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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 5, 2020

☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
Commission File Number: 001-32253

EnerSys
(Exact name of registrant as specified in its charter)

Delaware |  | 23-3058564
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

2366 Bernville Road
Reading, Pennsylvania 19605
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 610-208-1991
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol |  | Name of each exchange on which registered
Common Stock, $0.01 par value per share |  | ENS |  | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes ¨ No.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

Large Accelerated Filer |  | ý |  | Accelerated filer |  | ¨
Non-accelerated filer |  | ¨ (Do not check if a smaller reporting company) |  | Smaller reporting company |  | ☐
Emerging growth company |  | ☐ |  |  |  |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). ☐ Yes ý No.
Common Stock outstanding at August 7, 2020: 42,477,388 shares
1

ENERSYS
INDEX – FORM 10-Q

|  |  | Page
PART I – FINANCIAL INFORMATION |  |  |
Item 1. | Financial Statements |  |
| Consolidated Condensed Balance Sheets (Unaudited) as of July 5, 2020 and March 31, 2020 |  | 3
| Consolidated Condensed Statements of Income (Unaudited) for the Quarters Ended July 5, 2020 and June 30, 2019 |  | 4
| Consolidated Condensed Statements of Comprehensive Income (Unaudited) for the Quarters Ended July 5, 2020 and June 30, 2019 |  | 5
| Consolidated Condensed Statements of Cash Flows (Unaudited) for the Quarters Ended July 5, 2020 and June 30, 2019 |  | 6
| Notes to Consolidated Condensed Financial Statements (Unaudited) |  | 7
| 1 | Basis of Presentation | 7
| 2 | Revenue Recognition | 8
| 3 | Leases | 9
| 4 | Acquisition | 10
| 5 | Inventories | 11
| 6 | Fair Value of Financial Instruments | 11
| 7 | Derivative Financial Instruments | 12
| 8 | Income Taxes | 14
| 9 | Warranty | 15
| 10 | Commitments, Contingencies and Litigation | 15
| 11 | Restructuring and Other Exit Charges | 16
| 12 | Debt | 17
| 13 | Retirement Plans | 19
| 14 | Stock-Based Compensation | 19
| 15 | Stockholders’ Equity and Noncontrolling Interests | 19
| 16 | Earnings Per Share | 22
| 17 | Business Segments | 22
| 18 | Subsequent Events | 24
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 25
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |  | 33
Item 4. | Controls and Procedures |  | 35
PART II – OTHER INFORMATION |  |  |
Item 1. | Legal Proceedings |  | 36
Item 1A. | Risk Factors |  | 36
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |  | 37
Item 4. | Mine Safety Disclosures |  | 37
Item 6. | Exhibits |  | 38
SIGNATURES |  |  | 39

2

Table of Contents

PART I – | FINANCIAL INFORMATION

ITEM 1. | FINANCIAL STATEMENTS

ENERSYS
Consolidated Condensed Balance Sheets (Unaudited)
(In Thousands, Except Share and Per Share Data)

|  | July 5, 2020 |  | March 31, 2020
Assets |  |  |  |
Current assets: |  |  |  |
Cash and cash equivalents |  | $ | 384,379 |  |  | $ | 326,979 |
Accounts receivable, net of allowance for doubtful accounts: July 05, 2020 - $13,229; March 31, 2020 - $15,246 |  | 509,006 |  |  | 595,873 |
Inventories, net |  | 510,598 |  |  | 519,460 |
Prepaid and other current assets |  | 120,956 |  |  | 120,593 |
Total current assets |  | 1,524,939 |  |  | 1,562,905 |
Property, plant, and equipment, net |  | 493,173 |  |  | 480,014 |
Goodwill |  | 676,667 |  |  | 663,936 |
Other intangible assets, net |  | 450,606 |  |  | 455,685 |
Deferred taxes |  | 55,631 |  |  | 55,803 |
Other assets |  | 83,722 |  |  | 83,355 |
Total assets |  | $ | 3,284,738 |  |  | $ | 3,301,698 |
Liabilities and Equity |  |  |  |
Current liabilities: |  |  |  |
Short-term debt |  | $ | 46,762 |  |  | $ | 46,544 |
Accounts payable |  | 242,955 |  |  | 281,873 |
Accrued expenses |  | 253,564 |  |  | 271,902 |
Total current liabilities |  | 543,281 |  |  | 600,319 |
Long-term debt, net of unamortized debt issuance costs |  | 1,080,512 |  |  | 1,104,731 |
Deferred taxes |  | 78,640 |  |  | 78,363 |
Other liabilities |  | 217,132 |  |  | 214,223 |
Total liabilities |  | 1,919,565 |  |  | 1,997,636 |
Commitments and contingencies |  |  |  |
Equity: |  |  |  |
Preferred Stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding at July 5, 2020 and at March 31, 2020 |  | — |  |  | — |
Common Stock, 0.01 par value per share, 135,000,000 shares authorized, 55,251,879 shares issued and 42,465,194 shares outstanding at July 05, 2020; 55,114,808 shares issued and 42,323,305 shares outstanding at March 31, 2020 |  | 553 |  |  | 551 |
Additional paid-in capital |  | 531,546 |  |  | 529,100 |
Treasury stock at cost, 12,786,685 shares held as of July 05, 2020 and 12,791,503 shares held as of March 31, 2020 |  | (564,077) |  |  | (564,376) |
Retained earnings |  | 1,584,563 |  |  | 1,556,980 |
Contra equity - indemnification receivable |  | (6,724) |  |  | (6,724) |
Accumulated other comprehensive loss |  | (184,233) |  |  | (215,006) |
Total EnerSys stockholders’ equity |  | 1,361,628 |  |  | 1,300,525 |
Nonredeemable noncontrolling interests |  | 3,545 |  |  | 3,537 |
Total equity |  | 1,365,173 |  |  | 1,304,062 |
Total liabilities and equity |  | $ | 3,284,738 |  |  | $ | 3,301,698 |

See accompanying notes.
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ENERSYS
Consolidated Condensed Statements of Income (Unaudited)
(In Thousands, Except Share and Per Share Data)

|  | Quarter ended |  |
|  | July 5, 2020 |  | June 30, 2019
Net sales |  | $ | 704,924 |  |  | $ | 780,230 |
Cost of goods sold |  | 529,947 |  |  | 578,718 |
Gross profit |  | 174,977 |  |  | 201,512 |
Operating expenses |  | 120,370 |  |  | 130,804 |
Restructuring and other exit charges |  | 1,387 |  |  | 2,372 |
Operating earnings |  | 53,220 |  |  | 68,336 |
Interest expense |  | 10,165 |  |  | 10,898 |
Other (income) expense, net |  | 1,462 |  |  | (1,152) |
Earnings before income taxes |  | 41,593 |  |  | 58,590 |
Income tax expense |  | 6,410 |  |  | 9,954 |
Net earnings attributable to EnerSys stockholders |  | $ | 35,183 |  |  | $ | 48,636 |
Net earnings per common share attributable to EnerSys stockholders: |  |  |  |
Basic |  | $ | 0.83 |  |  | $ | 1.14 |
Diluted |  | $ | 0.82 |  |  | $ | 1.13 |
Dividends per common share |  | $ | 0.175 |  |  | $ | 0.175 |
Weighted-average number of common shares outstanding: |  |  |  |
Basic |  | 42,385,888 |  |  | 42,656,339 |
Diluted |  | 42,932,054 |  |  | 43,118,434 |

See accompanying notes.
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ENERSYS
Consolidated Condensed Statements of Comprehensive Income (Unaudited)
(In Thousands)

|  | Quarter ended |  |  |  |  |  |
|  | July 5, 2020 |  | June 30, 2019 |  |  |  |
Net earnings |  | $ | 35,183 |  |  | $ | 48,636 |  |  |  |  |
Other comprehensive income (loss): |  |  |  |  |  |  |  |
Net unrealized gain (loss) on derivative instruments, net of tax |  | 2,343 |  |  | (2,329) |  |  |  |  |
Pension funded status adjustment, net of tax |  | 291 |  |  | 237 |  |  |  |  |
Foreign currency translation adjustment |  | 28,147 |  |  | (3,211) |  |  |  |  |
Total other comprehensive income (loss), net of tax |  | 30,781 |  |  | (5,303) |  |  |  |  |
Total comprehensive income |  | 65,964 |  |  | 43,333 |  |  |  |  |
Comprehensive gain (loss) attributable to noncontrolling interests |  | 8 |  |  | (83) |  |  |  |  |
Comprehensive income attributable to EnerSys stockholders |  | $ | 65,956 |  |  | $ | 43,416 |  |  |  |  |

See accompanying notes.
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ENERSYS
Consolidated Condensed Statements of Cash Flows (Unaudited)
(In Thousands)

|  | Quarter ended |  |
|  | July 5, 2020 |  | June 30, 2019
Cash flows from operating activities |  |  |  |
Net earnings |  | $ | 35,183 |  |  | $ | 48,636 |
Adjustments to reconcile net earnings to net cash provided by operating activities: |  |  |  |
Depreciation and amortization |  | 23,657 |  |  | 20,725 |
Write-off of assets relating to exit activities |  | 471 |  |  | 802 |
Derivatives not designated in hedging relationships: |  |  |  |
Net gains |  | (262) |  |  | (34) |
Cash settlements |  | 467 |  |  | (376) |
Provision for doubtful accounts |  | 96 |  |  | 1,105 |
Deferred income taxes |  | (54) |  |  | 37 |
Non-cash interest expense |  | 518 |  |  | 378 |
Stock-based compensation |  | 5,053 |  |  | 3,874 |
Gain on disposal of property, plant, and equipment |  | 73 |  |  | 21 |
Changes in assets and liabilities, net of effects of acquisitions: |  |  |  |
Accounts receivable |  | 92,752 |  |  | 2,097 |
Inventories |  | 14,852 |  |  | (18,937) |
Prepaid and other current assets |  | 2,672 |  |  | (7,033) |
Other assets |  | 718 |  |  | 1,841 |
Accounts payable |  | (40,609) |  |  | (6,797) |
Accrued expenses |  | (18,571) |  |  | (16,275) |
Other liabilities |  | (452) |  |  | 320 |
Net cash provided by operating activities |  | 116,564 |  |  | 30,384 |
Cash flows from investing activities |  |  |  |
Capital expenditures |  | (26,330) |  |  | (17,315) |
Proceeds from disposal of property, plant, and equipment |  | 50 |  |  | 44 |
Net cash used in investing activities |  | (26,280) |  |  | (17,271) |
Cash flows from financing activities |  |  |  |
Net repayments on short-term debt |  | (987) |  |  | (19,499) |
Proceeds from 2017 Revolver borrowings |  | 35,000 |  |  | 95,000 |
Repayments of 2017 Revolver borrowings |  | (55,000) |  |  | (85,000) |
Repayments of 2017 Term Loan |  | (8,402) |  |  | (5,645) |
Option proceeds |  | 479 |  |  | 38 |
Payment of taxes related to net share settlement of equity awards |  | (3,135) |  |  | (6,081) |
Purchase of treasury stock |  | — |  |  | (23,029) |
Dividends paid to stockholders |  | (7,428) |  |  | (7,499) |
Other |  | 11 |  |  | (27) |
Net cash used by financing activities |  | (39,462) |  |  | (51,742) |
Effect of exchange rate changes on cash and cash equivalents |  | 6,578 |  |  | 1,530 |
Net increase (decrease) in cash and cash equivalents |  | 57,400 |  |  | (37,099) |
Cash and cash equivalents at beginning of period |  | 326,979 |  |  | 299,212 |
Cash and cash equivalents at end of period |  | $ | 384,379 |  |  | $ | 262,113 |

