Good day, ladies and gentlemen, and welcome to the second quarter 2012 EnerSys earnings conference call. My name is (Grant) and I'll be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to John Craig, Chairman, President and CEO. Please proceed, sir.

Thank you, (Grant). Good morning and thank you for joining us. Last night we posted on our website slides that we're going to reference this morning. If you didn't get a chance to see those slides, you can go to our website which is www.enersys.com and view the slides as we're going through the presentation this morning. Before we get started and get in the details for our second quarter and first half of the year, I'm going to ask Mike Schmidtlein, our Chief Financial Officer, to cover information regarding forward-looking statements. Mike?

Thank you, John, and good morning to everyone. As a reminder, we will be presenting certain forward-looking statements on this call that are based on the management's current expectations and are subject to uncertainties and changes in circumstances. Our actual results may differ materially from the forward-looking statements for a number of reasons. Our forward-looking statements are based on management's current views regarding future events and operating performance in are applicable only as of the dates of such statements. For a list of factors which could affect our future results, including our earnings estimates, see forward-looking statements included in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in our quarterly report on Form 10-Q for the quarter ended September 30, 2012, which was filed with the US Securities and Exchange Commission. In addition, we will also be presenting certain non-GAAP financial measures. For an explanation of the differences between the comparable GAAP financial information and the non-GAAP information, please see our company's Form 8-K, which includes our press release dated November 5, 2012 which is located on our website at www.enersys.com. Now let me turn it back to you, John.

Thanks, Mike. I'd like to start by saying that we're very pleased with our accomplishments and financial results for our second quarter and first half of this year. You'll notice on Slide 3 that we reported second quarter records for sales of $554 million, gross profit margin of 25%, operating profit margins of 11.6% and earnings per share of $0.92. We reached our minimum target of 25% gross profit for the second consecutive quarter. Year-over-year, on a sales increase of 1%, earnings per share was up almost 60%. Sequentially, these results are even more impressive when you consider our second quarter sales and profitability are impacted by the vacation season in Europe and the Americas. On Slide 4, our first half of financial highlights shows similar records for any first half in our company's history. Our earnings per share of $1.87 is 48% higher than last year's earnings which were $1.26. I now want to focus on our current business activities and third quarter guidance. During the summer, we experienced our normal seasonal slowdown in orders. In September, we experienced our normal increase in orders, which continued to early October. However, in the past few weeks, our order intake has slowed, which is not our normal historic pattern. Based on this information, last night we announced our third fiscal quarter guidance of $0.77 to $0.81 earnings per share. The guidance assumes our third quarter orders continue at the lower levels that we have recently experienced. Should the slowdown in our business continue, we would view that as an opportunity to execute a further consolidation of our global operations with the objective of reducing our cost and increasing our future profitability. That's exactly what we did during the last economic downturn and we exited that recession a much stronger company than…

Thank you, again, John. I am starting on Slide 6. Our second quarter net sales increased 1% over the prior year to $554 million, primarily from volume adding 2% along with solid growth from acquisitions of 4% offset by 4% decline in currency translation and 1% in lower pricing. On a region basis, our sales in the Americas increased 10% in the second quarter to $277 million and our Asian business increased 25% to $62 million while Europe's second quarter net sales decreased 12% to $215 million, all compared to the prior year. Europe's revenue decline was due to negative 8% currency impact, 6% less volume, 1% less pricing net of 3% from acquisitions. On a product line basis, net sales for reserve power increased 7% to $285 million while motor power decreased 4% to $269 million. Both product lines absorbed a 4% currency decline. Please now refer to Slide 7. On a sequential quarterly basis, second quarter net sales were down 7% for the first quarter with 6% from less volume. All regions had less revenue than the prior quarter. Europe and Asia declined 9% while the Americas declined 4%. On a product line basis, our motor power business was down sequentially 12% while sales in our reserve power product line decreased 1% sequentially. Lower volume in what is traditionally our weakest quarter was the principle factor in all of the regional revenue decline. Now, a few comments about our adjusted consolidated earnings performance; as you know, we utilize certain non-GAAP measures in analyzing our company's operating performance, specifically excluding highlighted items. Accordingly, my following comments concerning operating earnings and my later comments concerning diluted earnings per share exclude all highlighted items. Please refer to our company's Form 8-K which is included in our press release dated November 5,…

Thank you, Mike. Now we'll open the lines up for question.

(Operator Instructions) Your first question comes from the line of Michael Gallo – CL King. Michael Gallo – CL King: John, my question, as you look at a little bit of slowing in sales, obviously it's hard to tell how much of that is election and/or fiscal cliff related versus real end market demand. I was trying to get a sense for how much cost you think you can take out. Is it mostly Europe or do you see some opportunities in the Americas as well? And at what point do you start to really take those costs out? It seems like up until a month ago things were chugging along really at record levels. So help me frame the thinking of that.

