Q1 2009 Earnings Call Transcript
August 6, 2008 9:00 am ET
John Craig – Chairman and President and CEO
Mike Philion – EVP of Finance and CFO
John Franzreb – Sidoti & Company
Chris Agnew – Goldman Sachs
Paul Clegg – Jefferies & Company
Corey Tobin – William Blair & Company
Arthur Freezemen [ph] – Freezemen Asset Management [ph]
Richard Baxter – Ardour Capital
Kitty Wong – Train, Babcock Advisors
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Thank you, Nora. Good morning and thank you joining us for our conference call. During this call, we will be discussing our first quarter fiscal 2009 results as well as commenting on the general state of our business. But before we start, I'd like to ask Mike Philion, our Chief Financial Officer, to cover information regarding forward-looking statements. Mike?
Good morning to all and thank you, John. As a reminder, we will be presenting certain forward-looking statements on this call that are based on managements current expectations and assumptions which are subject to uncertainties and changes in circumstances. Enersys' actual results may differ materially from the forward-looking statements for a number of reasons. Our forward-looking statements are based on management's current views regarding future events and operating performance and are applicable only on the dates of such statements. For a list of the factors which could affect our future results including our earnings estimates, see forward-looking statements included in Item Two, Managements Discussion and Analysis of Financial Condition and Results of Operation set forth in our quarterly report on form 10-Q for the quarter ended June 29th, 2008 which was filed with the U.S. SEC.
In addition, we will also be presenting certain non-GAAP financial measures. For an explanation of the differences between the comparable GAAP financial information and the non-GAAP information, please see our company's form 8-K which includes our press release dated yesterday, August 5th, 2008, which is located on our website at www.enersys.com. Now, let me turn the call back to you, John.
Thanks, Mike. As reported last night, we experienced record sales and earnings for the first quarter of fiscal 2009. We also booked record orders and our backlog reached an all time high. Our revenue increased 38% compared to the first quarter of our prior fiscal year. We experienced strong revenue growth in both our Motor Power and Reserve Power businesses and across our three geographic regions. As adjusted, diluted earnings per share increased by 60% over the prior year, from $0.30 last year to $0.48 this year. We continued to experience solid growth in all of our established markets and continued to successfully penetrate emerging markets and introduced new products. In addition, we continued to experience increased demand for our thin-plate pure lead products or lithium products and our specialty nickel based batteries.
A substantial increase in earnings was largely due to selling price increases of approxibly 19% in the first quarter compared with average prices in the fourth – average prices in the prior year quarter. While we recovered the incremental commodity cost increase as we experienced in the first quarter, we still have improvements to make to recover the full cost increases we've experienced over the last couple of years. We still experienced a year-over-year decreased in our gross profit margin of 1.1%. We remain committed to the 25% gross profit target that I discussed in our last meeting.
On a sequential basis, our gross margins improved or increased from 18.2%, in the fourth quarter of fiscal 2008, to 19% this quarter. But this still remains far below our 25% target. We remain highly focused on this objective and we believe it will be achieved by continuing to close the selling price late [ph] cost timing gap along with our ongoing cost savings programs.
As previously announced, we completed the sale of our Manchester, England plant in the refinancing of our U.S. credit facilities in this quarter. Both of these actions will result in significant ongoing savings. Although, the general global economy clearly seems to be entering a period of slower activity, for the most part, we're not seeing it in our business. Even if the organic rate of growth of our base business were to slow, we believe we can offset this with higher rates of growth in certain geographic areas and with newer high growth products. Our confidence to continued growth is supported by recent consensus forecast of global GDP growth of about 4% in both 2008 and 2009.
We continue to expand in emerging markets globally. We believe that markets for our products in these areas will continue to grow rapidly and that we will continue to gain share in these markets. In the product area, we are also experience rapid growth in our thin-plate pure lead products in many applications for telecommunications, aerospace and defense, and numerous specialty areas.
Our $15 million capacity expansion project for thin-plate pure lead products remains on track, and we continue to see a strong demand for this type of product. This investment, coupled with our investment in Bulgaria, our restructuring – European restructuring program, as well as our expansion into emerging markets, should result in significant earnings improvements in the future. In addition, we continue to experience growth in our batteries used and renewable energy applications. We all recognized the importance of obtaining more energy from wind turbines, and solar panels. We believe this activity will grow rapidly and we are well positioned to supply high performance, cost effective batteries for these systems. We will continue to pursue opportunities in many emerging technologies that will help drive profitable growth for our company.