UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~February 28,~~November 30, 2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-11288

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ACTUANT CORPORATION

(Exact name of registrant as specified in its charter)

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Wisconsin		39-0168610
(State of incorporation)		(I.R.S. Employer Id. No.)

N86 W12500 WESTBROOK CROSSING

MENOMONEE FALLS, WISCONSIN 53051

Mailing address: P. O. Box 3241, Milwaukee, Wisconsin 53201

(Address of principal executive offices)

(262) 293-1500

(Registrant’s telephone number, including area code)

————————————

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ¨ No ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ¨ No x

The number of shares outstanding of the registrant’s Class A Common Stock as of ~~March~~December 31, 2018 was ~~60,686,435.~~61,124,834.

TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS AND CAUTIONARY FACTORS

This quarterly report on Form 10-Q contains certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include statements regarding expected financial results and other planned events, including, but not limited to, anticipated liquidity, anticipated restructuring costs and related savings, anticipated future charges and capital expenditures. Words such as “may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “plan,” “project” and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual future events or results may differ materially from these statements. We disclaim any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

The following is a list of factors, among others, that could cause actual results to differ materially from the forward-looking statements:

~~economic uncertainty or a prolonged economic downturn;~~instability in the domestic and international economy;

~~end market~~challenging conditions in our various end markets, including the industrial, oil & gas, and energy ~~power generation, infrastructure, commercial construction, truck, automotive, specialty vehicle, mining and agriculture industries;~~markets;

integrating our historic three segment structure into two new operating segments;

competition in the markets we ~~serve~~serve;

failure to develop new products and market acceptance of existing and new products;

a material disruption at a significant manufacturing facility;

~~our ability to successfully identify and integrate acquisitions and realize anticipated benefits/results from acquired companies;~~

~~divestitures and/or discontinued operations including retained liabilities from businesses that we sell;~~

operating margin risk due to competitive pricing, operating inefficiencies, production levels and ~~material, labor~~increases in the costs of commodities and ~~overhead cost increases;~~raw materials;

uncertainty over global tariffs, or the financial impact of tariffs;

our international operations present special risks, primarily from currency exchange rate fluctuations ~~exposure to local economic~~ and ~~political conditions,~~ export and import ~~restrictions and controls on repatriation of cash;~~restrictions;

regulatory and legal developments including changes to United States taxation ~~rules, conflict mineral supply chain compliance, environmental laws~~rules;

our ability to successfully identify, consummate and ~~governmental climate change initiatives;~~integrate acquisitions and realize anticipated benefits/results from acquired companies as part of our portfolio management process;

the effects of divestitures and/or discontinued operations including retained liabilities from, or indemnification obligations with respect to, businesses that we sell;

the potential for a non-cash asset impairment charge, if the operating performance ~~or the outlook~~ for ~~one or more of~~ our businesses were to fall significantly below current ~~levels;~~levels or impairment of goodwill and other intangible assets as they represent a substantial amount of our total assets;

our ability to execute restructuring actions and the realization of anticipated cost ~~savings from those restructuring actions and cost reduction efforts;~~

savings;

a significant failure in information technology (IT) infrastructure, ~~and systems,~~such as unauthorized access to financial and other sensitive data or cybersecurity threats;

~~due to the assembly nature of our operations we purchase a significant amount of components from suppliers and our~~heavy reliance on suppliers ~~involves certain risks;~~for components used in the manufacture and sale of our products;

litigation, including product liability and warranty claims;

our ability to attract, develop, and retain qualified employees;

inadequate intellectual property protection or if our products are deemed to infringe on the intellectual property of others;

our ~~level of indebtedness,~~ ability to comply with the ~~financial and other~~ covenants in our debt agreements and fluctuations in interest rates; and

numerous other matters including those of a political, economic, business, competitive and regulatory nature contained from time to time in U.S. Securities and Exchange Commission ("SEC") filings, including, but not limited to, those factors listed in the "Risk Factors" section within Item 1A of Part I of the Form 10-K filed with the SEC on October ~~26, 2017.~~29, 2018.

When used herein, the terms “Actuant,” “we,” “us,” “our” and the “Company” refer to Actuant Corporation and its subsidiaries. Actuant Corporation provides free-of-charge access to its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto, through its website, www.actuant.com, as soon as reasonably practical after such reports are electronically filed with the SEC.

PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

ACTUANT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended February 28,					Six Months Ended February 28,						Three Months Ended November 30,
	2018			2017		2018			2017			2018			2017
Net sales	$	275,165		$	258,869	$	564,120		$	524,662		$	292,531		$	288,955
Cost of products sold	185,469			171,543		373,513			344,269			187,523			188,044
Gross profit	89,696			87,326		190,607			180,393			105,008			100,911
Selling, administrative and engineering expenses	68,502			66,957		142,980			135,561			73,192			74,478
Amortization of intangible assets	5,168			5,069		10,299			10,330			4,278			5,131
Director & officer transition charges	—			—		—			7,784
Restructuring charges	3,450			2,101		10,079			5,048			403			6,629
Impairment & divestiture charges	2,987			—		2,987			—			36,453			—
Operating profit	9,589			13,199		24,262			21,670
Operating (loss) profit												(9,318		)	14,673
Financing costs, net	7,604			7,334		15,118			14,467			7,295			7,514
Other expense (income), net	367			591		696			(38		)
Earnings before income tax expense (benefit)	1,618			5,274		8,448			7,241
Income tax expense (benefit)	19,839			200		21,443			(2,798		)
Other expense, net												911			329
(Loss) earnings before income tax (benefit) expense												(17,524		)	6,830
Income tax (benefit) expense												(72		)	1,604
Net (loss) earnings	$	(18,221	)	$	5,074	$	(12,995	)	$	10,039		$	(17,452	)	$	5,226

(Loss) earnings per share
Basic	$	(0.30	)	$	0.09	$	(0.22	)	$	0.17		$	(0.29	)	$	0.09
Diluted	$	(0.30	)	$	0.08	$	(0.22	)	$	0.17		$	(0.29	)	$	0.09

Weighted average common shares outstanding:
Weighted average common shares outstanding
Basic	60,318			59,368		60,095			59,170			61,031			59,871
Diluted	60,318			60,146		60,095			59,881			61,031			60,609

~~See~~The accompanying ~~Notes to Condensed Consolidated Financial Statements~~notes are an integral part of these condensed consolidated financial statements.

ACTUANT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~

(In thousands)

(Unaudited)

Three Months Ended February 28, Six Months Ended February 28,
2018 2017 2018 2017
Net (loss) earnings $ (18,221 ) $ 5,074
$ (12,995 ) $ 10,039
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments 13,237
2,909
16,135
(23,749 )
Foreign currency translation due to divested business 67,645
—
67,645
—
Pension and other postretirement benefit plans 127
202
254
738
Total other comprehensive income (loss), net of tax 81,009
3,111
84,034
(23,011 )
Comprehensive income (loss) $ 62,788
$ 8,185
$ 71,039

$ (12,972 )



	Three Months Ended November 30,
	2018			2017
Net (loss) earnings	$	(17,452	)	$	5,226
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments	(8,176		)	2,898
Pension and other postretirement benefit plans	232			127
Total other comprehensive (loss) income, net of tax	(7,944		)	3,025
Comprehensive (loss) income	$	(25,396	)	$	8,251

~~See~~The accompanying ~~Notes to Condensed Consolidated Financial Statements~~notes are an integral part of these condensed consolidated financial statements.

ACTUANT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	February 28, 2018			August 31, 2017			November 30, 2018			August 31, 2018
ASSETS
Current assets
Cash and cash equivalents	$	153,595		$	229,571		$	203,443		$	250,490
Accounts receivable, net	210,650			190,206			191,190			187,749
Inventories, net	166,227			143,651			154,764			156,356
Assets held for sale	—			21,835			106,193			23,573
Other current assets	60,569			61,663			51,745			42,732
Total current assets	591,041			646,926			707,335			660,900
Property, plant and equipment
Land, buildings and improvements	48,457			43,737			41,177			47,468
Machinery and equipment	241,393			227,535			209,278			229,445
Gross property, plant and equipment	289,850			271,272			250,455			276,913
Less: Accumulated depreciation	(187,439		)	(176,751		)	(171,295		)	(186,693		)
Property, plant and equipment, net	102,411			94,521			79,160			90,220
Goodwill	546,135			530,081			477,360			512,412
Other intangibles, net	216,370			220,489			152,719			181,037
Other long-term assets	24,348			24,938			33,459			36,769
Total assets	$	1,480,305		$	1,516,955		$	1,450,033		$	1,481,338
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable	$	136,941		$	133,387		$	124,067		$	130,838
Accrued compensation and benefits	41,518			50,939			36,343			54,508
Current maturities of debt and short-term borrowings	30,000			30,000
Current maturities of debt							30,000			30,000
Income taxes payable	7,687			6,080			8,215			4,091
Liabilities held for sale	—			101,083			70,030			44,225
Other current liabilities	58,368			57,445			63,714			67,299
Total current liabilities	274,514			378,934			332,369			330,961
Long-term debt, net	517,318			531,940			495,384			502,695
Deferred income taxes	23,262			29,859			16,931			21,933
Pension and postretirement benefit liabilities	19,338			19,862			14,671			14,869
Other long-term liabilities	56,592			55,821			53,113			52,168
Total liabilities	891,024			1,016,416			912,468			922,626
Commitments and contingencies (Note 14)
Shareholders’ equity
Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 81,087,904 and 80,200,110 shares, respectively	16,218			16,040
Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 81,502,916 and 81,423,584 shares, respectively							16,301			16,285
Additional paid-in capital	155,974			138,449			171,606			167,448
Treasury stock, at cost, 20,439,434 shares	(617,731		)	(617,731		)	(617,731		)	(617,731		)
Retained earnings	1,178,047			1,191,042			1,149,578			1,166,955
Accumulated other comprehensive loss	(143,227		)	(227,261		)	(182,189		)	(174,245		)
Stock held in trust	(2,848		)	(2,696		)	(2,573		)	(2,450		)
Deferred compensation liability	2,848			2,696			2,573			2,450
Total shareholders’ equity	589,281			500,539			537,565			558,712
Total liabilities and shareholders’ equity	$	1,480,305		$	1,516,955		$	1,450,033		$	1,481,338

~~See~~The accompanying ~~Notes to Condensed Consolidated Financial Statements~~notes are an integral part of these condensed consolidated financial statements.

ACTUANT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended February 28,						Three Months Ended November 30,
	2018			2017			2018			2017
Operating Activities
Net (loss) earnings	$	(12,995	)	$	10,039		$	(17,452	)	$	5,226
Adjustments to reconcile net (loss) earnings to net cash (used in) provided by operating activities:
Impairment & divestiture charges, including tax expense	12,385			—
Adjustments to reconcile net (loss) earnings to net cash used in operating activities
Impairment & divestiture charges, net of tax effect							33,836			—
Depreciation and amortization	20,385			21,625			8,890			10,090
Stock based compensation expense	8,292			12,177			3,594			5,420
(Benefit) expense for deferred income taxes	(7,124		)	551
Benefit for deferred income taxes							(1,143		)	(307		)
Amortization of debt issuance costs	826			826			301			413
Other non-cash adjustments	200			715			130			113
Changes in components of working capital and other, excluding acquisitions and divestitures:
Changes in components of working capital and other, excluding acquisitions and divestitures
Accounts receivable	(16,872		)	(20,897		)	(17,676		)	(11,478		)
Inventories	(18,433		)	(394		)	(17,824		)	(11,628		)
Trade accounts payable	(1,753		)	12,276			1,051			6,204
Prepaid expenses and other assets	(9,168		)	(10,819		)	(4,998		)	(12,043		)
Income taxes payable/receivable	17,505			(6,918		)
Income tax accounts							1,064			(1,714		)
Accrued compensation and benefits	(9,959		)	(3,704		)	(16,544		)	(12,588		)
Other accrued liabilities	(5,395		)	(795		)	(2,339		)	1,834
Cash (used in) provided by operating activities	(22,106		)	14,682
Cash used in operating activities							(29,110		)	(20,458		)
Investing Activities
Capital expenditures	(12,547		)	(14,695		)	(7,666		)	(7,904		)
Proceeds from sale of property, plant and equipment	113			244			11			32
Rental asset buyout for Viking divestiture	(27,718		)	—			—			(27,718		)
Proceeds from sale of business, net of transaction costs	8,780			—
Cash paid for business acquisitions, net of cash acquired	(16,517		)	—
Cash used in investing activities	(47,889		)	(14,451		)	(7,655		)	(35,590		)
Financing Activities
Principal repayments on term loan	(15,000		)	(7,500		)	(7,500		)	(7,500		)
Stock option exercises and other	10,305			5,949			552			2,231
Taxes paid related to the net share settlement of equity awards	(1,107		)	(920		)	(201		)	(282		)
Cash dividend	(2,390		)	(2,358		)	(2,439		)	(2,390		)
Cash used in financing activities	(8,192		)	(4,829		)	(9,588		)	(7,941		)
Effect of exchange rate changes on cash	2,211			(3,116		)	(694		)	(532		)
Net decrease in cash and cash equivalents	(75,976		)	(7,714		)	(47,047		)	(64,521		)
Cash and cash equivalents - beginning of period	229,571			179,604			250,490			229,571
Cash and cash equivalents - end of period	$	153,595		$	171,890		$	203,443		$	165,050

~~See~~The accompanying ~~Notes to Condensed Consolidated Financial Statements~~notes are an integral part of these condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

General

The accompanying unaudited condensed consolidated financial statements of Actuant Corporation (“Actuant,” or the “Company”) have been prepared in accordance with United States generally accepted accounting principles for interim financial reporting and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The condensed consolidated balance sheet data as of August 31, ~~2017~~2018 was derived from the Company’s audited financial statements, but does not include all disclosures required by United States generally accepted accounting principles. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes in the Company’s fiscal ~~2017~~2018 Annual Report on Form 10-K.

