John Craig – Chairman, President, Chief Executive Officer Michael Schmidtlein – Chief Financial Officer

William Bremer – Maxim Group Tim Mulrooney – William Blair John Franzreb – Sidoti & Co. (Unknown Analyst) – Stifel Nicolaus Michael Gallo – CL King

Thank you very much. Good morning and thank you for joining us.

Last night we posted on our website slides that we’re going to reference during the call this morning, so if you didn’t get a chance to see this information, you may want to go to our website at www.enersys.com and view the slides. Before we get into details of our fourth quarter and full year 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 date 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 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in our annual report on Form 10-K for the fiscal year ended March 31, 2014 which was filed with the U.S. Securities and Exchange Commission.

In addition, we will also be presenting certain non-GAAP financial measures. For an explanation of the differences between the comparable GAAP financial information and the non-GAAP information, please see our company’s Form 8-K which includes our press release dated May 28, 2014 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 are very pleased with the accomplishments and financial results for our fourth quarter and for the full fiscal year of 2014.

You will notice on Slide 3 that we reported record full-year adjusted results for gross profit margins of 25.4%, operating profit margins up 11.6%, and earnings per share of $3.96. Our sales for the year were up 9% at nearly $2.5 billion and year-over-year our earnings per share were up $0.41 or 12%.

On Slide 4, we outline that for the last four consecutive years, EnerSys has delivered record earnings to our shareholders. Earnings per share have almost tripled over this four-year period, and we don’t plan to stop there – we’re going to keep going.

Please turn to Slide 5. Fiscal year 2014 was a transformational year for EnerSys.

In addition to our record results, we completed three significant acquisitions which will contribute approximately $200 million in annual revenue in fiscal year 2015. Purcell’s thermal management cabinet enclosure business is a good example of an acquisition we completed in a complementary market.

Quallion expands our space battery offering and adds medical as a new market for us, and the UTS acquisition expands our presence in the fast-growing Southeastern Asia region. Our EMEA region exceeded our minimum operating earnings target of 10%.

This was the first time we’ve ever accomplished this. This was a goal that we’ve had for many years and we finally hit; in fact, we beat it.

We came in at 12.4% in Europe for our fourth quarter. Over a year ago, we had a choice to make – either cut services in Europe or convince that market that EnerSys provides the best value.

We made a conscious effort to focus on best value and customer service and raise rather than cut prices. In the end, we provide best value to our customers which means our prices may be higher in the front end but in the long term we save our customers money.

We continue to increase returns to shareholders by not only initiating a dividend in June of 2013 but recently announcing that we will be raising our quarterly dividend by 40% to $0.175 per share. In addition, we continued our stock repurchase program by buying back approximately $70 million in fiscal 2014 at good values, and our board of directors has authorized a new share repurchase program of $70 million, bringing our total authorization for fiscal year 2015 to over $90 million.

I now want to focus on our current business activities and the first quarter guidance. Both our incoming orders and order backlog remain strong.

In motive power, the three-month electric fork truck orders from February through April are up double digits in all regions compared to prior year. In reserve power, we’re finally starting to see sizeable orders for 4G in western Europe.

Our lead costs in the first quarter will rise sequentially by a few cents per pound. These higher costs will only be partially offset by the expected price increases.

Based on this information, I’m pleased to confirm our previously announced first quarter guidance of $1.02 to $1.06 earnings per share. Finally as stated in our May 14 press release, we’re shocked and extremely disappointed by the Altergy arbitration award and are reviewing our legal options to challenge this decision.

However, I want to reassure you that this does not change any of our short term or long term plans. We’re still actively pursuing acquisitions, investing in new products and technologies, expanding our manufacturing footprint, increasing our best-in-class customer service, increasing returns to shareholders by increasing our dividend payout and buying back EnerSys stock at attractive prices.

In closing, we’ve had a great fiscal 2014 and we’re looking to extend our annual record earnings for a fifth year. The recent acquisitions and increased profitability keeps us on track to achieve our $4 billion sales target and $400 million minimum operating earnings targets by fiscal year ’18.

We thank you for your continued support of EnerSys, and now let’s turn it back to Mike Schmidtlein to provide further information on results and guidance. Mike?

Thanks John. For those of you following along on our webcast, I am starting with Slide 6.

