Good day, ladies and gentlemen, and welcome to the Q3 2018 EnerSys Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today's conference is being recorded. I would now like to turn this conference call to Mr. David Shaffer, President and CEO. You may begin, sir.

Thank you, Kevin. Good morning and thank you for joining us. Before we get started this morning, I promised Kerry Kane, our Chief Accounting Officer, I would say fly, Eagles, fly. So, on the all with me this morning is Mike Schmidtlein, our Chief Financial Officer. Last evening, we posted on our website slides we will be referencing during the call this morning. If you didn't get a chance to see this information, you may want to go to the webcast tab in the Investors section of our website at www.enersys.com. I'm going to ask Mike Schmidtlein to cover information regarding forward-looking statements.

Thank you, Dave, 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 and regarding future events and operating performance and are applicable only as of the dates of such statements. For a list of factors, which could affect our future results, including our earnings estimates, see forward-looking statements included in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in our quarterly report on Form 10-Q for the quarter ended December 31, 2017, 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 7, 2018, which is included on our website at www.enersys.com. I'll return it back to you, Dave.

Thanks, Mike. I will begin on slide 3. We were pleased to announce our third quarter results of $1.25 per share, which were well above our guidance range of $1.12 to $1.16 per share. In this quarter, there were positive impacts from taxes unrelated to the recent legislation on our adjusting earnings per share, which Mike will address in his comments. Sales increased 17% year-over-year, including organic growth of 8%. Simultaneously, year-over-year quarterly gross profit increased $12 million over last year despite continued commodity cost increases creating an $11 million headwind after factoring in selling price recovery. Our price recovery from rising raw material costs was consistent with prior quarters this fiscal year at approximately 70% on total commodity cost inflation. We have not yet been able to fully recover commodity cost increases so far this year. However, we remain confident in our ability to fully recover these increased costs once commodity prices stabilize. In the meantime, we continue to aggressively identify opportunities to offset higher commodity costs through a mix of price increases and opportunistic cost reductions. Increased organic volume has helped offset the increased commodity costs with strong gains coming from reserve power in all regions and motive power in the Americas and Asia. In addition, we were once again able to offset the increased spending for Lean, Digital Core installation and new product development with our cost savings initiatives. Please turn to slide 4. I want to briefly review our global businesses. Recent reserve power order trends continued to be robust in the Americas, driven mainly by increased orders for enclosures and batteries for telecommunications. We believe telecom operators are upgrading their networks infrastructure in anticipation of 5G deployment within the coming years. We believe recent legislative changes, including net neutrality, appear to be having a favorable…

Thanks, Dave. For those of you following along on our webcast, I'm starting with slide 7. Our third quarter net sales increased 17% over the prior year to $659 million due to an 8% increase in volume, a 4% increase from pricing and a 5% increase from currency. On a regional basis, our third quarter net sales in the Americas were up 12% to $353 million and Europe's net sales were up 21% to $225 million, while Asia increased 27% in the third quarter to $81 million compared to the prior year. The Americas enjoyed a 9% increase in volume and a 3% from pricing. Europe had a 5% pricing increase, a 13% in positive currency and 3% increase in volume. In Asia, volume increased 17%, while pricing and currency increased 5% each. On a product line basis, net sales for motive power were up 14% year-over-year at $332 million, while reserve power was up 21% to $327 million. Motive power had a 4% increase in price, a 5% volume increase and a 5% currency benefit. Reserve power generated 11% increase in volume and 5% increases in both price and foreign currency. Please now refer to slide 8. On a sequential quarterly basis, third quarter net sales were up 7% compared to the second quarter of fiscal 2018, driven by a 6% increase in volume and a 1% price increase. The Americas region was up 3% and Europe was up 14%, while Asia was up 4%. On a product line basis, motive power was up 2%, while reserve power was up 12%. 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…

Thanks, Mike. Kevin, we will now open the line for any questions.

Our first question comes from Noah Kaye with Oppenheimer. Noah Kaye - Oppenheimer & Co., Inc.: Thanks very much. Good morning, gentlemen. Dave, maybe I could start. You commented on maybe reconfiguring the Asia manufacturing footprint in both China and India. Could you maybe elaborate on that a little bit? What products are going to be manufactured really for which markets? How should we think about these decisions in context of your global supply chain?

