ENERSYS MANAGEMENT REPORT ON FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 (the "Reform Act") provides
a safe harbor for forward-looking statements made by or on behalf of EnerSys.
EnerSys and its representatives may, from time to time, make written or verbal
forward-looking statements, including statements contained in EnerSys' filings
with the Securities and Exchange Commission ("SEC") and its reports to
stockholders. Generally, the inclusion of the words "anticipate," "believe,"
"expect," "future," "intend," "estimate," "will," "plans," or the negative of
such terms and similar expressions identify statements that constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and that are
intended to come within the safe harbor protection provided by those sections.
All statements addressing operating performance, events, or developments that
EnerSys expects or anticipates will occur in the future, including statements
relating to sales growth, earnings or earnings per share growth, and market
share, as well as statements expressing optimism or pessimism about future
operating results, are forward-looking statements within the meaning of the
Reform Act. The forward-looking statements are and will be based on management's
then-current beliefs and assumptions regarding future events and operating
performance and on information currently available to management, and are
applicable only as of the dates of such statements.

Forward-looking statements involve risks, uncertainties and assumptions.
Although we do not make forward-looking statements unless we believe we have a
reasonable basis for doing so, we cannot guarantee their accuracy. Actual
results may differ materially from those expressed in these forward-looking
statements due to a number of uncertainties and risks, including the risks
described in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2021 (our "2021 Annual Report") and other unforeseen risks. You should
not put undue reliance on any forward-looking statements. These statements speak
only as of the date of this Quarterly Report on Form 10-Q, even if subsequently
made available by us on our website or otherwise, and we undertake no obligation
to update or revise these statements to reflect events or circumstances
occurring after the date of this Quarterly Report on Form 10-Q.

Our actual results may differ materially from those contemplated by the forward-looking statements for a number of reasons, including the following factors:

•economic, financial and other impacts of the COVID-19 pandemic, including
global supply chain disruptions;
•general cyclical patterns of the industries in which our customers operate;
•the extent to which we cannot control our fixed and variable costs;
•the raw materials in our products may experience significant fluctuations in
market price and availability;
•certain raw materials constitute hazardous materials that may give rise to
costly environmental and safety claims;
•legislation regarding the restriction of the use of energy or certain hazardous
substances in our products;
•risks involved in our operations such as supply chain issues, disruption of
markets, changes in import and export laws, environmental regulations, currency
restrictions and local currency exchange rate fluctuations;
•our ability to raise our selling prices to our customers when our product costs
increase;
•the extent to which we are able to efficiently utilize our global manufacturing
facilities and optimize our capacity;
•changes in macroeconomic and market conditions and market volatility (including
developments and volatility arising from the COVID-19 pandemic), including
inflation, interest rates, the value of securities and other financial assets,
transportation costs, costs and availability of electronic components, lead,
plastic resins, steel, copper and other commodities used by us, and the impact
of such changes and volatility on our financial position and business;
•competitiveness of the battery markets and other energy solutions for
industrial applications throughout the world;
•our timely development of competitive new products and product enhancements in
a changing environment and the acceptance of such products and product
enhancements by customers;
•our ability to adequately protect our proprietary intellectual property,
technology and brand names;
•litigation and regulatory proceedings to which we might be subject;
•our expectations concerning indemnification obligations;
•changes in our market share in the business segments where we operate;
•our ability to implement our cost reduction initiatives successfully and
improve our profitability;
•quality problems associated with our products;
•our ability to implement business strategies, including our acquisition
strategy, manufacturing expansion and restructuring plans;
•our acquisition strategy may not be successful in locating advantageous
targets;
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•our ability to successfully integrate any assets, liabilities, customers,
systems and management personnel we acquire into our operations and our ability
to realize related revenue synergies, strategic gains, and cost savings may be
significantly harder to achieve, if at all, or may take longer to achieve;
•potential goodwill impairment charges, future impairment charges and
fluctuations in the fair values of reporting units or of assets in the event
projected financial results are not achieved within expected time frames;
•our debt and debt service requirements which may restrict our operational and
financial flexibility, as well as imposing unfavorable interest and financing
costs;
•our ability to maintain our existing credit facilities or obtain satisfactory
new credit facilities;
•adverse changes in our short and long-term debt levels under our credit
facilities;
•our exposure to fluctuations in interest rates on our variable-rate debt;
•risks related to the discontinuation of the London Interbank Offered Rate and
other reference rates, including increased expenses and the effectiveness of
hedging strategies;
•our ability to attract and retain qualified management and personnel;
•our ability to maintain good relations with labor unions;
•credit risk associated with our customers, including risk of insolvency and
bankruptcy;
•our ability to successfully recover in the event of a disaster affecting our
infrastructure, supply chain, or our facilities;
•delays or cancellations in shipments;
•occurrence of natural or man-made disasters or calamities, including health
emergencies, the spread of infectious diseases, pandemics, vaccine mandates,
outbreaks of hostilities or terrorist acts, or the effects of climate change,
and our ability to deal effectively with damages or disruptions caused by the
foregoing; and
•the operation, capacity and security of our information systems and
infrastructure.

