Good day, ladies and gentlemen, and welcome to the Third Quarter 2013 EnerSys Earnings Conference Call. My name is Carissa and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now turn the presentation over to your host for today’s conference, Mr. John Craig, Chairman, President and CEO. Please proceed.

Thank you, Carissa. Good morning and thank you for joining us. Last night, we posted on our website slides that we’re going to be referencing during the call this morning. So if you didn’t get the chance to see the information, you may want to go to the website at www.enersys.com and view the slides. Before we get into the details of our third quarter 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 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 December 30, 2012, which was filed with the U.S. Securities and Exchange Commission. In addition, we will also be presenting certain non-GAAP financial measures. For an explanation of the differences between the comparable GAAP financial information and the non-GAAP information, please see our company’s Form 8-K, which includes our press release dated February 6, 2013 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 third quarter and first nine months. You’ll notice on slide three that we reported third quarter records for gross profit margins of 25.8%, operating profit margins of 11.4% and earnings per share of $0.88. Our sales for the third quarter of $557 million were $17 million or 3% lower than last year’s third quarter sales. However, year-over-year, our earnings per share were up $0.08 or 10%. During our last investor call, we cautioned that our recent order levels in October were lower than anticipated. However, in the remainder of the quarter, orders did pick up and stabilized at higher levels. The increase in orders drove our third quarter sales higher, and this was the main reason we surpassed our EPS guidance. On slide 4, our first nine months fiscal highlights show similar records for any first nine months of the company’s history. Our earnings per share of $2.75 is $33% higher than last year’s first nine months EPS of $2.06. I now want to focus on our current business activities and fourth quarter guidance. Our current orders are holding at the higher levels we saw on the latter part of the third fiscal quarter. Our Americas and Asia segments continue to see solid orders while Europe, Middle East, and Africa are holding steady. Our commodity cost in the fourth quarter will be rising sequentially as the higher LME lead and other commodity costs work their way through our P&L. To offset these higher costs, we recently announced price increases, which should recoup the majority of these increased costs, but will have little impact on our fourth quarter. Based on this information, last night, we announced our fourth quarter guidance of…

Thank you, again, John. For those of you following along on our webcast, I am starting with Slide 6. Our third quarter net sales decreased 3% over the prior year to $557 million, primarily from volume declining 2%, along with a 1% pricing decline from lower commodity costs and a 1% decline in currency translation, offset by 1% from acquisitions. On a regional basis, our sales in Asia increased 10% in the third quarter to $50 million while Europe’s third quarter net sales decreased 7% to $231 million and the Americas were down 2% to $276 million. In all regions, the volume was the primary factor for the increase or decrease. On a product line basis, net sales from motive power decreased 2% to $292 million on flat volume, while reserve power decreased 4% to $265 million reflecting its unit volume decline. Both product lines absorbed 1% currency and pricing declines. Please now refer to Slide 7. On a sequential quarterly basis, third quarter net sales were up 1% to the second quarter due to higher exchange rates. Europe was up 7%, while Asia declined 19% and the Americas region was flat. The decline in Asia reflects the completion of a large order from a Japanese customer, which also caused the decline in the reserve power product line. On that product line basis, our global reserve power business was down sequentially 7%, while sales in our motive power product line increased 9% sequentially. The improvements in motive power were from all geographic regions. Now, a few comments about our adjusted consolidated earnings performance. As you know, we utilized 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…

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

(Operator Instructions) And your first question comes from the line of Michael Gallo of C.L. King. Please proceed. Michael Gallo – C.L. King: Hi, good morning.

Good morning, Michael. Michael Gallo – C.L. King: Good results again. John, I was wondering if you can give us just an updated view on Europe. Obviously, it’s been difficult there for some time now. Are you starting to see signs of stabilizing? You look out six months, you think maybe you could start to see some pickup? And then at some point we should see LTE roll out over there, it seems like it’s staring very slowly in a few countries. I was wondering if you can give your view on what you see going on in Europe and any signs that that might start to flatten out or pick up here in the next six to 12 months. Thanks.

