EnerSys
Annual Report 2020

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ☐ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 2020 or Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to Commission file number: 001-32253 ENERSYS (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 23-3058564 (I.R.S. Employer Identification No.) 2366 Bernville Road Reading, Pennsylvania 19605 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: 610-208-1991 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol Name of each exchange on which registered Common Stock, $0.01 par value per share ENS New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer ☒ Accelerated filer Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☐ ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 1 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No State the aggregate market value of the voting and non-voting common equity held by non-affiliates at September 29, 2019: $2,642,464,560 (1) (based upon its closing transaction price on the New York Stock Exchange on September 29, 2019). (1) For this purpose only, “non-affiliates” excludes directors and executive officers. Common stock outstanding at May 28, 2020: 42,452,053 Shares of Common Stock Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on or about July 30, 2020 are incorporated DOCUMENTS INCORPORATED BY REFERENCE by reference in Part III of this Annual Report. 2 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 (the “Reform Act”) provides a safe harbor for forward-looking statements made by or on behalf of EnerSys. EnerSys and its representatives may, from time to time, make written or verbal forward-looking statements, including statements contained in EnerSys' filings with the Securities and Exchange Commission (“SEC”) and its reports to stockholders. Generally, the inclusion of the words “anticipate,” “believe,” “expect,” “future,” “intend,” “estimate,” “will,” “plans,” or the negative of such terms and similar expressions identify statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are intended to come within the safe harbor protection provided by those sections. All statements addressing operating performance, events, or developments that EnerSys expects or anticipates will occur in the future, including statements relating to sales growth, earnings or earnings per share growth, and market share, as well as statements expressing optimism or pessimism about future operating results, are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are and will be based on management’s then-current beliefs and assumptions regarding future events and operating performance and on information currently available to management, and are applicable only as of the dates of such statements. Forward-looking statements involve risks, uncertainties and assumptions. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Actual results may differ materially from those expressed in these forward-looking statements due to a number of uncertainties and risks, including the risks described in this Annual Report on Form 10-K and other unforeseen risks. You should not put undue reliance on any forward-looking statements. These statements speak only as of the date of this Annual Report on Form 10-K, even if subsequently made available by us on our website or otherwise, and we undertake no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K. Our actual results may differ materially from those contemplated by the forward-looking statements for a number of reasons, including the following factors: • • • • • • • • • • • • • • • • • • • • • • • • • • • • • economic, financial and other impacts of the COVID-19 pandemic; general cyclical patterns of the industries in which our customers operate; the extent to which we cannot control our fixed and variable costs; the raw materials in our products may experience significant fluctuations in market price and availability; certain raw materials constitute hazardous materials that may give rise to costly environmental and safety claims; legislation regarding the restriction of the use of certain hazardous substances in our products; risks involved in our operations such as disruption of markets, changes in import and export laws, environmental regulations, currency restrictions and local currency exchange rate fluctuations; our ability to raise our selling prices to our customers when our product costs increase; the extent to which we are able to efficiently utilize our global manufacturing facilities and optimize our capacity; general economic conditions in the markets in which we operate; competitiveness of the battery markets and other energy solutions for industrial applications throughout the world; our timely development of competitive new products and product enhancements in a changing environment and the acceptance of such products and product enhancements by customers; our ability to adequately protect our proprietary intellectual property, technology and brand names; litigation and regulatory proceedings to which we might be subject; our expectations concerning indemnification obligations; changes in our market share in the geographic business segments where we operate; our ability to implement our cost reduction initiatives successfully and improve our profitability; quality problems associated with our products; our ability to implement business strategies, including our acquisition strategy, manufacturing expansion and restructuring plans; our acquisition strategy may not be successful in locating advantageous targets; our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we acquire into our operations and our ability to realize related revenue synergies, strategic gains, and cost savings may be significantly harder to achieve, if at all, or may take longer to achieve; potential goodwill impairment charges, future impairment charges and fluctuations in the fair values of reporting units or of assets in the event projected financial results are not achieved within expected time frames; our debt and debt service requirements which may restrict our operational and financial flexibility, as well as imposing unfavorable interest and financing costs; our ability to maintain our existing credit facilities or obtain satisfactory new credit facilities; adverse changes in our short and long-term debt levels under our credit facilities; our exposure to fluctuations in interest rates on our variable-rate debt; our ability to attract and retain qualified management and personnel; our ability to maintain good relations with labor unions; credit risk associated with our customers, including risk of insolvency and bankruptcy; 3 • • • our ability to successfully recover in the event of a disaster affecting our infrastructure, supply chain, or our facilities, such as the Richmond, Kentucky facility, including, but not limited to, satisfactory resolution of insurance coverage and claims for both property damage, business interruption and other insurable losses, strategy for business interruption and revenue loss; occurrence of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, pandemics, outbreaks of hostilities or terrorist acts, or the effects of climate change, and our ability to deal effectively with damages or disruptions caused by the foregoing; and the operation, capacity and security of our information systems and infrastructure. This list of factors that may affect future performance is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. 4 EnerSys Annual Report on Form 10-K For the Fiscal Year Ended March 31, 2020 Index PART I Cautionary Note Regarding Forward-Looking Statements Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Item 6. Selected Financial Data Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services PART IV Item 15. Exhibits, Financial Statement Schedules Signatures 5 Page 3 6 12 21 22 22 22 23 26 27 52 55 110 110 110 111 111 111 111 112 113 117 Table of Contents ITEM 1. BUSINESS Overview PART I EnerSys (the “Company,” “we,” or “us”) is the world’s largest manufacturer, marketer and distributor of industrial batteries. We also manufacture, market and distribute products such as battery chargers, power equipment, battery accessories, and outdoor cabinet enclosures. Additionally, we provide related aftermarket and customer-support services for our products. We market our products globally to over 10,000 customers in more than 100 countries through a network of distributors, independent representatives and our internal sales force. We operate and manage our business in three geographic regions of the world—Americas, EMEA and Asia, as described below. Our business is highly decentralized with manufacturing locations throughout the world. More than half of our manufacturing capacity is located outside of the United States, and approximately 40% of our net sales were generated outside of the United States. The Company has three reportable business segments based on geographic regions, defined as follows: • • • Americas, which includes North and South America, with our segment headquarters in Reading, Pennsylvania, U.S.A.; EMEA, which includes Europe, the Middle East and Africa, with our segment headquarters in Zug, Switzerland; and Asia, which includes Asia, Australia and Oceania, with our segment headquarters in Singapore. We have two primary product lines: reserve power and motive power products. Net sales classifications by product line are as follows: • Reserve power products are used for backup power for the continuous operation of critical applications in telecommunications systems, uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems, and other specialty power applications, including medical and security systems, premium starting, lighting and ignition applications, in switchgear, electrical control systems used in electric utilities, large-scale energy storage, energy pipelines, in commercial aircraft, satellites, military aircraft, submarines, ships and tactical vehicles. Reserve power products also include thermally managed cabinets and enclosures for electronic equipment and batteries. With the Alpha acquisition, we are a provider of highly integrated power solutions and services to broadband, telecom, renewable and industrial customers. • Motive power products are used to provide 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. See Note 23 to the Consolidated Financial Statements for information on segment reporting. Fiscal Year Reporting In this Annual Report on Form 10-K, when we refer to our fiscal years, we state “fiscal” and the year, as in “fiscal 2020”, which refers to our fiscal year ended March 31, 2020. The Company reports interim financial information for 13-week periods, except for the first quarter, which always begins on April 1, and the fourth quarter, which always ends on March 31. The four quarters in fiscal 2020 ended on June 30, 2019, September 29, 2019, December 29, 2019, and March 31, 2020, respectively. The four quarters in fiscal 2019 ended on July 1, 2018, September 30, 2018, December 30, 2018, and March 31, 2019, respectively. History EnerSys and its predecessor companies have been manufacturers of industrial batteries for over 125 years. Morgan Stanley Capital Partners teamed with the management of Yuasa, Inc. in late 2000 to acquire from Yuasa Corporation (Japan) its reserve power and motive power battery businesses in North and South America. We were incorporated in October 2000 for the purpose of completing the Yuasa, Inc. acquisition. On January 1, 2001, we changed our name from Yuasa, Inc. to EnerSys to reflect our focus on the energy systems nature of our businesses. In 2004, EnerSys completed its initial public offering (the “IPO”) and the Company’s common stock commenced trading on the New York Stock Exchange, under the trading symbol “ENS”. 6 Table of Contents Key Developments There have been several key stages in the development of our business, which explain to a significant degree our results of operations over the past several years. In March 2002, we acquired the reserve power and motive power business of the Energy Storage Group of Invensys plc. (“ESG”). Our successful integration of ESG provided global scale in both the reserve and motive power markets. The ESG acquisition also provided us with a further opportunity to reduce costs and improve operating efficiency. During fiscal years 2003 through 2020, we made thirty-four acquisitions around the globe. In fiscal 2020, we completed the acquisition of NorthStar, headquartered in Stockholm, Sweden. In fiscal 2019, we completed the acquisition of Alpha. NorthStar Acquisition On September 30, 2019, we completed the acquisition of NorthStar, for $77.8 million in cash consideration and the assumption of $107.0 million in debt, which was funded using existing cash and credit facilities. NorthStar, through its direct and indirect subsidiaries, manufactures and distributes thin plate pure lead (“TPPL”) batteries and battery enclosures. NorthStar has two large manufacturing facilities in Springfield, Missouri. The results of the NorthStar acquisition have been included in our results of operations from the date of acquisition. Pro forma earnings and earnings per share computations have not been presented as this acquisition was not considered material. The North American and European results of operations of NorthStar have been included in our Americas segment and EMEA segment, respectively. Alpha Acquisition On December 7, 2018, the Company completed the acquisition of all of the issued and outstanding common stock of Alpha Technologies Services, Inc. (“ATS”) and Alpha Technologies Ltd. (“ATL”), resulting in ATS and ATL becoming wholly-owned subsidiaries of the Company (the “Alpha share purchase”). Additionally, the Company acquired substantially all of the assets of Alpha Technologies Inc. and certain assets of Altair Advanced Industries, Inc. and other affiliates of ATS and ATL (all such sellers, together with ATS and ATL, “Alpha”), in each case in accordance with the terms and conditions of certain restructuring agreements (collectively, the “Alpha asset acquisition” and together with the Alpha share purchase, the “Alpha acquisition”). Based in Bellingham, Washington, Alpha is a global industry leader in the comprehensive commercial-grade energy solutions for broadband, telecom, renewable, industrial and traffic customers around the world. The initial purchase consideration for the Alpha acquisition was $750.0 million of which $650.0 million was paid in cash and the balance was settled by issuing 1,177,630 shares of EnerSys common stock. These shares were issued out of the Company's treasury stock and were valued at $84.92 per share, which was based on the thirty-day volume weighted average stock price of the Company’s common stock at closing, in accordance with the purchase agreement. The 1,177,630 shares had a closing date fair value of $93.3 million, based upon the December 7, 2018 closing date spot rate of $79.20. The total purchase consideration, consisting of cash paid of $650.0 million, shares valued at $93.3 million and adjustment for working capital (due from seller of $0.8 million) was $742.5 million. The Company funded the cash portion of the acquisition with borrowings from the Amended Credit Facility (as defined in the Liquidity and Capital Resources section in Item 7. below). The results of operations of Alpha have been included in the Company’s Americas segment beginning December 8, 2018. Our Customers We serve over 10,000 customers in over 100 countries, on a direct basis or through our distributors. We are not overly dependent on any particular end market. Our customer base is highly diverse, and no single customer accounts for more than 10% of our revenues. Our reserve power customers consist of both global and regional customers. These customers are in diverse markets including telecom, UPS, electric utilities, security systems, emergency lighting, premium starting, lighting and ignition applications and space satellites. In addition, we sell our aerospace and defense products in numerous countries, including the governments of the U.S., Germany and the U.K. and to major defense and aviation original equipment manufacturers (“OEMs”). 7 Table of Contents Our motive power products are sold to a large, diversified customer base. These customers include material handling equipment dealers, forklift and heavy truck OEMs and end users of such equipment. End users include manufacturers, distributors, warehouse operators, retailers, airports, mine operators and railroads. Distribution and Services We distribute, sell and service reserve and motive power products throughout the world, principally through company-owned sales and service facilities, as well as through independent manufacturers’ representatives. Our company-owned network allows us to offer high-quality service, including preventative maintenance programs and customer support. Our warehouses and service locations enable us to respond quickly to customers in the markets we serve. We believe that the extensive industry experience of our sales organization results in strong long-term customer relationships. Manufacturing and Raw Materials We manufacture and assemble our products at manufacturing facilities located in the Americas, EMEA and Asia. With a view toward projected demand, we strive to optimize and balance capacity at our battery manufacturing facilities globally, while simultaneously minimizing our product cost. By taking a global view of our manufacturing requirements and capacity, we believe we are better able to anticipate potential capacity bottlenecks and equipment and capital funding needs. The primary raw materials used to manufacture our products include lead, plastics, steel and copper. We purchase lead from a number of leading suppliers throughout the world. Because lead is traded on the world’s commodity markets and its price fluctuates daily, we periodically enter into hedging arrangements for a portion of our projected requirements to reduce the volatility of our costs. Competition The industrial energy storage market is highly competitive both among competitors who manufacture and sell industrial batteries and other energy storage systems and solutions and among customers who purchase industrial energy solutions. Our competitors range from development stage companies to large domestic and international corporations. Certain of our competitors produce energy storage products utilizing technologies or chemistries different from our own. We compete primarily on the basis of reputation, product quality, reliability of service, delivery and price. We believe that our products and services are competitively priced. Americas We believe that we have the largest market share in the Americas industrial battery market. We compete principally with East Penn Manufacturing, Exide Technologies and New Power in both the reserve and motive products markets; and also C&D Technologies Inc., EaglePicher (GTCR Group), SAFT, as well as Chinese producers in the reserve products market. EMEA We believe that we have the largest market share in the European industrial battery market. Our primary competitors are Exide Technologies, FIAMM, Hoppecke, SAFT, as well as Chinese producers in the reserve products market; and Exide Technologies, Eternity, Hoppecke, Midac, Sunlight and TAB in the motive products market. Asia We have a small share of the fragmented Asian industrial battery market. We compete principally with GS-Yuasa, Shin-Kobe, Hoppecke and Zibo Torch in the motive products market; and Amara Raja, China Shoto, Coslight, Exide Industries, Leoch and Narada, in the reserve products market. Warranties Warranties for our products vary geographically and by product type and are competitive with other suppliers of these types of products. Generally, our reserve power product warranties range from one to twenty years and our motive power product warranties range from one to seven years. The length of our warranties is varied to reflect regional characteristics and competitive influences. In some cases, our warranty period may include a pro rata period, which is typically based around the 8 Table of Contents design life of the product and the application served. Our warranties generally cover defects in workmanship and materials and are limited to specific usage parameters. Intellectual Property We have numerous patents and patent licenses in the United States and other jurisdictions but do not consider any one patent to be material to our business. From time to time, we apply for patents on new inventions and designs, but we believe that the growth of our business will depend primarily upon the quality of our products and our relationships with our customers, rather than the extent of our patent protection. We believe we are leaders in TPPL. We believe that a significant capital investment would be required by any party desiring to produce products using TPPL technology for our markets. We own or possess exclusive and non-exclusive licenses and other rights to use a number of trademarks in various jurisdictions. We have obtained registrations for many of these trademarks in the United States and other jurisdictions. Our various trademark registrations currently have durations of approximately 10 to 20 years, varying by mark and jurisdiction of registration and may be renewable. We endeavor to keep all of our material registrations current. We believe that many such rights and licenses are important to our business by helping to develop strong brand-name recognition in the marketplace. Seasonality Our business generally does not experience significant quarterly fluctuations in net sales as a result of weather or other trends that can be directly linked to seasonality patterns, but historically our fourth quarter is our best quarter with higher revenues and generally more working days and our second quarter is the weakest due to the summer holiday season in Western Europe and North America. Product and Process Development Our product and process development efforts are focused on the creation of new stored energy products, and integrated power systems and controls. We allocate our resources to the following key areas: • • • • • • the design and development of new products; optimizing and expanding our existing product offering; waste and scrap reduction; production efficiency and utilization; capacity expansion without additional facilities; and quality attribute maximization. Employees At March 31, 2020, we had approximately 11,400 employees. Of these employees, approximately 29% were covered by collective bargaining agreements. Employees covered by collective bargaining agreements that expire in the next twelve months were approximately 12% of the total workforce. The average term of these agreements is two years, with the longest term being three years. We consider our employee relations to be good. We did not experience any significant labor unrest or disruption of production during fiscal 2020. Information about Our Executive Officers As of June 1, 2020, our executive officers are: David M. Shaffer, age 55, President and Chief Executive Officer. Mr. Shaffer has been a director of EnerSys and has served as our President and Chief Executive Officer since April 2016. Prior thereto, he served as President and Chief Operating Officer since November 2014. From January 2013 through October 2014, he served as our President-EMEA. From 2008 to 2013, Mr. Shaffer was our President-Asia. Prior thereto he was responsible for our telecommunications sales in the Americas. Mr. Shaffer joined EnerSys in 2005 and has worked in various roles of increasing responsibility in the industry since 1989. 9 Table of Contents Holger P. Aschke, age 50, President-Europe, Middle East and Africa (EMEA) and Asia. Mr. Aschke has served as President-EMEA since January 2016. From April 2010 to January 2016, he was the Vice President Sales and Marketing Reserve Power-Europe. Mr. Aschke joined a predecessor company in 1996 and has held a wide range of operational and sales roles of increased responsibility in the Company’s EMEA business. Mr. Aschke completed a commercial IT education and apprenticeship sponsored by the University of Dortmund (Germany) and completed the Advanced Management Program from INSEAD (France). Michael J. Schmidtlein, age 59, Executive Vice President and Chief Financial Officer. Mr. Schmidtlein has served as Executive Vice President and Chief Financial Officer since January 2016. Prior thereto, since February 2010, he was our Senior Vice President-Finance and Chief Financial Officer. From November 2005 until February 2010, Mr. Schmidtlein was Vice President-Corporate Controller and Chief Accounting Officer. Prior thereto, Mr. Schmidtlein was the Plant Manager of our manufacturing facility in Warrensburg, Missouri. In 1995, he joined the Energy Storage Group of Invensys plc, which EnerSys acquired in 2002. Mr. Schmidtlein is a certified public accountant and received his Bachelor of Science degree in Accounting from the University of Missouri. Shawn M. O’Connell, age 47, President, Motive Power - Americas. Mr. O’Connell has served as our President, Motive Power - Americas since April 2019. Prior thereto he served as our Vice President - Reserve Power Sales and Service for the Americas from February 2017 to March 2019, and Vice President of EnerSys Advanced Systems from December 2015 to January 2017. Mr. O’Connell joined EnerSys in 2011, serving in various sales and marketing capacities in several areas of our business. Mr. O’Connell received his Master of Business Administration degree in International Business from the University of Redlands, CA and his Bachelor of Arts degree in English Literature from the California State University, San Bernardino. Mr. O’Connell is a veteran of the U.S. Army’s 82nd Airborne Division (Paratroopers) where he served as a Signals Intelligence Analyst, Spanish Linguist, and held a Top Secret security clearance. Andrew M. Zogby, age 60, President, Energy Systems - Americas. Mr. Zogby has served as President, Energy Systems - Americas since April 2019. He joined EnerSys upon completion of the acquisition of Alpha Technologies in December 2018. Mr. Zogby served as Alpha Technologies' President since 2008 and brings over 30 years of experience in global broadband, telecommunications and renewal energy industries. He has held corporate leadership positions with several leading technology firms. Mr. Zogby received his Bachelor of Science degree in Industrial and Labor Relations from LeMoyne College, Syracuse, NY, and his Master in Business Administration degree from Duke University’s Fuqua School of Business. He is active in the US Chamber of Commerce, and serves on the Chamber’s Energy, Clean Air & Natural Resources Committee and the Chamber Technology Engagement Center Committee. Environmental Matters and Climate Change Impacts We are committed to the protection of the environment and train our employees to perform their duties accordingly. In the manufacture of our products throughout the world, we process, store, dispose of and otherwise use large amounts of hazardous materials, especially lead and acid. As a result, we are subject to extensive and evolving environmental, health and safety laws and regulations governing, among other things: the generation, handling, storage, use, transportation and disposal of hazardous materials; emissions or discharges of hazardous materials into the ground, air or water; and the health and safety of our employees. In addition, we are required to comply with the regulation issued from the European Union called Registration, Evaluation, Authorization and Restriction of Chemicals or “REACH”. Under the regulation, companies which manufacture or import more than one ton of a covered chemical substance per year are required to register it in a central database administered by the European Chemicals Agency. The registration process requires the submission of information to demonstrate the safety of chemicals as used and could result in significant costs or delay the manufacture or sale of our products in the European Union. Additionally, industry associations and their member companies, including EnerSys, have scheduled meetings with the European Union member countries to advocate for their support of an exemption for lead compounds. Compliance with these laws and regulations results in ongoing costs. Failure to comply with these laws and regulations, or to obtain or comply with required environmental permits, could result in fines, criminal charges or other sanctions by regulators. From time to time, we have had instances of alleged or actual noncompliance that have resulted in the imposition of fines, penalties and required corrective actions. Our ongoing compliance with environmental, health and safety laws, regulations and permits could require us to incur significant expenses, limit our ability to modify or expand our facilities or continue production and require us to install additional pollution control equipment and make other capital improvements. In addition, private parties, including current or former employees, can bring personal injury or other claims against us due to the presence of, or their exposure to, hazardous substances used, stored, transported or disposed of by us or contained in our products. 10 Table of Contents Sumter, South Carolina We currently are responsible for certain environmental obligations at our former battery facility in Sumter, South Carolina, that predate our ownership of this facility. This battery facility was closed in 2001 and is separate from our current metal fabrication facility in Sumter. We have a reserve of $1.1 million for this facility as of March 31, 2020. Based on current information, we believe this reserve is adequate to satisfy our environmental liabilities at this facility. Environmental and safety certifications Seventeen of our facilities in the Americas, EMEA and Asia are certified to ISO 14001 standards. ISO 14001 is a globally recognized, voluntary program that focuses on the implementation, maintenance and continual improvement of an environmental management system and the improvement of environmental performance. Six facilities in EMEA and Asia are certified to OHSAS 18001 standards. OHSAS 18001 is a globally recognized occupational health and safety management systems standard. Climate change impacts The potential impact of climate change on our operations is uncertain. Climate change may result in, among other things, changes in rainfall and storm patterns and intensity and increased temperature and sea levels. As discussed elsewhere in this Annual Report on Form 10-K (Annual Report), including in Item 1A. Risk Factors, our operating results are significantly influenced by weather, and significant changes in historical weather patterns could significantly impact our future operating results. For example, if climate change results in drier weather and more accommodating temperatures over a greater period of time, we may be able to increase our productivity, which could positively impact our revenues and gross margins. Conversely, if climate change results in a greater amount of rainfall, snow, ice or other less accommodating weather conditions, we could experience reduced productivity, which could negatively impact our revenues and gross margins. Further, while an increase in severe weather events, such as hurricanes, tropical storms, blizzards and ice storms, can create a greater amount of emergency restoration service work, it often also can result in delays or other negative consequences for our manufacturing operations, which could negatively impact our financial results. Climate change may also affect the conditions in which we operate, and in some cases, expose us to potentially increased liabilities associated with those environmental conditions. Concerns about climate change could also result in potential new regulations, regulatory actions or requirements to fund energy efficiency activities, any of which could result in increased costs associated with our operations. We strive to operate our facilities in a manner that protects the environment and the health and safety of our employees, customers and communities. We have implemented company-wide environmental, health and safety policies and practices, which includes monitoring, training and communication of these policies, formulation of relevant policies and standards. Quality Systems We utilize a global strategy for quality management systems, policies and procedures, the basis of which is the ISO 9001:2015 standard, which is a worldwide recognized quality standard. We believe in the principles of this standard and reinforce this by requiring mandatory compliance for all manufacturing, sales and service locations globally that are registered to the ISO 9001 standard. This strategy enables us to provide consistent quality products and services to meet our customers’ needs. Workplace, Social and Corporate Governance Under the direction of our Chief Executive Officer and the board of directors, we are focused on achieving a high level of social responsibility, respectful workplace and strong corporate governance. We operate our business in a manner intended to address climate change and reduce its environmental impact, including by encouraging recycling. We are also focused on our social responsibility within our workforce and our community. Integrity and respect are our core values and are ingrained in EnerSys’ culture and workplace. We want EnerSys to be the employer of choice for all and are focused on hiring and retaining diverse and highly talented employees and empowering them to create value for our stockholders. In our employee selection process and operation of our business, we adhere to equal employment opportunity policies and encourage the participation of our employees in training programs that will enhance their effectiveness in the performance of their duties. 11 Table of Contents In order to foster the highest standards of ethics and conduct in all business relationships, we have adopted a Code of Business Conduct and Ethics. This policy, which covers a wide range of business practices and procedures, applies to our officers, directors and employees. We also have an active integrity hotline to ensure we address potential issues quickly, efficiently, and with appropriate discretion when poor behaviors or actions are experienced or observed. At EnerSys, we have zero tolerance for behavior that creates a hostile workplace or makes employees feel uncomfortable in their work environment. Available Information We file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public on the Internet at the SEC’s website at http://www.sec.gov. Our Internet address is http://www.enersys.com. We make available free of charge on http://www.enersys.com our annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practical after we electronically file such material with, or furnish it to, the SEC. ITEM 1A. RISK FACTORS The following risks and uncertainties, as well as others described in this Annual Report on Form 10-K, could materially and adversely affect our business, our results of operations and financial condition and could cause actual results to differ materially from our expectations and projections. Stockholders are cautioned that these and other factors, including those beyond our control, may affect future performance and cause actual results to differ from those which may, from time to time, be anticipated. There may be additional risks that are not presently material or known. See “Cautionary Note Regarding Forward-Looking Statements.” All forward-looking statements made by us or on our behalf are qualified by the risks described below. We operate in an extremely competitive industry and are subject to pricing pressures. We compete with a number of major international manufacturers and distributors, as well as a large number of smaller, regional competitors. Due to excess capacity in some sectors of our industry and consolidation among industrial battery purchasers, we have been subjected to significant pricing pressures. We anticipate continued competitive pricing pressure as foreign producers are able to employ labor at significantly lower costs than producers in the U.S. and Western Europe, expand their export capacity and increase their marketing presence in our major Americas and European markets. Several of our competitors have strong technical, marketing, sales, manufacturing, distribution and other resources, as well as significant name recognition, established positions in the market and long-standing relationships with OEMs and other customers. In addition, certain of our competitors own lead smelting facilities which, during periods of lead cost increases or price volatility, may provide a competitive pricing advantage and reduce their exposure to volatile raw material costs. Our ability to maintain and improve our operating margins has depended, and continues to depend, on our ability to control and reduce our costs. We cannot assure you that we will be able to continue to control our operating expenses, to raise or maintain our prices or increase our unit volume, in order to maintain or improve our operating results. Our results of operations may be negatively impacted by the novel coronavirus outbreak. In December 2019, the 2019 novel coronavirus surfaced in Wuhan, China (“COVID-19”). The World Health Organization declared a global emergency on January 30, 2020, with respect to the outbreak and several countries have initiated travel restrictions, closed borders and social distancing directives, including instructions requiring “shelter-in-place”. In addition to these existing travel restrictions, countries may impose prolonged quarantines and further restrict travel, which may significantly impact the ability of our employees to get to their places of work to produce products, may make it such that we are unable to obtain sufficient components or raw materials and component parts on a timely basis or at a cost-effective price or may significantly hamper our products from moving through the supply chain. The impacts of the outbreak are unknown and rapidly evolving. Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such COVID-19. We rely on our production facilities, as well as third-party suppliers and manufacturers, in the United States, Australia, Canada, France, Germany, Italy, the PRC, the United Kingdom and other countries significantly impacted by COVID-19. This outbreak has resulted in the extended shutdown of certain businesses in many of these countries, which has resulted and may continue to result in disruptions or delays to our supply chain. Any disruption in these businesses will likely impact our sales and operating 12 Table of Contents results. COVID-19 has had, and may continue to have, an adverse impact on our operations, supply chains and distribution systems and increase our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking. Due to these impacts and measures, we have experienced, and may continue to experience, significant and unpredictable reductions in demand for certain of our products. The degree and duration of disruptions to business activity are unknown at this time. A widespread health crisis could adversely affect the global economy, resulting in an economic downturn that could impact demand for our products. The future impact of the outbreak is highly uncertain and cannot be predicted and there is no assurance that the outbreak will not have a material adverse impact on our business, financial condition and results of operations. The extent of the impact will depend on future developments, including actions taken to contain COVID-19, and if these impacts persist or exacerbate over an extended period of time. The uncertainty in global economic conditions could negatively affect the Company’s operating results. Our operating results are directly affected by the general global economic conditions of the industries in which our major customer groups operate. Our business segments are highly dependent on the economic and market conditions in each of the geographic areas in which we operate. Our products are heavily dependent on the end markets that we serve and our operating results will vary by geographic segment, depending on the economic environment in these markets. Sales of our motive power products, for example, depend significantly on demand for new electric industrial forklift trucks, which in turn depends on end-user demand for additional motive capacity in their distribution and manufacturing facilities. The uncertainty in global economic conditions varies by geographic segment, and can result in substantial volatility in global credit markets, particularly in the United States, where we service the vast majority of our debt. These conditions affect our business by reducing prices that our customers may be able or willing to pay for our products or by reducing the demand for our products, which could in turn negatively impact our sales and earnings generation and result in a material adverse effect on our business, cash flow, results of operations and financial position. Government reviews, inquiries, investigations, and actions could harm our business or reputation. As we operate in various locations around the world, our operations in certain countries are subject to significant governmental scrutiny and may be adversely impacted by the results of such scrutiny. The regulatory environment with regard to our business is evolving, and officials often exercise broad discretion in deciding how to interpret and apply applicable regulations. From time to time, we receive formal and informal inquiries from various government regulatory authorities, as well as self-regulatory organizations, about our business and compliance with local laws, regulations or standards. For example, certain of the Company’s European subsidiaries received subpoenas and requests for documents and, in some cases, interviews from, and have had on-site inspections conducted by the competition authorities of Belgium, Germany and the Netherlands relating to conduct and anticompetitive practices of certain industrial battery participants. The Company settled the Belgian regulatory proceeding in February 2016 by acknowledging certain anticompetitive practices and conduct and agreeing to pay a fine of $2.0 million, which was paid in March 2016. In June 2017, the Company settled a portion of its previously disclosed proceeding involving the German competition authority relating to conduct involving the Company's motive power battery business and agreed to pay a fine of $14.8 million, which was paid in July 2017, and settled the remaining portion related to the Company's reserve power battery business and agreed to pay a fine of $7.3 million, which was paid in April 2019. In July 2017, the Company settled the Dutch regulatory proceeding and agreed to pay a fine of $11.2 million, which was paid in August 2017. As of March 31, 2020, the Company had no reserve balance in connection with these investigations and related legal matters. However, the precise scope, timing and time period at issue, as well as the final outcome of the investigations or customer claims, remain uncertain and could be materially adverse to our business. (See Note 19 to the Consolidated Financial Statement). Any determination that our operations or activities, or the activities of our employees, are not in compliance with existing laws, regulations or standards could result in the imposition of substantial fines, interruptions of business, loss of supplier, vendor, customer or other third-party relationships, termination of necessary licenses and permits, or similar results, all of which could potentially harm our business and/or reputation. Even if an inquiry does not result in these types of determinations, regulatory authorities could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business, and it potentially could create negative publicity which could harm our business and/or reputation. Reliance on third party relationships and derivative agreements could adversely affect the Company’s business. 13 Table of Contents We depend on third parties, including suppliers, distributors, lead toll operators, freight forwarders, insurance brokers, commodity brokers, major financial institutions and other third party service providers, for key aspects of our business, including the provision of derivative contracts to manage risks of (a) commodity cost volatility, (b) foreign currency exposures and (c) interest rate volatility. Failure of these third parties to meet their contractual, regulatory and other obligations to the Company, or the development of factors that materially disrupt our relationships with these third parties, could expose us to the risks of business disruption, higher commodity and interest costs, unfavorable foreign currency rates and higher expenses, which could have a material adverse effect on our business. Our operating results could be adversely affected by changes in the cost and availability of raw materials. Lead is our most significant raw material and is used along with significant amounts of plastics, steel, copper and other materials in our manufacturing processes. We estimate that raw material costs account for over half of our cost of goods sold. The costs of these raw materials, particularly lead, are volatile and beyond our control. Additionally, availability of the raw materials used to manufacture our products may be limited at times resulting in higher prices and/or the need to find alternative suppliers. Furthermore, the cost of raw materials may also be influenced by transportation costs. Volatile raw material costs can significantly affect our operating results and make period-to-period comparisons extremely difficult. We cannot assure you that we will be able to either hedge the costs or secure the availability of our raw material requirements at a reasonable level or, even with respect to our agreements that adjust pricing to a market-based index for lead, pass on to our customers the increased costs of our raw materials without affecting demand or that limited availability of materials will not impact our production capabilities. Our inability to raise the price of our products in response to increases in prices of raw materials or to maintain a proper supply of raw materials could have an adverse effect on our revenue, operating profit and net income. Our operations expose us to litigation, tax, environmental and other legal compliance risks. We are subject to a variety of litigation, tax, environmental, health and safety and other legal compliance risks. These risks include, among other things, possible liability relating to product liability matters, personal injuries, intellectual property rights, contract-related claims, government contracts, taxes, health and safety liabilities, environmental matters and compliance with U.S. and foreign laws, competition laws and laws governing improper business practices. We or one of our business units could be charged with wrongdoing as a result of such matters. If convicted or found liable, we could be subject to significant fines, penalties, repayments or other damages (in certain cases, treble damages). As a global business, we are subject to complex laws and regulations in the U.S. and other countries in which we operate. Those laws and regulations may be interpreted in different ways. They may also change from time to time, as may related interpretations and other guidance. Changes in laws or regulations could result in higher expenses and payments, and uncertainty relating to laws or regulations may also affect how we conduct our operations and structure our investments and could limit our ability to enforce our rights. In the area of taxes, changes in tax laws and regulations, as well as changes in related interpretations and other tax guidance could materially impact our tax receivables and liabilities and our deferred tax assets and tax liabilities. Additionally, in the ordinary course of business, we are subject to examinations by various authorities, including tax authorities. In addition to ongoing examinations, there could be additional investigations launched in the future by governmental authorities in various jurisdictions and existing investigations could be expanded. The global and diverse nature of our operations means that these risks will continue to exist and additional legal proceedings and contingencies will arise from time to time. Our results may be affected by the outcome of legal proceedings and other contingencies that cannot be predicted with certainty. In the manufacture of our products throughout the world, we process, store, dispose of and otherwise use large amounts of hazardous materials, especially lead and acid. As a result, we are subject to extensive and changing environmental, health and safety laws and regulations governing, among other things: the generation, handling, storage, use, transportation and disposal of hazardous materials; remediation of polluted ground or water; emissions or discharges of hazardous materials into the ground, air or water; and the health and safety of our employees. In light of the efforts to slow the spread of COVID-19 by many governments, we have also become subject to a number of restrictions on the operation of our business. Compliance with these laws and regulations results in ongoing costs. Failure to comply with these laws or regulations, or to obtain or comply with required environmental permits, could result in fines, criminal charges or other sanctions by regulators. From time to time we have had instances of alleged or actual noncompliance that have resulted in the imposition of fines, penalties and required corrective actions. Our ongoing compliance with environmental, health and safety laws, regulations and permits could require us to incur significant expenses, limit our ability to modify or expand our facilities or continue production and require us to install additional pollution control equipment and make other capital improvements. In addition, private parties, including current or former employees, could bring personal injury or other claims against us due to the presence of, or exposure to, hazardous substances used, stored or disposed of by us or contained in our products. 14 Table of Contents Certain environmental laws assess liability on owners or operators of real property for the cost of investigation, removal or remediation of hazardous substances at their current or former properties or at properties at which they have disposed of hazardous substances. These laws may also assess costs to repair damage to natural resources. We may be responsible for remediating damage to our properties caused by former owners. Soil and groundwater contamination has occurred at some of our current and former properties and may occur or be discovered at other properties in the future. We are currently investigating and monitoring soil and groundwater contamination at several of our properties, in most cases as required by regulatory permitting processes. We may be required to conduct these operations at other properties in the future. In addition, we have been, and in the future, may be liable to contribute to the cleanup of locations owned or operated by other persons to which we or our predecessor companies have sent wastes for disposal, pursuant to federal and other environmental laws. Under these laws, the owner or operator of contaminated properties and companies that generated, disposed of or arranged for the disposal of wastes sent to a contaminated disposal facility can be held jointly and severally liable for the investigation and cleanup of such properties, regardless of fault. Additionally, our products may become subject to fees and taxes in order to fund cleanup of such properties, including those operated or used by other lead-battery industry participants. Changes in environmental and climate laws or regulations could lead to new or additional investment in production designs and could increase environmental compliance expenditures. For example, the European Union has enacted greenhouse gas emissions legislation, and continues to expand the scope of such legislation. The United States Environmental Protection Agency has promulgated regulations applicable to projects involving greenhouse gas emissions above a certain threshold, and the United States and certain states within the United States have enacted, or are considering, limitations on greenhouse gas emissions. Changes in climate change concerns, or in the regulation of such concerns, including greenhouse gas emissions, could subject us to additional costs and restrictions, including increased energy and raw materials costs. Additionally, we cannot assure you that we have been or at all times will be in compliance with environmental laws and regulations or that we will not be required to expend significant funds to comply with, or discharge liabilities arising under, environmental laws, regulations and permits, or that we will not be exposed to material environmental, health or safety litigation. Also, the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar worldwide anti-bribery laws in non-U.S. jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. The FCPA applies to companies, individual directors, officers, employees and agents. Under the FCPA, U.S. companies may be held liable for actions taken by strategic or local partners or representatives. The FCPA also imposes accounting standards and requirements on publicly traded U.S. corporations and their foreign affiliates, which are intended to prevent the diversion of corporate funds to the payment of bribes and other improper payments. Certain of our customer relationships outside of the U.S. are with governmental entities and are therefore subject to such anti-bribery laws. Our policies mandate compliance with these anti- bribery laws. Despite meaningful measures that we undertake to facilitate lawful conduct, which include training and internal control policies, these measures may not always prevent reckless or criminal acts by our employees or agents. As a result, we could be subject to criminal and civil penalties, disgorgement, further changes or enhancements to our procedures, policies and controls, personnel changes or other remedial actions. Violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction and result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition. There is also a regulation to improve the transparency and accountability concerning the supply of minerals coming from the conflict zones in and around the Democratic Republic of Congo. U.S. legislation included disclosure requirements regarding the use of conflict minerals mined from the Democratic Republic of Congo and adjoining countries and procedures regarding a manufacturer’s efforts to prevent the sourcing of such conflict minerals. In addition, the European Union adopted a EU-wide conflict minerals rule under which most EU importers of tin, tungsten, tantalum, gold and their ores will have to conduct due diligence to ensure the minerals do not originate from conflict zones and do not fund armed conflicts. Large manufacturers also will have to disclose how they plan to monitor their sources to comply with the rules. Compliance with the regulation is required by January 1, 2021. The implementation of these requirements could affect the sourcing and availability of minerals used in the manufacture of our products. As a result, there may only be a limited pool of suppliers who provide conflict-free metals, and we cannot assure you that we will be able to obtain products in sufficient quantities or at competitive prices. Future regulations may become more stringent or costly and our compliance costs and potential liabilities could increase, which may harm our business. 