Yes, and you're right. They were chugging along at record levels. And as I said, we've just seen this in the last few weeks. It's starting to slow down. Taking a conservative look at the guidance, we're going to assume that it continues to remain this slow through the third period or third quarter here. Keep in mind we're halfway through the quarter already, so orders that we take in, we've got to look at the percentage of what we take in and what we actually ship. Long term, I’m not at all concerned about this as a blip that it's down. The need for our types of products and batteries is going to continue to grow but we're going to see a period here this particular quarter where it's down. Now to your question on the cost, the cost, we have plans in each of the areas, in Europe, in Asia and in the Americas. There are opportunities. If I had to prioritize those opportunities, I would say that the biggest one we have is with further consolidation of the acquisitions that we did recently, looking at some of the lithium business. When we bought a number of different companies in lithium, there are redundancies there that we can take advantage of. And now that we have the time and the resources to do it, we will go ahead and implement those plans. It's the same thing in China. With our new plant coming online in (Chan Ching), older existing plants, even though they're low cost compared to the Americas or Europe, in the China market, our (Chan Ching) plant is significantly less in cost, so we're going to take advantage of that operation also. So it's really across the board. Michael Gallo – CL King: Then just had a question obviously unfortunate tragedy here with hurricane Sandy but is it too early to even frame what kind of opportunity this might present for your US reserve business, both on the telecomm side and UPS?

You answered it. It's too early to tell on it. I will say thought thus far we have seen a slow up in orders that normally would be coming out of the region because of what's happening. Things obviously have stopped with the tragedy that's happened there, or slowed up. How big that could get, it's hard to speculate. We really don't know and we probably won't see the beginning of that for a week or two. Michael Gallo – CL King: But obviously your slow up now is everything is just shut down and you would expect things to probably pick up.

Absolutely. And when it picks up there should be some pent up demand there, too.

Your next question comes from the line of Zach Larkin – Stephens. Zach Larkin – Stephens: Just a follow-up on some of the order commentary, John; obviously what we're seeing now is different than what you'd normally experience this time of year. But considering other times where you guys have gone through some economic pressures and obviously some of your businesses will get more pressured by that than others but is the order pattern that you're seeing now any different than what you've seen maybe in other shorter term contractions?

I would say this is more of a normal – it's not anything close to what we saw in 2008, 2009. It's a minor blip right now and hopefully it'll come back here in November and December but time will tell. As you well know, there's a lot of uncertainty right now with the election, the uncertainty with the fiscal cliff, the uncertainty in Europe and I think that our customers are holding back right now. At least our orders indicate that they're holding back and but as I said that I'm not worried about this coming back. There is a need for stored energy. The need for our types of products is only going to increase in time.

And then as you look at that – jumping onto the new products – as you look at the mode of applications, what's the customer acceptance that you're seeing? And maybe give a little bit of color on price points versus some of your traditional offerings if you could.

Well, let me make a couple of general statements. On anything that we're looking at new product development, a minimum 25% and I will say on the new product development, 25%. I don’t get real excited about that. We're looking for margins that are way in excess of 25%, 35% gross profit is what we would like to see on new designs. If we're going to spend our money and time developing new products, we want to do it on things that's going to change the mix of our business, change the mix so that it goes to higher margin products. So I would anticipate in time that we will see the margins increase. So Mike, do you want to add to that at all?

I think where we're providing the higher value situation, particularly in motive power where users are going to be able to use opportunity charging and fast charging to be able to use one battery versus maybe multiple batteries gives them an opportunity to save money, so we think of those as being win-win solutions.

In a fork truck, when you have to take the battery out at the end of the shift and put another battery in, that's time and money. We're trying to come up with designs that you can opportunity charge it, fast charge it so that you have less charging time and more run time and you're not paying workers to take the battery out and replace it. They can charge it during their breaks, during lunch, in between shifts. It's called opportunity charging. And we're trying to do that not only with lead acid batteries but with lithium batteries, too, and I shouldn't say try to do it. We are doing that. So I think it's something – it's what we call best value for customers. It's giving customers something that others are not giving them today in the marketplace and with that, obviously, are going to come a higher front end cost to the customers but in the long run they'll save money.

And with that higher front end cost, obviously, a lot of benefits to that. Are people pretty open and accepting of the cost benefit analysis?

Yes, they are.

Your next question comes from the line of John Franzreb – Sidoti & Co. John Franzreb – Sidoti & Co: Just a little bit about the recent weakness in the order trends; is there any particular geographic or product line bias that we should be aware about?

It's somewhat across the board. I think in each region, whether it's the Americas, Asia or Europe, we are seeing that. I would say that it's more in the motor power area than the reserve power area. The reserve power area, down but not near as much as the motive and the reason for that is we continue to see spending in telecommunications in US market, cloud computing in European market, although in the Asia market, in China specifically, the telecomm spending has slowed up but what we're hearing right now there is going to be very large orders being placed for new equipment installation in the China market going forward. How much of that we actually get or bids that we win, we'll have to see. But the telecoms right now in China are talking about spending again. John Franzreb – Sidoti & Co: And John, regarding the restructuring charges – I guess two pieces to this question. One, I think I budgeted for you doing more restructuring in the second quarter than you actually executed on. Can you talk a little bit maybe about deferrals and what you're planning on the timing of it? And the second part of this is you say you have a couple items that you're thinking about doing if things get worse so the trends continue. Why not execute them anyway?

