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, 2026 and 2025, 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 and analysis of our results of operations and financial condition for the fiscal years ended March 31, 2025 and 2024, has been omitted from this Form 10-K and can be found in Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2025. 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 and adjusted EBITDA in evaluating its financial performance. 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.
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 a world leader in stored energy solutions for industrial applications. We design, manufacture, and distribute energy systems solutions, and motive power batteries, specialty batteries, battery chargers, power equipment, battery accessories and outdoor equipment enclosure solutions to customers worldwide. Energy Systems, which combine power conversion, power distribution, energy storage, and enclosures, are used in the telecommunication, broadband, data center, and utility industries, uninterruptible power supplies, and numerous applications requiring stored energy solutions. Motive Power batteries and chargers are utilized in electric forklifts, automated guided vehicles ("AGVs"), and other industrial electric powered vehicles. Specialty batteries are used in aerospace and defense applications, large over-the-road trucks, premium automotive, portable power solutions for soldiers in the field, medical and security systems applications. New Ventures provides energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles. We also provide aftermarket and customer support services to over 10,000 customers in more than 100 countries through a network of distributors, independent representatives, and our internal sales force around the world.
The Company's chief operating decision maker, or CODM (the Company's Chief Executive Officer), reviews financial information for purposes of assessing business performance and allocating resources, by focusing on the lines of business on a global basis. The Company excludes certain items that are not included in the segment performance as these are managed and viewed on a consolidated basis. The Company identifies the following as its four operating segments, based on lines of business:
• Energy Systems - uninterruptible power systems, or “UPS” applications for computer and computer-controlled systems, as well as telecommunications systems, switchgear and electrical control systems used in industrial facilities and electric utilities, large-scale energy storage and energy pipelines. Energy Systems also includes highly integrated power solutions and services to broadband, telecom, data center, and industrial customers, as well as thermally managed cabinets and enclosures for electronic equipment and batteries.
• Motive Power - power for electric industrial forklifts, AGVs other material handling equipment used in manufacturing, and warehousing operations, as well as equipment used in floor care, mining, rail and airport ground support applications.
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• Specialty - premium starting, lighting and ignition applications in transportation, energy solutions for satellites, spacecraft, commercial aircraft, military, aircraft, submarines, ships, other tactical vehicles, defense applications and portable power solutions for soldiers in the field, as well as medical devices and equipment.
• New Ventures - energy storage and management systems for demand charge reduction, utility back-up power, and dynamic fast charging for electric vehicles.
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, 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 operating capital levels.
Our management structure, financial reporting systems, and associated internal controls and procedures, are all consistent with our four lines of business. 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.
Current Market Conditions
Economic Climate
Global economic conditions are mixed with the impacts from the uncertainty surrounding U.S. tariffs, elevated interest rates and heightened geopolitical tensions having various levels of impacts in North America, China and EMEA. On February 1, 2025, the U.S. signed an executive order, effective February 3, 2025, whereby the U.S. will apply additional tariffs on imported goods from Canada, Mexico, and China. Since that announcement, the tariffs to be applied to these three countries, and others, were suspended and/or renegotiated several times with varying results and some new negotiations delayed to take effect until later dates. The impact of the U.S. tariffs and retaliatory actions by other countries could be substantial. We are currently assessing the impacts these tariffs could have on the organization, and we believe that the international nature of our organizational structure will allow us to mitigate some of the financial impact of these potential tariffs.
The war in Ukraine continues to have widespread economic repercussions, particularly in Europe. The ongoing Israel-Hamas conflict is disrupting stability in the Middle East, raising significant concerns about the potential for further escalation across the region.
Inflation in North America, China and EMEA, while more controlled compared to the sharp increases in 2023, remains a challenge despite some cooling in the U.S. and Europe through 2024 and 2025. After reducing rates three consecutive times in 2025, the Fed held the policy rate steady at 3.50%–3.75% in January 2026, citing improving economic activity and stabilizing unemployment. After several rate cuts the European Central Bank (ECB) has held their main interest rates stable since June 2025. While these are incrementally positive actions toward deflation, both economies continue to face uncertainties such as potential tariffs and policy changes from a new presidential administration in the U.S. and potential global trade frictions, macroeconomic fragmentation and geopolitical tensions the euro area. Policy actions in China signal a shift towards more proactive fiscal measures to stabilize consumption and support economic growth. While increasing travel and consumer spending due to relaxed COVID policies have provided some bright spots in 2024 and 2025, China's economy continues to face from a real estate market and exports.
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The supply chain is generally stable, however, the ongoing Israel-Hamas conflict has periodically disrupted some shipments in the Red Sea. As a result, some ocean freight costs and transit times may temporarily increase until shipping in the region returns to normal. Generally, our mitigation efforts and ongoing lean initiatives have tempered the impact of broad market challenges.
The market demand in the forklift truck and Class 8 truck markets have been impacted by tariff policy uncertainty, causing some customers to pause larger projects and general spending activity until there is more clarity on global tariff impacts to their supply chains. The data center and communications markets tend to be less sensitive to tariff policy, with budget and spending plans based on their unique capital spending needs. The data center market is in the midst of a growth cycle driven by AI and increasing digitization. The communications market is currently in a modest, but slow spending recovery as investments in maintenance and network build outs are necessary to support the increased data required to be moved through their infrastructure. Global defense budgets are increasing in response to rising geopolitical tensions. Spending in EMEA has increased at a higher rate than in the US, as large program spending has outpaced sustainment spending with the U.S. Department of War.
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. In the fiscal year 2026, we have experienced a range in lead prices from approximately $0.85 per pound to $0.95 per pound. Costs in some of our other raw materials such as steel, acid, separator paper and electronics have moderated since the middle of fiscal year 2024, but we have seen some price increases in other raw materials such as copper and antimony since the beginning of fiscal year 2026.
Customer Pricing
Our selling prices fluctuated during the last several years to offset the volatile cost of commodities. Approximately 25% of our revenue is now subject to agreements that adjust pricing to a market-based index for lead. Customer pricing changes generally lag movements in lead prices and other costs by approximately six to nine months. In fiscal 2025 and 2026, customer pricing increased due to certain commodity prices and other costs having increased throughout the year.