See accompanying notes.
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ENERSYS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
(In Thousands, Except Share and Per Share Data)
1. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments except those otherwise described herein) considered necessary for a fair presentation have been included, unless otherwise disclosed. Operating results for the three months ended July 5, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2021.
The Consolidated Condensed Balance Sheet at March 31, 2020 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
The financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s 2020 Annual Report on Form 10-K (SEC File No. 001-32253), which was filed on June 1, 2020 (the “2020 Annual Report”).
EnerSys (the “Company,”) reports interim financial information for 13-week periods, except for the first quarter, which always begins on April 1, and the fourth quarter, which always ends on March 31. The four quarters in fiscal 2021 end on July 5, 2020, October 4, 2020, January 3, 2021, and March 31, 2021, respectively. The four quarters in fiscal 2020 ended on June 30, 2019, September 29, 2019, December 29, 2019, and March 31, 2020, respectively.
The consolidated condensed financial statements include the accounts of the Company and its wholly-owned subsidiaries and any partially owned subsidiaries that the Company has the ability to control. All intercompany transactions and balances have been eliminated in consolidation.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB, issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)”: Measurement of Credit Losses on Financial Instruments, which changes the recognition model for the impairment of financial instruments, including accounts receivable, loans and held-to-maturity debt securities, among others. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In contrast to current guidance, which considers current information and events and utilizes a probable threshold, (an “incurred loss” model), ASU 2016–13 mandates an “expected loss” model. The expected loss model: (i) estimates the risk of loss even when risk is remote, (ii) estimates losses over the contractual life, (iii) considers past events, current conditions and reasonable supported forecasts and (iv) has no recognition threshold. The Company adopted the standard effective April 1, 2020 and the adoption did not have a material impact on the Company's operating results, financial position or cash flows. However, the adoption resulted in modifying the Company's policies for accounts receivable.
The Company estimates the allowance for credit losses in relation to accounts receivable based on relevant qualitative and quantitative information about historical events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported accounts receivable. Subsequent to April 1, 2020, accounts receivable are recorded at amortized cost less an allowance for expected credit losses. The Company maintains an allowance for credit losses for the expected failure or inability of its customers to make required payments. The Company recognizes the allowance for expected credit losses at inception and reassesses quarterly based on management’s expectation of the asset’s collectability. The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivables and current macroeconomic conditions, as well as management’s expectations of conditions in the future. The Company’s allowance for uncollectible accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics. The Company then adjusts the historical credit loss percentage by current and forecasted economic conditions. The Company then includes a baseline credit loss percentage into the historical credit loss percentage for each aging category to reflect the potential impact of the current and economic conditions. Such a baseline calculation will be adjusted further if changes in the economic environment impacts the Company's expectation for future credit losses.
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The following table sets forth the changes in the Company's allowance for doubtful accounts for the first quarter ended July 5, 2020:

Allowance for doubtful accounts: |  | Balance at Beginning of Period |  | Provision for doubtful debts |  | Write-offs, net of recoveries and other |  | Balance at End of Period
First quarter ended July 5, 2020 |  | $ | 15,246 |  |  | $ | 96 |  |  | $ | (2,113) |  |  | $ | 13,229 |

Accounting Pronouncements Issued But Not Adopted as of July 5, 2020
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740)”: Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the potential impact that the adoption will have on its consolidated financial statements.
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 guidance was effective upon issuance and generally can be applied through December 31, 2022. The Company is currently assessing the potential impact that the adoption will have on its consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, including, but not limited to, the potential impacts arising from the coronavirus pandemic of 2019 (“COVID-19”) and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts of COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates.
Examples of significant estimates include the allowance for credit losses, the recoverability of property, plant and equipment, the incremental borrowing rate for lease liabilities, the recoverability of intangible assets and other long-lived assets, fair value measurements, including those related to financial instruments, goodwill and intangible assets, valuation allowances on tax assets, pension and postretirement benefit obligations, contingencies and the identification and valuation of assets acquired and liabilities assumed in connection with business combinations.
2. Revenue Recognition
The Company's revenues by reportable segments are presented in Note 17.
Service revenues related to the work performed for the Company’s customers by its maintenance technicians generally represent a separate and distinct performance obligation. Control for these services passes to the customer as the services are performed. Service revenues for the first quarter of fiscal 2021 and 2020 amounted to $68,758 and $79,147, respectively.
A small portion of the Company's customer arrangements obligate the Company to create customized products for its customers that require the bundling of both products and services into a single performance obligation because the individual products and services that are required to fulfill the customer requirements do not meet the definition for a distinct performance obligation. These customized products generally have no alternative use to the Company and the terms and conditions of these arrangements give the Company the enforceable right to payment for performance completed to date, including a reasonable profit margin. For these arrangements, control transfers over time and the Company measures progress towards completion by selecting the input or output method that best depicts the transfer of control of the underlying goods and services to the customer for each respective arrangement. Methods used by the Company to measure progress toward completion include labor
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hours, costs incurred and units of production. Revenues recognized over time for the first quarter of fiscal 2021 and 2020 amounted to $36,102 and $41,495, respectively.
On July 5, 2020, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $92,632, of which, the Company estimates that approximately $66,604 will be recognized as revenue in fiscal 2021, $24,149 in fiscal 2022, $1,808 in fiscal 2023, $18 in fiscal 2024 and $53 in fiscal 2025.
Any payments that are received from a customer in advance, prior to the satisfaction of a related performance obligation and billings in excess of revenue recognized, are deferred and treated as a contract liability. Advance payments and billings in excess of revenue recognized are classified as current or non-current based on the timing of when recognition of revenue is expected. As of July 5, 2020, the current and non-current portion of contract liabilities were $14,941 and $8,314, respectively. As of March 31, 2020, the current and non-current portion of contract liabilities were $17,342 and $8,356, respectively. Revenues recognized during the first quarter of fiscal 2021 and 2020 that were included in the contract liability at the beginning of the year, amounted to $3,466 and $4,467, respectively.
Amounts representing work completed and not billed to customers represent contract assets and were $44,792 and $39,048 as of July 5, 2020 and March 31, 2020, respectively.
The Company uses historic customer product return data as a basis of estimation for customer returns and records the reduction of sales at the time revenue is recognized. At July 5, 2020, the right of return asset related to the value of inventory anticipated to be returned from customers was $4,265 and refund liability representing amounts estimated to be refunded to customers was $6,970.
3. Leases
The Company leases manufacturing facilities, distribution centers, office space, vehicles and other equipment under non-cancellable leases with initial terms typically ranging from 1 to 17 years.
Short term leases with an initial term of 12 months or less are not presented on the balance sheet and expense is recognized as incurred.
The following table presents lease assets and liabilities and their balance sheet classification:

|  | Classification |  | As of July 5, 2020 |  | As of March 31, 2020
Operating Leases: |  |  |  |  |  |
Right-of-use assets |  | Other assets |  | $ | 71,124 |  |  | $ | 70,045 |
Operating lease current liabilities |  | Accrued expenses |  | 21,891 |  |  | 21,128 |
Operating lease non-current liabilities |  | Other liabilities |  | 51,461 |  |  | 51,215 |
Finance Leases: |  |  |  |  |  |
Right-of-use assets |  | Property, plant, and equipment, net |  | $ | 513 |  |  | $ | 540 |
Finance lease current liabilities |  | Accrued expenses |  | 169 |  |  | 162 |
Finance lease non-current liabilities |  | Other liabilities |  | 375 |  |  | 407 |

The components of lease expense for the first quarter ended July 5, 2020 and June 30, 2019 were as follows:

|  | Classification |  | Quarter ended July 5, 2020 |  | Quarter ended June 30, 2019
Operating Leases: |  |  |  |  |  |
Operating lease cost |  | Operating expenses |  | $ | 6,936 |  |  | $ | 7,295 |
Variable lease cost |  | Operating expenses |  | 2,119 |  |  | 1,706 |
Short term lease cost |  | Operating expenses |  | 1,829 |  |  | 2,184 |
Finance Leases: |  |  |  |  |  |
Depreciation |  | Operating expenses |  | $ | 42 |  |  | $ | 143 |
Interest expense |  | Interest expense |  | 7 |  |  | 12 |
Total |  |  |  | $ | 10,933 |  |  | $ | 11,340 |

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The following table presents the weighted average lease term and discount rates for leases as of July 5, 2020:

Operating Leases: |  |
Weighted average remaining lease term |  | 6 years
Weighted average discount rate |  | 5.11%
Finance Leases: |  |
Weighted average remaining lease term |  | 3.2 years
Weighted average discount rate |  | 4.92%

The following table presents future payments due under leases reconciled to lease liabilities as of July 5, 2020:

|  | Finance Leases |  | Operating Leases
Nine months ended March 31, 2021 |  | $ | 149 |  |  | $ | 19,170 |
Year ended March 31, |  |  |  |
2022 |  | 201 |  |  | 21,086 |
2023 |  | 158 |  |  | 14,239 |
2024 |  | 107 |  |  | 8,866 |
2025 |  | 15 |  |  | 5,641 |
Thereafter |  | 10 |  |  | 16,763 |
Total undiscounted lease payments |  | 640 |  |  | 85,765 |
Present value discount |  | 96 |  |  | 12,413 |
Lease liability |  | $ | 544 |  |  | $ | 73,352 |

The following table presents supplemental disclosures of cash flow information related to leases for the first quarter ended July 5, 2020 and June 30, 2019:

|  | Quarter ended July 5, 2020 |  | Quarter ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
Operating cash flows from finance leases |  | $ | 7 |  |  | $ | 12 |
Operating cash flows from operating leases |  | 6,921 |  |  | 7,213 |
Financing cash flows from finance leases |  | 41 |  |  | 142 |
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 |  | $ | — |  |  | $ | — |
Right-of-use assets obtained in exchange for new operating lease liabilities |  | 6,177 |  |  | 2,628 |

4. Acquisition
NorthStar
In fiscal 2020, the Company completed the acquisition of N Holding, AB (“NorthStar”) for $77,777 in cash consideration and the assumption of $107,018 in debt, which was funded using existing cash and credit facilities. NorthStar, through its direct and indirect subsidiaries, manufactures and distributes thin plate pure lead (TPPL) batteries and battery enclosures. NorthStar has two large manufacturing facilities in Springfield, Missouri. The Company acquired tangible and intangible assets, including trademarks, technology, customer relationships and goodwill. Based on valuations performed, trademarks were valued at $6,000, technology at $19,000, customer relationships at $9,000, and goodwill was recorded at $73,788. As a result of the change in operating and reportable segments discussed in Note 17, goodwill associated with the acquisition of NorthStar has been allocated to the Energy Systems and Specialty segments on a relative fair value basis. The useful lives of technology were estimated at 10 years, customer relationships were estimated at 15 to 18 years and trademarks were estimated at 5 years. Goodwill deductible for tax purposes is $72,056.
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The results of the NorthStar acquisition have been included in the Company’s Energy Systems and Specialty segments, respectively, from the date of acquisition. Pro forma earnings and earnings per share computations have not been presented as this acquisition is not considered material.
Other Intangible Assets
Information regarding the Company’s other intangible assets are as follows:

|  | Balance as of |  |  |  |  |  |  |  |  |  |
|  | July 5, 2020 |  |  |  |  |  | March 31, 2020 |  |  |  |
|  | Gross Amount |  | Accumulated Amortization |  | Net Amount |  | Gross Amount |  | Accumulated Amortization |  | Net Amount
Indefinite-lived intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Trademarks |  | $ | 147,749 |  |  | $ | (957) |  |  | $ | 146,792 |  |  | $ | 147,356 |  |  | $ | (953) |  |  | $ | 146,403 |
Finite-lived intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Customer relationships |  | 294,732 |  |  | (70,685) |  |  | 224,047 |  |  | 292,155 |  |  | (64,855) |  |  | 227,300 |
Non-compete |  | 3,038 |  |  | (2,824) |  |  | 214 |  |  | 3,021 |  |  | (2,817) |  |  | 204 |
Technology |  | 96,536 |  |  | (22,746) |  |  | 73,790 |  |  | 96,047 |  |  | (20,349) |  |  | 75,698 |
Trademarks |  | 8,008 |  |  | (2,245) |  |  | 5,763 |  |  | 8,008 |  |  | (1,928) |  |  | 6,080 |
Licenses |  | 1,196 |  |  | (1,196) |  |  | — |  |  | 1,196 |  |  | (1,196) |  |  | — |
Total |  | $ | 551,259 |  |  | $ | (100,653) |  |  | $ | 450,606 |  |  | $ | 547,783 |  |  | $ | (92,098) |  |  | $ | 455,685 |

