ENERSYS MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

0
The following discussion and analysis of our results of operations and financial
condition for the fiscal years ended March 31, 2022 and 2021, should be read in
conjunction with our audited Consolidated Financial Statements and the notes to
those statements included in Item 8. Financial Statements and Supplementary
Data, of this Annual Report on Form 10-K. Our discussion contains
forward-looking statements based upon current expectations that involve risks
and uncertainties, such as our plans, objectives, opinions, expectations,
anticipations and intentions and beliefs. Actual results and the timing of
events could differ materially from those anticipated in those forward-looking
statements as a result of a number of factors. See "Cautionary Note Regarding
Forward-Looking Statements," "Business" and "Risk Factors," sections elsewhere
in this Annual Report on Form 10-K. In the following discussion and analysis of
results of operations and financial condition, certain financial measures may be
considered "non-GAAP financial measures" under the SEC rules. These rules
require supplemental explanation and reconciliation, which is provided in this
Annual Report on Form 10-K.

EnerSys' management uses the non-GAAP measures, EBITDA and adjusted EBITDA, in
its computation of compliance with loan covenants and adjusted EBITDA in
evaluating its financial performance. These measures, as used by EnerSys, adjust
net earnings determined in accordance with GAAP for interest, taxes,
depreciation and amortization, and certain charges or credits as permitted by
our credit agreements, that were recorded during the periods presented.

EnerSys' management uses the non-GAAP measures, "free cash flows", "primary
working capital" and "primary working capital percentage" along with capital
expenditures, in its evaluation of business segment cash flow and financial
position performance. Primary working capital is trade accounts receivable, plus
inventories, minus trade accounts payable and the resulting net amount is
divided by the trailing three-month net sales (annualized) to derive a primary
working capital percentage. Free cash flows are cash flows from operating
activities less capital expenditures.

These non-GAAP disclosures have limitations as analytical tools, should not be
viewed as a substitute for cash flow or operating earnings determined in
accordance with GAAP, and should not be considered in isolation or as a
substitute for analysis of the Company's results as reported under GAAP, nor are
they necessarily comparable to non-GAAP performance measures that may be
presented by other companies. This supplemental presentation should not be
construed as an inference that the Company's future results will be unaffected
by similar adjustments to operating earnings determined in accordance with GAAP.

Insight

EnerSys (the "Company," "we," or "us") is a world leader in stored energy
solutions for industrial applications. We also manufacture and distribute energy
systems solutions and motive power batteries, specialty batteries, battery
chargers, power equipment, battery accessories and outdoor equipment enclosure
solutions to customers worldwide. Energy Systems which combine enclosures, power
conversion, power distribution and energy storage are used in the
telecommunication and broadband, utility industries, uninterruptible power
supplies, and numerous applications requiring stored energy solutions. Motive
Power batteries and chargers are utilized in electric forklift trucks and other
industrial electric powered vehicles. Specialty batteries are used in aerospace
and defense applications, large over the road trucks, premium automotive and
medical. We also provide aftermarket and customer support services to over
10,000 customers in more than 100 countries through a network of distributors,
independent representatives and our internal sales force around the world.

During the first quarter of fiscal 2021, 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. The operating segments were identified as Energy Systems, Motive Power
and Specialty. The Company's operating segments also represent its reportable
segments under ASC 280, Segment Reporting. Therefore, the Company changed its
segment presentation from three reportable segments based on geographic basis to
three reportable segments based on line of business. All prior comparative
periods presented have been recast to reflect these changes.

The three reportable segments of the Company, based on business segments, are as follows:

•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
                                       29
--------------------------------------------------------------------------------
  Table of Contents
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.

We evaluate business segment performance based primarily upon operating earnings
exclusive of highlighted items. Highlighted items are those that the Company
deems are not indicative of ongoing operating results, including those charges
that the Company incurs as a result of restructuring activities, impairment of
goodwill and indefinite-lived intangibles and other assets, acquisition
activities and those charges and credits that are not directly related to
operating unit performance, such as significant legal proceedings, ERP system
implementation, amortization of recently acquired intangible assets and tax
valuation allowance changes, including those related to the adoption of the Tax
Cuts and Jobs Act. Because these charges are not incurred as a result of ongoing
operations, or are incurred as a result of a potential or previous acquisition,
they are not as helpful a measure of the performance of our underlying business,
particularly in light of their unpredictable nature and are difficult to
forecast. All corporate and centrally incurred costs are allocated to the
business segments based principally on net sales. We evaluate business segment
cash flow and financial position performance based primarily upon capital
expenditures and primary working capital levels. Although we monitor the three
elements of primary working capital (receivables, inventory and payables), our
primary focus is on the total amount due to the significant impact it has on our
cash flow.

Our management structure, financial reporting systems, and associated internal
controls and procedures, are all consistent with our three lines of business. We
report on a March 31 fiscal year-end. Our financial results are largely driven
by the following factors:

•global economic conditions and general cyclical patterns of the industries in
which our customers operate;
•changes in our selling prices and, in periods when our product costs increase,
our ability to raise our selling prices to pass such cost increases through to
our customers;
•the extent to which we are able to efficiently utilize our global manufacturing
facilities and optimize our capacity;
•the extent to which we can control our fixed and variable costs, including
those for our raw materials, manufacturing, distribution and operating
activities;
•changes in our level of debt and changes in the variable interest rates under
our credit facilities; and
•the size and number of acquisitions and our ability to achieve their intended
benefits.


Current Market Conditions

Economic Climate

The economic climate in North America and China experienced strong growth during
calendar 2021. In calendar 2022, both regional economies have slowed. The U.S
economy slowed due to rising interest rates and inflation worries, while China's
economy has been slowed by COVID-19 lockdowns. EMEA's economy grew moderately
faster than normal in calendar 2021. In calendar 2022 the economic impact from
the war in Ukraine will likely cause the EMEA economies to achieve only slow
growth. Inflation has increased in all regions during calendar 2021 and
continues in calendar 2022.

EnerSys is experiencing supply chain disruptions and cost spikes in certain
materials such as plastic resins, acid, pasting paper and electronic components
along with transportation and related logistics challenges and broad-based cost
increases. In addition, some locations are experiencing difficulty meeting
hiring goals. Generally, our mitigation efforts and the recent economic
recovery, have tempered the impact of the pandemic-related challenges. The
overall market demand for our products and services remains robust.

Volatility of raw materials and foreign currencies

Our most significant commodity and foreign currency exposures are related to
lead and the Euro, respectively. Historically, volatility of commodity costs and
foreign currency exchange rates have caused large swings in our production
costs. As a result of the COVID-19 pandemic, lead costs dropped into the low 70
cents per pound during our first fiscal quarter of 2021 and increased to just
below $1.10 per pound in March 2022, which is above the pre-COVID-19 levels. We
are experiencing increasing costs in almost all of our other raw materials such
as plastic resins, steel, copper and electronics and increased freight costs.

