Good day, ladies and gentlemen, and welcome to the EnerSys Fourth Quarter Earnings Conference Call. My name is Erica, and I'll be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Mr. John Craig, Chairman, President and CEO. Please proceed.

Thank you, Erica. Good morning, and thank you for joining us. In case you missed it last evening, we posted on our website slides that we're going to reference during this call. So if you didn't get a chance to read the press release and you want to take a moment and pull this information out of our computer, now will be the time to do it. Before we get into the details of our fourth quarter and full year fiscal results, I'm going to ask Mike Schmidtlein, our Chief Financial Officer, to cover information regarding forward-looking statements. Mike?

Thank you, John, and good morning to everyone. As a reminder, we will be presenting certain forward-looking statements on this call that are based on 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 the factors that could affect our future results, including our earnings estimates, see forward-looking statements included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in our annual report on Form 10-K for the year ended March 31, 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 May 29, 2012, which is located on our website at www.enersys.com. Now let me turn it back to you, John.

Thanks, Mike. I'd like to start off by saying I am personally very pleased with our accomplishments and financial performance for fiscal year 2012. This is the first time in EnerSys' history that we reported over $3 in adjusted diluted annual earnings per share and had annual sales of $2.3 billion, both which were all-time records. Before we talk about where we're going as a company, I'd like to look back and review how we got to where we are today. If you look at Slide 2, you can see our sales in fiscal year 2008 were $2 billion with adjusted earnings per share at $1.42. Then we entered the great recession. From fiscal year 2008 to 2010, our sales dropped $448 million or 22%. But when you look at our adjusted EPS, we went from $1.42 to $1.44 or in other words, sales down 22% and adjusted earnings per share up 1%. At the start of the recession, we took major steps to reduce our total cost, which included shutting down some of our higher cost manufacturing operations, investing over $60 million in new products and increasing manufacturing capacity for higher margin products. These actions set the foundation for our record sales and profitability that were reported. In fact, when you compare fiscal year 2010 to 2012, as shown on Slide 2, you can see that our sales increased 45% and our diluted earnings per share increased by 110%. Our focus growth strategy, as shown on Slide 3, has guided us to our past performance, and we will continue to follow this strategy for future growth. While accomplishing our record sales and earnings in 2012, we are also very active in planting the seeds for future growth. Some examples are: We initiated additional restructuring in Europe to keep driving…

Okay, thank you again, John. I am starting with Slide 5. Our fourth quarter net sales increased 8% over the prior year to $593 million, primarily from acquisitions, adding 4% along with solid organic growth of 3% and higher selling prices of 2%, offset by a 1% decline in currency translation. On a regional basis, our sales in the Americas increased 18% in the fourth quarter to $290 million, and our Asian business increased 19% to $53 million, while Europe's fourth quarter net sales decreased 3% to $250 million, all compared to the prior year. On a product line basis, net sales for reserve power increased 7% to $282 million, while motive power increased 9% to $311 million. Please now refer to Slide 6. On a sequential quarterly basis, fourth quarter net sales increased 3% over the third quarter, with 1% from acquisitions and 2% from higher volume. Asia experienced a strong sequential increase in revenue of 17% with improving pricing prospects. The Americas were up 3% as sales growth in the Americas remains good, particularly in South America. Europe was up 1% with Western Europe mostly in recession, while Eastern Europe, the Middle East and Africa remains strong growth opportunities for us. On a product line basis, our Motive Power business was up sequentially 5%. Sales in our Reserve Power product line increased 2% sequentially. I am now on Slide 7. Net sales for fiscal 2012 increased 16% over the prior year to $2.28 billion. On a regional basis, our European operation's net sales increased 12% to $995 million. The Americas increased 21% to $1.08 billion and Asia, 16% to $205 million. The 16% increase for 2012 includes an increase of 8% in base volume, 4% from acquisitions, 2% due to pricing and 2% from stronger foreign currency translation.…

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

[Operator Instructions] Our first question comes from the line of Zach Larkin with Stephens.

First off, I wondered if you guys could touch on margins and what your expectations are as we move through the year. Obviously, the most recent quarter, we just saw some stellar margins. Do you expect both on kind of the gross and the operating line to see those hold steady? Or what type of color could you provide us as we think about going forward?