Sure, Michael. I think I’m going to go a little further than that. I think I’ll cover by each region because I’m sure during the call here, I’m going to be asked that question on each region. And then I’ll come back to Europe and hit your question specifically in a minute. One of the things I look at are the orders that are coming in currently, and to see what the daily average order takeout will be, oh yes. We look at the four-week average, an eight-week average, 12-week average and a 16-week average. When you look at the four-week average in the total business and compare it to prior year, we’re up 14%. When you look at the four-week average and compare it to the 16-week average, we’re up over 8%. So orders are, as I said earlier, are coming back strong. Now, to break that to you down a little further, in the Americas, looking at the four-week average compared to a year-ago four-week average, we’re up 20%. Looking at the four-week average in the Americas compared to the 16-week average in the Americas, we’re up over 11%. Same numbers with Asia, up over 50% from prior year compared to the 16-week average, we’re up 20%. Now, Michael, specifically to your question, Europe is up about 2% looking at the four-week average compared to the four-week average a year ago. When you look at the four-week average compared to the 16-week average in Europe, it’s up 2.5%. Specifically, to answer your question, I think we’ve hit bottom in Europe, and I think it’s going to be a gradual climb up is the position I would take on it right now based on the orders that we’re seeing. Michael Gallo – C.L. King: Thanks very much.

Your next question comes from the line of Zach Larkin of Stephens. Please proceed. Zach Larkin – Stephens: Hey. Good morning, gentlemen. Thanks for taking my call.

Thank you. Zach Larkin – Stephens: Mike, maybe first up, I wondered if we could talk a little bit more about the margins, appreciate the color on the range. But with all of the restructuring and everything that you guys have done recently, even with the move up in lead, is this kind of a new floor that we should maybe think about that we’re looking for, the margin range you talked about in Q4? I mean, structurally, I’m assuming we’ve improved kind of what the deck might be on the margin profile for the company as a whole.

Well, we have experienced in the last five years margins as low as 19% range and as high as now almost 26%. But I would say it is dependent on commodities. We do know that those commodities come through our P&L about three months after the actual incurred dates. So, for our third fiscal quarter, we’re really experiencing the cost that we saw in the July, August, September timeframe, and now that the cost that occurred in the fall are showing up in our Q4. And our pricing typically lags a couple of months, which is why we saw expansion in margins in Q3. We’re going to see a contraction in margins in Q4. So, to your earlier point, you’re right. We are always trying to improve on the cost improvements, the money we spend on restructuring, the new programs that we introduce to try to promote products like our Thin Plate Pure Lead into new markets, all of which are there to drive a longer-term improvement in our gross profit. So, I would tell we can’t control what lead is going to do and we know where we can achieve pricing and knowing that it typically lags. I think you could expect – I think that 19% floor is probably now 22%. But the – what you’re going to see over the course of the next year or two, I think, will be obviously dependent on lead. But as I said, we think 25% as a goal for us which we ought to be able to achieve on a longer-term basis and that’s what we strive for. Zach Larkin – Stephens: Thanks. That’s very helpful, that color. And then John, wondered if you could talk a little bit about your thoughts on the potential acquisitions, leverage is as low as it’s been in a really long time. You’re generating a ton of cash. How itchy are you to look for companies and how much has the kind of current mid-cycle pause increased your opportunities on that front...

Well, I would say we’re always busy. We continue to be busy looking at the acquisitions. We’re very highly disciplined on the acquisitions. And if we find the right deal, we’re going to go for it. We don’t plan on overpaying, we haven’t historically. We’ve done, since 1994, I think it’s 34 acquisitions. We’ve been successful at it, but we’re active. And if the price is right, we’re there. So, I’ll leave it at that. Zach Larkin – Stephens: And is the pipeline – is the pipeline – I mean, a good kind of flow of pipeline assuming you can get your price as you guys have always had a great track record on discipline on that side?

There are opportunities out there that we’re looking at currently. Obviously, I cannot go into any details on those because of non-disclosure agreements and other reasons, but I can say we’re active. Zach Larkin – Stephens: All right. Thank you very much. Congrats on the quarter.

Thank you very much.

Thanks, Zach.

And your next question comes from the line of Brian Drab of William Blair. Please proceed. Brian Drab – William Blair: Good morning, congratulations on a great quarter.

Thank you, Brian. Brian Drab – William Blair: Few questions. First, can you comment at all on what the ultimate impact of Hurricane Sandy was and if you’re still seeing the impact of that?

