Good day, ladies and gentlemen, and welcome to the Third Quarter Fiscal 2012 EnerSys Earnings Conference Call. My name is Kim and I'll be your coordinator for today. [Operator Instructions] As a reminder, this call is being recorded. I will now turn the call over to your host for today's conference, Mr. John Craig, Chairman, President and CEO. Please proceed, Mr. Craig.

Thank you, Kim. Good morning and thank you for joining us for our call. During this call, we'll be discussing our third quarter results and will comment on our general state of our business. Joining me on the call this morning is Mike Schmidtlein, our Chief Financial Officer. And before we get started, I will ask Mike 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 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, and 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 July -- January 1, 2012 which was filed with the U.S. 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 February 8, 2012, which is located on our website at www.enersys.com. Now let me turn it back to you John.

Thanks, Mike. Like to start off by saying that this has been one of the most exciting and rewarding quarters in our company's history. In the past, we've talked about increasing our earnings, expanding our geographic footprint, and increasing our lithium and alternative technology product offerings. These are lofty goals given especially with the current economic environment, but I'm pleased to report that we're able to make significant headway in all of these areas. Let me start with earnings. As reported last night, for the third quarter, we reported record earnings of $0.80 on an adjusted diluted earnings per share basis. This is well in excess of our $0.69 midpoint of our guidance. But more importantly, we are forecasting even higher earnings for the next quarter of $0.86 to $0.90. This is well supported with our current backlog situation, which is near record highs. Next, I'd like to focus on the acquisition expansion plans and high growth emerging markets. As I've said in the past meetings, our focus is on expanding our presence in South America, Africa, China and India. In South America, we acquired InterSystems, a markup leader in the region which has manufacturing facilities in both Brazil and Argentina. We are now executing our integration plan in anticipation of significant growth in that market. On the African continent, we entered into a joint venture in South Africa with plans to grow our market presence. This investment will complement our existing joint venture in Tunisia and our expanding sales offices on the continent. This will help place us in a market leadership position in Africa. In China, we started production of our new 400,000 square-foot world-class manufacturing facility in Chongqing. I was recently there to participate in the grand opening ceremonies, tour our facility and meet our new employees…

Thank you, again, John. Our third quarter net sales increased 13% over the prior year to $574 million, primarily from acquisitions adding 6%, along with solid organic growth of 4% and higher selling prices of 3%. On a regional basis, Europe's third quarter net sales increased 5% to $248 million compared to the prior year. Our sales in the Americas increased 25% to $281 million while our Asian business decreased 5% in the third quarter of $45 million. On a product line basis, net sales for reserve power increased 10% to $277 million while motive power continued in its solid recovery phase with an increase of 16% to $297 million. On a sequential quarterly basis, third quarter net sales increased 5% over the second quarter, with 4% from acquisitions, 2% from higher volume, 1% from pricing, offset by 2% from weaker foreign currencies. The Americas experienced a strong sequential increase in revenue of 12% while Europe was flat and Asia was down 8%. On a product line basis, our motive power business was up sequentially 6% as the normal summer slowdown is behind us. Sales in our reserve power product line increased 4% sequentially. Net sales for our first 9 months of fiscal 2012 increased 19% over the prior year to $1.69 billion. On a regional basis, our European operations net sales increased 18% to $746 million; the Americas increased 22% to $793 million; and Asia, 15% to $152 million. The 19% increase for 2012 includes an increase of 9% in base volume, 3% from acquisitions, 3% due to pricing and 4% from stronger foreign currency translation. On a product line basis, net sales in reserve power increased 15% to $811 million while motive power increased 24% to $880 million. Now, a few comments about our adjusted consolidated earnings performance.…

Thanks, Mike. And with I'd like to open the line up for questions.

[Operator Instructions] And your first question comes from the line of Michael Gallo with CL King.

A question on the margins. You obviously lost a little bit of volume in Europe. Do you still think you can get that operating margin to the 10% level? And conversely, I mean obviously terrific performance in the Americas, 13% operating margin, you used to say 10% was the target in all regions. Americas has been well above that now for several quarters. Do you think that, that target of what you can sustain is higher or do you think that, that business is just doing about as well as it can do right now?