                                       30
--------------------------------------------------------------------------------
  Table of Contents
Customer Pricing

Our selling prices fluctuated during the last several years to offset the
volatile cost of commodities. Approximately 30% of our revenue is now subject to
agreements that adjust pricing to a market-based index for lead. Customer
pricing changes generally lag movements in lead prices and other costs by
approximately six to nine months. In fiscal 2022, customer pricing has increased
due to higher raw material prices and shipping costs, labor and other costs
having increased throughout the year.

Based on the current volatility of the commodity markets, it is difficult to
predict with certainty whether commodity prices will be higher or lower in
fiscal 2023 versus fiscal 2022. However, given the lag related to increasing our
selling prices for inflationary cost increases, our selling prices should be
higher in fiscal 2023 versus fiscal 2022. As we concentrate more on energy
systems and non-lead chemistries, the emphasis on lead will continue to decline.

Cash and capital resources

We believe that our financial position is strong. We have substantial liquidity
with $402 million of available cash and cash equivalents and available and
undrawn, under all its lines of credit of approximately $482 million at
March 31, 2022 to cover short-term liquidity requirements and anticipated growth
in the foreseeable future. The nominal amount of credit available is subject to
a leverage ratio maximum of 3.5x EBITDA, as discussed in Liquidity and Capital
Resources, which effectively limits additional debt or lowered cash balances by
approximately $350 million.

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

During fiscal 2022, our operating cash flow was a use of cash of $65.5 million,
compared to a source of cash of $358.4 million in the prior year. The use of
cash in fiscal 2022 was primarily due to the large increase in primary working
capital dollars, compared to the prior year, reflects the increase in all
components of inventory due to supply chain delays, new products and higher
inventory costs from higher raw material costs, manufacturing and freight costs,
strategic inventory builds to buffer against potential supply chain exposures
and to address the high backlog of customer orders.

In fiscal 2022, we repurchased 1,996,334 common shares for $156.4 million. In fiscal 2021, we did not repurchase any shares, but in fiscal 2020, we repurchased 581,140 shares for $34.6 million within existing permissions.

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

The Federal Reserve Bank of the United States has discontinued quantitative
easing and, started raising short-term interest rates and has signaled they will
continue to raise interest rates through the remainder of calendar 2022. The
increase in short-term interest rates will increase EnerSys' variable cost of
borrowing under the Second Amended Credit Facility.

We believe that our strong capital structure and liquidity provide us with access to capital for future capital expenditures, stock acquisition and buyback opportunities and the continued payment of dividends.

Significant Accounting Policies and Estimates

Our significant accounting policies are described in Note 1 - Summary of
Significant Accounting Policies to the Consolidated Financial Statements in
Item 8. In preparing our financial statements, management is required to make
estimates and assumptions that, among other things, affect the reported amounts
in the Consolidated Financial Statements and accompanying notes. These estimates
and assumptions are most significant where they involve levels of subjectivity
and judgment necessary to account for highly uncertain matters or matters
susceptible to change, and where they can have a material impact on our
financial condition and operating performance. We discuss below the more
significant estimates and related assumptions used in the preparation of our
Consolidated Financial Statements. If actual results were to differ materially
from the estimates made, the reported results could be materially affected.

                                       31

————————————————– ——————————

Contents

Revenue recognition

In accordance with ASC 606, we recognize revenue only when we have satisfied a
performance obligation through transferring control of the promised good or
service to a customer. The standard indicates that an entity must determine at
contract inception whether it will transfer control of a promised good or
service over time or satisfy the performance obligation at a point in time
through analysis of the following criteria: (i) the entity has a present right
to payment, (ii) the customer has legal title, (iii) the customer has physical
possession, (iv) the customer has the significant risks and rewards of ownership
and (v) the customer has accepted the asset. Our primary performance obligation
to our customers is the delivery of finished goods and products, pursuant to
purchase orders. Control of the products sold typically transfers to our
customers at the point in time when the goods are shipped as this is also when
title generally passes to our customers under the terms and conditions of our
customer arrangements.

Management believes that the accounting estimates related to revenue recognition
are critical accounting estimates because they require reasonable assurance of
collection of revenue proceeds and completion of all performance obligations.
Also, revenues are recorded net of provisions for sales discounts and returns,
which are established at the time of sale. These estimates are based on our past
experience. For additional information see Note 1 of Notes to the Consolidated
Financial Statements.

Asset impairment determinations

We test our goodwill and indefinite life trademarks for impairment at least annually and whenever events or circumstances occur indicating that possible impairment has been incurred.

We assess whether goodwill impairment exists using both 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, we determine it is
not more likely than not that the fair value of a reporting unit is less than
its carrying amount, or if we elect not to perform a qualitative assessment, a
quantitative assessment is performed to determine whether a goodwill impairment
exists at the reporting unit.

We perform our annual goodwill impairment test on the first day of our fourth
quarter for each of our reporting units based on the income approach, also known
as the discounted cash flow ("DCF") method, which utilizes the present value of
future cash flows to estimate fair value. We also use the market approach, which
utilizes market price data of companies engaged in the same or a similar line of
business as that of our company, to estimate fair value. A reconciliation of the
two methods is performed to assess the reasonableness of fair value of each of
the reporting units.

The future cash flows used under the DCF method are derived from estimates of
future revenues, operating income, working capital requirements and capital
expenditures, which in turn reflect our expectations of specific global,
industry and market conditions. The discount rate developed for each of the
reporting units is based on data and factors relevant to the economies in which
the business operates and other risks associated with those cash flows,
including the potential variability in the amount and timing of the cash flows.
A terminal growth rate is applied to the final year of the projected period and
reflects our estimate of stable growth to perpetuity. We then calculate the
present value of the respective cash flows for each reporting unit to arrive at
the fair value using the income approach and then determine the appropriate
weighting between the fair value estimated using the income approach and the
fair value estimated using the market approach. Finally, we compare the
estimated fair value of each reporting unit to its respective carrying value in
order to determine if the goodwill assigned to each reporting unit is
potentially impaired. If the fair value of the reporting unit exceeds its
carrying value, goodwill is not impaired and no further testing is required. If
the fair value of the reporting unit is less than the carrying value, an
impairment charge is recognized for the amount by which the carrying amount
exceeds the reporting unit's fair value; however, the loss recognized should not
exceed the total amount of goodwill allocated to that reporting unit.

Significant assumptions used include management's estimates of future growth
rates, the amount and timing of future operating cash flows, capital
expenditures, discount rates, as well as market and industry conditions and
relevant comparable company multiples for the market approach. Assumptions
utilized are highly judgmental, especially given the role technology plays in
driving the demand for products in the telecommunications and aerospace markets.

Based on the results of the annual impairment test at January 3, 2022we determined that there was no impairment of goodwill.