This list of factors that may affect future performance is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated taking into account their inherent uncertainty.

In the following discussion and analysis of results of operations and financial
condition, certain financial measures may be considered "non-GAAP financial
measures" under SEC rules. These rules require supplemental explanation and
reconciliation, which is provided in this Quarterly Report on Form 10-Q.
EnerSys' management uses the non-GAAP measures "primary working capital" and
"primary working capital percentage" in its evaluation of cash flow and
financial position performance. These disclosures have limitations as an
analytical tool, should not be viewed as a substitute for cash flow 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. Management believes that this non-GAAP
supplemental information is helpful in understanding the Company's ongoing
operating results.

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Overview

EnerSys (the "Company," "we," or "us") is a world leader in stored energy
solutions for industrial applications. We also 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 enclosures, power
conversion, power distribution and energy storage are used in the
telecommunication and broadband, utility industries, uninterruptible power
supplies, and numerous applications requiring stored energy solutions. Motive
Power batteries and chargers are utilized in electric forklift trucks and other
industrial electric powered vehicles. Specialty batteries are used in aerospace
and defense applications, large over the road trucks, premium automotive and
medical. 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 three reportable segments of the Company, based on business segments, are as follows:

•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, renewable and industrial customers, as well as thermally
managed cabinets and enclosures for electronic equipment and batteries.
•Motive Power - power for electric industrial forklifts used in manufacturing,
warehousing and other material handling applications as well as mining
equipment, diesel locomotive starting and other rail equipment; and
•Specialty - premium starting, lighting and ignition applications in
transportation, energy solutions for satellites, military aircraft, submarines,
ships and other tactical vehicles as well as medical and security systems.

Economic climate

The economic climate in North America and China experienced strong growth during
calendar 2021 and is expected to grow strong in calendar 2022. EMEA's economy
grew moderately faster than normal in calendar 2021 and is forecasted to do the
same in 2022. EMEA's economic growth has been more impacted by the COVID-19
pandemic during calendar 2021. Inflation has increased in all regions during
calendar 2021.

EnerSys is experiencing supply chain disruptions and cost spikes in certain
materials such as plastic resins and electronic components along with
transportation and related logistics challenges and broad-based cost increases.
In addition, some locations are experiencing difficulty meeting hiring goals.
Generally, our mitigation efforts and the recent economic recovery, have
tempered the impact of the pandemic-related challenges. The overall market
demand remains robust.

Volatility of raw materials and foreign currencies

Our most significant commodity and foreign currency exposures are related to
lead and the Euro, respectively. Historically, volatility of commodity costs and
foreign currency exchange rates have caused large swings in our production
costs. As a result of the COVID-19 pandemic, lead cost dropped into the low 70
cents per pound during our first fiscal quarter of 2021 and has currently
rallied to just below $1.10 per pound, which is above the pre-COVID-19 levels.
We are experiencing increasing costs in some of our other raw materials such as
plastic resins, steel, copper and electronics and increased freight costs.

Customer Pricing

Our selling prices fluctuated during the last several years to offset the
volatile cost of commodities. Approximately 30% 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 2022, customer pricing has increased
due to lead prices and other costs having increased throughout the year.

Based on current commodity markets, we are likely to see year-over-year headwinds from rising commodity prices, with a related increase in our selling prices over the course of the year. coming year. As we focus more on energy systems and lead-free chemicals, the focus on lead will continue to decrease.

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Liquidity and Capital Resources

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.

We believe that our financial position is strong, and we have substantial
liquidity to cover short-term liquidity requirements and anticipated growth in
the foreseeable future, with $397 million of available cash and cash equivalents
and available and undrawn committed credit lines of approximately $571 million
at January 2, 2022, availability subject to credit agreement financial
covenants.

A substantial majority of the Company's cash and investments are held by foreign
subsidiaries and are considered to be indefinitely reinvested and 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.

During the current quarter, the Company repurchased 1,093,561 shares of common
stock for approximately $83.0 million. Between January 3, 2022 through February
9, 2022, the Company repurchased 446,969 shares for approximately $33.1 million.

We believe that our strong capital structure and liquidity affords us access to
capital for future acquisition and stock repurchase opportunities and continued
dividend payments.

Results of Operations

Net Sales

Net sales increased $92.9 million or 12.4% in the third quarter of fiscal 2022
as compared to the third quarter of fiscal 2021. This increase was the result of
a 10% increase in organic volume resulting primarily from strong demand arising
from robust markets and the easing of the pandemic and a 3% increase in pricing,
partially offset by a 1% decrease in foreign currency translation impact.

Net sales increased $285.9 million or 13.2% in the nine months of fiscal 2022 compared to the nine months of fiscal 2021. This increase is due to an 11% increase in organic volume resulting primarily from strong demand, and a increase of 1% each in the impact of currency translation and pricing.