Our fourth quarter net sales increased 16% over the prior year to $665 million from a 9% increase in volume, 6% from acquisitions, and 1% in pricing. On a regional basis, our fourth quarter net sales in the Americas were up 18% to $337 million while Europe’s increased 8% to $261 million and Asia increased 52% in the fourth quarter to $67 million.

In the Americas, 9% organic volume and 10% from acquisitions were the primary reasons for the increase. Europe had 4% increases in volume and currency translation.

In Asia, volume increased 44% along with the recent acquisition contributing 12% and pricing adding 1% net of an unfavorable currency impact of 5%. On a product line basis, net sales from motive power were up 13% to $332 million while reserve power increased 19% to $333 million.

Motive power enjoyed 11% volume gain and 1% gains from acquisitions and pricing, while reserve power attained a 7% volume increase, 11% from acquisitions and 2% from pricing net of 1% negative currency translation. Please now refer to Slide 7.

On a sequential quarterly basis, fourth quarter net sales were up 3% in the third quarter due primarily to 2% higher organic volume. The Americas region was up 3% while Europe and Asia increased 4% each.

On a product line basis, motive power was up 6% driven primarily by the Americas, and reserve power was up 1%. 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 includes our press release dated May 28, 2014 for details concerning these highlighted items. Please now turn to Slide 8.

On a year-over-year quarterly basis, adjusted consolidated operating earnings increased approximately $25 million with the operating margin up 220 basis points. On a sequential basis, our fourth quarter operating earnings dollars were also up $6 million and margins improved 50 basis points on higher volume and better sales mix.

From a historical perspective, operating earnings reached a record 12.5% of sales. The increase from the prior year reflects primarily greater volume and pricing.

Europe was a primary contributor for the improvements in both year-over-year and sequentially. Operating expenses when excluding restructuring, legal settlements and due diligence costs, were at 14.2% for the fourth quarter compared to 14.0% in the prior year.

We would expect our first quarter fiscal 2015 operating expenses to be comparable to those rates. Our Americas business segment achieved an operating earnings percentage of 13.7% versus 13.5% in the fourth quarter of last year primarily from the impact of higher organic volume.

On a sequential basis, Americas fourth quarter decreased 130 basis points from the 15.0% margin posted in the third quarter due to higher lead and other manufacturing costs. Europe’s operating earnings percentage of 12.4% was an all-time record, above last year’s fourth quarter of 7.4% and better than last quarter’s rate of 8.5% primarily from higher volume, better mix, and the impact of prior restructuring efforts.

The operating earnings percentage in our Asia business improved in the fourth quarter of this year to 7.6% from 5.4% in the fourth quarter of last year but declined from 11.1% in the prior quarter. Asia’s operating earnings were $5.1 million for the fourth quarter, reflecting 44% higher organic volume in Q4 versus prior year from the improvements in Chinese markets.

Asia, due to its smaller size, remains our most sensitive region to operating inputs. Please move to Slide 9.

As previously noted on Slide 8, our fourth quarter adjusted consolidated operating earnings of $83 million was an increase of 42% in comparison to prior year with the operating margin increasing 220 basis points to 12.2%. Excluded from our adjusted net earnings for the fourth quarter was approximately $47 million of highlighted charges, the largest being the Altergy settlement of $36 million net of tax.

Please see our press release issued yesterday for details of these items. Our adjusted consolidated net earnings of $59.5 million increased 53% from the prior year to 8.9% of sales for a 210 basis point improvement, with the book tax rate decreasing to 22% on improved European contributions, which are taxed at lower rates.

EPS increased 48% to $1.18 on higher net earnings despite higher shares outstanding. The higher average diluted shares resulted primarily from our convertible debt, which becomes dilutive when our shares rise above $40.60.

This convertible debt dilution added approximately 1.8 million shares to our EPS calculation and decreased EPS by approximately $0.05 in our fourth quarter. To partially offset this convertible debt dilution, we have acquired approximately 1.2 million shares in fiscal 2014 and we will continue to acquire shares in 2015 and have over $90 million authorized.

We expect our first fiscal quarter of 2015 to have approximately 50.0 million weighted average shares outstanding, which represents a slight decline from the previous quarter. Our adjusted effective income tax rate of 22% for the fourth quarter was lower than the prior quarter due to the strength of our European results.