The indefinite-lived trademarks are tested 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 carrying
value over the amount
                                       32
--------------------------------------------------------------------------------
  Table of Contents
of fair value is recognized as impairment. Any impairment would be recognized in
full in the reporting period in which it has been identified.

With respect to our other long-lived assets other than goodwill and
indefinite-lived trademarks, we test for impairment when indicators of
impairment are present. An asset is considered impaired when the undiscounted
estimated net cash flows expected to be generated by the asset are less than its
carrying amount. The impairment recognized is the amount by which the carrying
amount exceeds the fair value of the impaired asset.

Business combinations

We account for business combinations in accordance with ASC 805, Business
Combinations. We recognize assets acquired and liabilities assumed in
acquisitions at their fair values as of the acquisition date, with the
acquisition-related transaction and
restructuring costs expensed in the period incurred. Determining the fair value
of assets acquired and liabilities assumed often involves estimates based on
third-party valuations, such as appraisals, or internal valuations based on
discounted cash flow analyses and may include estimates of attrition, inflation,
asset growth rates, discount rates, multiples of earnings or other relevant
factors. In addition, fair values are subject to refinement for up to a year
after the closing date of an acquisition. Adjustments recorded to the acquired
assets and liabilities are applied prospectively.

Fair values are based on estimates using management's assumptions using future
growth rates, future attrition of the customer base, discount rates, multiples
of earnings or other relevant factors.

Any change in the acquisition date fair value of assets acquired and liabilities
assumed may materially affect our financial position, results of operations and
liquidity.

Litigation and Claims

From time to time, the Company has been or may be a party to various legal
actions and investigations including, among others, employment matters,
compliance with government regulations, federal and state employment laws,
including wage and hour laws, contractual disputes and other matters, including
matters arising in the ordinary course of business. These claims may be brought
by, among others, governments, customers, suppliers and employees. Management
considers the measurement of litigation reserves as a critical accounting
estimate because of the significant uncertainty in some cases relating to the
outcome of potential claims or litigation and the difficulty of predicting the
likelihood and range of potential liability involved, coupled with the material
impact on our results of operations that could result from litigation or other
claims.

To determine the legal reserves, management takes into account, among other elements:

•interpretation of contractual rights and obligations;
•the status of government regulatory initiatives, interpretations and
investigations;
•the status of settlement negotiations;
•prior experience with similar types of claims;
•whether there is available insurance coverage; and
•advice of outside counsel.

For certain matters, management is able to estimate a range of losses. When a
loss is probable, but no amount of loss within a range of outcomes is more
likely than any other outcome, management will record a liability based on the
low end of the estimated range. Additionally, management will evaluate whether
losses in excess of amounts accrued are reasonably possible, and will make
disclosure of those matters based on an assessment of the materiality of those
addition possible losses.

Potential environmental losses

Accruals for environmental loss contingencies (i.e., environmental reserves) are
recorded when it is probable that a liability has been incurred and the amount
can reasonably be estimated. Management views the measurement of environmental
reserves as a critical accounting estimate because of the considerable
uncertainty surrounding estimation, including the need to forecast well into the
future. From time to time, we may be involved in legal proceedings under
federal, state and local, as well as international environmental laws in
connection with our operations and companies that we have acquired. The
estimation of environmental reserves is based on the evaluation of currently
available information, prior experience in the remediation of contaminated sites
and assumptions with respect to government regulations and enforcement activity,
changes in remediation technology and practices, and financial obligations and
creditworthiness of other responsible parties and insurers.
                                       33

————————————————– ——————————

Contents

guarantee

We record a warranty reserve for possible claims against our product warranties,
which generally run for a period ranging from one to twenty years for our Energy
Systems batteries, one to five years for our Motive Power batteries and for a
period ranging from one to four for Specialty transportation batteries. The
assessment of the adequacy of the reserve includes a review of open claims and
historical experience.

Management believes that the accounting estimate related to the warranty reserve
is a critical accounting estimate because the underlying assumptions used for
the reserve can change from time to time and warranty claims could potentially
have a material impact on our results of operations.

Allowance for doubtful accounts

Subsequent to the adoption of ASU No. 2016-13, "Financial Instruments - Credit
Losses (Topic 326)" effective April 1, 2020 the Company uses an expected loss
model as mandated by the standard. 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 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.

Management believes that the accounting estimate related to the allowance for
doubtful accounts is a critical accounting estimate because the underlying
assumptions used for the allowance can change from time to time and
uncollectible accounts could potentially have a material impact on our results
of operations.

Retirement Plans

We use certain economic and demographic assumptions in the calculation of the
actuarial valuation of liabilities associated with our defined benefit plans.
These assumptions include the discount rate, expected long-term rates of return
on assets and rates of increase in compensation levels. Changes in these
assumptions can result in changes to the pension expense and recorded
liabilities. Management reviews these assumptions at least annually. We use
independent actuaries to assist us in formulating assumptions and making
estimates. These assumptions are updated periodically to reflect the actual
experience and expectations on a plan-specific basis, as appropriate.

For benefit plans which are funded, we establish strategic asset allocation
percentage targets and appropriate benchmarks for significant asset classes with
the aim of achieving a prudent balance between return and risk. We set the
expected long-term rate of return based on the expected long-term average rates
of return to be achieved by the underlying investment portfolios. In
establishing this rate, we consider historical and expected returns for the
asset classes in which the plans are invested, advice from pension consultants
and investment advisors, and current economic and capital market conditions. The
expected return on plan assets is incorporated into the computation of pension
expense. The difference between this expected return and the actual return on
plan assets is deferred and will affect future net periodic pension costs
through subsequent amortization.

We believe that the current assumptions used to estimate plan obligations and
annual expense are appropriate in the current economic environment. However, if
economic conditions change materially, we may change our assumptions, and the
resulting change could have a material impact on the Consolidated Statements of
Income and on the Consolidated Balance Sheets.
                                       34

————————————————– ——————————

Contents

Share-based compensation

We recognize compensation cost relating to equity-based payment transactions by
using a fair-value measurement method whereby all equity-based payments to
employees, including grants of restricted stock units, stock options, market and
performance condition-based awards are recognized as compensation expense based
on fair value at grant date over the requisite service period of the awards. We
determine the fair value of restricted stock units based on the quoted market
price of our common stock on the date of grant. The fair value of stock options
is determined using the Black-Scholes option-pricing model, which uses both
historical and current market data to estimate the fair value. The fair value of
market condition-based awards is estimated at the date of grant using a Monte
Carlo Simulation. The fair value of performance condition-based awards is based
on the closing stock price on the date of grant, adjusted for a discount to
reflect the illiquidity inherent in these awards.

All models incorporate various assumptions such as the risk-free interest rate,
expected volatility, expected dividend yield and expected life of the awards.
When estimating the requisite service period of the awards, we consider many
related factors including types of awards, employee class, and historical
experience. Actual results, and future changes in estimates of the requisite
service period may differ substantially from our current estimates.

