EnerSys, Reading, Pennsylvania, United States, (NYSE: ENS), a global leader in stored energy solutions for industrial applications, announced today results for its first quarter of fiscal 2021, which ended on July 5, 2020.
| First Quarter FY 21 Highlights | ||
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Message from the CEO
“Despite headwinds from COVID-19, EnerSys generated strong profitability and operating cash flow in the first quarter of our fiscal year 2021, principally due to the demand for our products in industries where we have been designated as an essential critical infrastructure supplier. We generated $117M of operating cash flows in Q1. We are flexing our manufacturing capacity to match supply with demand, maximizing manufacturing efficiency and benefiting from raw material and energy cost reductions. Of our three lines of business, Motive Power was most affected by COVID-19 as many industrial manufacturing plants around the world were closed or operated on reduced production levels. Our Energy Systems business held up well as telecommunications operators expanded their capacity and hardened their networks to accommodate the work/school from home initiatives brought on by the pandemic. Our Specialty business benefited from several new aftermarket transportation contracts, which was somewhat offset by weakening demand from new large over-the-road truck manufacturers. Specialty also secured several large multi-year development contracts for guided munitions.”
“To offset the reduction in revenue, we have taken multiple initiatives to flex our operational expenses in line with reduced revenue and our work from home initiatives continue to successfully support the business. It is a reflection of our business model, the markets we serve, and our company culture that our manufacturing facilities generally have continued to operate during these unsettled times with most experiencing only relatively brief or no suspensions of activity. EnerSys products and services support niche markets within critical industries such as telecommunications and data networks, healthcare, food and beverage, energy, information technology, and defense. For the most part, these industries, and thus our major manufacturing operations, have been allowed by governments around the world to continue operating.”
“I am very proud of the professionalism demonstrated by my EnerSys colleagues during these trying times. We have taken additional measures to protect our employees against COVID-19, implementing enhanced health and safety protocols at our facilities around the world. Along with delivering essential products and services to critical industries, our employees have continued to advance EnerSys’ strategic priorities, including development of new products, and we expect to release our new lithium systems for material handling in September 2020, following testing with lift truck original equipment manufacturers and large end users.”
“The first quarter of our fiscal year 2021 presented significant market headwinds from the COVID-19 pandemic lockdowns and suppressed demand, but I am pleased with the way we have managed the business and very optimistic about our future opportunities. We are confident we can manage through the market downturn better than our competitors and remain committed to executing the strategy we outlined at Investor Day. Our priority is the health and safety of our employees and enhancing our strong business and balance sheet for our stakeholders.”
“We expect to resume guidance when our ability to assess the global Motive Power market’s recovery becomes clearer”,
David M. Shaffer, President and Chief Executive Officer, EnerSys.
| Key Results from Operations by Segments ($ in millions) | ||||||||||
| Q1 FY21 | Q1 FY20 | % Change | ||||||||
| Energy Systems | ||||||||||
| Net Sales | $ | 353.4 | $ | 353.8 | (0.1 | ) | % | |||
| Operating Earnings | 22.0 | 23.6 | (6.4 | ) | % | |||||
| Adjusted Operated Earnings * | 28.1 | 29.9 | (6.0 | ) | % | |||||
| Motive Power | ||||||||||
| Net Sales | 262.8 | 344.4 | (23.7 | ) | % | |||||
| Operating Earnings | 27.3 | 37.1 | (26.5 | ) | % | |||||
| Adjusted Operated Earnings * | 27.3 | 37.6 | (27.4 | ) | % | |||||
| Specialty | ||||||||||
| Net Sales | 88.7 | 82.0 | 8.2 | % | ||||||
| Operating Earnings | 5.3 | 10.0 | (47.7 | ) | % | *** | ||||
| Adjusted Operated Earnings * | 5.8 | 10.2 | (43.7 | ) | % | |||||
* This is a non-GAAP financial measure. See “Reconciliation of Non-GAAP Financial Measures” for more information.
** Please refer to Item 1. Financial Statements, Consolidated Condensed Statement of Cash Flows set forth in EnerSys’ Quarterly Report on Form 10-Q for the first quarter ended July 5, 2020.
*** Drop in Specialty reflects $5M in additional manufacturing variance allocations, including those of newly acquired NorthStar Battery.