We believe our tax rate for the first quarter of fiscal 2015 will be between 24 and 26% and for the full year of 2015 we expect a 25% rate on our adjusted earnings. Our as-reported rate for the full year was positively impacted by our third quarter release of the valuation reserves on a deferred tax asset created by German net operating losses accumulated in the past, and the Altergy arbitration ruling which we believe is tax deductible in the United States, our highest rate jurisdiction.

Please now turn to Slides 10 and 11. As usual, we have provided information on a full-year basis similar to that of our fourth quarter on prior pages.

These two pages are for your reference and I don’t intend to cover the full-year results. Please now turn to Slide 12.

Now some brief comments about our financial position and cash flow results. Our balance sheet remains very strong.

We now have $240 million on hand in cash and short term investments as of March 31, 2014, with nearly $360 million undrawn from our credit lines around the world. We generated nearly $194 million in cash from operations in fiscal 2014, even after $77 million of additional primary working capital from our higher volume.

Our leverage ratio remains at 0.8 times despite spending $94 million in share buybacks and dividends through the fourth quarter, and $182 million spent on acquisitions. We do not anticipate any difficulties in funding the recent arbitration ruling, if required to do so.

Capital expenditures were $62 million in fiscal 2014 compared to $55 million in fiscal 2013. Our increase in spending is attributable to our new plant in Gaoyou, China.

We expect to generate adjusted diluted net earnings per share of between $1.02 to $1.06 in our first quarter of fiscal 2015, which excludes an expected net charge of $0.07 per share from our restructuring programs and acquisition activities. We anticipate our gross profit rate in the first fiscal quarter to be between 25 and 26%.

In conclusion, we believe we remain well positioned to take advantage of future opportunities. Now, let me turn the call back to John.

Thank you, Mike. Let’s open the line up for questions, Operator.

Good morning gentlemen. Can you give us an update on Purcell, how the integration has gone, the expansion plans?

That’s my first question. Second, thin plate pure lead, where does this stand now?

Are we near record, and have you been deploying it in more geographic regions? And then third, you sort of gave us some color and some granularity on the margins for the first quarter.

Should we expect a similar pattern as we just had in terms of a heavier back-half weighting in consolidated margins?

Yes, let’s take Purcell to start with. From the day that we acquired Purcell – and Bill, as you know, we have what’s called 100-day plan, and that’s what we do right out of the box within our company.

Before we even closed on the company, we had the gentleman that runs Purcell at one of our management meetings and became very familiar with the company. A plan was put in place that we were going to be training, I’m going to call them the battery-side people, the sales people how to sell cabinets.

To date, we have north of $10 million in orders, in order report activity coming from the battery guys. So far, I’m pleased with what we’re seeing.

Now you have to keep in mind that this particular business is one that’s kind of lumpy – it’s up and it’s down. To start off with, it’s a little slower.

We’re in a little bit of a slow period right now, but the quote activity is at all-time record high as it stands right now. The second point is that I’m hoping that we can pick up some of the cabinet business in Europe for Purcell with the expansion of 4G that we talked about earlier.

The second question was about—go ahead, Mike?

Yes – thin plate pure lead.

Thin plate pure lead. What we’re seeing on that is that our lead times are actually going out quite far right now.

The acceptance of that product has really taken off well. We have revamped part of our France plant to manufacture thin plate pure lead products also, so now what we have—we’ll have three plants (indiscernible) producing: Warrensburg, Missouri, Newport, Wales, and Arras, France.

But as I said, right now the demand is very, very strong for that product and it is a higher margin product. The third one, Mike, you want to take it?

Yes. So Bill, your question on the margins, you referred to a similar pattern.

As you might recall, we started the first fiscal quarter of last year below our 25% target and then achieved succeedingly higher rates until we finished at 26.8% in the fourth quarter. The fourth quarter is always going to be our strongest quarter.

It typically has more business days, which contributes to utilization in our factories, et cetera, so we would expect a decline there which is why I said 25 to 26%. Now, lead has been pretty stable, so we have that benefit, so I think you’re going to see a fairly stable pattern somewhere between 25 and 26%.

Whether the fourth quarter can exceed that or not, it’s a little too early to tell; but in general, I think your premise is correct – the pattern should be fairly close to last year with, I’ll say, a mild increase potentially through the year.