Income taxes

Our effective tax rate is based on pretax income and statutory tax rates
available in the various jurisdictions in which we operate. We account for
income taxes in accordance with applicable guidance on accounting for income
taxes, which requires that deferred tax assets and liabilities be recognized
using enacted tax rates for the effect of temporary differences between book and
tax bases on recorded assets and liabilities. Accounting guidance also requires
that deferred tax assets be reduced by a valuation allowance, when it is more
likely than not that a tax benefit will not be realized.

The recognition and measurement of a tax position is based on management's best
judgment given the facts, circumstances and information available at the
reporting date. We evaluate 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, we recognize the largest amount of the
benefit that is greater than 50% likely of being realized upon ultimate
settlement in the financial statements. For tax positions that are not more
likely than not of being sustained upon audit, we do not recognize any portion
of the benefit in the financial statements. If the more likely than not
threshold is not met in the period for which a tax position is taken, we 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.

We evaluate, on a quarterly basis, our ability to realize deferred tax assets by
assessing our valuation allowance and by adjusting the amount of such allowance,
if necessary. The factors used to assess the likelihood of realization are our
forecast of future taxable income and available tax planning strategies that
could be implemented to realize the net deferred tax assets.
To the extent we prevail in matters for which reserves have been established, or
are required to pay amounts in excess of our reserves, our effective tax rate in
a given financial statement period could be materially affected.

                                       35
--------------------------------------------------------------------------------
  Table of Contents
Results of Operations-Fiscal 2022 Compared to Fiscal 2021

The following table presents summary Consolidated Statements of Income data for
fiscal year ended March 31, 2022, compared to fiscal year ended March 31, 2021:



                                                          Fiscal 2022                                 Fiscal 2021                              Increase (Decrease)
                                                  In                   As %                   In                   As %                       In
                                               Millions              Net Sales             Millions              Net Sales                 Millions                   %
Net sales                                    $  3,357.3                   100.0  %       $  2,977.9                   100.0  %       $            379.4               12.7  %
Cost of goods sold                              2,604.7                    77.6             2,238.8                    75.2                       365.9               16.3
Inventory adjustment relating to exit
activities                                          2.6                     0.1                   -                       -                         2.6                    NM
Gross profit                                      750.0                    22.3               739.1                    24.8                        10.9                1.5
Operating expenses                                520.8                    15.5               482.3                    16.2                        38.5                8.0
Restructuring and other exit charges               18.8                     0.6                40.4                     1.4                       (21.6)             (53.5)

Impairment of indefinite-lived
intangibles                                         1.2                       -                   -                       -                         1.2                    NM
Loss on assets held for sale                        3.0                     0.1                   -                       -                         3.0                    NM

Operating earnings                                206.2                     6.1               216.4                     7.2                       (10.2)              (4.7)
Interest expense                                   37.8                     1.1                38.5                     1.3                        (0.7)              (1.7)
Other (income) expense, net                        (5.5)                   (0.2)                7.8                     0.2                       (13.3)                   NM
Earnings before income taxes                      173.9                     5.2               170.1                     5.7                         3.8                2.2
Income tax expense                                 30.0                     0.9                26.8                     0.9                         3.2               12.2
Net earnings                                      143.9                     4.3               143.3                     4.8                         0.6                0.4
Net earnings attributable to
noncontrolling interests                              -                       -                   -                       -                           -                  -
Net earnings attributable to EnerSys
stockholders                                 $    143.9                     4.3  %       $    143.3                     4.8  %       $              0.6                0.4  %


 NM = not meaningful

Overview

Our sales in fiscal year 2022 were $3.4 billion, an increase of 12.7% over the previous year’s sales. This increase is due to a 10% increase in organic volume resulting mainly from strong demand and a 3% increase in prices.

A discussion of specific operating results for fiscal 2022 compared to fiscal 2021 follows, including an analysis and discussion of our reportable segment results.

Net Sales

Segment sales

                            Fiscal 2022                  Fiscal 2021                 Increase (Decrease)
                          In           % Net           In           % Net               In
                       Millions        Sales        Millions        Sales            Millions            %

Energy systems $1,536.6 45.8% $1,380.2 46.3%

   $            156.4       11.3  %
Motive Power            1,361.2        40.5          1,163.8        39.1                    197.4       17.0
Specialty                 459.5        13.7            433.9        14.6                     25.6        5.9

Total net sales $3,357.3 100.0% $2,977.9 100.0%

   $            379.4       12.7  %



                                       36
--------------------------------------------------------------------------------
  Table of Contents
Net sales of our Energy Systems segment in fiscal 2022 increased $156.4 million,
or 11.3%, compared to fiscal 2021. This increase was due to a 10% increase in
organic volume and a 1% increase in pricing / mix. Continued strong demand in
telecommunications and broadband was offset by supply chain driven constraints
for our power systems products.

Net sales of our Motive Power segment in fiscal 2022 increased by $197.4
million, or 17.0%, compared to fiscal 2021. This increase was primarily due to a
14% increase in organic volume and a 3% increase in pricing. The prior year's
COVID-19 restrictions and related economic slowdown impacted this segment more
than our other lines of business.

Net sales of our Specialty segment in fiscal 2022 increased by $25.6 million, or
5.9%, compared to fiscal 2021. The increase was primarily due to a 4% increase
in pricing and a 2% increase in organic volume. Strong demand from
transportation was joined with a resurgence in aerospace and defense sales but
logistical challenges were impediments to our sales performance.


Gross Profit

                                             Fiscal 2022                                   Fiscal 2021                                     Increase (Decrease)
                                     In                    As %                    In                    As %                            In
                                  Millions              Net Sales               Millions              Net Sales                       Millions                         %
Gross profit                   $     750.0                     22.3  %       $     739.1                     24.8  %       $            10.9                             1.5  %



Gross profit increased $10.9 million or 1.5% in fiscal 2022 compared to fiscal
2021. Gross profit, as a percentage of net sales, decreased 250 basis points in
fiscal 2022 compared to fiscal 2021. The decrease in the gross profit margin in
fiscal 2022 compared to the prior year reflects the negative impact of higher
freight costs and component shortages from our supply chain along with other
inflationary pressures in raw materials, labor, supplies and utilities, in
excess of pricing recoveries and organic volume growth. Energy Systems was most
acutely impacted by these pressures. Motive Power and Specialty have also been
impacted by higher costs but have a quicker pace of cost recovery relative to
Energy Systems.