Based on current commodity markets, it is difficult to predict with certainty whether commodity prices will be higher or lower in fiscal 2026 versus fiscal 2025. However, given the lag related to increasing our selling prices for inflationary cost increase, on average our selling prices should be higher in fiscal 2026 versus fiscal 2025. As we concentrate more on energy systems and non-lead chemistries, the emphasis on lead is expected to continue to decline.
Primary Operating Capital
As part of managing the performance of our business, we monitor the level of primary operating capital, and its ratio to net sales. We define primary operating capital as accounts receivable, plus inventories, minus accounts payable. The resulting net amount is divided by the trailing three month net sales (annualized) to derive a primary operating capital percentage. We believe these three elements included in primary operating capital are most operationally driven, and this performance measure provides us with information about the asset intensity and operating efficiency of the business on a company-wide basis that management can monitor and analyze trends over time. Primary operating capital was $876.6 million (yielding a primary operating capital percentage of 22.2%) at March 31, 2026 and $932.2 million (yielding a primary operating capital percentage of 23.9%) at March 31, 2025. The primary operating capital percentage of 22.2% at March 31, 2026 is 170 basis points lower than that for March 31, 2025, and 120 basis points lower than that for March 31, 2024. The change in the ratio is primarily due to improved collections and asset securitization and decrease in inventory due to the release of our strategic build up in prior periods.
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Primary Operating Capital and Primary Operating Capital percentages at March 31, 2026, 2025 and 2024 are computed as follows:
($ in Millions)
March 31, 2026
March 31, 2025
March 31, 2024
Accounts receivable, net
Inventory, net
Accounts payable
Total primary operating capital
Trailing 3 months net sales
Trailing 3 months net sales annualized
Primary operating capital as a % of annualized net sales
Liquidity and Capital Resources
We believe that our financial position is strong. We have substantial liquidity with $439 million of available cash and cash equivalents and available and undrawn, under all lines of credit of approximately $565 million at March 31, 2026 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 4.0x EBITDA, as discussed in Liquidity and Capital Resources.
During the second quarter of fiscal 2023, the Company entered into a third amendment to the 2017 Credit Facility (as amended, the “Third Amended Credit Facility”). The Third Amended Credit Facility provided new incremental delayed-draw senior secured term loan up to $300 million (the “Third Amended Term Loan”), which was available to draw until March 15, 2023. During the fourth quarter of fiscal 2023, the Company drew $300 million in the form of the Third Amended Term Loan. The funds will mature on September 30, 2026, the same as the Company's Second Amended Term loan and Second Amended Revolver.
During the fourth quarter of fiscal 2023, the Company entered into a fourth amendment to the 2017 Credit Facility (as amended, the “Fourth Amended Credit Facility”). The Fourth Amended Credit Facility replaces the London Interbank Offered Rate
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(“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) in the calculation of interest for both the Second Amended Revolver and the Second Amended Term Loan.
During the second quarter of fiscal 2022, we entered into a second amendment to the Amended Credit Facility (as amended, the “Second Amended Credit Facility”). As a result, the Second Amended Credit Facility, now scheduled to mature on September 30, 2026, consists of a $130.0 million senior secured term loan (the “Second Amended Term Loan”), a CAD 106.4 million ($84.2 million) term loan and an $850.0 million senior secured revolving credit facility (the “Second Amended Revolver”). This amendment resulted in a decrease of the Amended Term Loan by $150.0 million and an increase of the Amended Revolver by $150.0 million.
On January 11, 2024, we issued $300 million in aggregate principal amount of our 6.625% Senior Notes due 2032 (the “2032 Notes”). Proceeds from this offering, net of debt issuance costs were $297.0 million and were utilized to pay down the Fourth Amended Credit Facility.
In the first quarter of fiscal year 2025, the Company entered into a fifth amendment to the 2017 Credit Facility (as amended, the “Fifth Amended Credit Facility”). The Fifth Amended Credit Facility replaces the Canadian Dollar Offered Rate ("CODR”) with term CORRA in the calculation of interest for borrowings denominated in Canadian Dollars.
During the second quarter of fiscal 2026, the Company entered into the sixth amendment to the 2017 Credit Facility (as amended, the “Sixth Amended Credit Facility”). The Sixth Amended Credit Facility provides (i) an upsized revolving credit facility in an aggregate committed amount of $1.0 billion (the “ Third Amended Revolver”), which represents an increase of $150 million from the existing revolving credit facility and which matures on September 30, 2030 and (ii) certain other modifications to the existing credit agreement as further set forth in the Sixth Amended Credit Facility. In connection with the Sixth Amended Credit Facility, (i) all of the outstanding term loans (including accrued and unpaid interest thereon) and (ii) all accrued and unpaid interest and fees on the outstanding revolving loans, in each case, under the existing credit agreement were repaid in full.
On December 23, 2024 and December 24, 2024 , the Company entered into cross-currency fixed interest rate swap contracts each with an aggregate notional amount of $150 million, maturing on June 15, 2028 and December 15, 2026, respectively.
During fiscal 2026, our operating cash flow provided cash of $547.6 million, compared to $260.3 million in the prior year. The change in the operating cash flows in fiscal 2026 was a result of effect from AMPC's (defined in Critical Accounting Policies and Estimates) recognized in the year and reduced receivables relating to improved collections and increases to our Amended RPA (defined in footnote 6 Accounts Receivable in the Consolidated Financial Statement).
In fiscal 2026 and 2025, we repurchased 3,457,688 and 1,568,292 shares of common stock for $370.7 million and $154.0 million, respectively. In fiscal 2024, we repurchased 1,002,415 shares of common stock for $95.7 million.
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.
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
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In accordance with ASC 606, 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.
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 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 assess whether goodwill impairment exists using both 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 a reporting unit is less than its carrying amount, including goodwill. If, based on this qualitative assessment, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, or if we elect not to perform a qualitative assessment, a quantitative assessment is performed to determine whether a goodwill impairment exists at the reporting unit.
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 the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the 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.
Based on the results of the annual impairment test as of December 29, 2025, we determined that there was no goodwill 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.
