EnerSys

Previous wording

EnerSys (the “Company,” “we,” or “us”) is a world leader in stored energy solutions for industrial applications. We design, 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 power conversion, power distribution, energy storage, and enclosures, are used in the telecommunication, broadband, data center and utility industries, uninterruptible power supplies, and numerous applications requiring stored energy solutions. Motive Power batteries and chargers are utilized in electric forklift trucks, automated guided vehicles (AGVs), and other industrial electric powered vehicles. Specialty batteries are used in aerospace and defense applications, large over the road trucks, premium automotive and medical products. New Ventures provides energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles. 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.

Current wording

EnerSys (the “Company,” “we,” or “us”) is a world leader in stored energy solutions for industrial applications. We design, 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 power conversion, power distribution, energy storage, and enclosures, are used in the telecommunication, broadband, data center and utility industries, uninterruptible power supplies, and numerous applications requiring stored energy solutions. Motive Power batteries and chargers are utilized in electric forklifts, automated guided vehicles (AGVs), and other industrial electric powered vehicles. Specialty batteries are used in aerospace and defense applications, large over-the-road trucks, premium automotive, portable power solutions for soldiers in the field, medical and security systems applications. New Ventures provides energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles. 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.

Previous wording

•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, data center, and renewable and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries.

Current wording

•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, data center, and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries.

Previous wording

•Motive Power -power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications, AGVs, as well as mining equipment, diesel locomotive starting and other rail equipment.

Current wording

•Motive Power -power for electric industrial forklifts, AGVs other material handling equipment used in manufacturing and warehousing operations, as well equipment used in floor care, mining, rail and airport ground support applications.

Previous wording

•Specialty - premium starting, lighting and ignition applications in transportation, energy solutions for satellites, spacecraft, commercial aircraft, military aircraft, submarines, ships and other tactical vehicles as well as medical devices and equipment.

Current wording

•Specialty - premium starting, lighting and ignition applications in transportation, energy solutions for satellites, spacecraft, commercial aircraft, military aircraft, submarines, ships, other tactical vehicles, defense applications and portable power solutions for soldiers in the field, as well as medical devices and equipment.

Previous wording

On July 26, 2024, the Company completed the acquisition of all of the equity of Bren-Tronics Defense LLC for $208 million in cash consideration, subject to adjustments as set forth in the stock purchase agreement. Bren-Tronics Defense LLC, headquartered in Commack, New York, is a leading manufacturer of highly reliable portable power solutions, including small and large format lithium batteries and changing solutions, for military and defense applications.

Current wording

On July 26, 2024, the Company completed the acquisition of all of the equity of Bren-Tronics Defense LLC for $205.3 million in cash consideration, subject to adjustments as set forth in the stock purchase agreement. Bren-Tronics Defense LLC, headquartered in Commack, New York, is a leading manufacturer of highly reliable portable power solutions, including small and large format lithium batteries and charging solutions, for military and defense applications. The financial results contributed from this business are reported within our Specialty line of business.

Previous wording

Global economic conditions are mixed with the impacts of elevated interest rates and rising geopolitical tensions having various levels of impacts in North America, China and EMEA. All regions experienced a moderate rise in inflation in calendar year 2023 compared to calendar 2022 and continue to be negatively impacted by the war in Ukraine. We expect inflationary pressures and interest rates to continue to stay elevated through calendar 2024, but saw positive trends in June 2024 when the European Central Bank (ECB) cut its main interest rate by 25 basis points for the first time in five years. The U.S. Federal Reserve kept interest rates stable, but there is an expectation for a modest decrease in the second half of calendar year 2024. Policy makers in both regions have maintained a cautious stance. China’s economy saw some bright spots entering calendar year 2024 as a result of increasing travel and consumer spending due to relaxed COVID policies, but the region faces ongoing challenges from a weakened real estate market and is expected to experience a slowdown compared to calendar year 2023.

Current wording

Global economic conditions are mixed with the impacts of elevated interest rates and heightened geopolitical tensions having various levels of impacts in North America, China and EMEA. The war in Ukraine continues to have widespread economic repercussions, particularly in Europe. The ongoing Israel-Hamas conflict is disrupting stability in the Middle East, raising significant concerns about the potential for further escalation across the region. Inflation in North America, China and EMEA, while somewhat more controlled compared to the sharp increases in 2023, remains a challenge with some signs of cooling in the U.S. and Europe. Interest rate cuts of 50 basis points by the Federal Reserve in September are expected to be followed by further rate cuts at the end of the calendar year. The European Central Bank (ECB) cut its main interest rate by 25 basis points in September following its initial rate cut in June. China’s economy saw some bright spots entering calendar year 2024 as a result of increasing travel and consumer spending due to relaxed COVID policies, but the region faces ongoing challenges from a weakened real estate market and declining exports.

