EnerSys

Previous wording

•legislation regarding the restriction of the use of energy or certain hazardous substances in our products;

Current wording

•legislation, regulation, or policy regarding the restriction of the use of energy or certain hazardous substances in our products;

Previous wording

•risks involved in our operations such as supply chain issues, disruption of markets, changes in import and export laws, environmental regulations, currency restrictions and local currency exchange rate fluctuations;

Current wording

•risks involved in our operations such as supply chain issues, disruption of markets, changes in government priorities or budgets, and changes in import and export laws, environmental regulations, currency restrictions and local currency exchange rate fluctuations;

Previous 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.

Current wording

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

Previous 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.

Current wording

On July 26, 2024, the Company completed the acquisition of all of the equity of Bren-Tronics Defense LLC for $206.0 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 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.

Current wording

Global economic conditions are mixed with the impacts from the uncertainty surrounding U.S. tariffs, elevated interest rates and heightened geopolitical tensions having various levels of impacts in North America, China and EMEA. On February 1, 2025, the U.S. signed an executive order, effective February 3, 2025, whereby the U.S. will apply additional tariffs on imported goods from Canada, Mexico, and China. Since this announcement, the tariffs to be applied to Canada and Mexico have been suspended for an additional month. The impact of the U.S. tariffs and retaliatory actions by other countries could be substantial. We are currently assessing the impacts these tariffs could have on the organization, and we believe that the international nature of our organizational structure will allow us to mitigate some of the financial impact of these potential tariffs 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. Both the Federal Reserve and the European Central Bank (ECB) cut their main interest rates by 25 basis points in December, marking the third consecutive reduction in calendar year 2024 in both regions. While these are incrementally positive actions toward deflation, both economies continue to face uncertainties such as potential tariffs and policy changes from a new presidential administration in the U.S. and potential global trade frictions, macroeconomic fragmentation and geopolitical tensions the euro area. Recent policy actions in China signal a shift towards more proactive fiscal measures to stabilize consumption and support economic growth. While increasing travel and consumer spending due to relaxed COVID policies have provided some bright spots in 2024, China's economy continues to face challenges from a weakened real estate market and declining exports.

Previous 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.

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.

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 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 $1.00 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 $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.

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 $947.4 million (yielding a primary operating capital percentage of 26.1%) at December 29, 2024, $852.9 million (yielding a primary operating capital percentage of 23.4%) at March 31, 2024 and $911.6 million at December 31, 2023 (yielding a primary operating capital percentage of 26.5%). The primary operating capital percentage of 26.1% at December 29, 2024 increased by 270 basis points compared to March 31, 2024 and decreased 40 basis points compared to December 31, 2023. The increase in primary operating capital percentage at December 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 decrease in primary operating capital percentage at December 29, 2024 compared to December 31, 2023 was due to improved inventory management actions and easing of supply chain constraints compared to the third 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 $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.

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 $463 million of available cash and cash equivalents and available and undrawn committed credit lines of approximately $375 million at December 29, 2024, availability subject to credit agreement financial covenants.

Previous 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.

Current wording

Net sales increased $44.7 million or 5.2% in the third quarter of fiscal 2025 as compared to the third quarter of fiscal 2024. This increase was the result of a 2% increase in organic volume and a 2% increase in pricing, and a 3% increase in acquisitions, partially offset by a 2% decrease in foreign currency translation.

Previous 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.

Current wording

Net sales decreased $28.3 million or 1.1% in the nine months of fiscal 2025 as compared to the nine months of fiscal 2024. This decrease was due to an 1% decrease in organic volume, a 1% decrease in pricing, and a 1% decrease in foreign currency translation, partially offset by a 2% increase in acquisitions.

Previous wording

Net sales of our Energy Systems segment in the second quarter of fiscal 2025 decreased $40.4 million or 9.6% compared to the second quarter of fiscal 2024. This decrease was due to an 8% decrease in organic volume and a 2% decrease in pricing. This decrease in sales was driven by continued capital spending pauses of our network communications customers, which was partially offset by an increase in datacenter customers. Net sales of our Energy Systems segment in the six months of fiscal 2025 decreased $103.9 million or 12.3% compared to the six months of fiscal 2024. This decrease was due to a 9% decrease in organic volume, a 2% decrease in pricing, and a 1% decrease in foreign currency translation. This decrease in sales was driven by continued capital spending pauses of our network communications customers particularly of our higher margin power electronics products.