Operating Items



                                                            Fiscal 2022                                   Fiscal 2021                                      Increase (Decrease)
                                                    In                    As %                    In                    As %                            In
                                                 Millions              Net Sales               Millions              Net Sales                       Millions                          %
Operating expenses                            $     520.8                     15.5  %       $     482.3                     16.2  %       $            38.5                               8.0  %
Restructuring, exit and other charges                18.8                      0.6                 40.4                      1.4                      (21.6)                            (53.5)

Impairment of indefinite-lived
intangibles                                           1.2                        -                    -                        -                        1.2                                   NM
Loss on assets held for sale                          3.0                      0.1                    -                        -                        3.0                                   NM


NM = not meaningful

Operating Expenses

Operating expenses increased $38.5 million or 8.0% in fiscal 2022 from fiscal
2021 and decreased as a percentage of net sales by 70 basis points. Selling
expenses, our main component of operating expenses, increased $14.3 million or
7.0% in fiscal 2022 compared to fiscal 2021.

                                       37
--------------------------------------------------------------------------------
  Table of Contents
Restructuring, exit and other charges

Exit Charges

Fiscal 2022 Programs

Russia

In February 2022, as a result of the Russia-Ukraine conflict, economic sanctions
were imposed on Russian individuals and entities, including financial
institutions, by countries around the world, including the U.S. and the European
Union. On March 3, 2022, the Company announced that it was indefinitely
suspending its operations in Russia in order to comply with the sanctions. As a
result of this decision, the Company wrote off net assets of $4.0 million
relating to its Russian subsidiary. The Company also incurred cash charges of
$1.3 million relating to severance and exiting lease obligations.

Zamudio, Spain

In fiscal 2022, the Company closed a small assembly plant in Zamudio,
Spain and sold the same for $1.8 million. A net gain of $0.7 million has been recorded as a credit to exit costs in the consolidated statements of earnings.

Fiscal 2021 Programs

Hagen, Germany

In fiscal 2021, we committed to a plan to close substantially all of our
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. We plan to retain the facility with
limited sales, service and administrative functions along with related personnel
for the foreseeable future.

We currently estimate that the total charges for these actions will amount to
approximately $60.0 million, the majority of which were recorded by the end of
calendar 2021. Cash charges of approximately $40.0 million 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 $20.0
million. These actions resulted in the reduction of approximately 200 employees.

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

During fiscal 2021, the Company recorded charges related to the breach of $23.3 million and $7.9 million mainly concerns fixed asset write-offs.

Targovishty, 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.
During fiscal 2022, the Company sold this facility for $1.5 million. A net gain
of $1.2 million was recorded as a credit to exit charges in the Consolidated
Statements of Income.

Fiscal 2020 Programs

In line with our strategy to exit the manufacture of batteries for diesel-electric submarines, we sold in fiscal 2020 certain licenses and assets for $2.0 million and recorded a net gain of $0.9 millionwhich have been reported as other exit fees in Specialty.

During fiscal 2020, we also wrote off $5.5 million of assets at our Kentucky and
Tennessee Motive Power plants, as a result of our strategic product mix shift
from traditional flooded batteries to maintenance free lead acid and lithium
batteries.

                                       38
--------------------------------------------------------------------------------
  Table of Contents
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 $46.1 million
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 $4.4 million, which was recorded
as a reduction to operating expenses in the Consolidated Statements of Income.

The details of charges and recoveries for the 2021 and 2020 financial years are as follows:

In fiscal 2020, the Company recorded $17.0 million as receivable, 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 $12.0 million related to its initial
claims.

During fiscal year 2021, the Company recorded a $16.6 million to be received for cleaning and received $21.6 million with the insurance company.

In addition to the property damage claim, the Company received $12.5 million in
business interruption claims, of which $5.0 million was recorded in fiscal 2020
and $7.5 million in fiscal 2021, and was credited to cost of goods sold, in the
respective periods.

Impairment of indefinite life intangible assets

During the fourth quarter of fiscal 2022, the Company recorded a non-cash charge
of $1.2 million related to impairment of indefinite-lived trademarks. 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 that were acquired through legacy acquisitions was
appropriate, as it plans to phase out these trademarks.

Loss on assets held for sale

Vijayawada, India

During fiscal 2021, we also committed to a plan to close our facility in
Vijayawada, India to align with the strategic vision for our new line of
business structure and footprint and recorded exit charges of $1.5 million
primarily relating to asset write-offs. In fiscal 2022, the Company reclassified
property, plant and equipment with a carrying value of $4.6 million to assets
held for sale on the Consolidated Balance Sheet and recognized an impairment
loss of $3.0 million under the caption Loss on assets held for sale on its
consolidated statement of income, by writing down the carrying value of these
assets to their estimated fair value of $1.6 million, based on their expected
proceeds, less costs to sell. We also recorded a non-cash write off relating to
inventories of $0.8 million, which was reported in cost of goods sold.
                                       39

————————————————– ——————————

Contents

Operating profit

Operating profit by segment was as follows:

                                                               Fiscal 2022                                     Fiscal 2021                                  Increase (Decrease)
                                                      In                     As %                     In                     As %                        In
                                                   Millions              Net Sales(1)              Millions              Net Sales(1)                 Millions                    %
Energy Systems                                  $      18.6                        1.2  %       $      66.9                        4.9  %       $            (48.3)                (72.4) %
Motive Power                                          169.7                       12.5                143.6                       12.3                        26.1                  18.3
Specialty                                              43.5                        9.5                 46.3                       10.6                        (2.8)                 (5.8)
Subtotal                                              231.8                        6.9                256.8                        8.6                       (25.0)                 (9.7)
Inventory adjustment relating to exit
activities - Energy Systems                            (0.2)                         -                    -                          -                        (0.2)                      NM
Inventory adjustment relating to exit
activities - Motive                                    (2.4)                      (0.2)                   -                          -                        (2.4)                      NM
Restructuring and other exit charges -
Energy Systems                                         (2.8)                      (0.2)                (3.1)                      (0.2)                        0.3                 (14.9)
Restructuring and other exit charges -
Motive Power                                          (17.1)                      (1.3)               (36.9)                      (3.2)                       19.8                 (53.6)
Restructuring and other exit charges -
Specialty                                               1.1                        0.2                 (0.4)                      (0.1)                        1.5                       NM

Impairment of indefinite-lived
intangibles - Energy Systems                           (0.5)                         -                    -                          -                        (0.5)                      NM
Impairment of indefinite-lived
intangibles - Motive Power                             (0.7)                         -                    -                          -                        (0.7)                      NM
Loss on assets held for sale - Motive
Power                                                  (3.0)                      (0.2)                   -                          -                        (3.0)                      NM

Total operating earnings                        $     206.2                
       6.1  %       $     216.4                        7.2  %       $            (10.2)                 (4.7) %


  NM = not meaningful
(1)The percentages shown for the segments are computed as a percentage of the
applicable segment's net sales.

Operating earnings decreased $10.2 million or 4.7% in fiscal 2022, compared to
fiscal 2021. Operating earnings, as a percentage of net sales, decreased 110
basis points in fiscal 2022, compared to fiscal 2021.