Well, let me pick up on that. I’m going to ask Mike to pick up on it also. When you take a look at the new products that we have and the resources that we have and you're running along fairly – as we talked about earlier, we were really chugging along well, I think was the term. We were running near record volumes and everyone was very, very busy with things. And when you're running a factory near capacity or at a very high end, it's tough to shut down an operation and move it someplace else. Let me be more specific on it. I'll go back to the operation we had in Italy. During 2009, when we shut that factory down, if the recession would have ended early and the volume would have come back quickly, we would have been in real trouble because we wouldn't have been able to keep up. And the reason for that, shutting that factory down in Italy, we had to move that production to Bulgaria and (inaudible) Poland. It took time to do that and it takes resources to do that. So there are a lot of projects but we have X number of engineers and manufacturing people to do it. So when we execute something like this it has to be planned thoroughly and controlled because if it gets out of control, it can get very expensive. Mike, do you want to add to it?

Yes, as you know, John, one of the reasons that we highlight restructuring and mergers and acquisition-type costs is because the timing of them are not as certain as some of our base business, so it's because these two items are less certain. We may make a decision on a restructuring action but we then have to make a formal communication generally to those employees and sometimes they may have to make some decisions on what they might elect to do. And all of that can affect the timing of when you record that in your financial statement. So I realize that in quarters past there may have been times where we may have said expect a charge of $0.05 to $0.06 and it came in at $0.02 or $0.03 and I think it demonstrates the uncertainty that does come in those two areas. As we look at the $0.08 that we put into the guidance for our Q3, it does contemplate that we will likely take a major action in that quarter but we haven't concluded on what or where that is going to be. So and so that timing is a little bit tenuous, if you will. John Franzreb – Sidoti & Co: It seems like the pricing environment in Europe has held up reasonably well, at least it did last quarter. How are you thinking about pricing in Europe in particular across both product lines?

Well, I think that we are – obviously as lead goes up, we'd like to get the pass throughs or we will get the pass throughs on that automatically. And as you know, Europe has a larger percent of (inaudible) pass through. So we should see price increases come through on that. I think that we're competitively priced and a lot of that obviously depends on what our competitors do. I think the bigger opportunity for us, though, is not just at pricing existing products but it's on the product mix, the switching from flooded calcium products, let's say, to thin plate pure lead. We are trying to do everything we can to sell the premium products. But in that sale, you have to demonstrate there's a real advantage to justify the customer paying that premium. We've been pretty successful with doing that thus far and we're going to continue to stay focused on that area.

Your next question comes from the line of Elaine Kwei – Jefferies. Elaine Kwei – Jefferies: You guys have been making great progress on the margins even in a pretty challenging environment. But going forward with somewhat lower orders and bonds potentially, do you expect any pressure on gross margins from that? And then also, has the volatility in lead still been within the range that you typically manage around?

Yes, as you said, it's the – if volumes are down and you're not running production -- because we're not going to just build products to put on the shelf and increase primary working capital. We need to bring the production down. Bringing production down with high fixed cost, manufacturing variances will increase, so that is definitely a headwind that we have to face and we have to take and manage that through. Fortunately, we have some very good plant managers globally. They understand it. They know what they need to do and they will do everything possible to control that cost. On the lead side, you're right. You can go back in the summer time. Lead was in the mid $0.80 range. A few weeks ago it hit a high of $1.08. This morning it was down to $0.98, so that volatility is within a range but it's tough to go get pricing when you bought lead – obviously we fight for inventory. You buy lead at $1.08, let's say and then the market drops down to $0.98. It's tough to go in and try to justify getting that pricing. So yes, those are headwinds. And those are headwinds that we're very familiar with and we have to manage those headwinds. And we demonstrate over time that we're very good at managing those things. The problem with it is one quarter or two quarters we may not get all the pricing we want to offset the commodity cost but the next quarter we'll get it or the quarter after that. In the long haul, we always make up for it. We always get it back but it does take time. Elaine Kwei – Jefferies: And then just on the near term, in terms of flexibility that you have on the fixed versus variable costs, would you say you would be able to address a good amount of the slowdown just with what you can do very quickly or just trying to get a sense of what the – how much room you have to move there.

I think that our scheduling group has been working with all the plant managers and they're looking at scheduling the facilities based on the demands they're seeing for their products and trying to keep some upside for products that may be required as a result of hurricane Sandy. But we'll do some of the things that are easier, if you will, rather than taking a shift down only to find you might need that demand in future weeks or months. We'll look at the holiday weeks and see whether or not we want to take an extended period over Thanksgiving or Christmas are some of the things that every plant's looking at as they look at their individual supply and demand requirements. To your earlier question on margins, I would say to John's point, some of the lead that was in the mid $0.80s in the June, July, August timeframe, that's rolling through our third quarter and the $0.98, $0.99 we've been seeing more recently is more going to be a fourth quarter phenomenon, so still going to expect for the upcoming quarter pretty strong margin at the gross profit line.