Okay. Good question. Let's take India and China separately. I think we've been pretty open on all of our calls about our frustration with the India telecom market and our ability to compete domestically there. It's been a real challenge. And so, we found an opportunity to use the factory there in an export setting because of motive power growth and support a motive power growth in the Asia region. So, we do have a big motive power factory in China, but they're real busy with what's going on in China. I think we said double-digit growth rates in motive in China. It's really booming over there. And so, it frees up or it creates an opportunity for the rest of Asia, Southeast Asia, Australia to maybe take advantage of the Indian operation and to do that in a leaner fashion. And so, we've seen the business case and it looks promising for that. And in China, similar story. We configured and sized a lot of our factory footprint for the China telecom market. And as that changed since we went into that business, it became concentrated with one customer, China Tower. And our share at China Tower has actually grown, but their spending – they turned the spigot off and on just like the telcos do here in the States and we have to adjust accordingly. And so, as we mentioned, we're seeing datacenter growth globally and so we're seeing some opportunities to rebalance the product portfolio to just take better advantage of our factories. I think that's always been one of our real strengths being a truly global company, arbitrage different FX rates, different lead rates, SMM versus LME. And so, the guys are just actively reshuffling the deck and we think that's going to help Asia's performance.…

Okay. Well, I think there was one or two calls ago that we said that we were going to purchase the lithium-ion cells for the time being and as such, the capitalization of that modular lithium program is pretty low. And our intention, Noah, is to leverage our Purcell business and supply chain to really get us kicked off in that business. So, that's why we think we can get off to a relatively good start. Now, if that business grows, we might outgrow our current Purcell operations. The other thing with Purcell is we have to think about 5G is coming and so – but in the future, the sort of the model we have around here is nail it, then scale it. So, that's the focus right now. So, from a capitalization standpoint, on the modular lithium, that's fairly modest and we'll hardly get noticed. Mike, you want to add any color?

Yeah, I would say with regard to the lithium pack development, we are incurring those costs now. We'll probably have for the year nearly $4 million of costs that will be charged through earnings to develop those packs that are not going to be capitalized. So, this is when we talk about some of the investment we made in our self, whether it's Digital Core, new product development, et cetera, we're spending that money right now. We're not doing it on cell production, but we are doing it on battery pack development.

That's fantastic point and that's been one of the headwinds. And just give me one second here to plug my team, because it's been an amazingly difficult year given the commodity pressures. And then, at the same time, we tried to introduce my strategy, as a new CEO, with a lot of the transformation, the new product development, the drag of, as Mike just described, some of these initiatives that that's put on the P&L. And at the same time, we've been flying or sailing into the commodity headwinds and, you know what, the team hasn't complained. It's been a tough year, but everyone sees that we're doing the right things and I couldn't be more proud. Even though we maybe a little off pace to some of our Investor Day projections because of these commodity pressures, in the long run, we're still extremely confident based on the feedback we're getting from very important customers that we're doing the right things and I couldn't be more proud of the team. Noah Kaye - Oppenheimer & Co., Inc.: Hey, thanks for that, David. And if I could just sneak one more in here, Mike, I think you commented to a possible range of $250 million to $400 million of cash repatriation. So, I think our question is just how you see potential uses of that cash? How does the M&A pipeline look domestically, clearly this makes a lot easier for you guys to do things in the home market?

Yeah and the M&A pipeline is active. There's probably $1 billion worth of transactions that we find both attractive and we believe we have a reasonable chance of succeeding with that transaction. So, there's plenty of things going on and it's been a little frustrating for us over the last five years. We really haven't had a major transaction in that period. And most of you probably recognize that in that timeframe, we've repurchased 7.5 million shares of our stock at the cost of about $460 million and then initiated a dividend as well. So, when M&A wasn't right and we are very disciplined and selective and when those transactions were not available, we have deployed that money elsewhere. But the $250 million to $400 million, as you know, our initial inclination would be to invest that in ourselves and look for M&A activities. Dave?