Segment sales
                                                   Quarter ended                              Quarter ended
                                                  January 2, 2022                            January 3, 2021                                 Increase (Decrease)
                                                              Percentage                                 Percentage
                                            In                 of Total                In                 of Total                          In
                                         Millions             Net Sales             Millions             Net Sales                       Millions                        %
Energy Systems                          $  385.2                     45.7  %       $  337.2                     44.9  %       $            48.0                          14.2  %
Motive Power                               339.5                     40.2             304.4                     40.5                       35.1                          11.5
Specialty                                  119.3                     14.1             109.5                     14.6                        9.8                           9.0
Total net sales                         $  844.0                    100.0  %       $  751.1                    100.0  %       $            92.9                          12.4  %


                                                 Nine months ended                            Nine months ended
                                                  January 2, 2022                              January 3, 2021                             Increase (Decrease)
                                                               Percentage                                   Percentage
                                            In                  of Total                 In                  of Total                     In
                                         Millions              Net Sales              Millions              Net Sales                  Millions                   %
Energy Systems                         $  1,126.2                     46.0  %       $  1,031.4                     47.7  %       $             94.8                9.2  %
Motive Power                                996.3                     40.6               831.0                     38.4                       165.3               19.9
Specialty                                   327.8                     13.4               302.0                     13.9                        25.8                8.5
Total net sales                        $  2,450.3                    100.0  %       $  2,164.4                    100.0  %       $            285.9               13.2  %


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Contents


Net sales of our Energy Systems segment in the third quarter of fiscal 2022
increased $48.0 million or 14.2% compared to the third quarter of fiscal 2021.
This increase was due to a 14% increase in organic volume and a 1% increase in
pricing / mix, partially offset by a 1% decrease in foreign currency translation
impact. Net sales of our Energy Systems segment in the nine months of fiscal
2022 increased $94.8 million or 9.2% compared to the nine months of fiscal 2021.
This increase was due to a 9% increase in organic volume and a 1% increase in
foreign currency translation impact, partially offset by a 1% decrease in
pricing / mix. Continued strong demand in telecommunications and broadband was
offset by supply chain driven constraints for our power systems products.

Net sales of our Motive Power segment in the third quarter of fiscal 2022
increased by $35.1 million or 11.5% compared to the third quarter of fiscal
2021. This increase was primarily due to a 9% increase in organic volume and a
5% increase in pricing, partially offset by a 2% decrease in foreign currency
translation impact. Net sales of our Motive Power segment in the nine months of
fiscal 2022 increased by $165.3 million or 19.9% compared to the nine months of
fiscal 2021. This increase was primarily due to a 17% increase in organic
volume, a 2% increase in pricing and a 1% increase in foreign currency
translation impact. The prior year's COVID-19 restrictions and related economic
slowdown impacted this segment more than our other lines of business in the
prior year.

Net sales of our Specialty segment in the third quarter of fiscal 2022 increased
by $9.8 million or 9.0% compared to the third quarter of fiscal 2021. The
increase was primarily due to a 6% increase in pricing and a 3% increase in
organic volume. Net sales of our Specialty segment in the nine months of fiscal
2022 increased by $25.8 million or 8.5% compared to the nine months of fiscal
2021. The increase was primarily due to a 4% increase each in organic volume and
pricing and a 1% increase in foreign currency translation impact. Continued
strong demand from transportation was joined with a resurgence in aerospace and
defense sales.

Gross Profit
                                               Quarter ended                              Quarter ended
                                              January 2, 2022                            January 3, 2021                                 Increase (Decrease)
                                                          Percentage                                 Percentage
                                        In                 of Total                In                 of Total                          In
                                     Millions             Net Sales             Millions             Net Sales                       Millions                        %
Gross Profit                        $  184.3                     21.8  %       $  189.3                     25.2  %       $            (5.0)                         (2.6) %


                                               Nine months ended                           Nine months ended
                                                January 2, 2022                             January 3, 2021                                 Increase (Decrease)
                                                            Percentage                                  Percentage
                                          In                 of Total                 In                 of Total                          In
                                       Millions             Net Sales              Millions             Net Sales                       Millions                        %
Gross Profit                         $   555.4                     22.7  %       $   541.8                     25.0  %       $            13.6                          2.5  %




Gross profit decreased $5.0 million or 2.6% in the third quarter and increased
$13.6 million or 2.5% in the nine months of fiscal 2022 compared to the
comparable periods of fiscal 2021. Gross profit, as a percentage of net sales,
decreased 340 basis points and 230 basis points in the third quarter and nine
months of fiscal 2022, respectively, compared to the third quarter and nine
months of fiscal 2021. The decrease in the gross profit margin in the current
quarter and nine month period reflects the negative impact of higher freight
costs and component shortages from our supply chain along with other
inflationary pressures in raw materials, labor, supplies and utilities, in
excess of pricing recoveries and organic volume growth. Energy Systems is most
acutely impacted by these pressures. Motive Power and Specialty have also been
impacted by higher costs but reacted more quickly in recovering price.