No, it can do much better than it is right now. If you look at the headwind that we have in China, with what's happened over there with the austerity programs and the cutbacks and everything else, I'm fairly pleased that we're doing 6% year-to-date. It's not good enough. We need to get it to 10% but if you look at the improvement from last year, the operating earnings are up 26%, through 9 months compared it to last year and that's a volume increase of about 8%, total – or revenue increase I should say, about 8%. So we're making progress over there but the headwinds that we're seeing from the economy and specifically in the reserve power segment is much stronger than we anticipated seeing. But given that bad condition, doing 6% to 7% operating earnings is better than some of the other people are doing in the industry. So I hope that they will see improvement in earnings in Europe going forward.

And then, on the Americas, I mean obviously you've been doing extremely well. Can you sustain those kind of 13-ish percent kind of margins that's also been doing well for several quarters.

Yes. As we said, about a year ago that when we were north of 14% operating earnings that it was going to be very tough for us to hold that mark, and in fact, it has come down some. And I think we can hold where we are right now and possibly do even a little bit better in the future.

Your next question comes from the line of Steve Sanders with Stephens Inc.

First, maybe for you, John. Like a lot of industrials, you've let the easy comps so as we think about the incremental growth opportunities over the next couple of years, I think you've given us some color on the size of the market in India and China, maybe $500 million or $600 million each. As you roll Latin America, Africa, and India and China all together, what does that represent in terms of an opportunity? Where is your share and what's kind of realistic in terms of taking share in those markets over the next few years?

Well, I think we talked the acquisitions this morning. And you look at our presence, yes, we've now got a foothold in the regions as an example in South Africa. But our goal is to be a market leader there. I'm not happy with just being me-too type player at #3 or #4. We've got to look at what it takes to be #1 in those markets. So we'll be bringing in new technologies, new product offerings into the regions and we'll continue to look for acquisitions there. Generally speaking, we're about 50% market share in motive power in the Americas right now. Globally, we're in the mid-30% range in total. I would like to see each region in the world approach the norm that we have, the 30%, 35%. So you can do the math on the markets that we've talked about and to see the type of goals that we have. I think long-term, what’s it take to double the size of our business? What do we have to do in a 5 to 7-year period? And I think just keep doing what we're doing right now, taking care of customers, having new products out there, looking for accretive acquisitions and just growing the business the way we have.

Okay. And then, we obviously saw some nice acceleration this quarter in the Americas, things are obviously going well there. Was that primarily North America or are you seeing significant pickup in your Latin American products?

It primarily is in North America right now. But I expect that we're going to see big pickup in South America with the acquisition that we've made and the market activities that are taking place specifically in Brazil.

Okay. And then on your outlook for the March quarter, I think your commentary suggested that volumes were kind of flattish, so pricing and catch up on commodities, are those the primary drivers of the sequential improvement versus December?

Well, those are a number of things. As you know, going in a forecast like that, there's thousands of variables we've look at the volumes, we've looked at everything we possibly can and come up with our best estimate. And all of the factors that you mentioned are reflected in that estimate.

Okay. And then, Mike, I may have misunderstood this last quarter, but it looks like sequentially, lead was a bit of a headwind, December versus September. That obviously turns around pretty significantly in March versus December. Is that direct?

Well, I would say lead and overall commodities were actually for us, just slightly beneficial. But to your point, Steve, we will see lower commodity costs in the next quarter just based on what the LME has done. So your premise is correct though that -- largely, let's call Q2 to Q3 was relatively flat, Q3 to Q4, you'll see a benefit and that's why you see our guidance going up 10% over this current quarter.

Your next question comes from the line of William Bremer with Maxim Group.

My first question is on the Americas segment. Fantastic top line, you called out in the Q, you pretty much had a little bit of a mix. My question is, is with the 110 basis point decline there, how is capacity running right now in the industry? And secondly, how's pricing there?

Well, I can't speak in total for the industry because I have to be honest with you, I don't know what the capacity of all of our competitors globally. I can only talk about ours. And from a capacity standpoint, I think we are right at the sweet spot at high 70s, low 80s, depending on the product type. I want to be sure that we have upside capacity in place. We do anticipate that all the bad news that we read about in the global economy will someday turn around and we will be able to pick up additional business just through growth in markets. We also anticipate that we're going to be picking up some market share because of better service and product performance to our customers. And so I think we are positioned fairly well right now. We've got some minor capital expansions as planned but looking out 2 to 3 years, in most places, I think we are covered. But there will be some areas in thin plate pure lead we obviously have to keep a very close eye on that one but for right now, we're pretty good shape in capacity.

On the thin plate pure lead, you still operating close to full capacity?