Your next question comes from the line of William Bremer – Maxim Group. William Bremer – Maxim Group: Let's just touch base on your outlook a little bit here. Slowing order pattern intake, I understand that. Due to what has occurred here in the Northeast with Sandy, you have to anticipate, as you mentioned a little earlier, significant pent up demand. Now, if I take this a step further and analyze your inventory, especially your finished goods, we've got $156 million there. That's almost a third of the top line of a quarter here. Maybe help give us a little color on the cycle of turning that in. What's the breakdown there of the inventory? Some of it, motive versus reserve, I've got to anticipate you guys really bringing that all through right now. That could be a tremendous backend of the quarter here. Give us a little color on that.

Well, there could be. Again, it's very hard to predict what's going to happen with the hurricane and what we're going to see end of that. We have inventory – we have an operations planning group here at corporate that works globally with every manufacturing operation. Virtually every machine that we have at every factory we know the capability of that machine and the production planning is extremely critical. If we take a factory and we are running 100 one day and try and run 300 the next day and 50 the next day, that just is millions and millions of dollars of waste. So it's one that we're very good at – our operations planning people are excellent at controlling that particular element. Now, on your question about the inventory, what we do is we look at every skew and every business segment and we're looking at what is the proper inventory to cover. We call it between the uprights. You want it between the uprights. If it goes too far one way, you haven't got enough inventory. If it goes too far the other way, you've got cash setting on the shelf, so we've got to manage that thing. Right now, generally speaking, our inventory and our primary working capital is higher than I want to see it. We're over 27%. We need to bring that down slightly. So and bringing it down doesn't mean you just crash and bring it down. It means you gradually bring it down. So it'll take some time to do it but we will get that number down and but the number one target though is we will have that inventory for our customers. We will meet the customers' demands. That's a must. William Bremer – Maxim Group: Can you give us an idea of where that inventory is stored in a globalized fashion? Do you have significant amount of that inventory right here in the Northeast?

We have enough within the United States depending on the type of product. If it's a product that – in the Northeast, we have a distribution center in Allentown, Pennsylvania, as an example. We have inventory in New Jersey. So as far as getting the inventory, as far as getting the products to the region here, I'm not overly concerned about that. We've got the products and the production. We can handle that. William Bremer – Maxim Group: And can you give us a breakdown? How much do you have on the reserve side and how much do you have on the motive side?

I don't have the numbers here in front of me.

We can get that number very easily, Bill, but I just don't have them here. William Bremer – Maxim Group: Let's go to Europe here. In a sense, can you give us a little more color? What are you seeing there? Is it still as gloomy or are things picking up regionally in certain areas? Give us a little color there. As we look over the last say few quarters, you've done a great job of holding the operating margins give the degrade of the top line there. But do you feel as though things are just holding or getting a little better or are they getting worse in certain regions?

I'm going to answer that question both with the motive power and the reserve power. And what I'm going to start with is the ITA data, Industrial Truck Association data, that's looking at orders of electric fork trucks and this is looking at the month of September. Unfortunately, I don't have October data but I have September. When I look at Europe in total and I compare it to the trailing three months, it's flat. It's 0% increase. It's flat. So I would say it's stable. But as I said, the first couple of weeks – or actually the last couple of weeks of October, orders, our orders were off slightly. That's the red flag that runs up. If you take the last let's say two to three weeks of October, you take that off, that – we wouldn't have the same feeling about things. In fact, we would probably come out with higher guidance except for the last couple of weeks here. But it is a red flag, the uncertainty, that we pulled the guidance down. And again, keep in mind we're halfway through the quarter now. So orders that we take now, a lot of those are going to fall into fourth quarter and beyond, not in third quarter and that's reflected in our guidance.

Your next question comes from the line of Michael Lew – Needham. Michael Lew – Needham: You discussed the characteristics of the order slowdown. Have you also experienced a significant drop off in quotation activity across the various markets?

And I would say the answer to that is no. The quote activity is still good, just not seeing the orders.

And how would you characterize the current backlog? (Are you so) – are you starting to see cancellations or renegotiations? And if so, where is it most pronounced?

Yes, let me back up. I said we're not seeing the orders. We're still seeing good orders but they're not at the high level we were running during the second quarter. So we are seeing good orders but they're not the same level. And ask your question again, please.

Oh, the question was with regards to the backlog. Are you seeing a deterioration in backlog with regards to cancellations or renegotiations?

We saw a reduction in backlog, not because of cancellations because we're not seeing cancellations. But we saw a reduction in backlog because of the summer slowdown that takes place. Historically, backlog comes down during the second quarter but I will tell you it's down single digits. It's not down much.

So that would be along normal trends, then. It's following along with trends. Is that the way to think about it?

Yes, and it's followed the normal trends but right now the backlog historically would go up because the orders would be coming in October, November that would be stronger.

And also, with regards to the new initiatives, you mentioned the addressable market for OptiGrid. What are they for the nickel, zinc and lithium offerings? Have you sized that yet?