Great, gentlemen. Thank you.

Good morning gentlemen. So first question – you guys were up 34% organically in Asia in the third quarter and, I think, 44% in the fourth quarter.

Can you just talk about some of the major factors driving this growth? Is it mostly telecom?

It’s both telecom and motive power. Australia went through a little bit a slower period.

It has started to pick back up again for the motive power side. The reserve power side has been the 4G deployment we talked about in previous phone calls where you had the three telecom companies in China that are expanding and converting from 3G to 4G.

Okay, thank you. Sticking on 4G, just one more question – can you talk a little bit more about the 4G orders that you referenced earlier in the call for Europe?

Did this have a material impact on the fourth quarter, and do you expect this to carry into fiscal 2015? Thank you.

What we anticipate—and you ought to go back a little bit of time because if you’ve listened to our calls over the years or we’ve met in person, we’ve always said that there will come a day when Europe will start to deploy 4G. There’s a lot of reasons why it took so long.

A lot of it was the EU Commission, a lot of it was because they put fixed prices on roaming charges which reduced the CAPEX, licenses for 3G, some of these were as high as $50 billion – they were that expensive, and the telecoms just didn’t have the resources to do this. Now, these licenses now for 4G are about 5% of what the 3G licenses were – they’re significantly less to buy those licenses.

The licenses, from my understanding, most of them are already sold, they’re agreed to. The major telecoms in Europe now are really converting to 4G.

As I said in the past, once one starts, the rest must follow because they won’t be competitive, and we’re starting to see that. Bottom line in looking it over, I believe there is a potential we could be looking at a minimum of 10% growth in these type of batteries for 4G over the next two-year period, so I expect to see some real upside with this.

Yeah, I guess let’s stick on Europe for a second here. The changes that you’ve made to the operating profile, does that mean that maybe the $250 million run rate that we’re still doing a 11, 12% kind of op margin, or is it more variable than we realize?

I’m not sure I really understand your question.

I think, John, what he’s saying is if we could get 12.4 in the fourth quarter and are we going to be still looking at typical quarters at $250 million of revenue with 10 to 12%, so I think we expect that we will be at or above 10% this year in each quarter, but one of the reasons we never give guidance on the top line is because of the currency impact, so I’d want to put that caveat in there. But we feel very good about the transformation that’s gone on with Europe and we think that those are sustainable achievements.

Yeah, a little bit more color to this. There are—the reason when you look at going up from 8.5% roughly to 12.4% third quarter to fourth quarter, there are a number of factors that went into it.

First, we’re starting to see some of the cost savings come through with the restructuring programs that we put in place. The restructuring programs are approximately 90% done – they’re almost there, so we’re going to start to really see some cost benefits that’s going to come through with this thing.

The second thing, price management, we’ve talked about in the past, and as I talked about in my opening comments that we are focused on being the best value to customers, saving customers the most, and saving them money in the long run. Our initial prices are higher, so the pricing has helped us.

Third is mix of product, as I mentioned earlier about thin plate pure lead by having longer lead times on it, and fourth is mix of customers. There are customers that said that they don’t want necessarily the best value; they want to buy the cheapest priced battery in the front end, and that’s not our business model.

So some of the customer mix has changed. Net of fact, when all those variables are put in place, it allowed us to get over 10% operating earnings, and as Mike said, right now we think we’ll be over 10% for the year in each quarter.

The only thing that concerns me is the second quarter, where the second quarter is a summer shut down, but that’s what minimum 10% means. Even during those tough conditions, we’re hoping that we can at least hit the 10% minimum.

Perfect, perfect. And in sticking to the margin question, in Asia it looks like sequentially your margin was down on higher sales.

I think maybe Mike mentioned it’s more sensitive to input costs. Can you just talk a little bit about that?

Sure. When you get behind the Asian market, what you really have to look at or the way we view it is it’s a developing market for us.

I mean, in the Asia business we’re 7 or 8% of our total revenue – it’s a small number, but it’s one that I want to see major, major growth there. We’re not big enough, and we’re making investments that are going to hurt us in the short run but they’re going to help us in the long term.

As John, you’ve known for all the years you’ve followed us, we’re not short-term thinkers, we’re long-term thinkers. I’ll give you a good example – in India, it’s a $1 billion market.