I think the -- you have to look at the factors that are going to drive that. I think it's going to be commodity cost in total. And if you look at lead this morning, spot prices are this morning was $0.875 a pound, which is down to where it was running. Obviously, when you look at the metrics, cost is down. Just mathematically, it's going to drive a higher percentage of gross profit. But I think that right now with lead going down and staying down where it is and our ability to hold pricing on it, we should see some very nice margins going forward. However, if lead goes up, if it spikes back up again, that volatility that we've talked about for so many years in the lead market, it could switch the other way.

Okay. And then I wondered if you could talk about with some of the new movements in the nickel-zinc, what types of applications are you specifically targeting? Is there any type of competition out there? And how is that progressing with the recent acquisitions?

When you look at the nickel-zinc and you think about nickel-cadmium -- and cadmiums, the problems associated with it, not only from a battery performance standpoint but some of the environmental things, it would start out by looking at displacing some of the nickel-cadmium businesses out there. Second, we think we will get superior performance on it. The areas specifically that we use it is a lot of railroad applications in Europe, some UPS, where temperature extremes are in place. We would be using in those markets also.

The next question comes from the line of Brian Drab with William Blair.

First question is on the forklift market. Another company in the industry recently said that the outlook from their perspective was, for the forklift market: Americas okay, modest growth; Europe stable, that might be surprising to some; and I think the comment was still given with relative caution but stable in Europe, and then China down modestly. Is that similar to your expectation for the next 12 months?

I agree with all except on China. I think China is going to continue to grow, and we're seeing it in our orders.

Right. Okay. Okay. And let's see -- with respect to China then, do you feel like we're past the disruption related to the regulatory shutdowns, in general, in China? Is that kind of a thing of the past for the most part?

I don't think it's totally absorbed yet, but I think that most of it is. But I think there are some other problems that are developed with China product outside of China that are relatively new. And let me explain what I mean by that. If you look at the cost of lead, as I mentioned earlier, the spot market on LME this morning was at $0.875 per pound, and the Shanghai Exchange, where you'd buy lead in China, is $1.09 a pound, so you got about $0.22 per pound spread between that. Or in other words, it costs more to build the batteries from a lead standpoint in China than does in Europe or the Americas. Second point is the euro this morning, below $1.25. The net effect of that is with--when you look at the back taxes added on product coming -- batteries coming out of China, you look at the spread or the increase in costs they had to pay for lead and you look at the currency difference, what it says is it's going to be more difficult for Chinese manufacturers to build and ship batteries to other parts of the world. It's going to be more costly for them to do it. If you look at our European market, but 1/3 of the reserve power batteries that are used come from China. So what we think is going to happen is you're going to see the cost go up on batteries from China going into Europe, which is going to be -- it's going to put our position more competitive than it has been in the past by building our products in Europe and shipping to European customers.

Okay. And then that dynamic is clearly, I guess, what is affecting your pricing in Asia. Mike mentioned that the improved pricing environment in Asia, is that the main factor that's driving that?

I think that if you look at cost that I referred to earlier on the batteries from a lead perspective, you look at the factories that had been shut down in China because of environmental reasons, the net effect is that our competitors have increased their pricing to the customers in China. When pricing went way down, we walked from a lot of business. We held our pricing. Now that pricing has come back up, we're starting to see our business pick back up again on certain products.

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

Love the consistency here, very nicely done. What was the average price of lead for you guys in the fourth quarter?

We typically would not give that out specifically, but let's call it somewhere in the mid-$0.90 range.

Okay. And then, John, can you give us a little more color on what's happening here in Europe and how that affects your business, Western versus the Eastern bloc.

Well, as everybody knows, who's on the phone, Western Europe is extremely volatile right now. Where this thing is going to end up with Greece and several of the other countries is a big unknown. We have our own viewpoint on it, but we are planning for the worst and hoping for the best. We are seeing our business is down in Europe, but it's holding, it's flat. And what we're going to do is increase our sales and marketing presence in Western Europe to try to pick up additional share by not giving pricing, but by picking up quality customers. But we're really going to increase the emphasis in Eastern Europe, Middle East and Africa to pick up business in new markets that we are not as large in today as we want to be.