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Based on the results of the annual impairment test as of December 29, 2025, we determined that there were no impairments to indefinite-lived trademarks. For additional information see Note 8 Notes to the Consolidated Financial Statements.
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 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.
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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.
Production Tax Credits Under the Inflation Reduction Act
We continue to evaluate the extent of benefits available to us pursuant to the IRA, which we expect will favorably impact our results of operations in future periods. We currently expect to continue to qualify for the advanced manufacturing production credit (AMPC) under Section 45X of the IRC, which provides certain specified benefits for battery cells, battery modules manufactured or assembled in the United States and sold to third parties, as well for active electrode materials for such batteries. For eligible batteries the credit is equal to $35 multiplied by the capacity of such battery cell expressed on a kilowatt-hour basis. For eligible battery module the credit is equal to $10 multiplied by the capacity of such battery module expressed on a kilowatt-hour basis. For eligible electrode active material the credit is equal to 10% of the costs incurred with respect to the production of such materials.
During the year ended March 31, 2026 and March 31, 2025, we recognized $158.6 million and $184.6 million, respectively, of Section 45X credits as a reduction to “Cost of sales”. There are currently several critical and complex aspects of the IRA. The uncertainty of changes to the current guidance could materially affect the benefits we have recognized and expect to recognize from the advanced manufacturing production credit. We will continue to evaluate the effects of IRA to the extent additional guidance is issued and the relevant implications to our Consolidated Financial Statements.
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Results of Operations—Fiscal 2026 Compared to Fiscal 2025
The following table presents summary Consolidated Statements of Income data for fiscal year ended March 31, 2026, compared to fiscal year ended March 31, 2025:
Fiscal 2026
Fiscal 2025
Increase (Decrease)
Millions
Net Sales
Millions
Net Sales
Millions
Net sales
Cost of goods sold
Inventory adjustment relating to exit activities and step up to fair value relating to recent acquisitions
Gross profit
Operating expenses
Restructuring and other exit charges
Impairment of indefinite-lived intangibles
(Gain)Loss on assets held for sale
Operating earnings
Interest expense
Other (income) expense, net
Earnings before income taxes
Income tax expense
Net earnings attributable to EnerSys stockholders
NM = not meaningful
Overview
Our sales in fiscal 2026 were $3.8 billion, a 3.7% increase from prior year's sales. This increase was due to a 3% increase in pricing, a 2% increase in foreign currency translation, and a 1% increase from acquisitions, partially offset by a 2% decrease in organic volume.
A discussion of specific fiscal 2026 versus fiscal 2025 operating results follows, including an analysis and discussion of the results of our reportable segments.
Net Sales
Segment sales
Fiscal 2026
Fiscal 2025
Increase (Decrease)
Millions
% Net
Sales
Millions
% Net
Sales
Millions
Energy Systems
Motive Power
Specialty
Other
Total net sales
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Net sales of our Energy Systems segment in fiscal 2026 increased $120.2 million, or 7.8%, compared to fiscal 2025. This increase was due to a 3% increase in organic volume, a 3% increase in pricing, and a 2% increase in foreign currency translation. This increase in sales was driven by a continuing robust demand from data center and industrial customers and stronger product mix in communications.
Net sales of our Motive Power segment in fiscal 2026 decreased by $53.1 million, or 3.6%, compared to fiscal 2025. This decrease was due to a 8% decrease in organic volume, offset by a 2% increase in foreign currency translation, and a 2% increase in pricing. This decrease is primarily a result of lower volumes in the Americas due to ongoing macro and geopolitical uncertainties impacting customer buying behaviors market-wide and lingering weakness in the EMEA automotive market.
Net sales of our Specialty segment in fiscal 2026 increased by $71.5 million, or 12.1%, compared to fiscal 2025. The increase was due to a 8% increase from acquisitions, and a 4% increase in pricing. This increase in sales was primarily driven by continued strength in Aerospace and Defense including impacts from the Bren-Tronics acquisition, partially offset by softer demand in OEM transportation customers.
Gross Profit
Fiscal 2026
Fiscal 2025
Increase (Decrease)
Millions
Net Sales
Millions
Net Sales
Millions
Gross profit
Gross profit increased $5.2 million or 0.5% in fiscal 2026 compared to fiscal 2025. Gross profit, as a percentage of net sales decreased 100 basis points in fiscal 2026 compared to fiscal 2025. The decrease in the gross profit margin in fiscal 2026 compared to the prior year reflects greater IRC 45x benefits in fiscal 2025 as prior year included a change in estimate impacting prior amounts to IRC 45X tax credits.
Operating Items
Fiscal 2026
Fiscal 2025
Increase (Decrease)
Millions
Net Sales
Millions
Net Sales
Millions
Operating expenses
Restructuring, exit and other charges
Impairment of indefinite-lived intangibles
(Gain)Loss on assets held for sale
Operating Expenses
Operating expenses increased $12.3 million or 2.0% in fiscal 2026 from fiscal 2025 and decreased as a percentage of net sales by 20 basis points. The decrease as a percentage of sales was due to due to our cost saving and restructuring initiates offsetting additional accelerated stock compensation expense of $10.8 million.
Selling expenses, our main component of operating expenses, increased $2.2 million or 1.0% in fiscal 2026 compared to fiscal 2025. Selling expenses as a percentage of sales in the year decreased slightly as a result of our cost reduction initiatives.
Restructuring, exit and other charges
Exit Charges
Fiscal 2026 Programs
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On March 25, 2026, EnerSys announced a plan to close its facility in Tijuana, Mexico, which focused on manufacturing lead acid batteries. Management determined that the closure was appropriate as part of its efforts to optimize its cost structure, maximize near-term advanced manufacturing production tax benefits, and mitigate future risks associated with potential tariffs while reinforcing EnerSys’ commitment to strengthening domestic industrial capacity and supply chain resilience. In connection with this restructuring plan, which is estimated to be substantially complete by December 2027, EnerSys plans to sell the land and buildings and possibly the plant and equipment to other parties. In addition, EnerSys estimates that there will be a reduction of approximately 474 employees upon completion. EnerSys expects to incur a pre-tax charge of approximately $37 million under this restructuring plan when completed, the majority of which is expected to be incurred by the second half of fiscal year 2027, of which $14 million is expected to be non-cash charges primarily from accelerated depreciation. Cash charges of approximately $23 million, include severance and employee retention costs, environmental related expenses and equipment decommissioning, along with contractual releases and legal expenses.