Well, after the $60 million investment that we made globally, right now, we have capacity to take on additional business. And some of the things that we're looking at doing, I would guess 18 to 24 months out that we may be looking at additional investments so. But that only depends on if we pick up those additional contracts. But it's one that we keep a close eye on and every time that we're talking to a new customer, we assess it and right now, as I said, we're in good shape.

And can you give us an update on Europe right now? What are you seeing out there and how’s the pricing there?

The pricing in Europe is about the same as it has been. It's a little tougher than it is in the U.S. but it's steady. The environment in Europe right now, motive power continues to be relatively strong. The reserve power business stays about the same as it has been, which is, I should cover in the last call, the telecommunications companies over there, are not investing in 4G like they did in the Americas. For a host of reasons, they cut back on CapEx spending so we're not seeing the growth take place in telecom or the UPS market in Europe like we are in the Americas.

Okay. And then finally, adjusted operating margins in Asia hit 10%.

Close to 10%, yes.

Close to 10%, I know that has been your target with hopefully top line starting to ramp here, where can we see operating margins going in the next few years?

Well, again, if I can keep above -- we can keep it above 10%, that's a good mark, that's what we're targeting for. And I think that what we've got to really assess that we build a building, a world-class manufacturing facility that would be capable or will be capable of producing roughly $150 million of revenue. Now, I want to emphasize, it can't produce $150 million today because we built a building and put in part of the equipment. As the business grows, we will continue to put the equipment in to support that. But we were in a situation a few years ago where our block product, that’s the 12-volt batteries -- we're not competitive, and part of the reason was in a high-cost region, that was part of the reason for building this new factory. We now have products coming out, we're shipping to customers that are more competitive, are very competitive. Margins are better on them. The bottom line to your question, we're going to grow on that market as fast as the market is growing and maybe a little bit ahead of it because of cost structure we have in place and I'm hoping that we can hit a 10% and stay north of there. That's our goal.

Our next question comes from the line of Elaine Kwei with Jefferies.

So how would you characterize the drivers behind the improved organic volume and pricing that you saw on the quarter? What, if anything, was surprising for you guys in the sources of strength? And where would you say you're at now in the cycle for best motive and reserved?

Well, Elaine, I think we saw the drivers for the quarter being mostly Americas was the strongest, as we commented, Europe was a little weaker actually was negative 5% on our organic volume. Asia was down but we knew that for a couple of reasons such as our facility in Jiangsu that was shut down. So overall, we were pleased with it. I think you’ll continue to see a strong Americas segment right now. We see Asia resurging with our added capacity, with our facility in Jiangsu back online. Europe, we kind of see it neutral at best. So a lot left to be decided as what's going to happen in Europe but we think we're well-positioned there. So overall, as our guidance reflects, we are fairly bullish right now.

Could you just drill down perhaps a little bit in terms of the strength in the Americas and if that's from just increased economic or industrial activity overall or more so from perhaps telco build-outs, just maybe a little bit more color there?

I would say it's relatively balanced that we're seeing good strength in both motive and reserve markets in the Americas for largely the reasons you explained on the continued build-outs on telecommunications and data centers and the motive power as we talked about with the industrial truck orders being strong, up 8% year-over-year, so that continues to do well on all fronts for us.

And where does it feel like we're at in terms of industrial cycle and for you guys and on the truck orders, on the motive side and as well as in the reserve power?

Well, you're speaking specifically the Americas or are you talking global question?

Both, if you could, address that.

Well, when you look at -- if you look at our past run rate and how we've been running, I think there's upside to it. And the reason I say that is, I'm going to look at the industrial truck orders for the month of December and compare them with the prior 3 months. And if you look at the Americas, the new truck orders for the electric Ford trucks it’s up 19% in the month of December compared to the prior 3 months. We would see the battery orders come in between 15 to 20 weeks after the truck order is placed. So if -- just for simplicity, if the new truck orders are up 19% and we are 50% of that market, you can do the math to see that we should see an uptick theoretically in our battery sales in the motive power segment going forward. When you look at that same metric globally, and that's December, compared to the prior 3 months, it's up 9% on new truck orders. Now on the reserve power side, it's a mixed bag. In the Americas, year-to-date, our reserve power business is -- this is looking at 9 months, it's up 13% in Asia, it's up 18% in Europe and at least in Africa it's up about 15%. So that has volume and acquisitions and everything in it. So we're seeing on a 9-month basis, things are looking pretty good in both reserve and in motive. But when you get behind some of the areas that we've talked in Europe, it's right now, it's down, and it's staying down. But the good news is it will come back.