15 Table of Contents We are exposed to exchange rate risks, and our net earnings and financial condition may suffer due to currency translations. We invoice our foreign sales and service transactions in local and foreign currencies and translate net sales using actual exchange rates during the period. We translate our non-U.S. assets and liabilities into U.S. dollars using current exchange rates as of the balance sheet dates. Because a significant portion of our revenues and expenses are denominated in foreign currencies, changes in exchange rates between the U.S. dollar and foreign currencies, primarily the euro, British pound, Polish zloty, Chinese renminbi, Mexican peso and Swiss franc may adversely affect our revenue, cost of goods sold and operating margins. For example, foreign currency depreciation against the U.S. dollar will reduce the value of our foreign revenues and operating earnings as well as reduce our net investment in foreign subsidiaries. Approximately 40% of net sales were generated outside of the United States in fiscal 2020. Most of the risk of fluctuating foreign currencies is in our EMEA segment, which comprised approximately one-third of our net sales during the last three fiscal years. The euro is the dominant currency in our EMEA operations. In the event that one or more European countries were to replace the euro with another currency, our sales into such countries, or into Europe generally, would likely be adversely affected until stable exchange rates are established. The translation impact from currency fluctuations on net sales and operating earnings in our Americas and Asia segments are not as significant as our EMEA segment, as a substantial majority of these net sales and operating earnings are in U.S. dollars or foreign currencies that have been closely correlated to the U.S. dollar. If foreign currencies depreciate against the U.S. dollar, it would make it more expensive for our non-U.S. subsidiaries to purchase certain of our raw material commodities that are priced globally in U.S. dollars, while the related revenue will decrease when translated to U.S. dollars. Significant movements in foreign exchange rates can have a material impact on our results of operations and financial condition. We periodically engage in hedging of our foreign currency exposures, but cannot assure you that we can successfully hedge all of our foreign currency exposures or do so at a reasonable cost. We quantify and monitor our global foreign currency exposures. Our largest foreign currency exposure is from the purchase and conversion of U.S. dollar- based lead costs into local currencies in Europe. Additionally, we have currency exposures from intercompany financing and intercompany and third party trade transactions. On a selective basis, we enter into foreign currency forward contracts and purchase option contracts to reduce the impact from the volatility of currency movements; however, we cannot be certain that foreign currency fluctuations will not impact our operations in the future. If we are unable to effectively hedge against currency fluctuations, our operating costs and revenues in our non-U.S. operations may be adversely affected, which would have an adverse effect on our operating profit and net income. We have experienced and may continue to experience, difficulties implementing our new global enterprise resource planning system. We are engaged in a multi-year implementation of a new global enterprise resource planning system (“ERP”). The ERP is designed to efficiently maintain our financial records and provide information important to the operation of our business to our management team. The ERP will continue to require significant investment of human and financial resources. In implementing the ERP, we have experienced significant production and shipping delays, increased costs and other difficulties. Any significant disruption or deficiency in the design and implementation of the ERP will adversely affect our ability to process orders, ship product, send invoices and track payments, fulfill contractual obligations or otherwise operate our business. While we have invested significant resources in planning, project management and training, additional and significant implementation issues may arise. In addition, our efforts to centralize various business processes and functions within our organization in connection with our ERP implementation may disrupt our operations and negatively impact our business, results of operations and financial condition. The failure to successfully implement efficiency and cost reduction initiatives, including restructuring activities, could materially adversely affect our business and results of operations, and we may not realize some or all of the anticipated benefits of those initiatives. From time to time we have implemented efficiency and cost reduction initiatives intended to improve our profitability and to respond to changes impacting our business and industry. These initiatives include relocating manufacturing to lower cost regions, working with our material suppliers to lower costs, product design and manufacturing improvements, personnel reductions and voluntary retirement programs, and strategically planning capital expenditures and development activities. In the past we have recorded net restructuring charges to cover costs associated with our cost reduction initiatives involving 16 Table of Contents restructuring. These costs have been primarily composed of employee separation costs, including severance payments, and asset impairments or losses from disposal. We also undertake restructuring activities and programs to improve our cost structure in connection with our business acquisitions, which can result in significant charges, including charges for severance payments to terminated employees and asset impairment charges. We cannot assure you that our efficiency and cost reduction initiatives will be successfully or timely implemented, or that they will materially and positively impact our profitability. Because our initiatives involve changes to many aspects of our business, the associated cost reductions could adversely impact productivity and sales to an extent we have not anticipated. In addition, our ability to complete our efficiency and cost-savings initiatives and achieve the anticipated benefits within the expected time frame is subject to estimates and assumptions and may vary materially from our expectations, including as a result of factors that are beyond our control. Furthermore, our efforts to improve the efficiencies of our business operations and improve growth may not be successful. Even if we fully execute and implement these activities and they generate the anticipated cost savings, there may be other unforeseeable and unintended consequences that could materially adversely impact our profitability and business, including unintended employee attrition or harm to our competitive position. To the extent that we do not achieve the profitability enhancement or other benefits of our efficiency and cost reduction initiatives that we anticipate, our results of operations may be materially adversely affected. Our international operations may be adversely affected by actions taken by foreign governments or other forces or events over which we may have no control. We currently have significant manufacturing and/or distribution facilities outside of the United States, in Argentina, Australia, Belgium, Brazil, Canada, the Czech Republic, France, Germany, India, Italy, Malaysia, Mexico, the PRC, Poland, Spain, Switzerland and the United Kingdom. Our global operations are dependent upon products manufactured, purchased and sold in the U.S. and internationally, including in countries with political and economic instability or uncertainty. This includes, for example, the uncertainty related to the United Kingdom’s withdrawal from the European Union (commonly known as “Brexit”) and the adoption and expansion of trade restrictions, including the occurrence or escalation of a "trade war," or other governmental action related to tariffs or trade agreements or policies among the governments of the United States, PRC and other countries. On January 31, 2020, the United Kingdom left the European Union pursuant to a withdrawal agreement which provides for, among other things, a transition period ending on December 31, 2020 during which the United Kingdom will remain (i) subject to all European Union laws and all international agreements that the European Union has signed and (ii) in the European Union Customs Union and the European Union Single Market. Before July 1, 2020, the United Kingdom and the European Union can jointly extend this transition period once by up to one to two years. Some countries have greater political and economic volatility and greater vulnerability to infrastructure and labor disruptions than others. Our business could be negatively impacted by adverse fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure at important geographic points of exit and entry for our products. Operating in different regions and countries exposes us to a number of risks, including: • multiple and potentially conflicting laws, regulations and policies that are subject to change; • imposition of currency restrictions, restrictions on repatriation of earnings or other restraints imposition of burdensome import duties, tariffs or quotas; changes in trade agreements; imposition of new or additional trade and economic sanctions laws imposed by the U.S. or foreign governments; war or terrorist acts; and political and economic instability or civil unrest that may severely disrupt economic activity in affected countries. • • • • The occurrence of one or more of these events may negatively impact our business, results of operations and financial condition. Our failure to introduce new products and product enhancements and broad market acceptance of new technologies introduced by our competitors could adversely affect our business. Many new energy storage technologies have been introduced over the past several years. For certain important and growing markets, such as aerospace and defense, lithium-based battery technologies have a large and growing market share. Our ability to achieve significant and sustained penetration of key developing markets, including aerospace and defense, will depend upon our success in developing or acquiring these and other technologies, either independently, through joint ventures or through acquisitions. If we fail to develop or acquire, and manufacture and sell, products that satisfy our customers’ demands, or we fail to respond effectively to new product announcements by our competitors by quickly introducing competitive products, then 17 Table of Contents market acceptance of our products could be reduced and our business could be adversely affected. We cannot assure you that our portfolio of primarily lead-acid products will remain competitive with products based on new technologies. We may not be able to adequately protect our proprietary intellectual property and technology. We rely on a combination of copyright, trademark, patent and trade secret laws, non-disclosure agreements and other confidentiality procedures and contractual provisions to establish, protect and maintain our proprietary intellectual property and technology and other confidential information. Certain of these technologies, especially TPPL technology, are important to our business and are not protected by patents. Despite our efforts to protect our proprietary intellectual property and technology and other confidential information, unauthorized parties may attempt to copy or otherwise obtain and use our intellectual property and proprietary technologies. If we are unable to protect our intellectual property and technology, we may lose any technological advantage we currently enjoy and may be required to take an impairment charge with respect to the carrying value of such intellectual property or goodwill established in connection with the acquisition thereof. In either case, our operating results and net income may be adversely affected. Relocation of our customers’ operations could adversely affect our business. The trend by a number of our North American and Western European customers to move manufacturing operations and expand their businesses in faster growing and low labor-cost markets may have an adverse impact on our business. As our customers in traditional manufacturing-based industries seek to move their manufacturing operations to these locations, there is a risk that these customers will source their energy storage products from competitors located in those territories and will cease or reduce the purchase of products from our manufacturing plants. We cannot assure you that we will be able to compete effectively with manufacturing operations of energy storage products in those territories, whether by establishing or expanding our manufacturing operations in those lower-cost territories or acquiring existing manufacturers. Quality problems with our products could harm our reputation and erode our competitive position. The success of our business will depend upon the quality of our products and our relationships with customers. In the event that our products fail to meet our customers’ standards, our reputation could be harmed, which would adversely affect our marketing and sales efforts. We cannot assure you that our customers will not experience quality problems with our products. We offer our products under a variety of brand names, the protection of which is important to our reputation for quality in the consumer marketplace. We rely upon a combination of trademark, licensing and contractual covenants to establish and protect the brand names of our products. We have registered many of our trademarks in the U.S. Patent and Trademark Office and in other countries. In many market segments, our reputation is closely related to our brand names. Monitoring unauthorized use of our brand names is difficult, and we cannot be certain that the steps we have taken will prevent their unauthorized use, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the U.S. We cannot assure you that our brand names will not be misappropriated or utilized without our consent or that such actions will not have a material adverse effect on our reputation and on our results of operations. We may fail to implement our plans to make acquisitions or successfully integrate them into our operations. As part of our business strategy, we have grown, and plan to continue growing, by acquiring other product lines, technologies or facilities that complement or expand our existing business, such as the acquisition of Alpha during fiscal 2019 and NorthStar during fiscal 2020. There is significant competition for acquisition targets in the stored energy industry. We may not be able to identify suitable acquisition candidates or negotiate attractive terms. In addition, we may have difficulty obtaining the financing necessary to complete transactions we pursue. In that regard, our credit facilities restrict the amount of additional indebtedness that we may incur to finance acquisitions and place other restrictions on our ability to make acquisitions. Exceeding any of these restrictions would require the consent of our lenders. Even if acquisition candidates are identified, we cannot be sure that our diligence will surface all material issues that may be present, including as they relate to inside Alpha and/or NorthStar or their respective business, or that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of such acquisition candidate, Alpha, NorthStar and their business and outside of their respective control will not arise later. If any such material issues arise, they may materially and adversely impact the on-going business of EnerSys and our stockholders’ investment. We may be unable to successfully integrate any assets, liabilities, customers, systems and management personnel we acquire into our operations and we may not be able to realize related revenue synergies and cost savings within expected time frames. For example, the ability of EnerSys to realize the anticipated 18 Table of Contents benefits of the Alpha and NorthStar acquisitions will depend, to a large extent, on our ability to combine Alpha’s, NorthStar's and our businesses in a manner that facilitates growth opportunities and realizes anticipated synergies, and achieves the projected stand-alone cost savings and revenue growth trends identified by each company. It is expected that we will benefit from operational and general and administrative cost synergies resulting from the warehouse and transportation integration, direct procurement savings on overlapping materials, purchasing scale on indirect spend categories and optimization of duplicate positions and processes. We may also enjoy revenue synergies, driven by a strong portfolio of brands with exposure to higher growth segments and the ability to leverage our collective distribution strength. In order to achieve these expected benefits, we must successfully combine the businesses of Alpha, NorthStar and EnerSys in a manner that permits these cost savings and synergies to be realized and must achieve the anticipated savings and synergies without adversely affecting current revenues and investments in future growth. If we experience difficulties with the integration process or are not able to successfully achieve these objectives, the anticipated benefits of the Alpha and NorthStar acquisitions may not be realized fully or at all or may take longer to realize than expected. Our failure to execute our acquisition strategy could have a material adverse effect on our business. We cannot assure you that our acquisition strategy will be successful or that we will be able to successfully integrate acquisitions we do make. Any acquisitions that we complete may dilute stockholder ownership interests in EnerSys, may have adverse effects on our financial condition and results of operations and may cause unanticipated liabilities. Future acquisitions may involve the issuance of our equity securities as payment, in part or in full, for the businesses or assets acquired. Any future issuances of equity securities would dilute stockholder ownership interests. In addition, future acquisitions might not increase, and may even decrease, our earnings or earnings per share and the benefits derived by us from an acquisition might not outweigh or might not exceed the dilutive effect of the acquisition. We also may incur additional debt or suffer adverse tax and accounting consequences in connection with any future acquisitions. The failure or cyber security breach of critical computer systems could seriously affect our sales and operations. We operate a number of critical computer systems throughout our business that can fail for a variety of reasons. If such a failure were to occur, we may not be able to sufficiently recover from the failure in time to avoid the loss of data or any adverse impact on certain of our operations that are dependent on such systems. This could result in lost sales and the inefficient operation of our facilities for the duration of such a failure. In addition, these computer systems are essential for the exchange of information both within the company and in communicating with third parties. Despite our efforts to protect the integrity of these systems and network as well as sensitive, confidential or personal data or information, our facilities and systems and those of our third-party service providers may be vulnerable to security breaches, theft, misplaced or lost data, programming and/or human errors that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions, which in turn could adversely affect our reputation, competitiveness, and results of operations. We may not be able to maintain adequate credit facilities. Our ability to continue our ongoing business operations and fund future growth depends on our ability to maintain adequate credit facilities and to comply with the financial and other covenants in such credit facilities or to secure alternative sources of financing. However, such credit facilities or alternate financing may not be available or, if available, may not be on terms favorable to us. If we do not have adequate access to credit, we may be unable to refinance our existing borrowings and credit facilities when they mature and to fund future acquisitions, and this may reduce our flexibility in responding to changing industry conditions. Our indebtedness could adversely affect our financial condition and results of operations. As of March 31, 2020, we had $1,160.6 million of total consolidated debt (including finance leases). This level of debt could: • • increase our vulnerability to adverse general economic and industry conditions, including interest rate fluctuations, because a portion of our borrowings bear, and will continue to bear, interest at floating rates; require us to dedicate a substantial portion of our cash flow from operations to debt service payments, which would reduce the availability of our cash to fund working capital, capital expenditures or other general corporate purposes, including acquisitions; 19 Table of Contents • • • • • limit our flexibility in planning for, or reacting to, changes in our business and industry; restrict our ability to introduce new products or new technologies or exploit business opportunities; place us at a disadvantage compared with competitors that have proportionately less debt; limit our ability to borrow additional funds in the future, if we need them, due to financial and restrictive covenants in our debt agreements; and have a material adverse effect on us if we fail to comply with the financial and restrictive covenants in our debt agreements. There can be no assurance that we will continue to declare cash dividends at all or in any particular amounts. During fiscal 2020, we announced the declaration of a quarterly cash dividend of $0.175 per share of common stock for quarters ended June 30, 2019, September 29, 2019, December 29, 2019 and March 31, 2020. On May 21, 2020, we announced a fiscal 2021 first quarter cash dividend of $0.175 per share of common stock. Future payment of a regular quarterly cash dividend on our common shares will be subject to, among other things, our results of operations, cash balances and future cash requirements, financial condition, statutory requirements of Delaware law, compliance with the terms of existing and future indebtedness and credit facilities, and other factors that the Board of Directors may deem relevant. Our dividend payments may change from time to time, and we cannot provide assurance that we will continue to declare dividends at all or in any particular amounts. A reduction in or elimination of our dividend payments could have a negative effect on our share price. We cannot guarantee that our share repurchase programs will be fully consummated or that they will enhance long-term stockholder value. Share repurchases could also increase the volatility of the trading price of our stock and could diminish our cash reserves. Our Board of Directors has authorized two share repurchase programs, one authorizing the repurchase of up to $100 million of our common stock, of which authority, as of March 31, 2020, approximately $59 million remains available and another authorizing the repurchase of up to such number of shares as shall equal the dilutive effects of any equity based award granted during such fiscal year and the number of shares exercised through stock option awards during such fiscal year. Although our board of directors has authorized these share repurchase programs, the programs do not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares. We cannot guarantee that the programs will be fully consummated or that they will enhance long-term stockholder value. The programs could affect the trading price of our stock and increase volatility, and any announcement of a termination of these programs may result in a decrease in the trading price of our stock. In addition, these programs could diminish our cash reserves. The Company does not plan on utilizing the share repurchase authorization in the present financial environment. We depend on our senior management team and other key employees, and significant attrition within our management team or unsuccessful succession planning could adversely affect our business. Our success depends in part on our ability to attract, retain and motivate senior management and other key employees. Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, competitors’ hiring practices, cost reduction activities, and the effectiveness of our compensation programs. Competition for qualified personnel can be very intense. We must continue to recruit, retain and motivate senior management and other key employees sufficient to maintain our current business and support our future projects. We are vulnerable to attrition among our current senior management team and other key employees. A loss of any such personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition and results of operations. In addition, if we are unsuccessful in our succession planning efforts, the continuity of our business and results of operations could be adversely affected. We may have exposure to greater than anticipated tax liabilities. Our income tax obligations are based in part on our corporate operating structure and intercompany arrangements, including the manner in which we operate our business, develop, value, manage, protect, and use our intellectual property and the valuations of our intercompany transactions. We may also be subject to additional indirect or non-income taxes. The tax laws applicable to our business, including the laws of the United States and other jurisdictions, are subject to interpretation and certain jurisdictions are aggressively interpreting their laws in new ways in an effort to raise additional tax revenue from multi-national companies, like us. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, which could increase our worldwide effective tax rate and harm our financial position, results of operations, and cash flows. Although we believe that our provision for income taxes is reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our 20 Table of Contents financial results in the period or periods for which such determination is made. In addition, our future income tax rates could be adversely affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, or accounting principles. Changes in tax laws or tax rulings could materially affect our financial position, results of operations, and cash flows. The income and non-income tax regimes we are subject to or operate under are unsettled and may be subject to significant change. Changes in tax laws or tax rulings, or changes in interpretations of existing laws, could materially affect our financial position, results of operations, and cash flows. For example, changes to U.S. tax laws enacted in December 2017 had a significant impact on our tax obligations and effective tax rate for fiscal 2019 and 2018. In fiscal year 2020, Switzerland enacted the Federal Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF) which became effective on January 1, 2020. These enactments and future possible guidance from the applicable taxing authorities may have a material impact on the Company’s operating results. In addition, many countries in Europe, as well as a number of other countries and organizations, have recently proposed or recommended changes to existing tax laws or have enacted new laws that could significantly increase our tax obligations in many countries where we do business or require us to change the manner in which we operate our business. The Company closely monitors these proposals as they arise in the countries where it operates. Changes to the statutory tax rate may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted. The European Commission has conducted investigations in multiple countries focusing on whether local country tax rulings or tax legislation provides preferential tax treatment that violates European Union state aid rules and concluded that certain countries, including Ireland, have provided illegal state aid in certain cases. These investigations may result in changes to the tax treatment of our foreign operations. Due to the large and expanding scale of our international business activities, many of these types of changes to the taxation of our activities could increase our worldwide effective tax rate and harm our financial position, results of operations, and cash flows. In connection with the Organization for Economic Cooperation and Development Base Erosion and Profit Shifting (BEPS) project, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in other countries. The Company regularly assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves. However, any tax authority could take a position on tax treatment that is contrary to the Company’s expectations, which could result in tax liabilities in excess of reserves. Our software and related services are highly technical and may contain undetected software bugs or vulnerabilities, which could manifest in ways that could seriously harm our reputation and our business. The software and related services that we offer, including those as a result of the Alpha acquisition, are highly technical and complex. Our services or any other products that we may introduce in the future may contain undetected software bugs, hardware errors, and other vulnerabilities. These bugs and errors can manifest in any number of ways in our products, including through diminished performance, security vulnerabilities, malfunctions, or even permanently disabled products. We have a practice of regularly updating our products and some errors in our products may be discovered only after a product has been used by users, and may in some cases be detected only under certain circumstances or after extended use. Any errors, bugs or other vulnerabilities discovered in our code or backend after release could damage our reputation, drive away users, allow third parties to manipulate or exploit our software, lower revenue and expose us to claims for damages, any of which could seriously harm our business. Additionally, errors, bugs, or other vulnerabilities may, either directly or if exploited by third parties, affect our ability to make accurate royalty payments. We also could face claims for product liability, tort or breach of warranty. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention and seriously harm our reputation and our business. In addition, if our liability insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our business could be seriously harmed. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 21 Table of Contents ITEM 2. PROPERTIES The Company’s worldwide headquarters is located in Reading, Pennsylvania, U.S.A. Geographic headquarters for our Americas, EMEA and Asia segments are located in Reading, Pennsylvania, U.S.A., Zug, Switzerland and Singapore, respectively. The Company owns approximately 80% of its manufacturing facilities and distribution centers worldwide. The following sets forth the Company’s principal owned or leased facilities by business segment: Americas: Sylmar, California; Longmont, Colorado; Tampa, Florida; Suwanee, Georgia, Hays, Kansas; Richmond, Kentucky; Springfield and Warrensburg, Missouri; Horsham, Pennsylvania; Sumter, South Carolina; Ooltewah, Tennessee, Spokane, Washington and Bellingham, Washington in the United States; Burnaby, in Canada; Monterrey and Tijuana in Mexico; Buenos Aires, Argentina and São Paulo, in Brazil. EMEA: Hostomice, Czech Republic; Arras, France; Hagen in Germany; Bielsko-Biala, Poland; Stockholm, Sweden and Newport and Culham in the United Kingdom. Asia: Chongqing and Yangzhou in the PRC and Andhra Pradesh in India. We consider our plants and facilities, whether owned or leased, to be in satisfactory condition and adequate to meet the needs of our current businesses and projected growth. Information as to material lease commitments is included in Note 3 - Leases to the Consolidated Financial Statements. ITEM 3. LEGAL PROCEEDINGS From time to time, we are involved in litigation incidental to the conduct of our business. See Litigation and Other Legal Matters in Note 19 - Commitments, Contingencies and Litigation to the Consolidated Financial Statements, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 22 Table of Contents PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information The Company’s common stock has been listed on the New York Stock Exchange under the symbol “ENS” since it began trading on July 30, 2004. Prior to that time, there had been no public market for our common stock. Holders of Record As of May 28, 2020, there were approximately 303 record holders of common stock of the Company. Because many of these shares are held by brokers and other institutions on behalf of stockholders, the Company is unable to estimate the total number of stockholders represented by these record holders. Recent Sales of Unregistered Securities During the fourth quarter of fiscal 2020, we did not issue any unregistered securities. Dividends During fiscal 2020, the Company’s quarterly dividend was $0.175 per share. The Company declared aggregate regular cash dividends of $0.70 per share in each of the years ended March 31, 2019 and 2018. The Company anticipates that it will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remain within the discretion of the Board and will depend upon the Company's future earnings, financial condition, capital requirements, restrictions under existing or future credit facilities or debt and other factors. See “There can be no assurance that we will continue to declare cash dividends at all or in any particular amounts.” Under Item 1A. Risk Factors for additional information. 23 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table summarizes the number of shares of common stock we purchased from participants in our equity incentive plans as well as repurchases of common stock authorized by the Board of Directors. As provided by the Company’s equity incentive plans, (a) vested options outstanding may be exercised through surrender to the Company of option shares or vested options outstanding under the Company’s equity incentive plans to satisfy the applicable aggregate exercise price (and any withholding tax) required to be paid upon such exercise and (b) the withholding tax requirements related to the vesting and settlement of equity awards may be satisfied by the surrender of shares of the Company’s common stock. Purchases of Equity Securities (a) Total number of shares (or units) purchased (b) Average price paid per share (or unit) (c) Total number of shares (or units) purchased as part of publicly announced plans or programs 7,208 $ 9,021 — 16,229 $ 74.75 72.21 — 73.34 — $ — — — (d) Maximum number (or approximate dollar value) of shares (or units) that may be purchased under the plans or programs(1)(2) 9,002,889 9,002,889 9,002,889 Period December 30, 2019 - January 26, 2020 January 27, 2020 - February 23, 2020 February 24, 2020 - March 31, 2020 Total (1) The Company's Board of Directors has authorized the Company to repurchase up to such number of shares as shall equal the dilutive effects of any equity based award granted during such fiscal year under the 2017 Equity Incentive Plan and the number of shares exercised through stock option awards during such fiscal year. (2) On November 8, 2017, the Company announced the establishment of a $100 million stock repurchase authorization, with no expiration date and a remaining authorization of $59.1 million. The authorization is in addition to the existing stock repurchase programs. The Company does not plan on utilizing the share repurchase authorization in the present financial environment. 24 Table of Contents STOCK PERFORMANCE GRAPH The following graph compares the changes in cumulative total returns on EnerSys’ common stock with the changes in cumulative total returns of the New York Stock Exchange Composite Index, a broad equity market index, and the total return on a selected peer group index. The peer group selected is based on the standard industrial classification codes (“SIC Codes”) established by the U.S. government. The index chosen was “Miscellaneous Electrical Equipment and Suppliers” and comprises all publicly traded companies having the same three-digit SIC Code (369) as EnerSys. The graph was prepared assuming that $100 was invested in EnerSys’ common stock, the New York Stock Exchange Composite Index and the peer group (duly updated for changes) on March 31, 2015. *$100 invested on March 31, 2015 in stock or index, including reinvestment of dividends. 25 Table of Contents ITEM 6. SELECTED FINANCIAL DATA Consolidated Statements of Income: Net sales Cost of goods sold Inventory step up to fair value relating to acquisitions and exit activities Gross profit Operating expenses Restructuring, exit and other charges Impairment of goodwill Impairment of finite, indefinite-lived intangibles and fixed assets Legal proceedings charge, net of settlement income Gain on sale of facility Operating earnings Interest expense Other (income) expense, net Earnings before income taxes Income tax expense Net earnings Net earnings (losses) attributable to noncontrolling interests Net earnings attributable to EnerSys stockholders Net earnings per common share attributable to EnerSys stockholders: Basic Diluted Weighted-average number of common shares outstanding: $ $ $ Basic Diluted Fiscal Year Ended March 31, 2020 2019 2018 2017 2016 (In thousands, except share and per share data) $ 3,087,868 $ 2,808,017 $ 2,104,612 2,581,891 $ 1,920,030 2,367,149 $ 1,713,115 2,316,249 1,704,472 2,301,148 1,854 784,866 529,643 20,766 39,713 4,549 — — 190,195 43,673 (415) 146,937 9,821 137,116 — 137,116 $ 10,379 693,026 441,415 34,709 — — 4,437 — 212,465 30,868 (614) 182,211 21,584 160,627 388 160,239 $ 3,457 658,404 382,077 5,481 — — — — 270,846 25,001 7,519 238,326 118,493 119,833 239 119,594 $ 2,157 651,877 369,863 7,160 12,216 1,800 23,725 — 237,113 22,197 2,221 212,695 54,472 158,223 (1,991) 160,214 $ 3.23 3.20 $ $ 3.79 $ 3.73 $ 2.81 $ 2.77 $ 3.69 $ 3.64 $ 42,411,834 42,896,775 42,335,023 43,008,952 42,612,036 43,119,856 43,389,333 44,012,543 44,276,713 45,474,130 — 611,777 352,767 12,978 31,411 4,841 3,201 (3,420) 209,999 22,343 5,719 181,937 50,113 131,824 (4,326) 136,150 3.08 2.99 As a result of the adoption of ASU 2017-07, “Compensation—Retirement Benefits (Topic 715)” during the first quarter of 2019, the Company has recast the prior years of fiscal 2018 and 2017, those being the years presented in the primary financial statements in the year of adoption of the standard. Consolidated cash flow data: Net cash provided by operating activities Net cash used in investing activities Net cash provided by (used in) financing activities Other operating data: Capital expenditures Consolidated balance sheet data: Cash and cash equivalents Working capital Total assets Total debt, including finance leases Total EnerSys stockholders’ equity 2020 2019 2018 2017 2016 Fiscal Year Ended March 31, (In thousands) $ 253,398 $ (274,819) 62,683 101,425 197,855 $ (723,883) 346,577 211,048 $ (72,357) (166,888) 246,030 $ (61,833) (62,542) 307,571 (80,923) (105,729) 70,372 69,832 50,072 55,880 2020 2019 2018 2017 2016 (In thousands) As of March 31, $ 326,979 $ 962,586 3,301,698 1,151,844 1,300,525 299,212 $ 923,715 3,118,193 1,036,534 1,282,287 522,118 $ 1,048,057 2,486,925 598,020 1,195,675 500,329 $ 951,484 2,293,029 606,133 1,103,456 397,307 845,068 2,214,488 628,631 1,013,131 On April 1, 2019, we adopted ASU No. 2016-02 which required us to recognize lease right-of-use assets and corresponding lease liabilities on the consolidated balance sheet. No prior periods were restated as further discussed in Note 1 of Notes to the Consolidated Financial Statements. 26 Table of Contents ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our results of operations and financial condition for the fiscal years ended March 31, 2020, 2019 and 2018, should be read in conjunction with our audited Consolidated Financial Statements and the notes to those statements included in Item 8. Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. Our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, opinions, expectations, anticipations and intentions and beliefs. Actual results and the timing of events could differ materially from those anticipated in those forward-looking statements as a result of a number of factors. See “Cautionary Note Regarding Forward-Looking Statements,” “Business” and “Risk Factors,” sections elsewhere in this Annual Report on Form 10-K. In the following discussion and analysis of results of operations and financial condition, certain financial measures may be considered “non-GAAP financial measures” under the SEC rules. These rules require supplemental explanation and reconciliation, which is provided in this Annual Report on Form 10-K. EnerSys’ management uses the non-GAAP measures, EBITDA and adjusted EBITDA, in its computation of compliance with loan covenants. These measures, as used by EnerSys, adjust net earnings determined in accordance with GAAP for interest, taxes, depreciation and amortization, and certain charges or credits as permitted by our credit agreements, that were recorded during the periods presented. EnerSys’ management uses the non-GAAP measures, "primary working capital" and "primary working capital percentage" (see definition in “Liquidity and Capital Resources” below) along with capital expenditures, in its evaluation of business segment cash flow and financial position performance. These non-GAAP disclosures have limitations as analytical tools, should not be viewed as a substitute for cash flow or operating earnings determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. This supplemental presentation should not be construed as an inference that the Company’s future results will be unaffected by similar adjustments to operating earnings determined in accordance with GAAP. Overview EnerSys (the “Company,” “we,” or “us”) is the world’s largest manufacturer, marketer and distributor of industrial batteries. We also manufacture, market and distribute products such as battery chargers, power equipment, battery accessories, and outdoor cabinet enclosures. Additionally, we provide related aftermarket and customer-support services for our products. We market our products globally to over 10,000 customers in more than 100 countries through a network of distributors, independent representatives and our internal sales force. We operate and manage our business in three geographic regions of the world—Americas, EMEA and Asia, as described below. Our business is highly decentralized with manufacturing locations throughout the world. More than half of our manufacturing capacity is located outside the United States, and approximately 40% of our net sales were generated outside the United States. The Company currently has three reportable business segments based on geographic regions, defined as follows: • • • Americas, which includes North and South America, with our segment headquarters in Reading, Pennsylvania, U.S.A.; EMEA, which includes Europe, the Middle East and Africa, with our segment headquarters in Zug, Switzerland; and Asia, which includes Asia, Australia and Oceania, with our segment headquarters in Singapore. We evaluate business segment performance based primarily upon operating earnings exclusive of highlighted items. Highlighted items are those that the Company deems are not indicative of ongoing operating results, including those charges that the Company incurs as a result of restructuring activities, impairment of goodwill and indefinite-lived intangibles and other assets, acquisition activities and those charges and credits that are not directly related to operating unit performance, such as significant legal proceedings, ERP system implementation, amortization of recently acquired intangible assets and tax valuation allowance changes, including those related to the adoption of the Tax Cuts and Jobs Act. Because these charges are not incurred as a result of ongoing operations, or are incurred as a result of a potential or previous acquisition, they are not as helpful a measure of the performance of our underlying business, particularly in light of their unpredictable nature and are difficult to forecast. All corporate and centrally incurred costs are allocated to the business segments based principally on net sales. We evaluate business segment cash flow and financial position performance based primarily upon capital expenditures and primary working capital levels (see definition of primary working capital in “Liquidity and Capital Resources” below). Although we 27 Table of Contents monitor the three elements of primary working capital (receivables, inventory and payables), our primary focus is on the total amount due to the significant impact it has on our cash flow. Our management structure, financial reporting systems, and associated internal controls and procedures, are all consistent with our three geographic business segments. We report on a March 31 fiscal year-end. Our financial results are largely driven by the following factors: • • • • • • global economic conditions and general cyclical patterns of the industries in which our customers operate; changes in our selling prices and, in periods when our product costs increase, our ability to raise our selling prices to pass such cost increases through to our customers; the extent to which we are able to efficiently utilize our global manufacturing facilities and optimize our capacity; the extent to which we can control our fixed and variable costs, including those for our raw materials, manufacturing, distribution and operating activities; changes in our level of debt and changes in the variable interest rates under our credit facilities; and the size and number of acquisitions and our ability to achieve their intended benefits. We have two primary product lines: reserve power and motive power products. Net sales classifications by product line are as follows: • Reserve power products are used for backup power for the continuous operation of critical applications in telecommunications systems, uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems, and other specialty power applications, including medical and security systems, premium starting, lighting and ignition applications, in switchgear, electrical control systems used in electric utilities, large-scale energy storage, energy pipelines, in commercial aircraft, satellites, military aircraft, submarines, ships and tactical vehicles. Reserve power products also include thermally managed cabinets and enclosures for electronic equipment and batteries. With the recent Alpha acquisition, we are a provider of highly integrated power solutions and services to broadband, telecom, renewable and industrial customers. • Motive power products are used to provide 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. Current Market Conditions Economic Climate The COVID-19 pandemic has weakened economic activity around the world. China’s economic activity was the hardest hit during our fourth fiscal quarter and two of our plants in China were shut down for several weeks and order demand slowed significantly. In Europe and North America, the impact of COVID-19 was felt towards the end of our fourth quarter so the economic impact was not as severe as in China. We believe that EMEA and Americas economies will be much harder hit by the impact of COVID-19 during our first fiscal quarter of fiscal 2021. While the adverse direct impact from COVID-19 was felt by our factories in China and our overall supply chain, our factories in both the Americas and EMEA, deemed essential critical infrastructure suppliers, remain in operation with some near full capacity while others are experiencing lower demand, particularly those in our motive power lines of business. We have been able to meet customer demand while maintaining the safety considerations for those in our facilities and as many employees continue to work effectively from home. The pandemic continues to pose challenges in many of our markets including delayed 5G deployments and lower OEM sales to our transportation and motive power customers as they experience lower demand with their end customers. Volatility of Commodities and Foreign Currencies Our most significant commodity and foreign currency exposures are related to lead and the Euro, respectively. Historically, volatility of commodity costs and foreign currency exchange rates have caused large swings in our production costs. As a result of the COVID-19 pandemic and a forecasted global economic recession, we anticipate that our commodity costs will be lower in the near future and foreign currency exposures may continue to fluctuate as they have in the past several years. Since the outbreak of COVID-19 in our fourth fiscal quarter of 2020, we have experienced declining commodity costs. 28 Table of Contents Customer Pricing Our selling prices fluctuated during the last several years to offset the volatile cost of commodities. Approximately 30% of our revenue is currently subject to agreements that adjust pricing to a market-based index for lead. Lead prices rose for the most part of fiscal 2018, peaked in the first quarter of fiscal 2019 and then declined sequentially in every quarter in fiscal 2019. In fiscal 2020, our selling prices declined in response to declining commodity costs, including lead. Based on current commodity markets, we will likely see year over year benefits from declining commodity prices, with some related reduction in our selling prices in the upcoming year. Liquidity and Capital Resources We believe that our financial position is strong, and we have substantial liquidity with $327 million of available cash and cash equivalents and available and undrawn credit lines of approximately $694 million at March 31, 2020 to cover short-term liquidity requirements and anticipated growth in the foreseeable future. The nominal amount of credit available is subject to a leverage ratio maximum of 3.5x EBITDA, as discussed in the Liquidity and Capital Resources, which effectively limits additional debt or lowered cash balances by approximately $500 million. In fiscal 2020, we issued $300 million in aggregate principal amount of our 4.375% Senior Notes due 2027 (the “2027 Notes”). Proceeds from this offering, net of debt issuance costs were $296.3 million and were utilized to pay down the balance outstanding on the revolver borrowings. In fiscal 2018, we entered into a credit facility (“2017 Credit Facility”) that consisted of a $600.0 million senior secured revolving credit facility (“2017 Revolver”) and a $150.0 million senior secured term loan (“2017 Term Loan”) with a maturity date of September 30, 2022. On December 7, 2018, we amended the 2017 Credit Facility (as amended, the “Amended Credit Facility”). The Amended Credit Facility consists of $449.1 million senior secured term loans (the “Amended 2017 Term Loan”), including a CAD 133.1 million ($99.1 million) term loan and a $700.0 million senior secured revolving credit facility (the “Amended 2017 Revolver”). The amendment resulted in an increase of the 2017 Term Loan and the 2017 Revolver by $299.1 million and $100.0 million, respectively. In fiscal 2020 and 2019 we repurchased $34.6 million and $56.0 million of our common stock under existing authorizations, respectively. In fiscal 2020 and fiscal 2019, we reissued 17,410 and 3,256 shares out of our treasury stock, respectively, to participants under the Company's Employee Stock Purchase Plan. In fiscal 2019, we reissued 1,177,630 shares from our treasury stock to satisfy $100.0 million of the initial purchase consideration of $750.0 million, in connection with the Alpha acquisition. In fiscal 2018, we repurchased $121.0 million of our common stock through an accelerated share repurchase program (“ASR”) with a major financial institution and through open market purchases. A substantial majority of the Company’s cash and investments are held by foreign subsidiaries. The majority of that cash and investments is expected to be utilized to fund local operating activities, capital expenditure requirements and acquisitions. The Company believes that it has sufficient sources of domestic and foreign liquidity. We believe that our strong capital structure and liquidity affords us access to capital for future capital expenditures, acquisition and stock repurchase opportunities and continued dividend payments. Cost Savings Initiatives Cost savings programs remain a continuous element of our business strategy and are directed primarily at further reductions in plant manufacturing (labor and overhead), raw material costs and our operating expenses (primarily selling, general and administrative). In order to realize cost savings benefits for a majority of these initiatives, costs are incurred either in the form of capital expenditures, funding the cash obligations of previously recorded restructuring expenses or current period expenses. In January 2017, we started our Operational Excellence program, referred to as the EnerSys Operating System, or EOS, which serves as our continuous improvement engine. During fiscal 2018 and 2019, we were able to fund our investment in new product development and digital core with savings of approximately $25 million in each year, primarily from restructuring programs. Our global deployment of EOS began to slow in fiscal 2019 and we have struggled to maintain pace with surging customer demand for TPPL amidst disruptions in fiscal 2019 from our ERP implementation and in fiscal 2020 from a fire, both 29 Table of Contents adversely impacting our productivity at our Richmond motive power facility. We constantly evaluate the return on investment to ensure we achieve our targeted improvement by the end of fiscal 2021. Critical Accounting Policies and Estimates Our significant accounting policies are described in Note 1 - Summary of Significant Accounting Policies to the Consolidated Financial Statements in Item 8. In preparing our financial statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts in the Consolidated Financial Statements and accompanying notes. These estimates and assumptions are most significant where they involve levels of subjectivity and judgment necessary to account for highly uncertain matters or matters susceptible to change, and where they can have a material impact on our financial condition and operating performance. We discuss below the more significant estimates and related assumptions used in the preparation of our Consolidated Financial Statements. If actual results were to differ materially from the estimates made, the reported results could be materially affected. Revenue Recognition We adopted the new accounting standard for the recognition of revenue under ASC 606 for the fiscal year beginning on April 1, 2019. Under this standard, we recognize revenue only when we have satisfied a performance obligation through transferring control of the promised good or service to a customer. The standard indicates that an entity must determine at contract inception whether it will transfer control of a promised good or service over time or satisfy the performance obligation at a point in time through analysis of the following criteria: (i) the entity has a present right to payment, (ii) the customer has legal title, (iii) the customer has physical possession, (iv) the customer has the significant risks and rewards of ownership and (v) the customer has accepted the asset. Our primary performance obligation to our customers is the delivery of finished goods and products, pursuant to purchase orders. Control of the products sold typically transfers to our customers at the point in time when the goods are shipped as this is also when title generally passes to our customers under the terms and conditions of our customer arrangements. We assess collectibility based primarily on the customer’s payment history and on the creditworthiness of the customer. Management believes that the accounting estimates related to revenue recognition are critical accounting estimates because they require reasonable assurance of collection of revenue proceeds and completion of all performance obligations. Also, revenues are recorded net of provisions for sales discounts and returns, which are established at the time of sale. These estimates are based on our past experience. For additional information on the new accounting standard for the recognition of revenue see Note 1 of Notes to the Consolidated Financial Statements. Asset Impairment Determinations We test for the impairment of our goodwill and indefinite-lived trademarks at least annually and whenever events or circumstances occur indicating that a possible impairment has been incurred. We perform our annual goodwill impairment test on the first day of our fourth quarter for each of our reporting units based on the income approach, also known as the discounted cash flow (“DCF”) method, which utilizes the present value of future cash flows to estimate fair value. We also use the market approach, which utilizes market price data of companies engaged in the same or a similar line of business as that of our company, to estimate fair value. A reconciliation of the two methods is performed to assess the reasonableness of fair value of each of the reporting units. The future cash flows used under the DCF method are derived from estimates of future revenues, operating income, working capital requirements and capital expenditures, which in turn reflect our expectations of specific global, industry and market conditions. The discount rate developed for each of the reporting units is based on data and factors relevant to the economies in which the business operates and other risks associated with those cash flows, including the potential variability in the amount and timing of the cash flows. A terminal growth rate is applied to the final year of the projected period and reflects our estimate of stable growth to perpetuity. We then calculate the present value of the respective cash flows for each reporting unit to arrive at the fair value using the income approach and then determine the appropriate weighting between the fair value estimated using the income approach and the fair value estimated using the market approach. Finally, we compare the estimated fair value of each reporting unit to its respective carrying value in order to determine if the goodwill assigned to each reporting unit is potentially impaired. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value, an impairment charge is recognized for 30 Table of Contents the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Significant assumptions used include management’s estimates of future growth rates, the amount and timing of future operating cash flows, capital expenditures, discount rates, as well as market and industry conditions and relevant comparable company multiples for the market approach. Assumptions utilized are highly judgmental, especially given the role technology plays in driving the demand for products in the telecommunications and aerospace markets. Our annual goodwill impairment test, which we performed during the fourth quarter of fiscal 2020, resulted in an impairment charge for goodwill of $39.7 million in our Asia reporting unit, and a $4.5 million impairment of trademarks in EMEA, as discussed in Note 7 to the Consolidated Financial Statements. There was no goodwill remaining in the Asia reporting unit after this impairment charge was recorded. The excess of fair value over carrying value for each of our reporting units for which we performed a quantitative goodwill impairment test, as of December 30, 2019, the annual testing date, ranged from approximately 9% to approximately 180% of carrying value, except in the case of our Asia region. In order to evaluate the sensitivity of the fair value calculations on the goodwill impairment test, we applied a hypothetical 10% decrease to the fair values of each reporting unit. This hypothetical 10% decrease would result in excess fair values over carrying values range from approximately 40% to approximately 152% of the carrying values, except our South America reporting unit, where the fair value would be below the carrying value by 2%. South America's goodwill was $1.9 million and $2.6 million as of March 31, 2020 and 2019, respectively. We evaluate goodwill on an annual basis as of the beginning of our fourth fiscal quarter and whenever events or changes in circumstances, such as significant adverse changes in business climate or operating results, changes in management's business strategy or loss of a major customer, indicate that there may be a potential indicator of impairment. The indefinite-lived trademarks are tested for impairment by comparing the carrying value to the fair value based on current revenue projections of the related operations, under the relief from royalty method. Any excess carrying value over the amount of fair value is recognized as impairment. Any impairment would be recognized in full in the reporting period in which it has been identified. With respect to our other long-lived assets other than goodwill and indefinite-lived trademarks, we test for impairment when indicators of impairment are present. An asset is considered impaired when the undiscounted estimated net cash flows expected to be generated by the asset are less than its carrying amount. The impairment recognized is the amount by which the carrying amount exceeds the fair value of the impaired asset. Business Combinations We account for business combinations in accordance with ASC 805, Business Combinations. We recognize assets acquired and liabilities assumed in acquisitions at their fair values as of the acquisition date, with the acquisition-related transaction and restructuring costs expensed in the period incurred. Determining the fair value of assets acquired and liabilities assumed often involves estimates based on third-party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses and may include estimates of attrition, inflation, asset growth rates, discount rates, multiples of earnings or other relevant factors. In addition, fair values are subject to refinement for up to a year after the closing date of an acquisition. Adjustments recorded to the acquired assets and liabilities are applied prospectively. Fair values are based on estimates using management's assumptions using future growth rates, future attrition of the customer base, discount rates, multiples of earnings or other relevant factors. Any change in the acquisition date fair value of assets acquired and liabilities assumed may materially affect our financial position, results of operations and liquidity. Litigation and Claims From time to time, the Company has been or may be a party to various legal actions and investigations including, among others, employment matters, compliance with government regulations, federal and state employment laws, including wage and hour laws, contractual disputes and other matters, including matters arising in the ordinary course of business. These claims may be brought by, among others, governments, customers, suppliers and employees. Management considers the measurement of litigation reserves as a critical accounting estimate because of the significant uncertainty in some cases relating to the outcome 31 Table of Contents of potential claims or litigation and the difficulty of predicting the likelihood and range of potential liability involved, coupled with the material impact on our results of operations that could result from litigation or other claims. In determining legal reserves, management considers, among other inputs: • • • • • • interpretation of contractual rights and obligations; the status of government regulatory initiatives, interpretations and investigations; the status of settlement negotiations; prior experience with similar types of claims; whether there is available insurance coverage; and advice of outside counsel. For certain matters, management is able to estimate a range of losses. When a loss is probable, but no amount of loss within a range of outcomes is more likely than any other outcome, management will record a liability based on the low end of the estimated range. Additionally, management will evaluate whether losses in excess of amounts accrued are reasonably possible, and will make disclosure of those matters based on an assessment of the materiality of those addition possible losses. Environmental Loss Contingencies Accruals for environmental loss contingencies (i.e., environmental reserves) are recorded when it is probable that a liability has been incurred and the amount can reasonably be estimated. Management views the measurement of environmental reserves as a critical accounting estimate because of the considerable uncertainty surrounding estimation, including the need to forecast well into the future. From time to time, we may be involved in legal proceedings under federal, state and local, as well as international environmental laws in connection with our operations and companies that we have acquired. The estimation of environmental reserves is based on the evaluation of currently available information, prior experience in the remediation of contaminated sites and assumptions with respect to government regulations and enforcement activity, changes in remediation technology and practices, and financial obligations and creditworthiness of other responsible parties and insurers. Warranty We record a warranty reserve for possible claims against our product warranties, which generally run for a period ranging from one to twenty years for our reserve power batteries and for a period ranging from one to seven years for our motive power batteries. The assessment of the adequacy of the reserve includes a review of open claims and historical experience. Management believes that the accounting estimate related to the warranty reserve is a critical accounting estimate because the underlying assumptions used for the reserve can change from time to time and warranty claims could potentially have a material impact on our results of operations. Allowance for Doubtful Accounts We encounter risks associated with sales and the collection of the associated accounts receivable. We record a provision for accounts receivable that are considered to be uncollectible. In order to calculate the appropriate provision, management analyzes the creditworthiness of specific customers and the aging of customer balances. Management also considers general and specific industry economic conditions, industry concentration and contractual rights and obligations. Management believes that the accounting estimate related to the allowance for doubtful accounts is a critical accounting estimate because the underlying assumptions used for the allowance can change from time to time and uncollectible accounts could potentially have a material impact on our results of operations. Retirement Plans We use certain economic and demographic assumptions in the calculation of the actuarial valuation of liabilities associated with our defined benefit plans. These assumptions include the discount rate, expected long-term rates of return on assets and rates of increase in compensation levels. Changes in these assumptions can result in changes to the pension expense and recorded liabilities. Management reviews these assumptions at least annually. We use independent actuaries to assist us in formulating assumptions and making estimates. These assumptions are updated periodically to reflect the actual experience and expectations on a plan-specific basis, as appropriate. 32 Table of Contents For benefit plans which are funded, we establish strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk. We set the expected long-term rate of return based on the expected long-term average rates of return to be achieved by the underlying investment portfolios. In establishing this rate, we consider historical and expected returns for the asset classes in which the plans are invested, advice from pension consultants and investment advisors, and current economic and capital market conditions. The expected return on plan assets is incorporated into the computation of pension expense. The difference between this expected return and the actual return on plan assets is deferred and will affect future net periodic pension costs through subsequent amortization. We believe that the current assumptions used to estimate plan obligations and annual expense are appropriate in the current economic environment. However, if economic conditions change materially, we may change our assumptions, and the resulting change could have a material impact on the Consolidated Statements of Income and on the Consolidated Balance Sheets. Equity-Based Compensation We recognize compensation cost relating to equity-based payment transactions by using a fair-value measurement method whereby all equity-based payments to employees, including grants of restricted stock units, stock options, market and performance condition-based awards are recognized as compensation expense based on fair value at grant date over the requisite service period of the awards. We determine the fair value of restricted stock units based on the quoted market price of our common stock on the date of grant. The fair value of stock options is determined using the Black-Scholes option- pricing model, which uses both historical and current market data to estimate the fair value. The fair value of market condition-based awards is estimated at the date of grant using a Monte Carlo Simulation. The fair value of performance condition-based awards is based on the closing stock price on the date of grant, adjusted for a discount to reflect the illiquidity inherent in these awards. All models incorporate various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the awards. When estimating the requisite service period of the awards, we consider many related factors including types of awards, employee class, and historical experience. Actual results, and future changes in estimates of the requisite service period may differ substantially from our current estimates. Income Taxes Our effective tax rate is based on pretax income and statutory tax rates available in the various jurisdictions in which we operate. We account for income taxes in accordance with applicable guidance on accounting for income taxes, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between book and tax bases on recorded assets and liabilities. Accounting guidance also requires that deferred tax assets be reduced by a valuation allowance, when it is more likely than not that a tax benefit will not be realized. The recognition and measurement of a tax position is based on management’s best judgment given the facts, circumstances and information available at the reporting date. We evaluate tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, we recognize the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not more likely than not of being sustained upon audit, we do not recognize any portion of the benefit in the financial statements. If the more likely than not threshold is not met in the period for which a tax position is taken, we may subsequently recognize the benefit of that tax position if the tax matter is effectively settled, the statute of limitations expires, or if the more likely than not threshold is met in a subsequent period. We evaluate, on a quarterly basis, our ability to realize deferred tax assets by assessing our valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are our forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our effective tax rate in a given financial statement period could be materially affected. 33 Table of Contents Results of Operations—Fiscal 2020 Compared to Fiscal 2019 The following table presents summary Consolidated Statement of Income data for fiscal year ended March 31, 2020, compared to fiscal year ended March 31, 2019: Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions Net sales Cost of goods sold $ 3,087.8 2,301.0 100.0% $ 74.5 0.1 25.4 17.1 0.7 1.3 0.1 — 6.1 1.4 — 4.7 0.3 4.4 2,808.0 2,104.6 10.3 693.1 441.4 34.8 — — 4.4 212.5 30.9 (0.5) 182.1 21.6 160.5 100.0% $ 74.9 0.4 24.7 15.7 1.2 — — 0.2 7.6 1.1 — 6.5 0.8 5.7 279.8 196.4 (8.4) 91.8 88.3 (14.0) 39.7 4.5 (4.4) (22.3) 12.8 — (35.1) (11.7) (23.4) 1.9 784.9 529.7 20.8 39.7 4.5 — 190.2 43.7 (0.5) 147.0 9.9 137.1 % 10.0 % 9.3 (82.1) 13.3 20.0 (40.2) NM NM NM (10.5) 41.5 — (19.4) (54.5) (14.6) — — 0.3 — (0.3) NM $ 137.1 4.4% $ 160.2 5.7% $ (23.1) (14.4)% Inventory step up to fair value relating to acquisitions and exit activities Gross profit Operating expenses Restructuring, exit and other charges Impairment of goodwill Impairment of indefinite-lived intangibles Legal proceedings charge, net Operating earnings Interest expense Other (income) expense, net Earnings before income taxes Income tax expense Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to EnerSys stockholders NM = not meaningful Overview Our sales in fiscal 2020 were $3.1 billion, a 10% increase from prior year's sales. This increase was the result of a 17% increase due to the Alpha and NorthStar acquisitions (as discussed in Part I, Item 1 of this Annual Report), partially offset by a 4% decrease in organic volume, a 2% decrease in foreign currency translation impact and a 1% decrease in pricing. Organic volume decline in fiscal 2020 reflects the impact of the recent fire and ERP execution challenges in our Richmond, Kentucky facility and weakness in the European and Asian markets. A discussion of specific fiscal 2020 versus fiscal 2019 operating results follows, including an analysis and discussion of the results of our reportable segments. 34 Table of Contents Net Sales Segment sales Americas EMEA Asia Total net sales Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions % Net Sales In Millions % Net Sales In Millions % $ 2,082.3 67.4% $ 1,690.9 60.2% $ 787.3 218.2 25.5 7.1 860.6 256.5 30.7 9.1 $ 3,087.8 100.0% $ 2,808.0 100.0% $ 391.4 (73.3) (38.3) 279.8 23.1 % (8.5) (14.9) 10.0 % The Americas segment’s net sales increased by $391.4 million or 23.1% in fiscal 2020, as compared to fiscal 2019, primarily due to a 26% increase from the Alpha and NorthStar acquisitions, partially offset by a 1% decrease each in organic volume, pricing and currency translation impact. The EMEA segment’s net sales decreased by $73.3 million or 8.5% in fiscal 2020, as compared to fiscal 2019, primarily due to a 6% decrease in organic volume, a 4% decrease in currency translation impact and a 1% decrease in pricing, partially offset by a 2% increase from the NorthStar acquisition. The decrease in organic volume was driven in part by the return of a competitor to the market in fiscal 2020. This competitor was absent in fiscal 2019 due to a fire at their facility. The Asia segment’s net sales decreased by $38.3 million or 14.9% in fiscal 2020, as compared to fiscal 2019, primarily due to a 11% decrease in organic volume reflecting dramatic declines of telecom demand in China and the impact from the COVID-19 pandemic, a 3% decrease in currency translation impact and a 1% decrease in pricing. Product line sales Reserve power Motive power Total net sales Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions $ $ 1,739.6 1,348.2 3,087.8 56.3% $ 43.7 100.0% $ 1,416.2 1,391.8 2,808.0 50.4% $ 49.6 100.0% $ 323.4 (43.6) 279.8 % 22.8 % (3.1) 10.0 % Sales in our reserve power products increased in fiscal 2020 by $323.4 million or 22.8% compared to the prior year, primarily due to a 33% increase from the Alpha and NorthStar acquisitions, partially offset by a 7% decrease in organic volume, a 2% decrease in currency translation impact and a 1% decrease in pricing. The decrease in organic volume in fiscal 2020 is primarily from the deferral of spending by telecom and broadband customers and the conclusion of a large enclosure order a year ago. Sales in our motive power products decreased in fiscal 2020 by $43.6 million or 3.1% compared to the prior year, primarily due to a 2% decrease in currency translation impact and a 1% decrease in pricing. The lack of organic growth in motive power product volume is due to weak European markets, the recent fire in our Richmond, Kentucky facility and the impact from the COVID-19 pandemic on our fourth fiscal quarter sales. Gross Profit Gross profit $ 784.9 25.4% $ 693.1 24.7% $ 91.8 13.3% Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Gross profit increased $91.8 million or 13.3% in fiscal 2020 compared to fiscal 2019. Gross profit, as a percentage of net sales, increased 70 basis points in fiscal 2020 compared to fiscal 2019. This increase in the gross profit margin is largely a function of declines in commodity costs relative to pricing, partially offset by higher manufacturing costs. 35 Table of Contents Operating Items Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions Operating expenses $ 529.7 17.1% $ 441.4 15.7% $ Restructuring, exit and other charges Impairment of goodwill Impairment of indefinite-lived intangibles Legal proceedings charge, net NM = not meaningful Operating Expenses 20.8 39.7 4.5 — 0.7 1.3 0.1 — 34.8 — — 4.4 1.2 — — 0.2 88.3 (14.0) 39.7 4.5 (4.4) % 20.0 % (40.2) NM NM NM Operating expenses increased $88.3 million or 20% in fiscal 2020 from fiscal 2019 and increased as a percentage of net sales by 140 basis points. Excluding the impact of the foreign currency translation, the increase reflects the inclusion of Alpha and NorthStar, as well as an increase of $25.0 million towards new product development. Selling expenses, our main component of operating expenses, were 44.7% of sales in fiscal 2020, compared to 46.4% of sales in fiscal 2019. Impairment of goodwill and indefinite-lived intangibles Goodwill is tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances that indicate goodwill is more likely than not impaired. In the fourth quarter of fiscal 2020, we conducted our annual goodwill impairment test which indicated that the fair value of Asia was less than its carrying value. We recorded a non-cash charge of $39.7 million related to goodwill impairment in Asia under the caption “Impairment of goodwill” in the Consolidated Statements of Income. We also recorded a non-cash charge of $4.5 million related to indefinite-lived trademarks in EMEA, under the caption “Impairment of indefinite-lived intangibles” in the Consolidated Statements of Income. The key factors contributing to the impairment in Asia was the increasing pressure on organic sales growth that we began to experience in fiscal 2019 due to a slowdown in telecom spending in the PRC amidst growing trade tensions between the U.S.A and China. The impact of these trade tensions on our ability to capture market share in PRC accelerated in the second half of the fiscal year. Throughout fiscal 2020, there was a general slowdown in the Chinese economy which was further exacerbated by the outbreak of the COVID -19 pandemic, causing disruption to two of our plants in China in the fourth quarter. Also contributing to the poor performance of the Asia region was a general softening of demand in Australia, that began in fiscal 2019 and continued throughout fiscal 2020. We monitored the performance of our Asia reporting unit for interim impairment indicators throughout fiscal 2020, but the emergence of COVID-19 in China in December 2019 coupled with the totality of economic headwinds in the region resulted in the recognition of a goodwill impairment loss in connection with our annual impairment test. During the fourth quarter of fiscal 2020, management completed its evaluation of key inputs used to estimate the fair value of its indefinite-lived trademarks and determined that an impairment charge relating to two of its trademarks in the EMEA reporting unit, that were acquired through legacy acquisitions was appropriate, as it plans to phase out these trademarks. Restructuring, exit and other charges Included in our fiscal 2020 operating results are restructuring charges of $2.5 million in the Americas and $7.0 million in EMEA, both primarily relating to the recent NorthStar acquisition and $1.5 million in Asia. Also included in the fiscal 2020 operating results are exit charges of $5.1 million in EMEA, including $2.2 million of cash charges, relating to the closure of our facility in Targovishte, Bulgaria, that commenced in fiscal 2019 as explained below. In keeping with our strategy of exiting the manufacture of batteries for diesel-electric submarines, during fiscal 2020, we sold certain licenses and assets for $2.0 million and recorded a net gain of $0.9 million, which is reported as other exit charges. 36 Table of Contents During fiscal 2020, we also wrote off $5.5 million of assets at our Kentucky and Tennessee plants, as a result of our strategic product mix shift from traditional flooded batteries to maintenance free lead acid and lithium batteries. Included in our fiscal 2019 operating results are restructuring and exit charges of $4.0 million in Americas, $27.0 million in EMEA and $3.8 million in Asia. Of the $27.0 million charges in EMEA, $17.7 million related to the closure of our facility in Targovishte, Bulgaria, $4.9 million related to the disposition of GAZ Geräte - und Akkumulatorenwerk Zwickau GmbH, a wholly-owned German subsidiary, $3.4 million related to improving efficiencies of our general operations and $1.0 million related to dissolving a joint venture in Tunisia. The facility in Bulgaria produced diesel-electric submarine batteries. Management determined that the future demand for batteries of diesel-electric submarines was not sufficient given the number of competitors in the market. The $17.7 million charges were primarily non-cash charges of $15.0 million related to the write-off of fixed assets and $2.7 million of severance payments. In addition, cost of goods sold also included a $2.5 million of inventory write-off relating to the closure of the Bulgaria facility. These exit activities are a consequence of the Company's strategic decision to streamline its product portfolio and focus its efforts on new technologies. The charges in Asia primarily relate to improving efficiencies in the PRC in light of recent decline in demand. Richmond, Kentucky Plant Fire On September 19, 2019, a fire broke out in the battery formation area of our Richmond, Kentucky motive power production facility. We maintain insurance policies for both property damage and business interruption and are finishing cleanup and repair. We believe that the total claim, including the replacement of inventory and equipment, the cleanup and repairs to the building, as well as the claim for business interruption is nearly $50 million. We recorded $10.0 million of damages caused to our fixed assets and inventories, as well as for cleanup, asset replacement and other ancillary activities directly associated with the fire, which were initially reflected as a receivable for probable insurance recoveries. We received $12.0 million in advances related to our initial claims for recovery from our property and casualty insurance carriers in fiscal 2020. Subsequent to March 31, 2020, we also received an additional $8.7 million towards the business interruption claim, of which, $5.0 million was booked as a reduction to our cost of goods sold in our fourth quarter. 37 Table of Contents Operating Earnings Operating earnings by segment were as follows: Americas EMEA Asia Subtotal Inventory step up to fair value relating to acquisitions and exit activities - Americas Restructuring charges - Americas Inventory adjustment relating to exit activities - EMEA Restructuring and other exit charges - EMEA Inventory adjustment relating to exit activities - Asia Restructuring charges - Asia Fixed asset write-off relating to exit activities and other - Americas Impairment of indefinite-lived intangibles - EMEA Impairment of goodwill - Asia Legal proceedings charge, net - EMEA Total operating earnings NM = not meaningful $ Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions As % Net Sales(1) In Millions As % Net Sales(1) In Millions $ 206.9 9.9 % $ 186.9 11.0 % $ 50.2 — 257.1 (1.9) (2.5) — (11.3) — (1.5) (5.5) (4.5) (39.7) — 190.2 6.4 — 8.3 (0.1) (0.1) — (1.4) — (0.7) (0.3) (0.6) (18.2) 71.9 3.2 262.0 (7.2) (4.0) (2.6) (27.0) (0.5) (3.8) — — — — 6.1 % $ (4.4) 212.5 8.4 1.3 9.3 (0.4) (0.2) (0.3) (3.1) (0.2) (1.4) 20.0 (21.7) (3.2) (4.9) 5.3 1.5 2.6 15.7 0.5 2.3 — (5.5) — — (0.5) 7.6 % $ (4.5) (39.7) 4.4 (22.3) % 10.8 % (30.3) (100.0) (1.9) NM (36.4) NM (54.0) NM (61.0) NM NM NM NM (10.5)% (1) The percentages shown for the segments are computed as a percentage of the applicable segment’s net sales. Operating earnings decreased $22.3 million or 10.5% in fiscal 2020, compared to fiscal 2019. Operating earnings, as a percentage of net sales, decreased 150 basis points in fiscal 2020, compared to fiscal 2019. Excluding the impact of highlighted items, operating earnings in fiscal 2020 decreased 100 basis points primarily due to the recent fire at our Richmond, Kentucky facility which continued to result in missed sales opportunities and higher manufacturing costs, as well as the decline in our organic volume in EMEA and Asia. The Americas segment’s operating earnings, increased $20.0 million or 10.8% in fiscal 2020 compared to fiscal 2019, with the operating margin decreasing 110 basis points to 9.9%. The decrease is primarily due to the recent fire at our Richmond, Kentucky, facility which continued to result in missed sales opportunities and higher manufacturing costs. This negative impact was partially offset by the impact of lower commodity costs and Alpha's contribution to operating earnings of $53.2 million or 9.7% of its sales for fiscal 2020. The EMEA segment’s operating earnings, decreased $21.7 million or 30.3% in fiscal 2020 compared to fiscal 2019, with the operating margin decreasing 200 basis points to 6.4%. The decrease was primarily due to the lower volume previously discussed. The Asia segment's operating earnings, decreased $3.2 million in fiscal 2020 compared to fiscal 2019, with the operating margin decreasing by 130 basis points to 0%. Lower organic volume caused by the slowdown in the Chinese economy as well as the recent disruption due to the COVID-19 pandemic to our two plants were the primary reasons for the poor performance of our Asia region. 38 Table of Contents Interest Expense Interest expense $ 43.7 1.4% $ 30.9 1.1% $ 12.8 41.5% Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Interest expense of $43.7 million in fiscal 2020 (net of interest income of $2.2 million) was $12.8 million higher than the $30.9 million in fiscal 2019 (net of interest income of $2.1 million). Our average debt outstanding was $1,097.9 million in fiscal 2020, compared to our average debt outstanding of $742.0 million in fiscal 2019. Our average cash interest rate incurred in fiscal 2020 was 3.8% and was 4.1% in fiscal 2019. The increase in interest expense was primarily due to higher average debt incurred to fund the Alpha and NorthStar acquisitions. In connection with the issuance of the 2027 Notes, we capitalized $4.6 million of debt issuance costs. Included in interest expense were non-cash charges related to amortization of deferred financing fees of $1.7 million in fiscal 2020 and $1.3 million in fiscal 2019. Other (Income) Expense, Net Other (income) expense, net $ (0.5) —% $ (0.5) —% $ — —% Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Other (income) expense, net was income of $0.5 million in fiscal 2020 compared to income of $0.5 million in fiscal 2019. Foreign currency losses were $0.3 million in fiscal 2020 compared to foreign currency gains of $3.1 million in fiscal 2019. Earnings Before Income Taxes Earnings before income taxes $ 147.0 4.7% $ 182.1 6.5% $ (35.1) (19.4)% Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % As a result of the factors discussed above, fiscal 2020 earnings before income taxes were $147.0 million, a decrease of $35.1 million or 19.4% compared to fiscal 2019. Income Tax Expense Fiscal 2020 Fiscal 2019 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions Income tax expense Effective tax rate $ 9.9 6.7% 0.3% $ 21.6 0.8% $ (11.7) 11.9% (5.2)% % (54.5)% Our effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which we operate and the amount of our consolidated income before taxes. On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted into law. Among the significant changes resulting from the law, the Tax Act reduced the U.S. federal income tax rate from 35% to 21% effective January 1, 2018, and required companies to pay a one-time transition tax on unrepatriated cumulative non-U.S. earnings of foreign subsidiaries and created new taxes on certain foreign sourced earnings. The U.S. federal statutory tax rate for fiscal 2020 and 2019 is 21.0%. The Company’s income tax provision consists of federal, state and foreign income taxes. The effective income tax rate was 6.7% in fiscal 2020 compared to the fiscal 2019 effective income tax rate of 11.9%. The rate decrease in fiscal 2020 compared 39 Table of Contents to fiscal 2019 is primarily due to changes in mix of earnings among tax jurisdictions, Swiss tax reform, and items related to the Tax Act in fiscal 2019. On May 19, 2019, a public referendum held in Switzerland approved the Federal Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF) as adopted by the Swiss Federal Parliament on September 28, 2018. The Swiss tax reform measures are effective January 1, 2020. Certain provisions of the TRAF were enacted during the second quarter of fiscal 2020. Significant changes in the tax reform include the abolishment of preferential tax regimes for holding companies, domicile companies and mixed companies at the cantonal level. The transitional provisions of the TRAF allow companies to elect tax basis adjustments to fair value, which is used for tax depreciation and amortization purposes resulting in a deduction over the transitional period. We recorded a net deferred tax asset of $22.5 million during fiscal 2020, related to the amortizable goodwill. The fiscal 2020 foreign effective income tax rate was (7.4%) on foreign pre-tax income of $110.7 million compared to effective income tax rate of 12.3% on foreign pre-tax income of $128.9 million in fiscal 2019. For both fiscal 2020 and 2019, the difference in the foreign effective tax rate versus the U.S. statutory rate of 21% is primarily attributable to lower tax rates in the foreign countries in which we operate. The rate decrease in fiscal 2020 compared to fiscal 2019 is primarily due to Swiss tax reform and changes in the mix of earnings among tax jurisdictions. Income from our Swiss subsidiary comprised a substantial portion of our overall foreign mix of income for both fiscal 2020 and fiscal 2019 and was taxed, excluding the impact from Swiss tax reform, at approximately 3% and 4%, respectively. Results of Operations—Fiscal 2019 Compared to Fiscal 2018 The following table presents summary Consolidated Statement of Income data for fiscal year ended March 31, 2019, compared to fiscal year ended March 31, 2018: Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions Net sales Cost of goods sold $ 2,808.0 2,104.6 100.0% $ 74.9 0.4 24.7 15.7 1.2 0.2 7.6 1.1 — 6.5 0.8 5.7 2,581.8 1,920.0 3.4 658.4 382.1 5.5 — 270.8 25.0 7.5 238.3 118.5 119.8 100.0% $ 74.4 0.1 25.5 14.8 0.2 — 10.5 1.0 0.3 9.2 4.6 4.6 226.2 184.6 6.9 34.7 59.3 29.3 4.4 (58.3) 5.9 (8.0) (56.2) (96.9) 40.7 10.3 693.1 441.4 34.8 4.4 212.5 30.9 (0.5) 182.1 21.6 160.5 % 8.8 % 9.6 NM 5.3 15.5 NM NM (21.6) 23.5 NM (23.5) (81.8) 34.0 0.3 — 0.2 — 0.1 62.3 $ 160.2 5.7% $ 119.6 4.6% $ 40.6 34.0 % Inventory adjustment relating to acquisition and exit activities Gross profit Operating expenses Restructuring and other exit charges Legal proceedings charge, net Operating earnings Interest expense Other (income) expense, net Earnings before income taxes Income tax expense Net earnings Net earnings (losses) attributable to noncontrolling interests Net earnings attributable to EnerSys stockholders NM = not meaningful Overview Our sales in fiscal 2019 were $2.8 billion, an 8.8% increase from prior year's sales. This increase was the result of a 6% increase due to the Alpha acquisition (as discussed in Part I, Item 1 of this Annual Report), a 3% increase in organic volume and a 2% increase in pricing, partially offset by a 2% decrease in foreign currency translation impact. A discussion of specific fiscal 2019 versus fiscal 2018 operating results follows, including an analysis and discussion of the results of our reportable segments. 40 Table of Contents Net Sales Segment sales Americas EMEA Asia Total net sales Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions % Net Sales In Millions % Net Sales In Millions % $ 1,690.9 60.2% $ 1,429.8 55.4% $ 860.6 256.5 30.7 9.1 849.5 302.5 32.9 11.7 $ 2,808.0 100.0% $ 2,581.8 100.0% $ 261.1 11.1 (46.0) 226.2 18.3 % 1.3 (15.2) 8.8 % The Americas segment’s net sales increased by $261.1 million or 18.3% in fiscal 2019, as compared to fiscal 2018, primarily due to an 11% increase due to the Alpha acquisition, a 6% increase in organic volume and a 3% increase in pricing, partially offset by a 2% decrease in currency translation impact. The EMEA segment’s net sales increased by $11.1 million or 1.3% in fiscal 2019, as compared to fiscal 2018, primarily due to a 5% increase in organic volume, partially offset by a 4% decrease in currency translation impact. The Asia segment’s net sales decreased by $46.0 million or 15.2% in fiscal 2019, as compared to fiscal 2018, primarily due to a 14% decrease in organic volume reflecting dramatic declines in China telecom demands and a general softening of demand in Australia, and a 3% decrease in currency translation impact, partially offset by a 2% increase in pricing. Product line sales Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Reserve power Motive power Total net sales $ $ 1,416.2 1,391.8 2,808.0 50.4% $ 49.6 100.0% $ 1,247.9 1,333.9 2,581.8 48.3% $ 51.7 100.0% $ 168.3 57.9 226.2 13.5% 4.3 8.8% Sales in our reserve power products increased in fiscal 2019 by $168.3 million or 13.5% compared to the prior year, primarily due to a 13% increase due to the Alpha acquisition, a 2% increase in pricing, and a 1% increase in organic volume, partially offset by a 2% decrease in currency translation impact. Sales in our motive power products increased in fiscal 2019 by $57.9 million or 4.3% compared to the prior year, primarily due to a 5% increase in organic volume and a 1% increase in pricing, partially offset by a 2% decrease in currency translation impact. Gross Profit Gross profit $ 693.1 24.7% $ 658.4 25.5% $ 34.7 5.3% Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Gross profit increased $34.7 million or 5.3% in fiscal 2019 compared to fiscal 2018. Gross profit, as a percentage of net sales, decreased 80 basis points in fiscal 2019 compared to fiscal 2018. The decrease in the gross profit margin was primarily due to an increase in commodity costs, freight and tariffs of approximately $60 million, which were offset by comparable increase in organic volume and pricing, but still resulted in gross margin dilution. However, this dilutive effect had reversed by our fourth quarter of fiscal 2019, due to a decline in commodity costs. Gross profit, as a percentage of net sales, was also negatively impacted by the opening balance sheet adjustment to Alpha inventories of $7.2 million. 41 Table of Contents Operating Items Operating expenses $ Restructuring and other exit charges Legal proceedings charge, net NM = not meaningful Operating Expenses Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions 441.4 34.8 4.4 15.7% $ 382.1 14.8% $ 1.2 0.2 5.5 — 0.2 — 59.3 29.3 4.4 % 15.5% NM NM Operating expenses increased $59.3 million or 15.5% in fiscal 2019 from fiscal 2018 and increased as a percentage of net sales by 90 basis points. The impact of foreign currency translation resulted in a decrease of $8.5 million. Excluding the impact of the foreign currency translation, the increase in dollars was primarily due to Alpha acquisition related costs and payroll related expenses. Selling expenses, our main component of operating expenses, were 46.4% in fiscal 2019, compared to 51.5% in fiscal 2018. Restructuring and other exit charges With the recent Alpha acquisition, the Company commenced restructuring in the Americas, as part of its targeted synergy plans. The Company also continued meaningful restructuring actions in EMEA with the intent to improve profitability and streamline management’s focus. Included in our fiscal 2019 operating results were restructuring and exit charges of $4.0 million in Americas, $27.0 million in EMEA and $3.8 million in Asia. Of the $27.0 million charges in EMEA, $17.7 million related to the closure of our facility in Targovishte, Bulgaria, $4.9 million related to the disposition of GAZ Geräte - und Akkumulatorenwerk Zwickau GmbH, a wholly-owned German subsidiary, $3.4 million related to improving efficiencies of our general operations and $1.0 million related to dissolving a joint venture in Tunisia. The facility in Bulgaria produced diesel-electric submarine batteries. Management determined that the future demand for batteries of diesel-electric submarines was not sufficient given the number of competitors in the market. The $17.7 million charges were primarily non-cash charges of $15.0 million related to the write-off of fixed assets and $2.7 million of severance payments. In addition, cost of goods sold also included a $2.5 million of inventory write-off relating to the closure of the Bulgaria facility. These exit activities were a consequence of the Company's strategic decision to streamline its product portfolio and focus its efforts on new technologies. The charges in Asia primarily related to improving efficiencies in the PRC in light of recent decline in demand. Included in our fiscal 2018 operating results is a $5.5 million charge of restructuring and other exit charges, comprising $1.3 million in Americas, $4.0 million in EMEA and $0.2 million in Asia. The charges in the Americas primarily related to improving efficiencies of our general operations, while charges in EMEA related to restructuring programs to improve efficiencies in our manufacturing, supply chain and general operations. In addition, cost of goods sold also included a $3.4 million of inventory write-off relating to the closing of our Cleveland, Ohio charger manufacturing facility. Legal proceedings charge (settlement income) European Competition Investigations Certain of our European subsidiaries had received subpoenas and requests for documents and, in some cases, interviews from, and have had on-site inspections conducted by the competition authorities of Belgium, Germany and the Netherlands relating to conduct and anticompetitive practices of certain industrial battery participants. We settled the Belgian regulatory proceeding in February 2016 by acknowledging certain anticompetitive practices and conduct and agreeing to pay a fine of $2.0 million, which was paid in March 2016. During fiscal 2019, the Company paid $2.4 million towards certain aspects of this matter, which are under appeal. As of March 31, 2019 and March 31, 2018, the Company had a reserve balance of $0 million and $2.3 million, respectively. 42 Table of Contents In June 2017, the Company settled a portion of its previously disclosed proceeding involving the German competition authority relating to conduct involving the Company's motive power battery business and agreed to pay a fine of $14.8 million, which was paid in July 2017. Also in June 2017, the German competition authority issued a fining decision related to the Company's reserve power battery business, which constitutes the remaining portion of the previously disclosed German proceeding. The Company appealed this decision. In March 2019, the Company settled this matter by agreeing to pay $7.3 million, which was paid in April 2019. As of March 31, 2019 and March 31, 2018, the Company had a reserve balance of $7.3 million and $0, respectively. For the Dutch regulatory proceeding, we reserved $10.2 million as of March 31, 2017. In July 2017, the Company settled the Dutch regulatory proceeding and agreed to pay a fine of $11.2 million, which was paid in August 2017. As of March 31, 2019 and March 31, 2018, the Company had a reserve balance of $0 and $10.2 million, respectively, relating to the Dutch regulatory proceeding. As of March 31, 2019 and March 31, 2018, we had a total reserve balance of $7.3 million and $2.3 million, respectively, in connection with these remaining investigations and other related legal matters, included in Accrued Expenses on the Consolidated Balance Sheets. The foregoing estimate of losses is based upon currently available information for these proceedings. However, the precise scope, timing and time period at issue, as well as the final outcome of the investigations or customer claims, remain uncertain. Accordingly, the Company’s estimate may change from time to time, and actual losses could vary. EnerSys Sarl Litigation One of the parties to a litigation related to a 1999 fire in a French hotel under construction involving the Company’s French subsidiary, EnerSys Sarl, which was acquired by the Company in 2002, that was adverse to the Company, appealed the ruling by the Court of Appeal of Lyon on June 11, 2013, which ruled in the Company’s favor, entitling the Company to a refund of the monies paid of €2.0 million, or $2.8 million to the French Supreme Court, which appeal was denied in January 2015. During the third quarter of fiscal 2019, the Company and the adverse party settled this final item with the Company receiving a refund, including interest, from the adverse party of €2.5 million, or $2.8 million, for monies paid. The Company believes that it has no further liability with respect to this matter. Operating Earnings Operating earnings by segment were as follows: Americas EMEA Asia Subtotal Inventory adjustment relating to exit activities - Americas Restructuring charges - Americas Inventory adjustment relating to exit activities - EMEA Restructuring and other exit charges - EMEA Inventory adjustment relating to exit activities - Asia Restructuring charges - Asia Legal proceedings charge - EMEA Total operating earnings NM = not meaningful Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions As % Net Sales(1) In Millions (2) As % Net Sales(1) In Millions $ 186.9 71.9 3.2 262.0 (7.2) (4.0) (2.6) (27.0) (0.5) (3.8) (4.4) 11.0 % $ 8.4 1.3 9.3 (0.4) (0.2) (0.3) (3.1) (0.2) (1.4) (0.5) 189.4 77.7 12.6 279.7 (3.4) (1.3) — (4.0) — (0.2) — 13.3 % $ 9.1 4.2 10.8 (0.2) (0.1) — (2.5) (5.8) (9.4) (17.7) (3.8) (2.7) (2.6) (0.5) (23.0) — (0.1) — (0.5) (3.6) (4.4) % (1.4)% (7.3) (74.6) (6.4) NM NM NM NM NM NM NM $ 212.5 7.6 % $ 270.8 10.5 % $ (58.3) (21.5)% (1) The percentages shown for the segments are computed as a percentage of the applicable segment’s net sales. 43 Table of Contents (2) Restated for ASU No. 2017-07, “Compensation—Retirement Benefits (Topic 715)”. See Note 1 to the Consolidated Financial Statement for more details. Operating earnings decreased $58.3 million or 21.5% in fiscal 2019, compared to fiscal 2018. Operating earnings, as a percentage of net sales, decreased 290 basis points in fiscal 2019, compared to fiscal 2018. Excluding the impact of highlighted items, operating earnings in fiscal 2019 decreased 150 basis points primarily due to an increase in commodity costs, freight and tariffs, although offset by organic volume improvement and price recoveries, caused a dilutive effect along with higher operating expense. The Americas segment’s operating earnings, decreased $2.5 million or 1.4% in fiscal 2019 compared to fiscal 2018, with the operating margin decreasing 230 basis points to 11.0%. This decrease was primarily due to higher commodity costs, transaction costs related to the Alpha acquisition and product delays caused by ERP execution challenges, partially offset by organic volume improvement, price recoveries and cost saving initiatives. The EMEA segment’s operating earnings, decreased $5.8 million or 7.3% in fiscal 2019 compared to fiscal 2018, with the operating margin decreasing 70 basis points to 8.4%. This decrease was primarily due to higher commodity costs and freight, partially offset by organic volume improvement and cost saving initiatives. Operating earnings in Asia, decreased $9.4 million or 74.6% in fiscal 2019 compared to fiscal 2018, with the operating margin decreasing by 290 basis points to 1.3%. This was primarily due to a decrease in organic volume from a slow down in telecom spending in the PRC and a general softening of demand in Australia as well as higher commodity costs, in the first half of fiscal 2019 in the PRC. Interest Expense Interest expense $ 30.9 1.1% $ 25.0 1.0% $ 5.9 23.5% Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % Interest expense of $30.9 million in fiscal 2019 (net of interest income of $2.1 million) was $5.9 million higher than the $25.0 million in fiscal 2018 (net of interest income of $3.0 million). Our average debt outstanding was $742.0 million in fiscal 2019, compared to our average debt outstanding of $672.8 million in fiscal 2018. Our average cash interest rate incurred in fiscal 2019 was 4.1% compared to 3.7% in fiscal 2018. The increase in interest expense was primarily due to higher interest rates and higher average debt. The increased borrowings was primarily to fund the Alpha acquisition. Included in interest expense were non-cash charges related to amortization of deferred financing fees of $1.3 million in fiscal 2019 and $1.6 million in fiscal 2018. Other (Income) Expense, Net Other (income) expense, net NM = not meaningful Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % $ (0.5) —% $ 7.5 0.3% $ (8.0) NM Other (income) expense, net was income of $0.5 million in fiscal 2019 compared to expense of $7.5 million in fiscal 2018 primarily due to foreign currency gains of $3.1 million in fiscal 2019 compared to foreign currency losses of $5.5 million in fiscal 2018. 44 Table of Contents Earnings Before Income Taxes Earnings before income taxes $ 182.1 6.5% $ 238.3 9.2% $ (56.2) (23.5)% Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions % As a result of the factors discussed above, fiscal 2019 earnings before income taxes were $182.1 million, a decrease of $56.2 million or 23.5% compared to fiscal 2018. Income Tax Expense Income tax expense Effective tax rate Fiscal 2019 Fiscal 2018 Increase (Decrease) In Millions As % Net Sales In Millions As % Net Sales In Millions $ 21.6 0.8% $ 118.5 4.6% $ (96.9) % (81.8)% 11.9% 49.7% (37.8)% Our effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which we operate and the amount of our consolidated income before taxes. On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted into law. Among the significant changes resulting from the law, the Tax Act reduced the U.S. federal income tax rate from 35% to 21% effective January 1, 2018, and required companies to pay a one-time transition tax on unrepatriated cumulative non-U.S. earnings of foreign subsidiaries and created new taxes on certain foreign sourced earnings. The U.S. federal statutory tax rate for fiscal 2019 is 21.0%. On December 22, 2017, the SEC issued Staff Accounting Bulletin No.118 (“SAB 118”) that provided guidance on the financial statement implications of the Tax Act. In fiscal 2018, we recorded a provisional amount for the Transition Tax liability, resulting in an increase in income tax expense of $97.5 million. In fiscal 2019, we completed our accounting for the tax effects of enactment of the Tax Act and recognized an income tax benefit of $13.5 million, net of uncertain tax positions, resulting from a decrease in the mandatory one-time transition tax on unremitted earnings of our foreign business. We made the election on the 2017 Federal Income Tax Return to pay the one-time Tax Act liability over an eight-year period without interest, as allowed under the tax enactment. The Company’s income tax provision consists of federal, state and foreign income taxes. The effective income tax rate was 11.9% in fiscal 2019 compared to the fiscal 2018 effective income tax rate of 49.7%. The rate decrease in fiscal 2019 compared to fiscal 2018 is primarily due to the impact of the Tax Act, partially offset by increases for additional tax valuation allowances related to certain of our foreign subsidiaries, increases due to non-deductible legal proceedings charge related to the European competition investigation and changes in the mix of earnings among tax jurisdictions in fiscal 2019. The fiscal 2019 foreign effective income tax rate was 12.3% on foreign pre-tax income of $128.9 million compared to effective income tax rate of 5.2% on foreign pre-tax income of $163.9 million in fiscal 2018. For both fiscal 2019 and 2018, the difference in the foreign effective tax rate versus the U.S. statutory rate of 21% and 31.55%, respectively, is primarily attributable to lower tax rates in the foreign countries in which we operate. The rate increase in fiscal 2019 compared to fiscal 2018 is primarily due to additional tax valuation allowances related to certain of our foreign subsidiaries, increases due to non-deductible legal proceedings charge related to the European competition investigation and changes in the mix of earnings among tax jurisdictions in fiscal 2019. Income from our Swiss subsidiary comprised a substantial portion of our overall foreign mix of income for both fiscal 2019 and fiscal 2018 and is taxed at an effective income tax rate of approximately 4% and 8%, respectively. 45 Table of Contents Liquidity and Capital Resources Cash Flow and Financing Activities Cash and cash equivalents at March 31, 2020, 2019 and 2018, were $327.0 million, $299.2 million and $522.1 million, respectively. Cash provided by operating activities for fiscal 2020, 2019 and 2018, was $253.4 million, $197.9 million and $211.0 million, respectively. During fiscal 2020, cash provided by operating activities was primarily from net earnings of $137.1 million, depreciation and amortization of $87.3 million, non-cash charges relating to impairment of goodwill and other intangible assets of $44.2 million, restructuring, exit and other charges of $11.0 million, stock-based compensation of $20.8 million, provision for bad debts of $4.8 million and non-cash interest of $1.7 million, partially offset by deferred taxes of $16.5 million primarily from the Swiss Tax Reform. Cash provided by earnings adjusted for non-cash items were partially offset by the increase in primary working capital of $16.4 million, net of currency translation changes. Accrued expenses increased by $7.1 million, primarily due to payroll accruals of $8.6 million, sales incentives of $8.0 million, interest of $3.9 million, partially offset by payments of $7.3 million related to the German competition authority matter and $6.1 million paid to the seller in connection with the Alpha acquisition, for certain reimbursable pre-acquisition items. Prepaid and other current assets increased by $17.5 million, primarily due to contract assets of $11.1 million, insurance receivable of $22.0 million relating to the Richmond plant claim, partially offset by insurance proceeds of $12.0 million and the receipt of $4.1 million in connection with the Alpha transaction. Other liabilities decreased by $12.7 million due to income taxes. During fiscal 2019, cash provided by operating activities was primarily from net earnings of $160.5 million, depreciation and amortization of $63.3 million, non-cash charges relating to write-off of assets of $26.3 million, stock-based compensation of $22.6 million, non-cash interest of $1.3 million and provision for bad debts accounts of $1.4 million, partially offset by deferred tax benefit of $6.5 million. Cash provided by earnings as adjusted for non-cash items was partially offset by the increase in primary working capital of $30.7 million, net of currency translation changes, and a decrease in other long-term liabilities of $14.9 million, primarily related to income taxes. Prepaid and other current assets, primarily comprising of contract assets, also resulted in a decrease of $20.2 million to operating cash. During fiscal 2018, cash provided by operating activities was primarily from net earnings of $119.8 million, depreciation and amortization of $54.3 million, stock-based compensation of $19.5 million, non-cash charges relating to write-off of assets of $3.7 million, non-cash interest of $1.6 million and provision for bad debts of $0.8 million, partially offset by deferred tax benefit of $20.3 million. Cash provided by earnings as adjusted for non-cash items was improved by an increase of $94.0 million in long term liabilities primarily due to the Transition Tax liability and was partially offset by the increase in primary working capital of $49.0 million, net of currency translation changes, and a decrease in accrued expenses of $26.6 million, comprising primarily of legal proceedings related payments, payroll related expenses and income taxes. Prepaid and other current assets, comprising of prepaid taxes, also provided an increase of $14.5 million to operating cash. As explained in the discussion of our use of “non-GAAP financial measures,” we monitor the level and percentage of primary working capital to sales. Primary working capital for this purpose is trade accounts receivable, plus inventories, minus trade accounts payable and the resulting net amount is divided by the trailing three-month net sales (annualized) to derive a primary working capital percentage. Primary working capital was $833.5 million (yielding a primary working capital percentage of 26.7%) at March 31, 2020 and $835.6 million (yielding a primary working capital percentage of 26.2%) at March 31, 2019. The primary working capital percentage of 26.7% at March 31, 2020 is 50 basis points higher than that for March 31, 2019, and 100 basis points higher than that for March 31, 2018. The primary working capital dollars are consistent with prior year. The increase in fiscal 2019 compared to fiscal 2018, was primarily due to the inclusion of the Alpha acquisition and higher inventory levels. 46 Table of Contents Primary Working Capital and Primary Working Capital percentages at March 31, 2020, 2019 and 2018 are computed as follows: Balance at March 31, (1) (2) (3) Trade Receivables Inventory Primary Working Capital Quarter Revenue Annualized Primary Working Capital (%) Accounts Payable (in millions) 2020 $ 2019 595.9 $ 624.1 519.5 $ 503.9 (281.9) $ (292.4) 833.5 $ 835.6 3,127.2 3,186.4 26.7% 26.2 25.7 (1) The Company acquired NorthStar on September 30, 2019, as disclosed in Note 4 to the Consolidated Financial Statements. Therefore, the Primary working capital and 2,732.2 (258.9) 546.3 414.2 701.6 2018 related calculations as of March 31, 2018 and March 31, 2019 did not include NorthStar's primary working capital and its components. (2) The Company acquired Alpha on December 7, 2018, as disclosed in Note 4 to the Consolidated Financial Statements. Therefore, the Primary working capital and related calculations as of March 31, 2018 did not include Alpha's primary working capital and its components. (3) The inclusion of the NorthStar from its respective date of acquisition did not have a material impact on the Company's consolidated Primary working capital as of March 31, 2020. Cash used in investing activities for fiscal 2020, 2019 and 2018 was $274.8 million, $723.9 million and $72.4 million, respectively. During fiscal 2020 we acquired NorthStar for $176.5 million. During fiscal 2019, we acquired Alpha for a total purchase consideration of $742.5 million, of which $650.0 was paid in cash and the balance, after adjusting for working capital of $0.8 million due from seller, was settled by issuing 1,177,630 shares of EnerSys common stock at a closing date fair value of $93.3 million. See Note 4 to the Consolidated Financial Statements for more details. In fiscal 2019 and 2018, we also had minor acquisitions resulting in a cash outflow of $5.4 million and $3.0 million, respectively. Capital expenditures were $101.4 million, $70.4 million and $69.8 million in fiscal 2020, 2019 and 2018, respectively. During fiscal 2020, financing activities provided cash of $62.7 million. We issued our 2027 Notes for $300 million, the proceeds of which were utilized to pay down the existing revolver borrowings. We borrowed $386.7 million under the Amended 2017 Revolver and repaid $517.7 million of the Amended 2017 Revolver. Repayment on the Amended 2017 Term Loan was $28.1 million and net payments on short-term debt were $5.3 million. Treasury stock open market purchases were $34.6 million, payment of cash dividends to our stockholders were $29.7 million and payment of taxes related to net share settlement of equity awards were $6.4 million. During fiscal 2019, financing activities provided cash of $346.6 million. We borrowed $531.1 million under the Amended 2017 Revolver and $299.1 million under the Amended 2017 Term Loan, primarily to fund the Alpha acquisition and repaid $427.6 million of the Amended 2017 Revolver and $11.7 million on the Amended 2017 Term Loan. Treasury stock open market purchases were $56.4 million, payment of cash dividends to our stockholders were $29.7 million and payment of taxes related to net share settlement of equity awards were $3.6 million. Proceeds from stock options were $9.0 million and net borrowings on short-term debt were $37.4 million. During fiscal 2018, financing activities used cash of $166.9 million. In fiscal 2018, we entered into a 2017 Credit Facility and borrowed $379.8 million under the 2017 Revolver and $150.0 million under the 2017 Term loan. Repayments on the 2017 Revolver during fiscal 2018 were $244.3 million. Borrowings and repayments on the 2011 Revolver during fiscal 2018 were $147.1 million and $312.1 million, respectively, and repayment of the 2011 Term loan was $127.5 million. On August 4, 2017, the outstanding balance on the 2011 Revolver and the 2011 Term Loan of $240.0 million and $123.0 million, respectively, was repaid utilizing the proceeds from the 2017 Credit Facility. We also paid $100.0 million under the ASR agreement, which was settled on January 9, 2018. Treasury stock open market purchases were $21.2 million, payment of cash dividends to our stockholders were $29.7 million, payment of taxes related to net share settlement of equity awards were $7.5 million and debt issuance costs were $2.7 million. Net borrowings on short- term debt were $0.2 million and proceeds from stock options were $1.0 million. 47 Table of Contents As a result of the above, total cash and cash equivalents increased by $27.8 million from $299.2 million at March 31, 2019 to $327.0 million at March 31, 2020. In addition to cash flows from operating activities, we had available committed and uncommitted credit lines of approximately $694 million at March 31, 2020 to cover short-term liquidity requirements. Our Amended Credit Facility is committed through September 30, 2022, as long as we continue to comply with the covenants and conditions of the credit facility agreement. We have $587 million in available credit lines under our Amended Credit Facility at March 31, 2020. Compliance with Debt Covenants All obligations under our Amended Credit Facility are secured by, among other things, substantially all of our U.S. assets. The Amended Credit Facility contains various covenants which, absent prepayment in full of the indebtedness and other obligations, or the receipt of waivers, limit our ability to conduct certain specified business transactions, buy or sell assets out of the ordinary course of business, engage in sale and leaseback transactions, pay dividends and take certain other actions. There are no prepayment penalties on loans under this credit facility. We are in compliance with all covenants and conditions under our Amended Credit Facility and Senior Notes. We believe that we will continue to comply with these covenants and conditions, and that we have the financial resources and the capital available to fund the foreseeable organic growth in our business and to remain active in pursuing further acquisition opportunities. See Note 10 to the Consolidated Financial Statements included in this Annual Report on Form 10-K. Off-Balance Sheet Arrangements The Company did not have any off-balance sheet arrangements during any of the periods covered by this report. Contractual Obligations and Commercial Commitments At March 31, 2020, we had certain cash obligations, which are due as follows: Debt obligations Short-term debt Interest on debt Operating leases Tax Act - Transition Tax Pension benefit payments and profit sharing Restructuring Purchase commitments Lead and foreign currency forward contracts Finance lease obligations, including interest Total Total Less than 1 year 2 to 3 years (in millions) 4 to 5 years After 5 years $ 1,113.2 $ 38.9 $ 474.3 $ 300.0 $ 300.0 46.5 186.3 84.1 64.8 36.2 3.3 10.7 3.2 0.6 46.5 41.2 24.6 6.2 2.8 3.3 10.7 3.2 0.2 — 72.0 32.4 12.3 6.0 — — — 0.3 — 33.8 14.0 27.0 7.0 — — — 0.1 — 39.3 13.1 19.3 20.4 — — — — $ 1,548.9 $ 177.6 $ 597.3 $ 381.9 $ 392.1 Due to the uncertainty of future cash outflows, uncertain tax positions have been excluded from the above table. Under our Amended Credit Facility and other credit arrangements, we had outstanding standby letters of credit of $7.7 million as of March 31, 2020. Credit Facilities and Leverage Our focus on working capital management and cash flow from operations is measured by our ability to reduce debt and reduce our leverage ratios. 