Yes, as I’ve said on our last call, we expect very little impact on that. It’s – relative to our $2.3 billion, $2.4 billion we are on size, it’s going to be a very small impact. We’ve had some orders come through, some things that had to take place very quickly. We responded to it very quickly. Dollar-wise, small. But I think there’s something that really came out of this that’s been very good for us. And that is that the customers that did call and the response that we gave, there within a few hours and having the product and installing it, the goodwill that we built up with those customers was very, very good. So, the dollar impact on it, small; goodwill impact on the customers, I think, was outstanding. Brian Drab – William Blair: Okay, thanks. And then – John, thanks for that great detail on the latest trends in orders. And I’m wondering, as I’m looking at the forecast – my forecast, consensus forecast. Looks like the analysts were forecasting revenue to be down in the fourth quarter relative to the fourth quarter 2012. But with this outstanding momentum it sounds like you have in most regions in orders, but shouldn’t we expect revenue to be up year-over-year in the fourth quarter?

As you’re aware, we do not give out the guidance on the revenue side. So, I’m not going to comment on that. But I also will add that when orders are coming in, you have to take into account that some of these orders, if it does say in the telecommunications system or on a military application, these orders can run out three, four, five months. In fact, some of them can run out in years. So, I’m not going to comment on the impact on the fourth quarter. It’s factored into the guidance that we’ve given, the volume is. And – but I’ll say what we’re seeing out there is more encouraging today than it was on November 6, which was the date of our last analyst call. Brian Drab – William Blair: Okay, and one follow-up on that point. Can you – I know that there’s such a wide range that you just pointed out of order to sale timing, but what is the typical average if you can put an average number on it?

Again, that depends on the mix of the products and the orders coming in. I would be – just speculation on my part. But generally speaking, I would guess it’s three – two to four months would be a range. Brian Drab – William Blair: Okay. Thank you very much.

And your next question comes from the line of William Bremer of Maxim Group. Please proceed. Bill Bremer – Maxim Group: Good morning, John.

Good morning. Bill Bremer – Maxim Group: Okay. Great quarter.

Thank you, Bill. Bill Bremer – Maxim Group: Outstanding. I want to go right into your operating margins in the Americas. I mean, stellar, you’re over 16.4% there. It’s always been a target to hold 15%. Is there a new target here? And then I want to take that also to Europe, and you did a very splendid job, in our opinion, holding your margins there at about 6.5%, given the 6.5% pullback top line. And now, I’m assuming based upon your commentary, Europe, that’s just started to have a nice little ramp up as we go into the following – your strongest quarter and then 2014. But can you give us some color on where you anticipate your operating margins going here from this point on?

Well, obviously, with the guidance that we’ve given, the operating margins, we would anticipate them going down in the fourth quarter. And that’s primarily because of the lead situation. As you know, when lead goes up and we go after price increases, there’s a time delay there. And when you look at the cycle and you look and see that our – the LME cost of lead back a quarter ago was in the $0.98 range, and now it’s at more in the $1.03, those are LME prices by the way, that’s not exactly what we’re paying for it, but it’s up is the point, that we’re going to be playing catch-up on the pricing. It’s going to take some time to catch that. Now, the other side of the fence is when the LME goes down or lead prices go down, what happens is that if we can hold the pricing, we can neutralize that thing. The long-term effect of lead cost or commodity cost versus pricing, historically, we’ve been able to get back 100% of it. But in the cycle that we’re in right now, we’re going to see a downside here. So, beyond that, we’re going to continue to do everything we can to improve our productivity, to reduce our cost and introduce new products. Our target on new product design is going out right now. Rod Evans, who’s our Global Engineering Vice President, Rod knows and he manages it well. It’s – on all our products, we want to be looking at gross profit margins at 30% or greater. It’s not to say that there won’t be some products in there that we have to come out that are lower margins, but generally speaking, we want to be working on the higher-margin products. So, I hope that answers your question. Bill Bremer – Maxim Group: No, it does, and it’s good to hear going forward. The quarter, in terms of the split between reserve and motive, we thought that the reserve would be a little stronger than where it came in versus motive. Can you give us some color on what you saw during the quarter there and do you expect now them to flip-flop a little bit going forward?

Well, I’m going to ask Mike to cover the details on this, but I will say this that the motive power orders and reserve power orders, it’s funny over the years how it’s changed, one day, the reserve power looks great, the motive is down. And the next month is the motive is up and reserve is down. It flips back and forth. So, it’s nothing unusual there. But Mike, why don’t you get the specific numbers on it?

