Notes to Consolidated Financial Statements
March 31, 2021
(In Thousands, Except Share and Per Share Data)
1. Summary of Significant Accounting Policies
Description of Business
EnerSys (the “Company”) and its predecessor companies have been manufacturers of industrial batteries for over 125 years. EnerSys is a global leader in stored energy solutions for industrial applications. The Company manufactures, markets and distributes industrial batteries and related products such as chargers, outdoor cabinet enclosures, power equipment and battery accessories, and provides related after-market and customer-support services for its products. With the Alpha acquisition, the Company is also a provider of highly integrated power solutions and services to broadband, telecom, renewable and industrial customers.
Principles of Consolidation
The consolidated 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. Control generally equates to ownership percentage, whereby investments that are more than 50% owned are generally consolidated, investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method, and investments in affiliates of 20% or less are accounted for using the cost method. All intercompany transactions and balances have been eliminated in consolidation.
Foreign Currency Translation
Results of foreign operations of subsidiaries, whose functional currency is the local currency, are translated into U.S. dollars using average exchange rates during the periods. The assets and liabilities are translated into U.S. dollars using exchange rates as of the balance sheet dates. Gains or losses resulting from translating the foreign currency financial statements are accumulated as a separate component of accumulated other comprehensive income (“AOCI”) in EnerSys’ stockholders’ equity and noncontrolling interests.
Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency of the applicable subsidiary are included in the Consolidated Statements of Income, within “Other (income) expense, net”, in the year in which the change occurs.
Revenue Recognition
Beginning April 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers. Concurrent with the adoption of the new standard, the Company updated its revenue recognition policy as follows:
The Company determines revenue recognition by applying the following steps:
1. identify the contract with a customer;
2. identify the performance obligations in the contract;
3. determine the transaction price;
4. allocate the transaction price to the performance obligations; and
5. recognize revenue as the performance obligations are satisfied.
The Company recognizes revenue when (or as) performance obligations are satisfied by transferring control of the performance obligation to a customer. Control of a performance obligation may transfer to the customer either at a point in time or over time depending on an evaluation of the specific facts and circumstances for each contract, including the terms and conditions of the contract as agreed with the customer, as well as the nature of the products or services to be provided.
The Company's primary performance obligation to its customers is the delivery of finished goods and products, pursuant to
purchase orders. Control of the products sold typically transfers to its customers at the point in time when the goods are shipped
as this is also when title generally passes to its customers under the terms and conditions of the customer arrangements.
Each customer purchase order sets forth the transaction price for the products and services purchased under that arrangement. Some customer arrangements include variable consideration, such as volume rebates, some of which depend upon the customers meeting specified performance criteria, such as a purchasing level over a period of time. The Company uses judgment to estimate the most likely amount of variable consideration at each reporting date. When estimating variable consideration, the Company also applies judgment when considering the probability of whether a reversal of revenue could occur and only recognize revenue subject to this constraint.
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.
The Company's typical payment terms are 30 days and sales arrangements do not contain any significant financing component for its customers.
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.
Freight charges billed to customers are included in sales and the related shipping costs are included in cost of sales in the Consolidated Statements of Income. If shipping activities are performed after a customer obtains control of a product, the Company applies a policy election to account for shipping as an activity to fulfill the promise to transfer the product to the customer.
The Company applies a policy election to exclude transaction taxes collected from customers from sales when the tax is both imposed on and concurrent with a specific revenue-producing transaction.
The Company generally provides customers with a product warranty that provides assurance that the products meet standard specifications and are free of defects. The Company maintains a reserve for claims incurred under standard product warranty programs. Performance obligations related to service warranties are not material to the Consolidated Financial Statements.
The Company pays sales commissions to its sales representatives, which may be considered as incremental costs to obtain a contract. However, since the recoverability period is less than one year, the Company has utilized the practical expedient to record these costs of obtaining a contract as an expense as they are incurred.
Warranties
The Company’s products are warranted for a period ranging from one to twenty years for Energy Systems batteries, from one to seven years for Motive Power batteries and for a period ranging from one to four years for Specialty transportation batteries. The Company provides for estimated product warranty expenses when the related products are sold. The assessment of the adequacy of the reserve includes a review of open claims and historical experience.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less when purchased.
Concentration of Credit Risk
Financial instruments that subject the Company to potential concentration of credit risk consist principally of short-term cash investments and trade accounts receivable. The Company invests its cash with various financial institutions and in various investment instruments limiting the amount of credit exposure to any one financial institution or entity. The Company has bank deposits that exceed federally insured limits. In addition, certain cash investments may be made in U.S. and foreign government bonds, or other highly rated investments guaranteed by the U.S. or foreign governments. Concentration of credit risk with respect to trade receivables is limited by a large, diversified customer base and its geographic dispersion. The Company performs ongoing credit evaluations of its customers’ financial condition and requires collateral, such as letters of credit, in certain circumstances.
Accounts Receivable
Accounts receivable are recorded net of 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. Accounts are written off when management determines the account is uncollectible.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (FIFO) method. The cost of inventory consists of material, labor, and associated overhead.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost and include expenditures that substantially increase the useful lives of the assets. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows: 10 to 33 years for buildings and improvements and 3 to 15 years for machinery and equipment.
Maintenance and repairs are expensed as incurred. Interest on capital projects is capitalized during the construction period.
Business Combinations
The Company records an acquisition using the acquisition method of accounting and recognizes the assets acquired and liabilities assumed at their fair values as of the date of the acquisition. The excess of the purchase price over the net tangible and intangible assets is recorded to goodwill. The results of operations of the acquired business are included in the Company’s operating results from the date of acquisition.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived trademarks are tested for impairment at least annually and whenever events or circumstances occur indicating that a possible impairment may have been incurred. The Company assesses whether goodwill impairment exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If based on this qualitative assessment the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed by determining the fair value of the Company's reporting units.
Goodwill is tested for impairment by determining the fair value of the Company’s reporting units. These estimated fair values are based on financial projections, certain cash flow measures, and market capitalization.
The Company estimates the fair value of its reporting units using a weighting of fair values derived from both the income approach and the market approach. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business's ability to execute on the projected cash flows. The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and investment characteristics as the reporting unit. The weighting of the fair value derived from the market approach ranges from 0% to 50% depending on the level of comparability of these publicly-traded companies to the reporting unit.
In order to assess the reasonableness of the calculated fair values of its reporting units, the Company also compares the sum of the reporting units' fair values to its market capitalization and calculates an implied control premium (the excess of the sum of the reporting units' fair values over the market capitalization). The Company evaluates the control premium by comparing it to control premiums of recent comparable market transactions.
The Company assesses whether indefinite-lived intangible assets impairment exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If based on this qualitative assessment, the Company determines it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed to determine whether an indefinite-lived intangible asset impairment exists. The Company tests the indefinite-lived intangible assets for impairment by comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief from royalty method. Any excess of the carrying value over the amount of fair value is recognized as an impairment. Any such impairment is recognized in the reporting period in which it has been identified.
Finite-lived assets such as customer relationships, technology, trademarks, licenses, and non-compete agreements are amortized on a straight-line basis over their estimated useful lives, generally over periods ranging from 3 to 20 years. The Company continually evaluates the reasonableness of the useful lives of these assets.
Impairment of Long-Lived Assets
The Company reviews the carrying values of its long-lived assets to be held and used for possible impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable, based on undiscounted estimated cash flows expected to result from its use and eventual disposition. The factors considered by the Company in performing this assessment include current operating results, trends and other economic factors. In assessing the recoverability of the carrying value of a long-lived asset, the Company must make assumptions regarding future cash flows and other factors. If these estimates or the related assumptions change in the future, the Company may be required to record an impairment loss for these assets.
Environmental Expenditures
The Company records a loss and establishes a reserve for environmental remediation liabilities when it is probable that an asset has been impaired or a liability exists and the amount of the liability can be reasonably estimated. Reasonable estimates involve judgments made by management after considering a broad range of information including notifications, demands or settlements that have been received from a regulatory authority or private party, estimates performed by independent engineering companies and outside counsel, available facts, existing and proposed technology, the identification of other potentially responsible parties, their ability to contribute and prior experience. These judgments are reviewed quarterly as more information is received and the amounts reserved are updated as necessary. However, the reserves may materially differ from ultimate actual liabilities if the loss contingency is difficult to estimate or if management’s judgments turn out to be inaccurate. If management believes no best estimate exists, the minimum probable loss is accrued.
Derivative Financial Instruments
The Company utilizes derivative instruments to mitigate volatility related to interest rates, lead prices and foreign currency exposures. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company recognizes derivatives as either assets or liabilities in the accompanying Consolidated Balance Sheets and measures those instruments at fair value. Changes in the fair value of those instruments are reported in AOCI if they qualify for hedge accounting or in earnings if they do not qualify for hedge accounting. Derivatives qualify for hedge accounting if they are designated as hedge instruments and if the hedge is highly effective in achieving offsetting changes in the fair value or cash flows of the asset or liability hedged. Effectiveness is measured on a regular basis using statistical analysis and by comparing the overall changes in the expected cash flows on the lead and foreign currency forward contracts with the changes in the expected all-in cash outflow required for the lead and foreign currency purchases. This analysis is performed on the initial purchases quarterly that cover the quantities hedged. Accordingly, gains and losses from changes in derivative fair value of effective hedges are deferred and reported in AOCI until the underlying transaction affects earnings.
The Company has commodity, foreign exchange and interest rate hedging authorization from the Board of Directors and has established a hedging and risk management program that includes the management of market and counterparty risk. Key risk control activities designed to ensure compliance with the risk management program include, but are not limited to, credit review and approval, validation of transactions and market prices, verification of risk and transaction limits, portfolio stress tests, sensitivity analyses and frequent portfolio reporting, including open positions, determinations of fair value and other risk management metrics.
Market risk is the potential loss the Company and its subsidiaries may incur as a result of price changes associated with a particular financial or commodity instrument. The Company utilizes forward contracts, options, and swaps as part of its risk management strategies, to minimize unanticipated fluctuations in earnings caused by changes in commodity prices, interest rates and / or foreign currency exchange rates. All derivatives are recognized on the balance sheet at their fair value, unless they qualify for the Normal Purchase Normal Sale exemption.
Credit risk is the potential loss the Company may incur due to the counterparty’s non-performance. The Company is exposed to credit risk from interest rate, foreign currency and commodity derivatives with financial institutions. The Company has credit policies to manage their credit risk, including the use of an established credit approval process, monitoring of the counterparty positions and the use of master netting agreements.
The Company has elected to offset net derivative positions under master netting arrangements. The Company does not have any positions involving cash collateral (payables or receivables) under a master netting arrangement as of March 31, 2021 and 2020.
The Company does not have any credit-related contingent features associated with its derivative instruments.
Fair Value of Financial Instruments
The Company groups its recurring, non-recurring and disclosure-only fair value measurements into the following levels when making fair value measurement disclosures:
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Level 1
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Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
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Level 2
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Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.
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Level 3
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Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
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Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The Company and its subsidiaries use, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value techniques and option-pricing models), and / or a cost approach (generally, replacement cost) to measure the fair value of an asset or liability. These valuation approaches incorporate inputs such as observable, independent market data and / or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk.
Lead contracts, foreign currency contracts and interest rate contracts generally use an income approach to measure the fair value of these contracts, utilizing readily observable inputs, such as forward interest rates (e.g., London Interbank Offered Rate—“LIBOR”), forward foreign currency exchange rates (e.g., GBP and euro) and commodity prices (e.g., London Metals Exchange), as well as inputs that may not be observable, such as credit valuation adjustments. When observable inputs are used to measure all or most of the value of a contract, the contract is classified as Level 2. Over-the-counter (OTC) contracts are valued using quotes obtained from an exchange, binding and non-binding broker quotes. Furthermore, the Company obtains independent quotes from the market to validate the forward price curves. OTC contracts include forwards, swaps and options. To the extent possible, fair value measurements utilize various inputs that include quoted prices for similar contracts or market-corroborated inputs.
When unobservable inputs are significant to the fair value measurement, the asset or liability is classified as Level 3. Additionally, Level 2 fair value measurements include adjustments for credit risk based on the Company’s own creditworthiness (for net liabilities) and its counterparties’ creditworthiness (for net assets). The Company assumes that observable market prices include sufficient adjustments for liquidity and modeling risks. The Company did not have any fair value measurements that transferred between Level 2 and Level 3 as well as Level 1 and Level 2.
Income Taxes
The Company accounts for income taxes using the asset and liability approach, which requires deferred tax assets and liabilities be recognized using enacted tax rates to measure the effect of temporary differences between book and tax bases on recorded
assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets, if it is more likely than not some portion or all of the deferred tax assets will not be realized. The need to establish valuation allowances against deferred tax assets is assessed quarterly. The primary factors used to assess the likelihood of realization are expected reversals of taxable temporary timing differences, forecasts of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets.
The Company recognizes tax related interest and penalties in income tax expense in its Consolidated Statement of Income.
With respect to accounting for uncertainty in income taxes, the Company evaluates tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit. If the more likely than not threshold is not met in the period for which a tax position is taken, the Company may subsequently recognize the benefit of that tax position if the tax matter is effectively settled, the statute of limitations expires, or if the more likely than not threshold is met in a subsequent period.
No additional income taxes have been provided for any undistributed foreign earnings or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.
Regarding the GILTI tax rules, the Company is allowed to make an accounting policy choice of either (1) treating the taxes due on future US inclusions in taxable income as a current-period expense when incurred (“period cost method”) or (2) factoring amounts into a Company’s measurement of its deferred taxes (“deferred method”). The Company has elected the period cost method.
Deferred Financing Fees
Debt issuance costs that are incurred by the Company in connection with the issuance of debt are deferred and amortized to interest expense over the life of the underlying indebtedness, adjusted to reflect any early repayments and are shown as a deduction from long-term debt.
Stock-Based Compensation Plans
The Company measures the cost of employee services received in exchange for the award of an equity instrument based on the grant-date fair value of the award, with such cost recognized over the applicable vesting period.
Market and Performance condition-based awards
The Company grants market condition-based awards and performance condition-based awards.