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Operating Items
                                                      Quarter ended                              Quarter ended
                                                     January 2, 2022                            January 3, 2021                            Increase (Decrease)
                                                                 Percentage                                 Percentage
                                               In                 of Total                In                 of Total                     In
                                            Millions             Net Sales             Millions             Net Sales                  Millions                   %
Operating expenses                         $  130.7                     15.4  %       $  118.0                     15.7  %       $             12.7               10.7  %
Restructuring and other exit charges       $    2.5                      0.3  %       $   15.2                      2.0  %       $            (12.7)             (83.7) %


                                                  Nine months ended                           Nine months ended
                                                   January 2, 2022                             January 3, 2021                                 Increase (Decrease)
                                                               Percentage                                  Percentage
                                             In                 of Total                 In                 of Total                          In
                                          Millions             Net Sales              Millions             Net Sales                       Millions                        %
Operating expenses                      $   380.5                     15.5  %       $   357.4                     16.5  %       $            23.1                           6.5  %
Restructuring and other exit
charges                                 $    13.2                      0.6  %       $    19.7                      0.9  %       $            (6.5)                        (33.2) %



Operating expenses, as a percentage of sales, decreased 30 basis points and 100
basis points in the third quarter and nine months of fiscal 2022, compared to
the comparable periods of fiscal 2021. We have benefited from limited travel and
reduced selling expenses. While some of these benefits are COVID-19 related, we
believe our operating expense levels have been reduced, the benefit of which
continues as our revenue improves.

Selling expenses, our main component of operating expenses, increased $3.1
million or 6.0% in the third quarter of fiscal 2022 compared to the third
quarter of fiscal 2021 but decreased 40 basis points. In the nine months of
fiscal 2022, selling expenses increased by $9.3 million or 6.1% compared to the
nine months of fiscal 2021 but decreased 40 basis points. The decrease in
selling expenses as a percentage of sales in both the current quarter and nine
months, demonstrates our ability to flex our selling expenses.

Restructuring costs and other exit costs

Restructuring programs

Included in our third quarter and nine months of fiscal 2022 operating results
of Energy Systems were restructuring charges of $0.7 million and $1.8 million,
respectively. Included in our third quarter and nine months of fiscal 2022
operating results of Motive Power were restructuring charges of $0.3 million and
$1.5 million, respectively.

Included in our third quarter and nine months of fiscal 2021 operating results
of Energy Systems were restructuring charges of $0.8 million and $2.6 million,
respectively, primarily relating to Alpha. Included in our third quarter and
nine months of fiscal 2021 operating results of Motive Power were restructuring
charges of $2.7 million and $3.7 million, respectively.

Exit fees

Hagen, Germany

During the third quarter of fiscal 2021, we committed to a plan to close
substantially all of our 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. We plan to retain
the facility with limited sales, service and administrative functions along with
related personnel for the foreseeable future.

We currently estimate that the total charges for these actions will amount to
approximately $60.0 million, the majority of which has been recorded as of
January 2, 2022. Cash charges for employee severance related payments, cleanup
related to the facility, contractual releases and legal expenses are estimated
to be $40.0 million and non-cash charges from inventory and equipment write-offs
are estimated to be $20.0 million. These actions resulted in the reduction of
approximately 200 employees. 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.
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Contents

During the nine months of fiscal 2022, the Company recorded cash charges,
primarily relating to severance of $7.9 million and non-cash charges of $3.8
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.

Targovishte, Bulgaria

During fiscal 2019, the Company committed to a plan to close its facility in
Targovishte, Bulgaria, which produced diesel-electric submarine batteries.
Management determined that the future demand for batteries of diesel-electric
submarines was not sufficient given the number of competitors in the market.
During the nine months of fiscal 2022, the Company sold this facility for $1.5
million. A net gain of $1.2 million was recorded as a credit to exit charges in
the Consolidated Condensed Statement of Income.

Vijayawada, India

In fiscal 2021, we also embarked on a plan to close our Vijayawada plant, India to align with the strategic vision of our new business structure and footprint. We recorded exit costs of $1.5 million
primarily concerns asset write-offs.

Program for the 2022 financial year

Zamudio, Spain

During the nine months of fiscal 2022, the Company closed a minor assembling
plant in Zamudio, Spain and sold the same for $1.8 million. A net gain of $0.7
million was recorded as a credit to exit charges in the Consolidated Condensed
Statement of Income.

Richmond, Kentucky Plant Fire

During fiscal 2021, the Company settled its claims with its insurance company in relation to the fire that broke out in the battery formation area of ​​the Company’s plant. Richmond, Kentucky motive power generation facility in fiscal year 2020.

During the nine months of fiscal 2021, the Company recorded a charge of $16.6
million for cleanup and received $18.4 million from the insurance carrier. In
addition to the property damage claim, the Company also received $7.5 million in
business interruption claims that was credited to cost of goods sold.


Operating Earnings
                                                            Quarter ended                                       Quarter ended
                                                           January 2, 2022                                     January 3, 2021                                Increase (Decrease)
                                                                         Percentage                                          Percentage
                                                   In                     of Total                     In                     of Total                       In
                                                Millions                Net Sales (1)               Millions                Net Sales (1)                 Millions                   %
Energy Systems                              $          3.5                         0.9  %       $         18.5                         5.5  %       $            (15.0)             (80.8) %
Motive Power                                          39.0                        11.5                    40.2                        13.2                        (1.2)              (3.1)
Specialty                                             11.1                         9.3                    12.6                        11.5                        (1.5)             (12.1)
Subtotal                                              53.6                         6.4                    71.3                         9.5                       (17.7)             (24.7)

Restructuring and other exit charges
- Energy Systems                                      (0.7)                       (0.2)                   (0.8)                       (0.3)                        0.1              (21.4)
Restructuring and other exit charges
- Motive Power                                        (1.7)                       (0.5)                  (14.4)                       (4.7)                       12.7              (88.3)
Restructuring and other exit charges
- Specialty                                           (0.1)                       (0.1)                      -                           -                        (0.1)                   NM

Total operating earnings                    $         51.1                         6.1  %       $         56.1                         7.5  %       $             (5.0)              (8.8) %


NM = not meaningful
(1) The percentages shown for the segments are computed as a percentage of the
applicable segment's net sales.