And as I mentioned in my script, Bill, that in our Asian market, we had a large order in Japan with a customer, and then it happened to be a reserve power order that completed itself in the prior quarter. And that’s why you saw Asia step down of about $12 million of sales sequentially or I think 17% which was a big impact, and by region, it was a little bit mixed. Reserve was down in Asia and Europe, it was up in the Americas. So, I would say, it was probably a little bit skewed by one specific order. Some of the comments made earlier, I think Mike Gallo mentioned the LTE drive in Europe and we hope that that has some longer-term positive impacts on us. So we certainly think our reserve power business is one that is growing with the normal expansion in the transmission and storage of data. So, we’re very positive and bullish on reserve power market. But in terms of the timing of when large orders start and stop, it had a little bit of a negative impact this quarter. Bill Bremer – Maxim Group: Okay. And then my final question is on the restructuring charges. What could we look for? I know that you voiced last call the tightening potentially on the lithium side of the business, what can we see fourth quarter and going on until 2014 in terms of more restructuring across the board?

Well, we – in our guidance, we said that we would expect – or you should expect about $0.06 of charges related to our restructuring program for the fourth quarter. So, in broad numbers, we’re at about $5.5 million year-to-date in restructuring charges. We’re going to finish probably some place in $9 million to $10 million range on restructuring. One of the programs that we mentioned in the MD&A this quarter was a realignment of our manufacturing footprint in China, and now those charges will continue in the fourth quarter and that would be one of the larger ones. And we also have some programs going on in Europe, which are intended to continue to drive the cost out of that structure. So, you should expect – let’s call it, $4 million of restructuring charges in our Q4. Bill Bremer – Maxim Group: And, Mike, finally – I apologize, just one more. Saw the stock buyback affect this quarter. I know it’s still active. Can you give us some color on what has been since the end of the third, what has also occurred coming into the fourth?

Well, we did a repurchase that we’d referenced 683,000 shares, I think, $22.6 million, that program essentially is completed. We do have authorization with our board for another buyback program of about $50 million. That has some pricing levels at which it would be put into place. They are lower than where our share price is at the moment. So, as we’ve said in the past, we will – when the opportunity presents itself and that’s when we think the market price of our shares is below what we view as the intrinsic value of our shares, we plan to be in the market to repurchase shares. So and I – so I would say we have programs out there. I can’t promise you they’re going to hit in Q4. But if the opportunity presents itself, we have the balance sheet to do it. Bill Bremer – Maxim Group: Okay. Gentlemen, thank you for the color.

And your next question comes from the line of Elaine Kwei of Jefferies. Please proceed. Elaine Kwei – Jefferies: Hi, John and Michael. Thanks so much for all of the details. It’s really helpful. I just have a question on – related to convertibles. The stocks had quite a run here. And I think we’re above the conversion price, but could you give us just a little bit of an update in terms of where we stand with that?

Sure, Elaine. So the convertible has this – a conversion threshold of about $40.60. So currently, you’re right. We are above, and note that convertible becomes dilutive at prices above $40.60. And just to kind of give you some metrics for sensitivities, if you will, if our share price moved to $45 per share, that would add approximately 415,000 shares to our share calculation as you compute it for diluted earnings per share. At current earning levels, that’s little bit less than $0.01 per quarter of pressure. And you can kind of use that metric and say with every $5 increment in price, I’m going to add 400,000 to 500,000 shares and you can do your own math on where you think our net earnings might be in future quarters. But let’s say for practical purposes, it’s $0.01 for a quarter. Elaine Kwei – Jefferies: Okay. Great. That’s really helpful. And just one last one on the restructuring. Just sort of from a picture standpoint, I know you guys have a lot of ongoing programs, taking out costs and rightsizing the organization. When do you think you’d be at a point where you’d have most of that substantially done, I mean beyond 4Q? Would that be essentially by the end of this calendar year or do you see more going into next year as well?

Well, my answer may surprise you, but probably it’s a long, long ways off. And the reason I say that, when you look at these restructuring programs, what we’re doing is we’re reducing cost and becoming more productive in driving our earnings up by them. And these are very solid investments that we’re making. We have a lot of cash, and I look at the best way to use that cash and I call it investing in ourselves. So, what that really means is, ladies and gentlemen, within EnerSys, we have to find a better way of providing better products at lower, lower cost. And the other thing is, when you look at the M&A work that we’ve done recently and what we’re anticipating in the future, that’s going to require our restructuring cost to take in, make us more profitable. That whole philosophy and concept that we’ve covered here is what’s taken us from a smaller company to a little bit larger and then what’s going to take us from where we currently are to even being larger yet and more profitable. Elaine Kwei – Jefferies: Great, thanks so much and congrats on the great results again.