48 Table of Contents In the third quarter of fiscal 2020, we issued $300 million in aggregate principal amount of our 4.375% Senior Notes due 2027 (the “2027 Notes”). Proceeds from this offering, net of debt issuance costs were $296.3 million and were utilized to pay down the balance outstanding on the revolver borrowings. In the second quarter of fiscal 2018, we entered into the 2017 Credit Facility that comprised a $600.0 million senior secured revolving credit facility (“2017 Revolver”) and a $150.0 million senior secured term loan (“2017 Term Loan”) with a maturity date of September 30, 2022. We repaid our then existing facility (“2011 Credit Facility”), which comprised a $500 million senior secured revolving credit facility (“2011 Revolver”) and a $150.0 million senior secured incremental term loan (the “2011 Term Loan”) with the proceeds from the 2017 Credit facility. On December 7, 2018, we amended the 2017 Credit Facility (as amended, the “Amended Credit Facility”). The Amended Credit Facility consists of $449.1 million senior secured term loans (the “Amended 2017 Term Loan”), including a CAD 133.1 million ($99.1 million) term loan and a $700.0 million senior secured revolving credit facility (the “Amended 2017 Revolver”). The amendment resulted in an increase of the 2017 Term Loan and the 2017 Revolver by $299.1 million and $100.0 million, respectively. Shown below are the leverage ratios at March 31, 2020 and 2019, in connection with the Amended Credit Facility. The total net debt, as defined under the Amended Credit Facility is $905.6 million for fiscal 2020 and is 2.3 times adjusted EBITDA (non-GAAP), compared to total net debt of $835.8 million and 2.0 times adjusted EBITDA (non-GAAP) for fiscal 2019. The following table provides a reconciliation of net earnings to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) for March 31, 2020 and 2019, in connection with the Amended Credit Facility: Net earnings as reported Add back: Depreciation and amortization Interest expense Income tax expense EBITDA (non GAAP)(1) Adjustments per credit agreement definitions(2) Adjusted EBITDA (non-GAAP) per credit agreement(1) Total net debt(3) Leverage ratios(4): Total net debt/adjusted EBITDA ratio(4) Maximum ratio permitted Consolidated interest coverage ratio(5) Minimum ratio required Fiscal 2020 Fiscal 2019 (in millions, except ratios) $ 137.1 $ 160.5 $ $ $ 87.3 43.7 9.9 278.0 $ 123.6 401.6 $ 905.6 $ 2.3 X 3.5 X 9.1 X 3.0 X 63.3 30.9 21.6 276.3 139.0 415.3 835.8 2.0 X 4.0 X 9.9 X 3.0 X (1) We have included EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) because our lenders use them as key measures of our performance. EBITDA is defined as earnings before interest expense, income tax expense, depreciation and amortization. EBITDA is not a measure of financial performance under GAAP and should not be considered an alternative to net earnings or any other measure of performance under GAAP or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Our calculation of EBITDA may be different from the calculations used by other companies, and therefore comparability may be limited. Certain financial covenants in our Amended Credit Facility are based on EBITDA, subject to adjustments, which are shown above. Continued availability of credit under our Amended Credit Facility is critical to our ability to meet our business plans. We believe that an understanding of the key terms of our credit agreement is important to an investor’s understanding of our financial condition and liquidity risks. Failure to comply with our financial covenants, unless waived by our lenders, would mean we could not borrow any further amounts under our revolving credit facility and would give our lenders the right to demand immediate repayment of all outstanding revolving credit and term loans. We would be unable to continue our operations at current levels if we lost the liquidity provided under our credit agreements. Depreciation and amortization in this table excludes the amortization of deferred financing fees, which is included in interest expense. 49 Table of Contents (2) The $123.6 million adjustment to EBITDA in fiscal 2020 primarily related to impairment of goodwill and other intangible assets of $44.2 million, $20.8 million of non-cash stock compensation, inclusion of $18.5 million of six months of pro forma earnings of NorthStar, $20.8 million of restructuring and other exit charges and $1.9 million of inventory adjustments (fair value step up relating to the NorthStar transaction), $14.3 for insurance reimbursement for business interruption due to the Richmond, KY fire and other charges of $3.1 million. The $139.0 million adjustment to EBITDA in fiscal 2019 primarily related to the inclusion of $69.3 million of nine months of pro forma earnings of Alpha, $13.6 million for fees and expenses related to the Alpha transaction, $22.6 million of non-cash stock compensation, $23.2 million of non-cash restructuring and other exit charges and $10.3 million of inventory adjustments (including a fair value step up relating to the Alpha transaction of $7.2 million). (3) Debt includes finance lease obligations and letters of credit and is net of all U.S. cash and cash equivalents and all but $64 million of foreign cash and investments, as defined in the Amended Credit Facility. In fiscal 2020, the amounts deducted in the calculation of net debt were U.S. cash and cash equivalents and foreign cash investments of $262 million, and in fiscal 2019, were $200 million. (4) These ratios are included to show compliance with the leverage ratios set forth in our credit facilities. We show both our current ratios and the maximum ratio permitted or minimum ratio required under our Amended Credit Facility, for fiscal 2020 and fiscal 2019, respectively. (5) As defined in the Amended Credit Facility, interest expense used in the consolidated interest coverage ratio excludes non-cash interest of $1.7 million and $1.3 million for fiscal 2020 and fiscal 2019, respectively. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS See Note 1 to the Consolidated Financial Statements - Summary of Significant Accounting Policies for a description of certain recently issued accounting standards that were adopted or are pending adoption that could have a significant impact on our Consolidated Financial Statements or the Notes to the Consolidated Financial Statements. Related Party Transactions None. 50 Table of Contents Sequential Quarterly Information Fiscal 2020 and 2019 quarterly operating results, and the associated quarterly trends within each of those two fiscal years, are affected by the same economic and business conditions except for impairment charges relating to goodwill in Asia of $39.7 million and trademarks in EMEA of $4.5 million in the fourth quarter of fiscal 2020 (as discussed in Results of Operations - Fiscal 2020 Compared to Fiscal 2019 in Item 7), income tax benefit of $21.0 million in the second quarter of fiscal 2020, on account of the Swiss tax reform and a tax benefit of $13.5 million in the third quarter of fiscal 2019 as a result of the Tax Act. We have also included the operating results of NorthStar, in our third and fourth quarter results, for the period commencing on September 30, 2019 (the date of acquisition) and ending on March 31, 2020. NorthStar's sales for the third and fourth quarters of fiscal 2020 were $27.8 million and $26.7 million, respectively while net loss, for the same periods were $13.5 million and $0.5 million, respectively. We have also included the operating results of Alpha, in our third and fourth quarter results, for the period commencing on December 7, 2018 (the date of acquisition) and ending on March 31, 2019. The sales for the third and fourth quarters of fiscal 2019 were $26.8 million and $135.7 million, respectively. Alpha's net loss and net earnings, for the same periods were $4.4 million and $3.2 million, respectively. Fiscal 2020 Fiscal 2019 June 30, 2019 1st Qtr. Sept. 29, 2019 2nd Qtr. Dec. 29, 2019 3rd Qtr. March 31, 2020 4th Qtr. July 1, 2018 1st Qtr. Sept. 30, 2018 2nd Qtr. Dec. 30, 2018 3rd Qtr. March 31, 2019 4th Qtr. $ $ 780.2 578.7 $ 762.1 564.8 763.7 $ 574.6 781.8 $ 582.9 670.9 $ 505.1 660.5 $ 499.6 680.0 $ 511.7 (in millions, except share and per share amounts) Net sales Cost of goods sold Inventory step up to fair value relating to acquisitions and exit activities Gross profit Operating expenses Restructuring, exit and other charges Impairment of goodwill Impairment of indefinite- lived intangibles Legal proceedings (settlement income) charge Operating earnings Interest expense Other (income) expense, net Earnings before income taxes Income tax expense (benefit) Net earnings (loss) Net earnings attributable to noncontrolling interests Net earnings (loss) attributable to EnerSys stockholders Net earnings (loss) per common share attributable to EnerSys stockholders: Basic Diluted Weighted-average number of common shares outstanding: Basic Diluted — 201.5 130.8 2.4 — — — 68.3 10.9 (1.2) 58.6 10.0 48.6 — 197.3 132.3 6.3 — — — 58.7 10.1 0.2 48.4 (14.3) 62.7 — — 3.8 185.3 132.8 9.4 — — — 43.1 11.1 (0.6) 32.6 5.3 27.3 — (1.9) 200.8 133.8 2.7 39.7 4.5 — 20.1 11.6 1.1 7.4 8.9 (1.5) — 0.5 165.3 99.3 1.8 — — — 64.2 6.5 0.4 57.3 11.3 46.0 0.1 — 160.9 96.5 1.1 — — — 63.3 6.4 (1.3) 58.2 10.8 47.4 — 3.7 164.6 112.0 5.4 — — (2.8) 50.0 7.1 — 42.9 (5.7) 48.6 0.2 $ 48.6 $ 62.7 $ 27.3 $ (1.5) $ 45.9 $ 47.4 $ 48.4 $ $ $ 1.14 1.13 $ $ 1.48 1.47 $ $ 0.65 $ 0.64 $ (0.04) $ (0.04) $ 1.09 $ 1.08 $ 1.13 $ 1.11 $ 1.14 $ 1.12 $ 42,656,339 43,118,434 42,392,039 42,708,082 42,286,641 42,838,969 42,312,315 42,312,315 42,012,546 42,573,981 42,133,484 42,773,706 42,337,459 43,102,598 42,856,604 43,585,523 51 796.6 588.2 6.1 202.3 133.6 26.5 — — 7.2 35.0 10.9 0.4 23.7 5.2 18.5 — 18.5 0.43 0.42 Table of Contents Net Sales Quarterly net sales by segment were as follows: Fiscal 2020 Fiscal 2019 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. (in millions) $ $ 517.1 203.2 59.9 524.9 182.8 54.4 $ $ 503.1 202.3 58.3 $ 537.2 199.0 45.6 392.5 210.5 67.9 $ $ 388.6 204.0 67.9 402.0 217.8 60.2 $ $ 780.2 $ 762.1 $ 763.7 $ 781.8 $ 670.9 $ 660.5 $ 680.0 $ 507.8 228.3 60.5 796.6 66.3% 68.9% 65.9% 68.7% 58.5% 58.8% 59.1% 63.7% 26.0 7.7 24.0 7.1 26.5 7.6 25.5 5.8 31.4 10.1 30.9 10.3 32.0 8.9 28.7 7.6 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Net sales by segment: Americas EMEA Asia Total Segment net sales as % of total: Americas EMEA Asia Total Quarterly net sales by product line were as follows: Fiscal 2020 Fiscal 2019 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. (in millions) Net sales by product line: Reserve power Motive power Total $ $ 435.8 344.4 780.2 $ $ 426.8 335.3 762.1 $ $ 448.2 315.5 763.7 $ $ 428.8 353.0 781.8 $ $ 324.0 346.9 670.9 $ $ 313.4 347.1 660.5 $ $ 329.5 350.5 680.0 $ $ 449.3 347.3 796.6 Product line net sales as % of total: Reserve power Motive power Total 55.9% 44.1 56.0% 44.0 58.7% 41.3 54.9% 45.1 48.3% 51.7 47.4% 52.6 48.5% 51.5 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 56.4% 43.6 100.0% ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risks Our cash flows and earnings are subject to fluctuations resulting from changes in raw material costs, foreign currency exchange rates and interest rates. We manage our exposure to these market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments. Our policy does not allow speculation in derivative instruments for profit or execution of derivative instrument contracts for which there are no underlying exposures. We do not use financial instruments for trading purposes and are not a party to any leveraged derivatives. We monitor our underlying market risk exposures on an ongoing basis and believe that we can modify or adapt our hedging strategies as needed. Counterparty Risks We have entered into lead forward purchase contracts and foreign exchange forward and purchased option contracts to manage the risk associated with our exposures to fluctuations resulting from changes in raw material costs and foreign currency 52 Table of Contents exchange rates. The Company’s agreements are with creditworthy financial institutions. Those contracts that result in a liability position at March 31, 2020 are $3.2 million (pre-tax). Those contracts that result in an asset position at March 31, 2020 are $0.8 million (pre-tax) and the vast majority of these will settle within one year. The impact on the Company due to nonperformance by the counterparties has been evaluated and not deemed material. Interest Rate Risks We are exposed to changes in variable U.S. interest rates on borrowings under our credit agreements, as well as short term borrowings in our foreign subsidiaries. A 100 basis point increase in interest rates would have increased annual interest expense by approximately $5.6 million on the variable rate portions of our debt. Commodity Cost Risks—Lead Contracts We have a significant risk in our exposure to certain raw materials. Our largest single raw material cost is for lead, for which the cost remains volatile. In order to hedge against increases in our lead cost, we have entered into forward contracts with financial institutions to fix the price of lead. A vast majority of such contracts are for a period not extending beyond one year. We had the following contracts outstanding at the dates shown below: Date $’s Under Contract # Pounds Purchased Average Cost/Pound Approximate % of Lead Requirements (1) March 31, 2020 March 31, 2019 March 31, 2018 (in millions) $30.1 39.2 72.2 (in millions) 35.0 42.0 62.9 (1) Based on the fiscal year lead requirements for the periods then ended. $0.86 0.93 1.15 6% 7 14 We estimate that a 10% increase in our cost of lead would have increased our cost of goods sold by approximately $62 million for the fiscal year ended March 31, 2020. Foreign Currency Exchange Rate Risks We manufacture and assemble our products globally in the Americas, EMEA and Asia. Approximately 40% of our sales and related expenses are transacted in foreign currencies. Our sales revenue, production costs, profit margins and competitive position are affected by the strength of the currencies in countries where we manufacture or purchase goods relative to the strength of the currencies in countries where our products are sold. Additionally, as we report our financial statements in U.S. dollars, our financial results are affected by the strength of the currencies in countries where we have operations relative to the strength of the U.S. dollar. The principal foreign currencies in which we conduct business are the Euro, Swiss franc, British pound, Polish zloty, Chinese renminbi, Canadian dollar, Brazilian Real and Mexican peso. We quantify and monitor our global foreign currency exposures. Our largest foreign currency exposure is from the purchase and conversion of U.S. dollar based lead costs into local currencies in Europe. Additionally, we have currency exposures from intercompany financing and intercompany and third party trade transactions. On a selective basis, we enter into foreign currency forward contracts and purchase option contracts to reduce the impact from the volatility of currency movements; however, we cannot be certain that foreign currency fluctuations will not impact our operations in the future. We hedge approximately 10% - 15% of the nominal amount of our known foreign exchange transactional exposures. We primarily enter into foreign currency exchange contracts to reduce the earnings and cash flow impact of the variation of non-functional currency denominated receivables and payables. The vast majority of such contracts are for a period not extending beyond one year. Gains and losses resulting from hedging instruments offset the foreign exchange gains or losses on the underlying assets and liabilities being hedged. The maturities of the forward exchange contracts generally coincide with the settlement dates of the related transactions. Realized and unrealized gains and losses on these contracts are recognized in the same period as gains and losses on the hedged items. We also selectively hedge anticipated transactions that are subject to foreign exchange exposure, 53 Table of Contents primarily with foreign currency exchange contracts, which are designated as cash flow hedges in accordance with Topic 815 - Derivatives and Hedging. At March 31, 2020 and 2019, we estimate that an unfavorable 10% movement in the exchange rates would have adversely changed our hedge valuations by approximately $3.0 million and $1.9 million, respectively. 54 Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Contents EnerSys INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (on Consolidated Financial Statements and Schedule) Report of Independent Registered Public Accounting Firm (on Internal Control Over Financial Reporting) Audited Consolidated Financial Statements Consolidated Balance Sheets as of March 31, 2020 and 2019 Consolidated Statements of Income for the Fiscal Years Ended March 31, 2020, 2019 and 2018 Consolidated Statements of Comprehensive Income for the Fiscal Years Ended March 31, 2020, 2019 and 2018 Consolidated Statements of Changes in Equity for the Fiscal Years Ended March 31, 2020, 2019 and 2018 Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2020, 2019 and 2018 Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies 2. Revenue Recognition 3. Leases 4. Acquisitions 5. Inventories 6. Property, Plant, and Equipment 7. Goodwill and Other Intangible Assets 8. Prepaid and Other Current Assets 9. Accrued Expenses 10. Debt 11. Other Liabilities 12. Fair Value Measurements 13. Derivative Financial Instruments 14. Income Taxes 15. Retirement Plans 16. Stockholders’ Equity 17. Stock-Based Compensation 18. Earnings Per Share 19. Commitments, Contingencies and Litigation 20. Restructuring, Exit and Other Charges 21. Warranty 22. Other (Income) Expense, Net 23. Business Segments 24. Quarterly Financial Data (Unaudited) 25. Subsequent Events 55 Page 56 59 60 61 62 63 64 65 65 73 74 76 78 78 78 80 81 81 84 84 85 88 91 96 98 100 101 102 105 105 106 107 108 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of EnerSys Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of EnerSys (the Company) as of March 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the three years in the period ended March 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated June 1, 2020 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Description of the Matter Valuation of Goodwill and Indefinite-Lived Intangible Assets As reflected in the Company’s consolidated financial statements, at March 31, 2020, the Company’s goodwill balance was $663.9 million. As discussed in Note 7 to the consolidated financial statements, the Company recognized a $39.7 million goodwill impairment loss associated with its Asia reporting unit in fiscal 2020. In addition, the Company’s indefinite-lived intangible assets were $146.4 million as of March 31, 2020, and included $56.0 million of trademarks recognized in connection with the December 2018 acquisition of Alpha. As discussed in Note 1 to the consolidated financial statements, goodwill and other indefinite-lived intangible assets are tested for impairment at least annually. Auditing management’s annual quantitative goodwill and other indefinite-lived intangible assets impairment tests was complex and involved a high degree of subjectivity due to the significant estimation required in determining the fair value of the reporting units and the other indefinite-lived intangible assets. The fair value estimates related to the Company’s reporting units and other indefinite-lived intangible assets were sensitive to significant assumptions such as discount rates, revenue growth rates, operating margins, working capital rates, royalty rates, and terminal growth rates, which are forward-looking and could be affected by future economic and market conditions. 56 Table of Contents How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s quantitative goodwill and other indefinite-lived intangible assets annual impairment tests. For example, we tested controls over management’s review of the valuation models, the significant assumptions used to develop the estimate including forecasted revenue growth rates and profitability, and the completeness and accuracy of the data used in the valuations. To test the estimated fair value of the Company’s reporting units and other indefinite-lived intangible assets, we performed audit procedures that included, among others, assessing fair value methodologies and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used by the Company in its analyses. For example, we compared the significant assumptions used by management to current industry, market and economic trends, to historical results of the Company's business and other guideline companies within the same industry and to other relevant factors. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units and other indefinite-lived intangible assets that would result from changes in the assumptions. We also involved internal valuation specialists to assist in our evaluation of the significant assumptions and methodologies used by the Company. In addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company. Acquisition of NorthStar Description of the Matter As discussed in Note 4 to the Company’s consolidated financial statements, the Company completed the acquisition of N Holding, AB (“NorthStar”) on September 30, 2019 for $77.8 million in cash consideration and the assumption of $107.0 million in debt in a transaction that was accounted for as a business combination. The Company recognized the intangible assets acquired at their estimated fair values as of the date of the acquisition. These valuations required management to make significant judgments, estimates, and assumptions, especially with respect to the identifiable intangible assets, which were based in part upon historical experience and forward-looking information obtained from management of the acquired company. Auditing the Company's accounting for its acquisition of NorthStar was complex due to the significant estimation uncertainty in determining the fair value of identified intangible assets, which principally consisted of technology-related intangibles of $19.0 million, customer relationships of $9.0 million, and trademarks of $6.0 million. In particular, the income approach used to determine the fair value of acquired identifiable intangible assets was complex and required the use of assumptions that were inherently uncertain. The significant assumptions included discount rates and certain assumptions that form the basis of the forecasted results, including revenue growth rates, profit margins, royalty rates, and terminal growth rates. These significant assumptions are forward-looking and could be affected by future economic and market conditions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s accounting for the acquisition of NorthStar. For example, we tested controls over the completeness, recognition, and measurement of intangible assets acquired. We also tested controls over management’s review of the valuation models, the significant underlying assumptions used to develop the estimates and the completeness and accuracy of the data used in the valuations. To test the estimated fair value of the acquired technology-related intangibles, customer relationships and trademarks, we evaluated (1) whether all material intangible assets were properly identified, (2) the significant assumptions discussed above that were used in valuing these intangible assets and (3) the completeness and accuracy of the underlying data used by the Company in its analyses. Specifically, when evaluating the assumptions related to the revenue growth rates and projected profit margins, we compared the assumptions to the past performance of NorthStar in addition to current industry, market, and economic trends. We evaluated whether the assumptions used in developing the discount rate were consistent with the economic environment, market information, management’s plans, and the risk associated with the future cash flows. We also considered whether the assumptions were consistent with evidence obtained in other areas of the audit, such as assumptions used by the Company in the preparation of its budget and performed sensitivity analyses over the significant assumptions to evaluate the changes in the fair value of the identifiable intangible assets that would result from changes in the assumptions. In addition, we involved internal valuation specialists to assist in our evaluation of the significant assumptions and methodologies used by the Company. 57 Table of Contents Description of the Matter Income Taxes - Uncertain Tax Positions As discussed in Note 14 to the Company’s consolidated financial statements, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Also as disclosed in Note 14, over 75% of the Company’s consolidated earnings before taxes are generated in foreign jurisdictions. Uncertainty in a tax position taken or to be taken on a tax return may arise as tax laws are subject to interpretation. The Company must identify its uncertain tax positions and uses significant judgment in (1) determining whether a tax position’s technical merits are more-likely-than-not to be sustained and (2) measuring the amount of tax benefit that qualifies for recognition. As of March 31, 2020, the Company accrued liabilities of $7.8 million for uncertain tax positions. Auditing the completeness of the Company’s uncertain tax positions and the evaluation of the technical merits of those uncertain tax positions is complex given the scope of its international operations and the significant judgment required in evaluating the technical merits of the Company’s uncertain tax positions. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls over identifying uncertain tax positions and evaluating the technical merits of those positions. For example, we tested controls over the review of the Company’s foreign operations, including the tax positions taken by those operations, differences between statutory and effective tax rates, permanent differences impacting taxable income, and the monitoring of tax audits. We involved our tax professionals with subject matter expertise in the areas of international taxation and transfer pricing to assess the technical merits of the Company’s tax positions. This included assessing the Company’s correspondence with the relevant tax authorities and evaluating income tax opinions or other third-party advice obtained by the Company. We also used our knowledge of, and experience with, the application of international and local income tax laws by the relevant income tax authorities to evaluate the Company’s accounting for those tax positions. We analyzed the Company’s assumptions and data used to determine the amount of tax benefit to recognize and tested the accuracy of the calculations. We also evaluated the Company’s income tax disclosures included in Note 14 to the consolidated financial statements in relation to these matters. /s/ Ernst & Young LLP We have served as the Company's auditor since 1998. Philadelphia, Pennsylvania June 1, 2020 58 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of EnerSys Opinion on Internal Control over Financial Reporting We have audited EnerSys’ internal control over financial reporting as of March 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, EnerSys (the Company) maintained, in all material respects, effective internal control over financial reporting as of March 31, 2020, based on the COSO criteria. As indicated in the accompanying Management Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of NorthStar, which is included in the 2020 consolidated financial statements of the Company and constituted 6.7% of total assets as of March 31, 2020 and 1.8% of net sales for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of NorthStar. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated financial statements of the Company and our report dated June 1, 2020 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Philadelphia, Pennsylvania June 1, 2020 59 Table of Contents EnerSys Consolidated Balance Sheets (In Thousands, Except Share and Per Share Data) Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts (2020–$15,246; 2019–$10,813) Inventories Prepaid and other current assets Total current assets Property, plant, and equipment, net Goodwill Other intangible assets, net Deferred taxes Other assets Total assets Current liabilities: Short-term debt Current portion of finance leases Accounts payable Accrued expenses Total current liabilities Liabilities and Equity Long-term debt, net of unamortized debt issuance costs Finance leases Deferred taxes Other liabilities Total liabilities Commitments and contingencies Equity: Preferred Stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding at March 31, 2020 and at March 31, 2019 Common Stock, $0.01 par value per share, 135,000,000 shares authorized, 55,114,808 shares issued and 42,323,305 shares outstanding at March 31, 2020; 54,848,523 shares issued and 42,620,750 shares outstanding at March 31, 2019 Additional paid-in capital Treasury stock at cost, 12,791,503 shares held as of March 31, 2020 and 12,227,773 shares held as of March 31, 2019 Retained earnings Accumulated other comprehensive loss Contra equity - indemnification receivable Total EnerSys stockholders’ equity Nonredeemable noncontrolling interests Total equity Total liabilities and equity See accompanying notes. 60 March 31, 2020 2019 $ 326,979 $ 299,212 595,873 519,460 120,593 1,562,905 480,014 663,936 455,685 55,803 83,355 624,136 503,869 109,431 1,536,648 409,439 656,399 462,316 40,466 12,925 3,301,698 $ 3,118,193 46,544 $ 162 281,873 271,740 600,319 1,104,731 407 78,363 213,816 1,997,636 54,490 10,113 292,449 255,881 612,933 971,756 175 82,112 165,200 1,832,176 — — 551 529,100 (564,376) 1,556,980 (215,006) (6,724) 1,300,525 3,537 1,304,062 3,301,698 $ 548 512,696 (530,760) 1,450,325 (142,682) (7,840) 1,282,287 3,730 1,286,017 3,118,193 $ $ $ Table of Contents EnerSys Consolidated Statements of Income (In Thousands, Except Share and Per Share Data) Net sales Cost of goods sold Inventory step up to fair value relating to acquisitions and exit activities Gross profit Operating expenses Restructuring, exit and other charges Impairment of goodwill Impairment of indefinite-lived intangibles Legal proceedings charge, net Operating earnings Interest expense Other (income) expense, net Earnings before income taxes Income tax expense Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to EnerSys stockholders Net earnings per common share attributable to EnerSys stockholders: Basic Diluted Dividends per common share Weighted-average number of common shares outstanding: Basic Diluted Fiscal year ended March 31, 2020 3,087,868 $ 2019 2,808,017 $ $ 2,301,148 2,104,612 1,854 784,866 529,643 20,766 39,713 4,549 — 190,195 43,673 (415) 146,937 9,821 137,116 — 10,379 693,026 441,415 34,709 — — 4,437 212,465 30,868 (614) 182,211 21,584 160,627 388 $ $ $ $ 137,116 $ 160,239 $ 3.23 $ 3.20 $ 0.70 $ 3.79 $ 3.73 $ 0.70 $ 2018 2,581,891 1,920,030 3,457 658,404 382,077 5,481 — — — 270,846 25,001 7,519 238,326 118,493 119,833 239 119,594 2.81 2.77 0.70 42,411,834 42,335,023 42,612,036 42,896,775 43,008,952 43,119,856 See accompanying notes. 61 Table of Contents EnerSys Consolidated Statements of Comprehensive Income (In Thousands) Net earnings Other comprehensive (loss) income: Net unrealized (loss) gain on derivative instruments, net of tax Pension funded status adjustment, net of tax Foreign currency translation adjustment Total other comprehensive (loss) gain, net of tax Total comprehensive income Comprehensive (loss) gain attributable to noncontrolling interests Comprehensive income attributable to EnerSys stockholders Fiscal year ended March 31, 2020 2019 2018 $ 137,116 $ 160,627 $ 119,833 (5,793) (2,003) (64,721) (72,517) 64,599 (193) 3,295 1,712 (106,555) (101,548) 59,079 (195) $ 64,792 $ 59,274 $ (5,400) 3,052 113,739 111,391 231,224 523 230,701 See accompanying notes. 62 Table of Contents EnerSys Consolidated Statements of Changes in Equity Treasury Stock $ (439,800) Retained Earnings $ 1,231,444 Accumulated Other Comprehensive Income (Loss) Total EnerSys Stockholders’ Equity Contra- Equity Non- redeemable Non- Controlling Interests $ (152,824) $ — $ 1,103,456 $ 4,913 Total Equity $ 1,108,369 Additional Paid-in Capital $ 464,092 Common Stock 544 — (In Thousands, Except Per Share Data) Balance at March 31, 2017 Stock-based compensation Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net Purchase of common stock Other Net earnings Dividends ($0.70 per common share) Other comprehensive income: Pension funded status adjustment (net of tax benefit of $808) Net unrealized gain (loss) on derivative instruments (net of tax benefit of $2,071) Foreign currency translation adjustment Balance at March 31, 2018 Stock-based compensation Exercise of stock options Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net Purchase of common stock Reissuance of treasury stock, on LIFO basis, towards Alpha purchase consideration Reissuance of treasury stock towards employee stock purchase plan Contra equity - indemnification receivable for acquisition related tax liability Other Net earnings Dividends ($0.70 per common share) Dissolution of joint venture Other comprehensive income: Pension funded status adjustment (net of tax benefit of $120) Net unrealized gain (loss) on derivative instruments (net of tax expense of $1,006) Foreign currency translation adjustment Balance at March 31, 2019 Stock-based compensation Exercise of stock options Shares issued under equity awards (taxes paid related to net share settlement of equity awards), net Purchase of common stock Reissuance of treasury stock towards employee stock purchase plan Contra equity - adjustment to indemnification receivable for acquisition related tax liability Other Net earnings Dividends ($0.70 per common share) Other comprehensive income: Pension funded status adjustment (net of tax expense of $468) Net unrealized gain (loss) on derivative instruments (net of tax benefit of $1,793) Foreign currency translation adjustment Preferred Stock $ — $ — — — — — — — — — $ — $ — — — — — — — — — — — — — — $ — $ — — — — — — — — — — — — 2 — — — — — — — 546 — 2 — — — — — — — — — — — — 3 — — — — — — — — — — 548 — $ 477,288 $ (560,991) $ 1,320,549 $ 113,455 $ — $ 1,195,675 19,453 (6,533) — — — (121,191) (402) — 678 — — — — — — — — — — — — (137) 119,594 (30,352) — — — — — — — — — 3,052 (5,400) 113,455 (41,717) 22,608 9,046 (3,630) — — — — (56,436) 6,805 86,463 — — (141) — 720 — — — — 204 — — — — — — — — — — — — — — — — 160,239 (30,463) — — — — — — — — — — — — — — — 1,712 3,295 (105,972) 20,780 1,414 (6,393) — — — — (34,561) (73) — (80) — 756 — — — 945 — — — — — — — — — — — — — — 137,116 (30,461) — — — — — — — — — — — — (2,003) (5,793) (64,528) — — — — — — — — — — — — — — — (7,840) — — — — — — — — — — — — 1,116 — — — — — — 19,453 (6,531) (121,191) (539) 119,594 (29,674) 3,052 (5,400) 22,608 9,048 (3,630) (56,436) 93,268 204 (7,840) (141) 160,239 (29,743) — — — — 239 — — — 19,453 (6,531) (121,191) (539) 119,833 (29,674) 3,052 (5,400) 284 5,436 113,739 $ 1,201,111 $ — — — — — — — — 22,608 9,048 (3,630) (56,436) 93,268 204 (7,840) (141) 388 — 160,627 (29,743) — (1,511) (1,511) 1,712 3,295 — — 1,712 3,295 20,780 1,417 (6,393) (34,561) 872 1,116 (80) 137,116 (29,705) (2,003) (5,793) (583) $ 3,730 (106,555) $ 1,286,017 — — — — — — — — — — — 20,780 1,417 (6,393) (34,561) 872 1,116 (80) 137,116 (29,705) (2,003) (5,793) (193) $ 3,537 (64,721) $ 1,304,062 $ 512,696 $ (530,760) $ 1,450,325 $ (142,682) $ (7,840) (105,972) $ 1,282,287 Balance at March 31, 2020 $ — $ 551 $ 529,100 $ (564,376) $ 1,556,980 $ (215,006) $ (6,724) See accompanying notes. 63 (64,528) $ 1,300,525 Table of Contents EnerSys Consolidated Statements of Cash Flows (In Thousands) Cash flows from operating activities Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Write-off of assets relating to restructuring and other exit charges Impairment of goodwill Impairment of indefinite-lived intangibles and fixed assets Derivatives not designated in hedging relationships: Net losses (gains) Cash (settlements) proceeds Provision for doubtful accounts Deferred income taxes Non-cash interest expense Stock-based compensation (Gain) loss on disposal of property, plant, and equipment Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable Inventories Prepaid and other current assets Other assets Accounts payable Legal proceedings accrual Accrued expenses Other liabilities Net cash provided by operating activities Cash flows from investing activities Capital expenditures Purchase of businesses Proceeds from sale of facility Insurance proceeds relating to property, plant and equipment Proceeds from disposal of property, plant, and equipment Net cash used in investing activities Cash flows from financing activities Net (repayments) borrowings on short-term debt Proceeds from Amended 2017 Revolver borrowings Proceeds from 2027 Notes Proceeds from 2011 Revolver borrowings Repayments of Amended 2017 Revolver borrowings Repayments of 2011 Revolver borrowings Proceeds from Amended 2017 Term Loan Repayments of Amended 2017 Term Loan Repayments of 2011 Term Loan Debt issuance costs Finance lease obligations and other Option proceeds Payment of taxes related to net share settlement of equity awards Purchase of treasury stock Dividends paid to stockholders Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Fiscal year ended March 31, 2020 2019 2018 $ 137,116 $ 160,627 $ 119,833 87,344 10,986 39,713 4,549 178 (793) 4,821 (16,486) 1,673 20,780 (86) 26,486 (9,379) (17,508) 3,089 (33,490) — 7,055 (12,650) 253,398 (101,425) (176,548) 720 403 2,031 (274,819) (5,325) 386,700 300,000 — (517,700) — — (28,138) — (4,607) 995 1,417 (6,393) (34,561) (29,705) 62,683 (13,495) 27,767 299,212 63,348 26,308 — — 1,856 (1,802) 1,385 (6,456) 1,316 22,608 (258) 5,974 (46,614) (20,195) (7,611) 9,944 7,258 (4,937) (14,896) 197,855 (70,372) (654,614) — — 1,103 (723,883) 37,424 531,100 — — (427,600) — 299,105 (11,666) — (1,393) 368 9,048 (3,630) (56,436) (29,743) 346,577 (43,455) (222,906) 522,118 54,317 3,736 — — (180) 43 822 (20,313) 1,603 19,453 116 (32,242) (38,075) 14,470 (1,150) 21,266 — (26,614) 93,963 211,048 (69,832) (2,988) — — 463 (72,357) 214 379,750 — 147,050 (244,250) (312,050) 150,000 — (127,500) (2,677) (29) 958 (7,489) (121,191) (29,674) (166,888) 49,986 21,789 500,329 Cash and cash equivalents at end of year $ 326,979 $ 299,212 $ 522,118 Supplemental disclosures: Non-cash investing and financing activities: Common stock issued as partial consideration for Alpha acquisition $ — $ 93,268 $ — See accompanying notes. 64 Table of Contents 1. Summary of Significant Accounting Policies Description of Business Notes to Consolidated Financial Statements March 31, 2020 (In Thousands, Except Share and Per Share Data) EnerSys (the “Company”) and its predecessor companies have been manufacturers of industrial batteries for over 125 years. EnerSys is a global leader in stored energy solutions for industrial applications. The Company manufactures, markets and distributes industrial batteries and related products such as chargers, outdoor cabinet enclosures, power equipment and battery accessories, and provides related after-market and customer-support services for its products. With the Alpha acquisition, the Company is also a provider of highly integrated power solutions and services to broadband, telecom, renewable and industrial customers. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and any partially owned subsidiaries that the Company has the ability to control. Control generally equates to ownership percentage, whereby investments that are more than 50% owned are generally consolidated, investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method, and investments in affiliates of 20% or less are accounted for using the cost method. All intercompany transactions and balances have been eliminated in consolidation. Foreign Currency Translation Results of foreign operations of subsidiaries, whose functional currency is the local currency, are translated into U.S. dollars using average exchange rates during the periods. The assets and liabilities are translated into U.S. dollars using exchange rates as of the balance sheet dates. Gains or losses resulting from translating the foreign currency financial statements are accumulated as a separate component of accumulated other comprehensive income (“AOCI”) in EnerSys’ stockholders’ equity and noncontrolling interests. Transaction gains and losses resulting from exchange rate changes on transactions denominated in currencies other than the functional currency of the applicable subsidiary are included in the Consolidated Statements of Income, within “Other (income) expense, net”, in the year in which the change occurs. Revenue Recognition Prior to March 31, 2018, revenues were recognized under ASC 605, Revenue Recognition, when (i) persuasive evidence of an arrangement existed, (ii) delivery occurred or services were rendered, (iii) the price was fixed or determinable and (iv) collectibility was reasonably assured. Beginning April 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers. Concurrent with the adoption of the new standard, the Company updated its revenue recognition policy as follows: The Company determines revenue recognition by applying the following steps: 1. identify the contract with a customer; 2. identify the performance obligations in the contract; 3. determine the transaction price; 4. allocate the transaction price to the performance obligations; and 5. recognize revenue as the performance obligations are satisfied. The Company recognizes revenue when (or as) performance obligations are satisfied by transferring control of the performance obligation to a customer. Control of a performance obligation may transfer to the customer either at a point in time or over time depending on an evaluation of the specific facts and circumstances for each contract, including the terms and conditions of the contract as agreed with the customer, as well as the nature of the products or services to be provided. The Company's primary performance obligation to its customers is the delivery of finished goods and products, pursuant to 65 Table of Contents purchase orders. Control of the products sold typically transfers to its customers at the point in time when the goods are shipped as this is also when title generally passes to its customers under the terms and conditions of our customer arrangements. Each customer purchase order sets forth the transaction price for the products and services purchased under that arrangement. Some customer arrangements include variable consideration, such as volume rebates, some of which depend upon the customers meeting specified performance criteria, such as a purchasing level over a period of time. The Company uses judgment to estimate the most likely amount of variable consideration at each reporting date. When estimating variable consideration, the Company also applies judgment when considering the probability of whether a reversal of revenue could occur and only recognize revenue subject to this constraint. Service revenues related to the work performed for the Company’s customers by its maintenance technicians generally represent a separate and distinct performance obligation. Control for these services passes to the customer as the services are performed. The Company's typical payment terms are 30 days and sales arrangements do not contain any significant financing component for its customers. The Company uses historic customer product return data as a basis of estimation for customer returns and records the reduction of sales at the time revenue is recognized. Freight charges billed to customers are included in sales and the related shipping costs are included in cost of sales in the Consolidated Statements of Income. If shipping activities are performed after a customer obtains control of a product, the Company applies a policy election to account for shipping as an activity to fulfill the promise to transfer the product to the customer. The Company applies a policy election to exclude transaction taxes collected from customers from sales when the tax is both imposed on and concurrent with a specific revenue-producing transaction. The Company generally provides customers with a product warranty that provides assurance that the products meet standard specifications and are free of defects. The Company maintains a reserve for claims incurred under standard product warranty programs. Performance obligations related to service warranties are not material to the Consolidated Financial Statements. The Company pays sales commissions to its sales representatives, which may be considered as incremental costs to obtain a contract. However, since the recoverability period is less than one year, the Company has utilized the practical expedient to record these costs of obtaining a contract as an expense as they are incurred. Warranties The Company’s products are warranted for a period ranging from one to twenty years for reserve power batteries and for a period ranging from one to seven years for motive power batteries. The Company provides for estimated product warranty expenses when the related products are sold. The assessment of the adequacy of the reserve includes a review of open claims and historical experience. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less when purchased. Concentration of Credit Risk Financial instruments that subject the Company to potential concentration of credit risk consist principally of short-term cash investments and trade accounts receivable. The Company invests its cash with various financial institutions and in various investment instruments limiting the amount of credit exposure to any one financial institution or entity. The Company has bank deposits that exceed federally insured limits. In addition, certain cash investments may be made in U.S. and foreign government bonds, or other highly rated investments guaranteed by the U.S. or foreign governments. Concentration of credit risk with respect to trade receivables is limited by a large, diversified customer base and its geographic dispersion. The Company performs ongoing credit evaluations of its customers’ financial condition and requires collateral, such as letters of credit, in certain circumstances. 66 Table of Contents Accounts Receivable The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. The allowance is based on management’s estimate of uncollectible accounts, analysis of historical data and trends, as well as reviews of all relevant factors concerning the financial capability of its customers. Accounts receivable are considered to be past due based on when payments are received compared to the customer’s credit terms. Accounts are written off when management determines the account is uncollectible. Inventories Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. The cost of inventory consists of material, labor, and associated overhead. Property, Plant, and Equipment Property, plant, and equipment are recorded at cost and include expenditures that substantially increase the useful lives of the assets. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows: 10 to 33 years for buildings and improvements and 3 to 15 years for machinery and equipment. Maintenance and repairs are expensed as incurred. Interest on capital projects is capitalized during the construction period. Business Combinations The Company records an acquisition using the acquisition method of accounting and recognizes the assets acquired and liabilities assumed at their fair values as of the date of the acquisition. The excess of the purchase price over the net tangible and intangible assets is recorded to goodwill. The results of operations of the acquired business are included in the Company’s operating results from the date of acquisition. Goodwill and Other Intangible Assets Goodwill and indefinite-lived trademarks are tested for impairment at least annually and whenever events or circumstances occur indicating that a possible impairment may have been incurred. Goodwill is tested for impairment by determining the fair value of the Company’s reporting units. These estimated fair values are based on financial projections, certain cash flow measures, and market capitalization. The Company estimates the fair value of its reporting units using a weighting of fair values derived from both the income approach and the market approach. Under the income approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the business's ability to execute on the projected cash flows. The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and investment characteristics as the reporting unit. The weighting of the fair value derived from the market approach ranges from 0% to 50% depending on the level of comparability of these publicly-traded companies to the reporting unit. In order to assess the reasonableness of the calculated fair values of its reporting units, the Company also compares the sum of the reporting units' fair values to its market capitalization and calculates an implied control premium (the excess of the sum of the reporting units' fair values over the market capitalization). The Company evaluates the control premium by comparing it to control premiums of recent comparable market transactions. The Company assesses whether indefinite-lived intangible assets impairment exists using both the qualitative and quantitative assessments. The qualitative assessment involves determining whether events or circumstances exist that indicate it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount. If based on this qualitative assessment, the Company determines it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying amount or if the Company elects not to perform a qualitative assessment, a quantitative assessment is performed to determine whether an indefinite-lived intangible asset impairment exists. The Company tests the indefinite-lived intangible assets for impairment by comparing the carrying value to the fair value based on current revenue projections of 67 Table of Contents the related operations, under the relief from royalty method. Any excess of the carrying value over the amount of fair value is recognized as an impairment. Any such impairment is recognized in the reporting period in which it has been identified. Finite-lived assets such as customer relationships, technology, trademarks, licenses, and non-compete agreements are amortized on a straight-line basis over their estimated useful lives, generally over periods ranging from 3 to 20 years. The Company continually evaluates the reasonableness of the useful lives of these assets. Impairment of Long-Lived Assets The Company reviews the carrying values of its long-lived assets to be held and used for possible impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable, based on undiscounted estimated cash flows expected to result from its use and eventual disposition. The factors considered by the Company in performing this assessment include current operating results, trends and other economic factors. In assessing the recoverability of the carrying value of a long-lived asset, the Company must make assumptions regarding future cash flows and other factors. If these estimates or the related assumptions change in the future, the Company may be required to record an impairment loss for these assets. Environmental Expenditures The Company records a loss and establishes a reserve for environmental remediation liabilities when it is probable that an asset has been impaired or a liability exists and the amount of the liability can be reasonably estimated. Reasonable estimates involve judgments made by management after considering a broad range of information including notifications, demands or settlements that have been received from a regulatory authority or private party, estimates performed by independent engineering companies and outside counsel, available facts, existing and proposed technology, the identification of other potentially responsible parties, their ability to contribute and prior experience. These judgments are reviewed quarterly as more information is received and the amounts reserved are updated as necessary. However, the reserves may materially differ from ultimate actual liabilities if the loss contingency is difficult to estimate or if management’s judgments turn out to be inaccurate. If management believes no best estimate exists, the minimum probable loss is accrued. Derivative Financial Instruments The Company utilizes derivative instruments to mitigate volatility related to interest rates, lead prices and foreign currency exposures. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company recognizes derivatives as either assets or liabilities in the accompanying Consolidated Balance Sheets and measures those instruments at fair value. Changes in the fair value of those instruments are reported in AOCI if they qualify for hedge accounting or in earnings if they do not qualify for hedge accounting. Derivatives qualify for hedge accounting if they are designated as hedge instruments and if the hedge is highly effective in achieving offsetting changes in the fair value or cash flows of the asset or liability hedged. Effectiveness is measured on a regular basis using statistical analysis and by comparing the overall changes in the expected cash flows on the lead and foreign currency forward contracts with the changes in the expected all-in cash outflow required for the lead and foreign currency purchases. This analysis is performed on the initial purchases quarterly that cover the quantities hedged. Accordingly, gains and losses from changes in derivative fair value of effective hedges are deferred and reported in AOCI until the underlying transaction affects earnings. The Company has commodity, foreign exchange and interest rate hedging authorization from the Board of Directors and has established a hedging and risk management program that includes the management of market and counterparty risk. Key risk control activities designed to ensure compliance with the risk management program include, but are not limited to, credit review and approval, validation of transactions and market prices, verification of risk and transaction limits, portfolio stress tests, sensitivity analyses and frequent portfolio reporting, including open positions, determinations of fair value and other risk management metrics. Market risk is the potential loss the Company and its subsidiaries may incur as a result of price changes associated with a particular financial or commodity instrument. The Company utilizes forward contracts, options, and swaps as part of its risk management strategies, to minimize unanticipated fluctuations in earnings caused by changes in commodity prices, interest rates and / or foreign currency exchange rates. All derivatives are recognized on the balance sheet at their fair value, unless they qualify for the Normal Purchase Normal Sale exemption. Credit risk is the potential loss the Company may incur due to the counterparty’s non-performance. The Company is exposed to credit risk from interest rate, foreign currency and commodity derivatives with financial institutions. The Company has credit 68 Table of Contents policies to manage their credit risk, including the use of an established credit approval process, monitoring of the counterparty positions and the use of master netting agreements. The Company has elected to offset net derivative positions under master netting arrangements. The Company does not have any positions involving cash collateral (payables or receivables) under a master netting arrangement as of March 31, 2020 and 2019. The Company does not have any credit-related contingent features associated with its derivative instruments. Fair Value of Financial Instruments The Company groups its recurring, non-recurring and disclosure-only fair value measurements into the following levels when making fair value measurement disclosures: Level 1 Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3 Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The Company and its subsidiaries use, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value techniques and option-pricing models), and / or a cost approach (generally, replacement cost) to measure the fair value of an asset or liability. These valuation approaches incorporate inputs such as observable, independent market data and / or unobservable data that management believes are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk. Lead contracts, foreign currency contracts and interest rate contracts generally use an income approach to measure the fair value of these contracts, utilizing readily observable inputs, such as forward interest rates (e.g., London Interbank Offered Rate—“LIBOR”), forward foreign currency exchange rates (e.g., GBP and euro) and commodity prices (e.g., London Metals Exchange), as well as inputs that may not be observable, such as credit valuation adjustments. When observable inputs are used to measure all or most of the value of a contract, the contract is classified as Level 2. Over-the-counter (OTC) contracts are valued using quotes obtained from an exchange, binding and non-binding broker quotes. Furthermore, the Company obtains independent quotes from the market to validate the forward price curves. OTC contracts include forwards, swaps and options. To the extent possible, fair value measurements utilize various inputs that include quoted prices for similar contracts or market-corroborated inputs. When unobservable inputs are significant to the fair value measurement, the asset or liability is classified as Level 3. Additionally, Level 2 fair value measurements include adjustments for credit risk based on the Company’s own creditworthiness (for net liabilities) and its counterparties’ creditworthiness (for net assets). The Company assumes that observable market prices include sufficient adjustments for liquidity and modeling risks. The Company did not have any fair value measurements that transferred between Level 2 and Level 3 as well as Level 1 and Level 2. Income Taxes The Company accounts for income taxes using the asset and liability approach, which requires deferred tax assets and liabilities be recognized using enacted tax rates to measure the effect of temporary differences between book and tax bases on recorded assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets, if it is more likely than not some portion or all of the deferred tax assets will not be realized. The need to establish valuation allowances against deferred tax assets is assessed quarterly. The primary factors used to assess the likelihood of realization are expected reversals of taxable temporary timing differences, forecasts of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. The Company recognizes tax related interest and penalties in income tax expense in its Consolidated Statement of Income. 