Previous wording

Supply chain has been stabilizing since the second quarter of calendar year 2023. While there are still pockets of supply chain challenges and some elevated materials costs such as plastic resins, electronic components and copper and other costs such as transportation have returned to pre-COVID levels. However, recent geopolitical tensions between Hamas and Israel have begun to disrupt shipments in the Red Sea. As a result, some ocean freight costs and transit times may temporarily increase until shipping in the region returns to normal. Generally, our mitigation efforts and ongoing lean initiatives have tempered the impact of the pandemic-related challenges. The market demand in our Motive Power segment remains healthy, but we saw a decrease in demand in the Class 8 truck market in our fiscal first quarter, which impacted the Specialty segment. The cyclical capex pauses in the communication networks market has decreased demand in the Energy Systems segment since our second quarter fiscal 2024, but we saw some improvements in the last month of our first quarter fiscal 2025.

Current wording

The supply chain has been stabilizing since the second quarter of calendar year 2023. While some supply chain challenges and elevated costs remain, particularly for materials like copper and plastics, other costs, such as transportation, have returned to pre-COVID levels. However, the ongoing Israel-Hamas conflict have periodically disrupted some shipments in the Red Sea. As a result, some ocean freight costs and transit times may temporarily increase until shipping in the region returns to normal. Generally, our mitigation efforts and ongoing lean initiatives have tempered the impact of broad market challenges. The market demand in our Motive Power segment remains healthy, but we saw a decrease in demand in the Class 8 truck market in the first half of our fiscal year, which impacted the Specialty segment. The cyclical capex pauses in the communication networks market has decreased demand in the Energy Systems segment since our second quarter fiscal 2024, but we saw some improved order rates in the second quarter fiscal 2025.

Previous wording

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. In the fiscal year 2025, we have experienced a range in lead prices from approximately $1.05 per pound to $0.90 per pound. Costs in some of our other raw materials such as steel, acid, separator paper and electronics have moderated since the middle of fiscal year 2024, but we have seen some price increases in other raw materials such as copper and plastic resins since the beginning of fiscal year 2025.

Current wording

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. In the fiscal year 2025, we have experienced a range in lead prices from approximately $1.05 per pound to $0.90 per pound. Costs in some of our other raw materials such as steel, acid, separator paper and electronics have moderated since the middle of fiscal year 2024, but we have seen some price increases in other raw materials such as copper since the beginning of fiscal year 2025.

Previous wording

As part of managing the performance of our business, we monitor the level of primary operating capital, and its ratio to net sales. We define primary operating capital as accounts receivable, plus inventories, minus accounts payable. The resulting net amount is divided by the trailing three-month net sales (annualized) to derive a primary operating capital percentage. We believe these three elements included in primary operating capital are most operationally driven, and this performance measure provides us with information about the asset intensity and operating efficiency of the business on a company-wide basis that management can monitor and analyze trends over time. Primary operating capital was $866.9 million (yielding a primary operating capital percentage of 25.4%) at June 30, 2024, $852.9 million (yielding a primary operating capital percentage of 23.4%) at March 31, 2024 and $1,032.6 million at July 2, 2023 (yielding a primary operating capital percentage of 28.4%). The primary operating capital percentage of 25.4% at June 30, 2024 increased by 200 basis points compared to March 31, 2024 and decreased 300 basis points compared to July 2, 2023. The increase in primary operating capital percentage at June 30, 2024 compared to March 31, 2024 was primarily due to consistent inventory and accounts payable levels maintained this quarter in anticipation for future sales. Accounts receivable amounts were decreased comparatively mainly due to improved collection compared to the fourth fiscal quarter of the prior fiscal year. The decrease in primary operating capital percentage at June 30, 2024 compared to July 2, 2023 was primarily from a reduction in accounts receivable due to higher collections and inventory due to improved inventory management actions and easing of supply chain constraints compared to the first quarter of fiscal 2024.