Beginning in fiscal 2017 and until fiscal 2020, the Company granted market condition-based awards (“TSR”). A participant may earn between 0% to 200% of the number of awards granted, based on the total shareholder return of the Company's common stock over a three-year period, relative to the shareholder return of a defined peer group. The awards cliff vest on the third anniversary of the date of grant and are settled in common stock on the first anniversary of the vesting date. The TSR is calculated by dividing the sixty or ninety calendar day average price at end of the period (as applicable) and the reinvested dividends thereon by such sixty or ninety calendar day average price at start of the period. The maximum number of awards earned is capped at 200% of the target award. Additionally, no payout will be awarded in the event that the TSR at the vesting date reflects less than a 25% return from the average price at the grant date. These share units are similar to the share units granted prior to fiscal 2016, except that under these awards, the targets are more difficult to achieve as they are tied to the TSR of a defined peer group. The fair value of these awards is estimated at the date of grant, using a Monte Carlo Simulation.
The Company recognizes compensation expense using the straight-line method over the life of the market condition-based awards except for those issued to certain retirement-eligible participants, which are expensed on an accelerated basis.
In fiscal 2019 and fiscal 2020, the Company granted performance condition-based awards (“PSU”). A participant may earn between 0% to 200% of the number of awards granted, based on the Company’s cumulative adjusted earnings per share performance over a three-year period. The vesting of these awards is contingent upon meeting or exceeding performance conditions. The awards cliff vest on the third anniversary of the date of grant and are settled in common stock on the first anniversary of the vesting date. The maximum number of awards earned is capped at 200% of the target award. Expense for the
performance condition-based award is recorded when the achievement of the performance condition is considered probable of achievement and is recorded on a straight-line basis over the requisite service period. If such performance criteria are not met, no compensation cost is recognized, and any recognized compensation cost is reversed. The closing stock price on the date of grant, adjusted for a discount to reflect the illiquidity inherent in the PSUs, represents the grant-date fair value for these awards.
Restricted Stock Units
The fair value of restricted stock units is based on the closing market price of the Company’s common stock on the date of grant. These awards generally vest, and are settled in common stock, at 25% per year, over a four-year period from the date of grant. The Company recognizes compensation expense using the straight-line method over the life of the restricted stock units.
Stock Options
The fair value of the options granted is estimated at the date of grant using the Black-Scholes option-pricing model utilizing assumptions based on historical data and current market data. The assumptions include expected term of the options, risk-free interest rate, expected volatility, and dividend yield. The expected term represents the expected amount of time that options granted are expected to be outstanding, based on historical and forecasted exercise behavior. The risk-free rate is based on the rate at the grant date of zero-coupon U.S. Treasury Notes with a term equal to the expected term of the option. Expected volatility is estimated using historical volatility rates based on historical weekly price changes over a term equal to the expected term of the options. The Company’s dividend yield is based on historical data. The Company recognizes compensation expense using the straight-line method over the vesting period of the options except for those issued to certain retirement-eligible participants, which are expensed on an accelerated basis.
Forfeitures
Forfeitures of share-based awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
Earnings Per Share
Basic earnings per common share (“EPS”) are computed by dividing net earnings attributable to EnerSys stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. At March 31, 2021, 2020 and 2019, the Company had outstanding stock options, restricted stock units, market condition and performance condition-based awards, which could potentially dilute basic earnings per share in the future.
Segment Reporting
Effective April 1, 2020, the Company's chief operating decision maker, or CODM (the Company's Chief Executive Officer), changed the manner in which he reviews financial information for purposes of assessing business performance and allocating resources, by focusing on the lines of business on a global basis, rather than on geographic basis. As a result of this change, the Company re-evaluated the identification of its operating segments and reportable segments and identified the following as its three new operating segments, based on lines of business:
•Energy Systems - uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems, as well as telecommunications systems, switchgear and electrical control systems used in industrial facilities and electric utilities, large-scale energy storage and energy pipelines. Energy Systems also includes highly integrated power solutions and services to broadband, telecom, renewable and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries.
•Motive Power - power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications, as well as mining equipment, diesel locomotive starting and other rail equipment; and
•Specialty - premium starting, lighting and ignition applications in transportation, energy solutions for satellites, military aircraft, submarines, ships and other tactical vehicles, as well as medical and security systems.
The new operating segments also represent the Company's reportable segments under ASC 280, Segment Reporting. All prior comparative periods presented have been recast to conform to these changes.
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 previous 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.
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.
The following table sets forth the changes in the Company's allowance for doubtful accounts:
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Balance at Beginning of Period
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Provision
for Doubtful
Debts
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Write-offs, net of Recoveries and Other
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Balance at
End of
Period
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Fiscal year ended March 31, 2019
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$
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12,643
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$
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1,385
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$
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(3,215)
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$
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10,813
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Fiscal year ended March 31, 2020
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10,813
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4,821
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(388)
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15,246
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Fiscal year ended March 31, 2021
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15,246
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178
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(2,432)
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12,992
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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 amendments in this ASU were effective immediately and may be applied to impacted contracts and hedges prospectively through December 31, 2022. The adoption of the ASU had no impact on the Company’s Consolidated Financial Statements for the period ended March 31, 2021.
Accounting Pronouncements Issued But Not Adopted as of March 31, 2021
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 adoption is not expected to have a material impact 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 23.
Service revenues for fiscal 2021, 2020 and 2019 amounted to $296,213, $270,704 and $157,236, respectively.
A small portion of the Company's customer arrangements oblige 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 hours, costs incurred and units of production. Revenues recognized over time for fiscal 2021, 2020 and 2019 amounted to $155,217, $142,153 and $100,809, respectively.
On March 31, 2021, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $115,775, of which, the Company estimates that approximately $93,941 will be recognized as revenue in fiscal 2022, $21,011 in fiscal 2023, $774 in fiscal 2024, $49 in fiscal 2025 and $0 in fiscal 2026.
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 March 31, 2021, the current and non-current portion of contract liabilities were $15,992 and $2,072, 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 fiscal 2021 and fiscal 2020, that were included in the contract liability at the beginning of the year, amounted to $14,064 and $18,697, respectively.
Amounts representing work completed and not billed to customers represent contract assets and were $46,451 and $39,048 as of March 31, 2021 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 March 31, 2021, the right of return asset related to the value of inventory anticipated to be returned from customers was $4,271 and refund liability representing amounts estimated to be refunded to customers was $7,475.
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. At contract inception, the Company reviews the terms of the arrangement to determine if the contract is or contains a lease. Guidance in Topic 842 is used to evaluate whether the contract has an identified asset; if the Company has the right to obtain substantially all economic benefits from the asset; and if it has the right to direct the use of the underlying asset. When determining if a contract has an identified asset, the Company considers both explicit and implicit assets, and whether the supplier has the right to substitute the asset. When determining if the Company has the right to obtain substantially all economic benefits from the asset, the Company considers the primary outputs of the identified asset throughout the period of use and determines if it receives greater than 90% of those benefits. When determining if it has the right to direct the use of an underlying asset, the Company considers if it has the right to direct how and for what purpose the asset is used throughout the period of use and if it controls the decision-making rights over the asset.
Lease terms may include options to extend or terminate the lease. The Company exercises its judgment to determine the term of those leases when extension or termination options are present and include such options in the calculation of the lease term when it is reasonably certain that the Company will exercise those options.
The Company has elected to include both lease and non-lease components in the determination of lease payments for all asset classes. Payments made to a lessor for items such as taxes, insurance, common area maintenance, or other costs commonly referred to as executory costs, are also included in lease payments if they are fixed. The fixed portion of these payments are included in the calculation of the lease liability, while any variable portion would be recognized as variable lease expenses, when incurred. Variable payments made to third parties for these, or similar costs, such as utilities, are not included in the calculation of lease payments.
Both finance and operating leases are reflected as liabilities on the commencement date of the lease based on the present value of the lease payments to be made over the lease term. As most of the leases do not provide an implicit rate, the Company has exercised judgment in electing the incremental borrowing rate based on the information available when the lease commences to determine the present value of future payments. Right-of-use assets are valued at the initial measurement of the lease liability, plus any initial direct costs or rent prepayments and reduced by any lease incentives and any deferred lease payments.
Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease expense includes depreciation, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method.
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 current and non-current portion of operating lease liabilities are reflected in accrued expenses and other liabilities, respectively, on the consolidated balance sheets. The right-of use assets relating to operating and finance leases are reflected in other assets and property, plant and equipment, respectively, on the consolidated balance sheets.
The following table presents lease assets and liabilities and their balance sheet classification:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
As of
March 31, 2021
|
|
As of
March 31, 2020
|
Operating Leases:
|
|
|
|
|
|
|
Right-of-use assets
|
|
Other assets
|
|
$
|
62,159
|
|
|
$
|
70,045
|
|
Operating lease current liabilities
|
|
Accrued expenses
|
|
21,774
|
|
|
21,128
|
|
Operating lease non-current liabilities
|
|
Other liabilities
|
|
42,528
|
|
|
51,215
|
|
Finance Leases:
|
|
|
|
|
|
|
Right-of-use assets
|
|
Property, plant, and equipment, net
|
|
$
|
573
|
|
|
$
|
540
|
|
Finance lease current liabilities
|
|
Current portion of finance leases
|
|
236
|
|
|
162
|
|
Finance lease non-current liabilities
|
|
Finance leases
|
|
435
|
|
|
407
|
|
The components of lease expense for the fiscal years ended March 31, 2021 and March 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
March 31, 2021
|
|
March 31, 2020
|
Operating Leases:
|
|
|
|
|
|
|
Operating lease cost
|
|
Operating expenses
|
|
$
|
27,888
|
|
|
$
|
28,855
|
|
Variable lease cost
|
|
Operating expenses
|
|
7,781
|
|
|
8,238
|
|
Short term lease cost
|
|
Operating expenses
|
|
6,675
|
|
|
7,553
|
|
Finance Leases:
|
|
|
|
|
|
|
Depreciation
|
|
Operating expenses
|
|
$
|
221
|
|
|
$
|
461
|
|
Interest expense
|
|
Interest expense
|
|
33
|
|
|
37
|
|
Total
|
|
|
|
$
|
42,598
|
|
|
$
|
45,144
|
|
The following table presents the weighted average lease term and discount rates for leases as of March 31, 2021 and March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
March 31, 2020
|
Operating Leases:
|
|
|
|
|
Weighted average remaining lease term (years)
|
|
5.5 years
|
|
5.0 years
|
Weighted average discount rate
|
|
5.16%
|
|
5.17%
|
Finance Leases:
|
|
|
|
|
Weighted average remaining lease term (years)
|
|
3.1 years
|
|
3.5 years
|
Weighted average discount rate
|
|
4.81%
|
|
4.92%
|
The following table presents future payments due under leases reconciled to lease liabilities as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance Leases
|
|
Operating Leases
|
Year ended March 31,
|
|
|
|
|
2022
|
|
$
|
264
|
|
|
$
|
24,663
|
|
2023
|
|
218
|
|
|
16,618
|
|
2024
|
|
159
|
|
|
10,717
|
|
2025
|
|
48
|
|
|
6,977
|
|
2026
|
|
26
|
|
|
5,114
|
|
Thereafter
|
|
—
|
|
|
12,997
|
|
Total undiscounted lease payments
|
|
715
|
|
|
77,086
|
|
Present value discount
|
|
44
|
|
|
12,784
|
|
Lease liability
|
|
$
|
671
|
|
|
$
|
64,302
|
|
The following table presents supplemental disclosures of cash flow information related to leases for the fiscal years ended March 31, 2021 and March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
March 31, 2020
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows from finance leases
|
|
$
|
33
|
|
|
$
|
37
|
|
Operating cash flows from operating leases
|
|
28,036
|
|
|
28,593
|
|
Financing cash flows from finance leases
|
|
216
|
|
|
461
|
|
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
|
|
$
|
266
|
|
|
$
|
—
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
14,763
|
|
|
11,902
|
|
Disclosure related to periods prior to adoption of ASU 2016-02, Leases (Topic 842)
Rental expense was $40,261 for the fiscal year ended March 31, 2019.
4. Acquisitions
The Company made no acquisitions in fiscal 2021. Acquisitions made in fiscal 2020 and fiscal 2019 are as follows:
NorthStar
On September 30, 2019, 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 segments discussed in Note 23, 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 $68,522.
During 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 by $2,996 as a result of finalizing income tax accounting.
The results of the NorthStar acquisition have been included in the Company’s results of operations from the date of acquisition. Pro forma earnings and earnings per share computations have not been presented as this acquisition is not considered material.
Alpha
On December 7, 2018, the Company completed the acquisition of all of the issued and outstanding common stock of Alpha Technologies Services, Inc. (“ATS”) and Alpha Technologies Ltd. (“ATL”), resulting in ATS and ATL becoming wholly-owned subsidiaries of the Company (the “Alpha share purchase”). Additionally, the Company acquired substantially all of the assets of Alpha Technologies Inc. and certain assets of Altair Advanced Industries, Inc. and other affiliates of ATS and ATL (all such sellers, together with ATS and ATL, “Alpha”), in each case in accordance with the terms and conditions of certain restructuring agreements (collectively, the “Alpha asset acquisition” and together with the Alpha share purchase, the “Alpha acquisition”). Based in Bellingham, Washington, Alpha is a global industry leader in comprehensive commercial-grade energy solutions for broadband, telecom, renewable, industrial and traffic customers around the world. The initial purchase consideration for the Alpha acquisition was $750,000, of which $650,000 was paid in cash and the balance was settled by issuing 1,177,630 shares of EnerSys common stock. These shares were issued out of the Company's treasury stock and were valued at $84.92 per share, which was based on the thirty-day volume weighted average stock price of the Company’s common stock at closing, in accordance with the purchase agreement. The 1,177,630 shares had a closing date fair value of $93,268, based upon the December 7, 2018, closing date spot rate of $79.20. The total purchase consideration, consisting of cash paid of $650,000, shares valued at $93,268 and an adjustment for working capital (due post - closing from seller of $766) was $742,502. The Company funded the cash portion of the Alpha acquisition with borrowings from the Amended Credit Facility as defined in Note 10. See Note 10 for additional information.
The results of operations of Alpha have been included in the Company’s Energy Systems segment.
For the period ended March 31, 2019, that EnerSys owned Alpha, the contribution of the acquisition to net sales was $162,454 and net loss of $1,252, excluding the effect of the transaction and integration costs, and interest expense on the debt to finance the acquisition.
