Debt

Summary of Long-Term Debt

The following summarizes the Company’s long-term debt:



	March 31,
	2014		2013
3.375% Convertible Notes, net of discount, due 2038	$	162,887	$	155,273
2011 Credit Facility due 2018	125,000		—
	287,887		155,273
Less current portion	—		—
Total long-term debt	$	287,887	$	155,273

2011 Senior Secured Revolving Credit Facility

The Company is party to a $350,000 senior secured revolving credit facility (“2011 Credit Facility”) which matures in September 2018. This facility includes an early termination provision under which the Company is required to meet a liquidity test in February 2015 related to its capacity to meet certain potential obligations related to the Convertible Notes in June 2015. Borrowings under the 2011 Credit Facility bear interest at a floating rate based, at the Company’s option, upon (i) LIBOR plus an applicable percentage (currently 1.25%), (ii) the greater of the Federal Funds rate plus 0.50% or the prime rate, or one-month LIBOR plus 1.0%, plus an applicable percentage (currently 0.25%). The interest rate at the end of March 31, 2014 was 1.39%. There are no prepayment penalties on loans under the 2011 Credit Facility. The Company had $125,000 revolver borrowings outstanding under its 2011 Credit Facility as of March 31, 2014. These borrowings were primarily utilized to fund new acquisitions. The Company had no borrowings outstanding as of March 31, 2013.

Obligations under the 2011 Credit Facility are secured by substantially all of the Company’s existing and future acquired assets, including substantially all of the capital stock of the Company’s United States subsidiaries that are guarantors under the credit facility, and 65% of the capital stock of certain of the Company’s foreign subsidiaries that are owned by the Company’s United States companies.

Amendment to 2011 Credit Facility

In August 2013 and December 2013, the Company amended its 2011 Credit Facility. The key amendments to the agreement were extending the maturity until September 2018, and increasing flexibility for entering into acquisitions and joint ventures, divestitures, stock buybacks and cash dividend payments. The Company incurred $853 in deferred financing fees in connection with the amendments.

Senior Unsecured 3.375% Convertible Notes

On May 28, 2008, the Company completed a registered offering of $172,500 aggregate principal amount of senior unsecured 3.375% Convertible Notes Due 2038 (“Convertible Notes”) (see prospectus and supplemental indenture dated May 28, 2008). The Company received net proceeds of $168,200 after the deduction of commissions and offering expenses. The Company used all of the net proceeds to repay a portion of its then existing senior secured credit facility.

The Convertible Notes are general senior unsecured obligations and rank equally with the Company’s existing and future senior unsecured obligations and are junior to any of the Company’s future secured obligations to the extent of the value of the collateral securing such obligations. The Convertible Notes are not guaranteed, and are structurally subordinate in right of payment to, all of the (i) existing and future indebtedness and other liabilities of the Company’s subsidiaries and (ii) preferred stock of the Company’s subsidiaries to the extent of their respective liquidation preferences.

The Convertible Notes require the semi annual payment of interest in arrears on June 1 and December 1 of each year beginning December 1, 2008, at 3.375% per annum on the principal amount outstanding. The Convertible Notes will accrete principal beginning on June 1, 2015 and will bear contingent interest, if any, beginning with the six-month interest period commencing on June 1, 2015 under certain circumstances.

The Convertible Notes will mature on June 1, 2038, unless earlier converted, redeemed or repurchased. Prior to maturity, the holders may convert their Convertible Notes into shares of the Company’s common stock at any time after March 1, 2015 or prior to that date under certain circumstances. When issued, the initial conversion rate was 24.6305 shares per one thousand dollars in principal amount of Convertible Notes, which was equivalent to an initial conversion price of $40.60 per share. The conversion rate as of April 1, 2014, the date when the the holders were notified that they can submit the Convertible Notes for conversion was 24.8385 shares of the Company's common stock per one thousand dollars in principal amount of the Convertible Notes or $40.26 per share, due to the cumulative impact of cash dividends paid on the Company's common stock. Based on this conversion rate, the number of shares to be delivered upon conversion is 4,284,641. The conversion price is subject to adjustment under certain circumstances. It is the Company’s current intent to settle the principal amount of any conversions in cash, and any additional conversion consideration in cash, shares of EnerSys common stock or a combination of cash and shares.

At any time after June 6, 2015, the Company may at its option redeem the Convertible Notes, in whole or in part, for cash, at a redemption price equal to 100% of the principal amount of Convertible Notes to be redeemed, plus any accrued and unpaid interest.

Holders may convert their Convertible Notes prior to March 1, 2015, at the option of the holder, under the following circumstances: (i) during any calendar quarter (and only during such calendar quarter), if the last reported sale price (as defined in the indenture for the Convertible Notes) of a share of EnerSys common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect for the Convertible Notes on the last trading day of the immediately preceding calendar quarter, (ii) upon the occurrence of specified corporate events, or (iii) during the five business-day period after any five consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the indenture for the Convertible Notes) of the Convertible Notes for each day of the measurement period was less than 98% of the product of the “last reported sale price” (as defined in the indenture for the Convertible Notes) of a share of EnerSys common stock and the applicable conversion rate on such day.