With the system – let me back up a little bit and talk about OptiGrid and the whole concept on this. When you take a look at the systems that have been out there, they have been designed by electrical engineers. They've been designed by non-battery people. And if you look at what's most critical in this thing, it's the battery, it's the electrochemistry. When you take a look at what failed, it was the batteries. What caused the fire? In some cases they've had fires. It was the battery. That's where our expertise is is with the batteries. The electronics and doing the AC portion of it is not as complex as doing the DC portion for it. So we think that we've got a real advantage because we do understand the batteries very well and we do have experts that we're working with on the electronics of the AC side of it too. Now, our system is being designed that it's not only lead acid. It's also lithium. It's also nickel-based systems. It can use competitors' batteries. Our system is versatile enough that we can handle just about any electrochemistry to put into this. We're starting out and we're building a unit right now that in our press release we talked about that it's going to be a customer demonstration unit and we are going to use lead acid batteries to start with that. But if the customer wants a different technology, a different electrochemistry, we can easily put that in.

And back to the nickel, zinc and lithium offerings, they've been offered for the forklifts. Have you sized that opportunity?

We have sized it. I personally think that putting a lithium (IM) battery in a large fork truck is going to be a very small market but, again, (Palajax) is smaller material handling equipment. There are those that have gone out with it already, those being a fork truck manufacturer. They have a product offering but they're selling very little of it. The problem with lithium ion is it's expensive and to justify that premium thus far the market has not been willing to pay a large premium for it. Now, there are some that are buying it. There are some out there but it's a very small niche market at this stage. But if the market wants it, we're prepared to go. We manufactured the sells. We can manufacture the whole thing.

Your next question comes from the line of Brian Drab – William Blair. Brian Drab – William Blair: Can you talk a little bit more about the dynamics playing out in Europe and whether you're gaining share in Europe? You're continuing to gain share given the difficulty that some of your Asian competitors are having competing with you on price in Europe.

Yes, we believe that we have picked up market share and we haven't done or picked up that market share by giving lower pricing. We've done that by selling what we call best value and having customers recognize that what we provide in a product is better than our competitors and the service is better than our competitors. So we believe we have picked up some market share in Europe. But we're not going to go after market share for the sake of market share. We want to go after quality market share. Brian Drab – William Blair: Are you seeing though – I thought one of the dynamics that's playing out for you with the higher cost of lead in Asia that some of these Asian competitors are having a more difficult time competing with you outside of Asia.

That’s very true. That's on the reserve power side. About half the market at one point in Europe were suppliers from China or from the Asia market. And when you look at the back tax that they are not getting a rebate on now and you look at the different it costs between the L&E prices and the Shanghai Exchange, it makes us much more competitive on a price standpoint. Brian Drab – William Blair: Shifting over to the OptiGrid discussion again, there's a lot of superlatives being associated with this energy storage market and I think the one thing that's clear is it's going to be big. But just wondering what percentage roughly or what fraction of the market do you think is associated with batteries themselves compared with the electronics associated systems?

We don't know the answer to that. I've seen numbers that have been as high as $200 billion, some projected. And you notice what we said this morning that we believe it'll be larger than the markets that we serve today which is approximately $10 billion. The neat thing about this from a risk rewards standpoint, this is really good for us because the risk associated with this is relatively minor. It's not a multi or $100 million investment or anything like that. We build a system up and we demonstrate that system and we can pay as we go. As the market develops for this, we will get further into it. We will continue to spend money if the market grows. But so I think from a risk reward standpoint we've got little invested in it. I think it's going to be a growth market and if it is we're going to participate in that market. And having the product offering that we have, the batteries that we have, it's just so natural for us. Brian Drab – William Blair: And who would be the customers? Is it the utilities or municipalities?

It would be both those and also large industries, especially when you look outside the United States and you see in different areas of the world and the power grid and how bad they are in some areas that this is just a natural for that.

Your next question comes from the line of (Kurt Vodki) – TRT Capital Group. (Kurt Vodki) – TRT Capital Group: You mentioned earlier opportunity charging in the motive power market and I'm curious about how you think that will affect market share going forward and if you can maybe expand on when we would start to see that and if you can quantify any share gains, that would be great.

It's hard to tell how big it will get. I think obviously it's going to be the high end of the market and when our sales people go in, they'll have – I'm going to call it a me too product, one that will compete with our competitors. They're going to have a better product and then they're going to have the top of the line product. So and it's across the board. I think it's going to – you're going to see certain customers that really understand and calculate the value of the price difference between a standard battery and a premium battery and to say I want that premium battery because I can save money in the long run either that it runs longer or I don't have to charge it, I can charge it faster or I don’t have to replace the battery at the end of a shift and save money. It maybe 10%, 15% of the market to start with but I don’t know what that is. We're going to have to just take and continue to have our marketing programs in place and push it and hopefully the market will accept it. (Kurt Vodki) – TRT Capital Group: Because it increases the utilization rate of the equipment that's already out there, is there a negative impact on demand as well so the market shrinks because utilization rates go up?