During fiscal 2026, the Company recorded a $11.0 million in severance costs.
On March 25, 2026, EnerSys announced a plan to close its facility in Sao Paulo, Brazil. Management continually evaluates the Company's footprint and decided to exit this facility due to the challenging local economic environment. In connection with this closure, which is estimated to be substantially complete by the end of fiscal 2027, the Company estimates there will be a reduction of approximately 141 employees. EnerSys expects to incur a pre-tax charge of approximately $7.5 million under this restructuring plan, of which include cash charges of approximately $4.5 million, primarily related to severance and employee retention costs, and other cash and non-cash items.
During fiscal 2026, the Company recorded $3.0 million in cash charges relating to severance and contract termination costs and $1.8 million in non cash charges relating to ROU and fixed asset impairments.
On April 1, 2025, the Company's Board of Directors approved a plan to close its facility in Monterrey, Mexico, which focused on manufacturing flooded motive power batteries. Management determined that future demand for traditional motive power flooded cells will decrease as customers transition to maintenance free product solutions in lithium and Thin Plate Pure Lead (TPPL). Production of products being manufactured in Monterrey, Mexico will be moved to EnerSys’ existing facility in Richmond, Kentucky. The Company expects to incur a pre-tax charge of approximately $13.7 million under this restructuring plan when completed, the majority of which was recorded by the end of the 2026 fiscal year, of which $1.5 million is expected to be a non-cash charge from fixed asset and inventory charges. Cash charges of approximately $12.2 million, include severance and employee retention costs, environmental related expenses and equipment decommissioning, along with contractual releases and legal expenses.
During fiscal 2026, the Company recorded a cash charges totaling $5.2 million primarily relating to severance costs and unusual manufacturing variances of $2.3 million.
Fiscal 2024 Programs
Renewables
On November 8, 2023, the Company's Board of Directors approved a plan to stop production and operations of residential renewable energy products, which include the OutBack and Mojave brands. Management determined that residential renewable energy products no longer fit with the Company’s core strategy and resources will be better allocated toward commercial energy solutions for enterprise customers. The plan was completed as the end of fiscal 2025.
During fiscal 2024, the Company recorded non-cash charges totaling $0.6 million primarily related to fixed assets and cash charges of $0.7 million related to severance costs. The Company also recorded a non-cash write offs relating to inventories of $17.1 million, which was reported in cost of goods sold, and impairment of indefinite-lived intangible asset of $6.0 million.
During fiscal 2025, the Company recorded non-cash charges totaling $0.3 million related to fixed asset write offs and inventories of $0.3 million.
Spokane
On November 8, 2023, the Company committed to a plan to close its facility in Spokane, Washington, which primarily manufactures enclosure systems for telecommunications and related end markets. Management determined that existing manufacturing locations have the capacity to satisfy demand for these products and will execute more efficient distribution to customers. The plan was completed as of the end of fiscal 2025.
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During fiscal 2024, the Company recorded cash charges of $1.3 million primarily related to severance costs and non-cash charges totaling $2.1 million related to lease right of use asset and fixed asset write offs.
During fiscal 2025, the Company recorded cash charges of $0.7 million primarily related to manufacturing variances.
Fiscal 2023 Programs
Sylmar
In November 2022, the Company committed to a plan to close its facility in Sylmar, California, which manufactures specialty lithium batteries for aerospace and medical applications. Management determined to close the site upon the expiration of its lease on the property and to redirect production through consolidation into existing locations. The plan was completed as of the end of fiscal 2025.
During fiscal 2023, the Company recorded cash charges of $1.7 million related primarily related to severance costs and non-cash charges totaling $0.4 million primarily relating to contract assets.
During fiscal 2024, the Company recorded cash charges of $7.2 million primarily related to severance costs, relocation expenses, and manufacturing variances and non-cash charges totaling $0.4 million. The Company also recorded a non-cash write off relating to inventories of $3.1 million, which was reported in cost of goods sold.
During fiscal 2025, The Company recorded cash charges of $0.9 million primarily related to relocation costs.
Ooltewah
On June 29, 2022, the Company committed to a plan to close its facility in Ooltewah, Tennessee, which produced flooded motive power batteries for electric forklifts. Management determined that future demand for traditional motive power flooded cells will decrease as customers transition to maintenance free product solutions in lithium and TPPL. These actions resulted in the reduction of approximately 165 employees. The plan was completed as of the end of fiscal 2026.
During fiscal 2023, the Company recorded cash charges relating to severance and manufacturing variances of $2.7 million and non-cash charges of $7.3 million relating to fixed asset write-offs. The Company also recorded a non-cash write off relating to inventories of $1.6 million, which was reported in cost of goods sold.
During fiscal 2024, the Company recorded cash charges relating to site cleanup and decommissioning equipment of $4.4million.
During fiscal 2025, the Company recorded $0.5 million cash charges relating to site cleanup.
During fiscal 2026, the Company recorded a $1.1 million gain of the sale of the building.
Fiscal 2021 Programs
Hagen, Germany
In fiscal 2021, the Company's Board of Directors approved a plan to substantially close all of its facility in Hagen, Germany, which produces flooded motive power batteries for forklifts. Management determined that future demand for the motive power batteries produced at this facility was not sufficient, given the conversion from flooded to maintenance free batteries by customers, the existing number of competitors in the market, as well as the near term decline in demand and increased
uncertainty from the pandemic. The Company plans to retain the facility with limited sales, service and administrative functions along with related personnel for the foreseeable future. These actions resulted in the reduction of approximately 200 employees. This program is considered substantially complete as of the end of fiscal 2026.
During fiscal 2021, the Company recorded cash charges relating to severance of $23.3 million and non-cash charges of $7.9 million primarily relating to fixed asset write-offs.