Current wording

As part of managing the performance of our business, we monitor the level of primary operating capital, and its ratio to net sales. We define primary operating capital as accounts receivable, plus inventories, minus accounts payable. The resulting net amount is divided by the trailing three-month net sales (annualized) to derive a primary operating capital percentage. We believe these three elements included in primary operating capital are most operationally driven, and this performance measure provides us with information about the asset intensity and operating efficiency of the business on a company-wide basis that management can monitor and analyze trends over time. Primary operating capital was $978.8 million (yielding a primary operating capital percentage of 27.7%) at September 29, 2024, $852.9 million (yielding a primary operating capital percentage of 23.4%) at March 31, 2024 and $990.2 million at October 1, 2023 (yielding a primary operating capital percentage of 27.5%). The primary operating capital percentage of 27.7% at September 29, 2024 increased by 430 basis points compared to March 31, 2024 and increased 20 basis points compared to October 1, 2023. The increase in primary operating capital percentage at September 29, 2024 compared to March 31, 2024 was primarily due to the addition of Bren-Tronics balances as well as increases to inventory for strategic build up and decreases to accounts payable levels due to timing of payments this quarter. Accounts receivable amounts increased comparatively mainly due to longer termed collections from customers compared to the fourth fiscal quarter of the prior fiscal year. The slight increase in primary operating capital percentage at September 29, 2024 compared to October 1, 2023 was increases from Bren-Tronics offset by reduction in accounts receivable due to higher collections and inventory due to improved inventory management actions and easing of supply chain constraints compared to the second quarter of fiscal 2024.

Previous wording

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 $344 million of available cash and cash equivalents and available and undrawn committed credit lines of approximately $782 million at June 30, 2024, availability subject to credit agreement financial covenants.

Current wording

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 $408 million of available cash and cash equivalents and available and undrawn committed credit lines of approximately $445 million at September 29, 2024, availability subject to credit agreement financial covenants.

Previous wording

Net sales decreased $55.7 million or 6.1% in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024. This decrease was the result of a 3% decrease in organic volume, a 2% decrease in price/mix, and a 1% decrease in foreign currency translation.

Current wording

Net sales decreased $17.3 million or 1.9% in the second quarter of fiscal 2025 as compared to the second quarter of fiscal 2024. This decrease was the result of a 3% decrease in organic volume and a 1% decrease in pricing, partially offset by a 2% increase in acquisitions.

Previous wording

Net sales of our Energy Systems segment in the first quarter of fiscal 2025 decreased $63.6 million or 15.0% compared to the first quarter of fiscal 2024. This decrease was due to an 11% decrease in organic volume, a 3% decrease in price/mix and a 1% decrease in foreign currency translation. This decrease in sales and price/mix was driven by continued capital spending pauses by our telecommunication and broadband customers.

Current wording

Net sales decreased $73.0 million or 4.0% in the six months of fiscal 2025 as compared to the six months of fiscal 2024. This decrease was due to an 3% decrease in organic volume, a 1% decrease in pricing, and a 1% decrease in foreign currency translation, partially offset by a 1% increase in acquisitions.

Previous wording

Net sales of our Motive Power segment in the first quarter of fiscal 2025 increased by $15.4 million or 4.4% compared to the first quarter of fiscal 2024. This increase was primarily due to a 6% increase in organic volume, offset by a 1% decrease from price/mix and a 1% decrease from foreign currency translation. We continue to benefit from a favorable sales mix, which was offset by the removal of both the utility adder and the elevated utility costs in EMEA in prior year.

Current wording

Net sales of our Motive Power segment in the second quarter of fiscal 2025 increased by $11.5 million or 3.2% compared to the second quarter of fiscal 2024. This increase was primarily due to a 3% increase in organic volume. Net sales of our Motive Power segment in the six months of fiscal 2025 increased by $26.9 million or 3.8% compared to the six months of fiscal 2024. This increase was primarily due to a 5% increase in organic volume, offset by a 1% decrease in foreign currency translation. We continue to benefit from increased volumes of our maintenance-free thin plate pure lead and lithium product sales mix for the quarter and six months.

Previous wording

Gross profit decreased $1.9 million or 0.8% in the first quarter compared to the comparable periods of fiscal 2024. Gross profit, as a percentage of net sales, increased 160 basis points in the first quarter compared to the first quarter of fiscal 2024. The increase in gross profit margin as a percentage of revenue reflects greater impact of IRA benefits compared to the first quarter of fiscal 2024.

Current wording

Gross profit increased $12.5 million or 5.2% in the second quarter and increased $10.6 million or 2.2% in the six months of fiscal 2025 compared to the comparable periods of fiscal 2024. Gross profit, as a percentage of net sales, increased 190 basis points and increased 170 basis points in the second quarter and six months of fiscal 2025, respectively, compared to the second quarter and six months of fiscal 2024. . The increase in the gross profit margin in the current quarter and six months reflects greater impact of IRA benefits compared to the same periods in fiscal year 2024 as well as improved mix from higher margin maintenance-free sales in Motive Power.