The Company’s amortization expense related to finite-lived intangible assets was $8,555 for the first quarter of fiscal 2021, compared to $7,316 for the first quarter of fiscal 2020. The expected amortization expense based on the finite-lived intangible assets as of July 5, 2020, is $24,104 for the remainder of fiscal 2021, $32,420 in fiscal 2022, $31,122 in fiscal 2023, $27,725 in fiscal 2024 and $26,494 in fiscal 2025.
5. Inventories
Inventories, net consist of:

|  | July 5, 2020 |  | March 31, 2020
Raw materials |  | $ | 144,185 |  |  | $ | 141,906 |
Work-in-process |  | 88,091 |  |  | 91,520 |
Finished goods |  | 278,322 |  |  | 286,034 |
Total |  | $ | 510,598 |  |  | $ | 519,460 |

6. Fair Value of Financial Instruments
Recurring Fair Value Measurements
The following tables represent the financial assets and (liabilities) measured at fair value on a recurring basis as of July 5, 2020 and March 31, 2020, and the basis for that measurement:

|  | Total Fair Value Measurement July 5, 2020 |  | Quoted Price in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Lead forward contracts |  | $ | 3 |  |  | $ | — |  |  | $ | 3 |  |  | $ | — |
Foreign currency forward contracts |  | 93 |  |  | — |  |  | 93 |  |  | — |
Total derivatives |  | $ | 96 |  |  | $ | — |  |  | $ | 96 |  |  | $ | — |

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|  | 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 to the Company's consolidated financial statements included in its 2020 Annual Report.
The fair values for foreign currency forward contracts are based upon current quoted market prices and are classified as Level 2 based on the nature of the underlying market in which these derivatives are traded.
Financial Instruments
The fair values of the Company’s cash and cash equivalents approximate carrying value due to their short maturities.
The fair value of the Company’s short-term debt and borrowings under the Amended Credit Facility (as defined in Note 12), approximate their respective carrying value, as they are variable rate debt and the terms are comparable to market terms as of the balance sheet dates and are classified as Level 2.
In fiscal 2020, the Company issued its 4.375% Senior Notes due 2027 (the “2027 Notes”), with an original face value of $300,000. The Company's 5.00% Senior Notes due 2023 (the “2023 Notes”), with an original face value of $300,000, were issued in April 2015. The fair value of the 2027 Notes and 2023 Notes, (collectively, the “Senior Notes”) represent the trading values based upon quoted market prices and are classified as Level 2. The 2027 Notes were trading at approximately 99% and 94% of face value on July 5, 2020 and March 31, 2020, respectively. The 2023 Notes were trading at approximately 103% and 97% of face value on July 5, 2020 and March 31, 2020, respectively.
The carrying amounts and estimated fair values of the Company’s derivatives and Senior Notes at July 5, 2020 and March 31, 2020 were as follows:

|  | July 5, 2020 |  |  |  | March 31, 2020 |  |
|  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Financial assets: |  |  |  |  |  |  |  |
Derivatives (1) |  | $ | 96 |  |  | $ | 96 |  |  | $ | — |  |  | $ | — |
Financial liabilities: |  |  |  |  |  |  |  |
Senior Notes (2) |  | $ | 600,000 |  |  | $ | 606,000 |  |  | $ | 600,000 |  |  | $ | 573,000 |
Derivatives (1) |  | — |  |  | — |  |  | 2,432 |  |  | 2,432 |

(1)Represents lead and foreign currency forward contracts (see Note 7 for asset and liability positions of the lead and foreign currency forward contracts at July 5, 2020 and March 31, 2020).
(2)The fair value amount of the Senior Notes at July 5, 2020 and March 31, 2020 represent the trading value of the instruments.
7. Derivative Financial Instruments
The Company utilizes derivative instruments to reduce its exposure to fluctuations in commodity prices and foreign exchange rates under established procedures and controls. The Company does not enter into derivative contracts for speculative purposes. The Company’s agreements are with creditworthy financial institutions and the Company anticipates performance by counterparties to these contracts and therefore no material loss is expected.
Derivatives in Cash Flow Hedging Relationships
Lead Forward Contracts
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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 July 5, 2020 and March 31, 2020, the Company has hedged the price to purchase approximately 24.0 million pounds and 35.0 million pounds of lead, respectively, for a total purchase price of $19,299 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 July 5, 2020 and March 31, 2020, the Company had entered into a total of $9,062 and $34,008, respectively, of such contracts.
In the coming twelve months, the Company anticipates that $4,569 of pretax loss 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 Condensed Statements of Income as an offset to the corresponding actual changes in lead costs to be realized in connection with the variable lead cost and foreign exchange rates being hedged.
Derivatives not Designated in Hedging Relationships
Foreign Currency Forward Contracts
The Company also enters into foreign currency forward contracts to economically hedge foreign currency fluctuations on intercompany loans and foreign currency denominated receivables and payables. These are not designated as hedging instruments and changes in fair value of these instruments are recorded directly in the Consolidated Condensed Statements of Income. As of July 5, 2020 and March 31, 2020, the notional amount of these contracts was $19,618 and $42,232, respectively.
Presented below in tabular form is information on the location and amounts of derivative fair values in the Consolidated Condensed Balance Sheets and derivative gains and losses in the Consolidated Condensed Statements of Income:
Fair Value of Derivative Instruments
July 5, 2020 and March 31, 2020

|  | Derivatives and Hedging Activities Designated as Cash Flow Hedges |  |  |  | Derivatives and Hedging Activities Not Designated as Hedging Instruments |  |
|  | July 5, 2020 |  | March 31, 2020 |  | July 5, 2020 |  | March 31, 2020
Prepaid and other current assets: |  |  |  |  |  |  |  |
Lead forward contracts |  | $ | 3 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Foreign currency forward contracts |  | 72 |  |  | — |  |  | 21 |  |  | 375 |
Total assets |  | $ | 75 |  |  | $ | — |  |  | $ | 21 |  |  | $ | 375 |
Accrued expenses: |  |  |  |  |  |  |  |
Lead forward contracts |  | $ | — |  |  | $ | 2,433 |  |  | $ | — |  |  | $ | — |
Foreign currency forward contracts |  | — |  |  | 374 |  |  | — |  |  | — |
Total liabilities |  | $ | — |  |  | $ | 2,807 |  |  | $ | — |  |  | $ | — |

The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income
For the quarter ended July 5, 2020

Derivatives Designated as Cash Flow Hedges |  | Pretax Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion) |  | Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) |  | Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Lead forward contracts |  | $ | (1,274) |  |  | Cost of goods sold |  | $ | (3,799) |
Foreign currency forward contracts |  | 261 |  |  | Cost of goods sold |  | (283) |
Total |  | $ | (1,013) |  |  |  |  | $ | (4,082) |

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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 |  | $ | 262 |
Total |  |  | $ | 262 |

The Effect of Derivative Instruments on the Consolidated Condensed Statements of Income
For the quarter ended June 30, 2019

Derivatives Designated as Cash Flow Hedges |  | Pretax Gain (Loss) Recognized in AOCI on Derivatives (Effective Portion) |  | Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) |  | Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion)
Lead forward contracts |  | $ | (2,494) |  |  | Cost of goods sold |  | $ | 441 |
Foreign currency forward contracts |  | 103 |  |  | Cost of goods sold |  | 217 |
Total |  | $ | (2,391) |  |  |  |  | $ | 658 |

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 |  | $ | 34 |
Total |  |  | $ | 34 |

8. Income Taxes
The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the first quarter of fiscal 2021 and 2020 was based on the estimated effective tax rates applicable for the full years ending March 31, 2021 and March 31, 2020, respectively, after giving effect to items specifically related to the interim periods. The Company’s effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which the Company operates, change in tax laws and the amount of the Company's consolidated earnings before taxes.
On May 19, 2019, a public referendum held in Switzerland approved the Federal Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF) as adopted by the Swiss Federal Parliament on September 28, 2018. The Company recorded a deferred tax asset of $22,500 during fiscal 2020 related to the amortizable goodwill. Based on further discussions with the Swiss tax authority, the Company recorded an additional income tax benefit of $1,883 during the first quarter of fiscal 2021.
The consolidated effective income tax rates for the first quarter of fiscal 2021 and 2020 were 15.4% and 17.0%, respectively. The rate decrease in the first quarter of fiscal 2021 compared to the comparable prior year quarter is primarily due to Swiss tax reform and changes in the mix of earnings among tax jurisdictions.
Foreign income as a percentage of worldwide income is estimated to be 69% for fiscal 2021 compared to 64% for fiscal 2020. The foreign effective tax rates for the first quarter of fiscal 2021 and 2020 were 9% and 11.5%, respectively. The rate decrease compared to the prior year period 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 the Company's overall foreign mix of income and was taxed at an effective income tax rate of approximately 6% in both the current and prior year quarter of fiscal 2021 and fiscal 2020.
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9. Warranty
The Company provides for estimated product warranty expenses when products are sold, with related liabilities included within accrued expenses and other liabilities. As warranty estimates are forecasts that are based on the best available information, primarily historical claims experience, costs of claims may ultimately differ from amounts provided. An analysis of changes in the liability for product warranties is as follows:

|  | Quarter ended |  |  |  |  |  |
|  | July 5, 2020 |  | June 30, 2019 |  |  |  |
Balance at beginning of period |  | $ | 63,525 |  |  | $ | 54,568 |  |  |  |  |
Current period provisions |  | 6,974 |  |  | 7,519 |  |  |  |  |
Costs incurred |  | (11,310) |  |  | (5,948) |  |  |  |  |
Foreign currency translation adjustment |  | 582 |  |  | 40 |  |  |  |  |
Balance at end of period |  | $ | 59,771 |  |  | $ | 56,179 |  |  |  |  |