Yeah. And just a point, we've talked about changing the scope and the scale and the size of some of the transactions we've been going after and that's on me. And unfortunately, the ZIP code or the size of the deals we've been after is sort of a sweet spot for a lot of the private equity money that's on the Street right now. So, we've lost a couple deals. And frankly, we think maybe the valuations that we've seen people paying were just too rich for our blood. So, we're not going to do a deal. We've said this all along, we're not going to do a deal for a deal's sake. We're going to try to remain as disciplined as we can. And when they don't avail themselves, then we're going to do what we think is responsible for returning the capital, but that said, I don't want anybody to interpret the lack of deals of late as being us not trying or not putting effort into it. If anything, I think we've probably worked harder and redoubled our efforts, but there's just a lot of cash in these private equity funds right now, but that said, we're going to stay disciplined. Noah Kaye - Oppenheimer & Co., Inc.: Great. Great. Thanks for taking the questions.

Yeah. Thank you, Noah.

Our next question comes from John Franzreb with Sidoti & Company. John E. Franzreb - Sidoti & Co. LLC: Good morning, guys.

Hey, John. John E. Franzreb - Sidoti & Co. LLC: Going back to your prepared remarks, I felt I heard you say something about the telecom business that the strength you saw in the third quarter will not repeat in the fourth quarter. Did I hear that correctly, because I kind of think historically the fourth quarter is one of your – probably your strongest quarter for that business?

Yeah. We had a Bluebird in EMEA in Q3 in the telco area. You know that the telecom business is a rollercoaster and we don't expect that Bluebird to repeat in Q4, but it is a big account that's going to continue into next year. It's just a little bit lumpy. So, the comps for Q3 from a volume standpoint were probably favorable, the comps for Q4 for volume organics are probably a little less favorable and so we had a pretty good Q4 last year. But that said, we're happy with the organic volume growth in the second half net-net and really whether it's telecom or transportation or datacenters, we just have a lot – especially A&D in the U.S., there's just a lot of exciting activity right now in the energy storage arena. So – but, yeah, you did hear us right, we had – but we just wanted to make sure that we set the right level of expectations in the fourth quarter. So, we did, but we did have a nice pickup on a telco account in Q3 for EMEA. John E. Franzreb - Sidoti & Co. LLC: Got it. And similarly, you said that you're seeing related telecommunication spending on infrastructure ahead of a potential 5G rollout. Can you just talk a little bit about what's they're spending on, how they're spending and if you're hearing any potential of pulling forward the 5G rollout to 2019 or 2018?

Yeah. So, in the end, you have to remember, we all have to remember that the 5G network will be built on the backbone of what's already out there today. So, whether it's a cable company with a hybrid fiber coaxial network, whether it's a telco company with a fiber wireless network, what happens in 5G, all this new data that's going to enter will largely be based on the backbone. So – and really, as I said in the prepared remarks, we think net neutrality and the ruling there has really changed some of the buying dynamics for the telco customers in the U.S. And so, we see sort of a renewed infrastructure investment activity level and a lot of that I'm sure that they are going to do in preparation for what they say is going to be an increase in data demand. So, whether it's one of our traditional central office flooded batteries, whether it's some of our enclosures out of the Purcell business, whether it's some of our SBS Thin Plate Pure Lead batteries, we're seeing it on all fronts in the U.S. especially. And then, in terms of some of the discussions about nationalization or legislation, we just think whatever gets the network out there the fastest is what we're excited about and again, we feel very well prepared whether because of it's in our sweet spot with the existing stuff and then what Joern's got cooking on the smaller cell side stuff, we're super excited about 5G. John E. Franzreb - Sidoti & Co. LLC: Okay. Got it. And, Mike or Dave, on this one, on one of your slides, you presented the price increases by region and I kind of noticed that the Americas was 3% and Asia and EMEA was 5%. I guess there's just two questions here. One, can you realize better pricing overseas than you can here in the Americas? And two, when think about lead, it spiked to $1.22 or so a couple weeks ago. When do you feel that most in the P&L?