Previous wording

Included in our first quarter of fiscal 2025 operating results of Energy Systems were restructuring charges of $3.0 million. Included in our first quarter of fiscal 2025 operating results of Motive Power were restructuring charges of $0.8 million. Included in our first quarter of fiscal 2025 operating results of Specialty were restructuring charges of $0.3 million.

Current wording

Included in our second quarter and six months of fiscal 2025 operating results of Energy Systems were restructuring charges of $0.9 million and $3.8 million respectively. Included in our second quarter and six months of fiscal 2025 operating results of Motive Power were restructuring charges of $0.0 million and $0.8 million, respectively. Included in our second quarter and six months of fiscal 2025 operating results of Specialty were restructuring charges of $0.1 million and $0.4 million, respectively.

Previous wording

On November 8, 2023, the Company's Board of Directors approved a plan to stop production and operations of residential renewable energy products, which include our OutBack and Mojave brands. Management determined that residential renewable energy products no longer fit with the Company’s core strategy and resources will be better allocated toward commercial energy solutions for enterprise customers. The Company currently estimates that the total charges for these actions will amount to $24.5 million relating primarily to $23.6 million in non-cash charges primarily including inventory and an indefinite-lived intangible asset write-offs and $0.9 million in cash charges including employee severance and retention payments. The plan was substantially complete as the end of fiscal 2024.

Current wording

On November 8, 2023, the Company's Board of Directors approved a plan to stop production and operations of residential renewable energy products, which include our OutBack and Mojave brands. Management determined that residential renewable energy products no longer fit with the company’s core strategy and resources will be better allocated toward commercial energy solutions for enterprise customers. The Company currently estimates that the total charges for these actions will amount to $24.5 million relating primarily to $23.6 million in non-cash charges primarily including inventory and an indefinite-lived intangible asset write-offs and $0.9 million in cash charges including employee severance and retention payments. The plan is expected to be completed in fiscal 2024.

Previous wording

On November 8, 2023, the Company committed to a plan to close its facility in Spokane, Washington, which primarily manufactures enclosure systems for telecommunications and related end markets. Management determined that existing manufacturing locations have the capacity to satisfy demand for these products and will execute more efficient distribution to customers. The Company currently estimates that the total charges for these actions will amount to approximately $3.6 million relating to $1.4 million in cash charges for employee severance, and non-cash charges of $2.2 million fixed assets, facility lease, and inventory. The plan was substantially complete as the end of fiscal 2024.

Current wording

On November 8, 2023, the Company committed to a plan to close its facility in Spokane, Washington, which primarily manufactures enclosure systems for telecommunications and related end markets. Management determined that existing manufacturing locations have the capacity to satisfy demand for these products and will execute more efficient distribution to customers. The Company currently estimates that the total charges for these actions will amount to approximately $3.6 million relating to $1.4 million in cash charges for employee severance, and non-cash charges of $2.2 million fixed assets, facility lease, and inventory. The majority of the charges were incurred in fiscal 2024.

Previous wording

During the current quarter of fiscal 2025, the Company recorded cash charges of $0.8 million primarily related to manufacturing variances.

Current wording

During the six months of fiscal 2025, the Company recorded cash charges of $0.7 million primarily related to manufacturing variances.

Previous wording

In November 2022, the Company committed to a plan to close its facility in Sylmar, California, which manufactures specialty lithium batteries for aerospace and medical applications. Management determined to close the site upon the expiration of its lease on the property and to redirect production through consolidation into existing locations. The Company currently estimates total charges in the exit to amount to $13.2 million. Cash charges are estimated to total $9.3 million primarily relating to severance and other costs to leave the site. Non-cash charges are estimated to be $3.9 million relating to fixed assets, inventory, and contract assets. The plan was substantially complete as the end of fiscal 2024.

Current wording

In November 2022, the Company committed to a plan to close its facility in Sylmar, California, which manufactures specialty lithium batteries for aerospace and medical applications. Management determined to close the site upon the expiration of its lease on the property and to redirect production through consolidation into existing locations. The Company currently estimates total charges in the exit to amount to $13.5 million. Cash charges are estimated to total $9.6 million primarily relating to severance and other costs to leave the site. Non-cash charges are estimated to be $3.9 million relating to fixed assets, inventory, and contract assets. The plan was substantially complete as the end of fiscal 2024.

Previous wording

During fiscal 2023, the Company recorded cash charges of $1.6 million related primarily related to severance costs and non-cash charges totaling $0.4 million primarily relating to contract assets.