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                                                      Nine months ended                              Nine months ended
                                                       January 2, 2022                                January 3, 2021                              Increase (Decrease)
                                                                   Percentage                                     Percentage
                                                In                  of Total                   In                  of Total                       In
                                             Millions             Net Sales (1)             Millions             Net Sales (1)                 Millions                   %
Energy Systems                             $    11.8                         1.0  %       $    63.3                         6.2  %       $            (51.5)             (81.5) %
Motive Power                                   130.6                        13.1               91.7                        11.0                        38.9               42.5
Specialty                                       33.5                        10.2               29.4                         9.7                         4.1               14.4
Subtotal                                       175.9                         7.2              184.4                         8.5                        (8.5)              (4.6)
Inventory adjustment relating to
exit activities - Motive Power                  (1.0)                       (0.1)                 -                           -                        (1.0)                   NM
Restructuring and other exit charges
- Energy Systems                                (1.4)                       (0.1)              (2.6)                       (0.3)                        1.2              (50.9)
Restructuring and other exit charges
- Motive Power                                 (12.9)                       (1.3)             (16.9)                       (2.0)                        4.0              (23.2)
Restructuring and other exit charges
- Specialty                                      1.1                         0.3               (0.2)                       (0.1)                        1.3                    NM

Total operating earnings                   $   161.7                         6.6  %       $   164.7                         7.6  %       $             (3.0)              (1.8) %


NM = not meaningful
(1) The percentages shown for the segments are computed as a percentage of the
applicable segment's net sales.

Operating earnings decreased $5.0 million or 8.8% and decreased $3.0 million or
1.8% in the third quarter and nine months of fiscal 2022, respectively, compared
to the third quarter and nine months of fiscal 2021. Operating earnings, as a
percentage of net sales, decreased 140 basis points and 100 basis points in the
third quarter and nine months of fiscal 2022, respectively, compared to the
third quarter and nine months of fiscal 2021.

The Energy Systems operating earnings, as a percentage of sales, decreased 460
basis points and 520 basis points in the third quarter and nine months of fiscal
2022, respectively, compared to the third quarter and nine months of fiscal
2021. Higher lead and freight costs along with lack of component availability
negatively impacted the performance and sales mix of this line of business.

The Motive Power operating earnings, as a percentage of sales, decreased 170
basis points but increased 210 basis points in the third quarter and nine months
of fiscal 2022, respectively, compared to the third quarter and nine months of
fiscal 2021. The strong recovery in organic growth along with price increases
improved the performance of this line of business. However, the prior year
period benefited from $6.7 million of insurance recoveries.

The Specialty operating earnings, as a percentage of sales, decreased 220 basis
points but increased 50 basis points in the third quarter and nine months of
fiscal 2022, respectively, compared to the third quarter and nine months of
fiscal 2021. Revenue growth and cost controls mitigated supply chain disruptions
in the transportation portion of the business, while defense and aerospace
margins declined mildly due to specific project performance.


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Interest Expense
                                                     Quarter ended                                   Quarter ended
                                                    January 2, 2022                                 January 3, 2021                                   Increase (Decrease)
                                                                  Percentage                                      Percentage
                                              In                   of Total                   In                   of Total                           In
                                           Millions               Net Sales                Millions               Net Sales                        Millions                        %
Interest expense                       $         9.7                      1.2  %       $         9.4                      1.3  %       $             0.3                           4.2  %


                                                     Nine months ended                            Nine months ended
                                                      January 2, 2022                              January 3, 2021                                  Increase (Decrease)
                                                                   Percentage                                   Percentage
                                                In                  of Total                 In                  of Total                          In
                                             Millions              Net Sales              Millions              Net Sales                       Millions                        %
Interest expense                           $     28.4                      1.2  %       $     29.4                      1.3  %       $            (1.0)                         (3.1) %



Interest expense of $9.7 million in the third quarter of fiscal 2022 (net of
interest income of $0.6 million) was $0.3 million higher than the interest
expense of $9.4 million in the third quarter of fiscal 2021 (net of interest
income of $0.6 million).

Interest expense of $28.4 million during the nine months of fiscal 2022 (net of interest income from $1.7 million) has been $1.0 million less than the interest expense of $29.4 million during the nine months of fiscal 2021 (net of interest income from $1.6 million).