Okay, John. So you're right in this quarter that the Americas did not have the same pricing year-over-year improvement as EMEA. Keep in mind EMEA uses pass-through mechanisms, which actually give them in the near-term probably a quicker traction, albeit delayed. They're able to pick up faster than the Americas. The Americas, the buyers or the consumers of our products have the ability to kind of, based on how they place their order patterns, to do a little bit better job of deferring it. So, with that, you see while we typically think Americas in the long-term does a better job and they do better, but in the short-term, with Europe and Asia as well having pass-throughs, those guys pick up a little faster than our Americas business, but in the long-term, Americas probably ultimately does a little bit better. And the $1.22 lead pricing obviously, we did see lead got down into the sub-$1.15 yesterday. I haven't checked where it is today. But, for us, what we would like to see and where we've been if you're playing catch up and getting 70% recovery on an ever-increasing lead rising cost slope that makes it difficult. If lead will stabilize or even decline, that's when you see the pricing catch up as you're well aware. So, if lead were to your premise in $1.22 range on an incurred basis for the remainder of this first calendar quarter, then you would see pressure beyond this fourth fiscal quarter for us in terms of margin. But we would also raise prices most likely in that scenario as well.

Yeah. And I think that what we've demonstrated so far this year is the market is responding. The pricing is coming up. And it's just really, as Mike stated and we said even in my prepared remarks, what we're looking for is stability and just a little bit of a breather. But until then, just be assured that we're doing everything we can from a pricing and a cost reduction standpoint. It's the nature of our business and we have to manage and we have to deal with it. But stability is key. Mike is right. It's going to be a little choppy region to region because of the degree of the pass-throughs. But when lead goes down, obviously it works the other direction. And so, when you assess this over the long haul, it's difficult to say which is right and which is wrong, but I am confident. One of the things that we've picked up is one of the reasons that lead has gone up. It's not really a demand story. As you know, almost all lead consumption is driven by lead-acid batteries. And the biggest part of lead-acid batteries are car starter batteries. That's I think by a ratio of maybe 6 to 1, the amount of lead that's consumed in the car starting business versus industrial batteries. And that business, a big market like the U.S. or Western Europe, that bumps along just a couple percent, very low-single-digit type of growth rates. So, it's not really a demand story that's driving it. It's a lot of speculation. It's a lot of money that goes in and out of commodities. And then, I think on the supply side, there has been some discussion and noise about the number of mines that are mining led at the time.…

Okay.

Our next question comes from Brian Drab with William Blair. Brian P. Drab - William Blair & Co. LLC: Hey, good morning. Thanks for taking my questions. Dave, you just mentioned the WITS data, can you run through Americas, Europe and EMEA, just give us those numbers?

I'll let Mike read it. The font – the print is too small for me. So, I'll let Mike do it.

All right, Brian, I usually go through the trailing three-month activity, but before I do that, I will stop to make a point that the month of December on a global basis was, I think, 83,172 units is an all-time record. Sort of going back to the trailing three-month average versus the prior year, globally, new truck orders are up 22% and now the Americas at 24% are kind of leading the way and Europe is at 15%. And Asia, actually Asia remains strong at 36%, but it seems like a long time Europe has had higher rates of growth than the Americas. So, that is encouraging. Now, as you know, the new trucks are ordered and often our batteries get ordered 6 or 12 weeks later because of the lengthy lead times for these trucks to be delivered and – compared to our lead time. So, this is encouraging for us and would bode well for upcoming order intake and future sales. Brian P. Drab - William Blair & Co. LLC: Okay. Great. And give the EMEA too, Mike.

Right, so just going through, this is the three-month average. Brian P. Drab - William Blair & Co. LLC: Yeah.

The Americas is 24% growth year-over-year. Total Europe 15% – excuse me, total Europe with Africa 14% and Asia is 36% for a total worldwide of 22%. Brian P. Drab - William Blair & Co. LLC: Yeah. Got it. Thanks. I just didn't know if you'd differentiate between Europe and EMEA just to fill up my spreadsheet. Thanks. And then, I guess you mentioned the big order with Bluebird in Europe and looking at the volume results across the regions, Americas and Asia were really outstanding at 3% – sorry, 3% in Europe, 9% in Americas, 17% in Asia. Can you talk a little bit about what's driving that strength in the Americas and Asia and I guess this WITS data explains a lot of it? And then, the follow-on question is just could we expect these types of growth rates into the fourth quarter or could you actually be down sequentially in either segment motive or reserve in the fourth quarter given this strong growth that we're seeing right now?