The Company finalized the measurement of all provisional amounts recognized for the Alpha business combination in fiscal 2020. The final amounts recognized in connection with the Alpha business combination are in the table below.
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
115,467
|
|
Inventories
|
|
84,297
|
|
Other current assets
|
|
6,822
|
|
Other intangible assets
|
|
332,000
|
|
Property, plant and equipment
|
|
20,987
|
|
Other assets
|
|
9,005
|
|
Total assets acquired
|
|
$
|
568,578
|
|
|
|
|
Accounts payable
|
|
35,803
|
|
Accrued liabilities
|
|
41,918
|
|
Deferred income taxes
|
|
54,941
|
|
Other liabilities
|
|
12,642
|
|
Total liabilities assumed
|
|
$
|
145,304
|
|
Net assets acquired
|
|
$
|
423,274
|
|
|
|
|
Purchase price:
|
|
|
Cash paid for net assets acquired
|
|
$
|
650,000
|
|
Fair value of shares issued for net assets acquired
|
|
93,268
|
|
Working capital adjustment
|
|
(766)
|
|
Total purchase consideration
|
|
742,502
|
|
Less: Fair value of acquired identifiable assets and liabilities
|
|
423,274
|
|
Goodwill
|
|
$
|
319,228
|
|
The following table summarizes the fair value of Alpha's identifiable intangible assets and their respective lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
Life in Years
|
|
Fair Value
|
Trademarks
|
|
Indefinite-lived
|
|
Indefinite
|
|
$
|
56,000
|
|
Customer relationships
|
|
Finite-lived
|
|
14
|
|
221,000
|
|
Technology
|
|
Finite-lived
|
|
10
|
|
55,000
|
|
Total identifiable intangible assets
|
|
|
|
|
|
$
|
332,000
|
|
As of March 31, 2021, goodwill deductible for tax purposes relating to Alpha is $28,525.
The following unaudited summary information is presented on a consolidated pro forma basis as if the acquisition had occurred on April 1, 2018:
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended
|
|
|
March 31, 2019
|
Net sales
|
|
$
|
3,250,332
|
|
Net earnings attributable to EnerSys stockholders
|
|
181,915
|
|
Net earnings per share attributable to EnerSys stockholders - basic
|
|
4.19
|
|
Net earnings per share attributable to EnerSys stockholders - assuming dilution
|
|
4.12
|
|
The pro forma amounts include additional interest expense on the debt issued to finance the purchases, amortization and depreciation expense based on the estimated fair value and useful lives of intangible assets and plant assets, and related tax effects. The pro forma results are not necessarily indicative of the combined results had the Alpha acquisition been completed on April 1, 2018, nor are they indicative of future combined results. The pro forma results for the twelve months of fiscal 2019 exclude pre-tax transaction costs of $12,883, as well as the pre-tax amortization of the acquisition date step up to fair value of inventories of $7,263 as they are considered non-recurring in nature. The remeasurement of Alpha's deferred taxes due to the Tax Act are being excluded in arriving at these pro forma results.
5. Inventories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
2021
|
|
2020
|
Raw materials
|
|
$
|
147,040
|
|
|
$
|
141,906
|
|
Work-in-process
|
|
97,715
|
|
|
91,520
|
|
Finished goods
|
|
273,492
|
|
|
286,034
|
|
Total
|
|
$
|
518,247
|
|
|
$
|
519,460
|
|
6. Property, Plant, and Equipment
Property, plant, and equipment consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
2021
|
|
2020
|
Land, buildings, and improvements
|
|
$
|
313,031
|
|
|
$
|
291,271
|
|
Machinery and equipment
|
|
822,725
|
|
|
722,955
|
|
Construction in progress
|
|
60,049
|
|
|
93,921
|
|
|
|
1,195,805
|
|
|
1,108,147
|
|
Less accumulated depreciation
|
|
(698,749)
|
|
|
(628,133)
|
|
Total
|
|
$
|
497,056
|
|
|
$
|
480,014
|
|
Depreciation expense for the fiscal years ended March 31, 2021, 2020 and 2019 totaled $60,956, $56,331, and $48,618, respectively. Interest capitalized in connection with major capital expenditures amounted to $1,319, $2,030, and $1,581 for the fiscal years ended March 31, 2021, 2020 and 2019, respectively.
7. Goodwill and Other Intangible Assets
Other Intangible Assets
Information regarding the Company’s other intangible assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
2021
|
|
2020
|
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Amount
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Amount
|
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
$
|
148,164
|
|
|
$
|
(953)
|
|
|
$
|
147,211
|
|
|
$
|
147,352
|
|
|
$
|
(953)
|
|
|
$
|
146,399
|
|
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
298,576
|
|
|
(87,308)
|
|
|
211,268
|
|
|
292,155
|
|
|
(64,855)
|
|
|
227,300
|
|
Non-compete
|
|
2,825
|
|
|
(2,825)
|
|
|
—
|
|
|
3,021
|
|
|
(2,817)
|
|
|
204
|
|
Technology
|
|
97,349
|
|
|
(29,561)
|
|
|
67,788
|
|
|
96,047
|
|
|
(20,349)
|
|
|
75,698
|
|
Trademarks
|
|
8,012
|
|
|
(3,381)
|
|
|
4,631
|
|
|
8,012
|
|
|
(1,928)
|
|
|
6,084
|
|
Licenses
|
|
1,196
|
|
|
(1,196)
|
|
|
—
|
|
|
1,196
|
|
|
(1,196)
|
|
|
—
|
|
Total
|
|
$
|
556,122
|
|
|
$
|
(125,224)
|
|
|
$
|
430,898
|
|
|
$
|
547,783
|
|
|
$
|
(92,098)
|
|
|
$
|
455,685
|
|
The Company’s amortization expense related to finite-lived intangible assets was $33,126, $31,013, and $14,730, for the years ended March 31, 2021, 2020 and 2019, respectively. The expected amortization expense based on the finite-lived intangible assets as of March 31, 2021, is $32,624 in fiscal 2022, $30,399 in fiscal 2023, $27,545 in fiscal 2024, $26,552 in fiscal 2025 and $25,618 in fiscal 2026.
Goodwill
Concurrent with the change in operating segments effective April 1, 2020, goodwill was reassigned to the affected reporting units that have been identified within each operating segment, using a relative fair value approach outlined in ASC 350, Intangibles - Goodwill and Other.
The following table presents the amount of goodwill that has been reassigned to each of the Company's reporting units as of April 1, 2020, using the relative fair value approach, as well as changes in the carrying amount of goodwill by segment during fiscal 2020 and 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy Systems
|
|
Motive Power
|
|
Specialty
|
|
Americas(2)
|
|
EMEA
|
|
Asia(2)
|
|
Total
|
Balance at April 1, 2019
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
470,194
|
|
|
$
|
143,269
|
|
|
$
|
42,936
|
|
|
$
|
656,399
|
|
Acquisitions during the year
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72,056
|
|
|
1,732
|
|
|
—
|
|
|
73,788
|
|
Measurement period adjustments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,390)
|
|
|
—
|
|
|
—
|
|
|
(1,390)
|
|
Goodwill impairment charge
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39,713)
|
|
|
(39,713)
|
|
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,704)
|
|
|
(5,221)
|
|
|
(3,223)
|
|
|
(25,148)
|
|
Balance at March 31, 2020
|
|
—
|
|
|
—
|
|
|
—
|
|
|
524,156
|
|
|
139,780
|
|
|
—
|
|
|
663,936
|
|
Reallocation to new Reporting Units(1)
|
|
263,150
|
|
|
308,497
|
|
|
92,289
|
|
|
(524,156)
|
|
|
(139,780)
|
|
|
—
|
|
|
—
|
|
Balance at April 1, 2020
|
|
263,150
|
|
|
308,497
|
|
|
92,289
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
663,936
|
|
Measurement period adjustments
|
|
1,348
|
|
|
—
|
|
|
1,648
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,996
|
|
Foreign currency translation adjustment
|
|
15,178
|
|
|
18,558
|
|
|
4,925
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38,661
|
|
Balance at March 31, 2021
|
|
$
|
279,676
|
|
|
$
|
327,055
|
|
|
$
|
98,862
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
705,593
|
|
(1)Represents the reallocation of goodwill as a result of the Company reorganizing its segments as described in Note 1.
(2)Goodwill is net of accumulated impairment charges of $57,845 and $44,892 in the legacy Americas and Asia reporting units, respectively, as of March 31, 2020.
Impairment of goodwill, finite and indefinite-lived intangibles
Goodwill is tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances that indicate goodwill is more likely than not impaired. The Company did not record any impairment relating to its goodwill and intangible assets during fiscal 2021 and 2019.
In the fourth quarter of fiscal 2020, the Company conducted its annual goodwill impairment test which indicated that the fair value of its legacy Asia reporting unit was less than its carrying value. The Company recorded a non-cash charge of $39,713 related to goodwill impairment in Asia under the caption “Impairment of goodwill” in the Consolidated Statements of Income. The Company also recorded a non-cash charge of $4,549 related to impairment of indefinite-lived trademarks in its legacy EMEA reportable segment under the caption “Impairment of indefinite-lived intangibles” in the Consolidated Statements of Income. The key factors contributing to the impairment in Asia was the increasing pressure on organic sales growth that the Company began to experience in fiscal 2019 due to a slowdown in telecom spending in the People's Republic of China (“PRC”) amidst growing trade tensions between the U.S.A and China. The impact of these trade tensions on the Company's ability to capture market share in the PRC accelerated in the second half of the fiscal year. Throughout fiscal 2020, there was a general slowdown in the Chinese economy which was further exacerbated by the outbreak of the COVID -19 pandemic, causing disruption to two of the Company's plants in China in the fourth quarter. Also contributing to the poor performance of the Asia region was a general softening of demand in Australia, that began in fiscal 2019 and continued throughout fiscal 2020. The Company monitored the performance of its Asia reporting unit for interim impairment indicators throughout fiscal 2020, but the emergence of COVID-19 in China in December 2019 coupled with the totality of economic headwinds in the region resulted in the recognition of a goodwill impairment loss in connection with its annual impairment test.
During the fourth quarter of fiscal 2020, management completed its evaluation of key inputs used to estimate the fair value of its indefinite-lived trademarks and determined that an impairment charge relating to two of its trademarks in EMEA, that were acquired through legacy acquisitions was appropriate, as it plans to phase out these trademarks.
The Company estimated tax-deductible goodwill to be approximately $110,063 and $120,708 as of March 31, 2021 and 2020, respectively.
8. Prepaid and Other Current Assets
Prepaid and other current assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
2021
|
|
2020
|
Contract assets
|
|
$
|
46,451
|
|
|
$
|
39,048
|
|
Prepaid non-income taxes
|
|
25,251
|
|
|
23,069
|
|
Non-trade receivables
|
|
10,925
|
|
|
19,380
|
|
Prepaid income taxes
|
|
6,562
|
|
|
13,062
|
|
Other
|
|
28,492
|
|
|
26,034
|
|
Total
|
|
$
|
117,681
|
|
|
$
|
120,593
|
|
9. Accrued Expenses
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
2021
|
|
2020
|
Payroll and benefits
|
|
$
|
92,305
|
|
|
$
|
62,131
|
|
Accrued selling expenses
|
|
47,364
|
|
|
43,292
|
|
Hagen exit related accruals
|
|
24,593
|
|
|
—
|
|
Operating lease liabilities
|
|
21,774
|
|
|
21,128
|
|
Warranty
|
|
18,982
|
|
|
27,766
|
|
Contract liabilities
|
|
15,992
|
|
|
17,342
|
|
VAT and other non-income taxes
|
|
14,267
|
|
|
14,209
|
|
Freight
|
|
13,097
|
|
|
14,222
|
|
Interest
|
|
10,592
|
|
|
11,180
|
|
Tax Act - Transition Tax
|
|
6,172
|
|
|
6,172
|
|
Income taxes payable
|
|
5,683
|
|
|
304
|
|
Restructuring
|
|
2,595
|
|
|
3,325
|
|
Pension
|
|
1,514
|
|
|
1,350
|
|
Other
|
|
43,793
|
|
|
49,319
|
|
Total
|
|
$
|
318,723
|
|
|
$
|
271,740
|
|
10. Debt
The following summarizes the Company’s long-term debt as of March 31, 2021 and March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Principal
|
|
Unamortized Issuance Costs
|
|
Principal
|
|
Unamortized Issuance Costs
|
Senior Notes
|
|
$
|
600,000
|
|
|
$
|
5,106
|
|
|
$
|
600,000
|
|
|
$
|
6,306
|
|
Amended Credit Facility, due 2022
|
|
376,039
|
|
|
1,315
|
|
|
513,224
|
|
|
2,187
|
|
|
|
$
|
976,039
|
|
|
$
|
6,421
|
|
|
$
|
1,113,224
|
|
|
$
|
8,493
|
|
Less: Unamortized issuance costs
|
|
6,421
|
|
|
|
|
8,493
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of unamortized issuance costs
|
|
$
|
969,618
|
|
|
|
|
$
|
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 and are unsecured and unsubordinated obligations of the Company. They 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 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.
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 1.25% 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.
As of March 31, 2021, the Company had $0 outstanding under the Amended 2017 Revolver and $376,039 under the Amended 2017 Term Loan.
The current portion of the Amended 2017 Term Loan of $45,579 is classified as long-term debt as the Company expects to refinance the future quarterly payments with revolver borrowings under the Amended Credit Facility.
Interest Rates on Long Term Debt
The weighted average interest rate on the long term debt at March 31, 2021 and March 31, 2020, was 3.5% and 3.7%, respectively.
Interest Paid
The Company paid in cash, $36,365, $38,632 and $29,552, net of interest received, for interest during the fiscal years ended March 31, 2021, 2020 and 2019, respectively.
Covenants
The Company’s financing agreements contain various covenants, which, absent prepayment in full of the indebtedness and other obligations, or the receipt of waivers, would limit the Company’s ability to conduct certain specified business transactions including incurring debt, mergers, consolidations or similar transactions, buying or selling assets out of the ordinary course of business, engaging in sale and leaseback transactions, paying dividends and certain other actions. The Company is in compliance with all such covenants.