During fiscal 2022, the Company recorded cash charges primarily relating to severance of $8.1 million and non-cash charges of $3.5 million primarily relating to fixed asset write-offs. The Company also recorded a non-cash write off relating to inventories of $1.0 million, which was reported in cost of goods sold.
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During fiscal 2023, the Company recorded cash charges of $2.2 million relating to primarily to site cleanup and $0.6 million of non-cash charges relating to accelerated depreciation of fixed assets.
During fiscal 2024, the Company recorded cash charges of $2.1 million relating primarily to site cleanup and $0.5 million of non-cash charges relating to accelerated depreciation of fixed assets.
During fiscal 2025, the Company recorded cash charges of $3.6 million relating primarily to site cleanup and $0.6 million of non-cash charges relating to accelerated depreciation of fixed assets.
During fiscal 2026, the Company recorded cash charges of $2.4 million relating primarily to site cleanup and $0.1 million of non-cash charges relating to accelerated depreciation of fixed assets. Additionally, the Company recorded a gain on assets held for sale previously impaired of $1.2 million.
Impairment of indefinite-lived intangibles
During fiscal 2026 there were $0.4 million of charges related to impairment of indefinite-lived trademarks.
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Operating Earnings
Operating earnings by segment were as follows:
Fiscal 2026
Fiscal 2025
Increase (Decrease)
Millions
Net Sales (1)
Millions
Net Sales (1)
Millions
Energy Systems
Motive Power
Specialty
Corporate and other (2)
Subtotal
Inventory adjustment relating to exit activities - Energy Systems
Inventory adjustment relating to exit activities - Motive Power
Inventory adjustment relating to exit activities and step up to fair value relating to recent acquisitions - Specialty
Accelerated stock compensation expense - Energy Systems
Accelerated stock compensation expense - Motive Power
Accelerated stock compensation expense - Specialty
Restructuring and other exit charges - Energy Systems
Restructuring and other exit charges - Motive Power
Restructuring and other exit charges - Specialty
Restructuring and other exit charges - Corporate Other
(Gain)Loss on assets held for sale - Motive Power
Total Amortization - Energy Systems
Total Amortization - Motive Power
Total Amortization - Specialty
Impairment of indefinite-lived intangibles - Energy Systems
Other - Energy Systems
Other - Motive Power
Other - Specialty
Total operating earnings
NM = not meaningful
(1) The percentages shown for the segments are computed as a percentage of the applicable segment’s net sales; Corporate and other is computed based on total consolidated net sales.
(2) Corporate and other includes amounts managed on a company-wide basis and not directly allocated to any reportable segments, primarily relating to IRA production tax credits. Also, included are start-up costs for exploration and construction of a new lithium plant as well as sales and expenses from the New Ventures operating segment.
Operating earnings decreased $38.3 million or 8.2% in fiscal 2026, compared to fiscal 2025 . Operating earnings, as a percentage of net sales, decreased 140 basis points in fiscal 2026, compared to fiscal 2025.
The Energy Systems operating earnings percentage of net sales increased 210 basis points in fiscal 2026 compared to fiscal 2025. This increase was driven by improved price/mix. We also continue to benefit from lower operating costs from tight cost controls and restructuring initiatives.
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The Motive Power operating earnings as a percentage of net sales decreased 170 basis points in fiscal 2026 compared to fiscal 2025. This decrease was driven by higher freight and tariff costs and lost leverage on lower volumes partially offset by higher pricing and our cost reduction initiatives.
Specialty operating earnings percentage of net sales increased 310 basis points in fiscal 2026 compared to fiscal 2025. This increase was primarily a result of continued benefit of the Bren-Tronics acquisition and favorable price/mix.
Interest Expense
Fiscal 2026
Fiscal 2025
Increase (Decrease)
Millions
Net Sales
Millions
Net Sales
Millions
Interest expense
Interest expense of $50.5 million in fiscal 2026 (net of interest income of $9.3 million) was $0.7 million lower than the $51.2 million in fiscal 2025 (net of interest income of $3.1 million).
Our average debt outstanding was $1,212.6 million in fiscal 2026, compared to our average debt outstanding of $1,129.8 million in fiscal 2025. Our average cash interest rate incurred in fiscal 2026 and fiscal 2025 was 4.8% and 4.3%, respectively. The decrease in interest expense in fiscal 2026 compared to fiscal 2025 is due to lower interest rates on long-term debt.
In fiscal 2026 the Company capitalized $3.5 million in debt issuance costs in connection with the Sixth Amendment of the 2017 Credit Facility and wrote off $0.3 million in deferred financing costs related to the Second and Third Amended Term Loans. In fiscal 2024 and 2025, we capitalized $4.4 million in debt issuance costs in connection with the 2032 Senior Notes and wrote off $0.8 million in issuance costs relating to our Second and Third Amended Term Loans. Included in interest expense were non-cash charges related to amortization of deferred financing fees of $1.9 million and $1.9 million in fiscal 2026 and fiscal 2025, respectively.
Other (Income) Expense, Net
Fiscal 2026
Fiscal 2025
Increase (Decrease)
Millions
Net Sales
Millions
Net Sales
Millions
Other (income) expense, net
NM = not meaningful
Other (income) expense, net was expense of $28.5 million in fiscal 2026 compared to expense of $7.0 million in fiscal 2025. Foreign currency impact resulted in a loss of $7.4 million in fiscal 2026 compared to a foreign currency gain of $3.3 million in fiscal 2025. Cost of funds associated with our asset securitization totaled $9.2 million in fiscal 2026 compared to $8.7 million in fiscal 2025. We incurred additional pension related expenses relating to the settlement of the UK plan totalling $9.7 million in fiscal 2026 compared to a gain of $1.5 million relating to the settlement of the U.S. plans in fiscal 2025.
Earnings Before Income Taxes
Fiscal 2026
Fiscal 2025
Increase (Decrease)
Millions
Net Sales
Millions
Net Sales
Millions
Earnings before income taxes
As a result of the factors discussed above, fiscal 2026 earnings before income taxes were $347.4 million, a decrease of $59.1 million or 14.6% compared to fiscal 2025.