Current wording

During fiscal 2023, the Company recorded $1.7 million primarily related to severance costs and non-cash charges totaling $0.4 million primarily relating to contract assets.

Previous wording

On June 29, 2022, the Company committed to a plan to close its facility in Ooltewah, Tennessee, which produced flooded motive power batteries for electric forklifts. Management determined that future demand for traditional motive power flooded cells will decrease as customers transition to maintenance free product solutions in lithium and TPPL. The Company currently estimates that the total charges for these actions will amount to approximately $18.5 million. Cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses are estimated to be $9.2 million and non-cash charges from inventory and fixed asset write-offs are estimated to be $9.3 million. These actions will result in the reduction of approximately 165 employees. The plan was substantially complete as the end of fiscal 2024.

Current wording

On June 29, 2022, the Company committed to a plan to close its facility in Ooltewah, Tennessee, which produced flooded motive power batteries for electric forklifts. Management determined that future demand for traditional motive power flooded cells will decrease as customers transition to maintenance free product solutions in lithium and TPPL. The Company currently estimates that the total charges for these actions will amount to approximately $18.5 million. Cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses are estimated to be $9.2 million and non-cash charges from inventory and fixed asset write-offs are estimated to be $9.3 million. These actions will result in the reduction of approximately 165 employees. The majority of these charges were recorded by the end of fiscal 2024.

Previous wording

During fiscal 2023, the Company recorded cash charges relating to severance and manufacturing variances of $2.7 million and non-cash charges of $7.3 million relating to fixed asset write-offs. The Company also recorded a non-cash write-off relating to inventories of $1.6 million, which was reported in cost of goods sold.

Current wording

During fiscal 2023, the Company recorded cash charges relating primarily to severance and manufacturing variances of $2.8 million and non-cash charges of $7.3 million relating to fixed asset write-offs. The Company also recorded a non-cash write-off relating to inventories of $1.6 million, which was reported in cost of goods sold.

Previous wording

We currently estimate that the total charges for these actions will amount to approximately $60.0 million of which cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses were estimated to be $40.0 million and non-cash charges from inventory and equipment write-offs were estimated to be $20.0 million. The majority of these charges have been recorded as of March 31, 2022. These actions resulted in the reduction of approximately 200 employees.

Current wording

We currently estimate that the total charges for these actions will amount to approximately $60.0 million of which cash charges for employee severance related payments, cleanup related to the facility, contractual releases and legal expenses were estimated to be $40.0 million and non-cash charges from inventory and equipment write-offs were estimated to be $20.0 million. The majority of these charges have been recorded as of Janurary 1, 2023. These actions resulted in the reduction of approximately 200 employees.

Previous wording

Operating earnings increased $1.9 million or 2.1% in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. Operating earnings, as a percentage of net sales, increased 90 basis points in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024.

Current wording

Operating earnings increased $10.8 million or 12.2% and increased $12.7 million or 7.1% in the second quarter and six months of fiscal 2025, respectively, compared to the second quarter and six months of fiscal 2024. Operating earnings, as a percentage of net sales, increased 140 basis points and 120 basis points in the second quarter and six months of fiscal 2025, respectively, compared to the second quarter and six months of fiscal 2024.

Previous wording

The Energy Systems operating earnings, as a percentage of sales, decreased 170 basis points in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. This decrease for the quarter was primarily as a result of lower volumes and unfavorable price/mix that were partially offset by lower freight costs and operating costs.

Current wording

The Energy Systems operating earnings, as a percentage of sales, increased 30 basis points and decreased 70 basis points in the second quarter and six months of fiscal 2025, respectively, compared to the second quarter and six months of fiscal 2024. The increase for the quarter was primarily as a result of lower commodity costs as well as lower operating expenses as a percentage of sales on lower volumes partially offset by unfavorable product mix; and the decrease for the six months was a result of continued lower volumes and unfavorable mix from lower high margin power electronics sales, partially offset by lower operating costs.

Previous wording

The Motive Power operating earnings, as a percentage of sales, increased 90 basis points in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024. This increase was driven by volume growth and favorable pricing/mix gains.

Current wording

The Motive Power operating earnings, as a percentage of sales, increased 70 basis points and 80 basis points in the second quarter and six months of fiscal 2025, respectively, compared to the second quarter and six months of fiscal 2024. These increases were driven by continued volume growth in addition to favorable lead costs.