In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for the three ~~and six~~ months ended ~~February 28,~~November 30, 2018 are not necessarily indicative of the results that may be expected for the entire fiscal year ending August 31, ~~2018.~~2019.

New Accounting Pronouncements

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Stock Compensation: Improvements to Employee Share-Based Payment Accounting,~~ to simplify several aspects of accounting for share-based payment transactions. Under the new guidance it is required, among other items, that all excess tax deficiencies or benefits be recorded as income tax expense or benefit in the statement of operations and not in additional paid-in capital (shareholder's equity). This guidance was adopted on September 1, 2017 and the impact of adopting this guidance had the following effects:

for the three and six months ended February 28, 2018, we recorded $1.3 million and $1.5 million, respectively, in excess tax deficiency as an increase to our income tax expense. This requirement was applied prospectively;

excess tax benefits are now presented as operating activities in the statement of cash flows, rather than as financing activities. The Company chose to apply this requirement retrospectively, and as a result, reclassified approximately $0.6 million of excess tax benefits recognized during the six months ended February 28, 2017 from financing activities to operating activities in the condensed consolidated statement of cash flows;

~~our computation of diluted earnings per share now excludes the excess tax benefits or deficiencies from the assumed proceeds available to repurchase shares. This requirement was applied prospectively.~~

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with ~~Customers.~~ Customers. Under ASU 2014-09 and subsequent updates included in ASU 2016-10, ASU 2016-12, ASU 2017-13 and ASU 2017-14 (collectively referred to as Accounting Standards Codification 606 “ASC 606”), an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This guidance ~~is effective for fiscal years beginning~~was adopted by the Company on September 1, 2018 using the modified retrospective method and was applied to contracts that were not completed or ~~after December 15, 2017 (fiscal 2019~~substantially complete as of September 1, 2018. Results for the ~~Company)~~reporting period beginning after September 1, 2018 are presented under ASC 606, while prior year amounts have not been adjusted and continue to be reported in accordance with the Company’s historical accounting policy in accordance with ASC 605 Revenue Recognition. The Company ~~has begun assessing its various revenue streams~~reported a net increase to ~~identify performance obligations under these ASUs and the key aspects~~opening retained earnings of $0.1 million on September 1, 2018 as a result of the ~~standard that will~~cumulative impact ~~the Company's revenue recognition process. Based upon our preliminary assessments, these standards may impact our allocation~~ of ~~contract revenue between various products and services and the timing of when those revenues are recognized, but do not expect a material or significant~~adopting ASC 606. The impact to ~~amounts recognized. Given~~net sales due to the ~~diversity~~adoption of ~~its commercial arrangements,~~ASC 606 for the ~~Company is continuing to assess~~three months ended November 30, 2018 was a decrease of $0.4 million. See Note 2, “Revenue Recognition,” for further discussion of the ~~impact these standards may have on its consolidated results~~adoption of ~~operations, financial position, cash flows and related financial statement disclosures upon adoption.~~ASC 606.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changes how employers that sponsor defined benefit pension or other postretirement benefit plans present the net periodic benefit cost in the income statement. The new guidance requires the service cost component of net periodic benefit cost to be presented in the same income statement line items as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost are to be stated separately from service cost and outside of operating income. This guidance ~~is effective for fiscal years beginning after December 15, 2017 (fiscal 2019 for~~was adopted by the ~~Company) and interim periods within those annual periods. The amendment is to be applied retrospectively.~~Company on September 1, 2018. Due to a majority of the Company's defined benefit pension orand other postretirement benefit plans being frozen and the net periodic benefit pension cost not being significant, the ~~Company does not believe that~~ adoption of this guidance ~~will~~did not have a ~~significant~~material impact on the financial statements of the Company.

In August 2016, the FASB issued ASU 2016‑15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments, to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This guidance ~~is effective for fiscal years beginning after December 15, 2017 (fiscal 2019 for the Company), including interim~~

~~periods within those fiscal years. This update will require~~was adopted on September 1, 2018. The adoption ~~on a retrospective basis unless it is impracticable to apply. The Company does~~did not ~~believe that this guidance will~~ have ~~a significant~~an impact on ~~its presentation~~the financial statements of the ~~statement of cash flows.~~Company.

In February 2016, the FASB issued ASU 2016-02, Leases (and ~~subsequent~~subsequently ASU 2018-01), to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset. This guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020 for the Company), including interim periods within those fiscal years. Upon adoption, ~~the lessee will apply the new standard retrospectively to all periods presented under a~~certain qualitative and quantitative disclosures are required along with modified retrospective ~~approach using a cumulative effect adjustment in the year~~recognition and measurement of ~~adoption.~~impacted leases. The Company is currently gathering, documenting and analyzing lease agreements subject to this ~~ASU and~~guidance, as well as working through system implementation steps. The Company anticipates material additions to the balance sheet (upon adoption) of right-of-use assets, offset by the associated liabilities, due to our routine use of operating leases over time.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings in their consolidated financial statements. This guidance is effective for fiscal years beginning after December 15, 2018 ~~(fiscal~~

(fiscal 2020 for the Company), including interim periods within those fiscal years. ~~We are~~The Company is currently evaluating the impact of this new standard ~~on our consolidated financial statements.~~ and whether we will elect to reclassify the stranded income taxes.

Accumulated Other Comprehensive Loss

The following is a summary of the Company's accumulated other comprehensive loss (in thousands):


	February 28, 2018		August 31, 2017		November 30, 2018		August 31, 2018
Foreign currency translation adjustments	$	124,024	$	207,804	$	166,673	$	158,497
Pension and other postretirement benefit plans, net of tax	19,203		19,457		15,516		15,748
Accumulated other comprehensive loss	$	143,227	$	227,261	$	182,189	$	174,245

Note 2. ~~Director & Officer Transition Charges~~Revenue Recognition

~~During~~Significant Accounting Policies

The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control of a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and revenue is measured based on the ~~six months ended February 28, 2017,~~consideration that the Company expects to be entitled to in exchange for the goods or services transferred. When contracts include multiple products or services to be delivered to the customer, the consideration for each element is generally allocated on the standalone transaction prices of the separate performance obligations, using the adjusted market assessment approach.

Under normal circumstances, the Company invoices the customer once transfer of control has occurred and has a right to payment. The typical payment terms vary based on the customer and the types of goods and services in the contract. The period of time between invoicing and when payment is due is not significant, as our standard payment terms are less than one year. Amounts billed and due from customers are classified as receivables on the balance sheet.

Taxes Collected: Taxes collected by the Company from a customer concurrent with revenue-producing activities are excluded from revenue.

Shipping and Handling Costs: The Company records costs associated with shipping its products after control over a product has transferred to a customer and are accounted for as fulfillment costs. These costs are included in cost of products sold.

Nature of Goods and Services

The Company generates its revenue under two principal activities which are discussed below:

Product Sales: Sales of tools, components and systems are recorded ~~separation~~when control is transferred to the customer (i.e. performance obligation has been satisfied) in both segments. For the majority of the Company’s product sales, revenue is recognized at a point in time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company to the customer. Due to the highly custom nature and ~~transition charges~~limited alternative use of ~~$7.8 million in connection~~certain products, for which the Company has an enforceable right of reimbursement for performance completed to date, revenue is recognized over time. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over time revenue associated with these custom products. For a majority of the ~~retirement~~Company’s custom products, machine hours and labor hours (efforts-expended measurement) are used as a measure of ~~one director~~progress.

Service & Rental Sales: Service contracts consist of providing highly trained technicians to perform bolting, technical services, machining and joint integrity work for our customers. These revenues are recognized over time as our customers simultaneously receive and consume the benefits provided by the Company. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over time revenue associated with service contracts. For a majority of the Company’s service contracts, labor hours (efforts-expended measurement) is used as the measure of progress when it is determined to be a better depiction of the transfer of control to the customer due to the timing and pattern of labor hours incurred. Revenue from rental contracts (less than a year and non-customized products) is generally recognized ratably over the contract term, depicting the customer’s consumption of the benefit related to the rental equipment. The majority of the Company’s service and rental sales are generated by its Industrial Tools & Services (“IT&S”) segment, with a limited number of service sales that exist within the Engineered Components & Systems (“EC&S”) segment.

Disaggregated Revenue and Performance Obligations

The Company disaggregates revenue from contracts with customers by reportable segment and product line and by the timing of when goods and services are transferred.

The following table presents information regarding our revenue disaggregation by reportable segment and product (in thousands):



	Three Months Ended November 30,
Net Sales by Reportable Product Line & Segment:	2018
Industrial Tools & Services Segment
Product	$	102,768
Service & Rental	45,887
	148,655

Engineered Components & Systems Segment ⁽¹⁾
On-Highway	$	60,591
Agriculture, Off-Highway and Other	53,884
Rope & Cable Solutions	16,166
Concrete Tensioning	13,235
	143,876
Total	$	292,531

⁽¹⁾The majority of the EC&S segment revenues are product sales, with an immaterial number of service sales.

The following table presents information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in thousands):



	Three Months Ended November 30,
	2018
Revenues recognized at point in time	$	240,622
Revenues recognized over time	51,909
Total	$	292,531

Contract Balances

The opening and closing balances of the Company's ~~Board~~contract assets and liabilities are as follows:



	November 30, 2018		August 31, 2018
Receivables, which are included in accounts receivable, net	$	191,190	$	187,749
Contract assets, which are included in other current assets	7,048		6,367
Contract liabilities, which are included in other current liabilities	14,978		16,484

Receivables: The Company performs its obligations under a contract with a customer by transferring goods or services products in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of ~~Directors~~an asset is transferred and a receivable for the Company is established.

Contract Assets: Contract assets primarily relate to the Company’s rights to consideration for work completed, but not billed as of the reporting date on contracts with customers. The contract assets are transferred to receivables when the rights become unconditional. The Company typically only has contract assets on contracts that are generally long-term and have revenues that are recognized over time.

Contract Liabilities: As of November 30, 2018, the Company had certain contracts where there were unsatisfied performance obligations and the ~~transition~~Company had received cash consideration from customers before the performance obligations were satisfied. The majority of these contracts related to long-term customer contracts (project durations of greater than three months) and were recognized over time. The Company estimates that $14.8 million will be recognized from satisfying those performance obligations through the remainder of fiscal 2019 with an insignificant amount recognized in years thereafter.

Significant Judgments

Timing of Performance Obligations Satisfied at a Point in Time: The Company evaluates when the customer obtains control of the ~~Executive Vice President/Chief Financial Officer.~~product based on shipping terms, as control will transfer, dependent upon such terms, at different points between the Company's manufacturing facility or warehouse and the customer’s location. The ~~charges were mainly comprised~~Company considers control to have transferred upon shipment

or delivery because (i) the Company has a present right to payment at that time; (ii) the legal title has been transferred to the customer; (iii) the Company has transferred physical possession of ~~compensation~~the product to the customer; and (iv) the customer has significant risks and rewards of ownership of the product.

Variable Consideration: The Company estimates whether it will be subject to variable consideration under the terms of the contract and includes its estimate of variable consideration in the transaction price based on the expected value method when it is deemed probable of being realized based on historical experience and trends. Types of variable consideration may include rebates, incentives and discounts, among others, which are recorded as a reduction to net sales at the time when control of a performance obligation is transferred to the customer.

Practical Expedients & Exemptions: The Company elected to expense the incremental cost to obtaining a contract for ~~accelerated equity vesting, severance, outplacement, legal, signing bonus~~when the amortization period for such contracts would be one year or less. The Company does not disclose the value of unperformed obligations for (i) contracts with an original expected length of one year or less and ~~relocation costs.~~(ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.

Note 3. Restructuring Charges

The Company has undertaken or committed to various restructuring initiatives including workforce reductions, leadership changes, plant consolidations to reduce manufacturing overhead, satellite office closures, the continued movement of production and product sourcing to low cost alternatives and the centralization and standardization of certain administrative functions. Total restructuring charges for these activities were ~~$4.3~~$0.4 million and ~~$2.1~~$6.6 million in the three months ended ~~February 28,~~November 30, 2018 and 2017, respectively. Year-to-date restructuring charges totaled $10.9 million and $5.0 million for fiscal 2018 and 2017. Approximately $0.8 million of the restructuring charges recognized in the three and six months ended February 28, 2018 were reported in the Consolidated Statements of Operations in “Cost of products sold,” with the balance of the charges reported in “Restructuring charges.” Liabilities for severance will generally be paid during the next twelve months, while future lease payments related to facilities vacated as a result of restructuring will be paid over the underlying remaining lease terms.