Net earnings attributable to EnerSys stockholders (“Net earnings”) for the first quarter of fiscal 2021 was $35.2 million, or $0.82 per diluted share, which included an unfavorable highlighted net of tax impact of $4.2 million, or $0.10 per diluted share, from highlighted items described in further detail in the tables shown below, reconciling non-GAAP adjusted financial measures to reported amounts.
Net earnings for the first quarter of fiscal 2020 were $48.6 million, or $1.13 per diluted share, which included an unfavorable highlighted net of tax impact of $7.3 million, or $0.17 per diluted share from highlighted items described in further detail in the tables shown below, reconciling non-GAAP adjusted financial measures to reported amounts.
Excluding these highlighted items, adjusted Net earnings per diluted share for the first quarter of fiscal 2021, on a non-GAAP basis, were $0.92.
During the first quarter of fiscal 2021, the Company received $3.7 million relating to the business interruption claim from a fire in our Richmond, KY motive power facility that occurred in the second quarter of fiscal 2020. Receipts to date were $8.7 million, which represents approximately half of our claim against our policy.
These earnings compare to the prior year first quarter adjusted Net earnings of $1.30 per diluted share. Please refer to the section included herein under the heading “Reconciliation of Non-GAAP Financial Measures” for a discussion of the Company’s use of non-GAAP adjusted financial information, which includes tables reconciling GAAP and non-GAAP adjusted financial measures for the quarters ended July 5, 2020 and June 30, 2019.
Net sales for the first quarter of fiscal 2021 were $704.9 million, a decrease of 10% from the prior year first quarter net sales of $780.2 million and a 10% sequential quarterly decrease from the fourth quarter of fiscal 2020 net sales of $781.8 million. The decrease from the prior year quarter was the result of an 11% decrease in organic volume, a 2% decrease in foreign currency translation impact and a 1% decrease in pricing, partially offset by a 4% increase from the NorthStar acquisition. The 10% sequential quarterly decrease was primarily from a 9% decrease in organic volume and a 1% decrease in pricing.
On July 6, 2020, the Company announced that it was changing its reportable segments, beginning with its first quarter of fiscal 2021, from being based on geographic regions to lines of business. The new reportable segments are Energy Systems (which includes energy solutions related to telecommunications systems, uninterruptible power systems, and other power applications), Motive Power (which includes power for electric industrial forklifts used in manufacturing, warehousing and other material handling applications, as well as mining equipment, diesel locomotive starting and other rail equipment) and Specialty (which includes energy solutions for transportation, satellites, military aircraft, submarines, ships and other tactical vehicles). Prior year quarter has been restated to reflect the new reportable segments.
The Company’s operating results for its business segments for the first quarters of fiscal 2021 and 2020 are as follows:
| Quarter ended | |||||||
| ($ millions) | |||||||
| July 5, 2020 | June 30, 2019 | ||||||
| Net sales by segment | |||||||
| Energy Systems | $ | 353.4 | $ | 353.8 | |||
| Motive Power | 262.8 | 344.4 | |||||
| Specialty | 88.7 | 82.0 | |||||
| Total net sales | $ | 704.9 | $ | 780.2 | |||
| Operating earnings | |||||||
| Energy Systems | $ | 28.1 | $ | 29.9 | |||
| Motive Power | 27.3 | 37.6 | |||||
| Specialty | 5.8 | 10.2 | |||||
| Restructuring charges – Energy Systems | (0.5 | ) | (1.1 | ) | |||
| Restructuring charges – Motive Power | (0.8 | ) | (0.6 | ) | |||
| Restructuring and other exit charges – Specialty | (0.1 | ) | (0.7 | ) | |||
| Amortization of identified intangible assets from recent acquisitions – Energy Systems | (6.0 | ) | (5.3 | ) | |||
| Amortization of identified intangible assets from recent acquisitions – Specialty | (0.4 | ) | — | ||||
| ERP system implementation and other – Energy Systems | — | (0.9 | ) | ||||
| ERP system implementation and other – Motive Power | — | (0.5 | ) | ||||
| Acquisition activity expense – Energy Systems | (0.1 | ) | (0.1 | ) | |||
| Acquisition activity expense – Specialty | (0.1 | ) | (0.2 | ) | |||
| Total operating earnings | $ | 53.2 | $ | 68.3 | |||
Full report HERE