We do about $25 million over there, okay, and that’s it. One of the things that we did in this last quarter, we literally shut the plant down for a period of time and put new equipment in it and new product designs.

Our goal is not to go from $25 million to $30 million; our goal is to be number one or number two in that billion-dollar market, so we’re making the investments right now and it’s going to cost us in the short run. Same thing with China, where you’ve got the Chaolan (ph) plant that’s now running at about 50% capacity utilization, state-of-the-art, world-class factory, and I’m very pleased and very proud of the people that put that in place; but we’re also building a new factory in China also for the motive power group, so we’re having a lot of expenses that’s taking place right now that are investments for the future.

Short run, it’s going to hurt the earnings, it’s going to take it down below 10%. I’m okay with that because in the long run it’s a good payback.

And again, I’ll say when we were a $200 million company going to a $2.5 billion company, that was our viewpoint all along – you’ve got to make investments now for the future because the future will be here some day and you better in better shape then than you are now.

Perfect, and one last question, if I might. Long term, can you give us an update on progress in OptiGrid?

Yeah, in OptiGrid so far, we have about $5 million in hard orders that we’re working to fill, and right now we have over $25 million in quote activity out there. So we knew it was going to be slow, but as I’ve said many times in the past, it was a very low investment for us to do this and we’re starting to see orders come in on it.

Okay guys, thank you for taking my questions. Good quarter.

Yes, hi. Thanks for taking my questions.

My first question was related to pricing in Asia. It looks like you actually get a year-over-year pricing benefit there, or should I read into that that the pricing on the 4G side is actually not as tough as some folks have expected it to be.

No, I think in the 4G, it is—with the major telecoms, it is tough. The pricing is tough, and really why you’re seeing the increase is because of other areas.

It’s not necessarily telecom, it’s in other areas. Now that being said, our pricing is higher than some of our competitors.

I suspect that we will see—it’s possible that our volume could go down because of our price, but even at our pricing right now, the margins aren’t as strong there as they are in other areas.

Got it, and you also referred to some initial kind of investments here in China and India in terms of developing growth in these markets. Is that a two quarter phenomenon here, or how should we think about this kind of incremental margin impact here?

I think what you’re asking is how long will we see the drag because of India and because of the drag of building new factories. I think you’re probably going to be looking at at least a year on that, and maybe even a little bit longer on that.

But the thing of it is, it’s like every other area of the world that we’ve gone into, whether it’s been South America or Africa or all across Europe – on the front end, you’re going to lose some money on some of these things or not make as much money, I should say, as you’d like to see. We’re not going to be north of10% on these things.

They’re longer term investments, and I would guess right now you’re probably looking to a year, maybe even two years.

Got it, and in terms of you said around $200 million of acquisition contributions on the revenue side this year, how much of that do you expect out of Southeast Asia?

I don’t think we break that number down.

Well, I think we had said on the UTS acquisition, you can probably expect that to—did we put that in the public?

It’s okay if we do. It was roughly $40 million.

Got it, and then the last question from my side is what are your expectations in terms of CAPEX spending next year, and actually part to it is you indicated that there is roughly $20 million of European cost savings coming through this year. Is that factored into that 10% volume assumption for the region, or is that on top of that?

No, that’s factored into the 10%. The cost savings that we are seeing coming through, the $20 million – you’ve obviously read the K, that’s in there – and that is coming through based on the projects, we call it Project Lamotte (ph), which is the project that we basically mothballed the Bulgaria factory and put that product into other factories, and that has a very good payback on that program and that’s part of the reason that we feel pretty strongly that we should be at 10% minimum for the year in Europe – part of it is because of that project.

Now the other cost savings just coming through, just for clarify, we’ve had a lot of restructuring in Europe over the years. What we did two years ago and what we did a year ago, those cost saving programs are fully implemented and we’re seeing the benefit from those.

So this project will not – the $20 million you’re looking at, that’s upside to what we’ve been running.

And (indiscernible), on your question on CAPEX, we would expect a slight increase this year from, say, mid-60 to mid-$70 million range as we complete the facility in Gaoyou, China.

Yeah, so the facility in Gaoyou, China is also that we’re going to—we’ve got a long-term IT plan, and that’s to convert everything to SAP. In Europe, we’ve accomplished that.