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Income Tax Expense
Fiscal 2026
Fiscal 2025
Increase (Decrease)
Millions
Net Sales
Millions
Net Sales
Millions
Income tax expense
Effective tax rate
The Organization for Economic Co-operation and Development (OECD) has adopted model rules to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective for taxable years beginning after December 31, 2023.
On January 5, 2026, the OECD issued the Side-by-Side package (the “SbS Package”), which provides administrative guidance that modifies the application of the Pillar Two rules. The SbS Package includes simplifications and additional safe harbors intended to facilitate coordination between domestic and international tax regimes and the Pillar Two framework. If adopted by relevant jurisdictions, certain provisions of the SbS Package could result in U.S.-parented groups being exempt from the application of two of the three Pillar Two top-up taxes.
The SbS Package is expected to be available for fiscal years beginning on or after January 1, 2026. The safe harbors are not self-executing and generally would require enactment through domestic legislation (and related interpretive guidance) by each Inclusive Framework member, subject to local legislative processes and timelines, as well as potential guidance related to the European Union (“EU”) Minimum Tax Directive. The Company continues to monitor developments and assess the potential impact of the SbS Package on its results of operations. In addition, the SbS Package extends the Transitional Country-by-Country Reporting (“CbCR”) Safe Harbor by one year, through the end of fiscal year 2027. The Company continues to refine the effective tax rate and cash tax impact for Pillar 2 considering legislative changes in multiple countries.
On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA”) was enacted into law. The law included permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and changes to the tax treatment for certain business provisions and energy credits.
The impact of the enacted legislation is included in our effective tax rate. The Company will continue to monitor and evaluate as new legislation and guidance is issued.
On August 26, 2024, the U.S. Tax Court issued a ruling in Varian Medical Systems, Inc. v. Commissioner ("Varian") . The ruling related to the U.S. taxation of deemed foreign dividends in the transition tax of the Tax Cuts and Jobs Act (“Tax Act”) which was originally recorded in fiscal 2018. The impact of the ruling was included in our fiscal 2025 results.
In fiscal 2025 the Company entered into a cost sharing arrangement and platform contribution transaction (“IP Transaction”) related to certain intellectual property between the EnerSys U.S. and a Swiss subsidiary. Although the transaction between consolidated entities did not result in any gain in the consolidated statement of operations, the Company recorded a net tax expense of approximately $2,500 in fiscal 2025 and $5,897 in fiscal 2026. The net expense represents the tax recognized by the selling jurisdiction offset by the value of future tax deductions for amortization of the assets in the acquiring jurisdiction.
The effective income tax rates for the fiscal years ended March 31, 2026, and 2025 were 15.5%, and 10.5%, 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 increase in fiscal 2026 compared to fiscal 2025 is primarily due to the impact of changes in valuation allowances, IP Transaction, the impact of Varian in fiscal 2025, and mix of earnings among tax jurisdictions. The rate increase in fiscal 2025 compared to fiscal 2024 is primarily due to the impact of Pillar 2, IP Transaction, and mix of earnings among tax jurisdictions offset by the impact of Varian .
In fiscal 2026, the foreign effective income tax rate on foreign pre-tax income of $150.7 was 24.2%. In fiscal 2025, the foreign effective income tax rate on foreign pre-tax income of $205.2 was 0.1% and in fiscal 2024, the foreign effective income tax rate on foreign pre-tax income of $193.0 was 13.8%. The rate increase in fiscal 2026 compared to fiscal 2025 is primarily due to the impact of changes in valuation allowances, IP Transaction, and changes in mix of earnings among tax jurisdictions. The rate decrease in fiscal 2025 compared to fiscal 2024 is primarily due to the IP Transaction offset by changes in mix of earnings among tax jurisdictions.
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, 2026, and 2025 and was taxed at approximately 16% and 13% respectively.The rate increase in fiscal 2026 compared to fiscal 2025 is primarily related to the IP Transaction.
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A portion of the Company’s undistributed earnings of foreign subsidiaries is not considered indefinitely reinvested and, accordingly, the Company recorded additional income taxes in prior years. The Company intends to continue to indefinitely reinvest the remaining undistributed foreign earnings and outside basis differences. While substantially all of the Company’s undistributed earnings of foreign subsidiaries have been taxed in the United States, distributions may be subject to foreign withholding taxes and additional U.S. income taxes (net of applicable foreign tax credits). The determination of the deferred tax liability related to unremitted earnings and outside basis differences for which the Company asserts indefinite reinvestment is not practicable.
Liquidity and Capital Resources
Cash Flow and Financing Activities
Cash and cash equivalents at March 31, 2026, 2025 and 2024, were $438.7 million, $343.1 million and $333.3 million, respectively.
Cash provided by operating activities for fiscal 2026 was $547.6 million. Cash provided by operating activities for 2025 was $260.3 million and cash provided by operating activities in 2024 was $457.0 million.
During fiscal 2026, accounts receivable decreased or provided cash of $104.7 million due to improved collections and impacts of our Amended Receivables Purchase Agreement. Accounts payable decreased or used cash of $52.6 million, Inventory decreased or provided cash of $25.9 million. Net earnings were $293.6 million with adjustments of depreciation and amortization for $113.6 million, provision for deferred taxes for $14.4 million, and stock-based compensation for $37.6 million. Prepaid and other current assets increased by $65.2 million, primarily from an increases of $30.3 million of prepaid taxes, $21.7 million of contract assets, $13.2 million in other prepaid expenses, such as insurance and other advances. Accrued expenses provided funds of $55.0 million primarily from increases of $19.4 million for deferred income, $2.3 in miscellaneous accruals, payroll related accruals of $10.0 million, freight accruals of $8.1 million, accrued warranty of $7.7 million, accrued restructuring of $4.8 million and contract liabilities of $3.9 million, partially offset by a decrease of $1.4 million for income tax payable.
