of the Amended 2017 Term Loan of $44,990 is classified as long-term debt as the Company expects to refinance the future quarterly payments with revolver borrowings under the Amended Credit Facility.

Short-Term Debt

As of October 4, 2020 and March 31, 2020, the Company had $31,813 and $46,544, respectively, of short-term borrowings. The weighted average interest rate on these borrowings was approximately 2% at October 4, 2020 and 3% at March 31, 2020.
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Letters of Credit

As of October 4, 2020 and March 31, 2020, the Company had standby letters of credit of $7,720.

Debt Issuance Costs

Amortization expense, relating to debt issuance costs, included in interest expense was $518 and $374, respectively, for the quarters ended October 4, 2020 and September 29, 2019 and $1,036 and $752 for the six months ended October 4, 2020 and September 29, 2019. Debt issuance costs, net of accumulated amortization, totaled $7,457 and $8,493, respectively, at October 4, 2020 and March 31, 2020.

Available Lines of Credit

As of October 4, 2020 and March 31, 2020, the Company had available and undrawn, under all its lines of credit, $765,768 and $693,640, respectively, including $123,074 and $105,946, respectively, of uncommitted lines of credit as of October 4, 2020 and March 31, 2020.

13. Retirement Plans

The following tables present the components of the Company’s net periodic benefit cost related to its defined benefit pension plans: 
 United States PlansInternational Plans
Quarter endedQuarter ended
October 4, 2020September 29, 2019October 4, 2020September 29, 2019
Service cost$— $— $252 $227 
Interest cost133 154 348 364 
Expected return on plan assets(66)(114)(474)(518)
Amortization and deferral132 51 259 245 
Net periodic benefit cost$199 $91 $385 $318 
 United States PlansInternational Plans
Six months endedSix months ended
October 4, 2020September 29, 2019October 4, 2020September 29, 2019
Service cost$— $— $487 $462 
Interest cost265 308 675 740 
Expected return on plan assets(131)(226)(921)(1,056)
Amortization and deferral265 103 503 498 
Net periodic benefit cost$399 $185 $744 $644 

14. Stock-Based Compensation

As of October 4, 2020, the Company maintains the 2017 Equity Incentive Plan (“2017 EIP”). The 2017 EIP reserved 4,173,554 shares of common stock for the grant of various classes of nonqualified stock options, restricted stock units, market condition-based on total shareholder return (“TSR”) and performance condition-based share units (“PSU”) and other forms of equity-based compensation.

The Company recognized stock-based compensation expense associated with its equity incentive plans of $5,533 for the second quarter of fiscal 2021 and $4,994 for the second quarter of fiscal 2020. Stock-based compensation was $10,586 and $8,868 for the six months of fiscal 2021 and fiscal 2020, respectively. The Company recognizes compensation expense using the straight-line method over the vesting period of the awards.

During fiscal 2021, the Company granted to non-employee directors 38,171 restricted stock units, pursuant to the 2017 EIP. The awards vest immediately upon the date of grant and are settled in shares of common stock.

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During fiscal 2021, the Company granted to management and other key employees 295,068 non-qualified stock options that vest ratably over three years from the date of grant and 283,101 restricted stock units that vest ratably over four years from the date of grant.

Common stock activity during fiscal 2021 included the vesting of 199,499 restricted stock units, 65,096 TSRs and the exercise of 34,369 stock options.

As of October 4, 2020, there were 1,025,768 non-qualified stock options, 932,976 restricted stock units, 125,537 TSRs and 99,608 PSUs outstanding.


15. Stockholders’ Equity and Noncontrolling Interests

Common Stock

The following demonstrates the change in the number of shares of common stock outstanding during the six months ended October 4, 2020:
 
Shares outstanding as of March 31, 202042,323,305 
Shares issued under equity-based compensation plans, net of equity awards surrendered for option price and taxes251,888 
Shares outstanding as of October 4, 202042,575,193 

Treasury Stock

During the six months ended October 4, 2020, the Company did not purchase any shares but purchased 581,140 shares for $34,561 during the six months ended September 29, 2019. At October 4, 2020 and March 31, 2020, the Company held 12,786,633 and 12,791,503 shares as treasury stock, respectively. During the six months ended October 4, 2020, the Company also issued 6,667 shares out of its treasury stock, valued at $62.55 per share, on a LIFO basis, to participants under the Company's Employee Stock Purchase Plan.