69 Table of Contents With respect to accounting for uncertainty in income taxes, the Company evaluates tax positions to determine whether the benefits of tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is greater than 50% likely of being realized upon ultimate settlement. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit. If the more likely than not threshold is not met in the period for which a tax position is taken, the Company may subsequently recognize the benefit of that tax position if the tax matter is effectively settled, the statute of limitations expires, or if the more likely than not threshold is met in a subsequent period. No additional income taxes have been provided for any undistributed foreign earnings or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. Regarding the GILTI tax rules, the Company is allowed to make an accounting policy choice of either (1) treating the taxes due on future US inclusions in taxable income as a current-period expense when incurred (“period cost method”) or (2) factoring amounts into a Company’s measurement of its deferred taxes (“deferred method”). The Company has elected the period cost method. Deferred Financing Fees Debt issuance costs that are incurred by the Company in connection with the issuance of debt are deferred and amortized to interest expense over the life of the underlying indebtedness, adjusted to reflect any early repayments and are shown as a deduction from long-term debt. Stock-Based Compensation Plans The Company measures the cost of employee services received in exchange for the award of an equity instrument based on the grant-date fair value of the award, with such cost recognized over the applicable vesting period. Market and Performance condition-based awards The Company grants market condition-based awards and performance condition-based awards. Beginning in fiscal 2017, the Company granted market condition-based awards (“TSR”). A participant may earn between 0% to 200% of the number of awards granted, based on the total shareholder return of the Company's common stock over a three-year period, relative to the shareholder return of a defined peer group. The awards cliff vest on the third anniversary of the date of grant and are settled in common stock on the first anniversary of the vesting date. The TSR is calculated by dividing the sixty or ninety calendar day average price at end of the period (as applicable) and the reinvested dividends thereon by such sixty or ninety calendar day average price at start of the period. The maximum number of awards earned is capped at 200% of the target award. Additionally, no payout will be awarded in the event that the TSR at the vesting date reflects less than a 25% return from the average price at the grant date. These share units are similar to the share units granted prior to fiscal 2016, except that under these awards, the targets are more difficult to achieve as they are tied to the TSR of a defined peer group. The fair value of these awards is estimated at the date of grant, using a Monte Carlo Simulation. The Company recognizes compensation expense using the straight-line method over the life of the market condition-based awards except for those issued to certain retirement-eligible participants, which are expensed on an accelerated basis. In fiscal 2019 and fiscal 2020, the Company granted performance condition-based awards (“PSU”). A participant may earn between 0% to 200% of the number of awards granted, based on the Company’s cumulative adjusted earnings per share performance over a three-year period. The vesting of these awards is contingent upon meeting or exceeding performance conditions. The awards cliff vest on the third anniversary of the date of grant and are settled in common stock on the first anniversary of the vesting date. The maximum number of awards earned is capped at 200% of the target award. Expense for the performance condition-based award is recorded when the achievement of the performance condition is considered probable of achievement and is recorded on a straight-line basis over the requisite service period. If such performance criteria are not met, no compensation cost is recognized, and any recognized compensation cost is reversed. The closing stock price on the date of grant, adjusted for a discount to reflect the illiquidity inherent in the PSUs, represents the grant-date fair value for these awards. 70 Table of Contents Restricted Stock Units The fair value of restricted stock units is based on the closing market price of the Company’s common stock on the date of grant. These awards generally vest, and are settled in common stock, at 25% per year, over a four-year period from the date of grant. The Company recognizes compensation expense using the straight-line method over the life of the restricted stock units. Stock Options The fair value of the options granted is estimated at the date of grant using the Black-Scholes option-pricing model utilizing assumptions based on historical data and current market data. The assumptions include expected term of the options, risk-free interest rate, expected volatility, and dividend yield. The expected term represents the expected amount of time that options granted are expected to be outstanding, based on historical and forecasted exercise behavior. The risk-free rate is based on the rate at the grant date of zero-coupon U.S. Treasury Notes with a term equal to the expected term of the option. Expected volatility is estimated using historical volatility rates based on historical weekly price changes over a term equal to the expected term of the options. The Company’s dividend yield is based on historical data. The Company recognizes compensation expense using the straight-line method over the vesting period of the options except for those issued to certain retirement-eligible participants, which are expensed on an accelerated basis. Forfeitures Forfeitures of share-based awards are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Earnings Per Share Basic earnings per common share (“EPS”) are computed by dividing net earnings attributable to EnerSys stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. At March 31, 2020, 2019 and 2018, the Company had outstanding stock options, restricted stock units, market and performance condition-based awards, which could potentially dilute basic earnings per share in the future. Segment Reporting A segment for reporting purposes is based on the financial performance measures that are regularly reviewed by the chief operating decision maker to assess segment performance and to make decisions about a public entity’s allocation of resources. Based on this guidance, the Company reports its segment results based upon the three geographical regions of operations. • • • Americas, which includes North and South America, with segment headquarters in Reading, Pennsylvania, U.S.A., EMEA, which includes Europe, the Middle East and Africa, with segment headquarters in Zug, Switzerland, and Asia, which includes Asia, Australia and Oceania, with segment headquarters in Singapore. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). This update requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. Effective April 1, 2019, the Company adopted the new standard under the modified retrospective approach, which resulted in no adjustment to the April 1, 2019 beginning Retained Earnings. There are optional practical expedients and policy elections made available to simplify the transition to the new standard. The Company has elected the following: • to adopt the optional transition method defined within ASU 2018-11 and not restate comparative prior periods but instead recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption; 71 Table of Contents • • • • the package of three practical expedients addressing whether a contract contains a lease, lease classification and initial direct costs; to combine lease and non-lease components as a single component for all asset classes; to use a portfolio approach to determine the incremental borrowing rate; and to apply the short-term lease exception to leases that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. Upon adoption, the Company recorded Right-of-use (“ROU”) assets and lease liabilities of approximately $84,878 and $87,248, respectively. In addition, capital lease assets and liabilities are now classified as finance lease right-of-use assets and liabilities. The difference between the operating lease assets and lease liabilities primarily relates to unamortized lease incentives and deferred rent recorded in accordance with the previous lease guidance. Apart from the aforementioned changes, the adoption of this standard did not have a significant impact on the Company's operating results, financial position or cash flows. The discount rates used to calculate the ROU assets and lease liabilities as of the effective date were based on the remaining lease terms as of the effective date. See Note 3, Leases for additional information. In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815)”: Targeted Improvements to Accounting for Hedging Activities, which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The Company adopted the standard effective April 1, 2019 and the adoption did not have any impact on the Company's operating results, financial position or cash flows. In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220)”. The new standard will allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (“Tax Act”). The amendments eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statements users. However, because the amendment only relates to the reclassification of the income tax effects of the Tax Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The Company adopted this standard effective April 1, 2019 with the election not to reclassify $478 of stranded tax effects, primarily related to the Company's pension plans, from accumulated other comprehensive income (“AOCI”) to retained earnings, as the amount was not material. Accounting Pronouncements Issued But Not Adopted as of March 31, 2020 In June 2016, the FASB, issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)”: Measurement of Credit Losses on Financial Instruments, which changes the recognition model for the impairment of financial instruments, including accounts receivable, loans and held-to-maturity debt securities, among others. The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In contrast to current guidance, which considers current information and events and utilizes a probable threshold, (an “incurred loss” model), ASU 2016–13 mandates an “expected loss” model. The expected loss model: (i) estimates the risk of loss even when risk is remote, (ii) estimates losses over the contractual life, (iii) considers past events, current conditions and reasonable supported forecasts and (iv) has no recognition threshold. The Company does not believe that the adoption will have a material impact on its consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740)”: Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently assessing the potential impact that the adoption will have on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”: Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients to ease the financial reporting burdens of the expected market transition from London Interbank Offered Rate (LIBOR) to an alternative reference rate such as Secured Overnight Financing Rate (SOFR). The guidance was effective upon issuance and generally can be applied through December 72 Table of Contents 31, 2022. The Company is currently assessing the potential impact that the adoption will have on its consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These estimates and assumptions take into account historical and forward looking factors that the Company believes are reasonable, including, but not limited to, the potential impacts arising from the coronavirus pandemic of 2019 (“COVID-19”) and public and private sector policies and initiatives aimed at reducing its transmission. As the extent and duration of the impacts of COVID-19 remain unclear, the Company’s estimates and assumptions may evolve as conditions change. Actual results could differ significantly from those estimates. Examples of significant estimates include the allowance for credit losses, the recoverability of property, plant and equipment, the incremental borrowing rate for lease liabilities, the recoverability of intangible assets and other long-lived assets, fair value measurements, including those related to financial instruments, goodwill and intangible assets, valuation allowances on tax assets, pension and postretirement benefit obligations, contingencies and the identification and valuation of assets acquired and liabilities assumed in connection with business combinations. 2. Revenue Recognition The Company's revenues by reportable segments are presented in Note 23. Service revenues for fiscal 2020 and fiscal 2019 amounted to $270,704 and $157,236, respectively. A small portion of the Company's customer arrangements oblige the Company to create customized products for its customers that require the bundling of both products and services into a single performance obligation because the individual products and services that are required to fulfill the customer requirements do not meet the definition for a distinct performance obligation. These customized products generally have no alternative use to the Company and the terms and conditions of these arrangements give the Company the enforceable right to payment for performance completed to date, including a reasonable profit margin. For these arrangements, control transfers over time and the Company measures progress towards completion by selecting the input or output method that best depicts the transfer of control of the underlying goods and services to the customer for each respective arrangement. Methods used by the Company to measure progress toward completion include labor hours, costs incurred and units of production. Revenues recognized over time for fiscal 2020 and fiscal 2019 amounted to $142,153 and $100,809, respectively. On March 31, 2020, the aggregate transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations was approximately $100,420, of which, the Company estimates that approximately $76,189 will be recognized as revenue in 2021, $18,767 in fiscal 2022, $5,403 in fiscal 2023, $61 in fiscal 2024 and $0 in fiscal 2025. Any payments that are received from a customer in advance, prior to the satisfaction of a related performance obligation and billings in excess of revenue recognized, are deferred and treated as a contract liability. Advance payments and billings in excess of revenue recognized are classified as current or non- current based on the timing of when recognition of revenue is expected. As of March 31, 2020, the current and non-current portion of contract liabilities were $17,342 and $8,356, respectively. As of March 31, 2019, the current and non-current portion of contract liabilities were $15,162 and $6,360, respectively. Revenues recognized during fiscal 2020 and fiscal 2019, that were included in the contract liability at the beginning of the year, amounted to $18,697 and $6,132, respectively. Amounts representing work completed and not billed to customers represent contract assets and were $39,048 and $38,778 as of March 31, 2020 and March 31, 2019, respectively. The Company uses historic customer product return data as a basis of estimation for customer returns and records the reduction of sales at the time revenue is recognized. At March 31, 2020, the right of return asset related to the value of inventory anticipated to be returned from customers was $4,198 and refund liability representing amounts estimated to be refunded to customers was $6,804. 73 Table of Contents 3. Leases The Company leases manufacturing facilities, distribution centers, office space, vehicles and other equipment under non-cancellable leases with initial terms typically ranging from 1 to 17 years. At contract inception, the Company reviews the terms of the arrangement to determine if the contract is or contains a lease. Guidance in Topic 842 is used to evaluate whether the contract has an identified asset; if the Company has the right to obtain substantially all economic benefits from the asset; and if it has the right to direct the use of the underlying asset. When determining if a contract has an identified asset, the Company considers both explicit and implicit assets, and whether the supplier has the right to substitute the asset. When determining if the Company has the right to obtain substantially all economic benefits from the asset, the Company considers the primary outputs of the identified asset throughout the period of use and determines if it receives greater than 90% of those benefits. When determining if it has the right to direct the use of an underlying asset, the Company considers if it has the right to direct how and for what purpose the asset is used throughout the period of use and if it controls the decision- making rights over the asset. Lease terms may include options to extend or terminate the lease. The Company exercises its judgment to determine the term of those leases when extension or termination options are present and include such options in the calculation of the lease term when it is reasonably certain that the Company will exercise those options. The Company has elected to include both lease and non-lease components in the determination of lease payments for all asset classes. Payments made to a lessor for items such as taxes, insurance, common area maintenance, or other costs commonly referred to as executory costs, are also included in lease payments if they are fixed. The fixed portion of these payments are included in the calculation of the lease liability, while any variable portion would be recognized as variable lease expenses, when incurred. Variable payments made to third parties for these, or similar costs, such as utilities, are not included in the calculation of lease payments. Both finance and operating leases are reflected as liabilities on the commencement date of the lease based on the present value of the lease payments to be made over the lease term. As most of the leases do not provide an implicit rate, the Company has exercised judgment in electing the incremental borrowing rate based on the information available when the lease commences to determine the present value of future payments. Right-of-use assets are valued at the initial measurement of the lease liability, plus any initial direct costs or rent prepayments and reduced by any lease incentives and any deferred lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease expense includes depreciation, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method. Short term leases with an initial term of 12 months or less are not presented on the balance sheet and expense is recognized as incurred. The current and non-current portion of operating lease liabilities are reflected in accrued expenses and other liabilities, respectively, on the consolidated balance sheets. The right-of use assets relating to operating and finance leases are reflected in other assets and property, plant and equipment, respectively, on the consolidated balance sheets. The following table presents lease assets and liabilities: Operating Leases: Right-of-use assets Operating lease current liabilities Operating lease non-current liabilities Finance Leases: Right-of-use assets Finance lease current liabilities Finance lease non-current liabilities 74 March 31, 2020 $ $ 70,045 21,128 51,215 540 162 407 Table of Contents The components of lease expense for the fiscal year ended March 31, 2020 were as follows: Operating Leases: Operating lease cost Variable lease cost Short term lease cost Finance Leases: Depreciation Interest expense Total Classification March 31, 2020 Operating expenses Operating expenses Operating expenses Operating expenses Interest expense $ $ $ 28,855 8,238 7,553 461 37 45,144 The following table presents the weighted average lease term and discount rates for leases as of March 31, 2020: Operating Leases: Weighted average remaining lease term (years) Weighted average discount rate Finance Leases: Weighted average remaining lease term (years) Weighted average discount rate 5 years 5.17% 3.5 years 4.92% The following table presents future payments due under leases reconciled to lease liabilities as of March 31, 2020: Year ended March 31, 2021 2022 2023 2024 2025 Thereafter Total undiscounted lease payments Present value discount Lease liability Finance Leases Operating Leases $ 192 $ 195 154 104 15 10 670 101 $ 569 $ 24,603 19,452 12,951 8,437 5,552 13,138 84,133 11,790 72,343 The following table presents supplemental disclosures of cash flow information related to leases for the fiscal year ended March 31, 2020: Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from finance leases Operating cash flows from operating leases Financing cash flows from finance leases Supplemental non-cash information on lease liabilities arising from right-of-use assets: Right-of-use assets obtained in exchange for new finance lease liabilities Right-of-use assets obtained in exchange for new operating lease liabilities March 31, 2020 $ $ 37 28,593 461 — 11,902 75 Table of Contents Disclosures related to periods prior to adoption of ASU 2016-02, Leases (Topic 842) The Company’s future minimum lease payments under operating leases that have noncancelable terms in excess of one year as of March 31, 2019 are as follows: 2020 2021 2022 2023 2024 Thereafter Total minimum lease payments $ $ 31,483 24,290 16,514 11,596 8,683 23,757 116,323 Rental expense was $40,261 and $38,146 for the fiscal years ended March 31, 2019 and 2018, respectively. Certain operating lease agreements contain renewal or purchase options and / or escalation clauses. 4. Acquisitions NorthStar On September 30, 2019, the Company completed the acquisition of N Holding, AB (“NorthStar”) for $77,777 in cash consideration and the assumption of $107,018 in debt, which was funded using existing cash and credit facilities. NorthStar, through its direct and indirect subsidiaries, manufactures and distributes thin plate pure lead (“TPPL”) batteries and battery enclosures. NorthStar has two large manufacturing facilities in Springfield, Missouri. The Company acquired tangible and intangible assets, including trademarks, technology, customer relationships and goodwill. Based on valuations performed, trademarks were valued at $6,000, technology at $19,000, customer relationships at $9,000, and goodwill was recorded at $73,788. The useful lives of technology were estimated at 10 years, customer relationships were estimated at 15 to 18 years and trademarks were estimated at 5 years. Goodwill deductible for tax purposes is $72,056. The results of the NorthStar acquisition have been included in the Company’s results of operations from the date of acquisition. Pro forma earnings and earnings per share computations have not been presented as this acquisition is not considered material. The North American and European results of operations of NorthStar have been included in the Company’s Americas segment and EMEA segment, respectively. Alpha On December 7, 2018, the Company completed the acquisition of all of the issued and outstanding common stock of Alpha Technologies Services, Inc. (“ATS”) and Alpha Technologies Ltd. (“ATL”), resulting in ATS and ATL becoming wholly-owned subsidiaries of the Company (the “Alpha share purchase”). Additionally, the Company acquired substantially all of the assets of Alpha Technologies Inc. and certain assets of Altair Advanced Industries, Inc. and other affiliates of ATS and ATL (all such sellers, together with ATS and ATL, “Alpha”), in each case in accordance with the terms and conditions of certain restructuring agreements (collectively, the “Alpha asset acquisition” and together with the Alpha share purchase, the “Alpha acquisition”). Based in Bellingham, Washington, Alpha is a global industry leader in comprehensive commercial-grade energy solutions for broadband, telecom, renewable, industrial and traffic customers around the world. The initial purchase consideration for the Alpha acquisition was $750,000, of which $650,000 was paid in cash and the balance was settled by issuing 1,177,630 shares of EnerSys common stock. These shares were issued out of the Company's treasury stock and were valued at $84.92 per share, which was based on the thirty-day volume weighted average stock price of the Company’s common stock at closing, in accordance with the purchase agreement. The 1,177,630 shares had a closing date fair value of $93,268, based upon the December 7, 2018, closing date spot rate of $79.20. The total purchase consideration, consisting of cash paid of $650,000, shares valued at $93,268 and an adjustment for working capital (due post - closing from seller of $766) was $742,502. The Company funded the cash portion of the Alpha acquisition with borrowings from the Amended Credit Facility as defined in Note 10. See Note 10 for additional information. The Alpha acquisition expanded the Company's footprint in broadband and telecom markets. The goodwill recognized in connection with this transaction reflects the benefits the Company expects to realize from being able to provide a one-stop, 76 Table of Contents fully integrated power solutions offering to its customers, as well as the benefit of cost synergies from alignment of the Alpha group within its own organizational structure. The results of operations of Alpha have been included in the Company’s Americas segment. For the period ended March 31, 2019, that EnerSys owned Alpha, the contribution of the acquisition to net sales was $162,454 and net loss of $1,252, excluding the effect of the transaction and integration costs, and interest expense on the debt to finance the acquisition. The Company finalized the measurement of all provisional amounts recognized for the Alpha business combination. The final amounts recognized in connection with the Alpha business combination are in the table below. Accounts receivable Inventories Other current assets Other intangible assets Property, plant and equipment Other assets Total assets acquired Accounts payable Accrued liabilities Deferred income taxes Other liabilities Total liabilities assumed Net assets acquired Purchase price: Cash paid for net assets acquired Fair value of shares issued for net assets acquired Working capital adjustment Total purchase consideration Less: Fair value of acquired identifiable assets and liabilities Goodwill The following table summarizes the fair value of Alpha's identifiable intangible assets and their respective lives: Trademarks Customer relationships Technology Total identifiable intangible assets Goodwill deductible for tax purposes is $33,926. Type Indefinite-lived Finite-lived Finite-lived Life in Years Indefinite 14 10 77 $ $ $ $ $ $ $ $ 115,467 84,297 6,822 332,000 20,987 9,005 568,578 35,803 41,918 54,941 12,642 145,304 423,274 650,000 93,268 (766) 742,502 423,274 319,228 Fair Value 56,000 221,000 55,000 332,000 Table of Contents The following unaudited summary information is presented on a consolidated pro forma basis as if the acquisition had occurred on April 1, 2017: Net sales Net earnings attributable to EnerSys stockholders Net earnings per share attributable to EnerSys stockholders - basic Net earnings per share attributable to EnerSys stockholders - assuming dilution Fiscal year ended March 31, 2019 March 31, 2018 $ 3,250,332 $ 181,915 4.19 4.12 3,124,527 126,965 2.90 2.87 The pro forma amounts include additional interest expense on the debt issued to finance the purchases, amortization and depreciation expense based on the estimated fair value and useful lives of intangible assets and plant assets, and related tax effects. The pro forma results are not necessarily indicative of the combined results had the Alpha acquisition been completed on April 1, 2017, nor are they indicative of future combined results. The pro forma results for the twelve months of fiscal 2019 and 2018 exclude pre-tax transaction costs of $12,883, as well as the pre-tax amortization of the acquisition date step up to fair value of inventories of $7,263 as they are considered non-recurring in nature. The remeasurement of Alpha's deferred taxes due to the Tax Act are being excluded in arriving at these pro forma results. The Company made no significant acquisitions in fiscal 2018. 5. Inventories Raw materials Work-in-process Finished goods Total 6. Property, Plant, and Equipment Property, plant, and equipment consist of: Land, buildings, and improvements Machinery and equipment Construction in progress Less accumulated depreciation Total March 31, 2020 2019 141,906 $ 91,520 286,034 519,460 $ 138,718 129,736 235,415 503,869 March 31, 2020 2019 291,271 $ 722,955 93,921 1,108,147 (628,133) 480,014 $ 268,006 683,955 54,278 1,006,239 (596,800) 409,439 $ $ $ $ Depreciation expense for the fiscal years ended March 31, 2020, 2019 and 2018 totaled $56,331, $48,618, and $45,874, respectively. Interest capitalized in connection with major capital expenditures amounted to $2,030, $1,581, and $1,082 for the fiscal years ended March 31, 2020, 2019 and 2018, respectively. 7. Goodwill and Other Intangible Assets Other Intangible Assets Information regarding the Company’s other intangible assets are as follows: 78 Table of Contents Gross Amount 2020 Accumulated Amortization Net Amount Gross Amount 2019 Accumulated Amortization Net Amount March 31, Indefinite-lived intangible assets: Trademarks $ 147,356 $ (953) $ 146,403 $ 152,484 $ (953) $ 151,531 Finite-lived intangible assets: Customer relationships Non-compete Technology Trademarks Licenses 292,155 3,021 96,047 8,008 1,196 (64,855) (2,817) (20,349) (1,928) (1,196) 227,300 286,664 204 75,698 6,080 — 3,025 77,779 2,003 1,477 (42,704) (2,807) (12,229) (1,236) (1,187) 243,960 218 65,550 767 290 Total $ 547,783 $ (92,098) $ 455,685 $ 523,432 $ (61,116) $ 462,316 The Company’s amortization expense related to finite-lived intangible assets was $31,013, $14,730, and $8,443, for the years ended March 31, 2020, 2019 and 2018, respectively. The expected amortization expense based on the finite-lived intangible assets as of March 31, 2020, is $32,659 in fiscal 2021, $32,420 in fiscal 2022, $31,122 in fiscal 2023, $27,725 in fiscal 2024 and $26,494 in fiscal 2025. Goodwill The changes in the carrying amount of goodwill by reportable segment are as follows: Balance at beginning of year Acquisitions during the year Measurement period adjustments Goodwill impairment charge Foreign currency translation adjustment Balance at end of year Balance at beginning of year Acquisitions during the year Foreign currency translation adjustment Balance at end of year Fiscal year ended March 31, 2020 Americas EMEA Asia Total $ 470,194 $ 143,269 $ 42,936 $ 72,056 (1,390) — (16,704) 1,732 — — (5,221) — — (39,713) (3,223) $ 524,156 $ 139,780 $ — $ 656,399 73,788 (1,390) (39,713) (25,148) 663,936 Fiscal year ended March 31, 2019 Americas EMEA Asia Total $ 151,255 $ 155,825 $ 45,725 $ 320,618 (1,679) — (12,556) — (2,789) $ 470,194 $ 143,269 $ 42,936 $ 352,805 320,618 (17,024) 656,399 79 Table of Contents A reconciliation of goodwill and accumulated goodwill impairment losses, by reportable segment, is as follows: Gross carrying value Accumulated goodwill impairment charges Net book value Gross carrying value Accumulated goodwill impairment charges Net book value March 31, 2020 Americas EMEA Asia Total 582,001 $ (57,845) 524,156 $ 145,933 $ (6,153) 139,780 $ 44,892 $ (44,892) — $ 772,826 (108,890) 663,936 March 31, 2019 Americas EMEA Asia Total 528,039 $ (57,845) 470,194 $ 149,422 $ (6,153) 143,269 $ 48,115 $ (5,179) 42,936 $ 725,576 (69,177) 656,399 $ $ $ $ Impairment of goodwill, finite and indefinite-lived intangibles Goodwill is tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances that indicate goodwill is more likely than not impaired. In the fourth quarter of fiscal 2020, the Company conducted its annual goodwill impairment test which indicated that the fair value of Asia was less than its carrying value. The Company recorded a non-cash charge of $39,713 related to goodwill impairment in Asia under the caption “Impairment of goodwill” in the Consolidated Statements of Income. The Company also recorded a non-cash charge of $4,549 related to impairment of indefinite-lived trademarks in EMEA under the caption “Impairment of indefinite-lived intangibles” in the Consolidated Statements of Income. The key factors contributing to the impairment in Asia was the increasing pressure on organic sales growth that the Company began to experience in fiscal 2019 due to a slowdown in telecom spending in the PRC amidst growing trade tensions between the U.S.A and China. The impact of these trade tensions on the Company's ability to capture market share in PRC accelerated in the second half of the fiscal year. Throughout fiscal 2020, there was a general slowdown in the Chinese economy which was further exacerbated by the outbreak of the COVID -19 pandemic, causing disruption to two of the Company's plants in China in the fourth quarter. Also contributing to the poor performance of the Asia region was a general softening of demand in Australia, that began in fiscal 2019 and continued throughout fiscal 2020. The Company monitored the performance of its Asia reporting unit for interim impairment indicators throughout fiscal 2020, but the emergence of COVID-19 in China in December 2019 coupled with the totality of economic headwinds in the region resulted in the recognition of a goodwill impairment loss in connection with our annual impairment test. During the fourth quarter of fiscal 2020, management completed its evaluation of key inputs used to estimate the fair value of its indefinite-lived trademarks and determined that an impairment charge relating to two of its trademarks in EMEA, that were acquired through legacy acquisitions was appropriate, as it plans to phase out these trademarks. The Company did not record any impairment relating to its goodwill and intangible assets during fiscal 2019 and 2018. The Company estimated tax-deductible goodwill to be approximately $120,708 and $58,699 as of March 31, 2020 and 2019, respectively. 8. Prepaid and Other Current Assets Prepaid and other current assets consist of the following: 80 Table of Contents Contract assets Prepaid non-income taxes Non-trade receivables Prepaid income taxes Other Total 9. Accrued Expenses Accrued expenses consist of the following: Payroll and benefits Accrued selling expenses Warranty Operating lease liabilities VAT and other non-income taxes Project related accruals Contract liabilities Freight Income taxes payable Legal proceedings Interest Tax Act - Transition Tax Restructuring Pension Other Total 10. Debt March 31, 2020 2019 $ 39,048 $ 23,069 19,380 13,062 26,034 $ 120,593 $ March 31, 2020 2019 $ 62,131 $ 43,292 27,766 21,128 14,209 — 17,342 14,222 304 — 11,180 6,172 3,325 1,350 49,319 $ 271,740 $ 38,778 22,490 10,823 9,608 27,732 109,431 54,285 35,394 21,646 — 17,125 16,301 15,162 14,423 9,234 7,258 7,248 5,290 2,952 1,207 48,356 255,881 The following summarizes the Company’s long-term debt as of March 31, 2020 and March 31, 2019: 2020 2019 Principal Unamortized Issuance Costs Principal Unamortized Issuance Costs $ $ $ 600,000 $ 513,224 1,113,224 $ 8,493 1,104,731 6,306 $ 2,187 8,493 $ $ 300,000 $ 677,315 977,315 $ 5,559 971,756 2,497 3,062 5,559 Senior Notes Amended Credit Facility, due 2022 Less: Unamortized issuance costs Long-term debt, net of unamortized issuance costs The Company's Senior Notes comprise the following: 4.375% Senior Notes due 2027 On December 11, 2019, the Company issued $300,000 in aggregate principal amount of its 4.375% Senior Notes due 2027 (the “2027 Notes”). Proceeds from this offering, net of debt issuance costs were $296,250 and were utilized to pay down the 81 Table of Contents Amended 2017 Revolver (defined below). The 2027 Notes bear interest at a rate of 4.375% per annum accruing from December 11, 2019. Interest is payable semiannually in arrears on June 15 and December 15 of each year, commencing on June 15, 2020. The 2027 Notes mature on December 15, 2027, unless earlier redeemed or repurchased in full. The 2027 Notes are unsecured and unsubordinated obligations of the Company. The 2027 Notes are fully and unconditionally guaranteed, jointly and severally, by certain of its subsidiaries that are guarantors under the Amended Credit Facility. These guarantees are unsecured and unsubordinated obligations of such guarantors. The Company may redeem, prior to September 15, 2027, all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus accrued and unpaid interest and a “make whole” premium to, but excluding, the redemption date. The Company may redeem, on or after September 15, 2027, all or a portion of the 2027 Notes at a price equal to 100% of the principal amount of the 2027 Notes, plus accrued and unpaid interest to, but excluding, the redemption date. If a change of control triggering event occurs, the Company will be required to offer to repurchase the 2027 Notes at a price in cash equal to 101% of the aggregate principal amount of the 2027 Notes, plus accrued and unpaid interest to, but excluding, the date of repurchase. The 2027 Notes rank pari passu with the 2023 Notes. 5.00% Senior Notes due 2023 The 5% Senior Notes due April 30, 2023 (the “2023 Notes”) bear interest at a rate of 5.00% per annum and have an original face value of $300,000. Interest is payable semiannually in arrears on April 30 and October 30 of each year and commenced on October 30, 2015. The 2023 Notes will mature on April 30, 2023, unless earlier redeemed or repurchased in full. The 2023 Notes are unsecured and unsubordinated obligations of the Company. The 2023 Notes are fully and unconditionally guaranteed, jointly and severally, by certain of its subsidiaries that are guarantors under the Amended Credit Facility. These guarantees are unsecured and unsubordinated obligations of such guarantors. 2017 Credit Facility and Subsequent Amendment In fiscal 2018, the Company entered into a credit facility (the “2017 Credit Facility”). The 2017 Credit Facility scheduled to mature on September 30, 2022, initially comprised a $600,000 senior secured revolving credit facility (“2017 Revolver”) and a $150,000 senior secured term loan (“2017 Term Loan”). The Company's previous credit facility (“2011 Credit Facility”) consisted of a $500,000 senior secured revolving credit facility (“2011 Revolver”) and a $150,000 senior secured incremental term loan (the “2011 Term Loan”) with a maturity date of September 30, 2018. On August 4, 2017, the outstanding balance on the 2011 Revolver and the 2011 Term Loan of $240,000 and $123,750, respectively, was repaid utilizing borrowings from the 2017 Credit Facility. The Company utilized the borrowings from the 2017 Credit Facility to repay its pre-existing credit facility. In fiscal 2019, the Company amended the 2017 Credit Facility (as amended, the “Amended Credit Facility”) to fund the Alpha acquisition. The Amended Credit Facility consists of $449,105 senior secured term loans (the “Amended 2017 Term Loan”), including a CAD 133,050 ($99,105) term loan and a $700,000 senior secured revolving credit facility (the “Amended 2017 Revolver”). The amendment resulted in an increase of the 2017 Term Loan and the 2017 Revolver by $299,105 and $100,000, respectively. As of March 31, 2020, the Company had $108,000 outstanding under the Amended 2017 Revolver and $405,224 under the Amended 2017 Term Loan. Subsequent to the amendment, the quarterly installments payable on the Amended 2017 Term Loan are $5,645 beginning December 31, 2018, $8,468 beginning December 31, 2019 and $11,290 beginning December 31, 2020 with a final payment of $320,000 on September 30, 2022. The Amended Credit Facility may be increased by an aggregate amount of $325,000 in revolving commitments and /or one or more new tranches of term loans, under certain conditions. Both the Amended 2017 Revolver and the Amended 2017 Term Loan bear interest, at the Company's option, at a rate per annum equal to either (i) the London Interbank Offered Rate (“LIBOR”) or Canadian Dollar Offered Rate (“CDOR”) plus (i) LIBOR plus between 1.25% and 2.00% (currently 1.50% and based on the Company's consolidated net leverage ratio) or (ii) the U.S. Dollar Base Rate (which equals, for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Effective Rate plus 0.50%, (b) Bank of America “Prime Rate” and (c) the Eurocurrency Base Rate plus 1%; provided that, if the Base Rate shall be less than zero, such rate shall be deemed zero) (iii) the CDOR Base Rate equal to the higher of (a) Bank of America “Prime Rate” and (b) average 30-day CDOR rate plus 0.50%. Obligations under the Amended Credit Facility are secured by substantially all of the Company’s existing and future acquired assets, including substantially all of the capital stock of the Company’s United States subsidiaries that are guarantors under the Amended Credit Facility and up to 65% of the capital stock of certain of the Company’s foreign subsidiaries that are owned by the Company’s United States subsidiaries. 82 Table of Contents The Amended Credit Facility allows for up to two temporary increases in the maximum leverage ratio from 3.50x to 4.00x for a four quarter period following an acquisition larger than $250,000. Effective December 7, 2018 through December 28, 2019, the maximum leverage ratio was increased to 4.00x. On December 29, 2019, the maximum leverage ratio returned to 3.50x. The current portion of the Amended 2017 Term Loan of $38,859 is classified as long-term debt as the Company expects to refinance the future quarterly payments with revolver borrowings under the Amended Credit Facility. Interest Rates on Long Term Debt The weighted average interest rate on the long term debt at March 31, 2020 and March 31, 2019, was 3.7% and 4.1%, respectively. Interest Paid The Company paid in cash, $38,632, $29,552 and $23,527, net of interest received, for interest during the fiscal years ended March 31, 2020, 2019 and 2018, respectively. Covenants The Company’s financing agreements contain various covenants, which, absent prepayment in full of the indebtedness and other obligations, or the receipt of waivers, would limit the Company’s ability to conduct certain specified business transactions including incurring debt, mergers, consolidations or similar transactions, buying or selling assets out of the ordinary course of business, engaging in sale and leaseback transactions, paying dividends and certain other actions. The Company is in compliance with all such covenants. Short-Term Debt As of March 31, 2020 and 2019, the Company had $46,544 and $54,490, respectively, of short-term borrowings. The weighted-average interest rate on these borrowings was approximately 3% and 4%, respectively, for fiscal years ended March 31, 2020 and 2019. Letters of Credit As of March 31, 2020 and 2019, the Company had $7,720 and $3,955, respectively, of standby letters of credit. Debt Issuance Costs In fiscal 2020, the Company capitalized $4,607 of debt issuance costs in connection with the issuance of the 2027 Notes. In fiscal 2019, the Company capitalized $1,393 in debt issuance costs and wrote off $483 of unamortized debt issuance costs related to the Amended Credit Facility. In fiscal 2018, the Company capitalized $2,677 in debt issuance costs and wrote off $301 of unamortized debt issuance costs related to the 2011 Credit Facility. Amortization expense, relating to debt issuance costs, included in interest expense was $1,673, $1,316, and $1,302 for the fiscal years ended March 31, 2020, 2019 and 2018, respectively. Debt issuance costs, net of accumulated amortization, totaled $8,493 and $5,559 as of March 31, 2020 and 2019, respectively. Available Lines of Credit As of March 31, 2020 and 2019, the Company had available and undrawn, under all its lines of credit, $693,640 and $546,960, respectively, including $105,946 and $87,685, respectively, of uncommitted lines of credit as of March 31, 2020 and March 31, 2019. 83 Table of Contents 11. Other Liabilities Other liabilities consist of the following: Tax Act - Transition Tax Operating lease liabilities Pension Warranty Liability for uncertain tax positions Contract liabilities Other Total 12. Fair Value of Financial Instruments Recurring Fair Value Measurements March 31, 2020 2019 $ 58,630 $ 51,215 40,496 35,759 8,080 8,356 11,280 55,489 — 39,924 32,922 20,240 6,360 10,265 $ 213,816 $ 165,200 The following tables represent the financial assets and (liabilities) measured at fair value on a recurring basis as of March 31, 2020 and March 31, 2019 and the basis for that measurement: Lead forward contracts Foreign currency forward contracts Total derivatives Lead forward contracts Foreign currency forward contracts Total derivatives Total Fair Value Measurement March 31, 2020 Quoted Price in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (2,433) $ 1 (2,432) $ — $ — — $ (2,433) $ 1 (2,432) $ Total Fair Value Measurement March 31, 2019 Quoted Price in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (902) $ (249) (1,151) $ — $ — — $ (902) $ (249) (1,151) $ — — — — — — $ $ $ $ The fair values of lead forward contracts are calculated using observable prices for lead as quoted on the London Metal Exchange (“LME”) and, therefore, were classified as Level 2 within the fair value hierarchy as described in Note 1, Summary of Significant Accounting Policies. The fair values for foreign currency forward contracts are based upon current quoted market prices and are classified as Level 2 based on the nature of the underlying market in which these derivatives are traded. Financial Instruments The fair values of the Company’s cash and cash equivalents approximate carrying value due to their short maturities. The fair value of the Company’s short-term debt and borrowings under the Amended Credit Facility (as defined in Note 10), approximate their respective carrying value, as they are variable rate debt and the terms are comparable to market terms as of the balance sheet dates and are classified as Level 2. 84 Table of Contents The fair value of the Company's 2027 Notes and 2023 Notes, (collectively, the “Senior Notes”) represent the trading values based upon quoted market prices and are classified as Level 2. The 2027 Notes were trading at approximately 94% on March 31, 2020. The 2023 Notes were trading at approximately 97% and 99% of face value on March 31, 2020 and March 31, 2019, respectively. The carrying amounts and estimated fair values of the Company’s derivatives and Senior Notes at March 31, 2020 and 2019 were as follows: Financial assets: Derivatives(1) Financial liabilities: Senior Notes (2) Derivatives(1) March 31, 2020 March 31, 2019 Carrying Amount Fair Value Carrying Amount Fair Value $ $ — $ — $ — $ — 600,000 $ 573,000 $ 300,000 $ 2,432 2,432 1,151 297,000 1,151 (1) Represents lead and foreign currency forward contracts (see Note 13 for asset and liability positions of the lead and foreign currency forward contracts at March 31, 2020 and March 31, 2019). (2) The fair value amount of the Senior Notes at March 31, 2020 and March 31, 2019 represent the trading value of the instruments. Non-recurring fair value measurements The valuation of goodwill and other intangible assets is based on information and assumptions available to the Company at the time of acquisition, using income and market approaches to determine fair value. The Company tests goodwill and other intangible assets annually for impairment, or when indications of potential impairment exist (see Note 1). Goodwill is tested for impairment by determining the fair value of the Company’s reporting units. The unobservable inputs used to measure the fair value of the reporting units include projected growth rates, profitability, and the risk factor premium added to the discount rate. The remeasurement of the reporting unit fair value is classified as a Level 3 fair value assessment due to the significance of unobservable inputs developed using company-specific information. The inputs used to measure the fair value of other intangible assets were largely unobservable and accordingly were also classified as Level 3. The fair value of trademarks is based on an estimate of the royalties saved that would have been paid to a third party had the Company not owned the trademark. The fair value of other indefinite-lived intangibles was estimated using the income approach, based on cash flow projections of revenue growth rates, taking into consideration industry and market conditions. In connection with the annual impairment testing conducted as of December 30, 2019 for fiscal 2020, indefinite-lived trademarks associated with the Company's EMEA reporting unit were recorded at fair value on a non-recurring basis at $1,700 and the remeasurement resulted in an impairment of $4,549. In determining the fair value of these assets, the Company used a royalty rate of 1.25% based on comparable market rates and used a discount rate of 13.0%. These impairment charges relating to goodwill and indefinite-lived trademarks are included under the captions Impairment of goodwill and Impairment of indefinite-lived intangibles in the Consolidated Statements of Income. On March 5, 2019, the Company committed to a plan to close its facility in Targovishte, Bulgaria, which produced diesel-electric submarine batteries. Management determined that the future demand for batteries of diesel-electric submarines was not sufficient given the number of competitors in the market. As a result, the Company concluded that the carrying value of the asset group is not recoverable and recorded a write-off of $14,958 in the fixed assets to their estimated fair value of $242, which was recognized in the fourth quarter of fiscal 2019. The valuation technique used to measure the fair value of fixed assets was a combination of the income and market approaches. The inputs used to measure the fair value of these fixed assets under the income approach were largely unobservable and accordingly were classified as Level 3. 85 Table of Contents 13. Derivative Financial Instruments The Company utilizes derivative instruments to reduce its exposure to fluctuations in commodity prices and foreign exchange rates, under established procedures and controls. The Company does not enter into derivative contracts for speculative purposes. The Company’s agreements are with creditworthy financial institutions and the Company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Derivatives in Cash Flow Hedging Relationships Lead Forward Contracts The Company enters into lead forward contracts to fix the price for a portion of its lead purchases. Management considers the lead forward contracts to be effective against changes in the cash flows of the underlying lead purchases. The vast majority of such contracts are for a period not extending beyond one year. At March 31, 2020 and 2019, the Company has hedged the price to purchase approximately 35.0 million pounds and 42.0 million pounds of lead, respectively, for a total purchase price of $30,078 and $39,218, respectively. Foreign Currency Forward Contracts The Company uses foreign currency forward contracts and options to hedge a portion of the Company’s foreign currency exposures for lead, as well as other foreign currency exposures so that gains and losses on these contracts offset changes in the underlying foreign currency denominated exposures. The vast majority of such contracts are for a period not extending beyond one year. As of March 31, 2020 and 2019, the Company had entered into a total of $34,008 and $42,318, respectively, of such contracts. In the coming twelve months, the Company anticipates that $7,635 of pretax loss relating to lead and foreign currency forward contracts will be reclassified from AOCI as part of cost of goods sold. This amount represents the current net unrealized impact of hedging lead and foreign exchange rates, which will change as market rates change in the future, and will ultimately be realized in the Consolidated Statements of Income as an offset to the corresponding actual changes in lead costs to be realized in connection with the variable lead cost and foreign exchange rates being hedged. Derivatives not Designated in Hedging Relationships Foreign Currency Forward Contracts The Company also enters into foreign currency forward contracts to economically hedge foreign currency fluctuations on intercompany loans and foreign currency denominated receivables and payables. These are not designated as hedging instruments and changes in fair value of these instruments are recorded directly in the Consolidated Statements of Income. As of March 31, 2020 and 2019, the Company had entered into a total of $42,232 and $22,201, respectively, of such contracts. Presented below in tabular form is information on the location and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Statements of Income: Fair Value of Derivative Instruments March 31, 2020 and 2019 Derivatives and Hedging Activities Designated as Cash Flow Hedges Derivatives and Hedging Activities Not Designated as Hedging Instruments March 31, 2020 March 31, 2019 March 31, 2020 March 31, 2019 Prepaid and other current assets: Foreign currency forward contracts Total assets Accrued expenses: Lead forward contracts Foreign currency forward contracts Total liabilities $ $ $ — — $ 902 $ 8 910 $ 375 375 $ — $ — — $ — — — 241 241 — — $ 2,433 $ 374 2,807 $ 86 Table of Contents The Effect of Derivative Instruments on the Consolidated Statements of Income For the fiscal year ended March 31, 2020 Derivatives Designated as Cash Flow Hedges Lead forward contracts Foreign currency forward contracts Total Derivatives Not Designated as Hedging Instruments Foreign currency forward contracts Total Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) (8,683) $ Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) Cost of goods sold $ Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion) (1,690) (54) Cost of goods sold $ (8,737) $ 539 (1,151) Location of Gain (Loss) Recognized in Income on Derivatives Pretax Gain (Loss) Other (income) expense, net $ $ (178) (178) The Effect of Derivative Instruments on the Consolidated Statements of Income For the fiscal year ended March 31, 2019 Derivatives Designated as Cash Flow Hedges Lead forward contracts Foreign currency forward contracts Total Derivatives Not Designated as Hedging Instruments Foreign currency forward contracts Total Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) (12,531) $ Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) Cost of goods sold $ Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion) (15,666) 1,551 Cost of goods sold $ (10,980) $ 385 (15,281) Location of Gain (Loss) Recognized in Income on Derivatives Pretax Gain (Loss) Other (income) expense, net $ $ (1,856) (1,856) The Effect of Derivative Instruments on the Consolidated Statements of Income For the fiscal year ended March 31, 2018 Derivatives Designated as Cash Flow Hedges Lead forward contracts Foreign currency forward contracts Total Derivatives Not Designated as Hedging Instruments Foreign currency forward contracts Total Pretax Gain (Loss) Recognized in AOCI on Derivative (Effective Portion) (805) $ Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion) Cost of goods sold $ Pretax Gain (Loss) Reclassified from AOCI into Income (Effective Portion) 5,860 $ (3,524) (4,329) Cost of goods sold $ (2,718) 3,142 Location of Gain (Loss) Recognized in Income on Derivatives Pretax Gain (Loss) Other (income) expense, net $ $ 180 180 87 Table of Contents 14. Income Taxes Current income tax expense Current: Federal State Foreign Total current income tax expense Deferred income tax (benefit) expense Federal State Foreign Total deferred income tax (benefit) expense Total income tax expense Earnings before income taxes consists of the following: United States Foreign Earnings before income taxes Fiscal year ended March 31, 2020 2019 2018 $ 9,185 $ 6,377 $ 2,561 14,561 26,307 5,489 741 (22,716) (16,486) $ 9,821 $ 5,027 16,636 28,040 (5,031) (669) (756) (6,456) 21,584 $ 115,315 3,461 20,030 138,806 (9,551) 789 (11,551) (20,313) 118,493 Fiscal year ended March 31, 2020 2019 2018 $ $ 36,193 $ 110,744 146,937 $ 53,339 $ 128,872 182,211 $ 74,440 163,886 238,326 Income taxes paid by the Company for the fiscal years ended March 31, 2020, 2019 and 2018 were $48,653, $53,866 and $28,044, respectively. U.S. Tax Cuts and Jobs Act of 2017 On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted into law. Among the significant changes resulting from the law, the Tax Act reduced the U.S. federal income tax rate from 35% to 21% effective January 1, 2018, and required companies to pay a one-time transition tax on unrepatriated cumulative non-U.S. earnings of foreign subsidiaries and created new taxes on certain foreign sourced earnings. The U.S. federal statutory tax rate for fiscal 2020 and 2019 was 21.0%. In fiscal 2018, the Company recorded a provisional amount for the Transition Tax liability, resulting in an increase in income tax expense of $97,500. In fiscal 2019, the Company completed its accounting for the tax effects of enactment of the Tax Act. The Company recognized an income tax benefit of $13,483, net of uncertain tax positions, resulting from a decrease in the mandatory one-time transition tax on unrepatriated cumulative non-U.S. earnings of the Company's foreign businesses. The Company made the election on the 2017 Federal Income Tax Return to pay the one-time Tax Act liability over an eight-year period without interest, as allowed under the tax enactment. 88 Table of Contents The following table sets forth the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities: Deferred tax assets: Accounts receivable Inventories Net operating loss carryforwards Accrued expenses Capitalized research and development costs Other assets Gross deferred tax assets Less valuation allowance Total deferred tax assets Deferred tax liabilities: Property, plant and equipment Intangible assets Other liabilities Total deferred tax liabilities Net deferred tax liabilities March 31, 2020 2019 $ 1,110 $ 5,010 44,340 26,113 — 19,793 96,366 (20,951) 75,415 30,229 66,529 1,217 97,975 $ (22,560) $ 1,297 4,081 48,423 21,574 7,061 17,656 100,092 (17,519) 82,573 25,656 96,826 1,737 124,219 (41,646) The Company has approximately $1,258 in United States federal net operating loss carryforwards, all of which are limited by Section 382 of the Internal Revenue Code, with expirations between 2023 and 2027. The Company has approximately $158,252 of foreign net operating loss carryforwards, of which $112,405 may be carried forward indefinitely and $45,847 expire between fiscal 2021 and fiscal 2035. In addition, the Company also has approximately $34,473 of state net operating loss carryforwards with expirations between fiscal 2021 and fiscal 2040. As of March 31, 2020 and 2019, the federal valuation allowance was $0 and $1,027, respectively. The decrease of $1,027 is due finalized purchase accounting related to the prior year acquisition of Alpha. As of March 31, 2020 and 2019, the valuation allowance associated with the state tax jurisdictions was $896 and $898, respectively. As of March 31, 2020 and 2019, the valuation allowance associated with certain foreign tax jurisdictions was $20,055 and $15,594, respectively. Of the net increase of $4,461, $4,351 was recorded as an increase to tax expense primarily related to deferred tax assets attributable to Swiss tax reform generated in the current year that the Company believes are not more likely than not to be realized. The remaining increase of $110 is primarily related to foreign currency translation adjustments. 