10. Commitments, Contingencies and Litigation
Litigation and Other Legal Matters
In the ordinary course of business, the Company and its subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings are generally based on alleged violations of environmental, anticompetition, employment, contract and other laws. In some of these actions and proceedings, claims for substantial monetary damages are asserted against the Company and its subsidiaries. In the ordinary course of business, the Company and its subsidiaries are also subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations, and threatened legal actions and proceedings. In connection with formal and informal inquiries by federal, state, local and foreign agencies, the Company and its subsidiaries receive numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of their activities.
European Competition Investigations
Certain of the Company’s European subsidiaries had received subpoenas and requests for documents and, in some cases, interviews from, and have had on-site inspections conducted by, the competition authorities of Belgium, Germany and the Netherlands relating to conduct and anticompetitive practices of certain industrial battery participants. For additional information regarding these matters, see Note 19 - Commitments, Contingencies and Litigation to the consolidated financial statements contained in the Annual Report on Form 10-K for the fiscal year ended March 31, 2020.
The Company settled the Belgian regulatory proceeding in February 2016 by acknowledging certain anticompetitive practices and conduct and agreeing to pay a fine of $1,962, which was paid in March 2016. With respect to the Belgian regulatory matter, during the first quarter of fiscal 2019, the Company paid $2,402 towards certain aspects related to this matter, which are under appeal. As of July 5, 2020 and March 31, 2020, the Company did not have a reserve balance related to these matters.
The foregoing estimate of losses is based upon currently available information for these proceedings. However, 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 is responsible for certain cleanup obligations at the former Yuasa battery facility in Sumter, South Carolina, that predates its ownership of this facility. This manufacturing facility was closed in 2001 and the Company established a reserve
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for this facility, which was $1,060 as of July 5, 2020 and March 31, 2020. Based on current information, the Company’s management believes this reserve is adequate to satisfy the Company’s environmental liabilities at this facility. This facility is separate from the Company’s current metal fabrication facility in Sumter.
Lead and Foreign Currency Forward Contracts
To stabilize its lead costs and reduce volatility from currency movements, the Company enters into contracts with financial institutions. The vast majority of such contracts are for a period not extending beyond one year. Please refer to Note 7 - Derivative Financial Instruments for more details.
11. Restructuring and other Exit Charges
Restructuring Plans
As disclosed in the Company's Form 10-K for the year ended March 31, 2020, the Company committed to restructuring plans aimed at improving operational efficiencies across its lines of business. A substantial portion of these plans are complete with an estimated $6,500 remaining to be incurred by the end of fiscal 2021. The charges for the first quarter of fiscal 2021 relate to severance payments and are presented by reportable segments as follows:

|  | Energy Systems |  | Motive Power |  | Specialty |  | Total
Restructuring charges |  | $ | 507 |  |  | $ | 762 |  |  | $ | 134 |  |  | $ | 1,403 |

A roll-forward of the restructuring reserve is as follows:

Balance as of March 31, 2020 |  | $ | 3,325 |
Accrued |  | 1,403 |
Costs incurred |  | (1,291) |
Foreign currency impact |  | 140 |
Balance as of July 5, 2020 |  | $ | 3,577 |

Exit Charges
During fiscal 2019, the Company committed to a plan to close its facility in Targovishte, Bulgaria, which produced diesel-electric submarine batteries. Management determined that the future demand for batteries of diesel-electric submarines was not sufficient given the number of competitors in the market. Of the estimated total charges of $30,000 for all these actions, the Company had recorded charges amounting to $20,242 in fiscal 2019, relating to severance and inventory and fixed asset write-offs and an additional $5,123 relating to cash and non-cash charges during fiscal 2020. During the first quarter of fiscal 2021, in keeping with its strategy of exiting the manufacture of batteries for diesel-electric submarines, the Company continued to execute further actions which resulted in a non-material net impact from the cash and non-cash charges.
Richmond, Kentucky Plant Fire
In fiscal 2020, a fire broke out in the battery formation area of the Company's Richmond, Kentucky motive power production facility. The Company maintains insurance policies for both property damage and business interruption and are finishing cleanup and repair. The Company estimates that the total claim, including the replacement of inventory and equipment, the cleanup and repairs to the building, as well as the claim for business interruption may exceed $50,000.
In fiscal 2020, the Company recorded $17,037 of damages caused to its fixed assets and inventories, as well as for cleanup, asset replacement and other ancillary activities directly associated with the fire and received $12,000 in advances related to its initial claims for recovery from its property and casualty insurance carriers.
During the first quarter of fiscal 2021, the Company recorded a further charge of $9,274 for cleanup and received $10,000 in advances from the insurance carriers. Accumulated charges relating to the fire through July 5, 2020 were $26,311 and advances received from the property and casualty insurance carriers were $22,000.
The Company also received $8,700 through July 5, 2020, of which $3,700 was recorded in the first quarter of fiscal 2021 and $5,000 in fiscal 2020, relating to a partial settlement of its claim for business interruption which was recorded as a reduction to cost of goods sold.
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12. Debt
The following summarizes the Company’s long-term debt as of July 5, 2020 and March 31, 2020:

|  | July 5, 2020 |  |  |  | March 31, 2020 |  |
|  | Principal |  | Unamortized Issuance Costs |  | Principal |  | Unamortized Issuance Costs
Senior Notes |  | $ | 600,000 |  |  | $ | 6,006 |  |  | $ | 600,000 |  |  | $ | 6,306 |
Amended Credit Facility, due 2022 |  | 488,487 |  |  | 1,969 |  |  | 513,224 |  |  | 2,187 |
|  | $ | 1,088,487 |  |  | $ | 7,975 |  |  | $ | 1,113,224 |  |  | $ | 8,493 |
Less: Unamortized issuance costs |  | 7,975 |  |  |  |  | 8,493 |  |  |
Long-term debt, net of unamortized issuance costs |  | $ | 1,080,512 |  |  |  |  | $ | 1,104,731 |  |  |

The Company's Senior Notes comprise the following:
4.375% Senior Notes due 2027
On December 11, 2019, the Company issued $300,000 in aggregate principal amount of its 4.375% Senior Notes due December 15, 2027 (the “2027 Notes”). Proceeds from this offering, net of debt issuance costs were $296,250 and were utilized to pay down the Amended 2017 Revolver (defined below). The 2027 Notes bear interest at a rate of 4.375% per annum accruing from December 11, 2019. Interest is payable semiannually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020. The 2027 Notes mature on December 15, 2027, unless earlier redeemed or repurchased in full. The 2027 Notes are unsecured and unsubordinated obligations of the Company. The 2027 Notes are fully and unconditionally guaranteed, jointly and severally, by certain of its subsidiaries that are guarantors under the Amended Credit Facility. These guarantees are unsecured and unsubordinated obligations of such guarantors.
The Company may redeem, prior to September 15, 2027, all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest and a “make whole” premium to, but 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.
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As of July 5, 2020, the Company had $88,000 outstanding under the Amended 2017 Revolver and $400,487 under the Amended 2017 Term Loan.
Subsequent to the amendment, the quarterly installments payable on the Amended 2017 Term Loan are $5,645 beginning December 31, 2018, $8,468 beginning December 31, 2019 and $11,290 beginning December 31, 2020 with a final payment of $320,000 on September 30, 2022. The Amended Credit Facility may be increased by an aggregate amount of $325,000 in revolving commitments and / or one or more new tranches of term loans, under certain conditions. Both the Amended 2017 Revolver and the Amended 2017 Term Loan bear interest, at the Company's option, at a rate per annum equal to either (i) the London Interbank Offered Rate (“LIBOR”) or Canadian Dollar Offered Rate (“CDOR”) plus (i) LIBOR plus between 1.25% and 2.00% (currently 1.50% and based on the Company's consolidated net leverage ratio) or (ii) the U.S. Dollar Base Rate (which equals, for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate plus 0.50%, (b) Bank of America “Prime Rate” and (c) the Eurocurrency Base Rate plus 1%; provided that, if the Base Rate shall be less than zero, such rate shall be deemed zero) (iii) the CDOR Base Rate equal to the higher of (a) Bank of America “Prime Rate” and (b) average 30-day CDOR rate plus 0.50%. Obligations under the Amended Credit Facility are secured by substantially all of the Company’s existing and future acquired assets, including substantially all of the capital stock of the Company’s United States subsidiaries that are guarantors under the Amended Credit Facility and up to 65% of the capital stock of certain of the Company’s foreign subsidiaries that are owned by the Company’s United States subsidiaries.
The Amended Credit Facility allows for up to two temporary increases in the maximum leverage ratio from 3.50x to 4.00x for a four quarter period following an acquisition larger than $250,000. Effective December 7, 2018 through December 28, 2019, the maximum leverage ratio was increased to 4.00x. On December 29, 2019, the maximum leverage ratio returned to 3.50x.
The current portion of the Amended 2017 Term Loan of $42,009 is classified as long-term debt as the Company expects to refinance the future quarterly payments with revolver borrowings under the Amended Credit Facility.
Short-Term Debt
As of July 5, 2020 and March 31, 2020, the Company had $46,762 and $46,544, respectively, of short-term borrowings. The weighted average interest rate on these borrowings was approximately 2% at July 5, 2020 and 3% at March 31, 2020.
Letters of Credit
As of July 5, 2020 and March 31, 2020, the Company had standby letters of credit of $7,720.
Debt Issuance Costs
Amortization expense, relating to debt issuance costs, included in interest expense was $518 and $378, respectively, for the quarters ended July 5, 2020 and June 30, 2019. Debt issuance costs, net of accumulated amortization, totaled $7,975 and $8,493, respectively, at July 5, 2020 and March 31, 2020.
Available Lines of Credit
As of July 5, 2020 and March 31, 2020, the Company had available and undrawn, under all its lines of credit, $701,255 and $693,640, respectively, including $93,561 and $105,946, respectively, of uncommitted lines of credit as of July 5, 2020 and March 31, 2020.
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13. Retirement Plans
The following tables present the components of the Company’s net periodic benefit cost related to its defined benefit pension plans:

|  | United States Plans |  |  |  | International Plans |  |
|  | Quarter ended |  |  |  | Quarter ended |  |
|  | July 5, 2020 |  | June 30, 2019 |  | July 5, 2020 |  | June 30, 2019
Service cost |  | $ | — |  |  | $ | — |  |  | $ | 235 |  |  | $ | 235 |
Interest cost |  | 132 |  |  | 154 |  |  | 327 |  |  | 376 |
Expected return on plan assets |  | (65) |  |  | (112) |  |  | (447) |  |  | (538) |
Amortization and deferral |  | 133 |  |  | 52 |  |  | 244 |  |  | 253 |
Net periodic benefit cost |  | $ | 200 |  |  | $ | 94 |  |  | $ | 359 |  |  | $ | 326 |

14. Stock-Based Compensation
As of July 5, 2020, the Company maintains the 2017 Equity Incentive Plan (“2017 EIP”). The 2017 EIP reserved 4,173,554 shares of common stock for the grant of various classes of nonqualified stock options, restricted stock units, market condition-based on total shareholder return (“TSR”) and performance condition-based share units (“PSU”) and other forms of equity-based compensation.
The Company recognized stock-based compensation expense associated with its equity incentive plans of $5,053 for the first quarter of fiscal 2021 and $3,874 for the first quarter of fiscal 2020. The Company recognizes compensation expense using the straight-line method over the vesting period of the awards.
During the first quarter of fiscal 2021, the Company granted to non-employee directors 3,353 restricted stock units, pursuant to the 2017 EIP. The awards vest immediately upon the date of grant and are settled in shares of common stock.
Common stock activity during the first quarter of fiscal 2021 included the vesting of 120,390 restricted stock units, 65,096 TSRs and the exercise of 8,323 stock options.
As of July 5, 2020, there were 778,939 non-qualified stock options, 755,489 restricted stock units, 128,375 TSRs and 101,406 PSUs outstanding.
15. Stockholders’ Equity and Noncontrolling Interests
Common Stock
The following demonstrates the change in the number of shares of common stock outstanding during the first quarter ended July 5, 2020:

Shares outstanding as of March 31, 2020 |  | 42,323,305 |
Shares issued under equity-based compensation plans, net of equity awards surrendered for option price and taxes |  | 141,889 |
Shares outstanding as of July 5, 2020 |  | 42,465,194 |

Treasury Stock
During the first quarter ended July 5, 2020, the Company did not purchase any shares but purchased 376,343 shares for $23,029 during the first quarter ended June 30, 2019. At July 5, 2020 and March 31, 2020, the Company held 12,786,685 and 12,791,503 shares as treasury stock, respectively. During the first quarter ended July 5, 2020, the Company also issued 4,818 shares out of its treasury stock, valued at $62.55 per share, on a LIFO basis, to participants under the Company's Employee Stock Purchase Plan.
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Accumulated Other Comprehensive Income (“AOCI ”)
The components of AOCI, net of tax, as of July 5, 2020 and March 31, 2020, are as follows:

|  | March 31, 2020 |  | Before Reclassifications |  | Amounts Reclassified from AOCI |  | July 5, 2020
Pension funded status adjustment |  | $ | (22,794) |  |  | $ | — |  |  | $ | 291 |  |  | $ | (22,503) |
Net unrealized (loss) gain on derivative instruments |  | (5,923) |  |  | (773) |  |  | 3,116 |  |  | (3,580) |
Foreign currency translation adjustment |  | (186,289) |  |  | 28,139 |  |  | — |  |  | (158,150) |
Accumulated other comprehensive (loss) income |  | $ | (215,006) |  |  | $ | 27,366 |  |  | $ | 3,407 |  |  | $ | (184,233) |

The following table presents reclassifications from AOCI during the first quarter ended July 5, 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 |  | $ | 4,082 |  |  | Cost of goods sold
Tax benefit |  | (966) |  |  |
Net unrealized loss on derivative instruments, net of tax |  | $ | 3,116 |  |  |
Defined benefit pension costs: |  |  |  |
Prior service costs and deferrals |  | $ | 377 |  |  | Net periodic benefit cost, included in other (income) expense, net - See Note 13
Tax benefit |  | (86) |  |  |
Net periodic benefit cost, net of tax |  | $ | 291 |  |  |

The following table presents reclassifications from AOCI during the first quarter ended June 30, 2019:

Components of AOCI |  | Amounts Reclassified from AOCI |  | Location of (Gain) Loss Recognized on Income Statement
Derivatives in cash flow hedging relationships: |  |  |  |
Net unrealized gain on derivative instruments |  | $ | (658) |  |  | Cost of goods sold
Tax expense |  | 156 |  |  |
Net unrealized gain on derivative instruments, net of tax |  | $ | (502) |  |  |
Defined benefit pension costs: |  |  |  |
Prior service costs and deferrals |  | $ | 305 |  |  | Net periodic benefit cost, included in other (income) expense, net - See Note 13
Tax benefit |  | (68) |  |  |
Net periodic benefit cost, net of tax |  | $ | 237 |  |  |

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The following demonstrates the change in equity attributable to EnerSys stockholders and nonredeemable noncontrolling interests during the first quarter ended July 5, 2020:

(In Thousands, Except Per Share Data) |  | Preferred Stock |  | Common Stock |  | Additional Paid-in Capital |  | Treasury Stock |  | Retained Earnings |  | Accumulated Other Comprehensive Income (Loss) |  | Contra-Equity |  | Total EnerSys Stockholders’ Equity |  | Non- redeemable Non- Controlling Interests |  | Total Equity
Balance at March 31, 2020 |  | $ | — |  |  | $ | 551 |  |  | $ | 529,100 |  |  | $ | (564,376) |  |  | $ | 1,556,980 |  |  | $ | (215,006) |  |  | $ | (6,724) |  |  | $ | 1,300,525 |  |  | $ | 3,537 |  |  | $ | 1,304,062 |
Stock-based compensation |  | — |  |  | — |  |  | 5,053 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,053 |  |  | — |  |  | 5,053 |
Exercise of stock options |  | — |  |  | 2 |  |  | 479 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 481 |  |  | — |  |  | 481 |
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net |  | — |  |  | — |  |  | (3,135) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,135) |  |  | — |  |  | (3,135) |
Other |  | — |  |  | — |  |  | (123) |  |  | 299 |  |  | — |  |  | — |  |  | — |  |  | 176 |  |  | — |  |  | 176 |
Net earnings |  | — |  |  | — |  |  | — |  |  | — |  |  | 35,183 |  |  | — |  |  | — |  |  | 35,183 |  |  | — |  |  | 35,183 |
Dividends ($0.175 per common share) |  | — |  |  | — |  |  | 172 |  |  | — |  |  | (7,600) |  |  | — |  |  | — |  |  | (7,428) |  |  | — |  |  | (7,428) |
Other comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension funded status adjustment (net of tax benefit of $86) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 291 |  |  | — |  |  | 291 |  |  | — |  |  | 291 |
Net unrealized gain (loss) on derivative instruments (net of tax expense of $726) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,343 |  |  | — |  |  | 2,343 |  |  | — |  |  | 2,343 |
Foreign currency translation adjustment |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 28,139 |  |  | — |  |  | 28,139 |  |  | 8 |  |  | 28,147 |
Balance at July 5, 2020 |  | $ | — |  |  | $ | 553 |  |  | $ | 531,546 |  |  | $ | (564,077) |  |  | $ | 1,584,563 |  |  | $ | (184,233) |  |  | $ | (6,724) |  |  | $ | 1,361,628 |  |  | $ | 3,545 |  |  | $ | 1,365,173 |

The following demonstrates the change in equity attributable to EnerSys stockholders and nonredeemable noncontrolling interests during the first quarter ended June 30, 2019:

(In Thousands, Except Per Share Data) |  | Preferred Stock |  | Common Stock |  | Additional Paid-in Capital |  | Treasury Stock |  | Retained Earnings |  | Accumulated Other Comprehensive Income (Loss) |  | Contra-Equity |  | Total EnerSys Stockholders’ Equity |  | Non- redeemable Non- Controlling Interests |  | Total Equity
Balance at March 31, 2019 |  | $ | — |  |  | $ | 548 |  |  | $ | 512,696 |  |  | $ | (530,760) |  |  | $ | 1,450,325 |  |  | $ | (142,682) |  |  | $ | (7,840) |  |  | $ | 1,282,287 |  |  | $ | 3,730 |  |  | $ | 1,286,017 |
Stock-based compensation |  | — |  |  | — |  |  | 3,874 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,874 |  |  | — |  |  | 3,874 |
Exercise of stock options |  | — |  |  | 3 |  |  | 35 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 38 |  |  | — |  |  | 38 |
Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net |  | — |  |  | — |  |  | (6,081) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,081) |  |  | — |  |  | (6,081) |
Purchase of common stock |  | — |  |  | — |  |  | — |  |  | (23,029) |  |  | — |  |  | — |  |  | — |  |  | (23,029) |  |  | — |  |  | (23,029) |
Other |  | — |  |  | — |  |  | (80) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (80) |  |  | — |  |  | (80) |
Net earnings |  | — |  |  | — |  |  | — |  |  | — |  |  | 48,636 |  |  | — |  |  | — |  |  | 48,636 |  |  | — |  |  | 48,636 |
Dividends ($0.175 per common share) |  | — |  |  | — |  |  | 133 |  |  | — |  |  | (7,632) |  |  | — |  |  | — |  |  | (7,499) |  |  | — |  |  | (7,499) |
Other comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pension funded status adjustment (net of tax benefit of $68) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 237 |  |  | — |  |  | 237 |  |  | — |  |  | 237 |
Net unrealized gain (loss) on derivative instruments (net of tax benefit of $720) |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,329) |  |  | — |  |  | (2,329) |  |  | — |  |  | (2,329) |
Foreign currency translation adjustment |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,128) |  |  | — |  |  | (3,128) |  |  | (83) |  |  | (3,211) |
Balance at June 30, 2019 |  | $ | — |  |  | $ | 551 |  |  | $ | 510,577 |  |  | $ | (553,789) |  |  | $ | 1,491,329 |  |  | $ | (147,902) |  |  | $ | (7,840) |  |  | $ | 1,292,926 |  |  | $ | 3,647 |  |  | $ | 1,296,573 |

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16. 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.

|  | Quarter ended |  |  |  |  |  |
|  | July 5, 2020 |  | June 30, 2019 |  |  |  |
Net earnings attributable to EnerSys stockholders |  | $ | 35,183 |  |  | $ | 48,636 |  |  |  |  |
Weighted-average number of common shares outstanding: |  |  |  |  |  |  |  |
Basic |  | 42,385,888 |  |  | 42,656,339 |  |  |  |  |
Dilutive effect of: |  |  |  |  |  |  |  |
Common shares from exercise and lapse of equity awards, net of shares assumed reacquired |  | 546,166 |  |  | 462,095 |  |  |  |  |
Diluted weighted-average number of common shares outstanding |  | 42,932,054 |  |  | 43,118,434 |  |  |  |  |
Basic earnings per common share attributable to EnerSys stockholders |  | $ | 0.83 |  |  | $ | 1.14 |  |  |  |  |
Diluted earnings per common share attributable to EnerSys stockholders |  | $ | 0.82 |  |  | $ | 1.13 |  |  |  |  |
Anti-dilutive equity awards not included in diluted weighted-average common shares |  | 386,263 |  |  | 656,810 |  |  |  |  |

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17. Business Segments
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 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 equipmen t; 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 for the first quarter ended July 5, 2020 and June 30, 2019, is shown below:

|  | Quarter ended |  |  |  |  |  |
|  | July 5, 2020 |  | June 30, 2019 |  |  |  |
Net sales by segment to unaffiliated customers |  |  |  |  |  |  |  |
Energy Systems |  | $ | 353,387 |  |  | $ | 353,893 |  |  |  |  |
Motive Power |  | 262,834 |  |  | 344,387 |  |  |  |  |
Specialty |  | 88,703 |  |  | 81,950 |  |  |  |  |
Total net sales |  | $ | 704,924 |  |  | $ | 780,230 |  |  |  |  |
Operating earnings by segment |  |  |  |  |  |  |  |
Energy Systems |  | $ | 22,085 |  |  | $ | 23,587 |  |  |  |  |
Motive Power |  | 27,276 |  |  | 37,098 |  |  |  |  |
Specialty |  | 5,246 |  |  | 10,023 |  |  |  |  |
Restructuring charges - Energy Systems |  | (512) |  |  | (1,110) |  |  |  |  |
Restructuring charges - Motive Power |  | (762) |  |  | (558) |  |  |  |  |
Restructuring and other exit charges - Specialty |  | (113) |  |  | (704) |  |  |  |  |
Total operating earnings (1) |  | $ | 53,220 |  |  | $ | 68,336 |  |  |  |  |

(1) The Company does not allocate interest expense or other (income) expense to the reportable segments.
(2) The Company does not identify or allocate assets by reportable segment, nor does the CODM evaluate reportable segments using discrete asset information.
(3) Reportable segments do not record inter-segment revenues and accordingly there are none to report.
Goodwill
Concurrent with the change in reporting 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 reportable segments as of April 1, 2020, using the relative fair value approach, as well as any changes in the carrying amount of goodwill by segment during the first quarter of fiscal 2021:
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|  | Energy Systems |  | Motive Power |  | Specialty |  | Total
Balance at March 31, 2020 |  | $ | 263,150 |  |  | $ | 308,497 |  |  | $ | 92,289 |  |  | $ | 663,936 |
Foreign currency translation adjustment |  | 4,971 |  |  | 6,119 |  |  | 1,641 |  |  | 12,731 |
Balance as of July 5, 2020 |  | $ | 268,121 |  |  | $ | 314,616 |  |  | $ | 93,930 |  |  | $ | 676,667 |