I think the question you're asking is that typically on a me too type battery, you would solve two batteries for a fork truck. In this application you could argue that you could get by by selling one. So theoretically, in units, you'd sell half the units. I think that's your question. Now, the price point on that premium product is much more than the battery that you would buy two with, so there's going to be a higher price point. The other thing is that the life of that battery is going to be less because you're going to be running it hard. So you're going to have a shorter life of that battery. So I think what you're going to see with this thing is the unit volume will go down to start with but it will pick up because the replacement market will be greater. You're not looking at a seven or eight year battery. You're probably looking at about half that.

So the benefit for the end user is now he doesn't have to devote real estate to a charging room to be able to have that second battery. You can keep just one battery, so he has a smaller footprint in size as well. (Kurt Vodki) – TRT Capital Group: So it's a complicated equation but it's – can you talk a little bit about the timing of how you're rolling this out?

Well, as I mentioned, on the smaller fork trucks, what we're using – I’m going to call them mono blocks; those are 12-volt batteries, they're thin plate, pure lead type batteries – we have announced that for the smaller fork trucks already. Now, the 2-volt batteries which are for the larger Class 1 type fork trucks, those are 2-volt cells that are wired together to form the battery. We have built 500 of those already and they're in test – actually we've sold them. I'm going to call those a beta site. We're making further investment because the customers that have it thus far really like the product. They're experiencing what we've been talking about with the fast charge, so we're going to be making the next phase of investment here and we're in the process of doing that right now to increase that capacity. And with that, increasing that capacity, our cost will actually come down to what it's been running. (Kurt Vodki) – TRT Capital Group: Then just a follow-up on the lead question someone asked earlier. I think the takeaway was that eventually you do recover increases in lead costs. Were you saying that there will be some unrecovered lead costs in the December quarter?

I didn't say that per se and I think what Mike eluded to was when you look at our cycle where it's possible we'll see a little bit in December but more of it will be in our fourth quarter.

Your next question comes from the line of Bill Dezellem – Tieton Capital Management. Bill Dezellem – Tieton Capital Management: I actually would like to follow up on a prior questioner's call with the fast charge battery versus utility. My approach is slightly different which his first of all, do we understand correctly that over time you would expect the utility market to be substantially larger than the fork truck market since utility could be bigger than all of your markets combined?

If you believe what some of the analysts are saying and what they are projecting, the answer is definitely yes but those are projections and how big that will grow, we don't know. But I've seen numbers, as I said earlier, up to $200 billion as saying that business might get that big. I think that's probably a little bit large but even if it's a fraction of that, there's $10 billion or $15 billion, that's still a pretty good sized market for us when our industrial battery market globally is only about $10 billion. Bill Dezellem – Tieton Capital Management: And how about the issue of timing in terms of how quickly that you believe EnerSys would achieve sales in the fast charging arena versus how fast you would achieve sales in the utility arena? And let's say over the course of the next three years, which of these two, therefore, ends up being a bigger business for you and we should have our eye more focused on?

Yes, just for clarity for everyone else's sake, those are two separate markets. The fast charge is for the motive power and the OptiGrid is for reserve power, the utility market. And, again, to answer your question on it, it would be pure speculation. We don't know. We don't know. I am pretty optimistic, though, on the fast charge for motive power. What we've seen on that thus far, the premium associated with that that customers are willing to pay that premium. The advantages – let me jump a little bit because we have a lithium ion offering also with this as we said in the press release. Lithium ion is a more expensive proposition and lithium ion has some real advantages to it. You can charge it fast. You get greater cyclability and a lot of other things with it. The problem with it is it's expensive. So we have a lithium ion offering. We have a thin plate, pure lead offering and we think that we will see those products sell quite nicely as time goes on. I happen to believe that thin late, pure lead will outsell lithium because of the price difference on it.

And I think fast charge for us will hit faster than the utility.

I do, too. Bill Dezellem – Tieton Capital Management: And then a couple issues just relative to the overall market and the slowdown. Let's start with China first of all. You made some reference to the reserve power market and potentially some pickup there. But I'm curious more generally speaking are you sensing that your Chinese business is experiencing a little softness in line with the talk about slowdown in Chinese GDP or what are you experiencing relative to that?

Well, let me talk about the market and talk about EnerSys both. First off, when you look at the Chinese manufacturers that are shipping product, not only to within China but shipping product to Europe and other locations, as I mentioned earlier, the different select cost and the (vat) rebate not being there has made it tougher for those competitors to ship product out. Now, from our end, we don't ship a lot of product out of China. Our plans are there really to support the China market and the rest of Asia, so we ship very little from China to Europe because we have manufacturing in Europe. So I think it really hurt the competitors very bad. In fact, we're hearing that from a number of different competitors that are really going through some financial struggles right now. Now, as I said earlier, the Chinese markets, the telecoms did slow up. They have – we definitely see a slow up take place there. We are hearing that it's coming back right now. There have been some press releases come out that they are going to start spending. Specifically they're talking about 4G now. So as that market picks up, we will participate in that and we will help our China business. Bill Dezellem – Tieton Capital Management: The fork truck market in China, that is small enough that it's – is there more combustion engine?