Current wording

Net sales of our Energy Systems segment in the third quarter of fiscal 2025 increased $15.7 million or 4.2% compared to the third quarter of fiscal 2024. This increase was due to an 6% increase in organic volume, partially offset by a 2% decrease in foreign currency translation. This increase in sales was driven by improved volumes from the early stages of the return of spending from network communication customers. Net sales of our Energy Systems segment in the nine months of fiscal 2025 decreased $88.3 million or 7.2% compared to the nine months of fiscal 2024. This decrease was due to a 5% decrease in organic volume, a 1% decrease in pricing, and a 1% decrease in foreign currency translation. This decrease in sales was driven by capital spending pauses of our network communications customers particularly of our higher margin power electronics products in the first half of the year, partially offset by robust data center sales.

Previous 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.

Current wording

Net sales of our Motive Power segment in the third quarter of fiscal 2025 increased by $3.5 million or 1.0% compared to the third quarter of fiscal 2024. This increase was primarily due to a 1% increase in organic volume and a 2% increase in pricing, partially offset by a 2% decrease in foreign currency translation. Volumes were muted due to a plant disruption from a customer in EMEA in the quarter. Net sales of our Motive Power segment in the nine months of fiscal 2025 increased by $30.4 million or 2.9% compared to the nine months of fiscal 2024. This increase was primarily due to a 4% increase in organic volume, partially 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 in the nine months.

Previous wording

Net sales of our Specialty segment in the second quarter of fiscal 2025 increased by $11.6 million or 9.3% compared to the second quarter of fiscal 2024. The increase was primarily due to a 12% increase in acquisitions and a 1% increase in pricing, partially offset by a 4% decrease in organic volume. This increase in sales was primarily driven by increased volumes in Aerospace and Defense including impacts from the Bren-Tronics acquisition. Net sales of our Specialty segment in the six months of fiscal 2025 increased by $4.0 million or 1.5% compared to the six months of fiscal 2024. The increase was primarily due to a 6% increase in acquisitions, partially offset by a 3% decrease in organic volume and a 1% decrease in pricing. This increase in sales was primarily driven by increased volumes in Aerospace and Defense including impacts from the Bren-Tronics acquisition, partially offset by decreased demand in OEM transportation customers.

Current wording

Net sales of our Specialty segment in the third quarter of fiscal 2025 increased by $22.6 million or 17.0% compared to the third quarter of fiscal 2024. The increase was primarily due to a 21% increase from acquisitions and a 2% increase in pricing, partially offset by a 6% decrease in organic volume. Net sales of our Specialty segment in the nine months of fiscal 2025 increased by $26.7 million or 6.8% compared to the nine months of fiscal 2024. The increase was primarily due to a 11% increase from acquisitions, partially offset by a 4% decrease in organic volume. This increase in sales for the quarter and nine months was primarily driven by increased volumes in Aerospace and Defense including impacts from the Bren-Tronics acquisition, partially offset by decreased demand in OEM transportation customers.

Previous 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.

Current wording

Gross profit increased $49.6 million or 19.9% in the third quarter and increased $60.2 million or 8.3% in the nine months of fiscal 2025 compared to the comparable periods of fiscal 2024. Gross profit, as a percentage of net sales, increased 400 basis points and increased 250 basis points in the third quarter and nine months of fiscal 2025, respectively, compared to the third quarter and nine months of fiscal 2024. The increase in the gross profit margin in the current quarter and nine 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 and accretive impact of Bren-tronics margins. The additional IRA benefits recognized in the period represent further revised IRS guidance expanding qualified products and a catch up adjustment relating to prior periods.

Previous wording

Operating expenses, as a percentage of sales, increased 100 basis points and increased 90 basis points in the second quarter and six months of fiscal 2025, compared to the comparable periods of fiscal 2024. The increases are primarily a result of additional costs incurred relating to the Bren-Tronics acquisition as compared to the prior year.

Current wording

Operating expenses, as a percentage of sales, increased 30 basis points and increased 70 basis points in the third quarter and nine months of fiscal 2025, compared to the comparable periods of fiscal 2024. The increases are primarily a result of the Bren-Tronics acquisition, increased investment in Fast Charge and Storage, and other payroll costs net of Energy Systems's cost savings.

Previous wording

Selling expenses, a main component of operating expenses, decreased $3.4 million or 5.7% in the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024, and decreased 25 basis points as a percentage of net sales. In the six months of fiscal 2025, selling expenses decreased by $8.4 million or 7.2% compared to the six months of fiscal 2024 and decreased 21 basis points as a percentage of net sales. The decrease in selling expenses as a percentage of sales in the current quarter is a result of our cost reduction initiatives partially offsetting labor increases earlier this fiscal year.