Short-Term Debt
As of March 31, 2021 and 2020, the Company had $34,153 and $46,544, respectively, of short-term borrowings. The weighted-average interest rate on these borrowings was approximately 2% and 3%, respectively, for fiscal years ended March 31, 2021 and 2020.
Letters of Credit
As of March 31, 2021 and 2020, the Company had $2,959 and $7,720, respectively, of standby letters of credit.
Debt Issuance Costs
In fiscal 2020, the Company capitalized $4,607 of debt issuance costs in connection with the issuance of the 2027 Notes. In fiscal 2019, the Company capitalized $1,393 in debt issuance costs and wrote off $483 of unamortized debt issuance costs related to the Amended Credit Facility. Amortization expense, relating to debt issuance costs, included in interest expense was $2,072, $1,673, and $1,316 for the fiscal years ended March 31, 2021, 2020 and 2019, respectively. Debt issuance costs, net of accumulated amortization, totaled $6,421 and $8,493 as of March 31, 2021 and 2020, respectively.
Available Lines of Credit
As of March 31, 2021 and 2020, the Company had available and undrawn, under all its lines of credit, $697,875 and $693,640, respectively, including $122,303 and $105,946, respectively, of uncommitted lines of credit as of March 31, 2021 and March 31, 2020.
11. Other Liabilities
Other liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
2021
|
|
2020
|
Tax Act - Transition Tax
|
|
$
|
53,045
|
|
|
$
|
58,630
|
|
Operating lease liabilities
|
|
42,528
|
|
|
51,215
|
|
Pension
|
|
40,450
|
|
|
40,496
|
|
Warranty
|
|
39,980
|
|
|
35,759
|
|
Liability for uncertain tax positions
|
|
7,185
|
|
|
8,080
|
|
Contract liabilities
|
|
2,072
|
|
|
8,356
|
|
Other
|
|
10,508
|
|
|
11,280
|
|
Total
|
|
$
|
195,768
|
|
|
$
|
213,816
|
|
12. 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 March 31, 2021 and March 31, 2020 and the basis for that measurement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Fair Value Measurement March 31, 2021
|
|
Quoted Price in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Lead forward contracts
|
|
$
|
(1,980)
|
|
|
$
|
—
|
|
|
$
|
(1,980)
|
|
|
$
|
—
|
|
Foreign currency forward contracts
|
|
424
|
|
|
—
|
|
|
424
|
|
|
—
|
|
Total derivatives
|
|
$
|
(1,556)
|
|
|
$
|
—
|
|
|
$
|
(1,556)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
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.
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 10), 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.
The fair value of the Company's 2027 Notes and 2023 Notes, (collectively, the “Senior Notes”) represent the trading 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 March 31, 2021 and March 31, 2020, respectively. The 2023 Notes were trading at approximately 105% and 97% of face value on March 31, 2021 and March 31, 2020, respectively.
The carrying amounts and estimated fair values of the Company’s derivatives and Senior Notes at March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
March 31, 2020
|
|
|
|
Carrying
Amount
|
|
Fair Value
|
|
Carrying
Amount
|
|
Fair Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
Derivatives(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
Senior Notes (2)
|
|
$
|
600,000
|
|
|
$
|
621,000
|
|
|
$
|
600,000
|
|
|
$
|
573,000
|
|
|
Derivatives(1)
|
|
1,556
|
|
|
1,556
|
|
|
2,432
|
|
|
2,432
|
|
|
(1)Represents lead and foreign currency forward contracts (see Note 13 for asset and liability positions of the lead and foreign currency forward contracts at March 31, 2021 and March 31, 2020).
(2)The fair value amount of the Senior Notes at March 31, 2021 and March 31, 2020 represent the trading value of the instruments.
Non-recurring fair value measurements
The valuation of goodwill and other intangible assets is based on information and assumptions available to the Company at the time of acquisition, using income and market approaches to determine fair value. The Company tests goodwill and other intangible assets annually for impairment, or when indications of potential impairment exist (see Note 1).
Goodwill is tested for impairment by determining the fair value of the Company’s reporting units. The unobservable inputs used to measure the fair value of the reporting units include projected growth rates, profitability, and the risk factor premium added to the discount rate. The remeasurement of the reporting unit fair value is classified as a Level 3 fair value assessment due to the significance of unobservable inputs developed using company-specific information.
The inputs used to measure the fair value of other intangible assets were largely unobservable and accordingly were also classified as Level 3. The fair value of trademarks is based on an estimate of the royalties saved that would have been paid to a third party had the Company not owned the trademark. The fair value of other indefinite-lived intangibles was estimated using the income approach, based on cash flow projections of revenue growth rates, taking into consideration industry and market conditions.
In connection with the annual impairment testing conducted as of December 30, 2019 for fiscal 2020, two of the Company's indefinite-lived trademarks, that were acquired through legacy acquisitions were recorded at fair value on a non-recurring basis at $1,700 and the remeasurement resulted in an impairment of $4,549. In determining the fair value of these assets, the Company used a royalty rate of 1.25% based on comparable market rates and used a discount rate of 13.0%.
These impairment charges relating to goodwill and indefinite-lived trademarks are included under the captions Impairment of goodwill and Impairment of indefinite-lived intangibles in the Consolidated Statements of Income.
On November 11, 2020, the Company committed to a plan to substantially close its facility in Hagen, Germany, which produces flooded motive power batteries for forklifts. Management determined that future demand for the motive power batteries produced at this facility was not sufficient, given the conversion from flooded to maintenance free batteries by customers, the existing number of competitors in the market, as well as the near term decline in demand and increased uncertainty from the pandemic. As a result, the Company concluded that the carrying value of the asset group is not recoverable and recorded a write-off of $3,975 of the fixed assets to their estimated fair value of $14,456, which was recognized in the third quarter of fiscal 2021. The valuation technique used to measure the fair value of fixed assets was a combination of the income and market approaches. The inputs used to measure the fair value of these fixed assets under the income approach were largely unobservable and accordingly were classified as Level 3.
On March 5, 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. As a result, the Company concluded that the carrying value of the asset group is not recoverable and recorded a write-off of $14,958 in the fixed assets to their estimated fair value of $242, which was recognized in the fourth quarter of fiscal 2019. The valuation technique used to measure the fair value of fixed assets was a
combination of the income and market approaches. The inputs used to measure the fair value of these fixed assets under the income approach were largely unobservable and accordingly were classified as Level 3.
13. 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 March 31, 2021 and 2020, the Company has hedged the price to purchase approximately 54.5 million pounds and 35.0 million pounds of lead, respectively, for a total purchase price of $50,567 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 March 31, 2021 and 2020, the Company had entered into a total of $26,033 and $34,008, respectively, of such contracts.
In the coming twelve months, the Company anticipates that $597 of pretax gain relating to lead and foreign currency forward contracts will be reclassified from AOCI 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 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 instruments and changes in fair value of these instruments are recorded directly in the Consolidated Statements of Income. As of March 31, 2021 and 2020, the notional amount of these contracts was $28,995 and $42,232, respectively.
Presented below in tabular form is information on the location and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Statements of Income:
Fair Value of Derivative Instruments
March 31, 2021 and 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives and Hedging Activities Designated as Cash Flow Hedges
|
|
Derivatives and Hedging Activities Not Designated as Hedging Instruments
|
|
|
March 31, 2021
|
|
March 31, 2020
|
|
March 31, 2021
|
|
March 31, 2020
|
Prepaid and other current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
375
|
|
Total assets
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
375
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Lead forward contracts
|
|
$
|
1,980
|
|
|
$
|
2,433
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign currency forward contracts
|
|
—
|
|
|
374
|
|
|
100
|
|
|
—
|
|
Total liabilities
|
|
$
|
1,980
|
|
|
$
|
2,807
|
|
|
$
|
100
|
|
|
$
|
—
|
|
The Effect of Derivative Instruments on the Consolidated Statements of Income
For the fiscal year ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Designated as Cash Flow Hedges
|
|
Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
|
|
Location of Gain
(Loss) Reclassified
from
AOCI into Income
(Effective Portion)
|
|
Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
|
Lead forward contracts
|
|
$
|
202
|
|
|
Cost of goods sold
|
|
$
|
(7,411)
|
|
Foreign currency forward contracts
|
|
130
|
|
|
Cost of goods sold
|
|
(492)
|
|
Total
|
|
$
|
332
|
|
|
|
|
$
|
(7,903)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
Location of Gain (Loss)
Recognized in Income
on Derivatives
|
|
Pretax Gain (Loss)
|
Foreign currency forward contracts
|
Other (income) expense, net
|
|
$
|
430
|
|
Total
|
|
|
$
|
430
|
|
|
|
|
|
The Effect of Derivative Instruments on the Consolidated Statements of Income
For the fiscal year ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Designated as Cash Flow Hedges
|
|
Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
|
|
Location of Gain
(Loss) Reclassified
from
AOCI into Income
(Effective Portion)
|
|
Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
|
Lead forward contracts
|
|
$
|
(8,683)
|
|
|
Cost of goods sold
|
|
$
|
(1,690)
|
|
Foreign currency forward contracts
|
|
(54)
|
|
|
Cost of goods sold
|
|
539
|
|
Total
|
|
$
|
(8,737)
|
|
|
|
|
$
|
(1,151)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
Location of Gain (Loss)
Recognized in Income
on Derivatives
|
|
Pretax Gain (Loss)
|
Foreign currency forward contracts
|
Other (income) expense, net
|
|
$
|
(178)
|
|
Total
|
|
|
$
|
(178)
|
|
|
|
|
|
The Effect of Derivative Instruments on the Consolidated Statements of Income
For the fiscal year ended March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Designated as Cash Flow Hedges
|
|
Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
|
|
Location of Gain
(Loss) Reclassified
from
AOCI into Income
(Effective Portion)
|
|
Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
|
Lead forward contracts
|
|
$
|
(12,531)
|
|
|
Cost of goods sold
|
|
$
|
(15,666)
|
|
Foreign currency forward contracts
|
|
1,551
|
|
|
Cost of goods sold
|
|
385
|
|
Total
|
|
$
|
(10,980)
|
|
|
|
|
$
|
(15,281)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging Instruments
|
Location of Gain (Loss)
Recognized in Income
on Derivatives
|
|
Pretax Gain (Loss)
|
Foreign currency forward contracts
|
Other (income) expense, net
|
|
$
|
(1,856)
|
|
Total
|
|
|
$
|
(1,856)
|
|
14. Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
Current income tax expense
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
12,591
|
|
|
$
|
9,185
|
|
|
$
|
6,377
|
|
State
|
|
4,133
|
|
|
2,561
|
|
|
5,027
|
|
Foreign
|
|
19,031
|
|
|
14,561
|
|
|
16,636
|
|
Total current income tax expense
|
|
35,755
|
|
|
26,307
|
|
|
28,040
|
|
Deferred income tax (benefit) expense
|
|
|
|
|
|
|
Federal
|
|
1,495
|
|
|
5,489
|
|
|
(5,031)
|
|
State
|
|
735
|
|
|
741
|
|
|
(669)
|
|
Foreign
|
|
(11,224)
|
|
|
(22,716)
|
|
|
(756)
|
|
Total deferred income tax (benefit) expense
|
|
(8,994)
|
|
|
(16,486)
|
|
|
(6,456)
|
|
Total income tax expense
|
|
$
|
26,761
|
|
|
$
|
9,821
|
|
|
$
|
21,584
|
|
Earnings before income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
United States
|
|
$
|
56,055
|
|
|
$
|
36,193
|
|
|
$
|
53,339
|
|
Foreign
|
|
114,080
|
|
|
110,744
|
|
|
128,872
|
|
Earnings before income taxes
|
|
$
|
170,135
|
|
|
$
|
146,937
|
|
|
$
|
182,211
|
|
Income taxes paid by the Company for the fiscal years ended March 31, 2021, 2020 and 2019 were $32,002, $48,653 and $53,866, respectively.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law in the U.S. to provide certain relief as a result of the COVID-19 pandemic. In addition, governments around the world have enacted or implemented various forms of tax relief measures in response to the economic conditions in the wake of COVID-19. As of March 31, 2021, neither the CARES Act nor changes to income tax laws or regulations in other jurisdictions had a significant impact on the Company’s effective tax rate.
The following table sets forth the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
2021
|
|
2020
|
Deferred tax assets:
|
|
|
|
|
Accounts receivable
|
|
$
|
2,029
|
|
|
$
|
1,110
|
|
Inventories
|
|
8,831
|
|
|
5,010
|
|
Net operating loss carryforwards
|
|
62,663
|
|
|
44,340
|
|
Lease liabilities
|
|
15,685
|
|
|
18,168
|
|
Accrued expenses
|
|
36,775
|
|
|
26,113
|
|
Other assets
|
|
18,173
|
|
|
19,793
|
|
Gross deferred tax assets
|
|
144,156
|
|
|
114,534
|
|
Less valuation allowance
|
|
(31,928)
|
|
|
(20,951)
|
|
Total deferred tax assets
|
|
112,228
|
|
|
93,583
|
|
Deferred tax liabilities:
|
|
|
|
|
Property, plant and equipment
|
|
38,364
|
|
|
30,229
|
|
Lease Right-of-use assets
|
|
15,685
|
|
|
18,168
|
|
Intangible assets
|
|
66,743
|
|
|
66,529
|
|
Other liabilities
|
|
2,636
|
|
|
1,217
|
|
Total deferred tax liabilities
|
|
123,428
|
|
|
116,143
|
|
Net deferred tax liabilities
|
|
$
|
(11,200)
|
|
|
$
|
(22,560)
|
|
The Company has approximately $1,078 in United States federal net operating loss carryforwards, all of which are limited by Section 382 of the Internal Revenue Code, with expirations between 2023 and 2027. The Company has approximately $235,225 of foreign net operating loss carryforwards, of which $186,816 may be carried forward indefinitely and $48,409 expire between fiscal 2022 and fiscal 2041. In addition, the Company also has approximately $28,955 of state net operating loss carryforwards with expirations between fiscal 2022 and fiscal 2041.