Thank you.

And your next question comes from the line of Bill Dezellem of Tieton Capital Management. Please proceed. Bill Dezellem – Tieton Capital Management: Thank you. A couple of questions. First of all, would you please go into some detail on the China footprint realignment that you’re doing? I have not yet had an opportunity to read the MD&A, and if it’s totally laid out in there, then just tell me I’m wasting your time. And...

Well, no, not a waste of time. We can cover it. We’d be happy to cover it for you. About two years ago, we made a decision that we were going to build a new factory in China. And the primary reason for that was that when we analyzed our China business, we were really not competitive from a cost standpoint and some of the product designs that we had over there were more Western European designs and we needed to get more – in line with the China market. We built a state-of-the-art 450,000 square foot factory in Chongqing, China. And with doing that, we have some smaller operations that we evaluated those, and say, geez, we can actually integrate those smaller factories into our new factory, thus reducing overhead, thus saving money, and having a better-quality product that fits the market at a lower cost. So, China is no different than anywhere else in the world. We’re going to continue to look at how we can restructure our business and take cost out. And that’s in fact what we’re doing in China today. Bill Dezellem – Tieton Capital Management: Which facilities are you now exiting?

The facilities in Chao’an which is in Chaozhou district. And it’s a facility that was part of the Huada Battery Company when we acquired it, I’ll say, our predecessors acquired it in the mid-1990s. It had then been sold off, we repurchased it in 2005. It’s a smaller facility in light of – that footprint, in light of other considerations, we felt that it was appropriate – the best time to take it out of our footprint. I will say – and this is, by no means, a promise, but we’re taking the charges right now as we close that property. At some point, we believe in the next year or so, we will be able to sell that property and we may be able to realize a gain off the appreciation and value that that property has had in the 10 to 15 years that we’ve owned it. Bill Dezellem – Tieton Capital Management: That is helpful. Let me shift to the management changes, if we could please in Europe and Asia and share with us kind of the – what you can about that and what you’re trying to accomplish there.

Well, I’m not going to go back and talk about the changes per se that we have made and the reasons why, but I will say that we have an outstanding management team in both Asia – and we have an outstanding management team globally. I’ll start with that. Specifically, in the European market, a new set of eyes looking at it. We’re not at 10%, we’re at 6.5%. I committed to our shareholders, I committed to our board and I’m going to commit it to myself that we’re going to get Europe to 10%. Europe has gone through a lot of problems, we all know that. We’ve held it to 6.5%, 6.4% to 6.6% range in operating earnings, but we’re still not at the target. And I think with the new set of eyes and the team being very open and energized about looking at how we take it to the next level, I’m encouraged that we can get there. Bill Dezellem – Tieton Capital Management: Thank you. And then finally, if you want to beat the lead price increase horse here just a little bit further if we could, please. And lead prices have been going up since the fall and since last conference call, but you did reference the pricing action that you’ve taken. And so, to what degree does that pricing action take into account the $1.10 or so lead where we’re now at versus taking into account only the lower prices that were in place last fall? What can you do to help us understand how much you’re getting there, please?

Yes. And it’s a tough question because we don’t know the answer to it at this stage. We go out with – what we do is we analyze by region, we look at where we are price-wise compared to our competitors, we try to come up with what we think the – what’s a fair value to the market in each region. We analyze that and we announce a price increase. Historically, as I said earlier, we were able to get enough of the price increase to ultimately offset the cost or the commodity cost going up, but in part of it, it was offset because the commodity costs were going back down again. So, right now, it’s tough for us to analyze or to assess it. We have announced a price increase, we hope to get 100% of the price increase and we’ll see what happens.

I guess I would add that because of the timing lag effect of when our pricing is in place compared to when our costs hit, that’s typically a quarter later. So, to your point, Bill, lead has been going up, I’ll call it $0.15 moving from Q3 basis to Q4, it’s gone up another $0.10 or more going out into Q1. And obviously, we think our pricing will recapture that, but it will always be lagging at least a quarter. So, I would say right now, I can’t predict where lead is going to after February 7, but if we’re using February 7 prices, I would say the margins that we projected, the 23% to 24% range for Q4, it will probably stay in that range at least one quarter beyond that, and then we’ll have to see where lead prices go. But as we said, we expect to get – and then maybe the second half of next year, but our target is 25%, and we continue to take actions to reduce costs, improve our product mix so that we can drive that on a longer-term basis. Bill Dezellem – Tieton Capital Management: Great. I think that was very clear, but I do want to just make sure that I’m understanding correctly that if lead prices were to stay at this level and not change, you would not, in a quarter from now, feel the need to raise prices again to account for, again, that – the increase that’s recently taken place?