89 Table of Contents A reconciliation of income taxes at the statutory rate (21.0% for fiscal 2020, 21.0% for fiscal 2019 and 31.55% for fiscal 2018) to the income tax provision is as follows: United States statutory income tax expense Increase (decrease) resulting from: Impact of Tax Act State income taxes, net of federal effect Nondeductible expenses, domestic manufacturing deduction (fiscal 2018) and other Legal proceedings charge - European Competition Investigations Net effect of GILTI, FDII, BEAT Goodwill impairment - See Note 7 Effect of foreign operations Valuation allowance Switzerland Tax Reform Research and Development Credit Income tax expense Fiscal year ended March 31, 2020 2019 2018 $ 30,857 $ 38,264 $ 75,196 — 2,764 5,953 — 3,025 10,714 (17,605) 4,349 (26,846) (3,390) (13,483) 3,285 4,378 2,405 2,320 — (16,763) 2,879 — (1,701) $ 9,821 $ 21,584 $ 83,400 3,146 2,008 — — — (35,048) (9,279) — (930) 118,493 The effective income tax rates for the fiscal years ended March 31, 2020, 2019 and 2018 were 6.7%, 11.9% and 49.7%, respectively. The effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which the Company operates and the amount of its consolidated income before taxes. The rate decrease in fiscal 2020 compared to fiscal 2019 is primarily due to changes in mix of earnings among tax jurisdictions, Swiss tax reform, and items related to the Tax Act in fiscal 2019. The rate decrease in fiscal 2019 compared to fiscal 2018 is primarily due to the impact of the Tax Act, partially offset by increases for additional tax valuation allowances related to certain of our foreign subsidiaries, increases due to non-deductible legal proceedings charge related to the European competition investigation, and changes in the mix of earnings among tax jurisdictions in fiscal 2019. On May 19, 2019, a public referendum held in Switzerland approved the Federal Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF) as adopted by the Swiss Federal Parliament on September 28, 2018. The Swiss tax reform measures are effective January 1, 2020. Certain provisions of the TRAF were enacted during the second quarter of fiscal 2020. Significant changes in the tax reform include the abolishment of preferential tax regimes for holding companies, domicile companies and mixed companies at the cantonal level. The transitional provisions of the TRAF allow companies to elect tax basis adjustments to fair value, which is used for tax depreciation and amortization purposes resulting in a deduction over the transitional period. The Company recorded a net deferred tax asset of $22,500 during fiscal 2020, related to the amortizable goodwill. In fiscal 2020, the foreign effective income tax rate on foreign pre-tax income of $110,744 was (7.4)%. In fiscal 2019, the foreign effective income tax rate on foreign pre-tax income of $128,872 was 12.3% and in fiscal 2018, the foreign effective income tax rate on foreign pre-tax income of $163,886 was 5.2%. The rate decrease in fiscal 2020 compared to fiscal 2019 is primarily due to Swiss tax reform and changes in the mix of earnings among tax jurisdictions. The rate increase in fiscal 2019 compared to fiscal 2018 is primarily due to additional tax valuation allowances related to certain of the Company’s foreign subsidiaries, increases due to non-deductible legal proceedings charge related to the European competition investigation, and changes in the mix of earnings among tax jurisdictions in fiscal 2019. Income from the Company's Swiss subsidiary comprised a substantial portion of its overall foreign mix of income for the fiscal years ended March 31, 2020, 2019 and 2018 and was taxed, excluding the impact from the Swiss tax reform, at approximately 3%, 4% and 8%, respectively. The Company has approximately $1,376,000 and $1,167,000 of undistributed earnings of foreign subsidiaries for fiscal years 2020 and 2019, respectively. Since the Company’s undistributed foreign earnings and outside basis differences inherent in foreign entities continue to be indefinitely reinvested in foreign operations, no additional income taxes have been provided. 90 Table of Contents Uncertain Tax Positions The following table summarizes activity of the total amounts of unrecognized tax benefits: Balance at beginning of year Increases related to current year tax positions Increases related to the Alpha acquisition Increases related to prior year tax positions Decreases related to prior tax positions Decreases related to prior year tax positions settled Lapse of statute of limitations Balance at end of year Fiscal year ended March 31, 2020 2019 2018 $ 20,165 $ 1,568 $ 598 769 — (11,463) — (2,274) 129 7,840 11,463 (544) (93) (198) $ 7,795 $ 20,165 $ 1,450 397 — 11 — (1) (289) 1,568 The decrease of prior year tax positions during fiscal 2020, are related to items included in the Tax Act. In connection with the Alpha acquisition, the Company finalized purchase accounting during the fiscal year and recorded an unrecognized tax benefit of $769, as well as an indemnification asset of $769 representing the Seller's obligation to indemnify the Company for the outcome of potential contingent liabilities relating to uncertain tax positions. All of the balance of unrecognized tax benefits at March 31, 2020, if recognized, would be included in the Company’s Consolidated Statements of Income and have a favorable impact on both the Company’s net earnings and effective tax rate. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2009. While the net effect on total unrecognized tax benefits cannot be reasonably estimated, approximately $1,250 is expected to reverse in fiscal 2021 due to expiration of various statute of limitations. The Company recognizes tax related interest and penalties in income tax expense in its Consolidated Statements of Income. As of March 31, 2020 and 2019, the Company had an accrual of $285 and $75, respectively, for interest and penalties. 15. Retirement Plans Defined Benefit Plans The Company sponsors several retirement and pension plans covering eligible salaried and hourly employees. The Company uses a measurement date of March 31 for its pension plans. Net periodic pension cost for fiscal 2020, 2019 and 2018, includes the following components: United States Plans Fiscal year ended March 31, International Plans Fiscal year ended March 31, Service cost Interest cost Expected return on plan assets Amortization and deferral Net periodic benefit cost 2020 2019 2018 2020 2019 2018 $ — $ — $ — $ 906 $ 997 $ 616 (448) 188 631 (514) 184 658 (496) 303 1,485 (2,136) 910 1,831 (2,151) 1,520 $ 356 $ 301 $ 465 $ 1,165 $ 2,197 $ 1,025 1,795 (2,264) 1,468 2,024 91 Table of Contents The following table sets forth a reconciliation of the related benefit obligation, plan assets, and accrued benefit costs related to the pension benefits provided by the Company for those employees covered by defined benefit plans: United States Plans March 31, International Plans March 31, 2020 2019 2020 2019 Change in projected benefit obligation Benefit obligation at the beginning of the period $ 16,647 $ 16,713 $ 75,038 $ Service cost Interest cost Benefits paid, inclusive of plan expenses Plan curtailments and settlements Actuarial losses (gains) Foreign currency translation adjustment Benefit obligation at the end of the period — 616 (1,132) — 1,980 — — 631 (1,061) — 364 — 906 1,485 (2,262) (678) (3,024) (2,863) $ 18,111 $ 16,647 $ 68,602 $ Change in plan assets Fair value of plan assets at the beginning of the period $ 13,763 $ 13,928 $ 36,791 $ Actual return on plan assets Employer contributions Benefits paid, inclusive of plan expenses Plan curtailments and settlements Foreign currency translation adjustment Fair value of plan assets at the end of the period Funded status deficit (649) 54 (1,132) — — 12,036 $ (6,075) $ 758 138 (1,061) — — 13,763 $ (2,884) $ (1,605) 2,098 (2,262) (482) (1,709) 32,831 $ (35,771) $ $ $ 82,033 997 1,831 (1,758) (1,130) (261) (6,674) 75,038 38,757 2,109 1,670 (1,758) (1,130) (2,857) 36,791 (38,247) Amounts recognized in the Consolidated Balance Sheets consist of: Accrued expenses Other liabilities Total liabilities 92 March 31, 2020 2019 (1,350) (40,496) $ (41,846) $ (1,207) (39,924) (41,131) Table of Contents The following table represents pension components (before tax) and related changes (before tax) recognized in AOCI for the Company’s pension plans for the years ended March 31, 2020, 2019 and 2018: Amounts recorded in AOCI before taxes: Prior service cost Net loss Net amount recognized Changes in plan assets and benefit obligations: New prior service cost Net loss (gain) arising during the year Effect of exchange rates on amounts included in AOCI Amounts recognized as a component of net periodic benefit costs: Amortization of prior service cost Amortization or settlement recognition of net loss Total recognized in other comprehensive (income) loss Fiscal year ended March 31, 2020 2019 2018 (258) $ (25,796) (26,054) $ (307) $ (24,051) (24,358) $ (385) (27,762) (28,147) Fiscal year ended March 31, 2020 2019 2018 — $ 3,793 (804) (43) (1,250) 1,696 $ — $ (99) (1,984) (45) (1,659) (3,787) $ — (1,953) 3,019 (46) (1,725) (705) $ $ $ $ The amounts included in AOCI as of March 31, 2020 that are expected to be recognized as components of net periodic pension cost (before tax) during the next twelve months are as follows: Prior service cost Net loss Net amount expected to be recognized $ $ (43) (1,462) (1,505) The accumulated benefit obligation related to all defined benefit pension plans and information related to unfunded and underfunded defined benefit pension plans at the end of each year are as follows: All defined benefit plans: Accumulated benefit obligation Unfunded defined benefit plans: Projected benefit obligation Accumulated benefit obligation United States Plans International Plans March 31, March 31, 2020 2019 2020 2019 $ 18,110 $ 16,647 $ 65,337 $ 71,350 $ — $ — — $ 30,773 $ — 28,926 32,320 30,328 Defined benefit plans with a projected benefit obligation in excess of the fair value of plan assets: Projected benefit obligation Fair value of plan assets $ 18,110 $ 16,647 $ 68,603 $ 12,036 13,763 32,831 Defined benefit plans with an accumulated benefit obligation in excess of the fair value of plan assets: Projected benefit obligation Accumulated benefit obligation Fair value of plan assets $ 18,110 $ 16,647 $ 68,603 $ 18,110 12,036 16,647 13,763 65,337 32,831 75,038 36,791 74,235 70,654 36,077 93 Table of Contents Assumptions Significant assumptions used to determine the net periodic benefit cost for the U.S. and International plans were as follows: United States Plans Fiscal year ended March 31, International Plans Fiscal year ended March 31, 2020 2019 2018 3.8% 6.3 N/A 3.9% 6.3 N/A 4.1% 6.8 N/A 2020 1.0-2.7% 4.3-6.0 2.0-4.0 2019 1.4-3.3% 4.1-6.0 1.8-4.0 2018 1.5-3.5% 3.6-6.3 1.5-4.0 Discount rate Expected return on plan assets Rate of compensation increase N/A = not applicable Significant assumptions used to determine the projected benefit obligations for the U.S. and International plans were as follows: Discount rate Rate of compensation increase N/A = not applicable United States Plans International Plans March 31, March 31, 2020 2019 3.0% N/A 3.8% N/A 2020 1.3-2.3% 2.0-3.5 2019 1.0-2.7% 2.0-4.0 The United States plans do not include compensation in the formula for determining the pension benefit as it is based solely on years of service. The expected long-term rate of return for the Company’s pension plan assets is based upon the target asset allocation and is determined using forward looking assumptions in the context of historical returns and volatilities for each asset class, as well as correlations among asset classes. The Company evaluates the rate of return assumptions for each of its plans on an annual basis. Pension Plan Investment Strategy The Company’s investment policy emphasizes a balanced approach to investing in securities of high quality and ready marketability. Investment flexibility is encouraged so as not to exclude opportunities available through a diversified investment strategy. Equity investments are maintained within a target range of 40% - 75% of the total portfolio market value for the U.S. plans and with a target of approximately 65% for international plans. Investments in debt securities include issues of various maturities, and the average quality rating of bonds should be investment grade with a minimum quality rating of “B” at the time of purchase. The Company periodically reviews the asset allocation of its portfolio. The proportion committed to equities, debt securities and cash and cash equivalents is a function of the values available in each category and risk considerations. The plan’s overall return will be compared to and is expected to meet or exceed established benchmark funds and returns over a three to five year period. The objectives of the Company’s investment strategies are: (a) the achievement of a reasonable long-term rate of total return consistent with an emphasis on preservation of capital and purchasing power, (b) stability of annual returns through a portfolio that reflects a conservative mix of risk versus return, and (c) reflective of the Company’s willingness to forgo significantly above-average rewards in order to minimize above-average risks. These objectives may not be met each year but should be attained over a reasonable period of time. 94 Table of Contents The following table represents the Company's pension plan investments measured at fair value as of March 31, 2020 and 2019 and the basis for that measurement: March 31, 2020 United States Plans International Plans Total Fair Value Measurement Quoted Price In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Measurement Quoted Price In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) $ 1,221 $ 1,221 $ — $ — $ 141 $ 141 $ — $ 6,860 — 3,955 6,860 — 3,955 $ 12,036 $ 12,036 $ — — — — $ — — — — $ — 20,059 12,631 32,831 $ — — — 141 $ — 20,059 12,631 32,690 $ — — — — — March 31, 2019 United States Plans International Plans Total Fair Value Measurement Quoted Price In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair Value Measurement Quoted Price In Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) $ 1,080 $ 1,080 $ — $ — $ 83 $ 83 $ — $ 8,275 — 4,408 8,275 — 4,408 $ 13,763 $ 13,763 $ — — — — $ — — — — $ — 23,875 12,833 36,791 $ — — — 83 $ — 23,875 12,833 36,708 $ — — — — — Asset category: Cash and cash equivalents Equity securities US(a) International(b) Fixed income(c) Total Asset category: Cash and cash equivalents Equity securities US(a) International(b) Fixed income(c) Total The fair values presented above were determined based on valuation techniques to measure fair value as discussed in Note 1. (a) US equities include companies that are well diversified by industry sector and equity style (i.e., growth and value strategies). Active and passive management strategies are employed. Investments are primarily in large capitalization stocks and, to a lesser extent, mid- and small-cap stocks. (b) International equities are invested in companies that are traded on exchanges outside the U.S. and are well diversified by industry sector, country and equity style. Active and passive strategies are employed. The vast majority of the investments are made in companies in developed markets with a small percentage in emerging markets. (c) Fixed income consists primarily of investment grade bonds from diversified industries. The Company expects to make cash contributions of approximately $2,398 to its pension plans in fiscal 2021. Estimated future benefit payments under the Company’s pension plans are as follows: 2021 2022 2023 2024 2025 Years 2026-2030 $ 2,835 2,907 3,135 3,258 3,768 20,353 95 Table of Contents Defined Contribution Plan The Company maintains defined contribution plans primarily in the U.S. and U.K. Eligible employees can contribute a portion of their pre-tax and / or after-tax income in accordance with plan guidelines and the Company will make contributions based on the employees’ eligible pay and /or will match a percentage of the employee contributions up to certain limits. Matching contributions charged to expense for the fiscal years ended March 31, 2020, 2019 and 2018 were $15,835, $12,078 and $8,931, respectively. 16. Stockholders’ Equity Preferred Stock and Common Stock The Company’s certificate of incorporation authorizes the issuance of up to 1,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”). At March 31, 2020 and 2019, no shares of Preferred Stock were issued or outstanding. The Board of Directors of the Company has the authority to specify the terms of any Preferred Stock at the time of issuance. The following demonstrates the change in the number of shares of common stock outstanding during fiscal years ended March 31, 2018, 2019 and 2020, respectively: Shares outstanding as of March 31, 2017 Purchase of treasury stock Shares issued towards equity-based compensation plans, net of equity awards surrendered for option price and taxes Shares outstanding as of March 31, 2018 Purchase of treasury stock Shares issued towards purchase consideration of Alpha acquisition Shares issued under equity-based compensation plans, net of equity awards surrendered for option price and taxes Shares outstanding as of March 31, 2019 Purchase of treasury stock Shares issued under equity-based compensation plans, net of equity awards surrendered for option price and taxes Shares outstanding as of March 31, 2020 43,447,536 (1,756,831) 224,295 41,915,000 (726,347) 1,177,630 254,467 42,620,750 (581,140) 283,695 42,323,305 Treasury Stock In fiscal 2020, the Company purchased 581,140 shares for $34,561. In fiscal 2019, the Company purchased 726,347 shares of its common stock for $56,436 and in fiscal 2018, purchased 1,756,831 shares for $121,191. Of the shares purchased in fiscal 2018, 1,495,714 were acquired through an accelerated share repurchase program (“ASR”) for a total cash investment of $100,000 at an average price of $66.86. At March 31, 2020 and 2019, the Company held 12,791,503 and 12,227,773 shares as treasury stock, respectively. Treasury Stock Reissuance In fiscal 2019, the Company acquired Alpha. The initial purchase consideration for the acquisition was $750,000, of which $650,000 was paid in cash and the balance was settled by issuing 1,177,630 shares of EnerSys common stock. These shares were issued out of the Company's treasury stock and were valued at $84.92 per share, which was based on the thirty-day volume weighted average stock price of the Company’s common stock at closing. The 1,177,630 shares had a closing date fair value of $93,268. During fiscal 2020 and fiscal 2019, the Company also issued 17,410 and 3,256 shares out of its treasury stock, respectively, valued at $62.55 per share, on a LIFO basis, to participants under the Company's Employee Stock Purchase Plan. 96 Table of Contents Accumulated Other Comprehensive Income (“AOCI”) The components of AOCI, net of tax, are as follows: March 31, 2020 Pension funded status adjustment Net unrealized gain (loss) on derivative instruments Foreign currency translation adjustment Accumulated other comprehensive loss March 31, 2019 Pension funded status adjustment Net unrealized gain (loss) on derivative instruments Foreign currency translation adjustment Accumulated other comprehensive loss March 31, 2018 Pension funded status adjustment Net unrealized gain (loss) on derivative instruments Foreign currency translation adjustment Accumulated other comprehensive loss Beginning Balance Before Reclassifications Amount Reclassified from AOCI Ending Balance $ $ $ $ $ (20,791) $ (2,819) $ (130) (121,761) (142,682) $ (6,672) (64,528) (74,019) $ 1,695 $ 816 $ 879 — (22,503) $ (3,425) (15,789) 339 $ 1,373 $ (8,396) (105,972) 11,691 — (41,717) $ (114,029) $ 13,064 $ (25,555) $ 1,692 $ 1,360 $ 1,975 (129,244) (2,868) 113,455 (2,532) — $ (152,824) $ 112,279 $ (1,172) $ (22,794) (5,923) (186,289) (215,006) (20,791) (130) (121,761) (142,682) (22,503) (3,425) (15,789) (41,717) The following table presents reclassifications from AOCI during the twelve months ended March 31, 2020: Components of AOCI Amounts Reclassified from AOCI Location of (Gain) Loss Recognized on Income Statement Derivatives in Cash Flow Hedging Relationships: Net unrealized loss on derivative instruments Tax benefit Net unrealized loss on derivative instruments, net of tax Defined benefit pension costs: Prior service costs and deferrals Tax benefit Net periodic benefit cost, net of tax $ $ $ $ 1,151 Cost of goods sold (272) 879 Net periodic benefit cost, included in other (income) expense, net - See Note 15 1,098 (282) 816 97 Table of Contents The following table presents reclassifications from AOCI during the twelve months ended March 31, 2019: Components of AOCI Amounts Reclassified from AOCI Location of (Gain) Loss Recognized on Income Statement Derivatives in Cash Flow Hedging Relationships: Net unrealized loss on derivative instruments Tax benefit Net unrealized loss on derivative instruments, net of tax Defined benefit pension costs: Prior service costs and deferrals Tax benefit Net periodic benefit cost, net of tax $ $ $ $ 15,281 Cost of goods sold (3,590) 11,691 Net periodic benefit cost, included in other (income) expense, net - See Note 15 1,704 (331) 1,373 The following table presents reclassifications from AOCI during the twelve months ended March 31, 2018: Components of AOCI Amounts Reclassified from AOCI Location of (Gain) Loss Recognized on Income Statement Derivatives in Cash Flow Hedging Relationships: Net unrealized gain on derivative instruments Tax expense Net unrealized gain on derivative instruments, net of tax Defined benefit pension costs: Prior service costs and deferrals Tax benefit Net periodic benefit cost, net of tax 17. Stock-Based Compensation $ $ $ $ (3,142) Cost of goods sold 610 (2,532) Net periodic benefit cost, included in other (income) expense, net - See Note 15 1,771 (411) 1,360 As of March 31, 2020, the Company maintains the 2017 Equity Incentive Plan (“2017 EIP”). The 2017 EIP reserved 4,173,554 shares of common stock for the grant of various classes of nonqualified stock options, restricted stock units, market and performance condition-based share units and other forms of equity-based compensation. Shares subject to any awards that expire without being exercised or that are forfeited or settled in cash shall again be available for future grants of awards under the 2017 EIP. Shares subject to stock option or stock appreciation right awards, that have been retained by the Company in payment or satisfaction of the exercise price and any applicable tax withholding obligation of such awards, shall not be available for future grant under the 2017 EIP. As of March 31, 2020, 3,593,817 shares are available for future grants. The Company’s management equity incentive plans are intended to provide an incentive to employees and non-employee directors of the Company to remain in the service of the Company and to increase their interest in the success of the Company in order to promote the long-term interests of the Company. The plans seek to promote the highest level of performance by providing an economic interest in the long-term performance of the Company. The Company settles employee share-based compensation awards with newly issued shares. Stock Options During fiscal 2020, the Company granted to management and other key employees 284,109 non-qualified options that vest ratably over 3 years from the date of grant. Options expire 10 years from the date of grant. The Company recognized stock-based compensation expense relating to stock options of $2,996, with a related tax benefit of $565 for fiscal 2020, stock- based compensation expense of $3,251 with a related tax benefit of $634 for fiscal 2019 and stock-based compensation of $2,741 with a related tax benefit of $700 for fiscal 2018. For purposes of determining the fair value of stock options granted, the Company used a Black-Scholes Model with the following assumptions: Risk-free interest rate Dividend yield Expected life (years) 2020 2019 2018 1.52% 1.21% 6 2.77% 0.93% 6 2.08% 0.84% 6 Volatility 29.1% 26.8% 29.2% The following table summarizes the Company’s stock option activity in the years indicated: Options outstanding as of March 31, 2017 Granted Exercised Forfeited Expired Options outstanding as of March 31, 2018 Granted Exercised Forfeited Options outstanding as of March 31, 2019 Granted Exercised Forfeited Options outstanding as of March 31, 2020 Options exercisable as of March 31, 2020 Options vested and expected to vest, as of March 31, 2020 Number of Options Weighted- Average Remaining Contract Term (Years) Weighted- Average Exercise Price Aggregate Intrinsic Value 451,668 169,703 (62,197) (11,495) (2,089) 545,590 192,700 (171,630) (11,754) 554,906 284,109 (24,826) (22,607) 791,582 350,660 777,307 8.4 $ 62.29 $ 83.14 63.44 70.22 18.25 8.4 $ 68.65 $ 75.17 63.66 75.17 8.0 $ 72.31 $ 57.75 57.60 72.19 67.55 $ 70.65 $ 67.66 $ 7.8 $ 6.4 $ 7.8 $ 7,520 — 1,132 75 137 2,679 — 2,707 — 1,040 — 383 88 — — — The following table summarizes information regarding stock options outstanding as of March 31, 2020: Range of Exercise Prices $55.00-$60.00 $65.01-$70.00 $75.01-$83.14 Number of Options Weighted- Average Remaining Contractual Life (Years) Weighted- Average Exercise Price 391,986 73,368 326,228 791,582 8.4 $ 4.8 $ 7.6 $ 7.8 $ 57.71 68.82 79.10 67.55 98 Table of Contents Restricted Stock Units, Market and Performance-condition based Awards Non-Employee Directors In fiscal 2020, the Company granted to non-employee directors 40,462 deferred restricted stock units at the fair value of $39.74 per restricted stock unit at the date of grant. In fiscal 2019, such grants amounted to 35,065 restricted stock units at the fair value of $46.30 per restricted stock unit at the date of grant and in fiscal 2018, such grants amounted to 33,408 restricted stock units at the fair value of $46.24 per restricted stock unit at the date of grant. The awards vest immediately upon the date of grant and are settled in shares of common stock six months after termination of service as a director. In fiscal 2020, the Company also granted to non-employee directors, 1,147 restricted stock units and in fiscal 2019 and 2018, granted 1,441 and 1,345 restricted stock units, respectively, at fair values of $58.05, $75.32 and $73.39, for fiscal 2020, fiscal 2019 and 2018, respectively, under the deferred compensation plan for non-employee directors. Employees In fiscal 2020, the Company granted to management and other key employees 301,321 restricted stock units that vest ratably over four years from the date of grant, at the fair value of $57.75 per restricted stock unit, 62,512 performance condition-based share units (“PSU”) at the fair value of $50.69 and 51,063 market condition-based share units (“TSR”) at the fair value of $62.05 per unit at the date of grant. The PSUs and TSRs cliff vest three years from the date of grant. In fiscal 2019, the Company granted to management and other key employees 204,599 restricted stock units that vest ratably over four years from the date of grant at the fair value of $75.17 per restricted stock unit, 45,883 PSUs at the fair value of $68.48 and 36,646 TSRs at a weighted average fair value of $86.23 per unit at the date of grant that cliff vest three years from the date of grant. In fiscal 2018, the Company granted to management and other key employees 161,229 restricted stock units that vest ratably over four years from the date of grant at a fair value of $83.14 per restricted stock unit and 60,187 TSRs at a weighted average fair value of $105.74 per unit at the date of grant that cliff vest three years from the date of grant. For purposes of determining the fair value of the PSUs granted in fiscal 2020 and fiscal 2019, the Company used the market price at the date of grant to which a discount for illiquidity was applied to reflect post vesting restrictions. For purposes of determining the fair value of TSRs granted in fiscal 2020, fiscal 2019, and fiscal 2018, the Company used a Monte Carlo Simulation with the following assumptions: Risk-free interest rate Dividend yield Expected life (years) Volatility 2020 2019 2018 1.50% —% 3 34.39% 2.66% —% 3 26.41% 1.57% —% 3 27.49% 99 Table of Contents A summary of the changes in restricted stock units, TSRs and PSUs awarded to employees and directors that were outstanding under the Company’s equity compensation plans during fiscal 2020 is presented below: Non-vested awards as of March 31, 2019 Granted Stock dividend Performance factor Vested Forfeitures Non-vested awards as of March 31, 2020 Restricted Stock Units (RSU) Market condition-based Share Units (TSR) Performance condition-based Share Units (PSU) Number of RSU 721,647 $ 342,930 9,108 — (169,486) (23,864) 880,335 $ Weighted- Average Grant Date Fair Value 57.72 58.05 55.83 — 70.18 69.56 55.61 Number of TSR 352,584 $ 51,063 2,226 — (172,314) (24,839) 208,720 $ Weighted- Average Grant Date Fair Value 72.83 62.00 81.97 — 59.95 74.83 80.78 Number of PSU 42,526 $ 62,512 990 — — (4,898) 101,130 $ Weighted- Average Grant Date 68.48 50.65 58.74 — — 65.78 57.49 The Company recognized stock-based compensation expense relating to restricted stock units, TSRs and PSUs of $17,784, with a related tax benefit of $2,544 for fiscal 2020, $19,357, with a related tax benefit of $3,085 for fiscal 2019 and $16,712, with a related tax benefit of $3,325 for fiscal 2018. All Award Plans As of March 31, 2020, unrecognized compensation expense associated with the non-vested equity awards outstanding was $44,633 and is expected to be recognized over a weighted-average period of 26 months. 18. Earnings Per Share The following table sets forth the reconciliation from basic to diluted weighted-average number of common shares outstanding and the calculations of net earnings per common share attributable to EnerSys stockholders. Net earnings attributable to EnerSys stockholders Weighted-average number of common shares outstanding: Basic Dilutive effect of: Fiscal year ended March 31, 2020 2019 2018 $ 137,116 $ 160,239 $ 119,594 42,411,834 42,335,023 42,612,036 Common shares from exercise and lapse of equity awards, net of shares assumed reacquired Diluted weighted-average number of common shares outstanding Basic earnings per common share attributable to EnerSys stockholders Diluted earnings per common share attributable to EnerSys stockholders Anti-dilutive equity awards not included in diluted weighted-average common shares 484,941 42,896,775 673,929 43,008,952 $ $ 3.23 $ 3.20 $ 3.79 $ 3.73 $ 507,820 43,119,856 2.81 2.77 698,546 355,728 59,482 100 Table of Contents 19. Commitments, Contingencies and Litigation Litigation and Other Legal Matters In the ordinary course of business, the Company and its subsidiaries are routinely defendants in or parties to pending and threatened legal actions and proceedings, including actions brought on behalf of various classes of claimants. These actions and proceedings are generally based on alleged violations of environmental, anticompetition, employment, contract and other laws. In some of these actions and proceedings, claims for substantial monetary damages are asserted against the Company and its subsidiaries. In the ordinary course of business, the Company and its subsidiaries are also subject to regulatory and governmental examinations, information gathering requests, inquiries, investigations, and threatened legal actions and proceedings. In connection with formal and informal inquiries by federal, state, local and foreign agencies, the Company and its subsidiaries receive numerous requests, subpoenas and orders for documents, testimony and information in connection with various aspects of their activities. European Competition Investigations Certain of the Company’s European subsidiaries had received subpoenas and requests for documents and, in some cases, interviews from, and have had on- site inspections conducted by the competition authorities of Belgium, Germany and the Netherlands relating to conduct and anticompetitive practices of certain industrial battery participants. The Company settled the Belgian regulatory proceeding in February 2016 by acknowledging certain anticompetitive practices and conduct and agreeing to pay a fine of $1,962, which was paid in March 2016. During fiscal 2019, the Company also paid $2,402 towards certain aspects related to this matter, which are under appeal. As of March 31, 2020 and March 31, 2019, the Company did not have a reserve balance related to these matters. In June 2017, the Company settled a portion of its previously disclosed proceeding involving the German competition authority relating to conduct involving the Company's motive power battery business and agreed to pay a fine of $14,811, which was paid in July 2017. As of March 31, 2020 and March 31, 2019, the Company did not have a reserve balance relating to this matter. Also, in March 2019, the Company settled the remaining portion of its previously disclosed proceeding involving the German competition authority relating to conduct involving the Company’s reserve power battery business and agreed to pay a fine of $7,258, which was paid in April 2019. As of March 31, 2020 and March 31, 2019, the Company had a reserve balance of $0 and $7,258, respectively. In July 2017, the Company settled the Dutch regulatory proceeding and agreed to pay a fine of $11,229, which was paid in August 2017. The foregoing estimate of losses is based upon currently available information for these proceedings. However, the precise scope, timing and time period at issue, as well as the final outcome of the investigations or customer claims, remain uncertain. Accordingly, the Company’s estimate may change from time to time, and actual losses could vary. EnerSys SARL Litigation One of the parties to a litigation related to a 1999 fire in a French hotel under construction involving the Company’s French subsidiary, EnerSys SARL, which was acquired by the Company in 2002, that was adverse to the Company, appealed the ruling by the Court of Appeal of Lyon on June 11, 2013, which ruled in the Company’s favor, entitling the Company to a refund of the monies paid of €2,000, or $2,756 to the French Supreme Court, which appeal was denied in January 2015. During the third quarter of fiscal 2019, the Company and the adverse party settled this final item with the Company receiving a refund, including interest, from the adverse party of €2,500, or $2,843, for monies paid. The Company believes that it has no further liability with respect to this matter. Environmental Issues As a result of its operations, the Company is subject to various federal, state and local, as well as international environmental laws and regulations and is exposed to the costs and risks of registering, handling, processing, storing, transporting, and disposing of hazardous substances, especially lead and acid. The Company’s operations are also subject to federal, state, local and international occupational safety and health regulations, including laws and regulations relating to exposure to lead in the workplace. 101 Table of Contents The Company is responsible for certain cleanup obligations at the former Yuasa battery facility in Sumter, South Carolina that predates its ownership of this facility. This manufacturing facility was closed in 2001 and the Company established a reserve for this facility which was $1,060 and $1,081 as of March 31, 2020 and 2019, respectively. Based on current information, the Company’s management believes this reserve is adequate to satisfy the Company’s environmental liabilities at this facility. This facility is separate from the Company’s current metal fabrication facility in Sumter. Collective Bargaining At March 31, 2020, the Company had approximately 11,400 employees. Of these employees, approximately 29% were covered by collective bargaining agreements. Employees covered by collective bargaining agreements that expire in the next twelve months were approximately 12% of the total workforce. The average term of these agreements is 2 years, with the longest term being 3 years. The Company considers its employee relations to be good and did not experience any significant labor unrest or disruption of production during fiscal 2020. Lead and Foreign Currency Forward Contracts To stabilize its lead costs and reduce volatility from currency movements, the Company enters into contracts with financial institutions. The vast majority of such contracts are for a period not extending beyond one year. Please refer to Note 13 - Derivative Financial Instruments for more details. Other The Company has various purchase and capital commitments incidental to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market. 20. Restructuring, Exit and Other Charges Restructuring Programs During fiscal 2016, the Company announced restructurings to improve efficiencies primarily related to its motive power assembly and distribution center in Italy and its sales and administration organizations in EMEA. In addition, the Company announced a further restructuring related to its manufacturing operations in Europe. The program was completed during the third quarter of fiscal 2018. Total charges for this program were $6,568, primarily for cash expenses of $6,161 for employee severance payments of 130 employees and other charges of $407. In fiscal 2016, 2017 and 2018, the Company recorded restructuring charges of $5,232, $1,251 and $85, respectively. In fiscal 2016, 2017 and 2018 the Company incurred costs against the accrual of $2,993, $3,037 and $499, respectively. During fiscal 2017, the Company announced restructuring programs to improve efficiencies primarily related to its motive power production in EMEA. This program was completed during fiscal 2019. The total charges for these actions were $4,714, primarily from cash charges for employee severance- related payments and other charges. These actions resulted in the reduction of 45 employees. During fiscal 2017, the Company recorded restructuring charges of $3,104 and an additional $1,610 during fiscal 2018. The Company incurred $749 in costs against the accrual in fiscal 2017 and an additional $2,403 during fiscal 2018. During fiscal 2019, the Company incurred $1,682 against the accrual. During fiscal 2017, the Company announced restructurings primarily to complete the transfer of equipment and clean-up of its manufacturing facility located in Jiangdu, the People’s Republic of China, which stopped production during the first quarter of fiscal 2016. This program was completed during the fourth quarter of fiscal 2018. The total cash charges for these actions amounted to $991. During fiscal 2017, the Company recorded restructuring charges of $779 and an additional $212 during fiscal 2018. The Company incurred $648 in costs against the accrual in fiscal 2017 and an additional $341 during fiscal 2018. During fiscal 2018, the Company announced restructuring programs to improve efficiencies primarily related to supply chain and general operations in EMEA. The Company estimates that the total charges for these actions will amount to approximately $7,500, primarily from cash charges for employee severance-related payments and other charges. The Company estimates that these actions will result in the reduction of approximately 80 employees upon completion. During fiscal 2018, the Company recorded non-cash restructuring charges of $69 and cash charges of $2,260 and incurred $1,350 in costs against the accrual. During fiscal 2019, the Company recorded restructuring charges of $3,104 and incurred $2,844 in costs against the accrual. During fiscal 2020, the Company recorded restructuring charges of $975 and incurred $1,193 in costs against the accrual. As of 102 Table of Contents March 31, 2020, the reserve balance associated with these actions is $817. The Company expects to be committed to an additional $1,100 in restructuring charges related to this action, which it expects to complete in fiscal 2021. During the second quarter of fiscal 2018, the Company completed the sale of its Cleveland, Ohio facility and recorded a non-cash loss on the sale of the building of $210 and other cash charges of $75. The Cleveland facility ceased charger production in fiscal 2017. During fiscal 2018, the Company announced a restructuring program to improve efficiencies of its general operations in the Americas. This program was completed during fiscal 2019. The total charges for these actions were $960, from cash charges for employee severance-related payments to approximately 60 salaried employees. During fiscal 2018, the Company recorded restructuring charges of $960 and incurred $755 in costs against the accrual. During fiscal 2019, the Company incurred $207 in costs against the accrual. During fiscal 2019, the Company announced restructuring programs to improve efficiencies of its operations in EMEA. The Company estimates that the total charges for these actions will amount to approximately $2,500, from charges primarily for employee severance-related payments to approximately 35 employees. During fiscal 2019, the Company recorded restructuring charges of $347 and incurred $83 in costs against the accrual. During fiscal 2020, the Company recorded restructuring charges of $575 and incurred $784 in costs against the accrual. As of March 31, 2020, the reserve balance associated with these actions is $48. The Company expects to complete these actions in fiscal 2021. During fiscal 2019, the Company announced restructuring programs to improve efficiencies of its operations in the Americas. The Company estimates that the total charges for these actions will amount to approximately $4,100, from cash and non-cash charges primarily for employee severance-related payments to approximately 85 employees. During fiscal 2019, the Company recorded cash restructuring charges of $1,970, non-cash charges of $2,095 and incurred $1,480 in costs against the accrual. During fiscal 2020, the Company incurred $480 in costs against the accrual. As of March 31, 2020, the reserve balance associated with this action is $10. The Company expects to complete these actions in fiscal 2021. During fiscal 2019, the Company announced a restructuring program to improve efficiencies of its operations in Asia and to convert its India operations from mainly reserve power production to motive power production. The total charges for these actions amount to $4,390, from cash charges primarily for employee severance-related payments to approximately 160 employees, and non-cash charges related to the write-off of fixed assets. During fiscal 2019, the Company recorded cash restructuring charges of $2,772 and non-cash charges of $771 and incurred $1,683 in costs against the accrual. During fiscal 2020, the Company recorded cash restructuring charges of $717, non-cash charges of $130 and incurred $1,853 in costs against the accrual. As of March 31, 2020, the reserve balance associated with these actions is $0. The Company completed these actions in fiscal 2020. During fiscal 2020, the Company announced restructuring programs to improve efficiencies of its operations in EMEA. The Company estimates that the total charges for these actions will amount to approximately $7,500, from cash charges primarily for employee severance-related payments to approximately 70 employees. During fiscal 2020, the Company recorded restructuring charges of $5,422 and incurred $3,197 in costs against the accrual. As of March 31, 2020, the reserve balance associated with these actions is $2,019. The Company expects to complete these actions in fiscal 2021. During fiscal 2020, the Company announced restructuring programs to improve efficiencies of its operations in the Americas. The Company estimates that the total charges for these actions will amount to approximately $2,600, from cash charges primarily for employee severance-related payments to approximately 60 employees. During fiscal 2020, the Company recorded restructuring charges of $2,586 and incurred $2,145 in costs against the accrual. As of March 31, 2020, the reserve balance associated with these actions is $431. The Company expects to complete this action in fiscal 2021. During fiscal 2020, the Company announced a restructuring program to improve efficiencies of its operations in Asia. The total charges for these actions amount to $577, primarily from cash charges for employee severance-related payments to approximately 30 employees. During fiscal 2020, the Company recorded cash restructuring charges of $522, non-cash charges of $55 and incurred $522 in costs against the accrual. As of March 31, 2020, the reserve balance associated with this action is $0. The Company completed this action in fiscal 2020. 103 Table of Contents A roll-forward of the restructuring reserve is as follows: Balance at March 31, 2017 Accrued Costs incurred Foreign currency impact and other Balance at March 31, 2018 Accrued Costs incurred Foreign currency impact and other Balance at March 31, 2019 Accrued Costs incurred Foreign currency impact and other Balance at March 31, 2020 Other Exit Charges Employee Severance $ 2,668 $ 4,757 (4,849) 317 $ 2,893 $ 6,554 (6,893) (198) $ 2,356 $ 10,395 (9,179) (247) $ 3,325 $ Other Total 144 $ 445 (574) 1 16 $ 1,639 (1,086) 27 596 $ 402 (995) (3) — $ 2,812 5,202 (5,423) 318 2,909 8,193 (7,979) (171) 2,952 10,797 (10,174) (250) 3,325 During fiscal 2019, the Company committed to a plan to close its facility in Targovishte, Bulgaria, which produced diesel-electric submarine batteries. Management determined that the future demand for batteries of diesel-electric submarines was not sufficient given the number of competitors in the market. The Company estimated that the total charges for these actions will amount to approximately $30,000. In fiscal 2019, the Company recorded charges of $20,242 relating to severance and inventory and fixed asset write-offs. The Company recorded an additional $5,123 relating to cash and non- cash charges during fiscal 2020. In keeping with its strategy of exiting the manufacture of batteries for diesel-electric submarines, during the second quarter of fiscal 2020, the Company also sold certain licenses and assets for $2,031 and recorded a net gain of $892, which is reported in exit charges. During the second quarter of fiscal 2020, the Company wrote off $5,441 of assets at its Kentucky and Tennessee plants, as a result of its strategic product mix shift from traditional flooded batteries to maintenance free lead acid and lithium batteries. During fiscal 2019, the Company recorded exit charges of $4,930 relating to the disposition of GAZ Geräte- und Akkumulatorenwerk Zwickau GmbH, a wholly-owned German subsidiary and $957 relating to dissolving a joint venture in Tunisia. These exit activities are a consequence of the Company's strategic decision to streamline its product portfolio and focus its efforts on new technologies. During fiscal 2019, as part of the aforementioned program to convert its India operations from mainly reserve power production to motive power production, the Company recorded a non-cash write off of reserve power inventories of $526, which was reported in cost of goods sold and a $660 non- cash write-off related to reserve power fixed assets in restructuring charges. During fiscal 2018, the Company wrote off $3,457 of inventories, relating to the closing of its Cleveland, Ohio charger manufacturing facility, which was reported in cost of goods sold. During fiscal 2018, the Company recorded exit charges of $3,292 related to the South Africa joint venture, consisting of cash charges of $2,575 primarily relating to severance and non-cash charges of $717. Included in the non-cash charges were $2,157 relating to the inventory adjustment which was reported in cost of goods sold, partially offset by a credit of $1,099 relating to a change in estimate of contract losses and a $341 gain on deconsolidation of the joint venture. Weakening of the general economic environment in South Africa, reflecting the limited growth in the mining industry, affected the joint venture’s ability to compete effectively in the marketplace and consequently, the Company initiated an exit plan in consultation with its joint venture partner in the second quarter of fiscal 2018. The joint venture was under liquidation, which resulted in a loss of control and deconsolidation of the joint venture. The impact of the deconsolidation has been reflected in the Consolidated Statement of Income in fiscal 2018 and was deemed not material. 104 Table of Contents Richmond, Kentucky Plant Fire On September 19, 2019, a fire broke out in the battery formation area of the Company's Richmond, Kentucky motive power production facility. The Company maintains insurance policies for both property damage and business interruption and are finishing cleanup and repair. The Company estimates that the total claim, including the replacement of inventory and equipment, the cleanup and repairs to the building, as well as the claim for business interruption may exceed $50,000. As of March 31, 2020, the Company recorded $17,037 of damages caused to its fixed assets and inventories, as well as for cleanup, asset replacement and other ancillary activities directly associated with the fire, which were initially reflected as a receivable for probable insurance recoveries. The Company received $12,000 in advances related to its initial claims for recovery from its property and casualty insurance carriers in fiscal 2020. The Company also recorded a receivable of $5,000 related to a partial settlement of its claim for business interruption which is recorded as a reduction to cost of goods sold in the Consolidated Statements of Income. 21. Warranty The Company provides for estimated product warranty expenses when products are sold, with related liabilities included within accrued expenses and other liabilities. As warranty estimates are forecasts that are based on the best available information, primarily historical claims experience, costs of claims may ultimately differ from amounts provided. An analysis of changes in the liability for product warranties is as follows: Balance at beginning of year Current year provisions Costs incurred Warranty reserves of acquired businesses Foreign currency translation adjustment Balance at end of year 22. Other (Income) Expense, Net Other (income) expense, net consists of the following: Foreign exchange transaction losses (gains) Non-service components of pension expense Other Total Fiscal year ended March 31, 2020 2019 2018 $ 54,568 $ 50,602 $ 27,622 (25,778) 6,995 118 23,679 (25,053) 7,535 (2,195) $ 63,525 $ 54,568 $ 46,116 21,706 (18,820) — 1,600 50,602 Fiscal year ended March 31, 2020 2019 2018 264 $ 615 (1,294) (415) $ (3,044) $ 1,502 928 (614) $ 5,499 1,464 556 7,519 $ $ 105 Table of Contents 23. Business Segments Summarized financial information related to the Company’s reportable segments at March 31, 2020, 2019 and 2018 and for each of the fiscal years then ended is shown below. Net sales by segment to unaffiliated customers Americas EMEA Asia Total net sales Net sales by product line Reserve power Motive power Total net sales Intersegment sales Americas EMEA Asia Total intersegment sales(1) Operating earnings by segment Americas EMEA Asia Inventory step up to fair value relating to acquisitions - Americas Inventory adjustment relating to exit activities - Americas Inventory adjustment relating to exit activities - EMEA Inventory adjustment relating to exit activities - Asia Restructuring charges - Americas Restructuring and other exit charges - EMEA Restructuring charges - Asia Impairment of indefinite-lived intangibles - EMEA Impairment of goodwill - Asia Fixed asset write-off relating to exit activities and other - Americas Legal proceedings charge, net - EMEA Total operating earnings(2) Property, plant and equipment, net Americas EMEA Asia Total Capital Expenditures Americas EMEA Asia Total Depreciation and Amortization Americas Fiscal year ended March 31, 2020 2019 2018 $ 2,082,290 $ 1,690,912 $ 1,429,888 787,256 218,322 860,563 256,542 849,420 302,583 3,087,868 $ 2,808,017 $ 2,581,891 1,739,675 $ 1,416,173 $ 1,348,193 1,391,844 3,087,868 $ 2,808,017 $ 1,247,900 1,333,991 2,581,891 46,299 $ 28,753 $ 148,773 21,053 123,274 34,531 216,125 $ 186,558 $ 206,908 $ 186,814 $ 50,168 1 (1,854) — — — (2,586) (11,315) (1,424) (4,549) (39,713) (5,441) — 190,195 $ 71,963 3,213 (7,263) — (2,590) (526) (4,066) (26,989) (3,654) — — — (4,437) 212,465 $ 325,435 $ 257,559 $ 104,909 49,670 94,932 56,948 480,014 $ 409,439 $ 74,931 $ 23,788 2,706 101,425 $ 45,029 $ 18,972 6,371 70,372 $ 29,513 133,164 23,375 186,052 189,466 77,671 12,647 — (3,457) — — (1,246) (4,023) (212) — — — — 270,846 210,998 118,263 60,999 390,260 46,905 18,392 4,535 69,832 65,711 $ 40,675 $ 30,421 $ $ $ $ $ $ $ $ $ $ $ $ 106 Table of Contents EMEA Asia Total 14,291 7,342 87,344 $ 15,128 7,545 63,348 $ 16,198 7,698 54,317 $ (1) Intersegment sales are presented on a cost-plus basis which takes into consideration the effect of transfer prices between legal entities. (2) The Company does not allocate interest expense or other (income) expense, net, to the reportable segments. The Company markets its products and services in over 100 countries. Sales are attributed to countries based on the location of sales order approval and acceptance. Sales to customers in the United States were 58.1%, 48.5% and 49.2% for fiscal years ended March 31, 2020, 2019 and 2018, respectively. Property, plant and equipment, net, attributable to the United States as of March 31, 2020 and 2019, were $277,358 and $202,985, respectively. No single country, outside the United States, accounted for more than 10% of the consolidated net sales or net property, plant and equipment and, therefore, was deemed not material for separate disclosure. 24. Quarterly Financial Data (Unaudited) The Company reports interim financial information for 13-week periods, except for the first quarter, which always begins on April 1, and the fourth quarter, which always ends on March 31. The four quarters in fiscal 2020 ended on June 30, 2019, September 29, 2019, December 29, 2019, and March 31, 2020, respectively. The four quarters in fiscal 2019 ended on July 1, 2018, September 30, 2018, December 30, 2018, and March 31, 2019, respectively. Fiscal year ended March 31, 2020 Net sales $ 780,230 $ 762,137 $ 763,698 $ 781,803 $ 3,087,868 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Fiscal Year Gross profit Operating earnings(1)(3)(5) Net earnings (loss)(7) Net earnings (loss) attributable to EnerSys stockholders Net earnings (loss) per common share attributable to EnerSys stockholders—basic $ Net earnings (loss) per common share attributable to EnerSys stockholders—diluted $ Fiscal year ended March 31, 2019 201,512 68,336 48,636 197,317 58,710 62,698 185,241 43,084 27,305 200,796 20,065 (1,523) 784,866 190,195 137,116 48,636 62,698 27,305 (1,523) 137,116 1.14 $ 1.48 $ 0.65 $ (0.04) $ 1.13 $ 1.47 $ 0.64 $ (0.04) $ 3.23 3.20 Net sales $ 670,930 $ 660,462 $ 680,022 $ 796,603 $ 2,808,017 Gross profit Operating earnings(2)(4)(6) Net earnings(8) Net earnings attributable to EnerSys stockholders Net earnings per common share attributable to EnerSys stockholders—basic Net earnings per common share attributable to EnerSys stockholders—diluted $ $ 165,334 64,179 46,020 160,880 63,357 47,447 164,546 49,951 48,614 202,266 34,978 18,546 693,026 212,465 160,627 45,860 47,424 48,417 18,538 160,239 1.09 $ 1.13 $ 1.14 $ 0.43 $ 1.08 $ 1.11 $ 1.12 $ 0.42 $ 3.79 3.73 (1) Included in Operating earnings were inventory adjustments relating to the inventory step up to fair value relating to the NorthStar acquisition of $3,845 and $(1,991) in the third and fourth quarter of fiscal 2020, respectively. (2) Included in Operating earnings were inventory adjustment relating to exit activities of $526 and $2,590 in the first and fourth quarter of fiscal 2019, respectively. Also included were inventory adjustments relating to the inventory step up to fair value relating to Alpha acquisition of $3,747 and $3,516 in the third and fourth quarter of fiscal 2019, respectively. (3) Included in Operating earnings were restructuring and other exit charges of $2,372, $6,282, $9,417 and $2,695 for the first, second, third and fourth quarters of fiscal 2020, respectively. 107 Table of Contents (4) Included in Operating earnings were restructuring and other exit charges of $1,739, $1,121, $5,392 and $26,457 for the first, second, third and fourth quarters of fiscal 2019, respectively. (5) Included in Operating earnings for the fourth quarter of fiscal 2020 were charges relating to the impairment of goodwill for $39,713 and other indefinite-lived intangibles for $4,549. (6) Included in Operating earnings were legal proceedings settlement income of $2,843 in the third quarter and expense of $7,280 in the fourth quarter of fiscal 2019. (7) Included in net earnings was a tax benefit of $21,000 for the second quarter of fiscal 2020, on account of the Swiss tax reform. (8) Included in net earnings was a tax benefit of $13,483 for the third quarter of fiscal 2019, on account of the Tax Act. 25. Subsequent Events On May 21, 2020, the Company announced the payment of a quarterly cash dividend of $0.175 per share of common stock to be paid on June 26, 2020, to stockholders of record as of June 12, 2020. 108 Table of Contents Allowance for doubtful accounts: Fiscal year ended March 31, 2018 Fiscal year ended March 31, 2019 Fiscal year ended March 31, 2020 SCHEDULE II EnerSys Valuation and Qualifying Accounts (In Thousands) Allowance for Doubtful Accounts Balance at Beginning of Period Additions Charged to Expense Write-Offs Net of Recoveries Other(1) Balance at End of Period $ 12,662 $ 822 $ (1,400) $ 559 $ 12,643 10,813 1,385 4,821 (2,459) (642) (756) 254 12,643 10,813 15,246 Tax Valuation Allowance Balance at Beginning of Period Additions Charged to Expense Valuation Allowance Reversal Business Combination Adjustments Other(1) (2) (3) Balance at End of Period Deferred tax asset—valuation allowance: Fiscal year ended March 31, 2018 Fiscal year ended March 31, 2019 Fiscal year ended March 31, 2020 $ 27,053 $ 4,853 $ (14,132) $ — $ (2,519) $ 15,255 17,519 2,978 7,494 (99) (3,145) 1,157 (688) (1,772) (229) 15,255 17,519 20,951 (1) (2) (3) Primarily the impact of currency changes. In fiscal 2019, “Other” included expiration of net operating losses for which a full valuation allowance was recorded. In fiscal 2018, “Other” also included an offset to adjustments to foreign net operating losses for which a full valuation allowance was recorded. 