Previous wording

Interest expense of $11.0 million in the first quarter of fiscal 2025 (net of interest income of $1.1 million) was $4.2 million lower than the interest expense of 15.2 million in the first quarter of fiscal 2024 (net of interest income of $0.7 million).

Current wording

Interest expense of $12.5 million in the second quarter of fiscal 2025 (net of interest income of $0.7 million) was $0.3 million higher than the interest expense of $12.2 million in the second quarter of fiscal 2024 (net of interest income of $0.5 million).

Previous wording

The decrease in interest expense in the first quarter of fiscal 2025 is primarily due to lower borrowing levels. Our average debt outstanding was $910.1 million in the first quarter of fiscal 2025, compared to $1,040.7 million in the first quarter of fiscal 2024.

Current wording

The increase in interest expense in the second quarter of fiscal 2025 and the decrease in the six months of fiscal 2025 is primarily due to higher borrowing levels in the quarter where the six months benefited from lower average borrowing levels. Our average debt outstanding was $1,126.9 million and $1,009.2 million in the second quarter and six months of fiscal 2025, compared to $990.3 million and $1,030.3 million in the second quarter and six months of fiscal 2024.

Previous wording

Included in interest expense are non-cash charges for deferred financing fees of $0.5 million for the first quarter of fiscal 2025 and $0.4 million in the first quarter of fiscal 2024.

Current wording

Included in interest expense are non-cash charges for deferred financing fees of$0.5 million and $1.0 million for the second quarter and six months of fiscal 2025 and $0.4 million and $0.8 million in the second quarter and six months of fiscal 2024.

Previous wording

Other (income) expense, net in the first quarter of fiscal 2025 was expense of$1.0 million compared to expense of$0.7 million in the first quarter of fiscal 2024. Foreign currency impact resulted in a gain of $1.3 million in the first quarter of fiscal 2025 compared to a foreign currency gain of $2.3 million in the first quarter of fiscal 2024.

Current wording

Other (income) expense, net in the second quarter of fiscal 2025 was expense of $2.7 million compared to expense of $3.0 million in the second quarter of fiscal 2024. Other (income) expense, net in the six months of fiscal 2025 was expense of $3.7 million compared to expense of $3.7 million in the six months of fiscal 2024. Foreign currency impact resulted in a gain of $0.8 million and a gain of $2.1 million in the second quarter and six months of fiscal 2025, respectively, compared to a foreign currency gain of $0.5 million and a gain of $2.8 million in the second quarter and six months of fiscal 2024, respectively.

Previous wording

As a result of the above, earnings before income taxes in the first quarter of fiscal 2025 increased $5.8 million, or 7.9%, compared to the first quarter of fiscal 2024.

Current wording

As a result of the above, earnings before income taxes in the second quarter of fiscal 2025 increased $10.8 million, or 14.7%, compared to the second quarter of fiscal 2024 and increased $16.6 million, or 11.3% in the six months of fiscal 2025 compared to the six months of fiscal 2024.

Previous wording

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the first quarter of fiscal 2025 and 2024 was based on the estimated effective tax rates applicable for the full years ending March 31, 2025 and March 31, 2024, 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, changes in tax laws and the amount of our consolidated earnings before taxes.

Current wording

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the second quarter of fiscal 2025 and 2024 was based on the estimated effective tax rates applicable for the full years ending March 31, 2025 and March 31, 2024, 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, changes in tax laws and the amount of our consolidated earnings before taxes.

Previous wording

The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective for taxable years beginning after December 31, 2023. While it is uncertain whether the U.S. will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. The impact of the enacted legislation is identified below. The Company will continue to monitor and evaluate as new legislation and guidance is issued.

Current wording

The Organization for Economic Co-operation and Development (OECD) has a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective for taxable years beginning after December 31, 2023. While it is uncertain whether the U.S. will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. On August 26, 2024, the U.S. Tax Court issued a ruling in Varian. The ruling related to the U.S. taxation of deemed foreign dividends in the transition tax of the Tax Cuts and Jobs Act (our fiscal 2018). The impact of the enacted legislation and ruling is included below. The Company will continue to monitor and evaluate as new legislation and guidance is issued.

Previous wording

The consolidated effective income tax rates for the first quarter of fiscal 2025 and 2024 were 11.6% and 9.2%. The effective income tax rate increase in the first quarter compared to the prior year quarter is primarily due to a discrete foreign exchange tax benefit related to undistributed earnings in the first quarter of fiscal year 2024, impact of Pillar 2, and mix of earnings among tax jurisdictions.