Okay. And then finally, your slide mentioned that you've taken the existing thin plate pure lead and applying it to new applications. That seems to be a focus here. Can you give us some examples of that?

Well, we've talked often about taking thin plate pure lead into the motive power applications. We think, starting with the class 3 smaller trucks, that that's someplace where we plan to go immediately. And we'd like to see some of the development work we did with the U.S. Navy on the larger size plates to be able to get into class 2 and class 1 trucks. So I think motive power for us is the biggest application opportunity, but anywhere that they can use the attributes that come with thin plate pure lead in mission-critical type of environments, those are the type of customers that are willing and interested in paying the premium pricing for it because of those performance.

One of the other areas to take a look at -- and Mike mentioned on the motive power, and we do put some -- what's called block product in motive power today, which was a 12-volt batteries. Motive power batteries on class 1 through 3 fork trucks tend to use 2-volt cells that are wired up. And what we're doing is we're going to be making thin plate pure lead in 2-volt cells. Now the logic behind it is this, that some people are looking at going with lithium-ion batteries in fork trucks. There are some advantages -- you can charge it faster with a lithium-ion battery than you can a lead acid battery. The problem with the lithium-ion is the cost. If you take a typical battery and charger that, say, costs about $6,000, to replace that with a lithium battery, you're talking about $50,000. So what we're looking for is can we come up with a battery that you can charge it faster and not have to pull the battery out during the day, in other words you could opportunity charge it. And the solution we're coming up with that will be much less expensive than lithium-ion is to put a thin plate pure lead in it. From a user standpoint, what that means is during a 24-hour day, they can operate that truck approximately 20 hours with 4 hours opportunity charging, so when the driver is at lunch or on break they can charge it and then go back to work and they can run it during the full day. So it's something -- by the way, we will offer the lithium product line, too. So we're going to offer the lead acid, the conventional lead acid, the high-end product, which is the lithium-ion, and then a mid-range, which should be thin plate pure lead, which we think there's going to be some real advantages to it. It's going to add some of the major advantages to lithium, however, it's going to cost much less than lithium.

And, John, my last question, optimistically, when can we expect to start seeing these thin plate pure lead hit the mobile market?

You can expect it -- it's happening right now. We started the 1st of April. We're starting that project in the European market. And then -- see, we have a premium product with the square tube in the U.S. market. So our decision was start this and see if -- how the market accepts it. We are building them today in our plant in France, in Arras, France. And if the market accepts these, we will expand that operation and be able to build more of them. And then if it's really accepted well in the European market, we will then bring it to the U.S. and potentially even into the Asian market.

Our next question comes from the line of Michael Gallo with CL King.

John, 10% operating margin in Asia I think was the best it's been in a couple of years. Obviously, the start-up expenses and you're starting to fill up the facility, do you expect, based on what you see, that you'll be able to sustain that double-digit rate going forward?

I think there's -- you have to really break that business down and take a look at a number of things. The headwinds that we have is we still have some of that $5 million I referred to earlier on the start-up cost in the Chongqing plant. That plant right now is running about a 16% of capacity utilization that was planned for, so we still have that headwind or that dragging us even at the 10% operating earnings. The other side to it is some of the products that we manufacture on the 2-volt cells, the margins -- even though prices got better, the margins are still lower than we'd like to see them. So we have some opportunities to reduce cost or increase pricing to get that up. The third element is that many of the Asia companies, the real high-end companies, are -- have tested and have tried our thin plate pure lead products, and they are now buying that product at a greater extent than they have previously. They see the value in the product. To ship it from Newport, Wales, where we build that product or from Warrensburg, Missouri, is expensive, but the customers like the product and willing to pay for it. This last quarter, our mix was higher on thin plate pure lead. Now to get to your question, right now our forecast here for the next 6 months or so, we believe that thin plate pure lead product will be still there. The orders will still be there, so we expect we're going to be running fairly decent in Asia going forward.

Okay. Great, John. Second question I have is just on Europe, wanted to dig in a little bit more on some of the Asian imports becoming less competitive. I was wondering, any sense for if it's 1/3 of the market, is it 10% or 20% become really not competitive. And I was wondering also whether that spread differential on lead and some of the other issues there provided opportunity to get some better pricing in Europe despite what's obviously a challenging economic environment.