The following table sets forth the changes in the Company's valuation allowance for fiscal 2021, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
Beginning of
Period
|
|
Additions
Charged to
Expense
|
|
Valuation Allowance Reversal
|
|
Business Combination Adjustments
|
|
Other(1)
|
|
Balance at
End of
Period
|
Fiscal year ended March 31, 2019
|
|
$
|
15,255
|
|
|
$
|
2,978
|
|
|
$
|
(99)
|
|
|
$
|
1,157
|
|
|
$
|
(1,772)
|
|
|
$
|
17,519
|
|
Fiscal year ended March 31, 2020
|
|
17,519
|
|
|
7,494
|
|
|
(3,145)
|
|
|
(688)
|
|
|
(229)
|
|
|
20,951
|
|
Fiscal year ended March 31, 2021
|
|
20,951
|
|
|
8,437
|
|
|
(2,904)
|
|
|
6,384
|
|
|
(940)
|
|
|
31,928
|
|
(1)Includes the impact of currency changes and the expiration of net operating losses for which a full valuation allowance was recorded.
As of March 31, 2021 and 2020, the Company had no federal valuation allowance and the valuation allowance associated with the state tax jurisdictions was $686 and $896, respectively.
As of March 31, 2021 and 2020, the valuation allowance associated with certain foreign tax jurisdictions was $31,242 and $20,055, respectively. Of the net increase of $11,187, $5,743 was recorded as an increase to tax expense primarily related to deferred tax assets generated in the current year that the Company believes are not more likely than not to be realized. Of the remaining increase, $6,384 is related to purchase accounting from the prior year acquisition offset by $(940) primarily related to foreign currency translation adjustments and foreign net operating losses for which a full valuation allowance was recorded.
A reconciliation of income taxes at the statutory rate (21.0% for fiscal 2021, 2020 and 2019) to the income tax provision is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
United States statutory income tax expense
|
|
$
|
35,729
|
|
|
$
|
30,857
|
|
|
$
|
38,264
|
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|
Impact of Tax Act
|
|
—
|
|
|
—
|
|
|
(13,483)
|
|
State income taxes, net of federal effect
|
|
4,000
|
|
|
2,764
|
|
|
3,285
|
|
Nondeductible expenses and other
|
|
5,273
|
|
|
5,953
|
|
|
4,378
|
|
Legal proceedings charge - European Competition Investigations
|
|
—
|
|
|
—
|
|
|
2,405
|
|
Net effect of GILTI, FDII, BEAT
|
|
1,985
|
|
|
3,025
|
|
|
2,320
|
|
Goodwill impairment - See Note 7
|
|
—
|
|
|
10,714
|
|
|
—
|
|
Effect of foreign operations
|
|
(20,035)
|
|
|
(17,605)
|
|
|
(16,763)
|
|
Valuation allowance
|
|
5,533
|
|
|
4,349
|
|
|
2,879
|
|
Switzerland Tax Reform
|
|
(1,883)
|
|
|
(26,846)
|
|
|
—
|
|
Research and Development Credit
|
|
(3,841)
|
|
|
(3,390)
|
|
|
(1,701)
|
|
Income tax expense
|
|
$
|
26,761
|
|
|
$
|
9,821
|
|
|
$
|
21,584
|
|
The effective income tax rates for the fiscal years ended March 31, 2021, 2020 and 2019 were 15.7%, 6.7% and 11.9%, respectively. The 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 and the amount of its consolidated income before taxes. The rate increase in fiscal 2021 compared to fiscal 2020 is primarily due to Swiss tax reform, partially offset by the Hagen, Germany exit charges and changes in the mix of earnings among tax jurisdictions. The rate decrease in fiscal 2020 compared to fiscal 2019 is primarily due to changes in mix of earnings among tax jurisdictions, Swiss tax reform, and items related to the Tax Act in fiscal 2019.
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 Swiss tax reform measures were effective January 1, 2020. The Company recorded a net deferred tax asset of $22,500 during fiscal 2020, related to the amortizable goodwill and based on further evaluation with the Swiss tax authority, recorded an additional income tax benefit of $1,883 during fiscal 2021.
In fiscal 2021, the foreign effective income tax rate on foreign pre-tax income of $114,080 was 6.8%. In fiscal 2020, the foreign effective income tax rate on foreign pre-tax income of $110,744 was (7.4)% and in fiscal 2019, the foreign effective income tax rate on foreign pre-tax income of $128,872 was 12.3%. The rate increase in fiscal 2021 compared to fiscal 2020 is primarily due to Swiss tax reform, partially offset by the Hagen, Germany exit charges and changes in the mix of earnings among tax jurisdictions. The rate decrease in fiscal 2020 compared to fiscal 2019 is primarily due to Swiss tax reform and changes in the mix of earnings among tax jurisdictions.
Income from the Company's Swiss subsidiary comprised a substantial portion of its overall foreign mix of income for the fiscal years ended March 31, 2021, 2020 and 2019 and was taxed, excluding the impact from the Swiss tax reform, at approximately 8%, 3% and 4%, respectively.
The Company has approximately $1,591,000 and $1,376,000 of undistributed earnings of foreign subsidiaries for fiscal years 2021 and 2020, respectively. During fiscal 2021, previously undistributed earnings of certain foreign subsidiaries were no longer considered indefinitely reinvested. As a result, no additional income taxes have been provided as the Company had previously recognized a one-time transition tax on these earnings under the Tax Act. The Company intends to continue to be indefinitely reinvested on the remaining undistributed foreign earnings and outside basis differences and therefore, no additional income taxes have been provided.
Uncertain Tax Positions
The following table summarizes activity of the total amounts of unrecognized tax benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
Balance at beginning of year
|
|
$
|
7,795
|
|
|
$
|
20,165
|
|
|
$
|
1,568
|
|
Increases related to current year tax positions
|
|
346
|
|
|
598
|
|
|
129
|
|
Increases related to the Alpha acquisition
|
|
—
|
|
|
769
|
|
|
7,840
|
|
Increases related to prior year tax positions
|
|
325
|
|
|
—
|
|
|
11,463
|
|
Decreases related to prior tax positions
|
|
—
|
|
|
(11,463)
|
|
|
(544)
|
|
Decreases related to prior year tax positions settled
|
|
—
|
|
|
—
|
|
|
(93)
|
|
Lapse of statute of limitations
|
|
(1,681)
|
|
|
(2,274)
|
|
|
(198)
|
|
Balance at end of year
|
|
$
|
6,785
|
|
|
$
|
7,795
|
|
|
$
|
20,165
|
|
All of the balance of unrecognized tax benefits at March 31, 2021, if recognized, would be included in the Company’s Consolidated Statements of Income and have a favorable impact on both the Company’s net earnings and effective tax rate.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2010.
While the net effect on total unrecognized tax benefits cannot be reasonably estimated, approximately $1,850 is expected to reverse in fiscal 2022 due to expiration of various statute of limitations.
The Company recognizes tax related interest and penalties in income tax expense in its Consolidated Statements of Income. As of March 31, 2021 and 2020, the Company had an accrual of $400 and $285, respectively, for interest and penalties.
15. Retirement Plans
Defined Benefit Plans
The Company sponsors several retirement and pension plans covering eligible salaried and hourly employees. The Company uses a measurement date of March 31 for its pension plans.
Net periodic pension cost for fiscal 2021, 2020 and 2019, includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Plans
|
|
International Plans
|
|
|
Fiscal year ended March 31,
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2020
|
|
2019
|
Service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
993
|
|
|
$
|
906
|
|
|
$
|
997
|
|
Interest cost
|
|
533
|
|
|
616
|
|
|
631
|
|
|
1,388
|
|
|
1,485
|
|
|
1,831
|
|
Expected return on plan assets
|
|
(272)
|
|
|
(448)
|
|
|
(514)
|
|
|
(1,899)
|
|
|
(2,136)
|
|
|
(2,151)
|
|
Amortization and deferral
|
|
476
|
|
|
188
|
|
|
184
|
|
|
1,053
|
|
|
910
|
|
|
1,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
737
|
|
|
$
|
356
|
|
|
$
|
301
|
|
|
$
|
1,535
|
|
|
$
|
1,165
|
|
|
$
|
2,197
|
|
The following table sets forth a reconciliation of the related benefit obligation, plan assets, and accrued benefit costs related to the pension benefits provided by the Company for those employees covered by defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Plans
|
|
International Plans
|
|
|
March 31,
|
|
March 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
Benefit obligation at the beginning of the period
|
|
$
|
18,111
|
|
|
$
|
16,647
|
|
|
$
|
68,602
|
|
|
$
|
75,038
|
|
Service cost
|
|
—
|
|
|
—
|
|
|
993
|
|
|
906
|
|
Interest cost
|
|
533
|
|
|
616
|
|
|
1,388
|
|
|
1,485
|
|
|
|
|
|
|
|
|
|
|
Benefits paid, inclusive of plan expenses
|
|
(802)
|
|
|
(1,132)
|
|
|
(2,087)
|
|
|
(2,262)
|
|
Plan curtailments and settlements
|
|
—
|
|
|
—
|
|
|
(91)
|
|
|
(678)
|
|
Actuarial losses (gains)
|
|
(36)
|
|
|
1,980
|
|
|
7,761
|
|
|
(3,024)
|
|
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
6,686
|
|
|
(2,863)
|
|
Benefit obligation at the end of the period
|
|
$
|
17,806
|
|
|
$
|
18,111
|
|
|
$
|
83,252
|
|
|
$
|
68,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
Fair value of plan assets at the beginning of the period
|
|
$
|
12,036
|
|
|
$
|
13,763
|
|
|
$
|
32,831
|
|
|
$
|
36,791
|
|
Actual return on plan assets
|
|
4,379
|
|
|
(649)
|
|
|
6,272
|
|
|
(1,605)
|
|
Employer contributions
|
|
652
|
|
|
54
|
|
|
1,869
|
|
|
2,098
|
|
Benefits paid, inclusive of plan expenses
|
|
(802)
|
|
|
(1,132)
|
|
|
(2,087)
|
|
|
(2,262)
|
|
Plan curtailments and settlements
|
|
—
|
|
|
—
|
|
|
(91)
|
|
|
(482)
|
|
Foreign currency translation adjustment
|
|
—
|
|
|
—
|
|
|
4,050
|
|
|
(1,709)
|
|
Fair value of plan assets at the end of the period
|
|
$
|
16,265
|
|
|
$
|
12,036
|
|
|
$
|
42,844
|
|
|
$
|
32,831
|
|
Funded status deficit
|
|
$
|
(1,541)
|
|
|
$
|
(6,075)
|
|
|
$
|
(40,408)
|
|
|
$
|
(35,771)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
2021
|
|
2020
|
Amounts recognized in the Consolidated Balance Sheets consist of:
|
|
|
|
|
Non current assets
|
|
$
|
15
|
|
|
$
|
—
|
|
Accrued expenses
|
|
(1,514)
|
|
|
(1,350)
|
|
Other liabilities
|
|
(40,450)
|
|
|
(40,496)
|
|
Funded status deficit
|
|
$
|
(41,949)
|
|
|
$
|
(41,846)
|
|
The following table represents pension components (before tax) and related changes (before tax) recognized in AOCI for the Company’s pension plans for the years ended March 31, 2021, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
Amounts recorded in AOCI before taxes:
|
|
|
|
|
|
|
Prior service cost
|
|
$
|
(230)
|
|
|
$
|
(258)
|
|
|
$
|
(307)
|
|
Net loss
|
|
(25,450)
|
|
|
(25,796)
|
|
|
(24,051)
|
|
Net amount recognized
|
|
$
|
(25,680)
|
|
|
$
|
(26,054)
|
|
|
$
|
(24,358)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
Changes in plan assets and benefit obligations:
|
|
|
|
|
|
|
New prior service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net loss (gain) arising during the year
|
|
(753)
|
|
|
3,793
|
|
|
(99)
|
|
Effect of exchange rates on amounts included in AOCI
|
|
1,909
|
|
|
(804)
|
|
|
(1,984)
|
|
Amounts recognized as a component of net periodic benefit costs:
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
(46)
|
|
|
(43)
|
|
|
(45)
|
|
Amortization or settlement recognition of net loss
|
|
(1,484)
|
|
|
(1,250)
|
|
|
(1,659)
|
|
Total recognized in other comprehensive (income) loss
|
|
$
|
(374)
|
|
|
$
|
1,696
|
|
|
$
|
(3,787)
|
|
The amounts included in AOCI as of March 31, 2021 that are expected to be recognized as components of net periodic pension cost (before tax) during the next twelve months are as follows:
|
|
|
|
|
|
Prior service cost
|
$
|
(46)
|
|
Net loss
|
(1,163)
|
|
Net amount expected to be recognized
|
$
|
(1,209)
|
|
|
|
The accumulated benefit obligation related to all defined benefit pension plans and information related to unfunded and underfunded defined benefit pension plans at the end of each fiscal year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Plans
|
|
International Plans
|
|
|
March 31,
|
|
March 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
All defined benefit plans:
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
17,806
|
|
|
$
|
18,111
|
|
|
$
|
78,360
|
|
|
$
|
65,336
|
|
Unfunded defined benefit plans:
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
34,932
|
|
|
$
|
30,773
|
|
Accumulated benefit obligation
|
|
—
|
|
|
—
|
|
|
31,970
|
|
|
28,926
|
|
Defined benefit plans with a projected benefit obligation in excess of the fair value of plan assets:
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
17,806
|
|
|
$
|
18,111
|
|
|
$
|
82,814
|
|
|
$
|
68,602
|
|
Fair value of plan assets
|
|
16,265
|
|
|
12,036
|
|
|
42,390
|
|
|
32,831
|
|
Defined benefit plans with an accumulated benefit obligation in excess of the fair value of plan assets:
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
$
|
17,806
|
|
|
$
|
18,111
|
|
|
$
|
82,814
|
|
|
$
|
68,602
|
|
Accumulated benefit obligation
|
|
17,806
|
|
|
18,111
|
|
|
77,928
|
|
|
65,336
|
|
Fair value of plan assets
|
|
16,265
|
|
|
12,036
|
|
|
42,390
|
|
|
32,831
|
|
Assumptions
Significant assumptions used to determine the net periodic benefit cost for the U.S. and International plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Plans
|
|
International Plans
|
|
|
Fiscal year ended March 31,
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2020
|
|
2019
|
Discount rate
|
|
3.0
|
%
|
|
3.8
|
%
|
|
3.9
|
%
|
|
1.3%-2.3%
|
|
1.0%-2.7%
|
|
1.4%-3.3%
|
Expected return on plan assets
|
|
6.0
|
|
|
6.3
|
|
|
6.3
|
|
|
3.8-5.5
|
|
4.3-6.0
|
|
4.1-6.0
|
Rate of compensation increase
|
|
N/A
|
|
N/A
|
|
N/A
|
|
2.0-3.5
|
|
2.0-4.0
|
|
1.8-4.0
|
N/A = not applicable
Significant assumptions used to determine the projected benefit obligations for the U.S. and International plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States Plans
|
|
International Plans
|
|
|
March 31,
|
|
March 31,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Discount rate
|
|
3.0
|
%
|
|
3.0
|
%
|
|
0.5%-2.3%
|
|
1.3%-2.3%
|
|
|
|
|
|
|
|
|
|
Rate of compensation increase
|
|
N/A
|
|
N/A
|
|
1.5-4.0
|
|
2.0-3.5
|
N/A = not applicable
The United States plans do not include compensation in the formula for determining the pension benefit as it is based solely on years of service.
