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F2Q 2013 Earnings Conference Call
November 6, 2012, 9:00 am ET
John Craig – Chairman, President, CEO
Mike Schmidtlein - CFO
Michael Gallo – CL King
Zach Larkin – Stephens
John Franzreb – Sidoti & Co
Elaine Kwei – Jefferies
William Bremer – Maxim Group
Michael Lew – Needham
Brian Drab – William Blair
(Kurt Vodki) – TRT Capital Group
Bill Dezellem – Tieton Capital Management
Ross Taylor – Somerset Capital
Howard Rosencrans – Value Advisory
Previous Statements by ENS
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As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to John Craig, Chairman, President and CEO. Please proceed, sir.
Thank you, (Grant). Good morning and thank you for joining us. Last night we posted on our website slides that we're going to reference this morning. If you didn't get a chance to see those slides, you can go to our website which is www.enersys.com and view the slides as we're going through the presentation this morning.
Before we get started and get in the details for our second quarter and first half of the year, I'm going to ask Mike Schmidtlein, our Chief Financial Officer, to cover information regarding forward-looking statements. Mike?
Thank you, John, and good morning to everyone. As a reminder, we will be presenting certain forward-looking statements on this call that are based on the management's current expectations and are subject to uncertainties and changes in circumstances.
Our 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 in are applicable only as of the dates of such statements.
For a list of factors which could affect our future results, including our earnings estimates, see forward-looking statements included in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in our quarterly report on Form 10-Q for the quarter ended September 30, 2012, which was filed with the US Securities and Exchange Commission.
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 November 5, 2012 which is located on our website at www.enersys.com.
Now let me turn it back to you, John.
Thanks, Mike. I'd like to start by saying that we're very pleased with our accomplishments and financial results for our second quarter and first half of this year.
You'll notice on Slide 3 that we reported second quarter records for sales of $554 million, gross profit margin of 25%, operating profit margins of 11.6% and earnings per share of $0.92.
We reached our minimum target of 25% gross profit for the second consecutive quarter. Year-over-year, on a sales increase of 1%, earnings per share was up almost 60%. Sequentially, these results are even more impressive when you consider our second quarter sales and profitability are impacted by the vacation season in Europe and the Americas.
On Slide 4, our first half of financial highlights shows similar records for any first half in our company's history. Our earnings per share of $1.87 is 48% higher than last year's earnings which were $1.26.
I now want to focus on our current business activities and third quarter guidance. During the summer, we experienced our normal seasonal slowdown in orders. In September, we experienced our normal increase in orders, which continued to early October.
However, in the past few weeks, our order intake has slowed, which is not our normal historic pattern. Based on this information, last night we announced our third fiscal quarter guidance of $0.77 to $0.81 earnings per share.
The guidance assumes our third quarter orders continue at the lower levels that we have recently experienced. Should the slowdown in our business continue, we would view that as an opportunity to execute a further consolidation of our global operations with the objective of reducing our cost and increasing our future profitability.
That's exactly what we did during the last economic downturn and we exited that recession a much stronger company than when we entered it.
One thing we will not do, we will not cut back on customer service or slow down the introduction of new products. We'll do what it takes to meet our customers' demands.
Last week, EnerSys made two announcements about new product introductions that are detailed on Slide 5. First, we announced EnerSys was entering the large scale energy storage market with our new OptiGrid megawatt scale energy management system.
This product is designed for utilities and large industrial users who are increasingly discovering the large energy storage systems, like OptiGrid, are effective tools for power grid stabilization.
EnerSys is uniquely positioned to meet this growing demand since we have the financial resources, extensive production capabilities and proven product portfolio to serve this market.
Conservatively, you can estimate that this large scale energy storage market will grow to be larger than our existing markets, which are about $10 billion in size.
Second, we announced the addition of two advanced premium products to our Hawker material handling equipment line. We're offering advanced lithium and thin plate, pure lead advanced battery packages with onboard chargers and controls.
These batteries are designed to require less time to charge by employing rapid charge so users do not have to change batteries on the electric trucks.
In closing, we've had a great first half fiscal year 2013. The second half may present some challenges due to the global economic conditions, however, with our proven ability to reduce costs during slower economic periods and our addition of more premium and unique products, we believe we're well positioned to exit any economic slowdown stronger than when we entered it.