Well we hope that -- let's break it down first on the markets. Reserve power market, our estimate is about 1/3 of the reserve power markets are coming in from Chinese manufacturers. In the motive power, it's not an issue, they ship over very few. There are some that go over, but it's very small percentage of the market. So it really is going to focus on the reserve power business. We don't know the timing or total impact on it because in many cases, what happens is there are contracts in place. And these contracts that are in place with Chinese manufacturers to an OEM in Europe, it could be that the -- there might be a price adjuster in there, there may not be a price adjustor. Someone is going to get hurt on this thing one way or another. Either the customer is going to pay for it because of the lead spread in the currency or the manufacturer of the batteries is going to pay for it. But ultimately, what's going to happen -- we should be able to get -- if you get beyond the contracts and everything else and it stays where it is, we should be able to be in a better position to get the increased pricing.

Our next question comes from the line of John Franzreb with Sidoti & Company.

John, you just actually just touched on my next question. How much of your business is actually tied to lead escalators, and has that changed materially from a year ago?

It has not changed materially. We run probably as a company total about 35% ballpark, depending on the mix and the customer mix. It could be the low 30s to up to about 40.

Okay. And looking at a higher level, you kind of talked about the opportunities in other regions of the world. How big of an opportunity are we talking about there? Is it still in its infancy? Can you give us a sense of scale?

Yes, I think let's start with in -- with India, what we've done there, and let's talk about South Africa, what we've done there to start with, and you'll get an idea of it. In each of these regions, when we've gone into them, what we've looked at is not buying the largest battery manufacturer or the most profitable battery manufacturer in the region, in those regions. And the reason for that is because what you're going to pay in the front end is going to be a very, very high price. So what we've done is we went in and bought companies or invested in companies that are second or third tier. And within what we call the 100-day plan, you take them from second to third tier up to EnerSys standard of being first tier. And so when we invest in India, as an example, the amount of money we put in to buy the company was not all that much, but the amount of money we're putting in to upgrade the company is quite a bit. That's what I call planting a seed. That's what I call planting a seed. And from there, that seed will grow in by taking market share. We'll be bringing in new designs and products that we manufacture globally, and we will also look for other acquisitions in those regions. Back to India, specifically, am I happy with our market share there? Absolutely not. We planted the seed. It will grow. We've got to get much bigger. It is our intention to be #1 in India, #1 in Africa -- and I said Africa, not just South Africa, but all of Africa, and to be #1 in other regions of the world. Now in South Africa, we do have a joint venture there. We also have one in northern Africa in Tunisia. We have plans in place where we'll be putting sales offices on the rest of the continent or other areas in the continent to expand our presence in markets where we think we can get good returns.

And how big is the total Indian market just to use your example?

It's north of $1 billion, John, so.

Okay. It's sizeable. And one last question, making sure I heard this right. The new Asian facility plant, you said it was at 16%, 1-6 capacity utilization?

State again, John, I'm sorry.

The new plant in Asia.

In Chongqing, China, currently it's running about 16% of what the -- total capacity.

And where do you expect that to finish the year?

I don't know that answer right off. We're probably going to be in the 40% to 50% range. But keep in mind, when you're starting a plant up like this and you put, in our view, you put the EnerSys brand or name on that product, it better be top quality. And when you put a plant in place, the last thing we want to do is to increase that capacity so fast that we put out products that are not to our standards. So by design, it is a slower ramp up process. The #1 objective, if there's any questions, when in doubt, shut it down. Just be sure that it's top quality that's going out the door.

Your next question comes from the line of Scott Reynolds with Jefferies.

I think the one I wanted to ask was on the gross margins in the quarter. What would you attribute -- would you attribute most of the strength quarter-over-quarter to lead prices, or would it be some type of the mix of better product mix, pricing. Could you break it out percentage-wise, which it would be from?