109 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective. The Company completed the NorthStar acquisition on September 30, 2019 and has not yet included NorthStar in the assessment of the effectiveness of the Company's internal control over financial reporting. Accordingly, pursuant to the SEC's general guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment in the year of acquisition, the scope of the Company's assessment of the effectiveness of its disclosure controls and procedures does not include NorthStar. NorthStar accounted for 6.7% of total assets as of March 31, 2020 and 1.8% of net sales for the year ended March 31, 2020. (b) Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The report called for by Item 308(a) of Regulation S-K is included herein as “Management Report on Internal Control Over Financial Reporting.” Management Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. With the participation of the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of NorthStar, which was acquired on September 30, 2019, and is included in the 2020 consolidated financial statements of the Company, accounted for 6.7% of total assets as of March 31, 2020 and 1.8% of net sales for the year ended March 31, 2020. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of March 31, 2020. The attestation report called for by Item 308(b) of Registration S-K is included herein as “Report of Independent Registered Public Accounting Firm,” which appears in Item 8 in this Annual Report on Form 10-K. /s/ David M. Shaffer David M. Shaffer Chief Executive Officer /s/ Michael J. Schmidtlein Michael J. Schmidtlein Chief Financial Officer ITEM 9B. OTHER INFORMATION Not applicable. 110 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference from the sections entitled “Board of Directors,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance—Independence of Directors,” “Corporate Governance—Process for Selection of Director Nominee Candidates,” “Audit Committee Report,” and “Certain Relationships and Related Transactions—Employment of Related Parties” of the Company’s definitive proxy statement for its 2020 Annual Meeting of Stockholders (the “Proxy Statement”) to be filed no later than 120 days after the fiscal year end. We have adopted a Code of Business Conduct and Ethics that applies to all of our officers, directors and employees (including our Chief Executive Officer, Chief Financial Officer, and Corporate Controller) and have posted the Code on our website at www.enersys.com, and a copy is available in print to any stockholder who requires a copy. If we waive any provision of the Code applicable to any director, our Chief Executive Officer, Chief Financial Officer, and Corporate Controller, such waiver will be promptly disclosed to the Company’s stockholders through the Company’s website. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference from the sections entitled “Corporate Governance—Compensation Committee” and “Executive Compensation” of the Proxy Statement”) to be filed no later than 120 days after the fiscal year end. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT RELATED STOCKHOLDER MATTERS The information required by this item is incorporated by reference from the section entitled “Security Ownership of Certain Beneficial Owners and Management” of the Proxy Statement to be filed no later than 120 days after the fiscal year end. Plan Category Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total Equity Compensation Plan Information Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) 2,290,152 (1) Weighted-average exercise price of outstanding options, warrants and rights (b) $ 67.66 (2) — 2,290,152 $ — 67.66 Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) 3,593,817 — 3,593,817 (1) Assumes a 200% payout on market and performance condition-based awards. (2) Awards of restricted stock units, market and performance condition-based awards and deferred stock units and stock units held in both the EnerSys Voluntary Deferred Compensation Plan for Non-Employee Directors and the EnerSys Voluntary Deferred Compensation Plan for Executives were not included in calculating the weighted-average exercise price as they will be settled in shares of common stock for no consideration. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference from the sections entitled “Corporate Governance,” and “Certain Relationships and Related Transactions” of the Proxy Statement to be filed no later than 120 days after the fiscal year end. 111 Table of Contents ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item is incorporated by reference from the section entitled “Audit Committee Report” of the Proxy Statement to be filed no later than 120 days after the fiscal year end. 112 Table of Contents PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this Report: (1) Consolidated Financial Statements See Index to Consolidated Financial Statements. (2) Financial Statement Schedule The following consolidated financial statement schedule should be read in conjunction with the consolidated financial statements (see Item 8. “Financial Statements and Supplementary Data:”): Schedule II—Valuation and Qualifying Accounts. All other schedules are omitted because they are not applicable or the required information is contained in the consolidated financial statements or notes thereto. (b) The following documents are filed herewith as exhibits: Exhibit Number 3.1 Description of Exhibit Fifth Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to Amendment No. 3 to EnerSys’ Registration Statement on Form S-1 (File No. 001-32253) filed on February 6, 2013). 3.2 4.1 4.2 4.3 4.4 10.1 10.2 10.3 10.4 Third Amended and Restated Bylaws (incorporated by reference to Exhibits 3.1 to EnerSys’ Current Report on Form 8-K (File No. 001-32253) filed on August 3, 2016). Indenture, dated as of April 23, 2015, among EnerSys, the Guarantors party thereto and MUFG Union Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to EnerSys’ Current Report on Form 8-K (File No. 00-32253) filed on April 23, 2015). Fourth Supplemental Indenture, dated as of December 11, 2019, among EnerSys, the Guarantors party thereto and MUFG Union Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to EnerSys’ Current Report on Form 8-K (File No. 00-32253) filed on December 11, 2019). Form of 4.375% Senior Note due 2027 (incorporated by reference to Exhibit 4.3 to EnerSys’ Current Report on Form 8-K (File No. 00-32253) filed on December 11, 2019). Description of Capital Stock (filed herewith). Credit Agreement, dated as of August 4, 2017, among EnerSys, certain other borrowers and guarantors identified therein, Bank of America, N.A., as administrative agent, swing line lender and Letters of Credit issuer, and other lenders party thereto (incorporated herein by reference to Exhibit 10.4 of EnerSys’ Quarterly Report on Form 10-Q for the quarter ended July 2, 2017 (File No. 001- 32253) filed with the SEC on August 9, 2017). Stock Subscription Agreement, dated March 22, 2002, among EnerSys Holdings Inc., Morgan Stanley Dean Witter Capital Partners IV, L.P., Morgan Stanley Dean Witter Capital Investors IV, L.P., MSDW IV 892 Investors, L.P., Morgan Stanley Global Emerging Markets Private Investment Fund, L.P. and Morgan Stanley Global Emerging Markets Private Investors, L.P. (incorporated by reference to Exhibit 10.27 to Amendment No. 3 to EnerSys’ Registration Statement on Form S-1 (File No. 333-115553) filed on July 13, 2004). Employment Offer Letter, dated October 20, 2014, of EnerSys Delaware Inc. to David M. Shaffer (incorporated by reference to Exhibit 10.5 to EnerSys' Quarterly Report on Form 10-Q for the period ended September 28, 2014 (File No. 001-32253) filed on November 5, 2014). EnerSys 2013 Management Incentive Plan (incorporated by reference to Appendix A to EnerSys’ Definitive Proxy Statement on Schedule 14A (File No. 001-32253) filed on June 27, 2013). 113 Table of Contents Exhibit Number 10.5 10.6 10.7 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 Description of Exhibit Second Amended and Restated EnerSys 2010 Equity Incentive Plan (incorporated by reference to Appendix A to EnerSys’ Definitive Proxy Statement on Schedule 14A (File No. 001-32253) filed on June 23, 2016). EnerSys Voluntary Deferred Compensation Plan for Executives as amended August 5, 2010, and May 26, 2011 (incorporated by reference to Exhibit 10.23 to EnerSys’ Annual Report on Form 10-K (File No. 001-32253) filed on May 31, 2011). EnerSys 2018 Employee Stock Purchase Plan (incorporated by reference to Appendix A to EnerSys’ Definitive Proxy Statement on Schedule 14A (File No. 001-32253) filed on June 21, 2018). Form of Market Share Restricted Stock Unit Agreement – Employees (incorporated by reference to Exhibit 10.31 to EnerSys’ Annual Report on Form 10-K (File No. 001-32253) filed on June 1, 2010). Form of Deferred Stock Unit Agreement – Non-Employee Directors – 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.35 to EnerSys’ Annual Report on Form 10-K (File No. 001-32253) filed on May 31, 2011). Form of Severance Agreement, (incorporated by reference to Exhibit 10.37 to EnerSys’ Annual Report on Form 10-K (File No. 001- 32253) filed on May 28, 2013). Form of Stock Option Agreement - Employees - 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.32 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2014 (File No. 001-32253) filed on May 28, 2014). Form of Stock Option Agreement - Senior Executives - 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.33 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2014 (File No. 001-32253) filed on May 28, 2014). Form of Indemnification Agreement - Directors and Officers (incorporated by reference to Exhibit 10.37 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2016 (File No. 001-32253) filed on May 28, 2014). Form of Indemnification Agreement - Directors and Officers (incorporated by reference to Exhibit 10.26 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2017 (File No. 001-32253) filed on May 30, 2017). Form of Stock Option Agreement - Employees - 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.42 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2015 (File No. 001-32253) filed on May 27, 2015). Form of Stock Option Agreement - Executives - 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.43 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2015 (File No. 001-32253) filed on May 27, 2015). Form of Stock Option Agreement - Senior Executives - 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.44 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2015 (File No. 001-32253) filed on May 27, 2015). Form of Restricted Stock Unit Agreement - Employees - 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.45 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2015 (File No. 001-32253) filed on May 27, 2015). Form of Stock Option Agreement - Senior Executives - 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to EnerSys’ Quarterly Report on Form 10-Q for the period ended September 27, 2015 (File No. 001-32253) filed on November 2, 2015). Form of Stock Option Agreement - Employees - 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.46 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2016 (File No. 001-32253) filed on May 31, 2016). 114 Table of Contents Exhibit Number Description of Exhibit 10.21 10.22 10.23 10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 21.1 23.1 31.1 31.2 32.1 Form of Restricted Stock Unit Agreement - Employees - 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.47 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2016 (File No. 001-32253) filed on May 31, 2016). Employment Agreement, dated December 21, 2015, between EH Europe GmbH and Holger P. Aschke (incorporated by reference to Exhibit 10.49 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2016 (File No. 001-32253) filed on May 31, 2016). Employment Agreement, dated April 1, 2016, between EnerSys Reserve Power Pte Ltd. and Myles Jones (incorporated by reference to Exhibit 10.41 to EnerSys’ Annual Report on Form 10-K for the year ended March 31, 2017 (File No. 001-32253) filed on May 30, 2017). Form of letter agreement, dated June 7, 2017, between EnerSys and David M. Shaffer (incorporated herein by reference to Exhibit 10.1 of EnerSys’ Current Report on Form 8-K (File No. 001-32253) filed with the SEC on June 12, 2017). Form of letter agreement, dated June 7, 2017, between EnerSys and an executive officer (incorporated herein by reference to Exhibit 10.1 of EnerSys’ Current Report on Form 8-K (File No. 001-32253) filed with the SEC on June 12, 2017). Form of Deferred Stock Unit Agreement - Non-Employee Directors - 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.5 of EnerSys’ Quarterly Report on Form 10-Q for the quarter ended July 2, 2017 (File No. 001-32253) filed with the SEC on August 9, 2017). EnerSys 2017 Equity Incentive Plan filed on June 20, 2017. Form of Severance Letter Agreement, dated April 1, 2019, between EnerSys and Shawn M. O’Connell. Employment Agreement, dated as of October 6, 2008, between Alpha Technologies, Inc. and Andrew Zogby. Employment Agreement, dated as of September 13, 2012, between Alpha Technologies, Inc. and Andrew Zogby. Employment Agreement Extension, effective June 27, 2017, between Alpha Technologies, Inc. and Andrew Zogby. Assignment of Employment Agreement, dated December 6, 2018, between Alpha Technologies, Inc. and Alpha Technologies Services, Inc. regarding Employment Agreement, dated as of October 6, 2008, between Alpha Technologies, Inc. and Andrew Zogby and subsequent extensions 2020. Subsidiaries of the Registrant (filed herewith). Consent of Ernst & Young LLP (filed herewith). Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) Under the Securities Exchange Act of 1934 (filed herewith). Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) Under the Securities Exchange Act of 1934 (filed herewith). Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). 115 Table of Contents Exhibit Number 101.INS Description of Exhibit XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Document 101.LAB XBRL Taxonomy Extension Label Document 101.PRE XBRL Taxonomy Extension Presentation Document 116 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. June 1, 2020 ENERSYS By POWER OF ATTORNEY /s/ DAVID M. SHAFFER David M. Shaffer Chief Executive Officer KNOW ALL PERSONS BY THESE PRESENTS, that each person whose name appears below hereby appoints David M. Shaffer and Michael J. Schmidtlein and each of them, as his true and lawful agent, with full power of substitution and resubstitution, for him and in his, place or stead, in any and all capacities, to execute any and all amendments to the within annual report, and to file the same, together with all exhibits thereto, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this annual report has been signed below by the following persons in the capacities and on the dates indicated: Name Title /s/ DAVID M. SHAFFER Chief Executive Officer David M. Shaffer Date June 1, 2020 /s/ MICHAEL J. SCHMIDTLEIN Chief Financial Officer June 1, 2020 Michael J. Schmidtlein /s/ KERRY M. KANE Kerry M. Kane Vice President and Corporate Controller (Principal Accounting Officer) June 1, 2020 /s/ HWAN-YOON F. CHUNG Director Hwan-yoon F. Chung /s/ NELDA J. CONNORS Nelda J. Connors /s/ HOWARD I. HOFFEN Howard I. Hoffen Director Director /s/ ARTHUR T. KATSAROS Director Arthur T. Katsaros /s/ JOHN F. LEHMAN John F. Lehman Director /s/ GENERAL ROBERT MAGNUS, USMC (RETIRED) Director General Robert Magnus, USMC (Retired) /s/ DENNIS S. MARLO Dennis S. Marlo /s/ PAUL J. TUFANO Paul J. Tufano /s/ RONALD P. VARGO Ronald P. Vargo Director Director Director 117 June 1, 2020 June 1, 2020 June 1, 2020 June 1, 2020 June 1, 2020 June 1, 2020 June 1, 2020 June 1, 2020 June 1, 2020 DESCRIPTION OF CAPITAL STOCK EXHIBIT 4.4 The following information describes our capital stock and provisions of our certificate of incorporation, as amended, and bylaws, as amended. This description is only a summary. You should refer to our certificate of incorporation and bylaws, which have been filed with the Securities and Exchange Commission. General Matters Our authorized capital stock consists of 135,000,000 shares of common stock, par value $0.01 per share, of which 42,452,053 shares were issued and outstanding as of May 28, 2020 and 1,000,000 shares of undesignated preferred stock, par value $0.01 per share, none of which was outstanding as of May 28, 2020. The following summary describes the material provisions of our capital stock. This summary is not meant to be a complete description of our capital stock and we urge you to read our certificate of incorporation and our bylaws, which are incorporated by reference into this prospectus. Certain provisions of our certificate of incorporation and bylaws summarized below may be deemed to have an anti-takeover effect and may delay or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for shares of common stock. Common Stock We have one class of common stock. All holders of shares of common stock are entitled to the same rights and privileges. Holders of shares of common stock are entitled to one vote per share on the election or removal of our directors and on all other matters to be voted on by our stockholders. Holders of shares of common stock are not entitled to any preemptive or preferential rights to subscribe for additional shares of any class of our capital stock. The holders of shares of common stock are entitled to receive dividends, when, as and if declared by our board of directors, out of funds legally available therefor. Holders of shares of common stock are entitled to share ratably, upon dissolution or liquidation, in the assets available for distribution to holders of shares of common stock after the payment of all prior claims. Preferred Stock Our authorized capital stock includes 1,000,000 shares of undesignated preferred stock, none of which is issued or outstanding. Our board of directors is authorized, without further action by our stockholders, to provide for the issuance of such preferred stock in one or more series and to fix the dividend rate, conversion privileges, voting rights, redemption rights, redemption price or prices, liquidation preferences and qualifications, limitations and restrictions thereof with respect to each series. Holders of shares of preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of our company before any payment is made to the holders of shares of our common stock. In some circumstances, the issuance of shares of preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities or the removal of incumbent management. Upon the affirmative vote of our board of directors, without stockholder approval, we may issue shares of preferred stock with voting and conversion rights that could adversely affect the holders of shares of our common stock. We have no current intention to issue any shares of preferred stock. Section 203 of the Delaware General Corporation Law Section 203 of the Delaware General Corporation Law may have the effect of delaying, deferring or preventing a change of control. In general, Section 203 of the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date such stockholder became an “interested stockholder,” unless: • • • prior to such date the board of directors approved either the “business combination” or the transaction that resulted in the stockholder becoming an “interested stockholder”; upon consummation of the transaction that resulted in the stockholder becoming an “interested stockholder,” the “interested stockholder” owned at least 85% of the voting stock outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding those shares owned by persons who are directors and also officers and certain other stockholders; or on or subsequent to such date the “business combination” is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the “interested stockholder.” A “business combination” includes certain mergers, stock or asset sales and other transactions resulting in a financial benefit to the “interested stockholder.” An “interested stockholder” is a person who, together with affiliates and associates, owns (or in the preceding three years, did own) 15% or more of the outstanding voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us. Limitation of Liability and Indemnification of Directors and Officers We have included in our certificate of incorporation and bylaws provisions to: • • eliminate the personal liability of our directors for monetary damages resulting from breaches of their fiduciary duty, but such provision does not eliminate liability for breaches of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, violations under Section 174 of the Delaware General Corporation Law or for any transaction from which the director derived an improper personal benefit; and indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, including circumstances in which indemnification is otherwise discretionary. Acting pursuant to the provisions of our certificate of incorporation and bylaws and the provisions of Section 145 of the Delaware General Corporation Law, we have entered into agreements with each of our officers and directors to indemnify them to the fullest extent permitted by such provisions and such law. We also are authorized to carry directors’ and officers’ insurance providing indemnification for our directors, officers and certain employees for some liabilities. We believe that these indemnification provisions and insurance are useful to attract and retain qualified directors and executive officers. The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, investments in our common stock may be adversely affected to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors or officers pursuant to the provisions described above, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. Other Provisions of our Certificate of Incorporation and Bylaws Classified Board of Directors. Our certificate of incorporation provides for our board of directors to be divided into three classes of directors serving staggered three-year terms. Each class shall consist, as nearly as may be practicable, of one-third of the total number of directors constituting our entire board of directors. As a result, approximately one-third of our board of directors will be elected each year. When coupled with the provisions of our certificate of incorporation and bylaws authorizing only our board of directors to fill vacant directorships, a stockholder may be precluded from removing incumbent directors without cause and simultaneously gaining control of our board of directors by filling the vacancies created by such removal with its own nominees. This provision of our certificate of incorporation may not be amended or repealed by our stockholders except with the consent of the holders of at least two-thirds of our outstanding common stock. Special Meeting of Stockholders. Our certificate of incorporation provides that special meetings of our stockholders may be called only by our board of directors or our Chairman of the Board. This provision makes it more difficult for stockholders to take action opposed by our board of directors. This provision of our certificate of incorporation may not be amended or repealed by our stockholders except with the consent of the holders of at least two-thirds of our outstanding common stock. No Stockholder Action by Written Consent. Our certificate of incorporation provides that no action required or permitted to be taken at any annual or special meeting of our stockholders may be taken without a meeting, and the power of our stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied. Such provision limits the ability of any stockholder to take action immediately and without prior notice to our board of directors. Such a limitation on a majority stockholder’s ability to act might affect such person’s or entity’s decision to purchase our voting securities. This provision of our certificate of incorporation may not be amended or repealed by the stockholders except with the consent of the holders of at least two-thirds of our outstanding common stock. Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our bylaws provide that stockholders seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual or special meeting of stockholders, must provide timely notice thereof in writing. To be timely, a stockholder’s notice must be delivered to, or mailed and received at, our principal executive offices: in the case of an annual meeting that is called for a date that is within 30 days before or after the anniversary date of the immediately preceding annual meeting of stockholders, not less than 90 days nor more than 120 days prior to such anniversary date or, in the case of a special meeting called for the purpose of electing directors, not less than 90 days nor more than 120 days prior to such special meeting or not later than the close of business on the tenth day following the date on which public disclosure of the date of the meeting is made; and in the case of an annual meeting that is called for a date that is not within 30 days before or after the anniversary date of the immediately preceding annual meeting, not later than the close of business on the tenth day following the date on which public disclosure of the date of the meeting was made. Our bylaws also specify certain requirements for a stockholder’s notice to be in proper written form. These provisions may preclude some stockholders from bringing matters before the stockholders at an annual or special meeting or from making nominations for directors at an annual or special meeting. You should refer to our bylaws for a complete description of these requirements. As set forth below, our bylaws may not be amended or repealed by our stockholders, except with the consent of holders of at least two-thirds of our outstanding common stock. Majority Vote Requirement for Uncontested Director Elections. The Corporate Governance and Nominating Committee has established informal procedures under which a director nominee must tender his or her contingent resignation to the Nominating and Corporate Governance Committee in advance of an annual meeting of stockholders. If the Director Nominee fails to receive a majority number of votes for re-election in an uncontested election at an annual meeting, the Nominating and Corporate Governance Committee will make a recommendation to the board of directors whether to accept or reject the resignation or whether other action shall be taken. The board of directors will act on the Committee's recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results. The resignation becomes effective only if the director fails to receive a majority number of votes for re-election in an uncontested election at an annual meeting and the board of directors accepts the resignation. Adjournment of Meetings of Stockholders. Our bylaws provide that when a meeting of our stockholders is convened, the presiding officer, if directed by our board of directors, may adjourn the meeting if no quorum is present for the transaction of business or if our board of directors determines that adjournment is necessary or appropriate to enable the stockholders to consider fully information that our board of directors determines has not been made sufficiently or timely available to stockholders or to otherwise effectively exercise their voting rights. This provision will, under certain circumstances, make more difficult or delay actions by the stockholders opposed by our board of directors. The effect of such provision could be to delay the timing of a stockholders’ meeting, including in cases where stockholders have brought proposals before the stockholders that are in opposition to those brought by our board of directors and therefore may provide our board of directors with additional flexibility in responding to such stockholder proposals. As set forth below, our bylaws may not be amended or repealed by our stockholders, except with the consent of holders of at least two-thirds of our outstanding common stock. No Cumulative Voting. The Delaware General Corporation Law provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise. Our certificate of incorporation does not provide for cumulative voting. Authorized but Unissued Capital Stock. Our certificate of incorporation authorizes our board of directors to issue one or more classes or series of preferred stock, and to determine, with respect to any such class or series of preferred stock, the voting powers (if any), designations, powers, preferences, rights and qualifications, limitations or restrictions of such preferred stock. We have no current intention to issue any shares of preferred stock. The Delaware General Corporation Law does not require stockholder approval for any issuance of previously authorized shares of our capital stock. However, the listing requirements of the New York Stock Exchange, which will apply so long as our common stock is listed on the New York Stock Exchange, require, among other things, stockholder approval of certain related party transactions involving issuances of common stock, or securities convertible into or exercisable for common stock, if the issuance exceeds 1% of the number of shares of common stock outstanding or 1% of the voting power outstanding before the issuance. In addition, shareholder approval is required for certain issuances of common stock, or securities convertible into or exercisable for common stock, equal to or in excess of 20% of the voting power outstanding before such issuance or the number of shares of our common stock outstanding before the issuance of common stock or securities convertible into or exercisable for common stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions. One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices. Amendment of the Bylaws. Our certificate of incorporation provides that our bylaws may not be amended or repealed by our stockholders except with the consent of holders of at least two-thirds of our outstanding common stock and grants our board of directors the authority to amend and repeal our bylaws without a stockholder vote in any manner not inconsistent with the laws of Delaware or our certificate of incorporation. This provision makes it more difficult for our stockholders to make changes to our bylaws that are opposed by our board of directors. This provision of our certificate of incorporation may not be amended or repealed by our stockholders except with the consent of holders of at least two-thirds of our outstanding common stock. Transfer Agent and Registrar Computershare is the transfer agent and registrar for our common stock. Exhibit 10.28 April 1, 2019 Shawn M. O’Connell {Address} {City, State, Zip Code} Re: Severance Agreement Dear Shawn: EnerSys (the “Company”) considers it essential and in the best interests of its stockholders to foster the continuous employment of key management personnel. In this regard, the Board of Directors of the Company (the “Board”) recognizes that the possibility of a termination of employment related to a change in control of the Company may exist and that such possibility, and the uncertainty and questions that it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s senior management, including you, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a termination of employment. In order to induce you to remain in the employ of the Company, the Company agrees that you will receive the severance benefits set forth in this letter agreement (the “Agreement”) in the event your employment with the Company is terminated under the circumstances described below. 1. Term of Agreement. 1.1 The term of this Agreement will commence on the date above (the “Effective Date”) and will continue for a period of three (3) years thereafter. Commencing on the third anniversary of the Effective Date and on each anniversary thereafter (“Anniversary Date”), this Agreement will automatically be renewed for one (1) additional year beyond the term otherwise established, unless one party provides written notice to the other party, at least one (1) year in advance of an Anniversary Date, of its intent not to renew this Agreement for an additional one year term. Nothing in this provision will preclude termination as otherwise provided or permitted under this Agreement. Notwithstanding the foregoing, if a Change in Control occurs after the Effective Date and during the term of this Agreement, this Agreement will continue in effect for a limited period of two (2) years after the date of such Change in Control, unless terminated sooner in accordance with this Agreement. 1.2 You acknowledge that your employment with the Company constitutes “at-will” employment and that, because you are an at-will employee, either you or the Company may terminate your employment at any time, upon written notice of termination within a reasonable period of time before the effective date of the termination, subject to the procedures and consequences set forth in this Agreement. 2. Severance Benefits. 2.1 Termination by the Company without Cause or by You with Good Reason in connection with a Change in Control: If your employment hereunder is terminated by the Company other than for death, disability, or Cause or by you for Good Reason, in each case (i) during the six (6) month period prior to a Change in Control and it is reasonably demonstrated by you that your termination of employment was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or otherwise arose in connection with or anticipation of a Change in Control or (ii) on or within twenty-four (24) months after a Change in Control (such time periods, the “Protection Period”), you will be entitled to receive: a. A lump sum cash payment within sixty (60) days following your termination of employment equal to the sum of (i) your annual base compensation then in effect (or immediately prior to any reduction resulting in a termination for Good Reason) and (ii) your annual cash bonus at such target level then in effect (or immediately prior to any reduction resulting in a termination for Good Reason); a. If you and your dependents, if applicable, were enrolled in the Company’s medical, vision, and/or dental benefit plans on the date prior to the date of termination of employment, you may elect COBRA continuation coverage and for a period of one (1) year, you will pay the amount of premiums you would have paid for such coverage for such medical, vision, and/or dental benefits had you and your dependents, if applicable, continued to receive such coverage as an active employee, at the same level of coverage in effect as of your date of termination of employment; provided, however, that such reduced premiums will cease if you become eligible to participate in comparable programs of a subsequent employer prior to the end of such one (1) year period; and further provided that the Company will have no obligation to continue to maintain any plan or program during such period, solely as a result of the provisions of this Agreement. If required by law, regulation, or applicable guidance in order to 2 not trigger any excise or penalty taxes, the Company shall have the right to substitute such coverage described herein with a cash subsidy in its sole discretion; b. Immediate and full vesting of any unvested and outstanding equity awards granted to you, payable pursuant to the terms of any plan or other agreement under or pursuant to which any such equity awards were granted; provided that to the extent the benefits provided under this paragraph conflict with the terms of any such plan or agreement, the terms of such plan or agreement will control; and c. A pro-rata payment from the Company’s annual incentive plan for the fiscal year in which your termination occurred, equal to the payment you would have received had you remained in the employment of the Company through the end of such fiscal year, multiplied by a fraction, the numerator of which is the number of full months elapsed from the start of such fiscal year to the date of your termination of employment, and the denominator of which is 12. Such amount, if any, will be paid at the time such award would otherwise have been paid to other participants had your employment not terminated, but in no event later than two and one-half months following the end of such fiscal year. 2.2 Good Reason: You will be considered to have terminated employment hereunder for Good Reason if such termination of employment is on account of any of the following actions by the Company, which occur during the Protection Period, without your express written consent: a. A reduction of ten percent (10%) or more in your annual base compensation, other than a reduction which is proportionate to a Company-wide reduction in senior management pay; b. Any material diminution of your positions, duties, or responsibilities; c. Any permanent reassignment of you to a location greater than fifty (50) miles from the location of your primary office, unless such new location is closer to your primary residence; or d. A material breach by the Company of its obligations under this Agreement. Notwithstanding the foregoing, a termination by you will not be for “Good Reason,” unless you have given the Company at least ten (10) business days written notice specifying the grounds upon which you intend to terminate your employment hereunder for “Good Reason” and such notice is received by the Company within ninety (90) days of the date the event of “Good Reason” occurred. In addition, any action or inaction by the Company which is remedied within 3 thirty (30) days following such written notice will not constitute “Good Reason” for termination hereunder and will render such notice null and void. 2.3 Change in Control. Change in Control means a “Change in Control” as defined under the EnerSys 2010 Equity Incentive Plan, as such term may be amended therein from time to time. 2.4 Cause. “Cause” means any of the following events: (a) breach of your fiduciary duty to the Company or your duty of loyalty to the Company; (b) willful act of material dishonesty with respect to any material matter involving the Company; (c) theft or material misuse of Company property; (d) failure to conform in any material respect to the Company’s code of conduct (i.e., the policies and procedures related to the employment of employees by the Company as set forth in an employee handbook or any similar document or as communicated to you); (e) excessive absenteeism (which will not include authorized absences for leave pursuant to the Family and Medical Leave Act, the Americans With Disabilities Act, or the Company’s vacation, paid time off, or short-term disability leave plans, policies, or arrangements, or service in the uniformed services as such term is defined by the Uniformed Services Employment and Reemployment Rights Act) having a material adverse effect on Company business operations; (f) conviction of, or plea of guilty or nolo contendere to, a felony, any criminal charge involving moral turpitude, or illegal substance abuse charges; (g) continuing neglect of management duties and responsibilities that has a material adverse effect on the Company; (h) willful failure to timely report to the Board or direct supervisor information having a material adverse effect on Company business operations; or (i) failure to meet reasonable and achievable documented performance expectations (other than any such failure resulting from incapacity due to physical or mental illness). 2.5 Clawback – For Cause Matters. If, within ninety (90) days after a termination of your employment that entitles you to severance benefits under Section 2, the Board becomes aware of facts that, if known during your employment, it reasonably believes would have justified termination of your employment for Cause, the Company may refrain from paying any unpaid amounts due under Section 2 or require you to promptly (but in no event less than ninety (90) days after notice to you of such determination by the Board) repay any amounts previously paid or the value of any benefits previously received under Section 2. 2.6 Accrued Benefits. Upon your termination of employment for any reason, you, or your estate, as applicable, will receive your accrued but unpaid annual base compensation and any accrued but unpaid or otherwise vested benefits under any Company benefit or incentive plan. 3. Best Net Benefit Limitation. Anything contained in this Agreement to the contrary notwithstanding, if any of the payments or benefits received or to be received by you pursuant to this Agreement (which the parties agree will not include any portion of payments allocated to the non-solicitation and non-competition provisions of Section 4 that are classified as payments of reasonable compensation for purposes of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)), when taken together with payments and benefits provided to you under any other plans, contracts, or arrangements with the Company (all such payments and benefits, 4 the “Total Payments”), will be subject to any excise tax imposed under Code Section 4999 (together with any interest or penalties, the “Excise Tax”), then such Total Payments will be reduced to the extent necessary so that no portion thereof will be subject to the Excise Tax; provided, however, that if you would receive in the aggregate greater value (as determined under Code Section 280G and the regulations thereunder) on an after tax basis if the Total Payments were not subject to such reduction, then no such reduction will be made. To effectuate the reduction described above, if applicable, the Company will first reduce or eliminate the payments and benefits provided under this Agreement. All calculations required to be made under this Section, including the portion of the payments hereunder to be allocated to the restrictive covenants set forth in Section 4, will be made by the Company’s independent public accountants, subject to the right of your representative to review the same. The parties recognize that the actual implementation of the provisions of this Section are complex and agree to deal with each other in good faith to resolve any questions or disagreements arising hereunder. 4. Covenant Not to Compete; Nonsolicitation; Confidential Information; Nondisparagement. 4.1 You agree with the Company that you will not at any time, except in performance of your obligations to the Company or with the prior written consent of the Company, directly or indirectly, reveal to any “Person” (as defined in Section 3(9) of the Employee Retirement Income Security Act of 1974, as amended) (other than the Company, or its employees, officers, directors, shareholders, or agents) or use for your own benefit any information deemed to be confidential by the Company or any of its subsidiaries or affiliates (such subsidiaries and affiliates, collectively “Affiliates”) (“Confidential Information”) relating to the assets, liabilities, employees, goodwill, business affairs of the Company or any of its Affiliates, including, without limitation, any information concerning past, present, or prospective customers, manufacturing processes, marketing, operating, or financial data, or other confidential information used by, or useful to, the Company or any of its Affiliates and known (whether or not known with the knowledge and permission of the Company or any of its Affiliates and whether or not at any time prior to the Effective Date developed, devised, or otherwise created in whole or in part by your efforts) to you by reason of your employment by, shareholdings in or other association with the Company or any of its Affiliates. You further agree that you will retain all copies and extracts of any written or electronic Confidential Information acquired or developed by you during any such employment, shareholding, or association in trust for the sole benefit of the Company, its Affiliates, and their successors and assigns. You further agree that you will not, without the prior written consent of the Company, remove or take from the Company’s or any of its Affiliate’s premises (or if previously removed or taken, you will promptly return) any written or electronic Confidential Information or any copies or extracts thereof. Upon the request and at the expense of the Company, you will promptly make all disclosures, execute all instruments and papers, and perform all acts reasonably necessary to vest and confirm in the Company and its Affiliates, fully and completely, all rights created or contemplated by this Section 4.1. The term “Confidential Information” will not include information that is or becomes generally available to the public other than as a result of a disclosure by, or at the direction of, you. Your agreements set forth in this Section 4.1 regarding Confidential Information are independent of, and in 5 addition to, your agreements set forth in the rest of Section 4 and will not be construed either to enlarge or to contract the scope of such other agreements. 4.2 You agree with the Company that, for so long as you are employed by the Company or any of its Affiliates and continuing for the Restricted Period (as defined below), you will not, without the prior written consent of the Company, directly or indirectly, and whether as principal or investor or as an employee, officer, director, manager, partner, consultant, agent, or otherwise, alone or in association with any other Person, become involved in a Competing Business (as defined below) in the Americas, Europe, or Asia, or any other geographic area in which the Company or any of its Affiliates has engaged during such period in any of the activities which comprise a Competing Business, or in which you have knowledge of the Company’s plans to engage in any of the activities which comprise a Competing Business (including, without limitation, any area in which any customer of the Company or any of its Affiliates may be located). This Section 4.2 will not be violated, however, by your investment of up to $100,000 in the aggregate in one or several publicly-traded companies that engage in a Competing Business. 4.3 As a separate and independent covenant, you agree with the Company that, for so long as you are employed by the Company or any of its Affiliates and continuing for the Restricted Period (as defined below), you will not in any way, directly or indirectly (except in the course of your employment with the Company and its Affiliates), for the purpose of conducting or engaging in any Competing Business, call upon, solicit, advise, or otherwise do, or attempt to do, business with any Person who is, or was, during the then most recent 12-month period, a customer of the Company or any of its Affiliates, or take away or interfere or attempt to take away or interfere with any custom, trade, business, patronage, or affairs of the Company or any of its Affiliates, or hire or attempt to hire, or otherwise engage or attempt to engage as an independent contractor or otherwise any Person who is, or was during the then most recent 12-month period, an employee, officer, representative, or agent of the Company or any of its Affiliates, or solicit, induce, or attempt to solicit or induce any Person who is an employee, officer, representative, or agent of the Company or any of its Affiliates to leave the employ of the Company or any of its Affiliates or cease their business relationship with Company or any of its Affiliates (as the case may be), or violate the terms of their contracts, or any employment arrangements, with the Company or any of its Affiliates. 4.4 For purposes of this Section 4, a “Competing Business” means a business or enterprise (other than the Company and its Affiliates) that is engaged in any or all of the design, manufacture, importing, development, distribution, marketing, or sale of: a. reserve power products (including, without limitation, those products used for backup power for the continuous operation of critical applications in telecommunications systems, uninterruptible power systems, or UPS, applications for computer and computer-controlled systems, and other specialty power applications, including security systems, for premium starting, lighting and ignition applications, in switchgear and electrical control systems used in 6 electric utilities and energy pipelines, and in commercial aircraft and military aircraft, submarines, ships and tactical vehicles); and/or b. motive power products (including, without limitation, products used to provide power for manufacturing, warehousing, and other material handling equipment, such as electrical industrial forklift trucks, mining equipment, and diesel locomotive starting, rail car lighting, and rail signaling equipment); and/or c. lithium ion cells or batteries (for aerospace and defense applications, or otherwise); and/or d. hydrogen fuel cells; and/or e. any other product the Company is producing, marketing, researching, or developing at the time of your termination of employment. “Competing Business” also includes the design, engineering, installation, or service of stationary and DC power systems, and any consulting and/or turnkey services relating thereto. 4.5 You confirm that all Confidential Information is and will remain the exclusive property of the Company and its Affiliates. All business records, papers, and documents kept or made by you relating to the business of the Company will be and remain the property of the Company and its Affiliates. 4.6 You agree to refrain from performing any act, engaging in any conduct or course of action or making or publishing any statements, claims, allegations or assertions which have or may reasonably have the effect of demeaning the name or business reputation of the Company or any of its subsidiaries, or any of its or their employees, officers, directors, agents or advisors in their capacities as such or which adversely affects (or may reasonably be expected adversely to affect) the best interests (economic or otherwise) of any of them. Subject to the provisions of this Agreement, nothing in this Section 4.6 will preclude you from fulfilling any duty or obligation that you may have at law, from responding to any subpoena or official inquiry from any court or government agency, including providing truthful testimony, documents subpoenaed or requested or otherwise cooperating in good faith with any proceeding or investigation; or from taking any reasonable actions to enforce your rights under this Agreement in accordance with the dispute provisions specified in Section 7 hereof. 4.7 Without intending to limit the remedies available to the Company and its Affiliates, you agree that a breach of any of the covenants contained in this Section 4 may result in material and irreparable injury to the Company or its Affiliates for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such a breach or threat thereof, the Company and its Affiliates will be entitled to seek a temporary restraining order or a preliminary or permanent injunction, or both, without bond or other security, restraining you from engaging in activities prohibited by this Section 4 or such other relief as may be required specifically to enforce any of the covenants in 7 this Section 4. Such injunctive relief in any court will be available to the Company and its Affiliates in lieu of, or prior to or pending determination in, any arbitration proceeding. 4.8 Although you and the Company consider the restrictions contained in this Section 4 to be the minimum restriction reasonable for the purposes of preserving the Company’s goodwill and other proprietary rights, if a final determination is made by a court that the time or territory, or any other restriction contained in this Section 4 is an unreasonable or otherwise unenforceable restriction against you, the provisions of this Section 4 will not be rendered void, but will be deemed amended to apply as to such maximum time and territory and to such other extent as the court may determine to be reasonable. 4.9 Notwithstanding anything to the contrary in Section 2.1, in the event that you breach any of the covenants contained in this Section 4: a. Any remaining payments or benefits to be provided under Section 2.1 will not be paid or will cease immediately upon such breach; and b. The Company will be entitled to the immediate repayment of all payments and benefits provided under Section 2.1. 8 4.10 You agree that the covenants contained in this Section 4 may be assigned by the Company, as needed, to affect its purpose and intent and that the Company’s assignee will be entitled to the full benefit of the restrictions enjoyed by the Company under the terms of these covenants. 4.11 The term “Restricted Period” means one (1) year following the termination of your employment for any reason; provided, however, that the Restricted Period will be extended by a period of time equal to any period during which you are in breach of any of the covenants set forth in this Section 4. 5. Binding Effect and Benefit. 5.1 The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure by the Company to obtain such assumption and agreement prior to the effectiveness of any such succession will constitute a material breach of this Agreement. As used in this Agreement, “the Company” means the Company as defined above and any successor to the respective business or assets of the Company as abovementioned which assumes and agrees to perform this Agreement by operation of law, or otherwise. 5.2 This Agreement will inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, heirs, distributees, devisees, and legatees. If you should die while any amount is payable to you under this Agreement if you had continued to live, all such amounts, unless otherwise provided herein, will be paid in accordance with the terms of this Agreement to your devisee, legatee, or other designee, or, if there is no such designee, to your estate. 6. Assignment. This Agreement will not be assignable by either party hereto, except as provided in Section 4.10 and by the Company to any successor in interest to the business of the Company, provided that the Company (if it remains a separate entity) will remain fully liable under this Agreement for all obligations, payments, and otherwise. 7. Arbitration. Subject to Section 4.7, any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto will be settled exclusively by arbitration in Philadelphia, Pennsylvania before one arbitrator of exemplary qualifications and stature, who will be selected jointly by you and the Company, or, if you and the Company cannot agree on the selection of the arbitrator, will be selected by the American Arbitration Association. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The parties hereby agree that the arbitrator will be empowered to enter an equitable decree mandating specific enforcement of the terms of this Agreement. Each party will bear its own costs, including legal fees and out-of-pocket expenses, incurred in connection with any arbitration, and the party that prevails will bear all expenses of the arbitrator. 9 8. No Mitigation or Offset. In the event of termination of your employment, you will be under no obligation to seek other employment and there will be no offset against any payment or benefit provided for in this Agreement on account of any remuneration or benefits from any subsequent employment that you may obtain. 9. Application of Code Section 409A. 9.1 Notwithstanding anything in this Agreement to the contrary, the receipt of any benefits under this Agreement as a result of a termination of employment will be subject to satisfaction of the condition precedent that you undergo a “separation from service” within the meaning of Treas. Reg. § 1.409A-1(h) or any successor thereto. In addition, if you are deemed to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provisions of any benefit that is required to be delayed pursuant to Code Section 409A(a)(2)(B), such payment or benefit will not be made or provided prior to the earlier of (i) the expiration of the six (6) month period measured from the date of your “separation from service” (as such term is defined in Treas. Reg. § 1.409A-1(h)), or (ii) the date of your death (the “Delay Period”). Within ten (10) days following the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) will be paid or reimbursed to you in a lump sum, and any remaining payments and benefits due under this Agreement will be paid or provided in accordance with the normal payment dates specified for them herein. To the extent that the foregoing applies to the provision of any ongoing welfare benefits to you that would not be required to be delayed if the premiums therefore were paid by you, you will pay the full costs of premiums for such welfare benefits during the Delay Period and the Company will pay you an amount equal to the amount of such premiums paid by you during the Delay Period within ten (10) days after the conclusion of such Delay Period. 9.2 Except as otherwise expressly provided herein, to the extent any expense reimbursement or other in-kind benefit is determined to be subject to Code Section 409A, the amount of any such expenses eligible for reimbursement or in-kind benefits in one calendar year will not affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year (except under any lifetime limit applicable to expenses for medical care), in no event will any expenses be reimbursed or in-kind benefits be provided after the last day of the calendar year following the calendar year in which you incurred such expenses or received such benefits, and in no event will any right to reimbursement or in-kind benefits be subject to liquidation or exchange for another benefit. 9.3 Any payments made pursuant to Section 2.1, to the extent of payments made from the date of termination through March 15th of the calendar year following such date, are intended to constitute separate payments for purposes of Treas. Reg. §1.409A-2(b)(2) and thus payable pursuant to the “short-term deferral” rule set forth in Treas. Reg. §1.409A-1(b)(4); to the extent such payments are made following said March 15th, they are intended to constitute separate payments for purposes of Treas. Reg. §1.409A-2(b)(2) made upon an involuntary termination from service and payable pursuant to Treas. Reg. §1.409A- 1(b)(9)(iii), to the maximum extent permitted by said provision. 10 9.4 To the extent it is determined that any benefits described in Section 2.1(b) are taxable to Executive, they are intended to be payable pursuant to Treas. Reg. §1.409A-1(b)(9)(v), to the maximum extent permitted by said provision. 10. Miscellaneous. 10.1 The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect. 11 10.2 The validity, interpretation, construction, and performance of this Agreement will be governed by the laws of the Commonwealth of Pennsylvania, without regard to its conflict of laws principles. 