18. Subsequent Events
On August 12, 2020, the Board of Directors approved a quarterly cash dividend of $0.175 per share of common stock to be paid on September 25, 2020, to stockholders of record as of September 11, 2020.
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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor for forward-looking statements made by or on behalf of EnerSys. EnerSys and its representatives may, from time to time, make written or verbal forward-looking statements, including statements contained in EnerSys’ filings with the Securities and Exchange Commission ( “SEC”) and its reports to stockholders. Generally, the inclusion of the words “anticipate,” “believe,” “expect,” “future,” “intend,” “estimate,” “will,” “plans,” or the negative of such terms and similar expressions identify statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. All statements addressing operating performance, events, or developments that EnerSys expects or anticipates will occur in the future, including statements relating to sales growth, earnings or earnings per share growth, and market share, as well as statements expressing optimism or pessimism about future operating results, are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are and will be based on management’s then-current beliefs and assumptions regarding future events and operating performance and on information currently available to management, and are applicable only as of the dates of such statements.
Forward-looking statements involve risks, uncertainties and assumptions. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Actual results may differ materially from those expressed in these forward-looking statements due to a number of uncertainties and risks, including the risks described in the Company’s 2020 Annual Report on Form 10-K (the “2020 Annual Report”) and other unforeseen risks. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Quarterly Report on Form 10-Q, even if subsequently made available by us on our website or otherwise, and we undertake no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
Our actual results may differ materially from those contemplated by the forward-looking statements for a number of reasons, including the following factors:
•economic, financial and other impacts of the COVID-19 pandemic;
•general cyclical patterns of the industries in which our customers operate;
•the extent to which we cannot control our fixed and variable costs;
•the raw materials in our products may experience significant fluctuations in market price and availability;
•certain raw materials constitute hazardous materials that may give rise to costly environmental and safety claims;
•legislation regarding the restriction of the use of certain hazardous substances in our products;
•risks involved in our operations such as disruption of markets, changes in import and export laws, environmental regulations, currency restrictions and local currency exchange rate fluctuations;
•our ability to raise our selling prices to our customers when our product costs increase;
•the extent to which we are able to efficiently utilize our global manufacturing facilities and optimize our capacity;
•general economic conditions in the markets in which we operate;
•competitiveness of the battery markets and other energy solutions for industrial applications throughout the world;
•our timely development of competitive new products and product enhancements in a changing environment and the acceptance of such products and product enhancements by customers;
•our ability to adequately protect our proprietary intellectual property, technology and brand names;
•litigation and regulatory proceedings to which we might be subject;
•our expectations concerning indemnification obligations;
•changes in our market share in the business segments where we operate;
•our ability to implement our cost reduction initiatives successfully and improve our profitability;
•quality problems associated with our products;
•our ability to implement business strategies, including our acquisition strategy, manufacturing expansion and restructuring plans;
•our acquisition strategy may not be successful in locating advantageous targets;
•our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we acquire into our operations and our ability to realize related revenue synergies, strategic gains, and cost savings may be significantly harder to achieve, if at all, or may take longer to achieve;
•potential goodwill impairment charges, future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames;
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•our debt and debt service requirements which may restrict our operational and financial flexibility, as well as imposing unfavorable interest and financing costs;
•our ability to maintain our existing credit facilities or obtain satisfactory new credit facilities;
•adverse changes in our short and long-term debt levels under our credit facilities;
•our exposure to fluctuations in interest rates on our variable-rate debt;
•our ability to attract and retain qualified management and personnel;
•our ability to maintain good relations with labor unions;
•credit risk associated with our customers, including risk of insolvency and bankruptcy;
•our ability to successfully recover in the event of a disaster affecting our infrastructure, supply chain, or our facilities, such as the Richmond, Kentucky facility, including, but not limited to, satisfactory resolution of insurance coverage and claims for both property damage, business interruption and other insurable losses, strategy for business interruption and revenue loss;
•occurrence of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, pandemics, outbreaks of hostilities or terrorist acts, or the effects of climate change, and our ability to deal effectively with damages or disruptions caused by the foregoing; and
•the operation, capacity and security of our information systems and infrastructure.
This list of factors that may affect future performance is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
In the following discussion and analysis of results of operations and financial condition, certain financial measures may be considered “non-GAAP financial measures” under SEC rules. These rules require supplemental explanation and reconciliation, which is provided in this Quarterly Report on Form 10-Q. EnerSys’ management uses the non-GAAP measures “primary working capital” and “primary working capital percentage” in its evaluation of business segment cash flow and financial position performance. These disclosures have limitations as an analytical tool, should not be viewed as a substitute for cash flow determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Management believes that this non-GAAP supplemental information is helpful in understanding the Company’s ongoing operating results.
Overview
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 new 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 has 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 Company's three reportable segments, based on lines of business, 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 power solutions and services to broadband, telecom, renewable and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries.
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•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 equipmen t; 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.
Economic Climate
The COVID-19 pandemic has weakened economic activity around the world. EnerSys’ lines of business have been affected by varying degrees around the world. Our Motive Power business has been our most impacted segment as many industrial manufacturing plants around the world were closed or operated on reduced production levels. We expect the Motive Power business to recover as COVID-19 imposed restrictions are eased and the general economy recovers.
Our Energy Systems business has been less impacted as telecommunications and broadband operators either harden their networks to make them more robust or increase bandwidth to handle the increased demand for remote data caused by the work and school from home initiatives. While the pandemic may have caused a delay in full scale deployment of 5G telecom networks, we are seeing a number of companies starting their 5G deployments and feel the pandemic has reinforced the need for 5G.
Within the Specialty business, lower demand in the truck original equipment manufacturer (OEM) market has been partially offset by increased demand in aftermarket retail and distribution, while defense activity remains high.
Volatility of Commodities 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 and a forecasted global economic recession, we anticipate that our commodity costs will be lower in the near future and foreign currency exposures may continue to fluctuate as they have in the past several years. Since the outbreak of COVID-19 in our fourth fiscal quarter of fiscal 2020, we have experienced declining commodity costs.
Customer Pricing
Our selling prices fluctuated during the last several years to offset the volatile cost of commodities. Approximately 30% of our revenue is currently subject to agreements that adjust pricing to a market-based index for lead. Selling prices rose for the most part of fiscal 2018 in response to increased lead and other commodity costs, peaked in the first quarter of fiscal 2019 and then declined sequentially in every quarter in fiscal 2019. In fiscal 2020, our selling prices continued to decline in response to declining commodity costs, including lead. Based on current commodity markets, we will likely see continued year over year benefits in fiscal 2021 from declining commodity costs, with some related reduction in our selling prices.
Liquidity and Capital Resources
We believe that our financial position is strong and we have substantial liquidity to cover short-term liquidity requirements and anticipated growth in the foreseeable future, with $384 million of available cash and cash equivalents and available and undrawn credit lines of approximately $701 million at July 5, 2020, availability subject to Credit Agreement financial covenants.
A substantial majority of the Company’s cash and investments are held by foreign subsidiaries and are considered to be indefinitely reinvested and 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.
We believe that our strong capital structure and liquidity affords us access to capital for future acquisition and stock repurchase opportunities and continued dividend payments.
Results of Operations
Net Sales
Net sales decreased $75.3 million or 9.7% in the first quarter of fiscal 2021 as compared to the first quarter of fiscal 2020. This decrease was the result of a 11% decrease in organic volume, a 2% decrease in foreign currency translation impact and a 1% decrease in pricing, partially offset by a 4% increase from the NorthStar acquisition.
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Segment sales

|  | Quarter ended July 5, 2020 |  |  |  | Quarter ended June 30, 2019 |  |  |  | Increase (Decrease) |  |
|  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | %
Energy Systems |  | $ | 353.4 |  |  | 50.1 | % |  | $ | 353.8 |  |  | 45.4 | % |  | $ | (0.4) |  |  | (0.1) | %
Motive Power |  | 262.8 |  |  | 37.3 |  |  | 344.4 |  |  | 44.1 |  |  | (81.6) |  |  | (23.7) |
Specialty |  | 88.7 |  |  | 12.6 |  |  | 82.0 |  |  | 10.5 |  |  | 6.7 |  |  | 8.2 |
Total net sales |  | $ | 704.9 |  |  | 100.0 | % |  | $ | 780.2 |  |  | 100.0 | % |  | $ | (75.3) |  |  | (9.7) | %

Net sales of our Energy Systems segment in the first quarter of fiscal 2021 decreased $0.4 million or 0.1% compared to the first quarter of fiscal 2020. The relatively flat sales was due to a 6% increase from the NorthStar acquisition, offset by a 3% decrease in organic volume, a 2% decrease in foreign currency translation impact and a 1% decrease in pricing. Demand from telecommunication and data center customers remained strong in a work from home environment.
Net sales of our Motive Power segment in the first quarter of fiscal 2021 decreased by $81.6 million or 23.7% compared to the first quarter of fiscal 2020. The decrease was primarily due to a 21% decrease in organic volume, a 2% decrease in foreign currency translation impact and a 1% decrease in pricing. COVID-19 restrictions and related economic slowdown impacted this segment more than our other lines of business.
Net sales of our Specialty segment in the first quarter of fiscal 2021 increased by $6.7 million or 8.2% compared to the first quarter of fiscal 2020. The increase was primarily due to a 12% increase from the NorthStar acquisition, partially offset by a 4% decrease in organic volume.
Gross Profit

|  | Quarter ended July 5, 2020 |  |  |  | Quarter ended June 30, 2019 |  |  |  | Increase (Decrease) |  |
|  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | %
Gross Profit |  | $ | 175.0 |  |  | 24.8 | % |  | $ | 201.5 |  |  | 25.8 | % |  | $ | (26.5) |  |  | (13.2) | %

Gross profit decreased $26.5 million or 13.2% in the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020. Gross profit, as a percentage of net sales, decreased 100 basis points in the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020. This decrease in the gross profit margin in the first quarter is largely due to declines in organic volume from softening customer demand, particularly in our Motive Power segment. This adverse impact was further exacerbated by higher manufacturing costs and slightly lower pricing, partially offset by lower commodity costs.
Operating Items

|  | Quarter ended July 5, 2020 |  |  |  | Quarter ended June 30, 2019 |  |  |  | Increase (Decrease) |  |
|  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | %
Operating expenses |  | $ | 120.4 |  |  | 17.1 | % |  | $ | 130.8 |  |  | 16.7 | % |  | $ | (10.4) |  |  | (8.0) | %
Restructuring and other exit charges |  | $ | 1.4 |  |  | 0.2 | % |  | $ | 2.4 |  |  | 0.3 | % |  | $ | (1.0) |  |  | (41.5) | %