Accumulated Other Comprehensive Income (AOCI )

The components of AOCI, net of tax, as of October 4, 2020 and March 31, 2020, are as follows:
March 31, 2020Before ReclassificationsAmounts Reclassified from AOCIOctober 4, 2020
Pension funded status adjustment$(22,794)$— $596 $(22,198)
Net unrealized (loss) gain on derivative instruments(5,923)(2,812)6,625 (2,110)
Foreign currency translation adjustment(186,289)60,828 — (125,461)
Accumulated other comprehensive (loss) income$(215,006)$58,016 $7,221 $(149,769)















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The following table presents reclassifications from AOCI during the second quarter ended October 4, 2020:
Components of AOCI Amounts Reclassified from AOCILocation of (Gain) Loss Recognized on Income Statement
Derivatives in cash flow hedging relationships:
Net unrealized loss on derivative instruments$4,597 Cost of goods sold
Tax benefit(1,088)
Net unrealized loss on derivative instruments, net of tax$3,509 
Defined benefit pension costs:
Prior service costs and deferrals$391 Net periodic benefit cost, included in other (income) expense, net - See Note 13
Tax benefit(86)
Net periodic benefit cost, net of tax$305 

The following table presents reclassifications from AOCI during the six months ended October 4, 2020:
Components of AOCI Amounts Reclassified from AOCILocation of (Gain) Loss Recognized on Income Statement
Derivatives in cash flow hedging relationships:
Net unrealized loss on derivative instruments$8,679 Cost of goods sold
Tax benefit(2,054)
Net unrealized loss on derivative instruments, net of tax$6,625 
Defined benefit pension costs:
Prior service costs and deferrals$768 Net periodic benefit cost, included in other (income) expense, net - See Note 13
Tax benefit(172)
Net periodic benefit cost, net of tax$596 
22

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The following table presents reclassifications from AOCI during the second quarter ended September 29, 2019:

Components of AOCIAmounts Reclassified from AOCILocation of (Gain) Loss Recognized on Income Statement
Derivatives in cash flow hedging relationships:
Net unrealized loss on derivative instruments$3,110 Cost of goods sold
Tax benefit(736)
Net unrealized loss on derivative instruments, net of tax$2,374 
Defined benefit pension costs:
Prior service costs and deferrals$296 Net periodic benefit cost, included in other (income) expense, net - See Note 13
Tax benefit(59)
Net periodic benefit cost, net of tax$237 

The following table presents reclassifications from AOCI during the six months ended September 29, 2019:

Components of AOCIAmounts Reclassified from AOCILocation of (Gain) Loss Recognized on Income Statement
Derivatives in cash flow hedging relationships:
Net unrealized loss on derivative instruments$2,452 Cost of goods sold
Tax benefit(580)
Net unrealized loss on derivative instruments, net of tax$1,872 
Defined benefit pension costs:
Prior service costs and deferrals$601 Net periodic benefit cost, included in other (income) expense, net - See Note 13
Tax benefit(127)
Net periodic benefit cost, net of tax$474 
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The following demonstrates the change in equity attributable to EnerSys stockholders and nonredeemable noncontrolling interests during the second quarter and six months ended October 4, 2020:
(In Thousands, Except Per Share Data)