Yes, there are more combustion engines in China than there are electric fork trucks. However, that being said, that there is a very strong movement to go to electrics because of the environmental situation. I will say the Chinese government has been very serious in the last year to two years on environmental. And for those that have been to Beijing or others in China, you can see there's a real need to clean some things up. They are taking it seriously. They're much more environmentally conscious that I think they were three or four years ago. So you'll see more of a move towards electric over the gas fork trucks as time goes on. Bill Dezellem – Tieton Capital Management: Little over a year ago, I think it was five quarters ago rather than just four quarters ago, you also had a slowdown in orders and expressed some caution on your conference call after the June quarter results of 2011, if I remember it correct. How does what you're experiencing now compare to what you experienced then and I guess what's the difference and what's the same?

That particular quarter, my recollection is that we projected we would come in in the $0.58 range and I believe that's exactly what we came in. Was it $0.55, Mike?

Yes, we had a range that had $0.55 at the midpoint and we came in in that quarter at $0.58. Yes, so we saw orders slowing. We advised that that slowdown was coming and it turned out to be short lived. It was largely based on concerns that we were seeing and that others saw in Europe and we rebounded to have an $0.80 quarter in our third quarter and then finish the fourth quarter with $0.98. So it was a very short lived but a more severe decline than what we were expecting. If the guidance that we gave for the third quarter between $0.77 and $0.81 matches up pretty closely with the $0.80 we posted in the third quarter of a year ago. So what we experienced last year, to your point, Bill, was more severe, I would say, than what we're experiencing right now. But as to whether it remains a one-quarter phenomenon or stretches beyond that, we don't have an answer on.

Yes, that's the way I would have answered the question or will answer the question. If you go back and you ask me that question when we come out with our guidance, the $0.55 midpoint, if you ask me that question then I'll answer it the same way right now. We just don't know. There's so much uncertainty out there but I could tell you when we see things like that we take the actions and take them quickly so that we don't lose control, that we can bring it down, that we project at $0.55 and we come in at $0.58. For the next quarter we were up over $0.80 and hopefully we'll repeat that but time will tell. How long does this thing last? We've seen three weeks of it here and it's not a catastrophe by any stretch. It's just down slightly.

Your next question comes from the line of Ross Taylor – Somerset Capital. Ross Taylor – Somerset Capital: Could you gentlemen go through your thought process and discipline when you look at acquisitions versus share buybacks, give us a better understanding? When I look at the stock, obviously you've done a lot of acquisitions. They've been exceptionally profitable over time. But at the same time, we're sitting here with a stock that's trading at nine times what we figure you earn next year, maybe less. And how do you balance those two things out because, quite honestly, it strikes me – if I were sitting on your board I'd be arguing that you probably should be focusing some cash flow on a dividend, some cash flow on a buyback as well as trying to do opportunistic acquisitions where they're highly favorable.

Our board has looked at that very carefully. We recently had a board meeting and we went through this in a lot of detail. And I think the best way of looking at it is what do you project – what are the potential opportunities that are out there from the acquisition standpoint? Obviously I'm not going to talk about those but what we've done on paper is allocated X number of dollars for potential acquisitions. Now, whether they materialize or not, that's a whole different story but we want to be able to be in a position. You have to take advantage of these things. One of the advantages in a downturn, and as I mentioned earlier with China, what's happening in Europe or in China that with these companies that are financially in trouble, they may not have been for sale a year or two ago and some of them are starting to pop up now and it's not just in China. It's in other areas of the world. So we want to be in a position to be able to do that. Think back when we were $200 million on revenue going to $2.3 billion on revenue. We did that because we looked ahead of where we thought we could be and had the money there to do those acquisitions. And we'll continue to do that. Now, if it gets to a point that we don't think we have the opportunity for acquisitions or we don't have the opportunity to do what I call investing ourselves – that's the new product designs, the hard margin things we talked about earlier – if we get to a point we don't have that, the third thing we'll do is we'll do stock buybacks, which we did $60 million worth last year. And if the market doesn't recognize the value of our stock, we're going to buy it. And the fourth thing would be to consider a dividend when we get to a point that we think that we've exhausted the first three opportunities.

Yes, so Ross, we do. We've engaged our banks. We've looked at our capital structure. Those are questions that are raised and discussed at the board level. And just a reminder, there is a $50 million buyback authorized that's sitting in a 10B51 that hasn't hit at this point but it is out there. Ross Taylor – Somerset Capital: So that is something that when you're looking at these opportunities, the buyback, you don’t need to get approval. You actually have the ability to buy it back if you find that that's the place you should be putting capital right now.

Well, just on a clarity, on a 10B51, that's a predetermined price, which obviously we're not going to give that out what it is. But that is something, when we implemented that it was for approximately one year. If the stock drops and hits that price, or lower, then that would trip the 10B51 to start to buy back the stock. There's nothing that we can do at this phase. We can't pick up the phone and say buy back our stock today. We can't do that because it's locked in at that fixed price. Ross Taylor – Somerset Capital: You can amend that filing at that point in time.