Current wording

Selling expenses, a main component of operating expenses, decreased $1.1 million or 2% in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024, and decreased 44 basis points as a percentage of net sales. In the nine months of fiscal 2025, selling expenses decreased by $9.5 million or 5.5% compared to the nine months of fiscal 2024 and decreased 29 basis points as a percentage of net sales. The decrease in selling expenses as a percentage of sales in the current quarter is a result of our cost reduction initiatives in Energy Systems during the fiscal year.

Previous 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.

Current wording

Included in our third quarter and nine months of fiscal 2025 operating results of Energy Systems were restructuring charges of $0.1 million and $3.9 million respectively. Included in our third quarter and nine months of fiscal 2025 operating results of Motive Power were restructuring charges of $0.0 million and $0.8 million, respectively. Included in our third quarter and nine months of fiscal 2025 operating results of Specialty were restructuring charges of $0.0 million and $0.4 million, respectively.

Previous wording

Included in our second quarter and six months of fiscal 2024 operating results of Energy Systems were restructuring charges of $2.2 million and $2.7 million, respectively. Included in our second quarter and six months of fiscal 2024 operating results of Motive Power were restructuring charges of $0.8 million and $0.8 million, respectively.

Current wording

Included in our third quarter and nine months of fiscal 2024 operating results of Energy Systems were restructuring charges of $0.0 million and $2.7 million, respectively. Included in our third quarter and nine months of fiscal 2024 operating results of Motive Power were restructuring charges of $0.9 million and $1.8 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 is expected to be completed in 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 was substantially complete as the end of fiscal 2024.

Previous wording

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

Current wording

During the nine 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 $13.5 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.

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 $13.6 million. Cash charges are estimated to total $9.7 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 the six months of fiscal 2025, the Company recorded cash charges of $0.8 million primarily related to relocation costs.

Current wording

During the nine months of fiscal 2025, the Company recorded cash charges of $0.9 million primarily related to relocation costs.

Previous wording

During the six months of fiscal 2025, the Company recorded cash charges relating to site cleanup and decommissioning equipment of $0.3 million.

Current wording

During the nine months of fiscal 2025, the Company recorded cash charges relating to site cleanup and decommissioning equipment of $0.4 million.

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 Janurary 1, 2023. 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 January 1, 2023. These actions resulted in the reduction of approximately 200 employees.

Previous wording

(2) Corporate and other includes amounts managed on a company-wide basis and not directly allocated to any reportable segments, primarily relating to IRA production tax credits. Also, included are start-up costs for exploration of a new lithium plant as well as start-up operating expenses from the New Ventures operating segment.

Current wording

(2) Corporate and other includes amounts managed on a company-wide basis and not directly allocated to any reportable segments, primarily relating to IRA production tax credits. Also, included are start-up costs for exploration and construction of a new lithium plant as well as sales and expenses from the New Ventures operating segment.

Previous wording

(2) Corporate and other includes amounts managed on a company-wide basis and not directly allocated to any reportable segments, primarily relating to IRA production tax credits. Also, included are start-up costs for exploration of a new lithium plant as well as start-up operating expenses from the New Ventures operating segment.

Current wording

(2) Corporate and other includes amounts managed on a company-wide basis and not directly allocated to any reportable segments, primarily relating to IRA production tax credits. Also, included are start-up costs for exploration and construction of a new lithium plant as well as sales and expenses from the New Ventures operating segment.

Previous 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.

Current wording

The Motive Power operating earnings, as a percentage of sales, decreased 10 basis points and increased 50 basis points in the third quarter and nine months of fiscal 2025, respectively, compared to the third quarter and nine months of fiscal 2024. The slight decrease in the quarter was driven by foreign currency impacts and higher operating expenses mitigated by improved price/mix. Additionally the increase in the nine months continues to be driven by volume growth in addition to favorable commodity costs.

Previous wording

The Specialty operating earnings, as a percentage of sales, increased 90 basis points and decreased 130 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 is a result of the accretive Bren-Tronics acquisition combined with robust Aerospace and Defense volumes, partially offset by declines in transportation OEM volume. The decrease for the six months is a result of the volume declines from the transportation OEM customers which outweighed the improvements from the Bren-Tronics acquisition.

Current wording

The Specialty operating earnings, as a percentage of sales, increased 50 basis points and decreased 70 basis points in the third quarter and nine months of fiscal 2025, respectively, compared to the third quarter and nine months of fiscal 2024. The increase for the quarter is a result of the accretive Bren-Tronics acquisition, partially offset by declines in transportation OEM volume. The decrease for the nine months is a result of the volume declines from the transportation OEM customers which outweighed the improvements from the Bren-Tronics acquisition.

Previous 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).

Current wording

Interest expense of $14.9 million in the third quarter of fiscal 2025 (net of interest income of $1.4 million) was $3.2 million higher than the interest expense of $11.7 million in the third quarter of fiscal 2024 (net of interest income of $0.8 million).