The expected long-term rate of return for the Company’s pension plan assets is based upon the target asset allocation and is determined using forward looking assumptions in the context of historical returns and volatilities for each asset class, as well as correlations among asset classes. The Company evaluates the rate of return assumptions for each of its plans on an annual basis.
Pension Plan Investment Strategy
The Company’s investment policy emphasizes a balanced approach to investing in securities of high quality and ready marketability. Investment flexibility is encouraged so as not to exclude opportunities available through a diversified investment strategy.
Equity investments are maintained within a target range of 40% - 75% of the total portfolio market value for the U.S. plans and with a target of approximately 65% for international plans. Investments in debt securities include issues of various maturities, and the average quality rating of bonds should be investment grade with a minimum quality rating of “B” at the time of purchase.
The Company periodically reviews the asset allocation of its portfolio. The proportion committed to equities, debt securities and cash and cash equivalents is a function of the values available in each category and risk considerations. The plan’s overall return will be compared to and is expected to meet or exceed established benchmark funds and returns over a three to five year period.
The objectives of the Company’s investment strategies are: (a) the achievement of a reasonable long-term rate of total return consistent with an emphasis on preservation of capital and purchasing power, (b) stability of annual returns through a portfolio that reflects a conservative mix of risk versus return, and (c) reflective of the Company’s willingness to forgo significantly above-average rewards in order to minimize above-average risks. These objectives may not be met each year but should be attained over a reasonable period of time.
The following table represents the Company's pension plan investments measured at fair value as of March 31, 2021 and 2020 and the basis for that measurement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
United States Plans
|
|
International Plans
|
|
|
Total Fair
Value
Measurement
|
|
Quoted Price
In Active
Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total Fair
Value
Measurement
|
|
Quoted Price
In Active
Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Asset category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,454
|
|
|
$
|
1,454
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
81
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US(a)
|
|
10,435
|
|
|
10,435
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
International(b)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28,144
|
|
|
—
|
|
|
28,144
|
|
|
—
|
|
Fixed income(c)
|
|
4,376
|
|
|
4,376
|
|
|
—
|
|
|
—
|
|
|
14,619
|
|
|
—
|
|
|
14,619
|
|
|
—
|
|
Total
|
|
$
|
16,265
|
|
|
$
|
16,265
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
42,844
|
|
|
$
|
81
|
|
|
$
|
42,763
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2020
|
|
|
United States Plans
|
|
International Plans
|
|
|
Total Fair
Value
Measurement
|
|
Quoted Price
In Active
Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
Fair Value
Measurement
|
|
Quoted Price
In Active
Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Asset category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,221
|
|
|
$
|
1,221
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
141
|
|
|
$
|
141
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US(a)
|
|
6,860
|
|
|
6,860
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
International(b)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,059
|
|
|
—
|
|
|
20,059
|
|
|
—
|
|
Fixed income(c)
|
|
3,955
|
|
|
3,955
|
|
|
—
|
|
|
—
|
|
|
12,631
|
|
|
—
|
|
|
12,631
|
|
|
—
|
|
Total
|
|
$
|
12,036
|
|
|
$
|
12,036
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
32,831
|
|
|
$
|
141
|
|
|
$
|
32,690
|
|
|
$
|
—
|
|
The fair values presented above were determined based on valuation techniques to measure fair value as discussed in Note 1.
(a)US equities include companies that are well diversified by industry sector and equity style (i.e., growth and value strategies). Active and passive management strategies are employed. Investments are primarily in large capitalization stocks and, to a lesser extent, mid- and small-cap stocks.
(b)International equities are invested in companies that are traded on exchanges outside the U.S. and are well diversified by industry sector, country and equity style. Active and passive strategies are employed. The vast majority of the investments are made in companies in developed markets with a small percentage in emerging markets.
(c)Fixed income consists primarily of investment grade bonds from diversified industries.
The Company expects to make cash contributions of approximately $2,578 to its pension plans in fiscal 2022.
Estimated future benefit payments under the Company’s pension plans are as follows:
|
|
|
|
|
|
|
|
2022
|
$
|
3,181
|
|
2023
|
3,253
|
|
2024
|
3,172
|
|
2025
|
3,794
|
|
2026
|
4,073
|
|
Years 2027-2031
|
22,308
|
|
Defined Contribution Plan
The Company maintains defined contribution plans primarily in the U.S. and U.K. Eligible employees can contribute a portion of their pre-tax and / or after-tax income in accordance with plan guidelines and the Company will make contributions based on the employees’ eligible pay and /or will match a percentage of the employee contributions up to certain limits. Matching contributions charged to expense for the fiscal years ended March 31, 2021, 2020 and 2019 were $16,460, $15,835 and $12,078, respectively.
16. Stockholders’ Equity
Preferred Stock and Common Stock
The Company’s certificate of incorporation authorizes the issuance of up to 1,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”). At March 31, 2021 and 2020, no shares of Preferred Stock were issued or outstanding. The Board of Directors of the Company has the authority to specify the terms of any Preferred Stock at the time of issuance.
The following demonstrates the change in the number of shares of common stock outstanding during fiscal years ended March 31, 2019, 2020 and 2021, respectively:
|
|
|
|
|
|
|
|
Shares outstanding as of March 31, 2018
|
41,915,000
|
|
Purchase of treasury stock
|
(726,347)
|
|
Shares issued towards purchase consideration of Alpha acquisition
|
1,177,630
|
|
Shares issued towards equity-based compensation plans, net of equity awards surrendered for option price and taxes
|
254,467
|
|
Shares outstanding as of March 31, 2019
|
42,620,750
|
|
Purchase of treasury stock
|
(581,140)
|
|
Shares issued under equity-based compensation plans, net of equity awards surrendered for option price and taxes
|
283,695
|
|
Shares outstanding as of March 31, 2020
|
42,323,305
|
|
Purchase of treasury stock
|
—
|
|
Shares issued under equity-based compensation plans, net of equity awards surrendered for option price and taxes
|
429,715
|
|
Shares outstanding as of March 31, 2021
|
42,753,020
|
|
Treasury Stock
The Company did not purchase any shares in fiscal 2021 but purchased 581,140 shares for $34,561 in fiscal 2020. In fiscal 2019, the Company purchased 726,347 shares of its common stock for $56,436. At March 31, 2021 and 2020, the Company held 12,799,790 and 12,791,503 shares as treasury stock, respectively.
Treasury Stock Reissuance
In fiscal 2019, the Company acquired Alpha. The initial purchase consideration for the acquisition was $750,000, of which $650,000 was paid in cash and the balance was settled by issuing 1,177,630 shares of EnerSys common stock. These shares were issued out of the Company's treasury stock and were valued at $84.92 per share, which was based on the thirty-day volume weighted average stock price of the Company’s common stock at closing. The 1,177,630 shares had a closing date fair value of $93,268. During fiscal 2021, fiscal 2020 and fiscal 2019, the Company also issued 13,465, 17,410 and 3,256 shares out of its treasury stock, respectively, 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, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
Balance
|
|
Before Reclassifications
|
|
Amount Reclassified from AOCI
|
|
Ending
Balance
|
March 31, 2021
|
|
|
|
|
|
|
|
|
Pension funded status adjustment
|
|
$
|
(22,794)
|
|
|
$
|
680
|
|
|
$
|
1,167
|
|
|
$
|
(20,947)
|
|
Net unrealized gain (loss) on derivative instruments
|
|
(5,923)
|
|
|
250
|
|
|
6,033
|
|
|
360
|
|
Foreign currency translation adjustment
|
|
(186,289)
|
|
|
90,993
|
|
|
—
|
|
|
(95,296)
|
|
Accumulated other comprehensive loss
|
|
$
|
(215,006)
|
|
|
$
|
91,923
|
|
|
$
|
7,200
|
|
|
$
|
(115,883)
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
Pension funded status adjustment
|
|
$
|
(20,791)
|
|
|
$
|
(2,819)
|
|
|
$
|
816
|
|
|
$
|
(22,794)
|
|
Net unrealized gain (loss) on derivative instruments
|
|
(130)
|
|
|
(6,672)
|
|
|
879
|
|
|
(5,923)
|
|
Foreign currency translation adjustment
|
|
(121,761)
|
|
|
(64,528)
|
|
|
—
|
|
|
(186,289)
|
|
Accumulated other comprehensive loss
|
|
$
|
(142,682)
|
|
|
$
|
(74,019)
|
|
|
$
|
1,695
|
|
|
$
|
(215,006)
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
Pension funded status adjustment
|
|
$
|
(22,503)
|
|
|
$
|
339
|
|
|
$
|
1,373
|
|
|
$
|
(20,791)
|
|
Net unrealized gain (loss) on derivative instruments
|
|
(3,425)
|
|
|
(8,396)
|
|
|
11,691
|
|
|
(130)
|
|
Foreign currency translation adjustment
|
|
(15,789)
|
|
|
(105,972)
|
|
|
—
|
|
|
(121,761)
|
|
Accumulated other comprehensive loss
|
|
$
|
(41,717)
|
|
|
$
|
(114,029)
|
|
|
$
|
13,064
|
|
|
$
|
(142,682)
|
|
The following table presents reclassifications from AOCI during the twelve months ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of AOCI
|
|
Amounts Reclassified from AOCI
|
|
Location of (Gain) Loss Recognized on Income Statement
|
Derivatives in Cash Flow Hedging Relationships:
|
|
|
|
|
Net unrealized loss on derivative instruments
|
|
$
|
7,903
|
|
|
Cost of goods sold
|
Tax benefit
|
|
(1,870)
|
|
|
|
Net unrealized loss on derivative instruments, net of tax
|
|
$
|
6,033
|
|
|
|
|
|
|
|
|
Defined benefit pension costs:
|
|
|
|
|
Prior service costs and deferrals
|
|
$
|
1,529
|
|
|
Net periodic benefit cost, included in other (income) expense, net - See Note 15
|
Tax benefit
|
|
(362)
|
|
|
|
Net periodic benefit cost, net of tax
|
|
$
|
1,167
|
|
|
|
The following table presents reclassifications from AOCI during the twelve months ended March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of AOCI
|
|
Amounts Reclassified from AOCI
|
|
Location of (Gain) Loss Recognized on Income Statement
|
Derivatives in Cash Flow Hedging Relationships:
|
|
|
|
|
Net unrealized loss on derivative instruments
|
|
$
|
1,151
|
|
|
Cost of goods sold
|
Tax benefit
|
|
(272)
|
|
|
|
Net unrealized loss on derivative instruments, net of tax
|
|
$
|
879
|
|
|
|
|
|
|
|
|
Defined benefit pension costs:
|
|
|
|
|
Prior service costs and deferrals
|
|
$
|
1,098
|
|
|
Net periodic benefit cost, included in other (income) expense, net - See Note 15
|
Tax benefit
|
|
(282)
|
|
|
|
Net periodic benefit cost, net of tax
|
|
$
|
816
|
|
|
|
The following table presents reclassifications from AOCI during the twelve months ended March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of AOCI
|
|
Amounts Reclassified from AOCI
|
|
Location of (Gain) Loss Recognized on Income Statement
|
Derivatives in Cash Flow Hedging Relationships:
|
|
|
|
|
Net unrealized loss on derivative instruments
|
|
$
|
15,281
|
|
|
Cost of goods sold
|
Tax benefit
|
|
(3,590)
|
|
|
|
Net unrealized loss on derivative instruments, net of tax
|
|
$
|
11,691
|
|
|
|
|
|
|
|
|
Defined benefit pension costs:
|
|
|
|
|
Prior service costs and deferrals
|
|
$
|
1,704
|
|
|
Net periodic benefit cost, included in other (income) expense, net - See Note 15
|
Tax benefit
|
|
(331)
|
|
|
|
Net periodic benefit cost, net of tax
|
|
$
|
1,373
|
|
|
|
17. Stock-Based Compensation
As of March 31, 2021, 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. Shares subject to any awards that expire without being exercised or that are forfeited or settled in cash shall again be available for future grants of awards under the 2017 EIP. Shares subject to stock option or stock appreciation right awards, that have been retained by the Company in payment or satisfaction of the exercise price and any applicable tax withholding obligation of such awards, shall not be available for future grant under the 2017 EIP.
As of March 31, 2021, 3,206,045 shares are available for future grants. The Company’s management equity incentive plans are intended to provide an incentive to employees and non-employee directors of the Company to remain in the service of the Company and to increase their interest in the success of the Company in order to promote the long-term interests of the Company. The plans seek to promote the highest level of performance by providing an economic interest in the long-term performance of the Company. The Company settles employee share-based compensation awards with newly issued shares.
Stock Options
During fiscal 2021, the Company granted to management and other key employees 295,068 non-qualified options that vest ratably over 3 years from the date of grant. Options expire 10 years from the date of grant.
The Company recognized stock-based compensation expense relating to stock options of $3,514, with a related tax benefit of $368 for fiscal 2021, $2,996 with a related tax benefit of $565 for fiscal 2020 and $3,251 with a related tax benefit of $634 for fiscal 2019.