Current wording

The consolidated effective income tax rates for the second quarter of fiscal 2025 and 2024 were 2.3% and 11.2% and for the six months of fiscal 2025 and 2024 were 6.8% and 10.2%. The rate decrease in the second quarter compared to the prior year period is primarily due to a discrete tax benefit as a result of Varian, offset by the impact of Pillar 2. The rate decrease in the six months of fiscal 2025 compared to the prior year periods are primarily due to a discrete tax benefit as a result of Varian, offset primarily by a discrete foreign exchange tax benefit related to undistributed earnings in first quarter of fiscal 2024, impact of Pillar 2, and mix of earnings among tax jurisdictions.

Previous wording

Foreign income as a percentage of worldwide income is estimated to be 49% for fiscal 2025 compared to 51% for fiscal 2024. The foreign effective tax rates for the current quarter of fiscal 2025 and 2024 were 14% and 12%, respectively. The foreign effective tax rate increased in the first quarter compared to the first quarter of the prior year is primarily due to the impact of Pillar 2. Income from the Company's Swiss subsidiary comprised a substantial portion of the Company's overall foreign mix of income for both fiscal 2025 and fiscal 2024 and were taxed at an effective income tax rate of approximately 11% and 8%, respectively.

Current wording

Foreign income as a percentage of worldwide income is estimated to be 53% for fiscal 2025 compared to 56% for fiscal 2024. The foreign effective tax rates for the six months of fiscal 2025 and 2024 were 15% and 13%, respectively. The foreign effective tax rate increase in the second quarter compared to the second quarter of the prior year is primarily due to the impact of Pillar 2. Income from the Company's Swiss subsidiary comprised a substantial portion of the Company's overall foreign mix of income for both fiscal 2025 and fiscal 2024 and were taxed at an effective income tax rate of approximately 11% and 9%, respectively.

Previous wording

Operating activities provided cash of $10.4 million in the first quarter of fiscal 2025 compared to $74.9 million of cash provided in the first quarter of fiscal 2024, with the decrease in operating cash resulting mainly due to activity in accounts receivable, inventory, accrued expenses and accounts payable. Accounts receivable decreased or provided cash of $12.2 million, and inventory increased or used cash of $16.5 million. Additionally, accounts payable decreased or used cash of $10.3 million. In the first quarter of fiscal 2025, net earnings were $70.1 million, depreciation and amortization $23.6 million, stock-based compensation $7.1 million, non-cash charges relating to exit charges $0.1 million, allowance for doubtful debts of $0.6 million, and non-cash interest of $0.5 million. Prepaid and other current assets were a use of funds of $9.9 million, primarily from an increase of $2.6 million in prepaid taxes and $11.6 million in contract assets, partially offset by a decrease of $2.7 million in other prepaid expenses, such as non-trade receivables and other advances and prepaid insurance of $1.6 million. Accrued expenses were a use of funds of $64.8 million primarily from decrease in tax accruals of $37.0 million, other miscellaneous accruals of $5.3 million, payroll related payments of $16.8 million net of accruals, decrease to sales related accruals of $11.0 million, and interest payments net of accruals of $14.2 million, partially offset by $16.0 million in accrued interest, warranty accruals of $1.1 million, and $2.5 million in contract liabilities.

Current wording

Operating activities provided cash of $44.0 million in the six months of fiscal 2025 compared to $185.7 million of cash provided in the six months of fiscal 2024, with the decrease in operating cash resulting mainly due to activity in accounts receivable, inventory, accrued expenses and accounts payable. Inventory increased or used cash of $12.4 million, and accounts receivable increased or used cash of $9.3 million. Additionally, accounts payable decreased or used cash of $40.1 million. In the six months of fiscal 2025, net earnings were $152.4 million, depreciation and amortization $48.8 million, stock-based compensation $12.2 million, allowance for doubtful debts of $1.1 million, non-cash interest of $1.0 million and, non-cash charges relating to exit charges $0.2 million. Prepaid and other current assets were a use of funds of $26.2 million, primarily from an increase of $19.4 million in contract assets, $7.6 million in other prepaid expenses, and $1.6 million in prepaid insurance, partially offset by a decrease of $2.4 million in prepaid taxes. Accrued expenses were a use of funds of $83.9 million primarily from decrease in tax accruals of $81.8 million, interest payments net of accruals of $31.6 million, other miscellaneous accruals of $3.9 million, sales related accruals of $5.0 million, and payroll related payments of $0.5 million net of accruals, partially offset by $36.4 million in accrued interest, warranty accruals of $1.6 million, and $0.9 million in contract liabilities.