The following rollforwards summarize restructuring reserve activity by segment (in thousands):


	Six Months Ended February 28, 2018																		Three Months Ended November 30, 2018
	Industrial					Energy			Engineered Solutions			Corporate				Total			Industrial Tools & Services				Engineered Components & Systems			Corporate			Total
Balance as of August 31, 2017	$	202				$	3,613		$	1,792		$	30			$	5,637
Balance as of August 31, 2018																			$	1,687			$	1,592		$	415		$	3,694
Restructuring charges	2,951					3,205			486			4,271				10,913			(29		)	⁽¹⁾	432			—			403
Cash payments	(868		)			(2,666		)	(1,517		)	(1,648		)		(6,699		)	(922		)		(151		)	(46		)	(1,119		)
Other non-cash uses of reserve	(490		)	⁽¹	⁾	(473		)	(192		)	(2,007		)	⁽¹⁾	(3,162		)
Other non-cash uses/reclasses of reserve																			(79		)		209			(369		)	(239		)
Impact of changes in foreign currency rates	(10		)			(83		)	21			—				(72		)	(21		)		(13		)	—			(34		)
Balance as of February 28, 2018	$	1,785				$	3,596		$	590		$	646			$	6,617
Balance as of November 30, 2018																			$	636			$	2,069		$	—		$	2,705



	Three Months Ended November 30, 2017
	Industrial Tools & Services			Engineered Components & Systems			Corporate				Total
Balance as of August 31, 2017	$	1,499		$	4,108		$	30			$	5,637
Restructuring charges	1,405			1,050			4,174				6,629
Cash payments	(910		)	(1,509		)	(345		)		(2,764		)
Other non-cash uses of reserve	(427		)	(51		)	(2,019		)	⁽²⁾	(2,497		)
Impact of changes in foreign currency rates	—			(163		)	—				(163		)
Balance as of November 30, 2017	$	1,567		$	3,435		$	1,840			$	6,842

⁽¹⁾ Credit balance in restructuring charges relates to reversal of restructuring accrual due to underspend of estimated expenses.

⁽²⁾Majority of non-cash uses of reserve represents accelerated equity vesting in connection with employee severance agreements.

Six Months Ended February 28, 2017
Industrial Energy Engineered Solutions Corporate Total
Balance as of August 31, 2016 $ 1,343
$ 3,021
$ 1,863
$ 46
$ 6,273
Restructuring charges 1,372
48
3,546
82
5,048
Cash payments (1,394 ) (973 ) (2,312 ) (83 ) (4,762 )
Other non-cash uses of reserve (438 ) (14 ) (16 ) (36 ) (504 )
Impact of changes in foreign currency rates (21 ) 44
(8 ) —
15
Balance as of February 28, 2017 $ 862
$ 2,126
$ 3,073
$ 9
$ 6,070

Note 4. Acquisitions

~~The~~During fiscal 2018, the Company acquired the stock and certain assets of Mirage Machines, Ltd. ("Mirage") on December 1, 2017 for a purchase price of $16.5 million, net of cash acquired and subject to closing working capital adjustments plus potential future performance-based consideration. This Energy segment tuck-in acquisition is a provider of industrial and energy maintenance tools. This acquisitioncompleted two acquisitions which resulted in the recognition of goodwill in the Company’s consolidated financial statements because ~~the~~their purchase ~~price~~prices reflected the future earnings and cash flow potential of ~~Mirage,~~the acquired companies, as well as the complementary strategic fit and resulting synergies. The Company incurred acquisition transaction costs of $0.3 million in the six months ended February 28, 2018 (included in selling, administrative and engineering expenses in the condensed consolidated statement of operations) related to this acquisition.

The Company makes an initial allocation of the purchase price, at the date of acquisition, based upon the fair value of the acquired assets and assumed liabilities. The Company obtains this information during due diligence and through other sources. If additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), the Company will refine its estimates of fair value and adjust the purchase price allocation ~~accordingly.~~as appropriate.

The ~~preliminary~~Company acquired the stock and certain assets of Mirage Machines, Ltd. ("Mirage") on December 1, 2017 for a purchase price of $17.4 million, net of cash acquired. This Industrial Tools & Services segment tuck-in acquisition is a provider of industrial and energy maintenance tools. The final purchase price allocation resulted in ~~$8.9~~$10.3 million of goodwill (which is not deductible for tax purposes) and $4.1 million of intangible assets. The intangible assets ~~including~~were comprised of $2.3 million of indefinite lived tradenames and $1.8 million of amortizable customer relationships.

The Company acquired the stock and certain assets of Equalizer International, Limited ("Equalizer") on May 11, 2018 for a purchase price of $5.8 million, net of cash acquired. This Industrial Tools & Services segment tuck-in is a provider of industrial and energy maintenance tools, expanding our pipe and flange alignment offerings. The preliminary purchase price allocation resulted in $2.4 million of goodwill (a portion of which is not deductible for tax purposes) and $2.1 million of intangible assets. The intangible assets were comprised of $0.8 million of indefinite lived tradenames and $1.3 million of amortizable customer relationships and patents.

The Company incurred acquisition transaction costs of $0.2 million in the three months ended November 30, 2017 (included in "Selling, administrative and engineering expenses" in the Condensed Consolidated Statement of Earnings) related to the Mirage acquisition.

Net sales ~~of $1.9 million are included~~ in ~~our consolidated financial results for both~~ the three ~~and six~~ months ended ~~February 28,~~November 30, 2018 ~~related to Mirage.~~for these two acquisitions were $3.5 million. Because the net sales and earnings impact of ~~the Mirage acquisition~~both acquisitions are not material to the three ~~and six month periods~~months ended ~~February 28,~~November 30, 2018 and 2017, ~~respectively,~~ the Company has not included the pro forma operating result disclosures otherwise required for acquisitions. ~~The following table summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed, at the date of acquisition, for Mirage (in thousands):~~

Total
Accounts receivable, net $ 1,090
Inventories, net 3,004
Other current assets 90
Property, plant & equipment 2,014
Goodwill 8,856
Other intangible assets, net 4,126
Trade accounts payable (1,299 )
Accrued compensation and benefits (97 )
Income taxes payable (586 )
Deferred income taxes (681 )
Cash paid, net of cash acquired $ 16,517

Note 5. Divestiture Activities

During the fourth quarter of fiscal 2018, the Cortland Fibron business (Engineered Components & Systems segment) met the criteria for assets held for sale treatment. The related assets and liabilities of the Cortland Fibron business to be sold are classified as assets/liabilities held for sale and approximate the estimated fair value, less cost to sell as of August 31, 2018. As a result, the Company recognized impairment & divestiture charges in fiscal 2018 of $46.3 million which generated an income tax benefit of $1.4 million.

During the first quarter of fiscal 2019, the Company determined that the Precision Hayes and Cortland U.S. businesses (Engineered Components & Systems segment) were non-core assets, did not align with the strategic objectives of the Company and as a result, the Company committed to a plan to sell these businesses. Since the Precision Hayes and Cortland U.S. businesses met the criteria for assets held for sale as of November 30, 2018, the related assets and liabilities of the businesses to be sold are classified as assets/liabilities held for sale in the condensed consolidated balance sheet as of November 30, 2018 and approximate the estimated fair value, less cost to sell. As a result of the held for sale treatments and fair value estimates, the Company recognized impairment & divestiture charges in the first quarter of fiscal 2019 of $36.5 million, comprised of: (i) a $21.1 million charge representing the excess of the net book value of assets held for sale to the anticipated proceeds; (ii) a non-cash impairment charge of $13.7 million related to the recognition in earnings of the cumulative effect of foreign currency rate changes since acquisition and (iii) $1.7 million of other divestiture charges. These charges generated an income tax benefit of $2.6 million in the first quarter of fiscal 2019.

The following is a summary of the assets and liabilities held for sale (in thousands):



	November 30, 2018 ⁽¹⁾		August 31, 2018 ⁽²⁾
Accounts receivable, net	$	15,957	$	2,924
Inventories, net	22,645		2,597
Prepaid expenses and other current assets	3,654		3,267
Property, plant & equipment, net	13,546		2,186
Goodwill and other intangible assets, net	46,246		12,464
Other long-term assets	4,145		135
Assets held for sale	$	106,193	$	23,573

Trade accounts payable	$	11,669	$	3,915
Accrued compensation and benefits	1,915		1,414
Reserve for cumulative translation adjustment	48,267		35,346
Other current liabilities	3,077		1,269
Deferred income taxes	5,010		2,281
Other long-term liabilities	92		—
Liabilities held for sale	$	70,030	$	44,225

⁽¹⁾ Represents the consolidated assets and liabilities for the Precision Hayes, Cortland U.S. and Cortland Fibron businesses held for sale at

November 30, 2018.

⁽²⁾ Represents the Cortland Fibron business held for sale at August 31, 2018.

The historic results of the Precision Hayes and Cortland businesses are not material to the condensed consolidated financial results of the Company and are included in continuing operations. The Precision Hayes and Cortland businesses had combined net sales of $29.4 million and $28.0 million in the three months ended November 30, 2018 and 2017, respectively. Additional charges are anticipated upon the completion of a sale and include, but are not limited to, items such as liabilities triggered only upon sale completion, changes in the composition of the net asset disposal groups and changes to estimated sales proceeds.

The Company completed the sale of Cortland Fibron on December 19, 2018 for $12.5 million and the sale of Precision Hayes on December 31, 2018 for $23.6 million. Both transactions were paid in cash at the closing and are subject to closing working capital adjustments, indebtedness and other adjustments. We anticipate recognizing an additional $2 million to $4 million in divestiture charges (primarily working capital adjustments, accelerated vesting of equity compensation and completion bonuses) in the second quarter of fiscal 2019.

On December 1, 2017, the Company completed the sale of the Viking business for net cash proceeds of $8.8 million, ~~net~~which resulted in an after-tax impairment & divestiture charge of ~~transaction costs of $1.6~~$12.4 million ~~subject to closing working capital adjustments. In~~in the second quarter of fiscal 2018, ~~we recognized an after-tax impairment and divestiture charge of $12.4 million~~ comprised of real estate lease exit charges of $3.0 million related to retained facilities that became vacant as a result of the Viking divestiture ~~($3.0 million)~~ and approximately $9.4 million of associated discrete income

tax expense. ~~The divestiture results in the Company's exit from the offshore mooring market and will significantly limit our exposure to the upstream, offshore oil & gas market.~~

The results of the Viking business (which had net sales of $2.7 million in the three months ended November 30, 2017) are not material to the consolidated financial results ~~of the Company~~ and are included in continuing operations.

As part of our portfolio management process, we routinely review our businesses with respect to our strategic initiatives and long-term objectives and are taking actions that are anticipated to improve the operational performance of the Company. The ~~Viking~~aforementioned divestitures and any potential future divestitures pose risks and challenges that could negatively impact our business, ~~had net sales of $6.0 million~~including required separation or carve-out activities and ~~$11.5 million in the three and six months ended February 28, 2017, respectively. In addition, net sales were $2.7 million for the six months ended February 28, 2018.~~costs, disputes with buyers or potential impairment charges.

Note 6. Goodwill, Intangible Assets and Long-Lived Assets

Changes in the gross carrying value of goodwill and intangible assets ~~and goodwill~~ can result from changes in foreign currency exchange rates, business acquisitions, divestitures or impairment charges. The changes in the carrying amount of goodwill for the ~~six~~three months ended ~~February 28,~~November 30, 2018 are as follows (in thousands):

Industrial Energy Engineered Solutions Total
Balance as of August 31, 2017 $ 103,875
$ 188,830
$ 237,376
$ 530,081
Business acquisitions —
8,856
—
8,856
Impact of changes in foreign currency rates 968
4,180
2,050
7,198
Balance as of February 28, 2018 $ 104,843
$ 201,866
$ 239,426
$ 546,135



	Industrial Tools & Services			Engineered Components & Systems			Total
Balance as of August 31, 2018	$	248,705		$	263,707		$	512,412
Purchase accounting adjustments	253			—			253
Impairment charge	—			(10,166		)	(10,166		)
Reclassification of assets held for sale	—			(20,206		)	(20,206		)
Impact of changes in foreign currency rates	(2,093		)	(2,840		)	(4,933		)
Balance as of November 30, 2018	$	246,865		$	230,495		$	477,360

The gross carrying value and accumulated amortization of the Company’s other intangible assets are as follows (in thousands):


		February 28, 2018						August 31, 2017							November 30, 2018						August 31, 2018
	Weighted Average Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization		Net Book Value		Gross Carrying Value		Accumulated Amortization		Net Book Value		Weighted Average Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization		Net Book Value		Gross Carrying Value		Accumulated Amortization		Net Book Value
Amortizable intangible assets:
Customer relationships	15	$	268,105	$	163,676	$	104,429	$	263,498	$	153,003	$	110,495	15	$	188,316	$	123,129	$	65,187	$	230,601	$	147,451	$	83,150
Patents	10	30,538		24,918		5,620		30,401		24,027		6,374		11	20,831		18,757		2,074		30,355		25,327		5,028
Trademarks and tradenames	18	21,396		10,015		11,381		21,498		9,396		12,102		15	6,862		5,008		1,854		20,823		15,347		5,476
Other intangibles	3	6,777		6,458		319		6,672		6,234		438		3	5,143		5,070		73		5,946		5,816		130
Indefinite lived intangible assets:
Tradenames	N/A	94,621		—		94,621		91,080		—		91,080		N/A	83,531		—		83,531		87,253		—		87,253
		$	421,437	$	205,067	$	216,370	$	413,149	$	192,660	$	220,489		$	304,683	$	151,964	$	152,719	$	374,978	$	193,941	$	181,037

The Company estimates that amortization expense will be ~~$10.4~~$10.2 million for the remaining ~~six~~nine months of fiscal ~~2018.~~2019. Amortization expense for future years is estimated to be: ~~$20.2~~$12.9 million in fiscal ~~2019, $19.5~~2020, $12.2 million in ~~2020, $18.6~~2021, $10.5 million in fiscal ~~2021, $16.6 million in fiscal~~

2022, ~~$13.6~~$7.7 million in fiscal 2023, $6.5 million in fiscal 2024 and ~~$22.9~~$9.2 million cumulatively thereafter. The future amortization expense amounts represent estimates and may be impacted by future acquisitions, divestitures or changes in foreign currency exchange ~~rates.~~rates, among other causes.