Preferred
Stock
Common
Stock
Additional Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Contra-EquityTotal
EnerSys
Stockholders’
Equity
Non-
redeemable
Non-
Controlling
Interests
Total
Equity
Balance at March 31, 2020$ $551 $529,100 $(564,376)$1,556,980 $(215,006)$(6,724)$1,300,525 $3,537 $1,304,062 
Stock-based compensation— — 5,053 — — — — 5,053 — 5,053 
Exercise of stock options — 479 — — — — 481 — 481 
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net— — (3,135)— — — — (3,135)— (3,135)
Other— — (123)299 — — — 176 — 176 
Net earnings — — — — 35,183 — — 35,183 — 35,183 
Dividends ($0.175 per common share)— — 172 — (7,600)— — (7,428)— (7,428)
Other comprehensive income:
Pension funded status adjustment (net of tax benefit of $86)— — — — — 291 — 291 — 291 
Net unrealized gain (loss) on derivative instruments (net of tax expense of $726)— — — — — 2,343 — 2,343 — 2,343 
Foreign currency translation adjustment— — — — — 28,139 — 28,139 28,147 
Balance at July 5, 2020$ $553 $531,546 $(564,077)$1,584,563 $(184,233)$(6,724)$1,361,628 $3,545 $1,365,173 
Stock-based compensation— — 5,533 — — — — 5,533 — 5,533 
Exercise of stock options— 1,284 — — — — 1,285 — 1,285 
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net— — (1,467)— — — — (1,467)— (1,467)
Contra equity - adjustment to indemnification receivable for acquisition related tax liability— — — — — — 1,451 1,451 — 1,451 
Other— — (7)224 — — — 217 — 217 
Net earnings— — — — 35,731 — — 35,731 — 35,731 
Dividends ($0.175 per common share)— — 203 — (7,654)— — (7,451)— (7,451)
Other comprehensive income:
Pension funded status adjustment (net of tax benefit of $86)— — — — — 305 — 305 — 305 
Net unrealized gain (loss) on derivative instruments (net of tax expense of $454)— — — — — 1,470 — 1,470 — 1,470 
Foreign currency translation adjustment— — — — — 32,689 — 32,689 144 32,833 
Balance at October 4, 2020$ $554 $537,092 $(563,853)$1,612,640 $(149,769)$(5,273)$1,431,391 $3,689 $1,435,080 



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The following demonstrates the change in equity attributable to EnerSys stockholders and nonredeemable noncontrolling interests during the second quarter and six months ended September 29, 2019:
(In Thousands, Except Per Share Data)

Preferred
Stock
Common
Stock
Additional Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Contra-EquityTotal
EnerSys
Stockholders’
Equity
Non-
redeemable
Non-
Controlling
Interests
Total
Equity
Balance at March 31, 2019$ $548 $512,696 $(530,760)$1,450,325 $(142,682)$(7,840)$1,282,287 $3,730 $1,286,017 
Stock-based compensation— — 3,874 — — — — 3,874 — 3,874 
Exercise of stock options — 35 — — — — 38 — 38 
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net— — (6,081)— — — — (6,081)— (6,081)
Purchase of common stock— — — (23,029)— — — (23,029)— (23,029)
Other— — (80)— — — — (80)— (80)
Net earnings — — — — 48,636 — — 48,636 — 48,636 
Dividends ($0.175 per common share)— — 133 — (7,632)— — (7,499)— (7,499)
Other comprehensive income:
Pension funded status adjustment (net of tax benefit of $68)— — — — — 237 — 237 — 237 
Net unrealized gain (loss) on derivative instruments (net of tax benefit of $720)— — — — — (2,329)— (2,329)— (2,329)
Foreign currency translation adjustment— — — — — (3,128)— (3,128)(83)(3,211)
Balance at June 30, 2019$ $551 $510,577 $(553,789)$1,491,329 $(147,902)$(7,840)$1,292,926 $3,647 $1,296,573 
Stock-based compensation— — 4,994 — — — — 4,994 — 4,994 
Exercise of stock options— — (13)— — — — (13)— (13)
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net— — (169)— — — — (169)— (169)
Purchase of common stock— — — (11,532)— — — (11,532)— (11,532)
Contra equity - adjustment to indemnification receivable for acquisition related tax liability— — — — — — 2,002 2,002 — 2,002 
Other— — — 213 — — — 213 — 213 
Net earnings— — — — 62,698 — — 62,698 — 62,698 
Dividends ($0.175 per common share)— — 209 — (7,608)— — (7,399)— (7,399)
Other comprehensive income:
Pension funded status adjustment (net of tax benefit of $59)— — — — — 237 — 237 — 237 
Net unrealized gain (loss) on derivative instruments (net of tax benefit of $1,112)— — — — — 3,586 — 3,586 — 3,586 
Foreign currency translation adjustment— — — — — (32,068)— (32,068)(131)(32,199)
Balance at September 29, 2019$ $551 $515,598 $(565,108)$1,546,419 $(176,147)$(5,838)$