But what... Bill Dezellem – Tieton Capital Management: And...

I would say keep it mind that 35%-40% of our business is on automatic pass-through, so those are always going to be moving up and down as the – whatever metrics they use to calculate that pass-through occurs. So, I would say in other parts of our businesses that are not in a pass-through mode, that those are set on a more periodic basis. I would say that at the moment, we think that they reflect the current market situation, the prices do. Bill Dezellem – Tieton Capital Management: Very helpful. Thank you both.

Your next question comes from the line of Jeff Osborne of Stifel Nicolaus. Please proceed. Jeff Osborne – Stifel Nicolaus: Great, good morning and congratulations on the strong results this quarter. Just a couple questions that haven’t been answered. On the recent quarter, obviously gross margins were quite strong. I’m just trying to get a sense of how much of that was due to non-material – non-raw material conversion cost improvement and lower overheads, some of the initiatives that you’ve over the past couple of quarters and that flowing through. Is that anything you can help us quantify?

Well, we said in the MD&A section on the Q that it’s primarily driven in the shorter term by the commodity cost decline that ran through our P&L in Q3. On a more longer term, as I referenced earlier, looking back five years, I would tell you it is – there is a definite improvement that occurs in the longer term from the cost improvement and the improvement in mix and pushing our Thin Plate Pure Lead and other premium products.

I think when you look at the business in total, and I’m not talking about one quarter to the next, I’m talking over a longer term period of time, the investments that we’ve made in restructuring have paid off very, very well. The investments that we’ve made in new products have paid off very, very well. In each of the areas which serviced the customers by giving best value is taking our margins up. But the variation that we see quarter to quarter, a lot of that comes because of this whole thing with where commodities go and where our pricing goes with it. So, it’s a tough one to answer because it’s constantly changing because commodity costs constantly change. But the base business is improving every quarter with cost reductions and better products and better service. Jeff Osborne – Stifel Nicolaus: I understand. A few other quick ones here. On the tax rate for the upcoming fiscal year, is there any reason to believe that it wouldn’t be in the 28% range similar to this fiscal year?

The biggest impact that occurs outside of discrete items coming in and out of our tax calculation and our reserves is the mix of where we are earning our money. And we have talked about – Europe has been relatively stable in its earnings. Americas have been up. That puts pressure, upward pressure on our tax rate because the Americas has the highest tax rate, corporate tax rate in the world. And Asia has been declining a little bit sequentially. That also puts pressure on our tax rate because Asia is lower than the U.S. So, as I look out to 2014, I would say it’s mostly dependent on the mix of earnings and where we earn it, which is why when John says he’s determined to get Europe up to 10%, that would have the biggest long-term effect on reducing our tax rates.

Yes. And then Mike, just to pick up on that, our goal is to see that tax rate go down and the reason for it to go down, take everything else and push it aside, is because of mix. We need to get Europe to 10%. The growth in the Asia market is big. If we can hold steady in the Americas and increase the percentage in the other areas, our rates should come down with everything else being equal. Jeff Osborne – Stifel Nicolaus: No, the move to 10% in Europe, now much of that is your footprint and realignment there versus just competitive dynamics that are a bit out of your control?

Well, it’s – competitive dynamics is always going to enter into – on that, and that’s something that hopefully that the – hopefully we get better service than we have in Europe in the past, and hopefully we can have customers recognize that the value that we give is worth paying a little bit more in the front end. And ultimately, the customer will end up paying less over the life of the product because of better performance of products and better service. Jeff Osborne – Stifel Nicolaus: Understand. A last quick one here, I had a chance to see the OptiGrid product at the recent DistribuTECH tradeshow in San Diego, looks very exciting. Just a question on how you think about pricing that product going forward.

At this stage, I really don’t want to comment on that because we are still working with a number of customers on this and we haven’t really finalized that. Jeff Osborne – Stifel Nicolaus: I understand. Thanks so much.

Okay.