Fiscal 2019 Impairment Charge

During the first quarter of fiscal 2019, within the Engineered Components & Systems segment, the Company recognized impairment charges related to the Precision Hayes and Cortland U.S. businesses in conjunction with meeting the criteria for assets classified as held for sale. See Note 5, “Divestiture Activities,” for further discussion of impairment & divestiture charges. As a result of meeting the held for sale criteria, the Company reassessed the weighted-average holding period for the associated assets which resulted in a change in our current estimated fair value. Also, the Company recognized an additional impairment charge related to the Cortland Fibron business based on a change in the anticipated sales proceeds. Accordingly, we recognized a $21.1 million impairment charge, representing the excess of net book value of assets held for sale over anticipated proceeds.

A summary of the fiscal 2019 impairment charge by reporting unit is as follows (in thousands):



	Cortland ⁽¹⁾		Precision Hayes		Total
Goodwill	$	10,166	$	—	$	10,166
Amortizable intangible assets	—		8,264		8,264
Assets held for sale	1,477		—		1,477
Fixed assets	—		1,230		1,230
	$	11,643	$	9,494	$	21,137

⁽¹⁾ The Cortland reporting unit is representative of the Cortland U.S. and Cortland Fibron businesses. The goodwill impairment charge related to Cortland U.S. and the assets held for sale impairment charge related to Cortland Fibron.

To the extent actual proceeds on the divestiture are less than current projections, or there are changes in the composition of the asset disposal group, further write-downs of the carrying value of the Precision Hayes and Cortland reporting units may be required.

Note 7. Product Warranty Costs

The Company generally offers its customers a warranty on products sold, although warranty periods vary by product type and application. The reserve for future warranty claims, which is recorded within the "Other current liabilities" line on the Condensed Consolidated Balance Sheets, is based on historical claim rates and current warranty cost experience. The following is a rollforward of the product warranty reserves for the ~~six~~three months ended ~~February 28,~~November 30, 2018 and 2017 (in thousands):


	Six Months Ended February 28,						Three Months Ended November 30,
	2018			2017			2018			2017
Beginning balance	$	6,616		$	5,592		$	4,417		$	6,616
Provision for warranties	3,403			1,482			1,626			1,531
Warranty payments and costs incurred	(3,582		)	(3,096		)	(944		)	(1,145		)
Reclass of liabilities held for sale							(38		)	—
Impact of changes in foreign currency rates	213			(101		)	(64		)	(8		)
Ending balance	$	6,650		$	3,877		$	4,997		$	6,994

Note 8. Debt

The following is a summary of the Company’s long-term indebtedness (in thousands):


	February 28, 2018			August 31, 2017			November 30, 2018			August 31, 2018
Senior Credit Facility
Revolver	$	—		$	—		$	—		$	—
Term Loan	262,500			277,500			240,000			247,500
Total Senior Credit Facility	262,500			277,500			240,000			247,500
5.625% Senior Notes	287,559			287,559			287,559			287,559
Total Senior Indebtedness	550,059			565,059			527,559			535,059
Less: Current maturities of long-term debt	(30,000		)	(30,000		)	(30,000		)	(30,000		)
Debt issuance costs	(2,741		)	(3,119		)	(2,175		)	(2,364		)
Total long-term debt, net	$	517,318		$	531,940
Total long-term debt, less current maturities							$	495,384		$	502,695

The Company’s Senior Credit Facility matures on May 8, 2020 and provides a ~~$600~~$300 million revolver, ~~an amortizing~~a $300 million term loan and a $450 million expansion option, subject to certain conditions. Borrowings are subject to a pricing grid, which can result in increases or decreases to the borrowing spread, depending on the Company’s leverage ratio, ranging from a spread of 1.00% to 2.25% in the case of loans bearing interest at LIBOR and from 0.00% to 1.25% in the case of loans bearing interest at the base rate. As of ~~February 28,~~November 30, 2018, the borrowing spread on LIBOR based borrowings was 2.00% (aggregating to a ~~3.69%~~4.38% variable rate borrowing cost on the outstanding term loan balance). In addition, a non-use fee is payable quarterly on the average unused credit line under the revolver ranging from 0.15% to 0.35% per annum. As of ~~February 28,~~November 30, 2018, the unused credit line under the revolver was ~~$597.1~~$298.8 million, of which ~~$83.7~~$237.9 million was available for borrowing. Quarterly term loan principal payments of $3.8 million began on June 30, 2016, increased to $7.5 million starting on June 30, 2017 and extend through March 31, 2020, with the remaining principal due at maturity. The Senior Credit Facility, which is secured by substantially all of the Company’s domestic personal property assets, also contains customary limits and restrictions concerning investments, sales of assets, liens on assets, dividends and other payments. The two financial covenants included in the Senior Credit Facility agreement are a maximum leverage ratio of 3.75:1 and a minimum interest coverage ratio of 3.5:1. The Company was in compliance with all financial covenants at ~~February 28,~~November 30, 2018.

On April 16, 2012, the Company issued $300 million of 5.625% Senior Notes due 2022 (the “Senior Notes”), of which $287.6 million remains outstanding. The Senior Notes require no principal installments prior to their June 15, 2022 maturity, require semiannual interest payments in December and June of each year and contain certain financial and non-financial covenants. The Senior Notes include a call feature that allows the Company to repurchase them anytime on or after June 15, 2017 at stated redemption prices ~~(ranging~~(currently ranging from ~~100.0%~~100.00% to ~~102.8%~~101.88%), plus accrued and unpaid interest. The Company was in compliance with all the terms of the Senior Notes at November 30, 2018.

Note 9. Fair Value Measurement

The Company assesses the inputs used to measure the fair value of financial assets and liabilities using a three-tier hierarchy. Level 1 inputs include quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participation would use in pricing an asset or liability.

The fair value of the Company’s cash and cash equivalents, accounts receivable, accounts payable and variable rate long-term debt approximated book value at both ~~February 28,~~November 30, 2018 and August 31, ~~2017~~2018 due to their short-term nature and the fact that the interest rates approximated market rates. Foreign currency exchange contracts are recorded at fair value. The fair value of the Company's foreign currency exchange contracts was a net ~~liability~~asset of ~~$0.1~~$0.2 million and ~~$0.2~~$0.4 million at ~~February 28,~~November 30, 2018 and August 31, ~~2017,~~2018, respectively. The fair value of the foreign currency exchange contracts was based on quoted inactive market prices and is therefore classified as Level 2 within the valuation hierarchy. The fair value of the Company’s outstanding Senior Notes was ~~$293.3~~$289.4 million and ~~$295.8~~$293.5 million at ~~February 28,~~November 30, 2018 and August 31, ~~2017,~~2018, respectively. The fair value of the Senior Notes was based on quoted inactive market prices and is therefore classified as Level 2 within the valuation hierarchy.

At November 30, 2018, the assets and liabilities of the Precision Hayes and Cortland businesses are classified as held for sale and therefore are valued at fair value, less costs to sell. In determining the fair value of the assets and liabilities the Company utilized generally accepted valuation techniques. Specifically for the Cortland U.S. business, a market approach valuation was utilized, in which a trading multiple was applied to the forecasted EBITDA (earnings before interest, income taxes, depreciation and amortization). For the Precision Hayes and Cortland Fibron businesses, the anticipated proceeds from the sale of these

businesses was used to arrive at the estimated fair value. These valuations represent Level 3 assets measured at fair value on a nonrecurring basis.

Note 10. Derivatives

All derivatives are recognized in the balance sheet at their estimated fair value. On the date the Company enters into a derivative contract, it designates the derivative as a hedge of a recognized asset or liability (fair value hedge) or a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The Company does not enter into derivatives for speculative purposes. Changes in the value of fair value hedges and non-designated hedges are recorded in earnings along with the gain or loss on the hedged asset or liability, while changes in the value

of cash flow hedges are recorded in accumulated other comprehensive loss, until earnings are affected by the variability of cash flows.

The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. In order to manage this risk the Company has historically hedged portions of its forecasted inventory purchases and other cash flows that are denominated in non-functional currencies (cash flow hedges). However, there were no cash flow hedges outstanding at February 28, 2018 and August 31, 2017.

~~The Company also~~ utilizes foreign currency exchange contracts to reduce the exchange rate risk associated with recognized non-functional currency balances. The effects of changes in exchange rates are reflected concurrently in earnings for both the fair value of the foreign currency exchange contracts and the related non-functional currency asset or liability. These derivative gains and losses offset foreign currency gains and losses from the related revaluation of non-functional currency assets and liabilities (amounts included in other (income) expense in the condensed consolidated statement of ~~operations)~~earnings). The U.S. dollar equivalent notional value of these short duration foreign currency exchange contracts (fair value hedges or non-designated hedges) was ~~$26.5~~$22.0 million and ~~$22.0~~$17.0 million at ~~February 28,~~November 30, 2018 and August 31, ~~2017,~~2018, respectively. The fair value of outstanding foreign currency exchange contracts was a net ~~liability~~asset of ~~$0.1~~$0.2 million and ~~$0.2~~$0.4 million at ~~February 28,~~November 30, 2018 and August 31, ~~2017,~~2018, respectively. Net foreign currency gain ~~(loss)~~ related to these derivative instruments were as follows (in thousands):

Three Months Ended February 28, Six Months Ended February 28,
2018 2017 2018 2017
Foreign currency (loss) gain, net $ (74 ) $ (474 ) $ 140
$ (1,966 )



	Three Months Ended November 30,
	2018		2017
Foreign currency gain, net	$	370	$	214

Note 11. Capital Stock and Share Repurchases

The Company's Board of Directors authorized the repurchase of shares of the Company's common stock under publicly announced share repurchase programs. Since the inception of the initial share repurchase program in fiscal 2012, the Company has repurchased 20,439,434 shares of common stock for $617.7 million. As of ~~February 28,~~November 30, 2018, the maximum number of shares that may yet be purchased under the programs is 7,560,566 shares. There were no share repurchases in the three ~~and six~~ months ended ~~February 28,~~November 30, 2018.

The reconciliation between basic and diluted ~~(loss)~~ earnings per share is as follows (in thousands, except per share amounts):


	Three Months Ended February 28,					Six Months Ended February 28,					Three Months Ended November 30,
	2018			2017		2018			2017		2018			2017
Numerator:
Net (loss) earnings	$	(18,221	)	$	5,074	$	(12,995	)	$	10,039	$	(17,452	)	$	5,226
Denominator:
Weighted average common shares outstanding - basic	60,318			59,368		60,095			59,170		61,031			59,871
Net effect of dilutive securities - stock based compensation plans ⁽¹⁾	—			778		—			711		—			738
Weighted average common shares outstanding - diluted	60,318			60,146		$	60,095		$	59,881	61,031			60,609

Basic (loss) earnings per share	$	(0.30	)	$	0.09	$	(0.22	)	$	0.17	$	(0.29	)	$	0.09
Diluted (loss) earnings per share	(0.30		)	0.08		(0.22		)	0.17		$	(0.29	)	$	0.09

Anti-dilutive securities from stock based compensation plans (excluded from earnings per share calculation)(1)	3,397			2,011		2,613			1,987		2,973			1,829

⁽¹⁾As a result of the impairment & divestiture charges, which caused a net loss for the three ~~and six~~ months ended ~~February 28,~~November 30, 2018, shares from stock based compensation plans are excluded from the calculation of diluted ~~(loss) earnings~~loss per share, as the result would be anti-dilutive.

Note 12. Income Taxes

The Company's income tax expense or benefit is impacted by a number of factors, including the amount of taxable earnings generated in foreign jurisdictions with tax rates that are ~~lower~~different than the U.S. federal statutory rate, permanent items, state tax rates ~~changes in tax laws, acquisitions and divestitures~~ and the ability to utilize various tax credits and net operating loss carryforwards. The Company's global operations, acquisition activity and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Both fiscal ~~2018~~2019 and ~~2017~~2018 include the benefits of tax planning initiatives. Comparative (loss) earnings ~~(loss)~~ before income taxes, income tax ~~expense or~~ benefit and effective income tax rates are as follows (amounts in thousands):


	Three Months Ended February 28,						Six Months Ended February 28,						Three Months Ended November 30,
	2018			2017			2018			2017			2018			2017
Earnings (loss) before income taxes	$	1,618		$	5,274		$	8,448		$	7,241		$	(17,524	)	$	6,830
Income tax expense (benefit)	19,839			200			21,443			(2,798		)	(72		)	1,604
Effective income tax rate	1,226.1		%	3.8		%	253.8		%	(38.6		)%	0.4		%	23.5		%

The Company’s income tax expense and effective tax ~~rates during~~rate for the three ~~and six~~ months ended ~~February 28,~~November 30, 2018 were impacted by the Tax Cuts and Jobs Act (the “Act”), which was enacted into law on December 22, 2017. The Act includes significant changes to the U.S. corporate income tax system which reduce the U.S. federal corporate income tax rate from ~~35.0%~~35% to ~~21.0%~~21% as of January 1, 2018; shifts to a modified territorial tax regime which requires companies to pay a transition tax on earnings of certain foreign subsidiaries that were previously deferred from U.S. income tax; and creates new minimum taxes on certain foreign-sourced ~~earnings. The decrease in the~~earnings that were previously deferred from U.S. federal ~~corporate income tax rate from 35.0% to 21.0% results in a blended statutory tax rate of 25.7% for the fiscal year ending August 31, 2018.~~tax. The new minimum taxes ~~for~~on certain foreign-sourced earnings under the Act are effective for the Company starting in ~~fiscal 2019.~~the period ending November 30, 2018 and include the Global Intangible Low-Taxed Income (“GILTI”) provision, the Foreign-Derived Intangible Income (“FDII”) benefit, the Base Erosion Anti-Abuse Tax (“BEAT”), the limitation on interest expense deductions and certain executive compensation, and the elimination of dividends received from certain foreign subsidiaries.