Okay, great. And are you concerned about -- it sounds like your view on Europe is it's just going to be a function of sort of that natural evolution. And then it sounds like there could be potentially a harsher competitive environment in Asia there and what is your view on that? Is this a more of a matter of sticking to your guns while competitors beat each other up on price and sort of staying out of that, or do you see that being challenging potentially for another couple of quarters?

There is a lot of variables that go into that question and let me try to answer it this way, that if the Euro as an example goes back down to like 126 where it was at the low point, that makes buying products into Europe coming out of China much cheaper. We will use that plant to support Europe, the Chongqing plant to support Europe, if the euro drops way down. The thing of getting into price wars, we're not going to play in that game. We'll walk for business's slow margin, we've done in the past, we're holding our earnings quite well. Now the other side of the coin is that because of the crackdown in lead-acid battery companies in China, a lot of companies have been forced to close their doors and they have not reopened yet. And as you are aware, we had a plant that was down 2 months. Our plant is reopened, it's running. We've taken the financial hit with the factory being down for 2 months as part of the reason our numbers are down. Our numbers are down because of the motive power business, reserve power business, they're okay. So I think there's a lot of variables there. And if some of these competitors don't come back online, it's going to be less supply there, less capacity supported. Now the other side to it, the telecommunications in China has slowed up compared to what it was running. They're not buying the same level as they were buying before and I'm sure you've read about the total Chinese economy slowing up and we're seeing some of the impact of that in our numbers also.

Great. Just one little housekeeping -- operating expenses ticked up a bit this quarter. Is that more of a one-time thing or is this kind of near level going forward?

Well, I think it reflects the addition of some of the acquisitions that started in early October for one. So I would give that and part of it is being the way that those businesses are structured or their operating expenses, how they're recorded on their P&L versus the rest of the business. So to your point on that uptick, I would attribute it more to the M&A activity.

Your next question comes from the line of Michael Corelli with Barry Vogel and Associates.

Just a question first of all about the recent joint ventures and acquisitions you completed. I think you said about a $40 million total price for those and I think you had said, you expected somewhere around $100 million in revenues. It Looks like there was about $30 million in the quarter, was that all related to those recent JVs and acquisitions?

Well, you're right. We said $40 million was our total investment and not all of that has been made at this time. If you look at our cash flow, you'll see a number about half that range so there's some additional future investment that needs to be made. The sales from those 3 investments that occurred in our third quarter contributed a little under $30 million, call it closer $25 million on the quarter.

All right. So is that $100 million run rate a reasonable number to use?

I think so.

Yes, I would agree with that. The thing -- if you take a company like an ABSL, where you're building batteries for satellites and spacesuits, that's a very cyclic business. So you get big orders in 1 quarter and relatively small orders in the next quarter. So when we look at the backlog that we have in place, I think the $100 million is a good number to use.

And was it accretive in the quarter? I know you just completed some of these.

In this quarter, I would say, no, it was not. So that was a little bit of a drag particularly on Europe's operating earnings when you compare their quarter to say where it was a year ago. I mean a year ago, Europe did 6.9% of sales was operating this year was 6.6%. So a lot of that drag came from 2 things, the acquisitions and a 5% decline in organic volumes so -- but that's not unusual. The -- one of our joint ventures was essentially starting from scratch so we expected that to be negative in the first quarter.

So if we look ahead, let's say the next fiscal year, and look at these acquisitions and joint ventures, any thoughts on how we should be looking at fiscal 2013 revenues and accretion from these deals?

Well, I think, by the time you get to this quarter a year from now, they would all be accretive. And revenue wise, maybe a little bit stronger. It's not that we expect that they're going to cap out at $100 million in revenue. We would expect them to go stronger, and by this time next year, we would expect to be talking about 2 or 3 other investments and how they are doing.

I think you have to look at the longer-term strategy in what we're doing here. If you go back and look at EnerSys -- when I started the company, we were around $200 million in revenue, now we are more than $2.2 billion in revenue. And we had a direction that we were a roll-up vehicle, we've acquired 33 different companies. Most of them lead-acid battery space and we decided a few years ago that there are other technologies out there, other storage solutions -- short energy solutions that’ll make good returns or make money. And what we're looking at doing in our lithium business is duplicating what we did in the lead-acid battery business. And that's buying companies that we can put together and the sum of the pieces will be worth more than any of individuals added up, in other words, we can consolidate these operations. So a lot of what we've done thus far is on track to get to the ultimate plan of having a much larger lithium business that will make good returns, so we're consolidating companies together. Now, that's the upside to it. In the long range – long-term, it makes sense. In the short-term, it's going to be very similar to what we did with the other companies that we brought lead-acid. Many of them, in fact most of them were not accretive right out of the chute. They were dilutive. And it took us 1 year to 2 years to get them turned around and get them that we were making money. I remember on FIAMM when we bought that company, it was $90 million in revenue, in the first year, we projected we will lose about $0.04 and we lost $0.02, I believe it was that year. The next year, we made about $0.10. So that's the overall direction. We're looking longer-term, not short-term on these things.