And your next question comes from the line of Richard Rosen of Columbia Management. Please proceed. Rich Rosen – Columbia Management: Hi, thanks a lot for taking my questions. So, as an investor and we think about growth going forward, you guys have laid out your target of 25% gross margins and 10% operating margins, and give or take the movement in the price of lead, we’re effectively there. You’ve spent a lot of the call talking about investing – reinvesting yourself which presumably means better margins in the new projects that you have outstanding, et cetera. And other than – but at these prices, you’re not really buying back a lot of stock. So, in a long-winded way, how should we think about when it is that you’ll be comfortable perhaps increasing your secular target for where it is that the profitability of the business should be?

Well, Rich, at this point I – we haven’t set that internally. I’m obviously very pleased with what’s happened in the Americas. Europe, we’ve got work to do, Asia we have work to do, so we obviously want to continue to grow our top line and our bottom line and continue to improve. So at this stage, I’m going to leave it at that – as you put it, the 25% and 10%, in time, we’re going to adjust those accordingly. Rich Rosen – Columbia Management: So, if the industry demand grows 6% a year and were roughly at where your targets or maybe even a little higher. That’s – from the standpoint of expectations, that’s really what we ought to be expecting out of EnerSys, is that fair?

Well, I think if we can sustain that 6% growth. then those targets are definitely achievable. It’s – the decreases and increases, the puts and takes that in our demand and the world’s economies that... Rich Rosen – Columbia Management: Right.

Grow that. So, steady 6% and yes. I think 10% would quickly become 12%.

Yes. Let’s be sure we understand each other on those targets. The 25% and the 10% are minimum targets. Rich Rosen – Columbia Management: Yes.

Those are minimum targets. They’re not we’re happy at 10%. Rich Rosen – Columbia Management: Okay.

They are minimum targets. And when you look at it right now and yes, we’re hitting those targets and we have them for a couple of quarters here. But are we on real solid ground to have 10% and 25% every quarter going forward? Mike mentioned earlier that the bottom could be 22%, whether it’s 22% or 23% it’s still not 25%. Rich Rosen – Columbia Management: Okay.

We got to have a system in place and a company in place that even under the bad times that we can take and hit that 25% and that 10% as a minimum. Rich Rosen – Columbia Management: Okay. I guess I was thinking more of where is it that you think is possible within the organization? Not as a year-in and year-out because obviously there is a lot of -or certainly a degree of cyclicality caused by the economy and lead costs.

Yes, but those – that cyclicality, that’s the reality. I mean, that’s real. And I think a good management team has to understand that that’s real, and we have to look at how we contend with it and manage around those things. Rich Rosen – Columbia Management: Okay. You highlighted a couple of new products and obviously Thin Plate Pure Lead is – has been a great success for you. At what point do you anticipate some of these other projects becoming more significant to your business mix?

That’s hard to tell because you take the OptiGrid as an example. And some have said that that market could be $100 billion, $200 billion, there’s all kinds of numbers out there. It really doesn’t matter. If it’s $10 billion, it’s a market we want to participate in. And it’s one that we’re kind of the tail on the dog, so to speak. The market has to develop and the end user has to want it. All I know is that the investment for us to get into it is a modest investment at this stage. And the – so the risk is low. Our potential rewards could be significant. Rich Rosen – Columbia Management: Okay. But this is years away.

So, I don’t have that. Rich Rosen – Columbia Management: This is years away, not 2014.

I think that one could be – I don’t know. It depends how fast grid storage really takes off. And all I know is that we have a product that’s ready and proven and tested and ready to go. If that market takes off, we’re going to be there with that market. Rich Rosen – Columbia Management: Okay, fine. One final question and this is even outside of what you currently do. The issues that Boeing has been having, obviously they still don’t know what the problems are, from the standpoint of EnerSys, how does this change what you do? What is your observation, not necessarily from a Boeing standpoint, but from the standpoint of solutions and the development of lithium battery solutions?

Rich, as you know, our investments in lithium have been modest. They’ve been small. Rich Rosen – Columbia Management: Fine.

And part of the reason for that is because as you’ve heard me say in the past, when you look at the economics associated with lithium, not just the cell, the cell goes for, let’s say, $270 per kilowatt hour, the total battery cost, in my opinion, has been high and it’s going to get higher. And the reason I think it’s going to get higher is because of those applications, you’re going to find that added protection is needed. I’ll give you an example of one. With lithium-ion batteries, there’s different – there’s probably 12 or 13 different types of lithium-ion batteries. So, when you look at a particular one that we used in Boeing and that one is one that does have conditions that can cause problems. I think what you’re going to see in the future that from our end on it, those designs – you need to assume they’re going to catch fire. And when they do, they need to be in a container not to allow to cause damage to other areas. Rich Rosen – Columbia Management: Okay.