Well, we did receive sequentially a slight benefit from our commodity cost. Pricing, this is kind of where -- when our pricing normally is chasing the cost curve, there comes a point when the cost breaks downward and a quarter or therefore later the pricing will catch and overtake it, and that's kind of what you've seen in this quarter. So you had the benefit of very strong volume because it's $593 million of revenue, the fourth quarter is traditionally our strongest revenue. So we had good utilization of our factories. We had good pricing and relationship to our commodity costs, and those are really the factors that they kind of raise. One of the questions that was asked, Zach with Stephens asked earlier, about the margins, and I would say the 24.5% we enjoyed in the fourth quarter, it's going to be in that ballpark, maybe slightly less in the first quarter, but -- and that's about as far out as I can look given what I know about lead cost right now or order intakes. But I think for one more quarter, you're going to see again a very good strong performance at the gross profit line.

Okay, and on the euro fluctuations, how much of that do you have hedged? Is it mostly hedged by all of your operating basis there? Or is there some type of a benchmark that you can give us, just say a percent of your decline would impact operating profit.

When we look at derivatives -- I've said this many times in the past, we're not going to go out long on the market and go at risk. And when we take a look at our biggest exposure on the currency from a transaction standpoint is with lead that we buy in Europe that's dollar denominated, but we have to convert euros to dollars to buy the lead, so we will hedge out. So we track our lead hedging or currency hedging very consistent with our lead hedging. So we're not going to go at a big risk on it. Now if we have a long-term contract with a customer that, let's say, goes out a year or 2 and it's at a fixed price and there's a currency difference, then we will hedge that whole period if we think it's the right decision at that time and not take the risk. Mike, do you want to add to it at all?

Yes, I think we feel like we're naturally hedged in that most of the product we produce in Europe is sold in the European market, so you're producing under euro cost basis and you're selling in euros. Now where we don't have that circumstance like John described when we're buying lead that's denominated in U.S. dollars, we do put hedges on those to go back-to-back with the lead hedges that we have in place. We also have a couple of factories, 1 in Poland, 1 in the U.K. that are producing products, 1 is denominated in pounds, the other 1 is in zloty. We will do some forwards between those 2 to lock down the rates on those transactions. But you throw all of the euro transactions and you can see in our 10-K, there is only about $50 million worth of euros being hedged for all 3 of those type of events that occur. So we'd like to say in normal circumstances -- and I realized that the euro has -- it's down below $1.25 at the moment, it's dropping relatively fast. But we typically believe that FX noise is usually only plus or minus $0.03 to $0.05 in a quarter. And at the moment, we don't have anything that would lead us to believe we'll see anything greater than that in this quarter.

Take this conversation also with the conversation on where our gross profit is going. And think about this for a second. In selling a product in Europe, from a translation standpoint, if a currency is weaker and you translate that pricing or the net sales from Europe to the U.S., to the dollar, it's obviously going to be lower sales. So our sales will be lower because of the currency going down. If theoretically, the cost is in euros, then the cost of sales are going to come down. Theoretically, your gross profit would remain the same. The gross profit divided by a lower sales base would be a higher percentage gross profit. So think about back to your question of where the GP is going to go, the currency will help us from that end. Just -- it's a mathematical phenomena. It has nothing really to do with our business or a little to do with our business.

Your next question comes from the line of Michael Lew with Needham & Company.

You mentioned positive order trends carrying into the first quarter. Can you characterize the quotation activity by geographic region segments? In other words, you've mentioned growth, expectations for growth in Asia. Is it the quotation activity that's accelerating? Is that what's giving you the confidence?

What's giving us the confidence is when you look at our backlog, and if you go back just a few months ago and look at our backlog, the backlog was very high, the order take was lower. In the last 10 to 12 weeks, we've seen orders pick up globally that has held our backlog at, as Mike said earlier, near record levels. And so instead of looking in the first quarter of hitting our sales forecast by consuming a lot of backlog, we're going to hit the sales forecast with not consuming the backlog. Now by region what we're seeing is, yes, it's picked up in the Asian market quite nicely, Europe has remained relatively flat, U.S. has picked up.

And in Europe, is it fair to say then Western Europe and Eastern Europe, you have 2 different markets improvement in the Eastern and Western is a little bit sluggish?

I think it's fair to say that, yes. And just to add to that, that's why Western Europe is what it is. It's not -- we're not anticipating a major pickup. And the beauty of being -- having the diversification that we have that it's not going to have a significant impact on our business unless it really gets bad, but where we're really going to put the emphasis is going to be in those markets that we are -- as I said earlier, just planting the seeds. And we need to grow faster in those regions. We're going to put more resources in growing in areas like Russia or in Turkey or in Africa and India. And Western Europe, one of these days, will get healthy again.