It’s been seamless – no disruption whatsoever. And we’re going to follow the same process in the Americas and slowly put SAP in, and in Asia to have SAP.

We want to be on one system. We think we can do better customer service and run the business better by being on a global platform as opposed to having 11 or 12 different legacy systems that we currently have.

Okay, great. Thanks so much.

Hi, good morning – lost you earlier. A couple questions – John, congratulations on the good results.

Europe, the 12% operating margin you had in the quarter, it seems like you’re starting to see 4G starting to roll out there as well, so a two-part question. One, is there anything about that margin in the quarter that would suggest that you don’t think you can maintain the 12 and it might go back to 10, or it’s just a little early to make the call given you’ve been trying to get to 10 for some time?

And then two, did you have any shipments of 4G product in the quarter, or is that still all in front of us? And three, how much do you think that can ramp to in the coming year in Europe in 4G shipments?

Thanks.

The 4G in Europe, yes, we did see the benefits of that come through in the fourth quarter, and as I said earlier, we believe that potentially – and we’ve run a couple of different scenarios on this – we think it may have an impact of north of 10% for the next two years on our reserve power telecom business in western Europe, so we expect some real upside to take place in that particular area.

And Mike, your question on the Europe 12%, keep in mind our fourth quarter is always our strongest fiscal quarter typically, so I would expect a normal reduction in operating results for Europe coming into Q1, and we’ve already talked about, Q2 has got a special challenge with the fact that the month of August is pretty much a down month in Europe. So I don’t think you can expect 12%, but what we are tasking ourselves with is the 10% target in each of the quarters for this year.

All right, we’ll settle for 11. I’m just kidding.

Again, congratulations on the good results.

Thank you.

Thanks, Mike.

Yes, just two follow-ups. Last night, I saw that restructuring for ’15, approximately $7.5 million, but yet it still could be a little bit extra from the past restructuring plans of ’13 and ’14, so can you provide for us what we should be utilizing on a pre-tax basis for restructuring charges throughout ’15?

Second question is I noticed that your lead contracts increased quite significantly and you’re now sort of—I guess you’re pretty much hedged in terms of forward contracts, approximately 19, 20%. That’s up quite significantly year-over-year.

Can you just give us a little color on the reasons why?

Okay, well let’s take the restructuring charge. The restructuring charge of fiscal ’14 is approximately or was approximately $30 million.

I would anticipate that it’s going to be less than half in restructuring for fiscal ’15. Your number, 7.5, is right – there’s a little bit of carryover in there, but—and that’s saying that we don’t find another major restructuring program to take place, which is always possible as we’re evaluating the business, if something comes up.

I view those restructurings as being a solid investment. As an example, with the Bulgaria move, this had just over a one-year payback and so those are very good investments.

But right now, I think what I would assume is something less than $15 million. I think that’s a safe number.

Oh, the next part on lead – yeah, go ahead. You take it.

Yeah Bill, I agree the 90 million that we finished the year at, 90 million pounds is high but it’s not necessarily high compared to previous quarters, or it’s not as high as you might think. If I kind of walk you back, we had 64 million pounds at the end of December.

We had 94 million pounds at the end of September, we had 91 million pounds at the end of June, and a year ago March it was 56 million. So I would say 60 to 90 million is not unusual, and that’s kind of within our normal range.

Yeah, I think the other point on this thing is keep in mind that on longer term contracts—our philosophy on buying lead is this, that we want to go out three to four months. So when you look at that 19% and just spread it across the year, most of that is going to be within the next quarter.

And the philosophy behind this is you’ve got backlog and quote activity out there, so you’re locking down approximately 50% of the lead that’s required where you’ve got known orders in backlog. So that number is much higher than 19% for the next three to four months; however, there is a little bit of a different twist to this.

If we have a long-term contract that is a fixed price, to mitigate that risk we will go ahead and hedge lead for the life of that contract. So if the contract is a one-year contract and we sign that contract with acceptable margins, then we want to lock down both the currency and the lead and accept the margins the day that we sign the contract.

And that typically happens on military contracts most frequently.

Great color gentlemen. Thank you.

Well again, thank you very much for joining us this morning, and we appreciate your support, continued support of our company. As I said earlier, I hope next year at this time we’ll be talking about the fifth consecutive year of record sales and record earnings.

Everyone have a good day and thanks again.