Income tax effects resulting from changes in tax laws are accounted for by the Company in the period in which the law is enacted and the effects are recorded as a component of income tax expense or benefit. AsThe Securities and Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance on accounting for various effects of the Act that may be at different stages of completion. To the extent that a ~~result,~~company’s accounting for a certain income tax effect of the Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. In accordance with SAB 118, the financial reporting impact of the Act will be completed no later than one year from the Act’s enactment date of December 22, 2017. Prior to this date, the Company recorded provisional amounts for certain enactment-date effects of the Act by applying the guidance in SAB 118.

As of the financial reporting date, we have recorded all known enactment-date income tax effects of the Act. These adjustments have been recorded as a component of income tax expense ~~resulting from~~and include the ~~Act totaling $8.4 million during the three and six months ended February 28, 2018, which includes (i) a~~one-time transition tax ~~of $16.2 million on~~liability, the ~~Company’s total post-1986 earnings and profits (“E&P”) which, prior to the Act, were previously deferred from U.S. income tax, (ii) a $16.7 million decrease in income tax expense as a result~~revaluation of ~~the re-measurement of the Company’s~~ deferred tax assets and liabilities, ~~to the new corporate tax rate of 21%~~ and ~~(iii) $8.9 million in valuation allowances recorded against foreign tax credits as future utilization is now uncertain.~~

The amounts recorded are provisional and represent the Company’s best estimate of the tax effects of the Act as of February 28, 2018. Amounts recorded are based in part on a reasonable estimate of the effects on its transition tax and existing deferred tax balances which are subject to change and modification. Provisional amounts recorded may change as a result of the following:

The amount recorded for the transition tax liability is a provisional amount based on current estimates of total post-1986 foreign E&P and the income tax pools for all foreign subsidiaries which will continue to be refined over the coming periods. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the Company finalizes the calculation of ~~post-1986 foreign E&P previously deferred from U.S. federal taxation and finalizes~~ the amounts held in cash or other specified assets as of August 31, 2018. Further interpretations from U.S. federal and state governments and regulatory organizations may change the provisional tax liability or the accounting treatment of the provisional tax liability. It is anticipated that the amounts resulting from the transition tax will be fully offset by available foreign tax credits and will not result in future cash tax payments. In addition, there is a foreign tax credit carryforward on the balance sheet after the calculation of the transition tax liability. The Company is continuing to analyze the new provisions in order to determine future utilization of the credits and is anticipating further interpretive guidance in connection with the utilization of foreign tax credits going forward. As such, we are not yet able to reasonably estimate the future utilization of the foreign tax credits and have recorded the aforementioned valuation allowance.

The Company is still analyzing certain aspects of the Act and refining the estimate of the expected revaluation of its deferred tax balances. This can potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. In addition, the Act provides for accelerated first year expensing of certain capital ~~expenditures for which an estimate has been included in the estimated deferred balances~~expenditures. Included within tax expense for the ~~year but will continue to be refined as~~November 30, 2018 reporting period is a measurement period adjustment for the ~~year progresses.~~Company’s transition tax. This adjustment was based upon the review of additional information that was not previously available and had an immaterial impact on the financial statements. The ~~Act also provides changes~~Company’s assertion related to the ~~limits~~repatriation of ~~deduction for employee compensation. The Company~~undistributed earnings has not changed, which is ~~treating any future non-deductible compensation as impacting deductible compensation expenses in the period incurred until further guidance is provided.~~

The Act also includes a provision designed to tax global intangible low taxed income (GILTI) which will be effective in fiscal 2019. Under the provision, a U.S. shareholder is required to include in gross income the amount of its GILTI, which

is generally the net income of its controlled foreign corporations in excess of a 10% return on depreciable tangible assets after identification of other income subject to non-deferral rules. Due to the complexity of the new GILTI tax rules and uncertainty of the application of the foreign tax credit rules in relation to GILTI, we are continuing to evaluate this provision of the Act, the application of ASC 740, and are considering available accounting policy alternatives to either record the U.S. income tax effect of future GILTI inclusions in the period in which they arise or establish deferred taxes with respect to the expected future tax liabilities associated with future GILTI inclusions. Our accounting policies depend, in part, on analyzing our global income to determine whether we expect a tax liability resulting from the application of this provision, and, if so, whether and when to record related current and deferred income taxes. Whether we intend to recognize deferred tax liabilities related to the GILTI provisions is dependent, in part, on our assessment of the Company's future operating structure. In addition, we are awaiting further interpretive guidance in connection with the computation of the GILTI tax. For these reasons, we are not yet able to reasonably estimate the effect of this provision of the Act. Therefore, we have not made any adjustments relating to potential GILTI tax in our consolidated financial statements and have not made a policy decision regarding our accounting for GILTI.

~~Prior to the Act, our practice and intention was~~ to reinvest the earnings in our non-U.S. subsidiaries outside of the U.S., ~~and~~thereby resulting in no recorded U.S. deferred ~~income~~incomes taxes or foreign withholding ~~taxes were recorded. The transition~~taxes. Additionally, the Company has made the accounting policy election to record the income tax ~~noted above will result~~effects of GILTI in the ~~previously untaxed foreign~~period in which they arise.

The comparability of pre-tax earnings ~~being included in the federal and state fiscal 2018 taxable income. We are currently analyzing our global working capital requirements~~(loss), income tax expense (benefit) and the ~~potential~~related effective income tax liabilities that would be incurred if the non-U.S. subsidiaries distribute cash to the U.S. parent, which may include withholding taxes, local country taxes and potential U.S. state taxation. Furthermore, the transition tax will reduce the outside basis differences in our foreign corporations and any remaining temporary difference will potentially have some interaction with the GILTI tax noted above. For these reasons, werates are ~~not yet able to reasonably estimate the effect of this provision of~~impacted by the Act and have not recorded any withholding or state tax liabilities, any deferred taxes attributable to GILTI (as noted above) or any deferred taxes attributable to our investment in our foreign subsidiaries.

~~We are also currently analyzing certain additional provisions~~as described above, along with impairment & divestiture charges. Results included $36.5 million ($33.8 million after tax) of impairment & divestiture charges for the ~~Act that come into effect in fiscal 2019 and will determine if and how these items would impact~~three months ended November 30, 2018. Excluding the ~~effective tax rate in~~impairment & divestiture charges, the year the income or expense occurs. These provisions include the Base Erosion Anti-Abuse Tax (BEAT), eliminating U.S. federal income taxes on dividends from foreign subsidiaries, the new provision that could limit the amount of deductible interest expense, and the limitations on the deductibility of certain executive compensation.

~~The~~ effective tax rate for the ~~six~~three months ended ~~February 28,~~November 30, 2018 was 253.8% compared to (38.6)% for the comparable prior year period. The effective tax rate for the current year results in significantly greater tax expense than the comparable prior year period due to recording the effects of the Act as described above. Additionally, the six months ended February 28, 2018 also include discrete income tax expense of $9.4 million related to the Viking divestiture and $1.5 million related to the shortfall of tax benefits on deductible equity compensation and expiration of unexercised stock options.13.4%. Both the current and prior year effective income tax rates were impacted by the proportion of earnings in foreign jurisdictions ~~(with~~with income tax rates ~~lower~~different than the U.S. federal income tax ~~rate)~~rate and the amount of income tax benefits ~~derived~~ from tax planning ~~initiatives which were comparable between years.~~initiatives. The Company's earnings (loss) before income tax include approximately 70% and 80% of earnings from foreign jurisdictions for the estimated full-year fiscal 2019 and 2018, respectively. This foreign income tax rate differential had the effect of reducing the effective income tax rate from the 35% U.S. statutory tax rate by 12.2%, for the three months ended November 30, 2017; however, the impact of foreign rates as compared to the new U.S. statutory rate of 21% is minimal. In addition to the ~~Company may release~~benefit of the foreign rate differential and tax planning initiatives (which yield an effective income tax rate lower than the federal income tax rate) in each year, the income tax benefit for the three months ended November 30, 2018 is significantly impacted by a ~~material valuation allowance~~$2.6 million benefit related to the impairment & divestiture charges and a $1.1 million benefit related to realization of foreign tax credit carryforwards. The tax benefits related to tax planning initiatives are not expected to repeat in ~~a foreign jurisdiction~~future periods due to certain tax attributes that are no longer available and subsequent changes in ~~late fiscal 2018 or in fiscal 2019, if the Company determines that it is more likely than not the deferred~~relevant tax ~~assets will be realized.~~laws.

Note 13. Segment Information

The Company is a global manufacturer of a broad range of industrial products and ~~systems and is organized into three reportable segments:~~systems. The Industrial ~~Energy and Engineered Solutions. The Industrial~~Tools & Services segment is primarily ~~involved~~engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the industrial, maintenance, ~~industrial,~~ infrastructure, ~~and production automation markets. The Energy segment provides joint integrity products and services, as well as rope and cable solutions to the global~~ oil & gas, ~~power generation~~energy and other markets. ~~Divestiture of the Viking business during the quarter resulted in the elimination of the sale and rental of customized off-shore vessel mooring solutions.~~ The Engineered ~~Solutions~~Components & Systems segment provides highly engineered ~~position~~components for on-highway, off-highway agriculture, medical, concrete tensioning and ~~motion control systems to original equipment manufacturers ("OEM") in~~other vertical markets. All of the aforementioned markets are supported through our various ~~on and off-highway vehicle markets, as well as a variety of other products to the industrial and agricultural markets.~~segment product lines outlined below.

The following tables summarize financial information by reportable segment and product line (in thousands):

Three Months Ended February 28, Six Months Ended February 28,
2018 2017 2018 2017
Net Sales by Reportable Product Line & Segment:
Industrial Segment:
Industrial Tools $ 87,438
$ 78,679
$ 171,949
$ 157,718
Heavy Lifting Technology 11,643
12,969
24,048
21,220
99,081
91,648
195,997
178,938
Energy Segment:
Energy Maintenance & Integrity 48,889
51,590
105,598
116,411
Other Energy Solutions 17,103
21,294
36,235
41,119
65,992
72,884
141,833
157,530
Engineered Solutions Segment:
On-Highway 59,297
50,611
124,179
102,242
Agriculture, Off-Highway and Other 50,795
43,726
102,111
85,952
110,092
94,337
226,290
188,194
$ 275,165
$ 258,869
$ 564,120
$ 524,662
Operating Profit (Loss):
Industrial $ 16,781
$ 18,380
$ 35,024
$ 37,155
Energy ⁽¹⁾
(4,513 ) (579 ) (4,220 ) 2,632
Engineered Solutions 2,209
1,816
8,543
2,571
General Corporate (4,888 ) (6,418 ) (15,085 ) (20,688 )
$ 9,589
$ 13,199
$ 24,262
$ 21,670



	Three Months Ended November 30,
	2018			2017
Net Sales by Reportable Product Line & Segment
Industrial Tools & Services Segment
Product	$	102,768		$	101,120
Service & Rental	45,887			40,871
	148,655			141,991
Engineered Components & Systems Segment
On-Highway	60,591			64,883
Agriculture, Off-Highway and Other	53,884			51,316
Rope & Cable Solutions	16,166			16,386
Concrete Tensioning	13,235			11,634
Off Shore Mooring	—			2,745
	143,876			146,964
	$	292,531		$	288,955

Operating (Loss) Profit
Industrial Tools & Services	$	26,374		$	20,836
Engineered Components & Systems ⁽¹⁾	(28,292		)	4,035
General Corporate	(7,400		)	(10,197		)
	$	(9,318	)	$	14,673

⁽¹⁾ ~~Energy~~Engineered Components & Systems segment operating ~~(loss) profit~~loss includes impairment ~~and~~& divestiture charges of ~~$3.0~~$36.5 million for ~~both~~ the three ~~and six~~ months ended ~~February 28,~~November 30, 2018.

February 28, 2018 August 31, 2017
Assets by Segment:
Industrial $ 324,477
$ 329,134
Energy 464,018
482,963
Engineered Solutions 548,547
531,068
General Corporate 143,263
173,790
$ 1,480,305
$ 1,516,955



	November 30, 2018		August 31, 2018
Assets:
Industrial Tools & Services	$	588,003	$	589,932
Engineered Components & Systems	655,978		657,370
General Corporate	206,052		234,036
	$	1,450,033	$	1,481,338

In addition to the impact of foreign currency exchange rate changes, the comparability of segment and product line information is impacted by acquisition/divestiture activities, impairment ~~charges, director~~ & ~~officer transition~~divestiture charges, restructuring costs and related benefits. Corporate assets, which are not allocated, principally represent cash and cash equivalents, capitalized debt issuance costs and deferred income taxes.

Note 14. Commitments and Contingencies

The Company had outstanding letters of credit of $~~23.4~~15.7 million and $~~22.1~~23.6 million at ~~February 28,~~November 30, 2018 and August 31, ~~2017~~2018, respectively, the majority of which relate to commercial contracts and self-insured ~~workers~~workers' compensation programs.

The Company is a party to various legal proceedings that have arisen in the normal course of business. These legal proceedings typically include product liability, ~~environmental, labor, patent claims~~breaches of contract, employment, personal injury and other disputes. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable ~~that~~ a loss has been incurred and can be reasonably estimated. In the opinion of management, resolution of these contingencies ~~are~~is not expected to have a material adverse effect on the Company’s financial ~~condition,~~position, results of operations or cash flows.

The Company remains contingently liable for lease payments under leases of businesses that it previously divested or spun-off in the event that such businesses are unable to fulfill their future lease payment obligations. The discounted present value of future minimum lease payments for these leases at November 30, 2018 was ~~$12.1~~$10.4 million using a weighted average discount rate of ~~3.15% at~~ ~~February 28, 2018~~3.35%.