The increase in interest expense in the third quarter of fiscal 2022 is
primarily due to higher borrowing, partially offset by lower interest rates and
the decrease in interest expense in the nine months of fiscal 2022 is primarily
due to lower interest rates and borrowing. Our average debt outstanding was
$1,184.0 million and $1,105.8 million in the third quarter and nine months of
fiscal 2022, respectively, compared to $1,086.5 million and $1,118.0 million in
the third quarter and nine months of fiscal 2021.

In connection with the Second Amended Credit Facility, we capitalized $3.0
million in debt issuance costs and wrote off
$0.1 million of unamortized debt issuance costs. Included in interest expense
are non-cash charges for deferred financing fees of $0.5 million and $1.6
million in the third quarter and nine months of fiscal 2022, respectively,
compared to $0.5 million and $1.5 million in the third quarter and nine months
of fiscal 2021.

Other (Income) Expense, Net
                                                    Quarter ended                                    Quarter ended
                                                   January 2, 2022                                  January 3, 2021                               Increase (Decrease)
                                                                  Percentage                                      Percentage
                                             In                    of Total                   In                   of Total                      In
                                          Millions                Net Sales                Millions               Net Sales                   Millions                    %
Other (income) expense, net           $         (1.4)                    (0.2) %       $         2.9                      0.4  %       $               (4.3)                  NM


NM = not meaningful

                                             Nine months ended                            Nine months ended
                                              January 2, 2022                              January 3, 2021                             Increase (Decrease)
                                                           Percentage                                  Percentage
                                        In                  of Total                 In                 of Total                      In
                                     Millions              Net Sales              Millions             Net Sales                   Millions                    %
Other (income) expense, net        $     (1.7)                    (0.1) %       $     8.4                      0.4  %       $              (10.1)                  NM


NM = not meaningful

Other (income) expense, net in the third quarter of fiscal 2022 was income of
$1.4 million compared to expense of $2.9 million in the third quarter of fiscal
2021. Other (income) expense, net in the nine months of fiscal 2022 was income
of $1.7 million compared to expense of $8.4 million in the nine months of fiscal
2021. Foreign currency impact resulted in a gain of $2.2 million and a gain of
$3.1 million in the third quarter and nine months of fiscal 2022, respectively,
compared to a foreign currency loss of $2.4 million and $7.2 million in the
third quarter and nine months of fiscal 2021, respectively.


                                       37
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Table of Contents
Earnings Before Income Taxes
                                                     Quarter ended                                    Quarter ended
                                                    January 2, 2022                                  January 3, 2021                                    Increase (Decrease)
                                                                   Percentage                                       Percentage
                                              In                    of Total                   In                    of Total                          In
                                           Millions                Net Sales                Millions                Net Sales                       Millions                        %
Earnings before income taxes           $         42.8                      5.1  %       $         43.8                      5.8  %       $            (1.0)                         (2.3) %


                                             Nine months ended                           Nine months ended
                                              January 2, 2022                             January 3, 2021                                 Increase (Decrease)
                                                          Percentage                                  Percentage
                                        In                 of Total                 In                 of Total                           In
                                     Millions             Net Sales        
     Millions             Net Sales                        Millions                        %
Earnings before income taxes       $   135.0                      5.5  %       $   126.9                      5.9  %       $             8.1                           6.4  %




As a result of the above, earnings before income taxes in the third quarter of
fiscal 2022 decreased $1.0 million, or 2.3%, compared to the third quarter of
fiscal 2021 and increased $8.1 million, or 6.4% in the nine months of fiscal
2022 compared to the nine months of fiscal 2021.
Income Tax Expense
                                                       Quarter ended                                   Quarter ended
                                                      January 2, 2022                                 January 3, 2021                                    Increase (Decrease)
                                                                    Percentage                                      Percentage
                                                In                   of Total                   In                   of Total                           In
                                             Millions               Net Sales                Millions               Net Sales                        Millions                        %
Income tax expense                       $         6.5                      0.8  %       $         5.2                      0.7  %       $             1.3                           25.5  %
Effective tax rate                                         15.3%                                           11.9%                                                3.4%


                                                     Nine months ended                            Nine Months Ended
                                                      January 2, 2022                              January 3, 2021                                   Increase (Decrease)
                                                                   Percentage                                   Percentage
                                                In                  of Total                 In                  of Total                           In
                                             Millions              Net Sales              Millions              Net Sales                        Millions                        %
Income tax expense                         $     19.2                      0.8  %       $     17.4                      0.8  %       $             1.8
                          10.6  %
Effective tax rate                                         14.2%                                        13.7%                                               0.5%



The Company's income tax provision consists of federal, state and foreign income
taxes. The tax provision for the third quarter of fiscal 2022 and 2021 was based
on the estimated effective tax rates applicable for the full years ending
March 31, 2022 and March 31, 2021, respectively, after giving effect to items
specifically related to the interim periods. Our effective income tax rate with
respect to any period may be volatile based on the mix of income in the tax
jurisdictions, in which we operate, change in tax laws and the amount of our
consolidated earnings before taxes.

On May 19, 2019, a public referendum held in Switzerland approved the Federal
Act on Tax Reform and AHV (Old-Age and Survivors Insurance) Financing (TRAF) as
adopted by the Swiss Federal Parliament on September 28, 2018. The Swiss tax
reform measures were effective January 1, 2020. The Company recorded an income
tax benefit of $1.9 million during the nine months of fiscal 2021.

