Our second quarter results reflected a combination of record market demand across all of our segments, with Q2 '22 orders 36% higher than the same period pre-COVID fiscal year '20, but accompanied by continued inflation and supply chain challenges.
We reported second quarter adjusted earnings of $1.01 per diluted share, which was a slight increase over the second quarter of last year.
Strong demand led to our quarter end backlog reaching an all-time record exceeding $1 billion, which is more than double normalized levels.
The trend we saw in Q1 has continued with nearly $20 million of sequential cost increases in freight, wages, lead, non-lead commodities and semiconductors.
Let's start with our largest segment, Energy Systems, which continues to see robust demand with Q2 '22 order rates increasing over 50% compared to pre-COVID Q2 '20.
Freight costs for Energy Systems alone rose sequentially an additional $6 million in the quarter, doubling the prior year level.
Revenue decreased $15 million from Q1 due to the traditional European summer holidays.
Margins improved as a result of price and mix improvements as well as ongoing opex efficiencies with Motive Power enjoying nearly 20% higher operating earnings than the same pre-COVID period in F '20.
Our Thin Plate Pure Lead production capacity continues to grow and we will exit the fiscal year at our planned run rate of $1.2 billion per year.
We have fully launched 11 lithium variants for Motive Power Group and continue to expand our product portfolio.
Our second quarter net sales increased 12% over the prior year to $791 million due to an 11% increase from volume and 1% from price, net of mix.
On a line of business basis, our second quarter net sales in Energy Systems were up 9% to $370 million, Specialty was down 3% to $101 million and Motive Power revenues were up 22% to $321 million.
Motive Power's improvement was mostly from 20% growth in organic volume and 2% improvement from pricing.
The prior year Motive Power second quarter revenues were significantly impacted by the pandemic, resulting in a 21% decrease in organic volume.
Energy Systems had a 9% increase from volume as well as 1% improvement from FX, but had a 1% decrease in price after including negative mix.
Specialty had a 5% pricing improvement that was offset by an 8% erosion in volume due largely to delayed shipments.
On a geographical basis, net sales for the Americas were up 14% year-over-year to $550 million, with 14% more volume.
EMEA was up 5% to $180 million from a 3% increase in volume and 2% in pricing.
Asia was up 10% at $661 million on 7% more volume and 3% currency improvements.
On a sequential basis, moving to Slide 11, our second quarter net sales were down 3% from the first quarter, largely due to the normal vacation holidays in Europe and supply chain shortages.
On a line of business basis, Specialty decreased 6% with supply constraints pushing out order fulfillments into Q3.
Motive Power was down 5% due to the European holiday season previously mentioned and EMEA was flat -- excuse me, Energy Systems was flat.
On a geographical basis, Americas was also relatively flat and Asia revenues were up 8%, while EMEA was down 11% mostly from lower volumes.
On a year-over-year basis, adjusted consolidated operating earnings in the second quarter decreased approximately $5 million to $61 million with the operating margin down 160 basis points.
On a sequential basis, our second quarter operating earnings dollars eroded $14 million from $75 million, while the OE margin decreased 150 basis points to 7.8%, primarily due to the persistent supply chain headwinds and inflation in Energy Systems, which Dave has addressed.
Operating expenses, when excluding highlighted items, were at 14% of sales for the second quarter compared to 15.7% in the prior year and 16.1% from two years ago as our revenue growth exceeded our spending growth and we have maintained a more efficient operating leverage.
Excluded from operating expenses recorded on a GAAP basis in Q2 are pre-tax charges of approximately $12 million related to $6 million in Alpha and NorthStar amortizations and $4 million in restructuring charges from the previously announced closure of our flooded Motive Power manufacturing site in Hagen, Germany.
Excluding those charges, our Motive Power business generated operating earnings of $41 million or 12.8%, which was 370 basis points higher than the 9.2% in the second quarter of last year due to strong demand and easing of pandemic-related restrictions, favorable mix from maintenance-free growth and ongoing opex constraint or restraint.
Operating earnings dollars for Motive Power increased over $17 million from the prior year and $6 million from two years ago.
On a sequential basis, Motive Power's second quarter OE decreased 220 basis points from the 15.1% margin posted in the first quarter due to the vacation season volume decline noted earlier, along with higher lead and other input costs.
Energy Systems operating earnings percentage of 2.3% was down from last year's 8.8% and the prior quarter's 3.5%.
OE dollars of $9 million were $5 million below last quarter and $22 million below prior year.
Specialty operating earnings percentage of 11.8% was up from last quarter's 10.6% and last year's 11.4%.
As previously reflected on Slide 12, our second quarter adjusted consolidated operating earnings of $61 million was a decrease of $5 million or 7% from the prior year.
Our adjusted consolidated net earnings of $44 million was in line with prior year but $11 million lower than the prior quarter.
Our adjusted effective income tax rate of 16% for the second quarter was slightly below the prior year's rate of 17% and lower than the prior quarter's rate of 18%.
Second quarter earnings per share rose slightly year-over-year to $1.01, although it was slightly below the bottom of our guidance range.
We expect our weighted average shares in the third fiscal quarter of 2022 to be approximately 42.5 million versus the 43.3 million in the second quarter.
Our Board of Directors also recently renewed the $100 million share buyback authorization we had in place over the last two years that was completed with these recent October purchases.
Slides 14 and 15 reflect the year-to-date results and are provided for your reference, but I don't intend to cover these at this time.
We have $408 million of cash on hand and our credit agreement leverage ratio is now at 2.0 times, which allows nearly $550 million in additional borrowing capacity.
We expect our leverage ratio to remain between 2.0 and 2.5 times in fiscal 2022.
Our year-to-date cash flow from operations was a negative $66 million.
Included in that amount was $28 million in spending on the previously announced restructuring of our Hagen, Germany Motive Power Plant, which is in the second quarters -- which in the second quarter started delivering on cost savings that should exceed $20 million annually.
The negative operating cash flow was also due to our inventory expanding $123 million to meet rising revenues as well as from higher input costs and transit times, along with the other inefficiencies induced by supply chain disruptions.
Capital expenditures of $35 million were in line with our prior guidance.
Our capex expectation for fiscal 2022 remains approximately $100 million and reflects major investment programs in lithium battery development and our continued expansion of our TPPL capacity.
We anticipate our gross profit rate to remain near 22% in Q3 of fiscal 2022.
As a result, our guidance range of $0.96 to $1.06 in our third fiscal quarter of 2022 reflects the impact of these supply chain challenges, which we continue to see as temporary.
After more than 25 years with the company and 12 years as Chief Financial Officer, Mike has announced his intention to retire at the end of this fiscal year.

Summary:
We reported second quarter adjusted earnings of $1.01 per diluted share, which was a slight increase over the second quarter of last year.
Second quarter earnings per share rose slightly year-over-year to $1.01, although it was slightly below the bottom of our guidance range.
As a result, our guidance range of $0.96 to $1.06 in our third fiscal quarter of 2022 reflects the impact of these supply chain challenges, which we continue to see as temporary.