For purposes of determining the fair value of stock options granted, the Company used a Black-Scholes Model with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
Risk-free interest rate
|
|
0.39
|
%
|
|
1.52
|
%
|
|
2.77
|
%
|
Dividend yield
|
|
0.93
|
%
|
|
1.21
|
%
|
|
0.93
|
%
|
Expected life (years)
|
|
6
|
|
6
|
|
6
|
Volatility
|
|
37.2
|
%
|
|
29.1
|
%
|
|
26.8
|
%
|
The following table summarizes the Company’s stock option activity in the years indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
Weighted-
Average
Remaining
Contract
Term (Years)
|
|
Weighted-
Average
Exercise
Price
|
|
Aggregate
Intrinsic
Value
|
Options outstanding as of March 31, 2018
|
|
545,590
|
|
|
8.4
|
|
$
|
68.65
|
|
|
$
|
2,679
|
|
Granted
|
|
192,700
|
|
|
|
|
75.17
|
|
|
—
|
|
Exercised
|
|
(171,630)
|
|
|
|
|
63.66
|
|
|
2,707
|
|
Forfeited
|
|
(11,754)
|
|
|
|
|
75.17
|
|
|
—
|
|
Expired
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
Options outstanding as of March 31, 2019
|
|
554,906
|
|
|
8.0
|
|
$
|
72.31
|
|
|
$
|
1,040
|
|
Granted
|
|
284,109
|
|
|
|
|
57.75
|
|
|
—
|
|
Exercised
|
|
(24,826)
|
|
|
|
|
57.60
|
|
|
383
|
|
Forfeited
|
|
(22,607)
|
|
|
|
|
72.19
|
|
|
88
|
|
Expired
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
Options outstanding as of March 31, 2020
|
|
791,582
|
|
|
7.8
|
|
$
|
67.55
|
|
|
$
|
—
|
|
Granted
|
|
295,068
|
|
|
|
|
79.62
|
|
|
—
|
|
Exercised
|
|
(247,975)
|
|
|
|
|
66.11
|
|
|
6,382
|
|
Forfeited
|
|
(34,854)
|
|
|
|
|
69.20
|
|
|
290
|
|
Expired
|
|
(4,320)
|
|
|
|
|
80.25
|
|
|
—
|
|
Options outstanding as of March 31, 2021
|
|
799,501
|
|
|
7.8
|
|
$
|
72.31
|
|
|
$
|
14,781
|
|
Options exercisable as of March 31, 2021
|
|
291,440
|
|
|
6.1
|
|
$
|
73.25
|
|
|
$
|
5,114
|
|
Options vested and expected to vest, as of March 31, 2021
|
|
782,935
|
|
|
7.8
|
|
$
|
72.28
|
|
|
$
|
14,497
|
|
The following table summarizes information regarding stock options outstanding as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of Exercise Prices
|
|
Number of
Options
|
|
Weighted-
Average
Remaining
Contractual Life (Years)
|
|
Weighted-
Average
Exercise Price
|
$57.60-$60.00
|
|
231,025
|
|
|
7.9
|
|
$
|
57.73
|
|
$60.01-$70.00
|
|
56,530
|
|
|
3.9
|
|
$
|
68.78
|
|
$70.01-$83.14
|
|
511,946
|
|
|
8.2
|
|
$
|
79.28
|
|
|
|
799,501
|
|
|
7.8
|
|
$
|
72.31
|
|
Restricted Stock Units, Market and Performance-condition based Awards
Non-Employee Directors
In fiscal 2021, the Company granted to non-employee directors 39,726 deferred restricted stock units (“DSU”) at the fair value of $39.93 per restricted stock unit at the date of grant. In fiscal 2020, such grants amounted to 40,462 restricted stock units at the fair value of $39.74 per restricted stock unit at the date of grant and in fiscal 2019, such grants amounted to 35,065 restricted stock units at the fair value of $46.30 per restricted stock unit at the date of grant. The awards vest immediately upon the date of grant and are settled in shares of common stock six months after termination of service as a director.
The Company also granted to non-employee directors, during fiscal 2021, fiscal 2020 and 2019, 1,435, 1,147 and 1,441 restricted stock units, respectively, at fair values of $71.53, $58.05 and $75.32, respectively, under the deferred compensation plan for non-employee directors.
Employees
In fiscal 2021, the Company granted to management and other key employees 283,101 restricted stock units that vest ratably over four years from the date of grant, at the fair value of $75.39 per restricted stock unit.
In fiscal 2020, the Company granted to management and other key employees 301,321 restricted stock units that vest ratably over four years from the date of grant at the fair value of $57.75 per restricted stock unit, 62,512 performance condition-based share units (“PSU”) at the fair value of $50.69 and 51,063 market condition-based share units (“TSR”) at a weighted average fair value of $62.05 per unit at the date of grant, that cliff vest three years from the date of grant.
In fiscal 2019, the Company granted to management and other key employees 204,599 restricted stock units that vest ratably over four years from the date of grant at a fair value of $75.17 per restricted stock unit, 45,883 PSUs at the fair value of $68.48 and 36,646 TSRs at a weighted average fair value of $86.23 per unit at the date of grant, that cliff vest three years from the date of grant.
For purposes of determining the fair value of the PSUs granted in fiscal 2020 and fiscal 2019, the Company used the market price at the date of grant to which a discount for illiquidity was applied to reflect post vesting restrictions.
For purposes of determining the fair value of TSRs granted in fiscal 2020 and fiscal 2019, the Company used a Monte Carlo Simulation with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
Risk-free interest rate
|
|
1.50
|
%
|
|
2.66
|
%
|
Dividend yield
|
|
—
|
%
|
|
—
|
%
|
Expected life (years)
|
|
3
|
|
3
|
Volatility
|
|
34.39
|
%
|
|
26.41
|
%
|
A summary of the changes in restricted stock units, TSRs and PSUs awarded to employees and directors that were outstanding under the Company’s equity compensation plans during fiscal 2021 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units (RSU)
|
|
Market condition-based Share Units (TSR)
|
|
Performance condition-based Share Units (PSU)
|
|
|
Number of
RSU
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Number of
TSR
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Number of
PSU
|
|
Weighted-
Average
Grant Date
|
Non-vested awards as of March 31, 2020
|
|
880,335
|
|
|
$
|
55.61
|
|
|
208,720
|
|
|
$
|
80.78
|
|
|
101,130
|
|
|
$
|
57.49
|
|
Granted
|
|
324,262
|
|
|
71.53
|
|
|
37
|
|
|
79.51
|
|
|
—
|
|
|
—
|
|
Stock dividend
|
|
8,125
|
|
|
57.69
|
|
|
1,165
|
|
|
83.15
|
|
|
917
|
|
|
57.52
|
|
Performance factor
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Vested
|
|
(279,995)
|
|
|
58.01
|
|
|
(65,096)
|
|
|
71.17
|
|
|
—
|
|
|
—
|
|
Forfeitures
|
|
(52,443)
|
|
|
68.94
|
|
|
(18,866)
|
|
|
98.88
|
|
|
(3,701)
|
|
|
56.04
|
|
Non-vested awards as of March 31, 2021
|
|
880,284
|
|
|
$
|
60.07
|
|
|
125,960
|
|
|
$
|
83.48
|
|
|
98,346
|
|
|
$
|
57.55
|
|
The Company recognized stock-based compensation expense relating to restricted stock units, TSRs and PSUs of $16,303, with a related tax benefit of $2,121 for fiscal 2021, $17,784, with a related tax benefit of $2,544 for fiscal 2020 and $19,357, with a related tax benefit of $3,085 for fiscal 2019.
All Award Plans
As of March 31, 2021, unrecognized compensation expense associated with the non-vested equity awards outstanding was $49,054 and is expected to be recognized over a weighted-average period of 29 months.
18. Earnings Per Share
The following table sets forth the reconciliation from basic to diluted weighted-average number of common shares outstanding and the calculations of net earnings per common share attributable to EnerSys stockholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
Net earnings attributable to EnerSys stockholders
|
|
$
|
143,374
|
|
|
$
|
137,116
|
|
|
$
|
160,239
|
|
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
42,548,449
|
|
|
42,411,834
|
|
|
42,335,023
|
|
Dilutive effect of:
|
|
|
|
|
|
|
Common shares from exercise and lapse of equity awards, net of shares assumed reacquired
|
|
675,954
|
|
|
484,941
|
|
|
673,929
|
|
Diluted weighted-average number of common shares outstanding
|
|
43,224,403
|
|
|
42,896,775
|
|
|
43,008,952
|
|
Basic earnings per common share attributable to EnerSys stockholders
|
|
$
|
3.37
|
|
|
$
|
3.23
|
|
|
$
|
3.79
|
|
Diluted earnings per common share attributable to EnerSys stockholders
|
|
$
|
3.32
|
|
|
$
|
3.20
|
|
|
$
|
3.73
|
|
Anti-dilutive equity awards not included in diluted weighted-average common shares
|
|
281,483
|
|
|
698,546
|
|
|
355,728
|
|
19. 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.
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 were concluded in fiscal 2021. As of March 31, 2021 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. The Company believes that it has adequate reserves to satisfy its environmental liabilities.
Collective Bargaining
At March 31, 2021, the Company had approximately 11,100 employees. Of these employees, approximately 27% were covered by collective bargaining agreements. Employees covered by collective bargaining agreements that expire in the next twelve months were approximately 11% of the total workforce. The average term of these agreements is 2 years, with the longest term being 3.5 years. The Company considers its employee relations to be good and did not experience any significant labor unrest or disruption of production during fiscal 2021.
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 13 - Derivative Financial Instruments for more details.
Other
The Company has various purchase and capital commitments incidental to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market.
20. Restructuring, Exit and Other Charges
Restructuring Programs
The Company had committed to various restructuring plans aimed at improving operational efficiencies across its lines of business. A substantial portion of these programs are complete, with an estimated $7,424 remaining to be incurred by the end of fiscal 2022, mainly relating to programs that were started in fiscal 2021, the details of which are as follows:
During fiscal 2021, the Company announced restructuring programs in the Energy Systems segment relating to its recent acquisitions of Alpha and NorthStar, as part of its targeted synergy plans. The Company also announced a restructuring program to improve global operational efficiencies in its Motive Power segment. The charges, in both segments were primarily cash charges relating to severance payments and amounted to $3,187 to approximately 47 employees in the Energy Systems segment and $4,012 to approximately 32 employees in the Motive Power segment. In addition there was a $169 charge related to the Specialty segment.
During fiscal 2020, the Company announced restructuring programs to improve efficiencies across all its lines of business. The charges were primarily severance payments to approximately 160 employees. The Company completed these actions in fiscal 2021.
Restructuring and exit charges for fiscal 2021, 2020 and 2019 by reportable segments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31, 2021
|
|
|
Energy Systems
|
|
Motive Power
|
|
Specialty
|
|
Total
|
Restructuring charges
|
|
$
|
3,187
|
|
|
$
|
4,012
|
|
|
$
|
169
|
|
|
$
|
7,368
|
|
Exit charges
|
|
—
|
|
|
32,786
|
|
|
220
|
|
|
33,006
|
|
Restructuring and other exit charges
|
|
$
|
3,187
|
|
|
$
|
36,798
|
|
|
$
|
389
|
|
|
$
|
40,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31, 2020
|
|
|
Energy Systems
|
|
Motive Power
|
|
Specialty
|
|
Total
|
Restructuring charges
|
|
$
|
6,808
|
|
|
$
|
1,860
|
|
|
$
|
2,318
|
|
|
$
|
10,986
|
|
Exit charges
|
|
526
|
|
|
5,541
|
|
|
3,713
|
|
|
9,780
|
|
Restructuring and other exit charges
|
|
$
|
7,334
|
|
|
$
|
7,401
|
|
|
$
|
6,031
|
|
|
$
|
20,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31, 2019
|
|
|
Energy Systems
|
|
Motive Power
|
|
Specialty
|
|
Total
|
Restructuring charges
|
|
$
|
5,115
|
|
|
$
|
4,795
|
|
|
$
|
713
|
|
|
$
|
10,623
|
|
Exit charges
|
|
5,477
|
|
|
957
|
|
|
17,652
|
|
|
24,086
|
|
Restructuring and other exit charges
|
|
$
|
10,592
|
|
|
$
|
5,752
|
|
|
$
|
18,365
|
|
|
$
|
34,709
|
|
A roll-forward of the restructuring reserve is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
Severance
|
|
Other
|
|
Total
|
Balance at March 31, 2018
|
|
$
|
2,893
|
|
|
$
|
16
|
|
|
$
|
2,909
|
|
Accrued
|
|
6,554
|
|
|
1,639
|
|
|
8,193
|
|
Costs incurred
|
|
(6,893)
|
|
|
(1,086)
|
|
|
(7,979)
|
|
Foreign currency impact and other
|
|
(198)
|
|
|
27
|
|
|
(171)
|
|
Balance at March 31, 2019
|
|
$
|
2,356
|
|
|
$
|
596
|
|
|
$
|
2,952
|
|
Accrued
|
|
10,395
|
|
|
402
|
|
|
10,797
|
|
Costs incurred
|
|
(9,179)
|
|
|
(995)
|
|
|
(10,174)
|
|
Foreign currency impact and other
|
|
(247)
|
|
|
(3)
|
|
|
(250)
|
|
Balance at March 31, 2020
|
|
$
|
3,325
|
|
|
$
|
—
|
|
|
$
|
3,325
|
|
Accrued
|
|
6,537
|
|
|
831
|
|
|
7,368
|
|
Costs incurred
|
|
(7,550)
|
|
|
(831)
|
|
|
(8,381)
|
|
Foreign currency impact and other
|
|
283
|
|
|
—
|
|
|
283
|
|
Balance at March 31, 2021
|
|
$
|
2,595
|
|
|
$
|
—
|
|
|
$
|
2,595
|
|
Exit Charges
Fiscal 2021 Programs
Hagen, Germany
On November 10, 2020, the EnerSys’ Board of Directors approved a plan to substantially close its facility in Hagen, Germany, which produces flooded motive power batteries for forklifts. Management determined that future demand for the motive power batteries produced at this facility was not sufficient, given the conversion from flooded to maintenance free batteries by customers, the existing number of competitors in the market, as well as the near term decline in demand and increased
uncertainty from the pandemic. The Company plans to retain the facility with limited sales, service and administrative functions along with related personnel for the foreseeable future.