At March 31, 2014, the closing price of the Company's common stock exceeded 130% of the conversion price for more than 20 trading days during the period of 30 consecutive trading days ending March 31, 2014, thereby satisfying one of the early conversion events and as a result, the Convertible Notes became convertible on demand, and the holders were notified that they can elect to submit the Convertible Notes for conversion, between the notification date of April 1, 2014 and June 30, 2014. The carrying value of the Convertible Notes of $162,887 continues to be reported as long-term debt on the Consolidated Balance Sheet as of March 31, 2014 as the Company intends to draw on the $350,000, 2011 Credit Facility to settle the principal amount of any such conversions in cash and issue shares or a combination of cash and shares for the remaining value of the Convertible Notes. No gain or loss was recognized when the debt became convertible. The estimated fair value of the Convertible Notes was approximately $301,875 as of March 31, 2014.

This optional conversion period is reset each quarter and the Company will reassess on the last day of each calendar quarter.

In addition, upon becoming convertible, a portion of the equity component that was recorded upon the issuance of the Convertible Notes was considered redeemable and that portion of the equity was reclassified to temporary equity in the Consolidated Balance Sheet. Such amount was determined based on the cash considerations to be paid upon conversion and the carrying amount of the debt. As the holders of the Convertible Notes will be paid in cash for the principal amount and issued shares or a combination of cash and shares for the remaining value of the Convertible Notes, the reclassification into temporary equity as of March 31, 2014 was $9,613 based on the Convertible Notes principal of $172,500 and the carrying value of $162,887. If a conversion event takes place in the following quarter, this temporary equity balance will be recalculated based on the difference between the Convertible Notes principal and the debt carrying value. If the Convertible Notes are settled during the first quarter of fiscal 2015, an amount equal to the fair value of the liability component immediately prior to the settlement will be deducted from the fair value of the total settlement consideration transferred and allocated to the liability component. Any difference between the amount allocated to the liability and the net carrying amount of the Convertible Notes (including any unamortized debt issue costs and discount) will be recognized in earnings as a gain or loss on debt extinguishment. Any remaining consideration is allocated to the reacquisition of the equity component and will be recognized as a reduction of EnerSys stockholders’ equity.

The following represents the principal amount of the liability component, the unamortized discount, and the net carrying amount of our Convertible Notes as of March 31, 2014 and 2013, respectively:



	March 31, 2014			March 31, 2013
Principal	$	172,500		$	172,500
Unamortized discount	(9,613		)	(17,227		)
Net carrying amount	$	162,887		$	155,273

As of March 31, 2014, the remaining discount will be amortized over a period of 14 months.

The effective interest rate on the liability component of the Convertible Notes was 8.50%. The amount of interest cost recognized for the amortization of the discount on the liability component of the Convertible Notes was $7,614, $7,001 and $6,435, respectively, for the fiscal years ended March 31, 2014, 2013 and 2012.

The Company paid $8,490, $10,056 and $8,933, net of interest received, for interest during the fiscal years ended March 31, 2014, 2013 and 2012, respectively.

The Company’s financing agreements contain various covenants, which, absent prepayment in full of the indebtedness and other obligations, or the receipt of waivers, would limit the Company’s ability to conduct certain specified business transactions including incurring debt, mergers, consolidations or similar transactions, buying or selling assets out of the ordinary course of business, engaging in sale and leaseback transactions, paying dividends and certain other actions. The Company is in compliance with all such covenants.

Short-Term Debt

As of March 31, 2014 and 2013, the Company had $33,814 and $22,702, respectively, of short-term borrowings from banks. The weighted-average interest rates on these borrowings were approximately 7% and 9% for fiscal years ended March 31, 2014 and 2013, respectively.

Letters of Credit

As of March 31, 2014 and 2013, the Company had $1,653 and $11,854, respectively, of standby letters of credit outstanding under the 2011 Credit Facility and other credit arrangements.

Deferred Financing Fees

Deferred financing fees, net of accumulated amortization, totaled $2,899 and $3,355 as of March 31, 2014 and 2013, respectively. Amortization expense, relating to deferred financing fees, included in interest expense was $1,141, $1,279, and $1,278 for the fiscal years ended March 31, 2014, 2013 and 2012, respectively.

Available Lines of Credit

As of March 31, 2014 and March 31, 2013, the Company had available and undrawn, under all its lines of credit, $360,275 and $469,123, respectively, including $136,525 and $120,373, respectively, of uncommitted lines of credit as of March 31, 2014 and March 31, 2013.