I mean, it’s – that’s lithium technology. It does have a condition called thermal runaway. That’s nothing new. I mean the computer industry, the cell phone industry has experienced it in the past. The auto industry, to a lesser extent, has seen some problems with it too. So, you have to be very careful from a design standpoint on it. The other side of the fence, I think it’s a great technology for certain applications at the premium associated with it that the people are going to pay. Rich Rosen – Columbia Management: Okay.

And should pay. As an example, in your cell phone or in a satellite. And our area of expertise in this is really into satellites, it’s putting them into proton rockets and it’s putting into selected military applications and into select telecommunications applications. But it’s a technology that is different and needs to be treated differently than a traditional lead-acid. Rich Rosen – Columbia Management: Okay. All right. Thanks and great quarter.

Thank you.

Thanks, Rich.

(Operator Instructions) And your next question comes from the line of Dana Walker of Kalmar Investments. Please proceed. Dana Walker – Kalmar Investments: Good morning. Well done.

Thank you, Dana. How are you? Dana Walker – Kalmar Investments: Doing great. Thank you. Nice to hear your voice. And John, when you prefaced an earlier response as that you might be surprised by my answer, I wasn’t surprised by your answer at all. You folks are indefatigable in finding ways to add to your structural advantages. Question is this, if we – the pickup that you’re seeing in orders, do you think that that’s being shared by the market or do you think that’s unique to you?

Dana, it’s an excellent question. One of our competitors has information out this morning. I haven’t read all of it, but I think the indications in there were that that they were seeing an increase also. So, that piece of data right there would indicate that the market is up. I think in Asia, market is up. I think the Americas is up. It’s a good question, and I don’t have a real good answer for you just yet. I think we have to do further analysis on that. I would say that we have picked up some market share – modest market share, not a lot by design. We’re not going off giving pricings. The market share that we picked up is by better service, better performance. So, I would guess that it’s both market and then a little bit, we’re picking up market share, Dana. Dana Walker – Kalmar Investments: Do you see anything in the mix of your business or in the premium mix of your business that is different than the average number you described with your order pacing?

The premium business has picked up modestly. Dana Walker – Kalmar Investments: Modestly better than the number you cited or...?

Modestly better than – if you look at the percentage of the premium products to the other product lines, the premium products have picked up a little bit more than the other products. Dana Walker – Kalmar Investments: Okay. You have described how you have felt that Asia has been difficult on European-manufactured demands in the past, and you – that with some of the reduction outside of you in China that there might be a return of more demands sourced from Europe in Europe. If you were to update how you feel that interplay is working today, how does that look?

Well, if you go back when I made that statement, and the reason I made that statement, you have to look at where the euro was to the RMB. So, currency was one issue. The second issue and the bigger, bigger issue was where the Shanghai Exchange was to the LME. The Shanghai Exchange to the LME, the LME was $0.22 per pound for lead less than the Shanghai Exchange. Today, that has changed. We’re at parity and in fact, on any given day, the SMN is actually less than the LME. So, the bottom line to it is that perceived competitive advantage that we had because of reasons stated has not gone away. Now, that’s not bad from us. Because you got to keep in mind we’re also a Chinese manufacturer. So, where we source the product from, we could take it to China and compete head-on on that end. So – but to your point, that has changed. The dynamic has changed. Dana Walker – Kalmar Investments: Which may argue for a little less level loading in Europe than would have been the case when the LME was at a discount.

That is possible, yes. Dana Walker – Kalmar Investments: Final question. As you look at your reserve business, can you talk about the different markets that you’re addressing in reserve…

Communications market in the United States, I think, is continuing to expand, data systems in the U.S. continue to expand. China telecommunications, they basically stopped buying for a while. They’re back buying strong right now, although those margins are lower than many other areas. Europe is mainly a replacement business today on telecommunications. 4G really hasn’t taken off. Data systems in Europe on the UPS side is doing fairly well. Middle East and Africa, a lot of good activity taken, although small for us at this stage. We continued to invest in that area to pick up additional market share. Dana Walker – Kalmar Investments: Good stuff. Thank you.

And there are no further questions at this time. I’d like to turn the call back over to Mr. John Craig for closing remarks.

Thank you very much. I appreciate everybody joining us this morning and to continue your interest in our company. Thanks and have a great day.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a wonderful day.