The Energy Systems operating earnings decreased 370 basis points in fiscal 2022
compared to fiscal 2021. Higher lead and freight costs along with lack of
component availability negatively impacted the performance and sales mix of this
line of business.

The Motive Power operating earnings increased 20 basis points in fiscal 2022
compared to fiscal 2021. The strong recovery in organic growth along with price
increases improved the performance of this line of business. However, the prior
year period benefited from $11.9 million of insurance recoveries.

Specialty operating earnings decreased 110 basis points in fiscal 2022 compared
to fiscal 2021. Pricing and customer demand in the transportation and aerospace
and defense markets were stronger in the current year compared to prior year,
but capacity constraints and higher inflation costs, combined with increased
operating expenses negatively impacted the performance of this line of business.
Interest Expense

                                              Fiscal 2022                                  Fiscal 2021                                      Increase (Decrease)
                                      In                    As %                   In                    As %                            In
                                   Millions              Net Sales              Millions              Net Sales                       Millions                         %
Interest expense                 $     37.8                      1.1  %       $     38.5                      1.3  %       $            (0.7)                            (1.7) %



Interest expense of $37.8 million in fiscal 2022 (net of interest income of $2.1
million) was $0.7 million lower than the $38.5 million in fiscal 2021 (net of
interest income of $2.3 million).

                                       40
--------------------------------------------------------------------------------
  Table of Contents
Our average debt outstanding was $1,150.7 million in fiscal 2022, compared to
our average debt outstanding of $1,105.5 million in fiscal 2021. Our average
cash interest rate incurred in fiscal 2022 and fiscal 2021 was 3.3%. The
decrease in interest expense in fiscal 2022 compared to fiscal 2021 is primarily
due to the benefit from the $300 million cross currency fixed interest rate
swaps, partially offset by higher borrowings.

In fiscal 2022, in connection with the Second Amended Credit Facility, we
capitalized $3.0 million in debt issuance costs and wrote off $0.1 million of
unamortized debt issuance costs. In fiscal 2020, in connection with the issuance
of the 2027 Notes, we capitalized $4.6 million of debt issuance costs. Included
in interest expense were non-cash charges related to amortization of deferred
financing fees of $2.1 million in both fiscal 2022 and fiscal 2021.

Other (Income) Expense, Net

                                               Fiscal 2022                                 Fiscal 2021                              Increase (Decrease)
                                       In                   As %                   In                   As %                        In
                                    Millions              Net Sales             Millions              Net Sales                  Millions                   %
Other (income) expense, net       $     (5.5)                   (0.2) %       $      7.8                     0.2  %       $              (13.3)                 NM


  NM = not meaningful


Other (income) expense, net was income of $5.5 million in fiscal 2022 compared
to expense of $7.8 million in fiscal 2021. Foreign currency impact resulted in a
gain of $7.2 million in fiscal 2022 compared to a foreign currency loss of $6.7
million in fiscal 2021.

Profit before income taxes

                                              Fiscal 2022                                  Fiscal 2021                                     Increase (Decrease)
                                       In                   As %                    In                   As %                             In
                                    Millions              Net Sales              Millions              Net Sales                       Millions                        %
Earnings before income
taxes                            $     173.9                     5.2  %       $     170.1                     5.7  %       $             3.8                             2.2  %



As a result of the factors discussed above, fiscal 2022 earnings before income
taxes were $173.9 million, an increase of $3.8 million or 2.2% compared to
fiscal 2021.

Income Tax Expense

                                               Fiscal 2022                                Fiscal 2021                                    Increase (Decrease)
                                        In                  As %                   In                  As %                       In
                                     Millions             Net Sales             Millions             Net Sales                 Millions                               %
Income tax expense                 $    30.0                     0.9  %       $    26.8                     0.9  %       $           3.2                               12.2  %
Effective tax rate                      17.3  %                                    15.7  %                                           1.6    %



Our effective income tax rate with respect to any period may be volatile based
on the mix of income in the tax jurisdictions in which we operate and the amount
of our consolidated income before taxes.

The Company's income tax provision consists of federal, state and foreign income
taxes. The effective income tax rate was 17.3% in fiscal 2022 compared to the
fiscal 2021 effective income tax rate of 15.7%. The rate increase in fiscal 2022
compared to fiscal 2021 is primarily due to Swiss tax reform and changes in the
mix of earnings among tax jurisdictions.

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. We recorded a net deferred tax
asset of $22.5 million 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 $1.9 million during fiscal 2021.

The fiscal 2022 foreign effective income tax rate was 11.0% on foreign pre-tax
income of $152.1 million compared to an effective income tax rate of 6.8% on
foreign pre-tax income of $114.1 million in fiscal 2021. For both fiscal 2022
and fiscal 2021, the difference in the foreign effective tax rate versus the
U.S. statutory rate of 21% is primarily attributable to lower tax rates in the
foreign countries in which we operate. The rate increase in fiscal 2022 compared
to fiscal 2021 is primarily due to
                                       41
--------------------------------------------------------------------------------
  Table of Contents
Swiss tax reform and changes in the mix of earnings among tax jurisdictions.
Income from our Swiss subsidiary comprised a substantial portion of our overall
foreign mix of income for both fiscal 2022 and fiscal 2021 and was taxed,
excluding the impact from Swiss tax reform, at approximately 4% and 8%,
respectively.

Cash and capital resources

Cash flow and financing activities

Cash and cash equivalents at March 31, 20222021 and 2020, have been $402.5 million,
$451.8 million and $327.0 millionrespectively.

Cash flows used by operating activities for fiscal year 2022 were $65.6 million. Cash from operating activities for 2021 and 2020 has been $358.4 million and
$253.4 millionrespectively.

During fiscal 2022, primary working capital, net of currency translation
changes, resulted in an outflow of funds of $276.5 million. In fiscal 2022, net
earnings were $143.9 million, depreciation and amortization $95.9 million,
stock-based compensation $24.3 million, non-cash charges relating to exit
charges of $6.5 million, primarily relating to the Hagen, Germany plant closure
and exiting our operations in Russia following the conflict in Ukraine, loss on
valuation of the assets held for sale in India of $3.0 million, allowance for
doubtful debts of $2.6 million, non-cash interest of $2.1 million and non-cash
charges for impairment of indefinite-lived intangibles of $1.2 million. Prepaid
and other current assets were a use of funds of $32.0 million, primarily from an
increase of $13.6 million of contract assets, as well as an increase of $12.3
million in other prepaid expenses, such as taxes, insurance and other advances.
Accrued expenses were a use of funds of $38.6 million primarily from Hagen
severance payments of $19.6 million, income tax payments of $17.3 million net of
tax provisions, payroll related payments of $10.1 million, partially offset by
customer advances of $8.9 million.