Previous wording

Interest expense of $23.5 million in the six months of fiscal 2025 (net of interest income of $1.8 million) was $3.9 million lower than the interest expense of $27.4 million in the six months of fiscal 2024 (net of interest income of $1.2 million).

Current wording

Interest expense of $38.4 million in the nine months of fiscal 2025 (net of interest income of $3.1 million) was $0.7 million lower than the interest expense of $39.1 million in the nine months of fiscal 2024 (net of interest income of $2.0 million).

Previous 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.

Current wording

The increase in interest expense in the third quarter of fiscal 2025 and the decrease in the nine months of fiscal 2025 is primarily due to higher borrowing levels in the comparable quarter where the nine months benefited from slightly lower interest rates. Our average debt outstanding was $1,284.7 million and $1,096.3 million in the third quarter and nine months of fiscal 2025, compared to $970.5 million and $1,008.4 million in the third quarter and nine months of fiscal 2024.

Previous 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.

Current wording

Included in interest expense are non-cash charges for deferred financing fees of$0.5 million and $1.5 million for the third quarter and nine months of fiscal 2025 and $0.4 million and $1.2 million in the third quarter and nine months of fiscal 2024.

Previous 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.

Current wording

Other (income) expense, net in the third quarter of fiscal 2025 was expense of $1.1 million compared to expense of $2.2 million in the third quarter of fiscal 2024. Other (income) expense, net in the nine months of fiscal 2025 was expense of $4.8 million compared to expense of $5.9 million in the nine months of fiscal 2024. Foreign currency impact resulted in a gain of $2.2 million and a gain of $4.2 million in the third quarter and nine months of fiscal 2025, respectively, compared to a foreign currency gain of $0.4 million and a gain of $3.2 million in the third quarter and nine months of fiscal 2024, respectively.

Previous 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.

Current wording

As a result of the above, earnings before income taxes in the third quarter of fiscal 2025 increased $48.0 million, or 61.1%, compared to the third quarter of fiscal 2024 and increased $64.6 million, or 28.6% in the nine months of fiscal 2025 compared to the nine 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 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.

Current wording

The Company’s income tax provision consists of federal, state and foreign income taxes. The tax provision for the third 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 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.

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 Medical Systems, Inc. v. Commissioner ("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 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.

Current wording

The consolidated effective income tax rates for the third quarter of fiscal 2025 and 2024 were 9.4% and 3.2% and for the nine months of fiscal 2025 and 2024 were 7.9% and 7.7%. The rate increase in the third quarter compared to the prior year period is primarily due to the interim period allocation of annual tax due to the significant increase in quarterly earnings, impact of Pillar 2 and mix of earnings among tax jurisdictions. The rate increase in the nine months of fiscal 2025 compared to the prior year periods are primarily due to 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, offset primarily by a discrete tax benefit as a result of Varianin fiscal 2025.

Previous 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.

Current wording

Foreign income as a percentage of worldwide income is estimated to be 48% for fiscal 2025 compared to 52% for fiscal 2024. The foreign effective tax rates for the nine months of fiscal 2025 and 2024 were 15% and 11%, respectively. The foreign effective tax rate increase in the third quarter compared to the third 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 $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.

Current wording

Operating activities provided cash of $125.1 million in the nine months of fiscal 2025 compared to $320.2 million of cash provided in the nine months of fiscal 2024, with the decrease in operating cash resulting mainly due to activity in accounts receivable, inventory, prepaid and other current assets, accrued expenses and accounts payable. Inventory increased or used cash of $19.6 million, and accounts receivable increased or used cash of $24.2 million. Additionally, accounts payable decreased or used cash of $17.7 million. In the nine months of fiscal 2025, net earnings were $267.2 million, depreciation and amortization $74.4 million, stock-based compensation $20.3 million, allowance for doubtful debts of $1.9 million, non-cash interest of $1.4 million and, non-cash charges relating to exit charges $0.3 million. Prepaid and other current assets were a use of funds of $145.5 million, primarily from an increases of $119.7 million in income tax receivable, $15.5 million in contract assets, and $11.7 million in other prepaid expenses, partially offset by a decrease of $0.9 million in prepaid insurance . Accrued expenses were a use of funds of $34.8 million primarily from decrease in tax accruals of $32.5 million, payroll related payments of $13.6 million net of accruals, other miscellaneous accruals of $3.0 million, and sales related accruals of $1.0 million, partially offset by $8.1 million in accrued interest net of interest payments, $5.2 million in contract liabilities and deferred income, and warranty accruals of $1.9 million.