The Company has facilities in numerous geographic locations that are subject to ~~a range of~~ environmental laws and regulations. Environmental expenditures over the past two years have not been material. Management believes that such costs will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

As previously disclosed in the Annual Report on Form 10-K for the year ended August 31, 2018, in October 2018, the Company filed a voluntary self-disclosure ("VSD") with the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) regarding transactions related to otherwise authorized sales of tools and other products totaling approximately $0.5 million by certain of its foreign subsidiaries to two Iranian distributors. It is possible that certain limited transactions relating to the authorized sales fell outside the scope of General License H under the Iranian Transaction and Sanctions Regulations, 31 C.F.R. Part 560. The VSD also included information about additional transactions by certain of the Company's Dutch subsidiaries, with a counterparty in Estonia that may have been in violation of E.O. 13685, as certain sales of products and services may have been diverted to the Crimea region of Ukraine. OFAC is currently reviewing the Company’s disclosure to determine whether any violations of U.S. economic sanctions laws may have occurred and, if so, to determine the appropriate enforcement response. At this time, the Company cannot predict when OFAC will conclude its review of the VSD or the nature of its enforcement response.

Additionally, the Company has self-disclosed the sales to its Estonian customer to relevant authorities in the Netherlands as potentially violating applicable sanctions laws in that country and the European Union. The investigation by authorities in the Netherlands is ongoing and also may result in penalties. At this time, the Company cannot predict when the investigation will be completed or reasonably estimate what penalties, if any, will be assessed.

While there can be no assurance of the ultimate outcome of the above matters, the Company currently believes that there will be no material adverse effect on the Company's financial position, results of operations, or cash flows.

Note 15. Guarantor Subsidiaries

As discussed in Note 8, “Debt” on April 16, 2012, Actuant Corporation (the “Parent”) issued $300.0 million of 5.625% Senior Notes, of which $287.6 million remains outstanding as of ~~February 28,~~November 30, 2018. All of our material, domestic wholly owned subsidiaries (the “Guarantors”) fully and unconditionally guarantee the 5.625% Senior Notes on a joint and several basis. There are no significant restrictions on the ability of the Guarantors to make distributions to the Parent.

Certain assets, liabilities and expenses have not been allocated to the Guarantors and ~~non-Guarantors~~the subsidiaries that do not guarantee the 5.625% Senior Notes (the "non-Guarantors") and therefore are included in the Parent column in the accompanying condensed consolidating financial statements. These items are of a corporate or consolidated nature and include, but are not limited to, tax provisions and related assets and liabilities, certain employee benefit obligations, prepaid and accrued insurance and corporate indebtedness. Intercompany activity primarily includes loan activity, purchases and sales of goods or services, investments and dividends. Intercompany balances also reflect certain non-cash transactions including transfers of assets and liabilities between the Parent, Guarantor and non-Guarantor, allocation of non-cash expenses from the Parent to the Guarantors and non-Guarantors, non-cash intercompany dividends and the impact of foreign currency rate changes.

The following tables present the results of operations, financial position and cash flows of ~~Actuant Corporation~~the Parent, the Guarantors and ~~its subsidiaries,~~ the ~~Guarantor and non-Guarantor entities,~~non-Guarantors and the eliminations necessary to arrive at the information for the Company on a consolidated basis.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE ~~INCOME (LOSS)~~LOSS

(in thousands)


	Three Months Ended February 28, 2018															Three Months Ended November 30, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non-Guarantors			Eliminations		Consolidated
Net sales	$	36,219		$	83,072		$	155,874		$	—		$	275,165		$	40,290		$	95,822		$	156,419		$	—	$	292,531
Cost of products sold	5,848			63,979			115,642			—			185,469			9,881			70,596			107,046			—		187,523
Gross profit	30,371			19,093			40,232			—			89,696			30,409			25,226			49,373			—		105,008
Selling, administrative and engineering expenses	18,190			17,232			33,080			—			68,502			20,966			18,314			33,912			—		73,192
Amortization of intangible assets	318			2,861			1,989			—			5,168			318			2,692			1,268			—		4,278
Restructuring charges	194			909			2,347			—			3,450			—			(93		)	496			—		403
Impairment & divestiture charges	4,217			—			(1,230		)	—			2,987			—			10,220			26,233			—		36,453
Operating profit (loss)	7,452			(1,909		)	4,046			—			9,589			9,125			(5,907		)	(12,536		)	—		(9,318		)
Financing costs (income), net	7,777			22			(195		)	—			7,604			7,551			—			(256		)	—		7,295
Intercompany (income) expense, net	(5,042		)	5,419			(377		)	—			—			(4,053		)	6,491			(2,438		)	—		—
Other expense, net	90			49			228			—			367
Earnings (loss) before income taxes	4,627			(7,399		)	4,390			—			1,618
Income tax expense (benefit)	10,612			(2,234		)	11,461			—			19,839
Net loss before equity in loss of subsidiaries	(5,985		)	(5,165		)	(7,071		)	—			(18,221		)
Equity in loss of subsidiaries	(12,236		)	(9,454		)	(1,459		)	23,149			—
Other (income) expense, net																(216		)	7			1,120			—		911
Earnings (loss) before income tax (benefit) expense																5,843			(12,405		)	(10,962		)	—		(17,524		)
Income tax (benefit) expense																(2,706		)	(102		)	2,736					(72		)
Net earnings (loss) before equity in (loss) earnings of subsidiaries																8,549			(12,303		)	(13,698		)	—		(17,452		)
Equity in (loss) earnings of subsidiaries																(26,001		)	(13,132		)	1,255			37,878		—
Net loss	$	(18,221	)	$	(14,619	)	$	(8,530	)	$	23,149		$	(18,221	)	(17,452		)	(25,435		)	(12,443		)	37,878		(17,452		)
Comprehensive income (loss)	$	62,788		$	(14,619	)	$	74,820		$	(60,201	)	$	62,788
Comprehensive loss																$	(25,396	)	$	(25,434	)	$	(20,119	)	$	45,553	$	(25,396	)

CONDENSED CONSOLIDATING STATEMENTS OF ~~OPERATIONS~~EARNINGS AND COMPREHENSIVE INCOME ~~(LOSS)~~

(in thousands)


	Three Months Ended February 28, 2017														Three Months Ended November 30, 2017
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated		Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Net sales	$	34,953		$	80,973		$	142,943		$	—		$	258,869	$	35,710		$	87,834		$	165,411		$	—		$	288,955
Cost of products sold	10,049			61,821			99,673			—			171,543		6,963			64,574			116,507			—			188,044
Gross profit	24,904			19,152			43,270			—			87,326		28,747			23,260			48,904			—			100,911
Selling, administrative and engineering expenses	18,553			16,549			31,855			—			66,957		19,715			18,448			36,315			—			74,478
Amortization of intangible assets	318			2,918			1,833			—			5,069		318			2,861			1,952			—			5,131
Restructuring charges	372			441			1,288			—			2,101		5,356			169			1,104			—			6,629
Operating profit (loss)	5,661			(756		)	8,294			—			13,199
Operating profit															3,358			1,782			9,533			—			14,673
Financing costs (income), net	7,430			—			(96		)	—			7,334		7,623			21			(130		)	—			7,514
Intercompany (income) expense, net	(7,882		)	11,242			(3,360		)	—			—		(4,877		)	5,484			(607		)	—			—
Intercompany dividends	—			(4,258		)	—			4,258			—
Other (income) expense, net	(48		)	(4		)	643			—			591		(50		)	45			334			—			329
Earnings (loss) before income taxes	6,161			(7,736		)	11,107			(4,258		)	5,274
Income tax expense (benefit)	151			(667		)	716			—			200
Net earnings (loss) before equity in (loss) earnings of subsidiaries	6,010			(7,069		)	10,391			(4,258		)	5,074
Earnings (loss) before income tax (benefit) expense															662			(3,768		)	9,936			—			6,830
Income tax (benefit) expense															(285		)	437			1,452			—			1,604
Net earnings (loss) before equity in earnings (loss) of subsidiaries															947			(4,205		)	8,484			—			5,226
Equity in earnings (loss) of subsidiaries	(936		)	8,057			(268		)	(6,853		)	—		4,279			8,793			(46		)	(13,026		)	—
Net earnings	$	5,074		$	988		$	10,123		$	(11,111	)	$	5,074	5,226			4,588			8,438			(13,026		)	5,226
Comprehensive income	$	8,185		$	1,324		$	12,828		$	(14,152	)	$	8,185	$	8,251		$	4,588		$	11,566		$	(16,154	)	$	8,251

~~CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)~~

~~(in thousands)~~

Six Months Ended February 28, 2018
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net sales $ 71,929
$ 170,906
$ 321,285
$ —
$ 564,120
Cost of products sold 12,811
128,553
232,149
—
373,513
Gross profit 59,118
42,353
89,136
—
190,607
Selling, administrative and engineering expenses 37,905
35,680
69,395
—
142,980
Amortization of intangible assets 636
5,722
3,941
—
10,299
Restructuring charges 5,550
1,078
3,451
—
10,079
Impairment & divestiture charges 4,217
—
(1,230 ) —
2,987
Operating profit (loss) 10,810
(127 ) 13,579
—
24,262
Financing costs (income), net 15,400
43
(325 ) —
15,118
Intercompany (income) expense, net (9,919 ) 10,903
(984 ) —
—
Other expense, net 40
94
562
—
696
Earnings (loss) before income taxes 5,289
(11,167 ) 14,326
—
8,448
Income tax expense (benefit) 10,327
(1,797 ) 12,913
—
21,443
Net (loss) earnings before equity in loss of subsidiaries (5,038 ) (9,370 ) 1,413
—
(12,995 )
Loss in earnings of subsidiaries (7,957 ) (661 ) (1,505 ) 10,123
—
Net loss $ (12,995 ) $ (10,031 ) $ (92 ) $ 10,123
$ (12,995 )
Comprehensive income (loss) $ 71,039
$ (10,031 ) $ 86,386
$ (76,355 ) $ 71,039

~~CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)~~

~~(in thousands)~~

Six Months Ended February 28, 2017
Parent Guarantors Non-Guarantors Eliminations Consolidated
Net sales $ 66,682
$ 165,249
$ 292,731
$ —
$ 524,662
Cost of products sold 17,143
123,237
203,889
—
344,269
Gross profit 49,539
42,012
88,842
—
180,393
Selling, administrative and engineering expenses 36,520
33,185
65,856
—
135,561
Amortization of intangible assets 636
5,994
3,700
—
10,330
Restructuring charges 727
1,164
3,157
—
5,048
Director & officer transition charges 7,784
—
—
—
7,784
Operating profit 3,872
1,669
16,129
—
21,670
Financing costs (income), net 14,756
—
(289 ) —
14,467
Intercompany (income) expense, net (12,950 ) 10,156
2,794
—
—
Intercompany dividends —
(59,401 ) —
59,401
—
Other expense (income), net 2,037
(74 ) (2,001 ) —
(38 )
Earnings before income taxes 29
50,988
15,625
(59,401 ) 7,241
Income tax (benefit) expense (2,563 ) (697 ) 462
—
(2,798 )
Net earnings before equity in earnings of subsidiaries 2,592
51,685
15,163
(59,401 ) 10,039
Equity in earnings of subsidiaries 7,447
13,682
2,862
(23,991 ) —
Net earnings $ 10,039
$ 65,367
$ 18,025
$ (83,392 ) $ 10,039
Comprehensive (loss) income $ (12,972 ) $ 47,616
$ 13,459
$ (61,075 ) $ (12,972 )

CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)


	February 28, 2018											November 30, 2018
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated		Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	4,276	$	—	$	149,319	$	—		$	153,595	$	41,371	$	—	$	162,072	$	—		$	203,443
Accounts receivable, net	19,641		52,171		138,838		—			210,650		18,511		40,803		131,876		—			191,190
Inventories, net	26,915		61,363		77,949		—			166,227		25,035		51,389		78,340		—			154,764
Assets held for sale												—		79,748		26,445		—			106,193
Other current assets	14,186		3,263		43,120		—			60,569		11,761		1,824		38,160		—			51,745
Total current assets	65,018		116,797		409,226		—			591,041		96,678		173,764		436,893		—			707,335
Property, plant and equipment, net	8,076		31,661		62,674		—			102,411
Property, plant & equipment, net												7,828		16,557		54,775		—			79,160
Goodwill	38,846		201,578		305,711		—			546,135		38,847		184,121		254,392		—			477,360
Other intangibles, net	7,521		132,320		76,529		—			216,370		6,566		97,932		48,221		—			152,719
Investment in subsidiaries	1,902,303		1,274,274		806,292		(3,982,869		)	—		1,806,237		1,198,123		807,031		(3,811,391		)	—
Intercompany receivable	—		564,517		208,983		(773,500		)	—		—		616,713		208,731		(825,444		)	—
Other long-term assets	7,407		1,864		15,077		—			24,348		12,745		339		20,375		—			33,459
Total assets	$	2,029,171	$	2,323,011	$	1,884,492	$	(4,756,369	)	$	1,480,305	$	1,968,901	$	2,287,549	$	1,830,418	$	(4,636,835	)	$	1,450,033
LIABILITIES & SHAREHOLDERS' EQUITY	LIABILITIES & SHAREHOLDERS' EQUITY											LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable	$	15,469	$	31,079	$	90,393	$	—		$	136,941	$	13,915	$	20,468	$	89,684	$	—		$	124,067
Accrued compensation and benefits	13,376		5,239		22,903		—			41,518		10,509		2,938		22,896		—			36,343
Current maturities of debt and short-term borrowings	30,000		—		—		—			30,000		30,000		—		—		—			30,000
Income taxes payable	152		—		7,535		—			7,687		—		—		8,215		—			8,215
Liabilities held for sale												—		12,951		57,079		—			70,030
Other current liabilities	13,683		7,951		36,734		—			58,368		18,207		6,481		39,026		—			63,714
Total current liabilities	72,680		44,269		157,565		—			274,514		72,631		42,838		216,900		—			332,369
Long-term debt, net	517,318		—		—		—			517,318
Long-term debt												495,384		—		—		—			495,384
Deferred income taxes	17,631		—		5,631		—			23,262		15,426		—		1,505		—			16,931
Pension and postretirement benefit liabilities	11,942		—		7,396		—			19,338
Pension and post-retirement benefit liabilities												7,632		—		7,039		—			14,671
Other long-term liabilities	48,651		383		7,558		—			56,592		47,348		285		5,480		—			53,113
Intercompany payable	771,668		—		1,832		(773,500		)	—		792,915		32,529		—		(825,444		)	—
Shareholders’ equity	589,281		2,278,359		1,704,510		(3,982,869		)	589,281		537,565		2,211,897		1,599,494		(3,811,391		)	537,565
Total liabilities and shareholders’ equity	$	2,029,171	$	2,323,011	$	1,884,492	$	(4,756,369	)	$	1,480,305	$	1,968,901	$	2,287,549	$	1,830,418	$	(4,636,835	)	$	1,450,033

CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)


	August 31, 2017											August 31, 2018
	Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated		Parent		Guarantors		Non-Guarantors		Eliminations			Consolidated
ASSETS
Current assets
Cash and cash equivalents	$	34,715	$	—	$	194,856	$	—		$	229,571	$	67,649	$	—	$	182,841	$	—		$	250,490
Accounts receivable, net	17,498		50,749		121,959		—			190,206		19,969		54,822		112,958		—			187,749
Inventories, net	23,308		48,492		71,851		—			143,651		22,570		59,391		74,395		—			156,356
Assets held for sale	—		—		21,835		—			21,835		—		—		23,573		—			23,573
Other current assets	23,576		3,619		34,468		—			61,663		7,358		4,759		30,615		—			42,732
Total current assets	99,097		102,860		444,969		—			646,926		117,546		118,972		424,382		—			660,900
Property, plant & equipment, net	7,049		26,130		61,342		—			94,521		7,937		26,408		55,875		—			90,220
Goodwill	38,847		200,499		290,735		—			530,081		38,847		203,543		270,022		—			512,412
Other intangibles, net	8,156		138,042		74,291		—			220,489
Other intangible assets, net												6,884		121,793		52,360		—			181,037
Investment in subsidiaries	1,832,472		1,186,715		805,016		(3,824,203		)	—		1,836,954		1,211,781		789,917		(3,838,652		)	—
Intercompany receivable	—		589,193		205,183		(794,376		)	—
Intercompany receivables												—		622,646		200,173		(822,819		)	—
Other long-term assets	8,377		812		15,749		—			24,938		12,955		366		23,448		—			36,769
Total assets	$	1,993,998	$	2,244,251	$	1,897,285	$	(4,618,579	)	$	1,516,955	$	2,021,123	$	2,305,509	$	1,816,177	$	(4,661,471	)	$	1,481,338

LIABILITIES & SHAREHOLDERS' EQUITY												LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable	$	15,412	$	27,168	$	90,807	$	—		$	133,387	$	15,890	$	29,022	$	85,926	$	—		$	130,838
Accrued compensation and benefits	19,082		7,672		24,185		—			50,939		22,171		9,804		22,533		—			54,508
Current maturities of debt and short-term borrowings	30,000		—		—		—			30,000
Current maturities of debt												30,000		—		—		—			30,000
Income taxes payable	153		—		5,927		—			6,080		—		—		4,091		—			4,091
Liabilities held for sale	—		—		101,083		—			101,083		—		—		44,225		—			44,225
Other current liabilities	18,512		7,169		31,764		—			57,445		17,379		11,078		38,842		—			67,299
Total current liabilities	83,159		42,009		253,766		—			378,934		85,440		49,904		195,617		—			330,961
Long-term debt	531,940		—		—		—			531,940		502,695		—		—		—			502,695
Deferred income taxes	24,164		—		5,695		—			29,859		17,467		—		4,466		—			21,933
Pension and post-retirement benefit liabilities	12,540		—		7,322		—			19,862		7,765		—		7,104		—			14,869
Other long-term liabilities	48,692		352		6,777		—			55,821		45,483		359		6,326		—			52,168
Intercompany payable	792,964		—		1,412		(794,376		)	—		803,561		19,258		—		(822,819		)	—
Shareholders’ equity	500,539		2,201,890		1,622,313		(3,824,203		)	500,539		558,712		2,235,988		1,602,664		(3,838,652		)	558,712
Total liabilities and shareholders’ equity	$	1,993,998	$	2,244,251	$	1,897,285	$	(4,618,579	)	$	1,516,955	$	2,021,123	$	2,305,509	$	1,816,177	$	(4,661,471	)	$	1,481,338

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)


	Six Months Ended February 28, 2018														Three Months Ended November 30, 2018
	Parent			Guarantors			Non-Guarantors			Eliminations		Consolidated			Parent			Guarantors			Non-Guarantors			Eliminations		Consolidated
Operating Activities
Net cash (used in) provided by operating activities	$	(14,509	)	$	6,923		$	(14,520	)	$	—	$	(22,106	)	$	(16,275	)	$	4,337		$	(17,172	)	$	—	$	(29,110	)
Investing Activities
Capital expenditures	(1,982		)	(5,274		)	(5,291		)	—		(12,547		)	(423		)	(4,340		)	(2,903		)	—		(7,666		)
Proceeds from sale of property, plant and equipment	—			83			30			—		113			8			3			—			—		11
Rental asset buyout for Viking divestiture	—			—			(27,718		)	—		(27,718		)
Proceeds from sale of business, net of transactions costs	198			—			8,582			—		8,780
Cash paid for business acquisitions, net of cash acquired	—			(1,732		)	(14,785		)	—		(16,517		)
Cash used in investing activities	(1,784		)	(6,923		)	(39,182		)	—		(47,889		)	(415		)	(4,337		)	(2,903		)	—		(7,655		)
Financing Activities
Principal repayments on term loan	(15,000		)	—			—			—		(15,000		)	(7,500		)	—			—			—		(7,500		)
Stock option exercises and other	10,305			—			—			—		10,305
Stock option exercises, related tax benefits and other															552			—			—			—		552
Taxes paid related to the net share settlement of equity awards	(1,107		)	—			—			—		(1,107		)	(201		)	—			—			—		(201		)
Cash dividend	(2,390		)	—			—			—		(2,390		)
Intercompany loan activity	(5,954		)	—			5,954			—		—
Cash (used in) provided by financing activities	(14,146		)	—			5,954			—		(8,192		)
Cash Dividends															(2,439		)	—			—			—		(2,439		)
Cash used in financing activities															(9,588		)	—			—			—		(9,588		)
Effect of exchange rate changes on cash	—			—			2,211			—		2,211			—			—			(694		)	—		(694		)
Net decrease in cash and cash equivalents	(30,439		)	—			(45,537		)	—		(75,976		)	(26,278		)	—			(20,769		)	—		(47,047		)
Cash and cash equivalents—beginning of period	34,715			—			194,856			—		229,571			67,649			—			182,841			—		250,490
Cash and cash equivalents—end of period	$	4,276		$	—		$	149,319		$	—	$	153,595		$	41,371		$	—		$	162,072		$	—	$	203,443

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)


	Six Months Ended February 28, 2017															Three Months Ended November 30, 2017
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated			Parent			Guarantors			Non-Guarantors			Eliminations		Consolidated
Operating Activities
Net provided by operating activities	$	59,275		$	5,902		$	8,906		$	(59,401	)	$	14,682
Net cash (used in) provided by operating activities																$	(9,838	)	$	3,580		$	(14,200	)	$	—	$	(20,458	)
Investing Activities
Capital expenditures	(2,156		)	(6,108		)	(6,431		)	—			(14,695		)	(1,478		)	(3,589		)	(2,837		)	—		(7,904		)
Proceeds from sale of property, plant and equipment	—			135			109			—			244			—			9			23			—		32
Rental asset lease buyout for Viking divestiture																—			—			(27,718		)	—		(27,718		)
Cash used in investing activities	(2,156		)	(5,973		)	(6,322		)	—			(14,451		)	(1,478		)	(3,580		)	(30,532		)	—		(35,590		)
Financing Activities
Principal repayments on term loan	(7,500		)	—			—			—			(7,500		)
Repayments on term loan																(7,500		)	—			—			—		(7,500		)
Stock option exercises and other																2,231			—			—			—		2,231
Taxes paid related to the net share settlement of equity awards	(920		)	—			—			—			(920		)	(282		)	—			—			—		(282		)
Stock option exercises and other	5,949			—			—			—			5,949
Cash dividend	(2,358		)	—			(59,401		)	59,401			(2,358		)	(2,390		)	—			—			—		(2,390		)
Intercompany loan activity	(53,734		)	—			53,734			—			—			(5,954		)	—			5,954			—		—
Cash used in financing activities	(58,563		)	—			(5,667		)	59,401			(4,829		)
Cash (used in) provided by financing activities																(13,895		)	—			5,954			—		(7,941		)
Effect of exchange rate changes on cash	—			—			(3,116		)	—			(3,116		)	—			—			(532		)	—		(532		)
Net decrease in cash and cash equivalents	(1,444		)	(71		)	(6,199		)	—			(7,714		)	(25,211		)	—			(39,310		)	—		(64,521		)
Cash and cash equivalents—beginning of period	7,953			71			171,580			—			179,604			34,715			—			194,856			—		229,571
Cash and cash equivalents—end of period	$	6,509		$	—		$	165,381		$	—		$	171,890		$	9,504		$	—		$	155,546		$	—	$	165,050

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Actuant Corporation, headquartered in Menomonee Falls, Wisconsin, ~~is a Wisconsin corporation and~~ was incorporated in 1910. We are a global diversified company that designs, manufactures and distributes a broad range of industrial products and systems to various end markets. The Company is organized into ~~three operating~~in two reportable segments: Industrial ~~Energy~~Tools & Services ("IT&S") and Engineered ~~Solutions.~~Components & Systems ("EC&S"). The Industrial Tools & Services segment is primarily ~~involved~~engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools, ~~to the maintenance, industrial, infrastructure and production automation markets. The Energy segment provides joint integrity products and services,~~ as well as ~~rope~~providing services and ~~cable solutions~~tool rentals to the ~~global~~industrial, maintenance, infrastructure, oil & gas, ~~power generation~~energy and other ~~energy~~ markets. The Engineered ~~Solutions~~Components & Systems segment provides highly engineered ~~position~~components for on-highway, off-highway, agriculture, energy, medical, construction and ~~motion control systems to original equipment manufacturers (“OEM”) in various on and off-highway vehicle markets, as well as a variety of~~ other ~~products to the industrial and agricultural~~vertical markets. Financial information related to the Company's segments is included in Note 13, ~~"Segment~~"Business Segment, Geographic and Customer Information" in the notes to the condensed consolidated financial statements.

Our businesses provide an array of products and services across multiple markets and geographies, which results in significant diversification. ~~Our Industrial~~Both the IT&S and ~~Engineered Solutions~~EC&S segments continue to benefit from ~~improvement~~improvements within the broad industrial landscape, mining, infrastructure, commercial and off-highway vehicle and agriculture ~~markets, which began in the second half of fiscal 2017 and~~markets. We expect continued ~~through the first half of fiscal 2018. We anticipate~~growth, though at a ~~moderate growth rate~~moderated pace, in these markets ~~during the second half of~~in fiscal ~~2018, while we expect the on-highway vehicle markets to slow on weaker demand and more difficult comparisons.~~2019. Reduced capital and maintenance spending in the oil & gas and energy markets in the form of project cancellations, deferrals and scope reductions ~~are expected to be a continuing headwind~~were headwinds throughout much of fiscal ~~2018, though quarterly core sales declines~~2018. However, we are expecting to see stabilization of the oil & gas and energy markets in fiscal 2019, which should ~~moderate as fiscal 2018 progresses.~~result in modest improvement in maintenance spending. As a result, we expect consolidated fiscal ~~2018~~2019 core sales (sales growth ~~(sales~~ excluding the impact of acquisitions, divestitures and changes in foreign currency exchange rates) growth of 2%3% to 4%5%, compared to a 4%6% core sales ~~decline~~growth in fiscal ~~2017.~~2018.

We ~~continue to pursue~~remain focused on pursuing both organic and inorganic growth opportunities aligned with our strategic objectives. This includes the advancement of our commercial effectiveness initiatives along with new product development ~~efforts associated with~~efforts. We also remain focused on our ~~offerings of mission critical solutions to customers. We are also revitalizing~~ lean efforts across our manufacturing, assembly and service operations. ~~The Industrial~~Our IT&S segment is ~~primarily~~ focused on accelerating global sales growth through geographic expansion, continuing emphasis on sales and marketing efforts, new product introductions and regional growth via ~~second tier~~second-tier brands. ~~Within the Energy segment,~~In addition, we ~~continue to geographically diversify and expand capabilities within the maintenance tools and services offerings while also~~remain focused on redirecting sales, marketing and engineering resources to ~~various~~ non-oil & gas vertical ~~markets. During the quarter, we completed the divestiture~~markets and providing new and existing customers with critical products, rentals, services and solutions in a dynamic energy environment. We continue to expect IT&S segment year-over-year core sales growth of ~~our Viking business, thus exiting the offshore mooring business and significantly limiting our exposure~~3% to ~~the upstream, offshore oil & gas market. Also during the quarter, we completed the acquisition of Mirage, a provider of industrial and energy maintenance tools.~~5% in fiscal 2019. The ~~Engineered Solutions~~EC&S segment is capitalizing on their served end market demand recovery, while also expanding content and engineering capabilities across customers and ~~geographies. We continue~~geographies, resulting in an expected 2% to ~~analyze~~5% core sales growth in fiscal 2019.