Okay. With regards to the non-lead offerings like lithium-ion or nickel-zinc, you mentioned expanding into new applications, is the go-to-market strategy going to be the same or are you going to lead with the alternative technology offerings instead of like traditional lead? Like, would you need to increase the sales headcount?

I think that when you look at it -- again, you go back to our overall philosophy, we're a stored-energy solutions that make money. And we're going to look for the applications where we think lithium or nickel-zinc or nickel-cadmium battery or even a fuel cell is the right offering for the customer. And what we're going to do is we're going to walk into the customer and say, "Here's your application, and we have the different technologies. Here's the price on lead acid, here's the price on lithium-ion, here's it on the cadmium battery." And the customer can specifically pick -- the battery that fits their specific application. So it's more of the old concept of one-stop shopping.

Okay. And finally with regards to the Chongqing plant, you mentioned 40% to 50% utilization by fiscal year-end, what's the preliminary expectation for full utilization?

I think to get it to full utilization is going to depend on the market itself. I think that we will be capable of running the manufacturing plant at a higher level than the market will grow. That, by the way, is by design. And the reason I say that is when we planned this plant, we looked at where we thought the markets are going to go and said that when you build this building, you better not build it for a 1- or 2-year period, you better look longer range. So it could take quite a number of years to get it totally to 100% utilization or the high 90s. I don't think it's going to happen overnight, and that's by design. We want to be -- and what we'll do, we built the building, but we haven't put the equipment in place for all the different product types or all of the number of units we want to build. Again, it's going to be a process, a control process, a controlled ramp-up in it. But at the end, I think what's going to control it, to get to your question, is going to be how strong is the demand for the product.

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

Did we hear you mention earlier in the call that you may be putting thin plate pure lead in Chongqing? And if so, what would be the timeframe that you would suspect that might happen?

No, I did not say that on this call. We -- what I did say is that we are shipping product into the Asia market that is built in Newport or in Warrensburg, Missouri, and there's a premium associated with that. But to your question, if the market demand is strong enough in the Asia market that justifies us making the investment in thin plate pure lead in the Asia market, we would look at putting that operation in one of our factories or even building a new factory to support it. Chongqing would be an option, but it wouldn't be the only option.

That's helpful. And then relative to Europe, would you describe how you would characterize the activity level in the March quarter sequentially versus a normal activity level change in March versus December quarter.

Well, the -- when we looked at the fourth quarter in Europe, they actually had a nearly 2% step up organically from the third quarter, and that's not necessarily unusual because the fourth quarter is generally stronger across the board than the third quarter. So even though we saw some year-over-year step downs, sequentially, it went up by I think it's just under 2%. So Europe, to John's point earlier, while it's down, while we think Western Europe is struggling, we have other opportunities within that region to pick up the difference.

And so would that -- organic rate of change that you had sequentially, would you consider that normal or would basically you break it down into 2 pieces and say Western Europe was softer than normal and Eastern Europe was normal or stronger than normal?

Well, I would -- yes, I would definitely say that the strength of the Eastern and Middle East, Africa is what generated that positive sequential improvement.

I think when you look at Western Europe, obviously there's a lot of uncertainty. And you look and you read these draconian stories about how bad things are, and then you look at our numbers and say, "Why are you guys up or why you've been flat in Western Europe?" And one of the big reasons is replacement market. Think about it for a second. When you got a system, a UPS system or a telecom system, that's out there running and the battery is 10% to 15% of the cost and the battery goes bad, you're going to replace it. So the replacement market is still very good in Western Europe, and that's why we're holding up. The weakest part of most of these systems, whether it's a UPS system or a telecom system, the part that's going to go first is going to be the battery. Think about a flashlight, you buy a flashlight, what happens? What's the first thing you replace? It's going to be the battery. So there's a good replacement market out there for us. Now where we're going to see the real pickup take place, I believe, is one with motive power. When the economy turns around, yes, we'll see a pickup there. But I think the bigger one is going to be when the telecoms in Europe start to expand into 4G, and when you see that, I think we'll see a real pickup in reserve power battery spending to take place in Europe. As I said earlier, Europe, Western Europe, it is what it is, and we're not going to do anything about that, we just have to be patient and wait for it to change. And we're going to have to make up for that flatness that we're seeing in Western Europe by -- expansions in the other areas. And by doing that, and when Western Europe turns, and we do see 4G go into Western Europe, I think we're going to have some real nice growth coming at us.