Okay. And then just a question on China. I know that you've walked away from some lower margin business there, while at the same time starting up a new facility. So is there any issues with possibly having too much capacity there in the short term or is there enough demand within China for those 2 facilities? Oor are you going to have to start sending some of those products overseas, and if so, where would you be shipping it to?

Keep in mind on the investment that we've made over there, the building itself, as I mentioned before, is capable of producing $150 million. That's the building, that's the brick-and-mortar. The actual equipment will be put in there as it's needed, so we couldn't possibly do $150 million out of that building, day 1. We're starting up right now, we are shipping our product to customers in China, we are working plans to ship product out of that plant in other parts of the world specifically more of it into Europe. When we get into a situation in Europe that the currency drops off and the Chinese product becomes more competitive or because of the currency, we want to keep in mind that we've got facilities in China that are also capable of producing products there. So we're going to build the product wherever it's most cost-effective. Now the other point to make of this is that when we built this new factor, in part, we closed down a plant that was in the Shenzhen area because it was high cost. The other thing that we did was we designed some products that were more competitive in that market, in other words, we had European products being built in China that were not cost-effective so it's a product redesigns, a new factory going on that being built to support not only China but the rest of Asia and even areas outside of Asia specifically in Europe.

Your next question comes from the line of Walter Nasdeo with Ardour Capital.

Most of my questions have already been touched upon. But if I could just go a little bit over -- back into when you guys are out bidding business and running around the world looking for new opportunities, I know you said that you won't get into bidding wars and things like that and will walk away from low-cost business or low margin business. But my question is, how much of a premium does your name bring to the table when you are going up against some of these other companies that either aren't as established as you guys are over your history or through reputational advantage?

I don't know the exact percent on that, I'd be guessing on it but I think that the way we presented this is this, that when we go out to sell our product, we're not selling just a battery. And there are those that sell just the battery to an end-user and the way we view it is this, we're going to provide the best value to the customers. And in many cases, it's because of a superior product, in other cases, it's because of superior service. If there’s something wrong with our products, we will stand behind them 100%. If they need to be replaced, we'll replace them. We look at that we're best value. So when you look at the premium that we're charging, yes, it is going to be higher than some of the other people but if you look of the value you're getting, we think it's significantly greater than competitors.

Good, okay. And then, if I could just touch on your restructuring costs? How we're doing as far as winding those down?

Well, we still have next quarter. We said in our guidance that we expected to spend about $0.07 in restructuring and acquisition activities. And the bulk of that would be in acquisition activities primarily coming from the plan that we announced in fiscal 2012, which was really related to reducing some sales and general and administrative personnel in Europe, so I would expect that we're going to spend a few million dollars yet in this fourth quarter. And we continue to look at our business to see where and how we can make it more cost efficient, but that should wind down for the most part, the programs we have announced.

Let me take up a little bit further on that. When you bought 33 different companies over the years, it presents a lot of opportunities for integration and we're talking earlier about lithium and buying the individual companies. We need to put these together. And we need to find out how we eliminate duplicate operations and reduce overall cost. We've also talked earlier about when do we get to 10% operating earnings in Europe? I think it's going to take additional consolidation to take place in Europe. We're not going to rely just on volume coming back. We're going to rely on doing things more effective than we have in the past -- more cost-effective. So I think you're going to see as we continue to buy companies, we're going to continue to integrate those companies and there will be some additional cost associated with them.

Your next question comes from the line of Bill Dezellem with Tieton Capital Management.

A couple of questions. First of all, would you please discuss how you're viewing the acquisition opportunities today versus 3 months ago and 6 months ago?

I would say there's no major changes. We constantly have no less than 5 to 10 different things that we're looking at. I think that, right now, you look at M&A activity in total in this country, it's down compared to what it was prior year, in fact, January is one of the worst months in a long time. We continue to be very disciplined. We're not going to overpay for things. And I would say there's no major change. Mike, you want to add to that though?