Previous wording

In the first quarter of fiscal 2024, operating activities provided cash of $74.9 million, with the increase in operating cash resulting mainly due to net earnings. Accounts receivable decreased or provided cash of $73.2 million due to lower sales in the current quarter compared to the previous quarter. Inventory increased or used cash of $11.0 million due to lower inventory turns as compared to the previous quarter. Accounts payable decreased or used cash of $39.3 million due to seasonal reduction. In the first quarter of fiscal 2024, net earnings were $66.8 million, depreciation and amortization $22.7 million, stock based compensation $7.9 million, non-cash charges relating to exit charges $3.3 million, derivative gains of $0.5 million, derivatives cash proceeds of $0.7 million, non-cash interest of $0.4 million, and allowance for doubtful debts of $0.5 million. Prepaid and other current assets were a use of funds of $4.1 million, primarily from an increase of $7.3 million in contract assets partially offset by a decrease of $3.2 million in other prepaid expenses, such as taxes, insurance and other advances. Accrued expenses were a use of funds of $46.6 million primarily from tax payments net of accruals of $15.8 million, including $19.4 million relating to the IRA production tax credits, payroll related payments of $13.2 million net of accruals, decrease to sales related

Current wording

In the six months of fiscal 2024, operating activities provided cash of $185.7 million, with the increase in operating cash resulting mainly due to net earnings. Accounts receivable decreased or provided cash of $93.4 million due to lower sales in the current quarter compared to the previous quarter. Inventory decreased or provided cash of $10.5 million due to lower inventory turns as compared to the previous quarter. Accounts payable decreased or used cash of $57.2 million due to seasonal reduction. In the six months of fiscal 2024, net earnings were $132.0 million, depreciation and amortization $45.2 million, stock based compensation $13.1 million, non-cash charges relating to exit charges $4.1 million, allowance for doubtful debts $1.5 million, derivative losses of $1.2 million, non-cash interest of $0.8 million, and derivatives cash proceeds of $0.7 million. Prepaid and other current assets were a use of funds of $13.9 million, primarily from an increase of $6.3 million in contract assets and $3.9 million in prepaid insurance partially offset by a decrease of $3.7 million in other prepaid expenses, such as taxes, non-trade receivables and other advances. Accrued expenses were a use of funds of $44.8 million primarily from decrease in tax accruals of $37.4 million, deferred income and contract liabilities of $10.8 million, payroll related payments of $4.7 million net of accruals, decrease to sales related accruals of $2.9 million, and interest payments net of accruals of $1.0 million, partially offset by $2.9 million of freight charges, warranty accruals of $2.5 million, and other miscellaneous accruals of $7.2 million.

Previous wording

Investing activities used cash of $47.0 million in the first quarter of fiscal 2025, which primarily consisted of capital expenditures of $36.1 million relating to plant improvements and $10.9 million relating to investment in equity securities.

Current wording

Investing activities used cash of $282.5 million in the six months of fiscal 2025, which primarily consisted of the Bren-Tronics acquisition of $205.3 million, capital expenditures of $66.5 million relating to plant improvements and $10.9 million relating to investment in equity securities.

Previous wording

Investing activities used cash of $24.3 million in the first quarter of fiscal 2024, which primarily consisted of capital expenditures of $16.1 million relating to plant improvements and $8.3 million relating to the purchase of a business.

Current wording

Investing activities used cash of $42.1 million in the six months of fiscal 2024, which primarily consisted of capital expenditures of $35.9 million relating to plant improvements and $8.3 million relating to the purchase of a business partially offset by $2.0 million in proceeds from sale of disposal property, plant, and equipment.

Previous wording

Financing activities provided cash of $50.9 million in the first quarter of fiscal 2025. During the first quarter of fiscal 2025, we borrowed $65.0 million under the Second Amended Revolver. Net repayments on short-term debt were $0.2 million. We purchased treasury stock totaling $11.6 million, paid cash dividends to our stockholders totaling $9.0 million, and received proceeds from stock options of $7.0 million. Payments for financing costs for debt modification were $0.4 million.

Current wording

Financing activities provided cash of $305.3 million in the six months of fiscal 2025. During the six months of fiscal 2025, we borrowed $476.6 million under the Second Amended Revolver and repaid 76.7 million of the Second Amended Revolver. Net repayments on short-term debt were $0.4 million. We purchased treasury stock totaling $75.2 million, paid cash dividends to our stockholders totaling $18.6 million, and received proceeds from stock options of $7.4 million. Payments for financing costs for debt modification were $0.4 million. We paid $8.0 million for taxes related to net share settlement of equity awards.