During fiscal 2021, net earnings were $143.3 million, depreciation and
amortization $94.1 million, stock-based compensation $19.8 million, non-cash
charges relating to exit charges $10.2 million, primarily relating to the Hagen,
Germany plant closure, net gain from the disposal of assets of $3.9 million
($4.4 million from the insurance settlement relating to the Richmond fire
claim), deferred tax benefit of $9.0 million and non-cash interest of $2.1
million. Decrease in primary working capital of $53.7 million, net of currency
translation changes provided a source of funds and are explained below. Prepaid
and other current assets provided a source of funds of $27.3 million, primarily
from the receipt of $29.1 million towards the insurance receivable relating to
the Richmond plant claim in fiscal 2020 and the receipt of a working capital
adjustment claim of $2.0 million, relating to an acquisition made several years
ago, partially offset by an increase of $3.8 million in other prepaid expenses.
Accrued expenses provided a source of funds of $32.4 million primarily from
payroll related accruals of $27.8 million, taxes payable of $4.5 million and
selling and other expenses of $3.3 million, partially offset by payments
relating to warranty of $5.8 million. Other liabilities decreased by $12.7
million primarily relating to income taxes.

During fiscal 2020, cash provided by operating activities was primarily from net
earnings of $137.1 million, depreciation and amortization of $87.3 million,
non-cash charges relating to impairment of goodwill and other intangible assets
of $44.2 million, restructuring, exit and other charges of $11.0 million,
stock-based compensation of $20.8 million, provision for bad debts of $4.8
million and non-cash interest of $1.7 million, partially offset by deferred
taxes of $16.5 million primarily from the Swiss Tax Reform. Cash provided by
earnings adjusted for non-cash items were partially offset by the increase in
primary working capital of $16.4 million, net of currency translation changes.
Accrued expenses increased by $7.1 million, primarily due to payroll accruals of
$8.6 million, sales incentives of $8.0 million, interest of $3.9 million,
partially offset by payments of $7.3 million related to the German competition
authority matter and $6.1 million paid to the seller in connection with the
Alpha acquisition, for certain reimbursable pre-acquisition items. Prepaid and
other current assets increased by $17.5 million, primarily due to contract
assets of $11.1 million, insurance receivable of $22.0 million relating to the
Richmond plant claim, partially offset by insurance proceeds of $12.0 million
and the receipt of $4.1 million in connection with the Alpha transaction. Other
liabilities decreased by $12.7 million due to income taxes.

As explained in the discussion of our use of "non-GAAP financial measures," we
monitor the level and percentage of primary working capital to sales. Primary
working capital was $1,042.0 million (yielding a primary working capital
percentage of 28.7%) at March 31, 2022 and $797.9 million (yielding a primary
working capital percentage of 24.5%) at March 31, 2021. The primary working
capital percentage of 28.7% at March 31, 2022 is 420 basis points higher than
that for March 31, 2021, and 200 basis points higher than that for March 31,
2020. The large increase in primary working capital dollars, compared to the
prior years, reflects the increase in all components of inventory due to supply
chain delays, new products and higher inventory costs from higher raw material
costs, manufacturing and freight costs, strategic inventory builds to buffer
against potential supply chain exposures and to address the high backlog of
customer orders. In addition, trade receivables increased due to higher revenue
during fiscal 2022, as compared to a COVID-19 restricted revenue in fiscal 2021.
                                       42

————————————————– ——————————

Contents

Main working capital and Main working capital percentages to March 31, 20222021 and 2020 are calculated as follows:

                                                                                                           Primary
                                                                             Primary        Quarter        Working
                               Trade                          Accounts       Working        Revenue        Capital
Balance at March 31,        Receivables       Inventory       Payable        Capital       Annualized        (%)
                                                           (in millions)
2022                       $      719.4      $    715.7      $ (393.1)     $ 1,042.0      $  3,628.1        28.7  %
2021                              603.6           518.2        (323.9)         797.9         3,254.2        24.5
2020                              595.9           519.5        (281.9)         833.5         3,127.2        26.7




The cash flows allocated to investing activities for the financial years 2022, 2021 and 2020 have been $69.2 million, $65.0 million and $274.8 millionrespectively.

In fiscal 2022 and 2021, we did not make any acquisitions. In fiscal 2020, we acquired North Star for $176.5 million.

Capital expenditures were $74.0 million, $70.0 million and $101.4 million in
fiscal 2022, 2021 and 2020, respectively.
We also received $3.3 million from the sale of two of our facilities in Europe
during fiscal 2022.

During the second quarter of fiscal 2022, we entered into the Second Amended
Credit Facility. As a result, financing activities provided cash of $98.4
million in fiscal 2022. During fiscal 2022, we borrowed $523.4 million under the
Second Amended Revolver and repaid $88.4 million of the Second Amended Revolver.
Repayment on the Second Amended Term Loan was $161.4 million and net borrowings
on short-term debt were $20.6 million. Treasury stock open market purchases were
$156.4 million, payment of cash dividends to our stockholders were $29.4 million
and payment of taxes related to net share settlement of equity awards were $9.1
million. Debt issuance costs relating to the refinancing of the Credit Facility
was $3.0 million. Proceeds from stock options were $1.3 million.

During fiscal 2021, financing activities provided cash of $188.7 million. We
borrowed $102.0 million under the Amended 2017 Revolver and repaid $210.0
million of the Amended 2017 Revolver. Repayment on the Amended 2017 Term Loan
was $39.6 million and net payments on short-term debt were $15.9 million.
Proceeds from stock options during fiscal 2021 were $9.1 million. Payment of
cash dividends to our stockholders were $29.8 million, payment of taxes related
to net share settlement of equity awards were $5.2 million.

During fiscal 2020, financing activities provided cash of $62.7 million. We
issued our 2027 Notes for $300 million, the proceeds of which were utilized to
pay down the existing revolver borrowings. We borrowed $386.7 million under the
Amended 2017 Revolver and repaid $517.7 million of the Amended 2017 Revolver.
Repayment on the Amended 2017 Term Loan was $28.1 million and net payments on
short-term debt were $5.3 million. Treasury stock open market purchases were
$34.6 million, payment of cash dividends to our stockholders were $29.7 million
and payment of taxes related to net share settlement of equity awards were $6.4
million.

Currency translation had a negative impact of $12.9 million on our cash balance
in the twelve months of fiscal 2022 compared to the positive impact of $20.2
million in the twelve months of fiscal 2021. In the twelve months of fiscal
2022, principal currencies in which we do business such as the Euro, Polish
zloty, British pound and Swiss franc generally weakened versus the U.S. dollar.

As a result of the above, total cash and cash equivalents decreased by $49.3
million from $451.8 million at March 31, 2021 to $402.5 million at March 31,
2022.

In addition to cash flows from operating activities, we had available committed
and uncommitted credit lines of approximately $482 million at March 31, 2022 to
cover short-term liquidity requirements. Our Second Amended Credit Facility is
committed through September 30, 2026, as long as we continue to comply with the
covenants and conditions of the credit facility agreement.