Well, Bill, I would say nearly 50% of my time is spent evaluating, negotiating working on these transactions, and we do see a lot of opportunities and that's because people know that we are inquisitive in nature, that we have the balance sheet to go out and finance these transactions, so we're always seeing offerings being put in front of us. I don't think that we've seen a dramatic change in the multiples that sellers were looking for necessarily. You do see a little bit more in lithium ion opportunities as electric vehicle markets are kind of drying up perhaps or not coming on as quickly as some people had expected. But overall, I'd say the level hasn't changed dramatically.

Yes, I think that's a good point you brought up there Mike. That some of these companies that -- there are companies out there that you could buy today for a lot less than you could have in the past but frankly, we're not interested in them because we did think they had a future back then and it's proving out to be that way and their price has come way down, and so we just don't have an interest in those particular companies. And many of them were in the lithium-ion space.

That's helpful. And then relative to China, in the past, you've mentioned the pricing has been competitive there and you have walked from business. But on this call, you've also pointed out that the Chongqing facility is a lower-cost facility. And I think if I heard you correctly, you said you will walk from business that doesn't have the correct margin and given now that you have a lower-cost facility, my question is does this begin to imply that you have an opportunity to be more competitive on price and yet still have the margin, that you desire?

I think that's well stated. I think you stated it well, yes.

And one other thing, Bill, that this allows us is a broader offering of SKUs to bid on. Before, we were somewhat limited on which -- if there were 30 different products or SKUs that were being put up for bid, we may have only had 4 to 6 that we were actually bidding on, so expands are offering as well.

That's helpful. I want to take this a step further. Given the lower-cost, the Chongqing facility, when we're talking at the pricing level and you're in a bid situation, how much lower do you believe you can bid now and still maintain your margins?

Yes, for competitive reasons, I don't want to get into that at all. I think that's just -- we're opening ourselves up for some issues there that I prefer not to get into.

Your next question comes from the line of Elaine Kwei with Jefferies.

Just a follow-up on your earlier lithium comments. Right now, the industry seems bifurcated between the very large multinational producers, like LG, Chem [ph] and Panasonic, and a number of much smaller companies, most of which are struggling for scale and profitability, do you see room for a midsize consolidated producer versus these large Asian manufacturers? And what would you see as some of the low hanging fruit for rationalizing the lithium industry?

I think you have to take a look at the large internationals and what they're going after and the markets they are going after, and I'm going to equate that to the lead-acid battery. You have those in lead-acid battery that build batteries for cars. And we do very little in that. We have some contracts that we build a very high-end battery. What we do is we pick up niche markets. When you are building lithium-ion batteries for computers, we're not going to be competing in that particular space in the commercial area. I don't see us being in that because I don't think we can be competitive. When you look at building for hybrid vehicles, we could build a battery today for hybrid vehicles, and I don't see us doing that. If you look at building a battery to put into a diesel submarine or into a spacesuit or into a satellite, which is not only the battery itself, it's all the testing, it's the electronics, it's -- the battery, the cost of the battery is actually a small part of the total cost. It's all the other things that you have to go on, or go through. In other words, what we're focusing on are those niche markets. We're focused on the military, the aircraft, the space -- those niche markets where we can make good returns. To get in and try to compete with a company that's building millions and millions of cells, that's not what we're looking for. So to answer your question, yes, I do see a real good opportunity for us in these niche markets.

[Operator Instructions] Your next question comes from the line of Howard Rosencrans with VA.

I did get on the call a little late. When you were addressing, I believe it was a Jefferies question regarding the Americas and I didn't hear the prior to that. But how much of, do you think this is really share gains coming from your beleaguered competitors and where are we in terms of your pick up of -- because in different times, you've given up share to your competitors when you're just unwilling on price. But how much more in the way of share gains, where do you feel we are in that juncture particularly in the Americas which was just so phenomenal?

Well, let me just address the Americas, I don't think right now we're picking up major, major market share. We have in the past, I think if you look at it sequentially, it's modest, at best, I think a lot of it is market has come back. I haven't seen the recent PCI data, but I don't really believe that we picked up. We have picked up some market share but it hasn't been as much as it was let's say 1 year, 1.5 years ago. Mike, you want to add to it at all, or...

No, I think that's pretty accurate description. So the strength of the American economy is I think fueling most of it and there may be a little bit of market share gain, but we don't view that as the driver of the Americas growth right now.

It appears to be no more questions at this time. I would now like to turn the call back over to John Craig for closing remarks.

Well, thank you very much for joining us today, and everyone, have a good day. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.