I'd say based on the order book, the order activity, we're pretty optimistic about the volumes. The telco, the Bluebirds, they come and they go and I can't tell you when they're going to hit. That's just sort of the nature of the beast, but in general, I would say our telecom activity levels are markedly up, especially in the U.S. and the enclosure business is really seeing some great activity relative to quarters past. So, yeah, it's never going to be smooth one quarter on, one quarter off, but in general I would say the order activity, the order book, the business looks pretty solid right now. Brian P. Drab - William Blair & Co. LLC: Okay. So, what about the typical seasonality from third to fourth quarter? You're always up in the fourth quarter. Is there any reason to expect something different from that?

Well, I think you'll see our fourth quarter probably have historical traditional rates of growth for us organically in the fourth quarter, but they won't be as strong as the 8% for the third quarter because of the fact that it had a stronger comparable prior year to start with for a base compared to the third quarter of this year.

And shipping days factors in sometimes Q3 versus Q4. And just to reiterate, I would say in general outside of this one Bluebird, I would say that the reserve power in EMEA continues to be fairly flat. It's not been our most exciting region and we still have not seen a return to investment in the Middle East that we had enjoyed a few years ago. So, the oil-driven economies really – there is a lot of political unrest in those regions. We – just we haven't seen the orders out of Egypt or Tunisia, Morocco, places like that, that we were enjoying a few years ago, but that would certainly help. And then, the other thing to remember about EMEA, I have to remind everybody, is that big accounts like Ericsson, Nokia, Alcatel, they sell all over the world and those guys, they've been fighting Huawei and ZTE pretty hard. So, as they lose share to Huawei and ZTE, we feel that hardest in our European P&L. So, that's been part of the frustration we've had. And we just have to do a better job with the Chinese OEMs in the telco sector and that's a keen area of focus for us. But – so I just don't want to – we see a lot of great activity in certain parts, but Europe reserve isn't one of them. Brian P. Drab - William Blair & Co. LLC: Got it. Dave, you mentioned the days issue, it has been an issue in the past. So, are there any days issues to think about specifically for the fourth quarter?

I'm just trying to give Mike a chance to say Gregorian calendar, because he was saying that...

I love to say that. Actually, yeah, this fourth quarter has for us 62 shipping days versus last year's 63. And in the third quarter, you had the inverse. We had 1 more day in this year's third quarter than we did a year ago. So, the kind of inverse is there, so that that's a net 2-day difference in terms of year-over-year comparison.

Okay. Brian P. Drab - William Blair & Co. LLC: Got it. Thank you. And then, just the last question maybe, Dave, you have this initiative in the truck market that I think is one of the – seems to be one of the most promising here over the next few years. At the time of the Analyst Day, we had two – you just announced your second major win, can you just give an update there, it seems like still one of the great opportunities in front of you?

Yeah, it is, it's really exciting, I mean it's not – and beyond the truck business now, what we're finding is that there is a niche market within the automotive starting, lighting and ignition now. I'm not saying that we're going broad and deep in automotive. I don't want to deliver that message, but what we do see a niche market in that automotive sector that's also enjoying and seeing the value of our Thin Plate Pure Lead technology. And so, just as much as the truck business has been a nice growth engine for us, we're seeing a lot of interest in the premium automotive sector as well. I think one of the issues there we have to manage is supply and constraints in the factory. That's one of the things we're trying to manage and we've noted that. We really aren't in a position to take a huge share there in any way until we do something on the supply side and that's one of the key areas of focus for us later this year. It's the new high speed line operates in an entirely different pace versus anything we've ever done before. So, automation and getting that up and running and secure is one of the key initiatives that's going to help us drive deeper share. And again, just a little bite of that monster market is a meal for us. Brian P. Drab - William Blair & Co. LLC: Right.

So, that's real exciting for us and going well. Brian P. Drab - William Blair & Co. LLC: Great. Thanks for that update and thanks for taking my questions.

Thank you.

I am not showing any further questions at this time. I'd like to turn the call back over to David Shaffer for closing remarks.

All right. Well, I want to thank everyone for taking time to attend our call and if you get a chance to take a look at the Eagles' parade there, on the TV at 11:00. Take care. Bye-bye.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.