                                       43
--------------------------------------------------------------------------------
  Table of Contents
Compliance with Debt Covenants

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

We are in compliance with all covenants and conditions under our Second Amended
Credit Facility and Senior Notes. We believe that we will continue to comply
with these covenants and conditions, and that we have the financial resources
and the capital available to fund the foreseeable organic growth in our business
and to remain active in pursuing further acquisition opportunities. See Note 10
to the Consolidated Financial Statements included in this Annual Report on Form
10-K.

Off-balance sheet arrangements

The Company has not entered into any off-balance sheet arrangements during the periods covered by this report.

Contractual obligations and commercial commitments

At March 31, 2022, we had certain cash obligations, which are due as follows:

                                                                     Less than           2 to 3             4 to 5             After
                                                   Total              1 year              years             years             5 years
                                                                                     (in millions)
Debt obligations                                $ 1,250.3          $      5.4          $  324.2          $   920.7          $       -
Short-term debt                                      55.1                55.1                 -                  -                  -
Interest on debt                                    157.0                41.4              58.5               44.0               13.1
Operating leases                                     84.6                23.0              29.5               15.5               16.6
Tax Act - Transition Tax                             52.5                 6.2              27.0               19.3                  -
Pension benefit payments and profit
sharing                                              39.4                 3.0               6.4                7.8               22.2
Restructuring and Hagen exit related
accruals                                              2.9                 2.9                 -                  -                  -
Purchase commitments                                 22.2                22.2                 -                  -                  -
Lead and foreign currency forward
contracts                                             0.7                 0.7                 -                  -                  -
Finance lease obligations, including
interest                                              0.4                 0.2               0.2                  -                  -
Total                                           $ 1,665.1          $    160.1          $  445.8          $ 1,007.3          $    51.9


Due to the uncertainty of future cash outflows, uncertain tax positions have been excluded from the table above.

Under our second amended credit facility and other credit agreements, we had outstanding standby letters of credit $3.0 million of the March 31, 2022.

Credit facilities and leverage

Our focus on working capital management and operating cash flow is measured by our ability to reduce debt and lower our leverage ratios.

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

Below are the leverage ratios at March 31, 2022 and 2021, under the second amended credit facility.

                                       44

————————————————– ——————————

Table of Contents Total Net Debt, as defined in the Second Amended Credit Facility, is
$905.9 million for fiscal year 2022 and is 2.5 times Adjusted EBITDA (non-GAAP), compared to total net debt of $615.0 million and 1.7 times Adjusted EBITDA (non-GAAP) for fiscal year 2021.

The following table provides a reconciliation of net income to EBITDA (non-GAAP) and Adjusted EBITDA (non-GAAP) for March 31, 2022 and 2021, under the Second Amended Credit Facility:

                                                                                          Fiscal 2022                   Fiscal 2021
                                                                                            (in millions, except ratios)
Net earnings as reported                                                        $         143.9                       $      143.3
Add back:
Depreciation and amortization                                                              95.9                               94.1
Interest expense                                                                           37.8                               38.5
Income tax expense                                                                         30.0                               26.8
EBITDA (non GAAP)(1)                                                            $         307.6                       $      302.7
Adjustments per credit agreement definitions(2)                                            51.5                               56.3
Adjusted EBITDA (non-GAAP) per credit agreement(1)                              $         359.1                       $      359.0
Total net debt(3)                                                               $         905.9                       $      615.0

Leverage ratios(4):

    Total net debt/adjusted EBITDA ratio                                                                  2.5 X                 1.7 X
Maximum ratio permitted                                                                                   3.5 X                 3.5 X
    Consolidated interest coverage ratio(5)                                
                             10.0 X                 9.8 X
Minimum ratio required                                                                                    3.0 X                 3.0 X



(1)We have included EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) because our
lenders use them as key measures of our performance. EBITDA is defined as
earnings before interest expense, income tax expense, depreciation and
amortization. EBITDA is not a measure of financial performance under GAAP and
should not be considered an alternative to net earnings or any other measure of
performance under GAAP or to cash flows from operating, investing or financing
activities as an indicator of cash flows or as a measure of liquidity. Our
calculation of EBITDA may be different from the calculations used by other
companies, and therefore comparability may be limited. Certain financial
covenants in our Second Amended Credit Facility are based on EBITDA, subject to
adjustments, which are shown above. Continued availability of credit under our
Second Amended Credit Facility is critical to our ability to meet our business
plans. We believe that an understanding of the key terms of our credit agreement
is important to an investor's understanding of our financial condition and
liquidity risks. Failure to comply with our financial covenants, unless waived
by our lenders, would mean we could not borrow any further amounts under our
revolving credit facility and would give our lenders the right to demand
immediate repayment of all outstanding revolving credit and term loans. We would
be unable to continue our operations at current levels if we lost the liquidity
provided under our credit agreements. Depreciation and amortization in this
table excludes the amortization of deferred financing fees, which is included in
interest expense.
(2)The $51.5 million adjustment to EBITDA in fiscal 2022 primarily related to
$24.3 million of non-cash stock compensation, $26.0 million of restructuring and
other exit charges, impairment of indefinite-lived intangibles of $1.2 million.
The $56.3 million adjustment to EBITDA in fiscal 2021 primarily related to $19.8
million of non-cash stock compensation, $33.2 million of restructuring and other
exit charges, business integration costs of $7.3 million, partially offset by
$3.9 million of gain ($4.4 million gain less insurance deductibles) relating to
the final settlement of the Richmond, KY fire claim.
(3)Debt includes finance lease obligations and letters of credit and is net of
all U.S. cash and cash equivalents and foreign cash and investments, as defined
in the Second Amended Credit Facility. In fiscal 2022, the amounts deducted in
the calculation of net debt were U.S. cash and cash equivalents and foreign cash
investments of $402 million, and in fiscal 2021, were $399 million.
(4)These ratios are included to show compliance with the leverage ratios set
forth in our credit facilities. We show both our current ratios and the maximum
ratio permitted or minimum ratio required under our Second Amended Credit
Facility, for fiscal 2022 and fiscal 2021, respectively.
(5)As defined in the Second Amended Credit Facility, interest expense used in
the consolidated interest coverage ratio excludes non-cash interest of $2.1
million for both years of fiscal 2022 and fiscal 2021.

                                       45
--------------------------------------------------------------------------------
  Table of Contents
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

See Note 1 to the Consolidated Financial Statements - Summary of Significant
Accounting Policies for a description of certain recently issued accounting
standards that were adopted or are pending adoption that could have a
significant impact on our Consolidated Financial Statements or the Notes to the
Consolidated Financial Statements.

Related party transactions

No.

© Edgar Online, source Previews

Share.

Comments are closed.