We can and we would – that would be a discussion that we would have if we thought the circumstances merited it.

Your next question comes from the line of William Bremer – Maxim Group. William Bremer – Maxim Group: John, can you give us a little take on how you're managing your capabilities in assisting the events that occurred here in the Northeast? Really and truly, this falls right into your wheel house of reserve power and then once things start to settle down you're going to start seeing motive uptick here. How are you managing you capabilities in assisting the Northeast here given Sandy?

Well, obviously any customer that has any need whatsoever, we're there 24/7. And that's one of the things that wherever there's a potential problem with things – and we're there because it's been our motto for a long time about service and taking care of customers and that goes back to the whole thing with best value. So we have resources that are following very closely what's going on. We're constantly talking to our customers on things. It's early yet, Bill, but I can assure you it's just like what happened in Japan, the tsunami that took place. We were there and did a lot of business with it. In New Orleans, the hurricane there, it was the same thing. We will put the resources there. If we have to fly in people from other parts of the country to support the business in the Northeast, we will do it in a heartbeat. It's been our – we've done that many, many times in the past and we'll continue to do that. Taking care of that customer and giving a best value is our number one priority. William Bremer – Maxim Group: And the guidance you provided has no impact from the hurricane Sandy. I just want to make that clear.

Well, we have not seen anything that we would view as an appreciable amount of orders related to that. So to answer the question, Bill, that's correct. William Bremer – Maxim Group: We still have half the quarter remaining here, gentlemen, right? We still have half the quarter remaining. We have devastation to the extreme up here. I would assume that this has to impact this quarter and the fourth quarter significantly.

Bill, you may be right. We're trying to be sure that we deal in facts at this stage and looking at orders and things like that. But let's face it. You've got people waiting for a gallon of gas four hours plus in lines out there. There's a mess up there right now. It's chaotic. And you've got to wait until this shakes out a little bit here and get some stability in it. But I would fully anticipate that we would see increases in orders. When it's going to happen, I don't know.

Your next question comes from the line of Howard Rosencrans – Value Advisory. Howard Rosencrans – Value Advisory: I'm just trying to get a little more clarity on the lead to reconcile your comments regarding the current quarter. You spoke of the lead price moves which certainly we've all seen the move from $0.90 to I guess it was almost $1.10 and now in the high $0.90s. How do you (spend) – you had a contribution of I think on a net basis of about $17 million this quarter. I think you had a net contribution of about $20 million last quarter when you factor in both the cost and the price. Where are you thinking that's coming in this quarter?

I think you're going to see similar benefits in the third quarter as you did in the second quarter. So some of the lead costs that we had in June, July, August for the most part are going to roll through in our October through December P&L period. So I think you'll see that. Again, through the third quarter, margin should remain in the zip code of what we have experienced the last couple quarters. But beyond that then you get into prices that are in, for the last 2.5 months, have been in the mid, in the upper $0.98, $0.95, $0.98, $0.99. So that's going to be $0.10 per pound higher than what we have experienced sequentially. Now, for the business that's on pass throughs, it will obviously react to it. But those pass through mechanisms tend to be a one quarter trailing phenomenon. So you would see all other things being equal and those other things being our ability to take cost out elsewhere in the business would have a negative impact on the fourth quarter margins. Howard Rosencrans – Value Advisory: So on a – because the comparison – the $17 million in the second quarter and the $20 million in the first quarter, those were year-to-year numbers. So for all intensive purposes, on a year-to-year basis, you'll have lapped the improvements after December and just for simplicity, reflecting flat prices, you'll have a slight headwind in the marked quarter, if you can just think about that in terms of it from a year-to-year standpoint. I know you'll do it and you'll likely be successful in offsetting (inaudible) and obviously there will be some pass throughs that aren't somewhat on a (land). But is that in generality how we should be thinking about it for the March quarter?

If you take the assumptions that you said that we do not get pricing and the mix was exactly constant, you're right. Earnings would go down. You're right. The cost would go up. We wouldn't get the pricing and mix would be constant. Now, the challenge for us is you've got to go get pricing, guys. And number two, we've got to sell up on the higher margin products. So we've got to find a way to offset that. Will we get 100% of it? I don't know but that's what we're going to try to do. And if we don't get 100% of it in that quarter, it will come in future quarters. Mike, you want to add to it?

Yes, it depends on your point of reference on this one, Howard. If we're talking year-over-year, I would continue to expect comparable or even a slight benefit on my commodity cost compared to the prior period. But if we were looking at it sequentially, I'm simply pointing out with lead costs, which have gone up in the last 2.5 months on an incurred basis, those have gone up on average $0.10 to $0.12 per pound, that obviously on a sequential basis is going to put pressure on our fourth quarter.

You have no further questions at this time.

Well, thank, everybody, for joining us on the call this morning and we appreciate your interest in our company. Have a good day.