The consolidated effective income tax rates for the third quarter of fiscal 2022
and 2021 were 15.3% and 11.9%, respectively and were 14.2% and 13.7% for the
nine months of fiscal 2022 and 2021, respectively. The rate increase in the
third quarter compared to the prior quarter is primarily due to Hagen, Germany
exit charges and changes in the mix of earnings among tax jurisdictions. The
rate increase in the nine months of fiscal 2022 compared to the prior year
period is primarily due to changes in mix of earnings among tax jurisdictions.

Foreign income as a percentage of worldwide income is estimated to be 79% for
fiscal 2022 compared to 67% for fiscal 2021. The foreign effective income tax
rate for the nine months of fiscal 2022 and 2021 were 10.2% and 5.0%,
respectively. Income from the Company's Swiss subsidiary comprised a substantial
portion of our overall foreign mix of income for both fiscal 2022 and fiscal
2021 and were taxed at an effective income tax rate of approximately 8% in both
periods.
                                       38

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Contents

Significant Accounting Policies and Estimates

There have been no material changes to our critical accounting policies from
those discussed under the caption "Critical Accounting Policies and Estimates"
in Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations in our 2021 Annual Report.

Cash and capital resources

Cash flow and financing activities

Operating activities used cash of $78.0 million in the nine months of fiscal
2022 compared to $272.1 million of cash generated in the nine months of fiscal
2021, with the decrease in operating cash resulting mainly due to changes in our
primary working capital, details of which can be found below. In the nine months
of fiscal 2022, primary working capital, net of currency translation changes,
resulted in an outflow of funds of $213.1 million. In the nine months of fiscal
2022, net earnings were $115.8 million, depreciation and amortization $72.3
million, stock-based compensation $15.8 million, non-cash charges relating to
exit charges $3.9 million, primarily relating to the Hagen, Germany plant
closure, allowance for doubtful debts of $1.9 million and non-cash interest of
$1.6 million. Prepaid and other current assets were a use of funds of $18.3
million, primarily from an increase of $14.4 million in other prepaid expenses,
such as taxes, insurance and other advances, as well as an increase of $3.9
million of contract assets. Accrued expenses were a use of funds of $58.2
million primarily from payroll related payments of $23.1 million, income tax
payments of $20.4 million, Hagen severance payments of $19.6 million and
interest payments net of accrual of $7.0 million, partially offset by customer
advances of $11.7 million.
In the nine months of fiscal 2021, operating activities provided cash of $272.1
million and primary working capital, net of currency translation changes,
resulted in a source of funds of $58.2 million. In the nine months of fiscal
2021, net earnings were $109.5 million, depreciation and amortization $70.2
million, stock-based compensation $17.0 million, non-cash charges relating to
exit charges $7.3 million, primarily relating to the Hagen, Germany plant
closure, net gain from the disposal of assets of $4.0 million ($4.4 million from
the insurance settlement relating to the Richmond fire claim), deferred tax
benefit of $1.8 million and non-cash interest of $1.5 million. Prepaid and other
current assets provided a source of funds of $15.0 million, primarily from the
receipt of $23.4 million towards the insurance receivable relating to the
Richmond plant claim in fiscal 2020 and the receipt of a working capital
adjustment claim of $2.0 million, relating to an acquisition made several years
ago, partially offset by an increase of $10.4 million in other prepaid expenses.
Other assets decreased by $3.0 million. Accrued expenses provided a source of
funds of $9.8 million primarily from payroll related accruals of $14.5 million
and selling and other expenses of $7.4 million, partially offset by payments
relating to interest of $7.5 million and warranty of $4.5 million. Other
liabilities decreased by $14.2 million primarily relating to income taxes.

As explained in the discussion of our use of "non-GAAP financial measures," we
monitor the level and percentage of primary working capital to sales. Primary
working capital for this purpose is trade accounts receivable, plus inventories,
minus trade accounts payable. The resulting net amount is divided by the
trailing three month net sales (annualized) to derive a primary working capital
percentage. Primary working capital was $989.9 million (yielding a primary
working capital percentage of
29.3%) at January 2, 2022, $797.9 million (yielding a primary working capital
percentage of 24.5%) at March 31, 2021 and $793.9 million at January 3, 2021
(yielding a primary working capital percentage of 26.4%). The primary working
capital percentage of 29.3% at January 2, 2022 is 480 basis points higher than
that for March 31, 2021 and 290 basis points higher than that for January 3,
2021. The large increase in primary working capital dollars, compared to the
nine months of fiscal 2021 reflects the increase in all components of inventory
due to supply chain delays, new products and higher inventory costs from higher
raw material costs, manufacturing and freight costs and to address the high
backlog of customer orders. In addition, trade receivables increased due to
higher revenue during the current nine months of fiscal 2022, as compared to a
COVID-19 restricted revenue in the prior year. The increase in primary working
capital dollars compared to March 31, 2021 is primarily due to increased
inventory levels for similar reasons as stated above, as well as trade
receivable increase due to higher seasonal days sales outstanding at the current
fiscal quarter end.