The Company currently estimates that the total charges for these actions will amount to approximately $60,000, the majority of which are expected to be recorded by the end of calendar 2021. Cash charges of approximately $40,000 are primarily for employee severance related payments, but also include payments for cleanup related to the facility, contractual releases and legal expenses. Non-cash charges from inventory and equipment write-offs are estimated to be $20,000. These actions will result in the reduction of approximately 200 employees.
During fiscal 2021, the Company recorded cash charges relating to severance of $23,331 and non-cash charges of $7,946 primarily relating to fixed asset write-offs.
Vijayawada, India
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 and recorded exit charges of $1,509, primarily relating to asset write-offs.
Targovishte, Bulgaria
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 $26,000 for this plan, 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 fiscal 2021, in keeping with its strategy of exiting the manufacture of batteries for diesel-electric submarines, the Company completed further actions which resulted in $220 relating to cash and non-cash charges.
Fiscal 2020 Programs
During 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 the Specialty segment.
During 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.
Fiscal 2019 Programs
During fiscal 2019, the Company recorded exit charges of $4,930 relating to the disposition of GAZ Geräte- und Akkumulatorenwerk Zwickau GmbH, a wholly-owned German subsidiary and $957 relating to dissolving a joint venture in Tunisia. These exit activities are a consequence of the Company's strategic decision to streamline its product portfolio and focus its efforts on new technologies.
During fiscal 2019, as part of the aforementioned program to convert its India operations from mainly reserve power production to motive power production, the Company recorded a non-cash write off of reserve power inventories of $526, which was reported in cost of goods sold and a $660 noncash write-off related to reserve power fixed assets in restructuring charges.
Richmond, Kentucky Plant Fire
During fiscal 2021, the Company settled its claims with its insurance carrier relating to the fire that broke out in the battery formation area of the Company's Richmond, Kentucky motive power production facility in fiscal 2020. The total claims, for both property and business interruption of $46,117 were received through March 31, 2021.
The final settlement of insurance recoveries and finalization of costs related to the replacement of property, plant and equipment, resulted in a net gain of $4,397, which was recorded as a reduction to operating expenses in the Consolidated Statements of Income.
The details of charges and recoveries for fiscal 2021 and fiscal 2020 are as follows:
In fiscal 2020, the Company recorded as a receivable, $17,037, consisting 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 related to its initial claims.
During fiscal 2021, the Company recorded an additional $16,580 as a receivable for cleanup and received $21,617 from the insurance carrier.
In addition to the property damage claim, the Company received $12,500 in business interruption claims, of which $5,000 was recorded in fiscal 2020 and $7,500 in fiscal 2021, and was credited to cost of goods sold, in the respective periods.
21. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
Balance at beginning of year
|
|
$
|
63,525
|
|
|
$
|
54,568
|
|
|
$
|
50,602
|
|
Current year provisions
|
|
27,645
|
|
|
27,622
|
|
|
23,679
|
|
Costs incurred
|
|
(34,346)
|
|
|
(25,778)
|
|
|
(25,053)
|
|
Warranty reserves of acquired businesses
|
|
—
|
|
|
6,995
|
|
|
7,535
|
|
Foreign currency translation adjustment
|
|
2,138
|
|
|
118
|
|
|
(2,195)
|
|
Balance at end of year
|
|
$
|
58,962
|
|
|
$
|
63,525
|
|
|
$
|
54,568
|
|
22. Other (Income) Expense, Net
Other (income) expense, net consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
Foreign exchange transaction losses (gains)
|
|
$
|
6,696
|
|
|
$
|
264
|
|
|
$
|
(3,044)
|
|
Non-service components of pension expense
|
|
1,279
|
|
|
615
|
|
|
1,502
|
|
Other
|
|
(171)
|
|
|
(1,294)
|
|
|
928
|
|
Total
|
|
$
|
7,804
|
|
|
$
|
(415)
|
|
|
$
|
(614)
|
|
23. Business Segments
Effective April 1, 2020, the Company's chief operating decision maker, or CODM (the Company's Chief Executive Officer), changed the manner in which he reviews financial information for purposes of assessing business performance and allocating resources, by focusing on the lines of business on a global basis, rather than on geographic basis. As a result of this change, the Company re-evaluated the identification of its operating segments and reportable segments and identified the following as its three new operating segments, based on lines of business:
•Energy Systems - uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems, as well as telecommunications systems, switchgear and electrical control systems used in industrial facilities and electric utilities, large-scale energy storage and energy pipelines. Energy Systems also includes highly integrated power solutions and services to broadband, telecom, renewable and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries.
•Motive Power - power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications, as well as mining equipment, diesel locomotive starting and other rail equipment; and
•Specialty - premium starting, lighting and ignition applications in transportation, energy solutions for satellites, military aircraft, submarines, ships and other tactical vehicles, as well as medical and security systems.
The new operating segments also represent the Company's reportable segments under ASC 280, Segment Reporting. All prior comparative periods presented have been recast to conform to these changes.
Summarized financial information related to the Company’s reportable segments at March 31, 2021, 2020 and 2019 and for each of the fiscal years then ended is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal year ended March 31,
|
|
|
2021
|
|
2020
|
|
2019
|
Net sales by segment to unaffiliated customers
|
|
|
|
|
|
|
Energy Systems
|
|
$
|
1,380,278
|
|
|
$
|
1,357,475
|
|
|
$
|
1,086,279
|
|
Motive Power
|
|
1,163,710
|
|
|
1,348,193
|
|
|
1,391,844
|
|
Specialty
|
|
433,944
|
|
|
382,200
|
|
|
329,894
|
|
Total net sales
|
|
$
|
2,977,932
|
|
|
$
|
3,087,868
|
|
|
$
|
2,808,017
|
|
Operating earnings by segment
|
|
|
|
|
|
|
Energy Systems
|
|
$
|
67,060
|
|
|
$
|
67,809
|
|
|
$
|
45,164
|
|
Motive Power
|
|
143,541
|
|
|
146,814
|
|
|
172,749
|
|
Specialty
|
|
46,148
|
|
|
42,454
|
|
|
44,077
|
|
Inventory step up to fair value relating to acquisitions - Energy Systems
|
|
—
|
|
|
(304)
|
|
|
(7,789)
|
|
Inventory step up to fair value relating to acquisitions - Specialty
|
|
—
|
|
|
(1,550)
|
|
|
(2,590)
|
|
Restructuring and other exit charges - Energy Systems
|
|
(3,187)
|
|
|
(7,284)
|
|
|
(10,593)
|
|
Restructuring and other exit charges - Motive Power
|
|
(36,798)
|
|
|
(2,021)
|
|
|
(5,751)
|
|
Restructuring and other exit charges - Specialty
|
|
(389)
|
|
|
(6,020)
|
|
|
(18,365)
|
|
Impairment of goodwill (3)
|
|
—
|
|
|
(39,713)
|
|
|
—
|
|
Impairment of indefinite-lived intangibles (3)
|
|
—
|
|
|
(4,549)
|
|
|
—
|
|
Fixed asset write-off relating to exit activities and other - Energy Systems
|
|
—
|
|
|
(50)
|
|
|
—
|
|
Fixed asset write-off relating to exit activities and other - Motive Power
|
|
—
|
|
|
(5,380)
|
|
|
—
|
|
Fixed asset write-off relating to exit activities - Specialty
|
|
—
|
|
|
(11)
|
|
|
—
|
|
Legal proceedings charge, net - Energy Systems
|
|
—
|
|
|
—
|
|
|
(4,363)
|
|
Legal proceedings charge, net - Motive Power
|
|
—
|
|
|
—
|
|
|
(74)
|
|
Total operating earnings(2)
|
|
$
|
216,375
|
|
|
$
|
190,195
|
|
|
$
|
212,465
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
Energy Systems
|
|
$
|
34,826
|
|
|
$
|
40,768
|
|
|
$
|
24,333
|
|
Motive Power
|
|
14,154
|
|
|
22,285
|
|
|
26,112
|
|
Specialty
|
|
21,040
|
|
|
38,372
|
|
|
19,927
|
|
Total
|
|
$
|
70,020
|
|
|
$
|
101,425
|
|
|
$
|
70,372
|
|
Depreciation and Amortization
|
|
|
|
|
|
|
Energy Systems
|
|
$
|
57,864
|
|
|
$
|
53,793
|
|
|
$
|
32,052
|
|
Motive Power
|
|
21,706
|
|
|
20,900
|
|
|
20,725
|
|
Specialty
|
|
14,512
|
|
|
12,651
|
|
|
10,571
|
|
Total
|
|
$
|
94,082
|
|
|
$
|
87,344
|
|
|
$
|
63,348
|
|
(1)Reportable segments do not record inter-segment revenues and accordingly there are none to report.
(2)The Company does not allocate interest expense or other (income) expense, net, to the reportable segments.
(3)The impairment of goodwill and indefinite-lived intangibles in fiscal 2020 related to the Company's legacy reportable segments as discussed in Note 7.
The Company's property, plant and equipment by reportable segments as of March 31, 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
March 31, 2021
|
|
March 31, 2020
|
Energy Systems
|
|
$
|
224,513
|
|
|
$
|
182,122
|
|
Motive Power
|
|
152,468
|
|
|
153,438
|
|
Specialty
|
|
120,075
|
|
|
144,454
|
|
Total
|
|
$
|
497,056
|
|
|
$
|
480,014
|
|
The Company markets its products and services in over 100 countries. Sales are attributed to countries based on the location of sales order approval and acceptance. Sales to customers in the United States were 59.8%, 58.1% and 48.5% for fiscal years ended March 31, 2021, 2020 and 2019, respectively. Property, plant and equipment, net, attributable to the United States as of March 31, 2021 and 2020, were $291,578 and $277,358, respectively. No single country, outside the United States, accounted for more than 10% of the consolidated net sales or net property, plant and equipment and, therefore, was deemed not material for separate disclosure.
24. Quarterly Financial Data (Unaudited)
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 ended 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st Quarter
|
|
2nd Quarter
|
|
3rd Quarter
|
|
4th Quarter
|
|
Fiscal Year
|
Fiscal year ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
704,924
|
|
|
$
|
708,402
|
|
|
$
|
751,067
|
|
|
$
|
813,539
|
|
|
$
|
2,977,932
|
|
Gross profit(1)
|
|
174,977
|
|
|
177,560
|
|
|
189,312
|
|
|
197,301
|
|
|
739,150
|
|
Operating earnings(2)(3)
|
|
53,220
|
|
|
55,415
|
|
|
56,071
|
|
|
51,669
|
|
|
216,375
|
|
Net earnings(4)
|
|
35,183
|
|
|
35,731
|
|
|
38,624
|
|
|
33,836
|
|
|
143,374
|
|
Net earnings attributable to EnerSys stockholders
|
|
35,183
|
|
|
35,731
|
|
|
38,624
|
|
|
33,836
|
|
|
143,374
|
|
Net earnings per common share attributable to EnerSys stockholders—basic
|
|
$
|
0.83
|
|
|
$
|
0.84
|
|
|
$
|
0.91
|
|
|
$
|
0.79
|
|
|
$
|
3.37
|
|
Net earnings per common share attributable to EnerSys stockholders—diluted
|
|
$
|
0.82
|
|
|
$
|
0.83
|
|
|
$
|
0.89
|
|
|
$
|
0.78
|
|
|
$
|
3.32
|
|
Fiscal year ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
780,230
|
|
|
$
|
762,137
|
|
|
$
|
763,698
|
|
|
$
|
781,803
|
|
|
$
|
3,087,868
|
|
Gross profit(5)(6)
|
|
201,512
|
|
|
197,317
|
|
|
185,241
|
|
|
200,796
|
|
|
784,866
|
|
Operating earnings(7)(8)
|
|
68,336
|
|
|
58,710
|
|
|
43,084
|
|
|
20,065
|
|
|
190,195
|
|
Net earnings (loss)(9)
|
|
48,636
|
|
|
62,698
|
|
|
27,305
|
|
|
(1,523)
|
|
|
137,116
|
|
Net earnings (loss) attributable to EnerSys stockholders
|
|
48,636
|
|
|
62,698
|
|
|
27,305
|
|
|
(1,523)
|
|
|
137,116
|
|
Net earnings (loss) per common share attributable to EnerSys stockholders—basic
|
|
$
|
1.14
|
|
|
$
|
1.48
|
|
|
$
|
0.65
|
|
|
$
|
(0.04)
|
|
|
$
|
3.23
|
|
Net earnings (loss) per common share attributable to EnerSys stockholders—diluted
|
|
$
|
1.13
|
|
|
$
|
1.47
|
|
|
$
|
0.64
|
|
|
$
|
(0.04)
|
|
|
$
|
3.20
|
|
(1)Included in Gross profit were receipts for business interruption relating to the Richmond, Kentucky motive power production facility, of $3,700, $1,456 and $2,344 for the first, second, and third quarters of fiscal 2021, respectively.
(2)Also included in Operating earnings was a net gain of $4,397, recorded in the third quarter of fiscal 2021, relating to the final settlement of insurance recoveries and finalization of costs related to the replacement of property, plant and equipment of the aforementioned claim.
(3)Included in Operating earnings were restructuring and other exit charges of $1,387, $3,119, $15,196 and $20,672 for the first, second, third and fourth quarters of fiscal 2021, respectively.
(4)Included in net earnings was a tax benefit of $1,883 for the first quarter of fiscal 2021, on account of the Swiss tax reform.
(5)Included in Gross profit were inventory adjustment relating to the inventory step up to fair value relating to the NorthStar acquisition of $3,845 and $(1,991) in the third and fourth quarter of fiscal 2020, respectively.
(6)Included in Gross profit were receipts for business interruption relating to the Richmond, Kentucky motive power production facility, of $5,000 in the fourth quarter of fiscal 2020.
(7)Included in Operating earnings were restructuring and other exit charges of $2,372, $6,282, $9,417 and $2,695 for the first, second, third and fourth quarters of fiscal 2020, respectively.
(8)Included in Operating earnings for the fourth quarter of fiscal 2020 were charges relating to the impairment of goodwill for $39,713 and other indefinite-lived intangibles for $4,549.
(9)Included in net earnings was a tax benefit of $21,000 for the second quarter of fiscal 2020, on account of the Swiss tax reform.
25. Subsequent Events
On May 20, 2021, the Board of Directors approved a quarterly cash dividend of $0.175 per share of common stock to be paid on June 25, 2021, to stockholders of record as of June 11, 2021.