And what is the prospect for 4G in Western Europe?

Well, right now, recently what happened was because of some of the legislation that was coming out of the EU about pushing -- taking down roaming fees and some of the other requirements that we're putting in place, a number of the major telecoms got together and they went to the EU and said, "Look, we need some help, we want to expand in this thing." And what took place was that the government, the EU then opened up an investigation with these guys in collusion. So I don't know where it's going to go. I think there's -- you look at the license over -- in 3G license, they were selling for north of $50 billion for the license to use it, which was a real mistake for 3G, and a lot of them lost money on it. Now, there have been some licenses gone out that's been a lot less. But with the programs and the need that they have for additional capital, it's going to come down to what the government is willing to sell the license for. And once that happens, it's for the government, the EU and the telecom companies to work together. How that's going to come out? When it's going to happen? I don't know. But I don't think it's going to be forever, that Europe was going to stop at 3G. I think eventually they're going to expand, I just don't know when.

And then my final question is capital expenditures. What is the fiscal '13 plan relative to the $49 million you spent this last year?

It's going to be -- last year, we planned on spending closer to over $60 million. We only spent $49 million. I must say that our plan is going to be same. And as we find opportunities for further cost reductions, it's going to run somewhere between $50 million to $60 million.

Now last year you had the big expenditure from Chongqing, where the -- where would you anticipate your bigger dollar expenditures to be this year?

Well, I don't want to get into a lot of details on that because of competitive reasons, okay? But it's going to be looking at the same things that we talked about earlier. Product development, it's going to be capacity expansion for some of the higher margin products, if the demand is there, and it's going to be in cost-reduction activities.

And to John's earlier point, as we continue to build out Chongqing, to get it to its ultimate utilization, some of next year's spending is still related to Chongqing.

It's a very good point because as I said, we -- got the building there, we've got certain production areas running. But as demand increases and we ramp that plant up, we're going to add more to it. The other area that as I said that we plant seeds in certain locations, India as being an example, and we're going to be making capital investments to grow those areas.

Your next question comes from the line of Tom Daniels with Stifel, Nicolaus.

Most of my questions have been answered, and I apologize for continuing to harp on Europe. But I guess, I was wondering what you guys think about EnerSys' capacity in Western Europe as well as overall industry capacity as it stands today?

Our capacity utilization?

Yes, just in general.

Well, in general, I think that we'll be running in the high -- mid-70's, 70% thereabouts. But keep in mind, a lot of the restructuring cost that you see, what we've done is moved production from Western Europe to Eastern Europe or from high-cost areas to low-cost areas. And in the process of doing that, we've resized some of the capacity, okay? So we're not setting on a lot of assets that are not being used. We've resized it to match the markets as we see it today and where it's going to with the provision, when it grows larger that we can in fact, add more capacity then, but it will be on the lower cost areas.

The other thing to keep in mind is some of the European facilities also serve to export product to other regions in our business, whether they're in Asia, Japan, et cetera. So they're not entirely reliant in terms of what they're utilization of the capacity, not entirely reliant on their own market. They get the strength or they get the opportunities to sell into Australia, Japan, United States, et cetera.

Okay. And then just an overall industry capacity, I guess thinking around if it got really bad in Europe, would you guys be thinking of acquiring maybe some of your weaker competitors who are in tough financial straits or vice versa? Do you think that you could see some significant pricing pressure just if demand kind of goes down and there's too much capacity in the market? How are you guys thinking about those 2 things?

Well, the way we view it is this that when you take a look of the balance sheets of many of our competitors, their balance sheets are fairly weak and they need to make money. And if it goes down and they start lowering pricing, their situation would more than likely get worse. So it's one that we hope that they don't drop pricing. It's always a question -- they're in -- and so far it's been fairly rational and so far it's been, my belief anyway, that when they're losing money or breaking even and have a weak balance sheet, it's going to be very tough for them to take low margin business.