During fiscal 2025, accounts receivable increased or used cash of $81.8 million due to higher sales in March and additional outstanding balances from Bren-Tronics as compared to the prior year. Accounts payable increased or provided cash of $36.6 million, Inventory decreased or provided cash of $1.3 million. Net earnings were $363.7 million, depreciation and amortization $100.9 million, provision for deferred taxes $31.9 million, stock-based compensation $27.8 million, and non-cash charges for losses on assets held for sale of $4.6 million. Prepaid and other current assets increased by $220.0 million, primarily from an increase of $192.1 million of prepaid taxes, $16.3 million of contract assets, $12.8 million in other prepaid expenses, such as insurance and other advances, offset by a decrease of $1.2 million of other current assets. Accrued expenses provided funds of $54.4 million primarily from increases of $44.5 for increases of income tax payable and by increases to accrued interest net of payments of $6.4, accrued warranty of $6.0 million, and payroll related accruals of $4.7 million, partially offset by a $7.3 decrease in miscellaneous accruals.
During fiscal 2024, accounts receivable decreased or provided cash of $108.6 million due to lower sales and strong collection efforts. Inventory decreased or provided cash of $75.6 million due to lower sales. Accounts payable decreased or used cash of $15.1 million. Net earnings were $269.1 million, depreciation and amortization $92.0 million, stock-based compensation $30.6 million, non-cash charges relating to exit charges of $24.2 million, primarily relating to the Renewables, Spokane, and Sylmar plant closures, non-cash interest of $2.5 million, and non-cash charges for impairment of indefinite-lived intangibles of $13.6 million. Prepaid and other current assets increased by $112.7 million, primarily from an increase of $93.8 million of prepaid taxes, $6.6 million of contract assets, as well as an increase of $12.3 million in other prepaid expenses, such as insurance and other advances. Accrued expenses used funds of $8.3 million primarily from decreases of $15.3 for payment of taxes and $10.4 million of contract liabilities partially offset by increases to payroll related accruals of $4.0 million, warranty of $4.5 million, and $8.9 million relating to miscellaneous accruals.
Cash used in investing activities for fiscal 2026, 2025 and 2024 was $87.9 million, $336.4 million and $92.5 million, respectively.
During fiscal 2026 we had $12.7 million related to the acquisition of Rebel. During fiscal 2025 we had $206.4 million related to the acquisition of Bren-Tronics. In fiscal 2024 we had $8.3 million related to the acquisition of Industrial Battery and Charger Services Limited (IBCS).
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Capital expenditures were $80.1 million, $121.0 million and $86.4 million in fiscal 2026, 2025 and 2024, respectively. In fiscal 2026, we received $4.9 million in proceeds from disposal of property, plant, and equipment. In fiscal 2025, we received $1.9 million in proceeds from disposal of property, plant, and equipment, and a cash outflow of $10.9 million related to investments in equity securities. In fiscal 2024, we received $2.2 in proceeds from the disposal of property, plant, and equipment.
Financing activities used cash of $380.7 in Fiscal 2026. We borrowed $619.6 million under the Revolver and repaid $412.0 million of the Revolver. We repaid $210.0 million of term loans associated with our Sixth Amended Credit Facility. Net repayments on short-term debt were $0.2 million. Payment of cash dividends to our stockholders were $38.1 million, treasury stock open market purchases were $370.7 million, and payment of taxes related to net share settlement of equity awards were $8.8 million. We received proceeds from stock options of $42.0 million, and payments for financing costs for debt modification were $3.5 million.
Financing activities provided cash of $90.3 million in fiscal 2025. We borrowed $650 million under the Second Amended Revolver and repaid $370.0 million of the Second Amended Revolver. Net repayments on short-term debt were $0.3 million. Payment of cash dividends to our stockholders were $37.5 million, treasury stock open market purchases were $154.0 million, and payment of taxes related to net share settlement of equity awards were $8.0 million. We received proceeds from stock options of $9.5 million.
Financing activities used cash of $370.6 million in fiscal 2024. During fiscal 2024, the Company issued $300 million in Senior Notes, due January 15, 2032. The proceeds from Senior Notes were used to pay down our second and third amended term loans in the amount of $293.9. Additionally, we borrowed $182.5 million under the Second Amended Revolver and repaid $427.5 million of the Second Amended Revolver. Net repayments on short-term debt were $0.2 million. Payment of cash dividends to our stockholders were $34.5 million, treasury stock open market purchases were $95.7 million, and payment of taxes related to net share settlement of equity awards were $9.2 million. Proceeds from stock options were $10.8 million, and payments for financing costs for debt modification were $4.1 million.
Currency translation had a positive impact of $16.5 million on our cash balance in the twelve months of fiscal 2026 compared to the negative impact of $4.4 million in the twelve months of fiscal 2025. In the twelve months of fiscal 2026, principal currencies in which we do business such as the Swiss Franc, Polish zloty, Euro, and British pound generally strengthened versus the U.S. dollar.
As a result of the above, total cash and cash equivalents increased by $95.6 million from $343.1 million at March 31, 2025 to $438.7 million at March 31, 2026.
In addition to cash flows from operating activities, we had available committed and uncommitted credit lines of approximately $565.0 million at March 31, 2026 to cover short-term liquidity requirements. Our Sixth Amended Credit Facility is committed through September 30, 2030, as long as we continue to comply with the covenants and conditions of the credit facility agreement.
Compliance with Debt Covenants
Obligations under the Sixth 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 Sixth Amended Credit Facility and up to 0.65 of the capital stock of certain of the Company’s foreign subsidiaries that are owned by the Company’s United States subsidiaries.
We are in compliance with all covenants and conditions under our Sixth 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 11 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.
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Contractual Obligations and Commercial Commitments
At March 31, 2026, we had certain cash obligations, which are due as follows:
Total
Less than
1 year
years
years
After
5 years
(in millions)
Debt obligations
Short-term debt
Interest on debt (1)
Operating leases
Pension benefit payments and profit sharing
Purchase commitments
Total
(1) Interest payments for variable rate debt was calculated using the current applicable rate.
Due to the uncertainty of future cash outflows, uncertain tax positions have been excluded from the above table.
Under our Sixth Amended Credit Facility and other credit arrangements, we had outstanding standby letters of credit of $5.9 million as of March 31, 2026.