Operating expenses, as a percentage of sales, increased 40 basis points in the first quarter of fiscal 2021, compared to the first quarter of fiscal 2020. We focused on certain austerity measures during the first quarter of fiscal 2021 and also benefited from limited travel and other selling expenses, due to the restrictions brought about by COVID-19, allowing us to align our operating expenses with sales volume.
Selling expenses, our main component of operating expenses, was 42.8% of total operating expenses in the first quarter compared to 45.1% of total operating expenses in the first quarter of fiscal 2020.
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Restructuring and Other Exit Charges
Included in our first quarter of fiscal 2021 operating results are restructuring charges of $0.5 million in Energy Systems, $0.8 million in Motive Power and $0.1 million in Specialty, respectively. During the first quarter of fiscal 2021, in keeping with its strategy of exiting the manufacture of batteries for diesel-electric submarines, the Company continued to execute further actions which resulted in a non-material net impact from the cash and non-cash charges.
Included in our first quarter of fiscal 2020 operating results are restructuring charges of $1.1 million in the Energy Systems, $0.6 million in Motive Power and $0.7 million in Specialty, respectively, all of which relate to improving operational efficiencies in the respective lines of business. Also included in the first quarter of fiscal 2020 operating results are non-cash exit charges of $0.7 million in Specialty, relating to the closure of our facility in Targovishte, Bulgaria.
Richmond, Kentucky Plant Fire
In fiscal 2020, a fire broke out in the battery formation area of the Company's Richmond, Kentucky motive power production facility. The Company maintains insurance policies for both property damage and business interruption and are finishing cleanup and repair. The Company estimates that the total claim, including the replacement of inventory and equipment, the cleanup and repairs to the building, as well as the claim for business interruption may exceed $50 million.
In fiscal 2020, the Company recorded $17.0 million of 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 in advances related to its initial claims for recovery from its property and casualty insurance carriers.
During the first quarter of fiscal 2021, the Company recorded a further charge of $9.3 million for cleanup and received $10.0 million in advances from the insurance carriers. Accumulated charges relating to the fire through July 5, 2020 were $26.3 million and advances received from the property and casualty insurance carriers were $22.0 million.
The Company also received $8.7 million through July 5, 2020, of which $3.7 million was recorded in the first quarter of fiscal 2021 and $5.0 million in fiscal 2020, relating to a partial settlement of its claim for business interruption which was recorded as a reduction to cost of goods sold.
Operating Earnings

|  | Quarter ended July 5, 2020 |  |  |  | Quarter ended June 30, 2019 |  |  |  | Increase (Decrease) |  |
|  | In Millions |  | Percentage of Total Net Sales (1) |  | In Millions |  | Percentage of Total Net Sales (1) |  | In Millions |  | %
Energy Systems |  | $ | 22.0 |  |  | 6.2 | % |  | $ | 23.6 |  |  | 6.7 | % |  | $ | (1.6) |  |  | (6.4) | %
Motive Power |  | 27.3 |  |  | 10.4 |  |  | 37.1 |  |  | 10.8 |  |  | (9.8) |  |  | (26.5) |
Specialty |  | 5.3 |  |  | 5.9 |  |  | 10.0 |  |  | 12.2 |  |  | (4.7) |  |  | (47.7) |
Subtotal |  | 54.6 |  |  | 7.7 |  |  | 70.7 |  |  | 9.1 |  |  | (16.1) |  |  | (22.8) |
Restructuring charges - Energy Systems |  | (0.5) |  |  | (0.1) |  |  | (1.1) |  |  | (0.3) |  |  | 0.6 |  |  | (53.9) |
Restructuring charges - Motive Power |  | (0.8) |  |  | (0.3) |  |  | (0.6) |  |  | (0.2) |  |  | (0.2) |  |  | 36.6 |
Restructuring and other exit charges - Specialty |  | (0.1) |  |  | (0.1) |  |  | (0.7) |  |  | (0.9) |  |  | 0.6 |  |  | (83.9) |
Total operating earnings |  | $ | 53.2 |  |  | 7.5 | % |  | $ | 68.3 |  |  | 8.8 | % |  | $ | (15.1) |  |  | (22.1) | %

(1) The percentages shown for the segments are computed as a percentage of the applicable segment’s net sales.
Operating earnings decreased $15.1 million or 22.1% in the first quarter of fiscal 2021, compared to the first quarter of fiscal 2020. Operating earnings, as a percentage of net sales, decreased 130 basis points in the first quarter of fiscal 2021 compared to the first quarter of fiscal 2020, primarily due to declines in organic volume, particularly in our Motive Power segment, as explained earlier.
The Energy Systems operating earnings decreased 50 basis points in the first quarter of fiscal 2021, compared to the first quarter of fiscal 2020 primarily due to higher manufacturing costs. This negative impact was partially offset by the impact of lower commodity costs.
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The Motive Power operating earnings decreased 40 basis points in the first quarter of fiscal 2021, compared to the first quarter of fiscal 2020 due to lower volume as a direct adverse impact from COVID-19, partially offset by cost reductions and the receipt of $3.7 million of business interruption claim relating to the fire at our Richmond, Kentucky plant.
The Specialty operating earnings decreased 630 basis points in the first quarter of fiscal 2021, compared to the first quarter of fiscal 2020, primarily due to higher manufacturing costs.
Interest Expense

|  | Quarter ended July 5, 2020 |  |  |  | Quarter ended June 30, 2019 |  |  |  | Increase (Decrease) |  |
|  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | %
Interest expense |  | $ | 10.2 |  |  | 1.4 | % |  | $ | 10.9 |  |  | 1.4 | % |  | $ | (0.7) |  |  | (6.7) | %

Interest expense of $10.2 million in the first quarter of fiscal 2021 (net of interest income of $0.5 million) was $0.7 million lower than the interest expense of $10.9 million in the first quarter of fiscal 2020 (net of interest income of $0.5 million).
The decrease in interest expense in the first quarter of fiscal 2021 is primarily due to lower average interest rates partially offset by higher average debt. Our average debt outstanding was $1,160.7 million in the first quarter of fiscal 2021 compared to $1,052.0 million in the first quarter of fiscal 2020.
Included in interest expense are non-cash charges for deferred financing fees of $0.5 million in the first quarter of fiscal 2021 compared to $0.4 million, in the first quarter of fiscal 2020.
Other (Income) Expense, Net

|  | Quarter ended July 5, 2020 |  |  |  | Quarter ended June 30, 2019 |  |  |  | Increase (Decrease) |  |
|  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | %
Other (income) expense, net |  | $ | 1.4 |  |  | 0.2 | % |  | $ | (1.2) |  |  | (0.1) | % |  | $ | 2.6 |  |  | NM

NM = not meaningful
Other (income) expense, net in the first quarter of fiscal 2021 was expense of $1.4 million compared to income of $1.2 million in the first quarter of fiscal 2020. Foreign currency impact resulted in a loss of $1.3 million in the first quarter of fiscal 2021 compared to a foreign currency gain of $1.3 million in the first quarter of fiscal 2020.
Earnings Before Income Taxes

|  | Quarter ended July 5, 2020 |  |  |  | Quarter ended June 30, 2019 |  |  |  | Increase (Decrease) |  |
|  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | %
Earnings before income taxes |  | $ | 41.6 |  |  | 5.9 | % |  | $ | 58.6 |  |  | 7.5 | % |  | $ | (17.0) |  |  | (29.0) | %

As a result of the above, earnings before income taxes in the first quarter of fiscal 2021 decreased $17.0 million, or 29.0%, compared to the first quarter of fiscal 2020.
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Income Tax Expense

|  | Quarter ended July 5, 2020 |  |  |  | Quarter ended June 30, 2019 |  |  |  | Increase (Decrease) |  |
|  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | Percentage of Total Net Sales |  | In Millions |  | %
Income tax expense |  | $ | 6.4 |  |  | 0.9 | % |  | $ | 10.0 |  |  | 1.3 | % |  | $ | (3.6) |  |  | (35.6) |
Effective tax rate |  | 15.4% |  |  |  | 17.0% |  |  |  | (1.6)% |  |

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the first quarter of fiscal 2021 and 2020 was based on the estimated effective tax rates applicable for the full years ending March 31, 2021 and March 31, 2020, respectively, after giving effect to items specifically related to the interim periods. 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, change in tax laws and the amount of our consolidated earnings before taxes.
On May 19, 2019, a public referendum held in Switzerland approved the Federal Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF) as adopted by the Swiss Federal Parliament on September 28, 2018. We recorded a deferred tax asset of $22.5 million during fiscal 2020 related to the amortizable goodwill. Based on further discussions with the Swiss tax authority, we recorded an additional income tax benefit of $1.9 million during the first quarter of fiscal 2021.
The consolidated effective income tax rates for the first quarter of fiscal 2021 and 2020 were 15.4% and 17.0%, respectively. The rate decrease in the first quarter of fiscal 2021 compared to the comparable prior year quarter is primarily due to Swiss tax reform and changes in the mix of earnings among tax jurisdictions.
Foreign income as a percentage of worldwide income is estimated to be 69% for fiscal 2021 compared to 64% for fiscal 2020. The foreign effective income tax rates for the first quarter of fiscal 2021 and 2020 were 9% and 11.5%, respectively. The rate decrease compared to the prior year period 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 our overall foreign mix of income and is taxed at an effective income tax rate of approximately 6% in both the current and prior year quarter of fiscal 2021 and fiscal 2020.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies from those discussed under the caption “Critical Accounting Policies and Estimates” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report.
Liquidity and Capital Resources
Cash Flow Analysis
Operating activities provided cash of $116.6 million in the first quarter of fiscal 2021 compared to $30.4 million in the comparable period of fiscal 2020, the increase in operating cash resulting primarily from a reduction of $67.0 million in our primary working capital, net of currency translation changes. Primary working capital is discussed in further detail below. In the first quarter of fiscal 2021, net earnings were $35.2 million, depreciation and amortization $23.7 million, non-cash charges relating to exit charges $0.5 million, stock-based compensation $5.1 million and non-cash interest of $0.5 million. Accrued expenses decreased by $18.6 million primarily for payments of interest of $8.1 million, selling expense accruals of $6.3 million and warranties of $4.1 million. Prepaid and other current assets provided a source of funds of $2.7 million, from the receipt of $15.0 million towards the insurance receivable relating to the Richmond plant claim in fiscal 2020 offset by related accruals of $9.3 million, 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 in contract assets of $5.7 million.
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In the first quarter of fiscal 2020, cash provided by operating activities of $30.4 million was primarily from net earnings of $48.6 million, depreciation and amortization of $20.7 million, stock-based compensation of $3.9 million and non-cash interest of $0.4 million. Cash provided by earnings as adjusted for non-cash items were partially offset by the increase in primary working capital of $23.6 million, net of currency translation changes. Accrued expenses decreased by $16.3 million primarily for payments of $7.3 million related to the German competition authority matter (See Note 10 to the Consolidated Condensed Financial Statements included in this Quarterly Report on Form 10-Q) and $6.1 million paid to the seller in connection with the Alpha acquisition, for certain reimbursable pre-acquisition items.
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 for this purpose is trade accounts receivable, plus inventories, minus trade accounts payable. The resulting net amount is divided by the trailing three month net sales (annualized) to derive a primary working capital percentage. Primary working capital was $776.6 million (yielding a primary working capital percentage of 27.5%) at July 5, 2020, $833.5 million (yielding a primary working capital percentage of 26.7%) at March 31, 2020 and $838.6 million at June 30, 2019 (yielding a primary working capital percentage of 26.9%). The primary working capital percentage of 27.5% at July 5, 2020 is 80 basis points higher than that for March 31, 2020, and 60 basis points higher than that for the prior year period. The large decrease in primary working capital dollars, compared to the prior year periods reflects the decrease in all the three components of primary working capital, mainly accounts receivable and accounts payable. Sales declined sequentially, from our fourth quarter of fiscal 2020 by $76.9 million, as a direct adverse impact from COVID-19. Lower inventories reflect the Company's lower order levels and concerted efforts to keep inventory levels down.
Primary working capital and primary working capital percentages at July 5, 2020, March 31, 2020 and June 30, 2019 are computed as follows:

($ in Millions) |  |  |  |  |  |  |  |  |  |  |  |
Balance At (1) |  | Trade Receivables |  | Inventory |  | Accounts Payable |  | Total |  | Quarter Revenue Annualized |  | Primary Working Capital %
July 5, 2020 |  | $ | 509.0 |  |  | $ | 510.6 |  |  | $ | (243.0) |  |  | $ | 776.6 |  |  | $ | 2,819.7 |  |  | 27.5 | %
March 31, 2020 |  | 595.9 |  |  | 519.5 |  |  | (281.9) |  |  | 833.5 |  |  | 3,127.2 |  |  | 26.7 |
June 30, 2019 |  | 621.3 |  |  | 520.1 |  |  | (302.8) |  |  | 838.6 |  |  | 3,120.9 |  |  | 26.9 |

(1) The Company acquired NorthStar on September 30, 2019, as disclosed in Note 4 to the Consolidated Condensed Financial Statements included in this Quarterly Report on Form 10-Q. Therefore, the Primary working capital and related calculations as of June 30, 2019 do not include NorthStar's primary working capital and its components. The inclusion of NorthStar's primary working capital did not have a material impact on the Company's consolidated primary working capital as of July 5, 2020 and March 31, 2020.
Investing activities used cash of $26.3 million in the first quarter of fiscal 2021 which primarily consisted of capital expenditures relating to plant improvements.
Investing activities used cash of $17.3 million in the first quarter of fiscal 2020 which primarily consisted of capital expenditures relating to plant improvements.
Financing activities used cash of $39.5 million in the first quarter of fiscal 2021. During the first quarter of fiscal 2021, we borrowed $35.0 million under the Amended 2017 Revolver and repaid $55.0 million of the Amended 2017 Revolver. Repayment on the Amended 2017 Term Loan was $8.4 million and net payments on short-term debt were $1.0 million. Payment of cash dividends to our stockholders were $7.4 million and payment of taxes related to net share settlement of equity awards were $3.1 million.
Financing activities used cash of $51.7 million in the first quarter of fiscal 2020. During the first quarter of fiscal 2020, we borrowed $95.0 million under the Amended 2017 Revolver and repaid $85.0 million of the Amended 2017 Revolver. Repayment on the Amended 2017 Term Loan was $5.6 million and net payments on short-term debt were $19.5 million. Treasury stock open market purchases were $23.0 million, payment of cash dividends to our stockholders were $7.5 million and payment of taxes related to net share settlement of equity awards were $6.1 million.
Currency translation had a positive impact of $6.6 million and $1.5 million on our cash balance in the first quarter of fiscal 2021 and the first quarter of fiscal 2020, respectively. In the first quarter of fiscal 2021, principal currencies in which we do business such as the Euro, Swiss franc, Polish zloty and British pound generally trended stronger versus the U.S. dollar.
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As a result of the above, total cash and cash equivalents increased by $57.4 million to $384.4 million, in the first quarter of fiscal 2021 compared to a decrease by $37.1 million to $262.1 million, in the comparable period of fiscal 2020.
Compliance with Debt Covenants
All obligations under our Amended Credit Facility are secured by, among other things, substantially all of our U.S. assets. The 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 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 our 2020 Annual Report and Note 12 to the Consolidated Condensed Financial Statements included in this Quarterly Report on Form 10-Q for a detailed description of our debt.
Contractual Obligations and Commercial Commitments
A table of our obligations is contained in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations of our 2020 Annual Report for the year ended March 31, 2020. As of July 5, 2020, we had no significant changes to our contractual obligations table contained in our 2020 Annual Report.

ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risks
Our cash flows and earnings are subject to fluctuations resulting from changes in raw material costs, foreign currency exchange rates and interest rates. We manage our exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Our policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposures. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe that we can modify or adapt our hedging strategies as needed.
Counterparty Risks
We have entered into lead forward purchase contracts and foreign exchange forward and purchased option contracts to manage the risk associated with our exposures to fluctuations resulting from changes in raw material costs and foreign currency exchange rates. The Company’s agreements are with creditworthy financial institutions. Those contracts that result in a liability position at July 5, 2020 are $0.2 million (pre-tax). Those contracts that result in an asset position at July 5, 2020 are $0.3 million (pre-tax) and the vast majority of these will settle within one year. The impact on the Company due to nonperformance by the counterparties has been evaluated and not deemed material.
Interest Rate Risks
We are exposed to changes in variable U.S. interest rates on borrowings under our credit agreements as well as short-term borrowings in our foreign subsidiaries.
A 100 basis point increase in interest rates would have increased interest expense, on an annualized basis, by approximately $5.4 million on the variable rate portions of our debt.
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Commodity Cost Risks – Lead Contracts
We have a significant risk in our exposure to certain raw materials. Our largest single raw material cost is for lead, for which the cost remains volatile. In order to hedge against increases in our lead cost, we have entered into forward contracts with financial institutions to fix the price of lead. A vast majority of such contracts are for a period not extending beyond one year. We had the following contracts outstanding at the dates shown below:

Date |  | $’s Under Contract (in millions) |  | # Pounds Purchased (in millions) |  | Average Cost/Pound |  | Approximate % of Lead Requirements (1)
July 5, 2020 |  | $ | 19.3 |  |  | 24.0 |  |  | $ | 0.80 |  |  | 4 | %
March 31, 2020 |  | 30.1 |  |  | 35.0 |  |  | 0.86 |  |  | 6 |
June 30, 2019 |  | 33.0 |  |  | 38.0 |  |  | 0.87 |  |  | 6 |

(1) Based on approximate annual lead requirements for the periods then ended.
For the remaining three quarters of this fiscal year, we believe approximately 36% of the cost of our lead requirements is known. This takes into account the hedge contracts in place at July 5, 2020, lead purchased by July 5, 2020 that will be reflected in future costs under our FIFO accounting policy, and the benefit from our lead tolling program.
We estimate that a 10% increase in our cost of lead would have increased our cost of goods sold by approximately $14 million in the first quarter of fiscal 2021.
Foreign Currency Exchange Rate Risks
We manufacture and assemble our products globally in the Americas, EMEA and Asia. Approximately 40% of our sales and expenses are transacted in foreign currencies. Our sales revenue, production costs, profit margins and competitive position are affected by the strength of the currencies in countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our products are sold. Additionally, as we report our financial statements in U.S. dollars, our financial results are affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. dollar. The principal foreign currencies in which we conduct business are the Euro, Swiss franc, British pound, Polish zloty, Chinese renminbi and Mexican peso.
We quantify and monitor our global foreign currency exposures. Our largest foreign currency exposure is from the purchase and conversion of U.S. dollar based lead costs into local currencies in Europe. Additionally, we have currency exposures from intercompany financing and intercompany and third party trade transactions. On a selective basis, we enter into foreign currency forward contracts and purchase option contracts to reduce the impact from the volatility of currency movements; however, we cannot be certain that foreign currency fluctuations will not impact our operations in the future.
We hedge approximately 5% - 10% of the nominal amount of our known foreign exchange transactional exposures. We primarily enter into foreign currency exchange contracts to reduce the earnings and cash flow impact of the variation of non-functional currency denominated receivables and payables. The vast majority of such contracts are for a period not extending beyond one year.
Gains and losses resulting from hedging instruments offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged. The maturities of the forward exchange contracts generally coincide with the settlement dates of the related transactions. Realized and unrealized gains and losses on these contracts are recognized in the same period as gains and losses on the hedged items. We also selectively hedge anticipated transactions that are subject to foreign exchange exposure, primarily with foreign currency exchange contracts, which are designated as cash flow hedges in accordance with Topic 815 - Derivatives and Hedging.
At July 5, 2020 and June 30, 2019, we estimate that an unfavorable 10% movement in the exchange rates would have adversely changed our hedge valuations by approximately $1.3 million and $2.7 million, respectively.
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ITEM 4. | CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective. We completed the NorthStar acquisition on September 30, 2019, and are in the process, but have not yet concluded our assessment of the effectiveness of our internal control over financial reporting including this recent acquisition. Accordingly, pursuant to the SEC's general guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of our assessment of the effectiveness of our disclosure controls and procedures does not include NorthStar. NorthStar accounted for 7.4% of total assets as of July 5, 2020 and 4.8% of net sales for the first quarter ended July 5, 2020.
(b) Internal Control Over Financial Reporting. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) and determined that there was no change in our internal control over financial reporting during the quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II | OTHER INFORMATION

Item 1. | Legal Proceedings

From time to time, we are involved in litigation incidental to the conduct of our business. See Litigation and Other Legal Matters in Note 10 - Commitments, Contingencies and Litigation to the Consolidated Condensed Financial Statements, which is incorporated herein by reference.

Item 1A. | Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our 2020 Annual Report for the year ended March 31, 2020, which could materially affect our business, financial condition or future results.
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizes the number of shares of common stock we purchased from participants in our equity incentive plans, as well as repurchases of common stock authorized by the Board of Directors. As provided by the Company’s equity incentive plans, (a) vested options outstanding may be exercised through surrender to the Company of option shares or vested options outstanding under the Company’s equity incentive plans to satisfy the applicable aggregate exercise price (and any withholding tax) required to be paid upon such exercise and (b) the withholding tax requirements related to the vesting and settlement of restricted stock units and market and performance condition-based share units may be satisfied by the surrender of shares of the Company’s common stock.
Purchases of Equity Securities

Period |  | (a) Total number of shares (or units) purchased |  | (b) Average price paid per share (or unit) |  | (c) Total number of shares (or units) purchased as part of publicly announced plans or programs |  | (d) Maximum number (or approximate dollar value) of shares (or units) that may be purchased under the plans or programs (1) (2)
April 1 – April 26, 2020 |  | — |  |  | $ | — |  |  | — |  |  | $ | 9,002,889 |
April 27 – May 31, 2020 |  | 56,024 |  |  | 56.27 |  |  | — |  |  | 9,002,889 |
June 1 – July 5, 2020 |  | — |  |  | — |  |  | — |  |  | 9,002,889 |
Total |  | 56,024 |  |  | $ | 56.27 |  |  | — |  |  |

(1) The Company's Board of Directors has authorized the Company to repurchase up to such number of shares as shall equal the dilutive effects of any equity based award granted during such fiscal year under the 2017 Equity Incentive Plan and the number of shares exercised through stock option awards during such fiscal year.
(2) On November 8, 2017, the Company announced the establishment of a $100 million stock repurchase authorization, with no expiration date which has a remaining authorization of $59.1 million as of July 5, 2020. The authorization is in addition to the existing stock repurchase programs.

Item 4. | Mine Safety Disclosures

Not applicable.
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ITEM 6. | EXHIBITS

Exhibit Number |  | Description of Exhibit
3.1 |  | Fifth Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the Company’s Registration Statement on Form S-1 (File No. 333-115553) filed on July 13, 2004).
3.2 |  | Third Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-32253) filed on August 3, 2016).
31.1 |  | Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) Under the Securities Exchange Act of 1934 (filed herewith).
31.2 |  | Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) Under the Securities Exchange Act of 1934 (filed herewith).
32.1 |  | Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS |  | XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH |  | XBRL Taxonomy Extension Schema Document
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document
101.LAB |  | XBRL Taxonomy Extension Label Linkbase Document
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ENERSYS (Registrant) |  |
By | /s/ Michael J. Schmidtlein |
| Michael J. Schmidtlein |
| Chief Financial Officer |

Date: August 12, 2020
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