I would even say in some cases once that becomes known or suspected, their customers then are going to want to hedge and make sure they have a secured second source. So oftentimes, you can pick up additional business without acquiring a company, which in Europe, which is we have a very large market share, we have a difficult time of buying any one of any size in Europe because of the antitrust considerations.

Your next question comes from the line of Kirk Ludtke with CRT Capital Group.

I'm on Slide 5, and I just wanted to -- I was wondering if you could -- I see that overall your volume was up 3% year-over-year? And I was wondering if you could give us -- if you could go through these segments and maybe give us just directionally how you did share wise in the quarter year-over-year up, down, flat?

All right. Well, clearly we think that we had a slight gain in the Americas. You can see they had an 11% volume improvement. We believe on the motive power side, our share is approaching 50%, and we have a lesser share but a strong position in reserve. So I would say we feel that we have a slight market share increase in the Americas. Europe, their volume is down by 6%. And early in the year, we think we lost a little market share just to some of the competitive actions of other battery suppliers, but I think later in the year, we felt like we were starting to recover some of that. So I would say we're kind of a push in Europe on market share. And in Asia, where we're seeing strong growth, and we stepped out of some of the ultracompetitive bidding in the major telecoms earlier, and that pricing pressure has let up. Our competitors have had enough of not making any money, and everyone raised their prices more recently. I think you're going to see an expansion in our market share for no other reason with the number of lead supplier or battery suppliers that have been closed. Even though those weren't any of our direct competitors, it still has an easing effect on competition in China, so.

That's fantastic. I appreciate it. That's helpful. With respect to the -- just shifting gears for a second, with respect to the acquisition strategy, you talked about -- in that context, you talked about India and China. And just -- without putting words in your mouth, is it safe to say that, that's the strategy is focused on the emerging markets, higher value-added technologies, that type of thing?

I think that, yes, that's fair to say.

Okay. And then do you have any kind of size limitations?

The answer to your question is, I think that anything up to $1 billion we'd look at, and if it's over that, we'd have to take a serious look. But when you take a look at doing a stock buyback as an example we have in place, when we look at the acquisitions that we have on the table right now and we say we can cover those and plus do a $50 million stock buyback, and the concept is that we found something that was really big, say, $1 billion, $1.5 billion or whatever, we probably have to do a primary offering. And the -- our focus was that when our share price drops down and it's low and the market doesn't recognize the value, we're going to buy it back with the intent if we do find a larger company, and we have to do a primary offering when we do it. And we bought the stock at $20 and the stock is up -- or the stock price is up to $32, that will help us buy a larger company. So we're trying to manage the balance sheet from that perspective that it's just not small companies. So ultimately, if we find the right deal that we would consider it if it made sense for our shareholders.

And your next question comes from the line of Sean Britain with Bayside Capital.

Just one cleanup question on Europe. What percentage of European revenue is from Western Europe? Is that something you guys can share?

You want to take it, Mike, or do you want me to? Okay. When you look at Europe in total right now, it's running at about 50%, and you'd be looking at about 15% would be another area. So it's going to be in the zip code of about 35% would be my estimate on that. I don't have the hard numbers here in front of me, that's just off the cuff. Mike, do you agree to that or?

Yes, it's going to be the minority of their overall sales, but I think somewhere in the 30%, 35% sounds right.

And so just to be clear, that's 35% of total company-wide sales or from Western Europe?

Yes.

Got it. Okay. That's great. And then just shifting to North America, where you obviously had a fantastic quarter, what percent of the Americas is North America versus the more emerging markets?

On the Americas, you're running probably 85%, that's going to be the United States.

Okay. Great. And then just when you look at that 11% organic growth, what -- any kind of key drivers, key end markets? What's kind of driving that? We talked a little bit on market share on the last question, but anything that stands out as kind of driving that growth beyond just the recovery?

I think motive power was particularly strong. It was -- with the resurgence of manufacturing in the Americas, it certainly pushed the motive power quite nicely in the last year.

[Operator Instructions] And we have no further audio questions at this time.

Okay. Well, thank you, everybody, for joining us. Have a great day.

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