Credit Facilities and Leverage
During the second quarter of fiscal 2022, we entered into a second amendment to the Amended Credit Facility (as amended, the “Second Amended Credit Facility”). As a result, the Second Amended Credit Facility, now scheduled to mature on September 30, 2026, consists of a $130.0 million senior secured term loan (the “Second Amended Term Loan”), a CAD 106.4 million ($84.2 million) term loan and an $850.0 million senior secured revolving credit facility (the “Second Amended Revolver”). This amendment resulted in a decrease of the Amended Term Loan by $150.0 million and an increase of the Amended Revolver by $150.0 million.
During the second quarter of fiscal 2023, the Company entered into a third amendment to the 2017 Credit Facility (as amended, the “Third Amended Credit Facility”). The Third Amended Credit Facility provided new incremental delayed-draw senior secured term loan up to $300 million (the “Third Amended Term Loan”), which was available to draw until March 15, 2023. During the fourth quarter, the Company drew $300 million in the form of the Third Amended Term Loan. The funds will mature on September 30, 2026, the same as the Company's Second Amended Term loan and Second Amended Revolver. In connection with the agreement, the Company incurred $1.2 million in third party administrative and legal fees recognized in interest expense and capitalized $1.1 million in charges from existing lenders as a deferred asset. Additionally, the Company derecognized the capitalized deferred asset and recognized the $1.1 million as a deferred financing costs.
During the fourth quarter of fiscal 2023, the Company entered into a fourth amendment to the 2017 Credit Facility (as amended, the “Fourth Amended Credit Facility”). The Fourth Amended Credit Facility replaces the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) in the calculation of interest for both the Second Amended Revolver and the Second Amended Term Loan.
On January 11, 2024, we issued $300 million in aggregate principal amount of our 6.625% Senior Notes due 2032 (the “2032 Notes”). Proceeds from this offering, net of debt issuance costs were $297.0 million and were utilized to pay down the Fourth Amended Credit Facility. We used the remaining net proceeds for general corporate purposes, including prepayments of outstanding balances of our Fourth Amended Credit Facility.
On December 23, 2024 and December 24, 2024 , the Company entered into cross-currency fixed interest rate swap contracts each with an aggregate notional amount of $150 million, maturing on June 15, 2028 and December 15, 2026, respectively.
In the first quarter of fiscal year 2025, the Company entered into a fifth amendment to the 2017 Credit Facility (as amended, the “Fifth Amended Credit Facility”). The Fifth Amended Credit Facility replaces the Canadian Dollar Offered Rate ("CODR”) with term CORRA in the calculation of interest for borrowings denominated in Canadian Dollars.
During the second quarter of fiscal 2026, the Company entered into the sixth amendment to the 2017 Credit Facility (as amended, the “Sixth Amended Credit Facility”). The Sixth Amended Credit Facility provides (i) an upsized revolving credit
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facility in an aggregate committed amount of $1.0 billion (the “ Third Amended Revolver”), which represents an increase of $150 million from the existing revolving credit facility and which matures on September 30, 2030 and (ii) certain other modifications to the existing credit agreement as further set forth in the Sixth Amended Credit Facility. In connection with the Sixth Amended Credit Facility, (i) all of the outstanding term loans (including accrued and unpaid interest thereon) and (ii) all accrued and unpaid interest and fees on the outstanding revolving loans, in each case, under the existing credit agreement were repaid in full.
The Sixth Amended Credit Facility may be increased by an aggregate amount of $615,000 in revolving commitments and /or one or more new tranches of term loans, under certain conditions. The Third Amended Revolver bear interest, at the Company's option, at a rate per annum equal to either (i) the SOFR, CORRA, Euribor or SONIA Base rate as applicable according to credit extended, plus (i) between 1.250% and 2.25% (currently 1.375% and based on the Company's consolidated net leverage ratio) or (ii) the U.S. Dollar Base Rate plus between 0.25% and 1.25%, 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) Term SOFR plus 1%; provided that, if the Base Rate shall be less than zero, such rate shall be deemed zero)
The Sixth Amended Credit Facility allows for up to two temporary increases in the maximum leverage ratio to 4.50x from 4.00x for a four quarter period following an acquisition larger than $250,000. Effective with the Sixth Amended Credit Facility, the leverage ratio remains at 4.00x.
The total net debt, as defined under the Sixth Amended Credit Facility is $684.1 million for fiscal 2026 and is 1.1 times adjusted EBITDA (non-GAAP), compared to total net debt of $781.1 million and 1.3 times adjusted EBITDA (non-GAAP) for fiscal 2025.
The following table provides a reconciliation of net earnings to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP) for March 31, 2026 and 2025, in connection with the Sixth Amended Credit Facility:
Fiscal 2026
Fiscal 2025
(in millions, except ratios)
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
Maximum ratio permitted
Consolidated interest coverage ratio (5)
Minimum ratio required
(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 Fourth Amended Credit Facility are based on EBITDA, subject to adjustments, which are shown above. Continued availability of credit under our Fourth 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 the liquidity provided under our credit
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agreements. Depreciation and amortization in this table excludes the amortization of deferred financing fees, which is included in interest expense.
(2) The $91.9 million adjustment to EBITDA in fiscal 2026 primarily related to $37.6 million of non-cash stock compensation and $53.2 million of restructuring and other exit charges. The $56.2 million adjustment to EBITDA in fiscal 2025 primarily related to $27.8 million of non-cash stock compensation, $22.0 million of restructuring and other exit charges, impairment of indefinite-lived intangibles and write-down of other current assets of $5.5 million.
(3) Debt includes finance lease obligations and letters of credit and is net of all U.S. cash and cash equivalents and foreign cash and investments, as defined in the Fourth Amended Credit Facility. In fiscal 2026, the amounts deducted in the calculation of net debt were U.S. cash and cash equivalents and foreign cash investments of $438.7 million, and in fiscal 2025, were $343.1 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 Fourth Amended Credit Facility, for fiscal 2026 and fiscal 2025, respectively.
(5) As defined in the Second Amended Credit Facility, interest expense used in the consolidated interest coverage ratio excludes non-cash interest of $2.2 million and $1.9 million for fiscal 2026 and fiscal 2025, 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.