                                       39
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Table of Contents
Primary working capital and primary working capital percentages at January 2,
2022, March 31, 2021 and January 3, 2021 are computed as follows:
                                               ($ in Millions)
                                                                                    Quarter         Primary
                         Trade                          Accounts                    Revenue         Working
Balance At            Receivables       Inventory       Payable       
Total       Annualized      Capital %
January 2, 2022      $      636.0      $    671.4      $ (317.5)     $ 989.9      $  3,376.0          29.3  %
March 31, 2021              603.6           518.2        (323.9)       797.9         3,254.2          24.5
January 3, 2021             547.5           515.4        (269.0)       793.9         3,004.3          26.4




Investing activities used cash of $47.7 million in the nine months of fiscal
2022 which primarily consisted of capital expenditures of $52.4 million relating
to plant improvements. We also received $3.3 million from the sale of two of our
facilities in Europe.

Investing activities used cash of $48.8 million in the nine months of fiscal
2021 which primarily consisted of capital expenditures of $53.7 million relating
to plant improvements. We also received $4.8 million from the insurance
settlement relating to the Richmond plant fire claim for the replacement of
property, plant and equipment.

During the second quarter of fiscal 2022, we entered into the Second Amended
Credit Facility. As a result, financing activities provided cash of $76.4
million in the nine months of fiscal 2022. During the nine months of fiscal
2022, we borrowed $424.8 million under the Second Amended Revolver and repaid
$39.8 million of the Second Amended Revolver. Repayment on the Second Amended
Term Loan was $161.4 million and net repayments on short-term debt were $0.3
million. Treasury stock open market purchases were $114.5 million, payment of
cash dividends to our stockholders were $22.2 million and payment of taxes
related to net share settlement of equity awards were $9.1 million. Debt
issuance costs relating to the refinancing of the Credit Facility was $3.0
million. Proceeds from stock options were $1.3 million.

Financing activities used cash of $92.6 million in the nine months of fiscal
2021. During the nine months of fiscal 2021, we borrowed $90.0 million under the
Amended 2017 Revolver and repaid $123.0 million of the Amended 2017 Revolver.
Repayment on the Amended 2017 Term Loan was $28.2 million and net payments on
short-term debt were $9.4 million. Proceeds from stock options during the nine
months of fiscal 2021 were $4.8 million. Payment of cash dividends to our
stockholders were $22.3 million, payment of taxes related to net share
settlement of equity awards were $5.0 million.
Currency translation had a negative impact of $5.4 million on our cash balance
in the nine months of fiscal 2022 compared to the positive impact of $30.9
million in the nine months of fiscal 2021. In the nine months of fiscal 2022,
principal currencies in which we do business such as the Euro, Polish zloty and
British pound generally weakened versus the U.S. dollar while the Swiss franc
was stronger.

As a result of the above, total cash and cash equivalents decreased by $54.7 million at $397.1 millionin the nine months of fiscal 2022 compared to an increase of $161.7 million at $488.7 millionduring the nine months of fiscal year 2021.

Compliance with covenants

On July 15, 2021, we entered into a second amendment to our Amended Credit
Facility that resulted in the extension of the maturity date for the Second
Amended Credit Facility to September 30, 2026, resetting of the principal
amortization with respect to the Amended Term Loan, refinancing and reducing the
existing Amended Term Loan, increasing the revolving line of credit limit, and
certain other modifications.

All obligations under our Second Amended Credit Facility are secured by, among
other things, substantially all of our U.S. assets. The Second Amended Credit
Facility contains various covenants which, absent prepayment in full of the
indebtedness and other obligations, or the receipt of waivers, limit our ability
to conduct certain specified business transactions, buy or sell assets out of
the ordinary course of business, engage in sale and leaseback transactions, pay
dividends and take certain other actions. There are no prepayment penalties on
loans under this credit facility.

We are in compliance with all covenants and conditions under our Second Amended
Credit Facility and Senior Notes. We believe that we will continue to comply
with these covenants and conditions, and that we have the financial resources
and the capital available to fund the foreseeable organic growth in our business
and to remain active in pursuing further acquisition opportunities. See Note 10
to the Consolidated Financial Statements included in our 2021 Annual Report and
Note 12 to the Consolidated Condensed Financial Statements included in this
Quarterly Report on Form 10-Q for a detailed description of our debt.
                                       40

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Contents

Contractual obligations and commercial commitments

A table of our obligations is contained in Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Contractual Obligations of our 2021 Annual Report. On July 15, 2021, the Company
entered into a second amendment to its existing Amended Credit Facility. The
Second Amended Credit Facility, scheduled to mature on September 30, 2026,
consists of a $130.0 million senior secured term loan, a CAD 106.4 million
($84.2 million) senior secured term loan and an $850.0 million senior secured
revolving credit facility. The second 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. As of January 2, 2022, the principal and interest payments due
under the Second Amended Credit Facility are as follows: $3.3 million in fiscal
2022, $11.9 million in fiscal 2023, $17.1 million in fiscal 2024, $19.6 million
in fiscal 2025, $24.7 million in fiscal 2026 and $438.9 in fiscal 2027.

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