10.3 No waiver by you or the Company at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company or you, respectively, will be deemed a waiver of that or any other provision at any subsequent time. 10.4 Upon any termination of employment that entitles you to payments and benefits under Section 2, you must, within 60 days of your termination of employment, execute a legally enforceable release agreement substantially in the form of Exhibit A attached hereto prior to the receipt of such payments and benefits. If such 60 day period begins in one taxable year and ends in a second taxable year, the payments and benefits will be provided or commence being provided, if at all, in the second taxable year. Any payments made to you will be paid net of any applicable withholding required under federal, state, local, or foreign law. 10.5 This Agreement is the exclusive agreement with respect to the severance benefits payable to you in the event of a termination of your employment. All prior negotiations and agreements are hereby merged into this Agreement. You acknowledge and agree that any employment agreement, offer letter, and/or any agreement regarding change in control or termination benefits, previously entered into between you and the Company is immediately null and void. 10.6 Notwithstanding the termination of this Agreement, the provisions which specify continuing obligations, compensation and benefits, and rights will remain in effect until such time as all such obligations are discharged, all such compensation and benefits are received, and no party or beneficiary has any remaining actual or contingent rights under this Agreement. 11. Legal Fees. In the event of a dispute following a Change in Control, the Company, or its successor, will reimburse you for all reasonable legal fees and expenses incurred by you in attempting to obtain or enforce rights or benefits provided by this Agreement, if, with respect to any such right or benefit, you are successful in obtaining or enforcing such right or benefit (including by negotiated settlement). If you agree to the terms of this Agreement, please sign on the line provided below and return two signed copies to the Company. A fully executed copy will be returned to you for your files after it is signed by the Company. _________________________ Sincerely, ENERSYS By: /s/ David M. Shaffer 12 Title: President and Chief Executive Officer Dated: April 1, 2019 Agreed to and accepted: /s/ Shawn M. O’Connell Shawn M. O’Connell Dated: April 1, 2019 13 APPENDIX A FORM OF GENERAL RELEASE Reference is made to the Severance Agreement dated as of ____________ (the “Severance Agreement”), between EnerSys, a Delaware corporation (the “Company”), and ______________ (the “Executive”). Capitalized terms used herein without definition shall have the meanings assigned to them in the Severance Agreement, a copy of which is attached hereto. SECTION 1. Mutual Release. (a) General Waiver and Release. In consideration of their respective obligations under the Severance Agreement in connection with and following the Executive’s termination of employment with the Company and its affiliates, and subject to the limitations set forth in Section 2 hereof, the Company, on the one hand, does hereby release and forever discharge the Executive, and the Executive, on the other hand, does hereby release and forever discharge the Company, its present, former, and future shareholders, affiliates, direct and indirect parents, subsidiaries, successors, directors, officers, employees, agents, attorneys, heirs, and assigns (the “Company Parties” and, together with the Executive, the “Released Parties”), from any and all claims, actions, causes of action, suits, costs, controversies, judgments, decrees, verdicts, damages, liabilities, attorneys’ fees, covenants, contracts, and agreements that the Executive may have against the Company Parties or the Company Parties may have against the Executive, or in the future may possess based on events occurring during the term of the Executive’s employment with the Company arising out of (i) the Executive’s employment relationship with or service as an employee or officer of the Company and its affiliates or the termination of such relationship or service or (ii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date the Executive signs this Release, with respect to each other, including, but not limited to, any claims arising under Title VII of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the Civil Rights Act of 1866, the Civil Rights Act of 1991, the Employee Retirement Income Security Act of 1974, the Family Medical Leave Act of 1993, or any other federal or state or local law or any foreign jurisdiction, whether such claim arises under statute, common law, or in equity, and whether or not any of the Released Parties are presently aware of the existence of such claim, damage, action or cause of action, suit, or demand (collectively, including claims, actions, and causes of action set forth in Section 1(b) below, the “Claims”). The Executive and the Company Parties also do forever release, discharge, and waive any right the Executive or the Company Parties may have to recover in any proceeding brought by any federal, state, or local agency against the Company Parties and the Executive, respectively, to enforce any laws. Each of the parties hereto agrees that the value received or to be received in the future as described in the Severance Agreement shall be in full satisfaction of any and all claims, actions, or causes of action for payment or other benefits of any kind that the Executive may have against the Company Parties and that the Company Parties may have against the Executive; provided, however, that nothing in this Agreement shall preclude the Company from recouping, or refusing to pay, (i) severance benefits under the Severance Agreement in accordance with Section 2.5 thereof or (ii) cash or equity incentive-based compensation paid or 14 payable to the Executive in the event of a restatement of the Company’s financial statements pursuant to applicable law or regulation or Company policy adopted consistent with applicable law or regulation. (b) ADEA Release. In further recognition of the above, the Executive hereby releases and forever discharges each of the Company Parties from any and all claims, actions and causes of action that the Executive may have as of the date the Executive signs and delivers to the Company this Release arising under the federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”). SECTION 2. Limitations. (a) No Impact on Obligations under the Severance Agreement or the Shareholder Agreement. The releases contained herein do not, are not intended to, and shall not be interpreted to serve as a release or waiver by the Executive or the Company Parties with respect to their respective rights and obligations set forth in the Severance Agreement. In particular, and without limiting the generality of the preceding sentence, the Executive does not waive or release any claim the Executive might now or in the future have to be paid or receive the payments and benefits provided for in Section 2 of the Severance Agreement, and the Company Parties do not waive or release any claim they might now or in the future have under Section 4 of the Severance Agreement. (b) No Impact on Indemnification Rights. The releases contained herein do not, are not intended to, and shall not be interpreted to serve as a release or waiver by the Executive with respect to any indemnification rights the Executive may have and such indemnification rights shall not be effected, modified, or extinguished by the Executive’s execution of this Release. SECTION 3. No Pending Litigation. The Executive represents and agrees that the Executive has not filed, and will not file, any action, complaint, charge, grievance, or arbitration against any Company Party, except that such agreement shall not apply to any claim based on any matter which, pursuant to Section 2, is excluded from the scope of this Release. The Company hereby represents and agrees that no Company Party has filed, and no Company Party will file, any action, complaint, charge, grievance, or arbitration against the Executive except that such agreement shall not apply to any claim based on any matter which, pursuant to Section 2, is excluded from the scope of this Release. SECTION 4. Acknowledgment. The Executive acknowledges and confirms that (i) the Executive has been advised in writing by the Company in connection with the Executive’s termination to consult with an attorney of the Executive’s choice prior to signing this Release and to have such attorney explain to the Executive the terms of the Release, including, without limitation, the terms relating to the Executive’s release of Claims arising under ADEA; (ii) the Executive has read this Release 15 carefully and completely and understands each of the terms hereof; and (iii) the Executive was given not less than twenty-one (21) days to consider the terms of the Release and to consult with an attorney of the Executive’s choosing with respect thereto, and that for a period of seven (7) days following the Executive’s signing of this Agreement, the Executive shall have the option to revoke this Agreement in accordance with the terms set forth in Section 6 below. SECTION 5. Successors. The rights and obligations under this Agreement shall inure to any and all successors of the Company. SECTION 6. Revocation. The Executive shall have the right to revoke this Release during the seven-day period commencing immediately following the date the Executive signs and delivers this Agreement to the Company (the “Revocation Period”). The period shall expire at 5:00 p.m., Eastern Standard Time, on the last day of the seven-day period; provided, however, that if such seventh day is not a business day, the period shall extend to 5:00 p.m. on the next succeeding business day. In the event of any such revocation by the Executive, the obligations of the Company under this Release shall terminate and be of no further force and effect as of the date of such revocation. No such revocation by the Executive shall be effective unless it is in writing and signed by the Executive and received by a representative of the Company prior to the expiration of the Revocation Period. SECTION 7. Counterparts. This Release may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. ENERSYS By: Name: Title: ACCEPTED AND AGREED: [Name] Dated: 16 . ' EMPLOYMENT AGREEMENT Exhibit 10.29 This Employment Agreement (this "Agreement") is made as of this _6th day of October 2008, by and between ALPHA TECHNOLOGIES, Inc., a Washington corporation, with offices located at 3767 Alpha Way, Bellingham, WA 98226 (hereinafter called the "Corporation") and Andrew Zogby, residing at 15421 Harrow Lane, Poway, CA 92064 RECITALS A. The Corporation is engaged in the design, manufacture (through sub-contracts), and distribution of various products and technology relating to uninterruptible power supplies and power converters for the cable television and telecommunications industries and the Alternate Energy Market (the "Technology"). B. Executive wishes to accept such engagement on the terms and conditions described herein. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto agree as follows: AGREEMENT 1. EMPLOYMENT. The Corporation agrees to employ Executive, and Executive agrees to serve the Corporation. upon the terms and conditions hereinafter set forth. 2. TERM. The employment of Executive hereunder originally commenced on November 10th business on December 31st, 2012 (the "Termination Date"), unless sooner terminated in the manner hereinafter provided. , 2008, and shall terminate as of the close of 3. DUTIES AND EXTENT OF SERVICES. A. Duties. Executive shall be the President and COO of the Corporation with responsibility for management of the day to day affairs of the Corporation, and the management, coordination and overall development of the business of the Corporation, including managing its relationship with its vendors, sub-contractors. suppliers, licensors, distributors and others, and including product design, development and marketing, subject to the direction, oversight and approval of the Corporation's Board of Directors or Executive Committee. In addition Executive shall direct and supervise all officers, agents and employees of the Corporation (other than the Chairman of the Board), and shall see that all orders and resolutions of the Board of Directors and the Executive Committee are carried into effect. Executive shall also perform such other duties and exercise such other powers as the By-laws may provide or the Board of Directors or Executive Committee may assign. Executive agrees to serve on the Board of Directors and the Executive Committee of the Corporation, or on additional boards or committees. if elected or requested. B. Location. The principal place of employment of Executive shall be at the principal office of the Corporation located in Bellingham, Washington. 1 4. COMPENSATION. The Corporation shall pay to executive compensation comprised of the Salary and bonus as follows: A. The Corporation agrees to pay to Executive as compensation for all of the services to be rendered by Executive under or pursuant to this Agreement, a Salary at the rate of $ 240,000.00 US Dollars per annum (the “Salaryu). payable in accordance with the normal payroll practices of the Corporation. B. A performance based bonus of $150,000.00 per year will be paid based on objectives and goals to be determined jointly by the Executive and the Executive Committee. 5. EXECUTIVE BENEFITS. A. Vacation. Executive shall be entitled to 3 weeks' paid vacation in each year. The Corporation shall endeavor to be flexible in its administration of the vacation time available to Executive. In addition, Executive shall be entitled to sick leave in accordance with the Corporation's regular policies which at present provides for 5 days annually. B. Medical Plan. Executive shall be provided, with such health, accident and disability insurance plans as are generally provided to other executives of the Corporation. C. Additional Executive Benefit Plans. During the term of employment hereunder, Executive shall be entitled to participate, at the Corporation's expense, in all pension and retirement plans established by the Corporation for its employees and executive (to the extent permitted by the terms of those plans). D. Indemnification. The Corporation shall indemnify the Executive and hold him harmless in accordance with RCW 23B.08.510, et seq. as amended, to the maximum extent permitted by law and by the Articles of Incorporation and Bylaws of the Corporation, as amended, with respect to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or of any other nature, arising out of any act or omission by the Executive in carrying out his duties hereunder or as a Director of the Corporation (in the event he serves in such capacity); provided, however, that the Corporation shall not be required to provide such indemnification to the extent Executive receives payment therefore under any policy of insurance carried by the Corporation. 6. EXPENSES: PERQUISITES. A. Reimbursement: Vouchers. Subject to the Corporation's policies regarding the reimbursement and non-reimbursement of expenses, the Corporation shall reimburse Executive for all reasonable business expenses incurred by Executive in connection with his employment hereunder. The Executive shall submit to the Corporation such vouchers or expense statements satisfactorily evidencing such expenses as may be reasonably requested by the Corporation. 7. CONFIDENTIALITY: CORPORATION TO OWN INVENTIONS. 2 A. Acknowledgment of Proprietary Information. Executive acknowledges that he may become aware of information that is furnished by, or was created by, the Corporation or any of the Corporation's suppliers, vendors, subcontractors, licensors or other parties which have a contractual relationship with the Corporation (hereinafter, the "Disclosing Party"), which has commercial value and which is of a confidential nature or is marked as being confidential, or has not been publicly released by authorized representatives of the Dlscloslng Party. This information, includes, but is not limited to, designs, methods, inventions, improvements, trade secrets, processes, data and know-how, software programs, techniques, marketing plans, strategies, forecasts, business methods, copyrightable material and customer lists, whether in oral or written form ("confidential information"). B. Duty of Confldentlality. Executive agrees that all this confidential information is the sole property of the Disclosing Party, including all patents, copyrights or other rights in connection with that information, and promises not to use or disclose any of that Information, either during his employment by the Corporation or after its termination, without the written consent of the Disclosing Party, unless it is necessary in the ordinary course of performing his duties to the Corporation or the Disclosing party. Executive agrees, at the Disclosing Party's request, to execute any additional confidentiality agreements which may be required by the customers of the Disclosing Party in connection with specific customer contracts. In addition, Executive agrees that he shall deliver to the Disclosing Party all documents and materials which may contain such confidential information immediately when requested by the Disclosing Party. Moreover. if the Disclosing Party does not request it, Executive shall deliver to the Disclosing Party all manually or electronically written materials which may contain any confidential information upon the termination of his employment for any reason. Notwithstanding anything herein to the contrary, Executive may disclose confidential information in a court proceeding if he is ordered by a court to do so, provided he informs the court of the confidentiality obligations to which he is subject, and requests an appropriate protective order or disclosure in camera. C. Disclosure of Invention/Anticipated Research. Executive agrees to promptly disclose in writing to the Corporation any new designs, methods or processes, machines, product ideas or designs, methods or processes, computer programs or techniques ("inventions") which he makes or conceives during the term of his employment. He also shall disclose to the Corporation, in advance, any development of inventions which he plans to undertake during his employment if he desires to remove such endeavors from the operation of this Agreement. Executive understands that the Corporation cannot obligate him to assign certain inventions under the law. However, he shall make these disclosures for his own protection as well as for the protection of the Corporation. The Corporation shall promptly advise Executive whether any invention or anticipated development which he discloses relates to the Corporation's actual or demonstrably anticipated research and development. All disclosures shall be kept confidential by the Corporation. D. Ownership of Inventions. Executive agrees that all inventions which he develops either: (1) Using equipment, supplies, facilities or trade secret information of the Corporation; (2) During hours for which he was compensated by the Corporation; (3) Which relates to the business of the Corporation, or to Its actual or demonstrably anticipated research and development; or (4) Which results, in whole or in part, from work performed by Executive for the Corporation; shall be the sole property of the Corporation. or it's assigns, which shall also be the owner of all patents, copyrights, and 3'other rights in connection with the invention. Executive further agrees to assist the Corporation in every proper way, but at the Corporation's expense, to obtain and from time to time enforce patents, copyrights, and other rights in connection with such inventions and improvements in any way and all countries, and to that end Executive shall execute all documents for use in applying for and obtaining such patents and copyrights and for enforcing them as the Corporation may desire. Executive's obligation in this connection shall continue beyond the termination of his employment, but the Corporation shall compensate him at a reasonable rate after termination for time actually spent by him on behalf of the Corporation with respect to such assistance. The provisions of this paragraph 7.D. do not apply to any inventions for which no equipment, supplies, facilities or trade secret information of the Corporation were used and which was developed entirely on Executive's own time, unless the invention relates directly to (1) the business of the Corporation, or (2) the Corporation's actual or demonstrably anticipated results from any work performed by Executive for the Corporation. E. No Breach of Existing Agreement. Executive represents that his performance of all the terms of this paragraph 7 shall not breach any agreement to keep in confidence proprietary information acquired by him prior to his employment by the Corporation, nor violate any obligation he may have to any former employer. F. Non-Solicitation. Executive agrees that until 1 year from and after the termination or expiration of his employment by the Corporation, whereto pursuant to the terms of this Agreement or otherwise, and without regard to the reason for such termination of employment, he shall not: (1) directly or indirectly solicit, entice or induce any employee of the Corporation, or any of its subsidiary or affiliated companies, to be employed by any person, firm or corporation which is, directly or indirectly, in competition with the business activities of the Corporation, or any of its subsidiary or affiliated companies; or (2) directly or indirectly approach any such employee for these purposes; or (3) authorize or knowingly assist in the taking of such actions by other persons on behalf of any such person. firm or corporation. G. Conflicting Interest. Executive agrees that during the term of his employment by the Corporation, whether under this Agreement or otherwise, he shall not at any time, except with the express prior consent of the Board of Directors or the Chairman of the Board, enter into, on behalf of the Corporation, or any of its subsidiaries or afflliated companies, or cause the Corporation or any of its subsidiaries or affiliated companies to enter into, directly or indirectly, any transactions with any business or investment organization in which he or any member of his Immediate family may be interested as a partner, trustee, director, officer, employee, shareholder, lender of money, beneficiary, or guarantor. 8. NON COMPETITION. A. Executive hereby agrees and understands that this non-competition is a condition of employment with the Corporation that he shall not, until 1 year after the termination or expiration of his employment by the Corporation, whether pursuant to the terms of this Agreement or otherwise, and without regard to the reason for such termination, directly or indirectly engage or be interested in any business which Is competitive with the business of the Corporation, or any of its subsidiaries or affiliates, including any line of business which utilizes the Technology. Executive shall be deemed to be directly or indirectly interested in a business if he shall be engaged or interested in such business as a stockholder. director, officer, employee, salesman, sales representative, agent, broker, partner. individual proprietor, lender. consultant or otherwise, but not if such interest is limited solely to the ownership of 5% or less of the equity or debt securities of any Corporation whose shares are listed for tracking on a national securities exchange or quoted in the National Association of Securities Dealers automated quotation system. 9. INJUNCTIVE REUEF. Executive acknowledges that the services to be rendered by him hereunder are of a special, unique and extraordinary character and that it would be very difficult or impossible to replace such services and further that irreparable injury would be sustained by the Corporation and its subsidiary or affiliated companies in the event of a violation by Executive of any of the provisions of paragraphs 7 and 8 of this Agreement, and by reason thereof Executive consents and agrees that If he violates any of the provisions of this Agreement, the Corporation shall be entitled to an injunction to be issued by any court of competent jurisdiction restraining him from committing or continuing any violation of this Agreement. 10. TERMINATION. In the event of Executive's death or total disability (which for purposes hereof shall mean inability of Executive to perform his duties for a A. period of 60 or more days during a 12 month period), this Agreement shall terminate (in the case of total disability, effective only upon notice by Corporation) and the Corporation shall within 30 days of such termination, pay to Executive or his estate Executive's Salary to the effective date of termination. The Corporation may, effective only upon notice, terminate the employment of Executive for cause (which shall mean only gross negligence B. or willful misconduct in connection with the performance of Executive's duties hereunder, immoral actions or behavior by Executive, or criminal prosecution or conviction, or the voluntary resignation of Executive prior to the expiration of the term hereof, other than by reason of a default by the Corporation hereunder, in which case Executive shall be entitled to his Salary to the effective date of termination (which shall be paid within 30 days of such termination), but shall be entitled to no further compensation accruing after the effective date of termination. C. The Corporation may, effective only upon notice, terminate the employment of Executive without cause (as defined above), in which case the Corporation shall, within 30 days of such termination, pay to Executive his Salary to the effective date of termination, together with a lump-sum payment equal to 6 months of his then current base Salary. If a change of control as defined in Paragraph 10 E has taken place, then the lump-sum payment will be equal to a 0.5 multiple of the annual base Salary immediately prior to the change of control. In addition, if a change of control does take place during the term of this agreement, the Executive will be deemed fully vested in the Supplemental Executive Bonus Plan when applicable and active. D. The Corporation and the Executive each have as their sole right, the option to negotiate the renewal of this agreement at the end of the term as provided for in paragraph 2. Should the Corporation fail to offer to renew or extend the agreement at substantially the same terms and conditions as the original agreement, the Corporation shall pay a lump-sum payment equal to 2 months of the Executive's then current Salary. If the Corporation exercises it's right to not renew or extend the agreement and a change of control as defined in paragraph 10 E has taken place, the Corporation shall pay a lump-sum payment equal to 6 months of the Executive's then current monthly Salary. E. Change of control shall mean for purposes of termination, the transfer of ownership and control of the Board of Directors or Executive Committee from Mr. Fred Kaiser to any other parties, corporation, partnerships, etc., outside his direct control or the replacement of or change of reporting relationship of the Presi5ent and Chief Operating Officer. F. The payment described in this paragraph 10 are and shall be Executive's sole compensation with respect to termination, and shall constitute Executive's sole and exclusive remedy, in lieu of all rights and claims of Executive, at law or in equity, with respect to a claim of wrongful termination by the Corporation. 11. NO CONFLICTING AGREEMENTS. Executive represents and warrants that he is not a party to any agreement, contract or understanding, whether employment or otherwise which would in any way restrict or prohibit him from undertaking or performing employment in accordance with the terms and conditions of this Agreement. 12. ENTIRE AGREEMENT. This Agreement set forth the entire understanding of the parties with respect to the employment of Executive hereunder, and no statement, representation, warranty or covenant has been made by either party except as expressly set forth herein. This Agreement shall not be changed or terminated orally. This Agreement supersedes and cancels au prior agreements between the parties, whether written or oral, relating to the employment of Executive. and supersedes and cancels the Consultant Agreement, but it does not supersede or cancel any previous confidentiality or non-disclosure agreements, the terms and restriction of which shall continue to apply to Executive, except to the extent of any inconsistency with the terms and provisions of this Agreement. 13. APPLICABLE LAW: JURISDICTION. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Washington, as applied to residents of that state. Jurisdiction and venue for any action interpreting or enforcing this Agreement shall lie exclusively in the Federal District Court for the Western District of Washington. 14. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed, first class, postage prepaid, certified mail, return receipt requested, to each of the parties at it's or his address above written or at such other address as either of the parties may designate in conformity with the foregoing. 15. BINDING AGREEMENT. Executive shall not delegate or assign any of his rights or obligations under this Agreement. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of, and be enforceable by, the Executive and his heirs and personal representatives and the Corporation and its successors and assigns. 16. SEVERABILITY. 17. If, at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall not impair the enforceability of any other provision of this Agreement. 18. SURVIVAL. 6 The provisions of paragraphs 7, 8, 9 and 13 shall survive the termination hereof. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the date first above written. Corporation: Executive: ALPHA TECHNOLOGIES, INC. By: /s/ F. Kaiser /s/ Andrew M. Zogby Its: Chairman & CE 10-07-08 7 Exhibit 10.30 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") is made as of this 13th day of September 2012 by and between Alpha Technologies, Inc, a Washington corporation, with offices located at 3767 Alpha Way, Bellingham, WA 98226 (hereinafter called the "Corporation") and Andrew Zogby, residing at 5 Catkin Court, Bellingham WA 98229. RECITALS A. The Corporation is engaged in the design, manufacture (through sub-contracts}, and distribution of various products and technology relating to uninterruptible power supplies and power converters for the cable television and telecommunications industries (the "Technology"). B. Executive wishes to accept such engagement on the terms and conditions described herein. NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained, the parties hereto agree as follows: AGREEMENT 1. EMPLOYMENT. The Corporation agrees to employ Executive, and Executive agrees to serve the Corporation, upon the terms and conditions hereinafter set forth. 2. TERM. The employment of Executive hereunder originally commenced on November 1st, 2008, and extended effective January 1st, 2013 and shall terminate as of the close of business on December 31st, 2017 (the "Termination Date"), unless sooner terminated in the manner hereinafter provided. 3. DUTIES AND EXTENT OF SERVICES. A. Duties. Executive shall be the President and COO of the Corporation with responsibility for management of the day to day affairs of the Corporation, and the management, coordination and overall development of the business of the Corporation, including managing its relationship with its vendors, sub-contractors, suppliers, licensors, distributors and others, and including product design, development and marketing, subject to the direction, oversight and approval of the Corporation's Board of Directors or Executive Committee. In addition Executive shall direct and supervise all officers, \ agents and employees of the Corporation (other than the Chairman of the Board), and shall see that all orders and resolutions of the Board of Directors and the Executive Committee are carried into effect. Executive shall also perform such other duties and exercise such other powers as the By-laws may provide or the Board of Directors or Executive Committee may assign. Executive agrees to serve on the Board of Directors and the Executive Committee of the Corporation, or on additional boards or committees, if elected or requested. B. Location. The principal place of employment of Executive shall be at the facilities located in Bellingham, Washington. 1 4. COMPENSATION. The Corporation shall pay to executive compensation comprised of the Salary and bonus as follows: A. The Corporation agrees to pay to Executive as compensation for all of the services to be rendered by Executive under or pursuant to this Agreement, a Salary at the rate of $348,000 US dollars per annum (the "Salary"), payable in accordance with the normal payroll practices of the Corporation. B. A performance bonus of $150,000 per year will be paid based on objectives and goals to be determined jointly by the Executive and the Executive Committee. 5. EXECUTIVE BENEFITS. A. Vacation. Executive shall be entitled to 4 weeks paid vacation in each year. The Corporation shall endeavor to be flexible in its administration of the vacation time available to Executive. In addition, Executive shall be entitled to '. " sick leave in accordance with the Corporation's regular policies which at present provides for 5 days annually. B. Medical Plan. Executive shall be provided, with such health, accident and disability insurance plans as are generally provided to other executives of the Corporation. C. Additional Executive Benefit Plans. During the term of employment hereunder, Executive shall be entitled to participate, at the Corporation's expense, in all standard pension and retirement plans established by the Corporation for its employees and executive (to the extent permitted by the terms of those plans). D. Indemnification. The Corporation shall indemnify the Executive and hold him harmless in accordance with RCW 23B.08.510, et seq. as amended, to the maximum extent permitted by law and by the Articles of Incorporation and Bylaws of the Corporation, as amended, with respect to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or of any other nature, arising out of any act or omission by the Executive in carrying out his duties hereunder or as a Director of the Corporation (in the event he serves in such capacity}; provided, however, that the Corporation shall not be required to provide such indemnification to the extent Executive receives payment therefore under any policy of insurance carried by the Corporation. 6. EXPENSES: PERQUISITES. A. Reimbursement: Vouchers. Subject to the Corporation's policies regarding the reimbursement and non- reimbursement of expenses, the Corporation shall reimburse Executive for all reasonable business expenses incurred by Executive in connection with his employment hereunder. The Executive shall submit to the Corporation such vouchers or expense statements satisfactorily evidencing such expenses as may be reasonably requested by the Corporation. 7. CONFIDENTIALITY: CORPORATION TO OWN INVENTIONS. 2 A. Acknowledgment of Proprietary Information. Executive acknowledges that he may become aware of information that is furnished by, or was created by, the Corporation or any of the Corporation's suppliers, vendors, subcontractors, licensors or other parties which have a contractual relationship with the Corporation (hereinafter, the "Disclosing Party"), which has commercial value and which is of a confidential nature or is marked as being confidential, or has not been publicly released by authorized representatives of the Disclosing Party. This information, includes, but is not limited to, designs, methods, inventions, improvements, trade secrets, processes, data and know-how, software programs, techniques, marketing plans, strategies, forecasts, business methods, copyrightable material and customer lists, whether in oral or written form (“confidential information"). B. Duty of Confidentiality. Executive agrees that all this confidential information is the sole property of the Disclosing Party, including all patents, copyrights or other rights in connection with that information, and promises not to use or disclose any of that information, either during his employment by the Corporation or after its termination, without the written consent of the Disclosing Party, unless it is necessary in the ordinary course of performing his duties to the Corporation or the Disclosing party. Executive agrees, at the Disclosing Party's request, to execute any additional confidentiality agreements which may be required by the customers of the Disclosing Party in connection with specific customer contracts. In addition, Executive agrees that he shall deliver to the Disclosing Party all documents and materials which may contain such confidential information immediately when requested by the Disclosing Party. Moreover, if the Disclosing Party does not request it, Executive shall deliver to the Disclosing Party all manually or electronically written materials which may contain any confidential information upon the termination of his employment for any reason. Notwithstanding anything herein to the contrary, Executive may disclose confidential information in a court proceeding if he is ordered by a court to do so, provided he informs the court of the confidentiality obligations to which he is subject, and requests an appropriate protective order or disclosure in camera. C. Disclosure of Invention/Anticipated Research. Executive agrees to promptly disclose in writing to the Corporation any new designs, methods or processes, machines, product ideas or designs, methods or processes, computer programs or techniques ("inventions") which he makes or conceives during the term of his employment. He also shall disclose to the Corporation, in advance, any development of inventions which he plans to undertake during his employment if he desires to remove such endeavors from the operation of this Agreement. Executive understands that the Corporation cannot obligate him to assign certain inventions under the law. However, he shall make these disclosures for his own protection as well as for the protection of the Corporation. The Corporation shall promptly advise Executive whether any invention or anticipated development which he discloses relates to the Corporation's actual or demonstrably anticipated research and development. All disclosures shall be kept confidential by the Corporation. D. Ownership of Inventions. Executive agrees that all inventions which he develops either: (1) Using equipment, supplies, facilities or trade secret information of the Corporation; (2) During hours for which he was compensated by the Corporation; (3) Which relates to the business of the Corporation, or to its actual or demonstrably anticipated research and development; or (4) Which results, in whole or in part, from work performed by Executive for the Corporation; shall be the sole property of the Corporation, or it's assigns, which shall also be the owner of all patents, copyrights, and other rights in connection with the invention. Executive further agrees to assist the Corporation in every proper way, but at the Corporation's expense, to obtain and from time to time enforce patents, copyrights, and other rights in connection with such inventions and improvements in any way and all countries, and to that end Executive shall execute all documents for use in applying for and obtaining such patents and copyrights and for enforcing them as the Corporation may desire. Executive's obligation in this connection shall continue beyond the termination of his employment, but the Corporation shall compensate him at a reasonable rate after termination for time actually spent by him on behalf of the Corporation with respect to such assistance. The provisions of this paragraph 7.D. do not apply to any inventions for which no equipment, supplies, facilities or trade secret information of the Corporation were used and which was developed entirely on Executive's own time, unless the invention relates directly to (1) the business of the Corporation, or (2) the Corporation's actual or demonstrably anticipated results from any work performed by Executive for the Corporation. E. No Breach of Existing Agreement. Executive represents that his performance of all the terms of this paragraph 7 shall not breach any agreement to keep in confidence proprietary information acquired by him prior to his employment by the Corporation, nor violate any obligation he may have to any former employer. F. Non Solicitation. Executive agrees that until 1 year from and after the termination or expiration of his employment by the Corporation, whereto pursuant to the terms of this Agreement or otherwise, and without regard to the reason for such termination of employment, he shall not: (1) directly or indirectly solicit, entice or induce any employee of the Corporation, or any of its subsidiary or affiliated companies, to be employed by any person, firm or corporation which is, directly or indirectly, in competition with the business activities of the Corporation, or any of its subsidiary or affiliated companies; or (2) directly or indirectly approach any such employee for these purposes; or (3) authorize or knowingly assist in the taking of such actions by other persons on behalf of any such person, firm or corporation. G. Conflicting Interest. Executive agrees that during the term of his employment by the Corporation, whether under this Agreement or otherwise, he shall not at any time, except with the express prior consent of the Board of Directors or the Chairman of the Board, enter into, on behalf of the Corporation, or any of its subsidiaries or affiliated companies, or cause the Corporation or any of its subsidiaries or affiliated companies to enter into, directly or indirectly, any transactions with any business or investment organization in which he or any member of his immediate family may be interested as a partner, trustee, director, officer, employee, shareholder, lender of money, beneficiary, or guarantor. 8. NON-COMPETITION. A. Executive hereby agrees and understands that this non-competition is a condition of employment with the Corporation that he shall not, until 1 year after the termination or expiration of his employment by the Corporation, whether pursuant to the terms of this Agreement or otherwise, and without regard to the reason for such termination, directly or indirectly engage or be interested in any business which is competitive with the business of the Corporation, or any of its subsidiaries or affiliates, including any line of business which utilizes the Technology. Executive shall be deemed to be directly or indirectly interested in a business if he shall be engaged or interested in such, business as a stockholder, director, officer, employee, salesman, sales representative, agent, broker, partner, individual proprietor, lender, consultant or otherwise, but not if such interest is limited solely to the ownership of 5% or less of the equity or debt securities of any Corporation whose shares are listed for tracking on a national securities exchange or quoted in the National Association of Securities Dealers automated quotation system. 9. INJUNCTIVE RELIEF. Executive acknowledges that the services to be rendered by him hereunder are of a special, unique and extraordinary character and that it would be very difficult or impossible to replace such services and further that irreparable injury would be sustained by the Corporation and its subsidiary or affiliated companies in the event of a violation by Executive of any of the provisions of paragraphs 7 and 8 of this Agreement, and by reason thereof Executive consents and agrees that if he violates any of the provisions of this Agreement, the Corporation shall be entitled to an injunction to be issued by any court of competent jurisdiction restraining him from committing or continuing any violation of this Agreement. 10. TERMINATION. A. In the event of Executive's death or total disability (which for purposes hereof shall mean inability of Executive to perform his duties for a period of 60 or more days during a 12 month period), this Agreement shall terminate (in the case of total disability, effective only upon notice by Corporation) and the Corporation shall within 30 days of such termination, pay to Executive or his estate Executive's Salary to the effective date of termination. The Corporation may, effective only upon notice, terminate the employment of Executive for cause (which B. shall mean only gross negligence or willful misconduct in connection with the performance of Executive's duties hereunder, immoral actions or behavior by Executive, or criminal prosecution or conviction, or the voluntary resignation of Executive prior to the expiration of the term hereof, other than by reason of a default by the Corporation hereunder, in which case Executive shall be entitled to his Salary to the effective date of termination (which shall be paid within 30 days of such termination), but shall be entitled to no further compensation accruing after the effective date of termination. The Corporation may, effective only upon notice, terminate the employment of Executive without cause C. (as defined above), in which case the Corporation shall, within 30 days of such termination, pay to Executive his Salary to the effective date of termination, together with a lump-sum payment equal to 12 months of his then current monthly Salary. If a change of control as defined in Paragraph 10 E has taken place, then the lump-sum payment will be equal to a 1 multiple of the annual base Salary immediately prior to the change of control. D. E. F. The Corporation and the Executive each have as their sole right, the option to negotiate the renewal of this agreement at the end of the term as provided for in paragraph 2. Should the Corporation fail to offer to renew or extend the agreement at substantially the same terms and conditions as the original agreement, the Corporation shall pay a lump-sum payment equal to 2 months of the Executive's then current monthly Salary. If the Corporation exercises it's right to not renew or extend the agreement and a change of control as defined in paragraph 10 E has taken place, the Corporation shall pay a lump-sum payment equal to 12 months of the Executive's then current monthly Salary. Change of control shall mean for purposes of termination, the transfer of ownership and control of the Board of Directors or Executive Committee from Mr. Fred Kaiser to any other parties, corporation, partnerships, etc., outside his direct control or the replacement of or change of reporting relationship of the President and Chief Operating Officer. Excluded shall be any change of control to another Alpha Group company or the Kaiser/Bosari Foundation. 5 The payment described in this paragraph 10 are and shall be Executive's sole compensation with respect to termination, and shall constitute Executive's sole and exclusive remedy, in lieu of all rights and claims of Executive, at law or in equity, with respect to a claim of wrongful termination by the Corporation. 11. NO CONFLICTING AGREEMENTS. Executive represents and warrants that he is not a party to any agreement, contract or understanding, whether employment or otherwise which would in any way restrict or prohibit him from undertaking or performing employment in accordance with the terms and conditions of this Agreement. 12. ENTIRE AGREEMENT. This Agreement set forth the entire understanding of the parties with respect to the employment of Executive hereunder, and no statement, representation, warranty or covenant has been made by either party except as expressly set forth herein. This Agreement shall not be changed or terminated orally. This Agreement supersedes and cancels all prior agreements between the parties, whether written or oral, relating to the employment of Executive, and supersedes and cancels the Consultant Agreement, but it does not supersede or cancel any previous confidentiality or non-disclosure agreements, the terms and restriction of which shall continue to apply to Executive, except to the extent of any inconsistency with the terms and provisions of this Agreement. 13. APPLICABLE LAW; JURISDICTION. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Washington, as applied to residents of that state. Jurisdiction and venue for any action interpreting or enforcing this Agreement shall lie exclusively in the Federal District Court for the Western District of Washington. 14. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed, first class, postage prepaid, certified mail, return receipt requested, to each of the parties at it's or his address above written or at such other address as either of the parties may designate in conformity with the foregoing. 15. BINDING AGREEMENT. Executive shall not delegate or assign any of his rights or obligations under this Agreement. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of, and be enforceable by, the Executive and his heirs and personal representatives and the Corporation and its successors and assigns. 16. SEVERABILITY. If, at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall not impair the enforceability of any other provision of this Agreement. 17. SURVIVAL. 6 The provisions of paragraphs 7, 8, 9 and 13 shall survive the termination hereof. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the date first above written. Corporation: Executive: ALPHA TECHNOLOGIES, INC. By: /s/ F. Kaiser /s/ Andrew M. Zogby 09/13/12 Its: Chairman & CE 7 Employment Agreement Extension ALPHA TECHNOLOGIES Exhibit 10.31 Alpha Technologies, Inc., a Washington corporation (the "Corporation") and Andrew Zogby enter into this Employment Extension Agreement effective June 27, 2017 (the "Extension"). A. The Corporation employed Zogby beginning on November 10, 2008. The Corporation and Employee entered Employment Agreements on October 6, 2008 and on September 13, 2012. B. The Corporation and Employee desire to continue their employment under this Extension's terms and conditions. Recitals The Corporation and Employee agree to the following terms. Agreement 1. 2. 3. 4. Section 2. Modified Term. The Corporation and Employee are currently parties to a September 12, 2012 Employment Agreement (the "Employment Agreement") that includes a December 31, 2017 termination date. The Corporation and Employee agree to extend the Employment Agreement's termination date from December 31, 2017 until December 31, 2022. Section 4. Compensation. Salary is $440,000 USO per annum. Performance Bonus is $350,000 USO per annum. Section 10 D. Termination. Should the Corporation fail to offer to renew or extend the agreement at substantially the same terms and conditions as the original agreement, the Corporation shall pay a lump sum payment equal to 12 months of the Executive's then current monthly salary. All Other Terms Unchanged. The Corporation and Employee agree that all other terms of the Employment Agreement shall remain unchanged with the sole exception of the modified termination date. The Corporation and the Employee agree to these terms on the dates listed below. Alpha Technologies, Inc., a Washington Corporation By: /s/ F. Kaiser Its: CEO /s/ Andrew M. Zogby Dated: 25 July 2017 ASSIGNMENT OF EMPLOYMENT CONTRACT Exhibit 10.32 FOR VALUE RECEIVED, the undersigned Assignor hereby assigns, transfers and sets over to Alpha Technologies Services, Inc. (Assignee) all rights, title and interest held by the Assignor in and to the following described contract: Employment Contract by and between Mr. Andrew Zogby and Alpha Technologies, Inc. dated 6 October 2008, and subsequently renewed. The Assignor warrants and represents that said contract is in full force and effect and is fully assignable. The Assignee hereby assumes and agrees to perform all the remaining and executory obligations of the Assignor under the contract and agrees to indemnify and hold the Assignor harmless from any claim or demand resulting from non-performance by the Assignee. The Assignee shall be entitled to all money remaining to be paid under the contract, which rights are also assigned hereunder. The Assignor warrants that the contract is without modification, and remains on the terms contained. The Assignor further warrants that it has full right and authority to transfer said contract and that the contract rights herein transferred are free of lien, encumbrance or adverse claim. This assignment shall be binding upon and inure to the benefit of the parties, their successors and assigns. Signed this 6th day of December, 2018. Assignor Alpha Technologies, Inc. John O'Rourke, Secretary/Treasurer ENERSYS Subsidiaries Exhibit 21.1 EnerSys Argentina S.A. EnerSys Australia Pty Ltd. ICS Industries Pty Ltd. ICS Sheet Metal Pty Ltd. International Communication Shelters Australasia Pty Ltd. Lancord Pty Ltd. Lenmic Pty Ltd. National Infrastructure Pty Ltd. National Infrastructure Services Pty Ltd. Powercom (NSW) Pty Ltd. Alpha Technologies Pty. Ltd. EnerSys GmbH EnerSys BVBA EnerSys Brasil Ltda. EnerSys Participacoes Ltda. Industrial Battery Holding Ltda. Alpha Innovations Industria e Comercio de Produtos Eletronicos Ltda. EnerSys AD (99.8%) * EnerSys Canada Inc. Alpha Technologies Ltd. Argus Research Ltd. Alpha Technical Services Ltd. EnerSys Cayman Euro L.P. EnerSys Cayman Holdings L.P. EnerSys Cayman Inc. YCI, Inc. EnerSystem Chile Ltda. EnerSys (Chaozhou) Huada Batteries Company Limited EnerSys (China) Huada Batteries Company Limited EnerSys (Chongqing) Huada Batteries Company Limited EnerSys (Jiangsu) Huada Batteries Company Limited (94.7%) * EnerSys (Yangzhou) Huada Batteries Co. Ltd. Shenzhen Huada Power Supply Mechanical & Electrical Co. Ltd. Alphatec Technologies (Shenzhen) Co. Ltd. SiteTel Shanghai Co Ltd. EnerSys, s.r.o. EnerSys A/S EnerSys Europe Oy EnerSys SARL Hawker GmbH Argentina Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Austria Belgium Brazil Brazil Brazil Brazil Bulgaria Canada Canada Canada Canada Cayman Islands Cayman Islands Cayman Islands Cayman Islands Chile China China China China China China China China Czech Republic Denmark Finland France Germany EnerSys AE EnerSys Asia Limited Telecomponents & Supply (Hong Kong) Ltd. EnerSys Hungária Kft. EnerSys Battery Private Limited EnerSys India Batteries Private Ltd. Alpha Tech Energy Solutions India Private Limited EnerSys S.r.l. EnerSys Holdings (Luxembourg) Sarl EnerSys Luxembourg Finance Sarl DCPM Engineering Sdn Bhd EnerSys Malaysia Sdn Bhd MIB Energy Sdn Bhd UTS Holdings Sdn Bhd UTS Technology (JB) Sdn Bhd UTS Technology (PG) Sdn Bhd EnerSys de Mexico, S de R.L. de CV EnerSys de Mexico II, S de R.L. de CV Powersonic, S de R.L. de CV Yecoltd, S. de R.L. de CV Batterias Hawker de Mexico S. de R.L. de C.V. Alpha Mexico Network Power S.A. de C.V. Riverfront Holding S. de R.L. de C.V. Alpha Innovations Mexico S. de R.L. de C.V. ENAS Industrial Batteries Morocco Sarl EnerSys AS EnerSys sp. z o.o. EnerSys CJSC Battery Power International Pte Ltd. EnerSys Reserve Power Pte. Ltd. EnerSys South East Asia Pte. Ltd. NaviSemi Energy Pte Ltd. EnerSys, s.r.o. Acumuladores Industriales EnerSys SA EnerSys AB Purcell Systems International AB N Holding AB SiteTel Sweden AB EH Batterien AG EH Europe GmbH EH Global Holdings GmbH EH Swiss Holdings GmbH EnerSys BV Enersys Akü Sanaya Dis Ticaret Limited Sirketi EnerSys LLC NorthStar Battery DMCC Greece Hong Kong Hong Kong Hungary India India India Italy Luxembourg Luxembourg Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Mexico Mexico Mexico Mexico Mexico Mexico Mexico Mexico Morocco Norway Poland Russia Singapore Singapore Singapore Singapore Slovak Republic Spain Sweden Sweden Sweden Sweden Switzerland Switzerland Switzerland Switzerland The Netherlands Turkey Ukraine United Arab Emirates ABSL Power Solutions Ltd. EnerSys Holdings UK Ltd. EnerSys Ltd. NaviSemi Inc. ABSL Power Solutions Inc. EnerSys Advanced Systems Inc. EnerSys Capital Inc. EnerSys Delaware Inc. EnerSys Delaware LLC I EnerSys Delaware LLC II EnerSys Delaware LLC III EnerSys Delaware LLC IV EnerSys Delaware LLC V EnerSys Energy Products Inc. EnerSys European Holding Co. EnerSys Mexico Holdings LLC EnerSys Mexico Management LLC Esfinco,LLC Hawker Powersource, Inc. Hawker Power Systems, Inc. Purcell Systems, Inc. Quallion LLC NorthStar Battery Company, LLC New Pacifico Realty, Inc. Alpha Technologies Services, Inc. Alpha Broadband Services Inc. Alpha Alternative Energy Inc. Cooperative Enterprises Inc. Outback Power Technologies, Inc. * These entities are majority-owned by EnerSys with the remaining interests held by third parties. United Kingdom United Kingdom United Kingdom California Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Delaware Missouri Nevada Nevada Nevada Nevada Washington Washington Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1) Registration Statement (Form S-8 No. 333-226712) pertaining to the EnerSys 2018 Employee Stock Purchase Plan, (2) Registration Statement (Form S-8 No. 333-219838) pertaining to the EnerSys 2017 Equity Incentive Plan, and (3) Registration Statement (Form S-8 No. 333-168717) pertaining to the EnerSys 2010 Equity Incentive Plan; of our reports dated June 1, 2020, with respect to the consolidated financial statements and schedule of EnerSys and the effectiveness of internal control over financial reporting of EnerSys included in this Annual Report (Form 10-K) of EnerSys for the year ended March 31, 2020. Exhibit 23.1 /s/ Ernst & Young LLP Philadelphia, Pennsylvania June 1, 2020 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934 EXHIBIT 31.1 I, David M. Shaffer, certify that: 1. 2. 3. 4. 5. I have reviewed this Annual Report on Form 10-K of EnerSys; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and (b) (c) (d) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. (b) Date: June 1, 2020 ENERSYS By /s/ David M. Shaffer David M. Shaffer Chief Executive Officer CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934 EXHIBIT 31.2 I, Michael J. Schmidtlein, certify that: 1. 2. 3. 4. 5. I have reviewed this Annual Report on Form 10-K of EnerSys; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and (b) (c) (d) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. ENERSYS By /s/ Michael J. Schmidtlein Michael J. Schmidtlein Chief Financial Officer (b) Date: June 1, 2020 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18. U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 EXHIBIT 32.1 I certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of EnerSys on Form 10-K for the fiscal year ended March 31, 2020 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-K fairly presents, in all material respects, the financial condition and results of operations of EnerSys. ENERSYS By /s/ David M. Shaffer David M. Shaffer Chief Executive Officer By /s/ Michael J. Schmidtlein Michael J. Schmidtlein Chief Financial Officer Date: June 1, 2020 

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