As part of our portfolio management process, we routinely review our businesses ~~in line~~ with respect to our strategic initiatives and long-term objectives and are taking ~~portfolio management~~ actions that are anticipated to ~~simplify and~~ improve the operational performance of the Company. For example, the divestiture of our ~~Company.~~Cortland businesses in fiscal 2019 will represent a substantial exit from the upstream oil & gas market. In addition, the divestiture of the Precision Hayes business represents our exit of the Concrete Tensioning product line and allows us to redirect resources to other core product lines. Divestitures pose risks and challenges that could negatively impact our business, including required separation or carve-out activities and costs, disputes with buyers or potential impairment charges.

We ~~remain focused~~continue to execute on ~~improving our financial position and flexibility by adjusting our cost structure~~previously announced restructuring initiatives; however, we do not expect associated costs to ~~reflect changes in demand levels and by proactively managing working capital and cash flow generation. Across~~be material to the ~~Company, we are continuing the cost reduction programs initiated at the beginning~~rest of fiscal ~~2016. Restructuring charges related to these initiatives totaled approximately $33 million in fiscal 2016, fiscal~~2019 operating results. During the three months ended November 30, 2018 and 2017, ~~and the first half of fiscal 2018, combined. Total restructuring charges were $4.3~~we incurred $0.4 million and ~~$10.9~~$6.6 million ~~in the three and six months ended February 28, 2018,~~of restructuring costs, respectively. These restructuring costs related primarily to ~~executive leadership changes,~~ facility consolidation, headcount reductions and operational improvement. Due to continuing challenging market conditions and operating results within our Energy segment, we are examining our cost structure, restructuring initiatives and service strategy to align our business with current market expectations and maximize available opportunities in the interim. Similarly, we continue to examine other areas of our business that may require structural cost changes to improve performance and profitability. As such, the Company anticipates restructuring initiatives and related pre-tax charges continuing throughout the second half of fiscal 2018, including approximately $2 million to $4 million of additional restructuring charges during that time.

Pre-tax cost savings realized from executing these restructuring initiatives totaled approximately ~~$19~~$30 million in ~~fiscal~~fiscals 2016, ~~fiscal~~ 2017 and 2018, and the first ~~half~~quarter of fiscal ~~2018,~~2019 combined. Realized cost savings were comprised of $5$11 million within the ~~Industrial~~IT&S segment, $7$16 million within the ~~Energy~~EC&S segment $6and $3 million within ~~the Engineered Solutions segment and $1 million within Corporate expenses.~~Corporate. The Company anticipates realizing an incremental ~~$10~~$2 million to ~~$15~~$4 million in pre-tax cost savings for the ~~second half~~balance of ~~fiscal 2018 and in~~ fiscal 2019 for all previously executed restructuring ~~initiatives implemented in fiscals 2016, 2017 and 2018 and to be implemented in the second half of fiscal 2018. Thirty~~initiatives. Sixty-five percent of the anticipated future cost savings are expected to benefit the ~~Industrial~~IT&S segment, another ~~50%~~30% are expected to benefit the ~~Energy~~EC&S segment ~~another~~and the remaining 5% are expected to benefit ~~the Engineered Solutions segment and the remaining 15% are expected to~~Corporate. The annual benefit ~~Corporate expenses. These~~of these gross cost savings ~~are routinely offset~~may be impacted by ~~variations between years~~a number of factors, including sales and production volume variances and annual bonus expense ~~differential and corresponding re-investment of savings into other initiatives.~~

differential.

Given our global geographic footprint, changes in foreign currency exchange rates could have a significant impact on our financial results, financial position and cash flow. Changes in foreign currency exchange rates will continue to add volatility as over one-half of our sales are generated outside of the United States in currencies other than the U.S. dollar. The weakening of the U.S. dollar favorably impacts our sales, cash flow and earnings given the translation of our international results into U.S. dollars. This also results in lower costs for certain international operations, which incur costs or purchase components in U.S. dollars, and increases the dollar value of assets (including cash) and liabilities of our international operations. A strengthening of the U.S. dollar has the opposite effect on our sales, cash flow, earnings and financial position.

Results of Operations

The following table sets forth our results of operations (in millions, except per share amounts):


	Three Months Ended February 28,										Six Months Ended February 28,										Three Months Ended November 30,
	2018						2017				2018					2017					2018					2017
Net sales	$	275			100	%	$	259	100	%	$	564		100	%	$	525		100	%	$	293		100	%	$	289	100	%
Cost of products sold	185				67	%	172		66	%	374			66	%	344			66	%	188			64	%	188		65	%
Gross profit	90				33	%	87		34	%	190			34	%	181			34	%	105			36	%	101		35	%
Selling, administrative and engineering expenses	69				25	%	67		26	%	143			25	%	136			26	%	73			25	%	74		26	%
Amortization of intangible assets	5				2	%	5		2	%	10			2	%	10			2	%	4			1	%	5		2	%
Director & officer transition charges	—				—	%	—		—	%	—			—	%	8			2	%
Restructuring charges	3				1	%	2		1	%	10			2	%	5			1	%	—			—	%	7		2	%
Impairment & divestiture charges	3				2	%	—		—	%	3			1	%	—			—	%	37			13	%	—		—	%
Operating profit	10			0.03636363636	4	%	13		5	%	24			4	%	22			4	%
Operating (loss) profit																					(9		)	(3	)%	15		5	%
Financing costs, net	8				3	%	7		3	%	15			3	%	14			3	%	7			2	%	8		3	%
Other expense, net	—			0.02909090909	—	%	1		—	%	1			—	%	—			—	%	1			—	%	—		—	%
Earnings before income tax expense (benefit)	2			—	1	%	5		2	%	8			1	%	7			1	%
Income tax expense (benefit)	20			0.007272727273	7	%	—		—	%	21			4	%	(3		)	(1	)%
(Loss) earnings before income tax (benefit) expense																					(17		)	(6	)%	7		2	%
Income tax (benefit) expense																					—			—	%	2		1	%
Net (loss) earnings	$	(18	)	0.03636363636	(7	)%	$	5	2	%	$	(13	)	(2	)%	$	11		2	%	$	(17	)	(6	)%	$	5	2	%

Diluted (loss) earnings per share	$	(0.30	)				$	0.08			$	(0.22	)			$	0.17
Diluted earnings per share																					$	(0.29	)			$	0.09

Consolidated sales for the ~~second~~first quarter of fiscal ~~2018~~2019 were ~~$275~~$293 million, an increase of ~~$16~~$4 million ~~from the prior year, while year-to-date sales were $564 million, an increase of $39 million~~(1% ) from the prior year. For the three ~~and six~~ months ended ~~February 28,~~November 30, 2018, foreign currency exchange rates ~~favorably~~unfavorably impacted sales by ~~5% and 4%, respectively. However, the~~2% with minimal net ~~acquisition~~impact from acquisitions and divestiture, ~~activity reduced sales by 2% and 1% for the three and six months ended February 28, 2018, respectively. As~~resulting in a ~~result,~~ core sales ~~were up~~increase of 3% ~~for the second quarter and 5% year-to-date compared to prior year.~~year-over-year. The consolidated core sales increase was the result of ~~a strong end market demand~~increased sales and ~~volume~~pricing in both the Industrial Tools & Services and Engineered ~~Solutions segments, which more than offset the expected decline~~Components & Systems segments. Gross profit margins increased slightly to 36% in the ~~Energy segment. Operating profit margins stayed relatively consistent year-over-year. Non-recurring director~~first quarter of fiscal 2019 compared to 35% in the prior year period due to favorable sales mix, price realization net of tariff and commodity cost increases and the realization of benefits from restructuring activities. Additionally, the three months ended November 30, 2018 included impairment & ~~officer transition~~divestiture charges of $8$36 million ~~were included~~related to the anticipated sale of our Precision Hayes and Cortland businesses (as described in Note 5, "Divestiture Activities"), while the ~~six~~three months ended ~~February 28,~~November 30, 2017 ~~while the six months ended February 28, 2018~~ included ~~increased~~ restructuring charges of $7 million ~~year-over-year and $3 million of charges~~primarily related to the Viking divestiture. Additionally, the second quarter of fiscal 2018 included an increased effective income tax rate compared to prior year due to a one-time provisional tax charge for U.S. Tax Reform (see Note 12, "Income Taxes" for further discussion) and $9 million of tax expense associated with the Viking divestiture.

executive leadership changes.

Segment Results

Industrial Tools & Services Segment

The ~~Industrial~~IT&S segment is a global supplier of branded hydraulic and mechanical tools to a broad array of end markets, including ~~general maintenance and repair,~~ industrial, ~~oil & gas,~~energy, mining ~~infrastructure~~ and production ~~automation.~~automation markets. Its primary products include ~~high-force hydraulic~~branded tools, ~~production automation solutions and concrete stressing components and systems (collectively "Industrial Tools") and~~ highly engineered heavy lifting technology solutions, ~~("Heavy Lifting Technology")~~connectors for oil & gas, as well as hydraulic torque wrenches (Product product line). On the services side, we provide energy maintenance and manpower services to meet customer-specific needs and rental capabilities for certain of our products (Service & Rental product line). The following table sets forth the results of operations for the ~~Industrial~~IT&S segment (in millions):


	Three Months Ended February 28,						Six Months Ended February 28,						Three Months Ended November 30,
	2018			2017			2018			2017			2018			2017
Net sales	$	99		$	92		$	196		$	179		$	149		$	142
Operating profit	17			18			35			37			26			21
Operating profit %	17.0		%	20.1		%	17.9		%	20.8		%	17.7		%	14.7		%

~~Industrial~~The IT&S segment ~~second~~first quarter sales were ~~$99~~$149 million, an increase of ~~8% from the prior year, while year-to-date sales were $196~~$7 million ~~an increase of 10%~~(5%) from the prior year. ~~Second quarter core sales were up 4%, excluding a 4% benefit from~~Changes in foreign currency exchange ~~rates,~~rate unfavorably impacted sales comparison by 1%, while ~~year-to-date core~~the Mirage and Equalizer acquisitions increased net sales ~~were up 6%~~by 2%, excluding a 4% benefit from foreign currency exchange rates. Overall demand for the Industrial Tools product line remained strong globally and across our diverse set of end markets, with particular strengthresulting in the bolting and OEM service tool categories and weakness within concrete tensioning product sales. Core sales within the Industrial Tools product line increased $6 million (7%) and $10 million (6%) compared to prior year for the three and six months ended February 28, 2018 and 2017, respectively. The Industrialan IT&S segment core sales growth ~~represents both broad market strength and~~of $6 million (4%) compared to the ~~impact of new product and commercial coverage activities.~~prior year. The ~~segment's overall~~ core sales ~~growth percentage~~increase of $6 million (15%) in the Service & Rental product line was ~~slightly diminished by~~ the result of global maintenance activity levels increasing from prior year. The core sales ~~decline~~within the Product product line remained relatively flat (0% core sales growth) reflecting the continued strong sales demand in the ~~Heavy Lifting Technology product line of $2 million (-16%) for~~American, Australian and Asian regions offset by softer sales demand, largely in the ~~three months ended February 28, 2018 and an~~ European region. The

increase ~~of $1 million (7%) for the six months ended February 28, 2018. The decrease~~ in operating profit for the three ~~and six~~ months ended ~~February 28,~~November 30, 2018 ~~were~~was the result of ~~approximately $2 million in long-term specialty~~incremental gross profit on higher volumes within the Service & Rental product line, the elimination of prior year discrete charges associated with heavy lifting ~~project cost overruns~~projects, pricing benefits net of increased tariff and ~~production inefficiencies~~commodity costs and the lower ~~volumes in concrete tensioning. Incremental commercial and engineering investments~~restructuring charges compared to ~~support growth of $2 million~~the prior year. Restructuring charges were de minimis for the three months ended ~~February 28,~~November 30, 2018 ~~further contributed to lower comparative operating profit. Restructuring charges totaled $3 million and $1 million for the six months ended February 28, 2018 and 2017, respectively.~~

~~Energy Segment~~

The Energy segment provides products and maintenance services to the global energy markets, where safety, reliability, up-time and productivity are key value drivers. Products include joint integrity tools and connectors for oil & gas and power generation installations and high performance ropes, cables and umbilicals. In addition to these products, the Energy segment also provides joint integrity tools under rental arrangements, as well as technical manpower solutions. The following table sets forth comparative results of operations for the Energy segment (in millions):

Three Months Ended February 28, Six Months Ended February 28,
2018 2017 2018 2017
Net sales $ 66
$ 73
$ 142
$ 158
Operating (loss) profit ⁽¹⁾
(5 ) (1 ) (4 ) 3
Operating (loss) profit % (6.8 )% (0.8 )% (3.0 )% 1.7 %

⁽¹⁾~~Operating (loss) profit includes impairment and divestiture charges of $3 million for both the three and six months ended February 28, 2018.~~

Energy segment second quarter sales decreased 9% from the prior year, while year-to-date sales decreased 10%. Changes in foreign currency exchange rates favorably impacted sales comparisons by 4% and 3% for the three and six month periods. In addition, the net impact on sales from the Viking divestiture and Mirage acquisition resulted in a $6 million (-5%) and $11 million (-4%) headwind for the three and six months ended February 28, 2018, respectively. As a result, Energy segment core sales declined 8% for the second quarter and 9% year-to-date. Core sales from our Energy Maintenance & Integrity product line decreased $7 million (12%) and $16 million (13%) for the three and six months ended February 28, 2018, respectively. The decrease in both periods was due to the continuation of customer maintenance deferrals and scope reductions, most notably in the Asia Pacific region with modestly improving activity levels limited to the Middle East region. Core sales in our Other Energy Solutions product line, consisting of umbilical & rope solutions, increased by $1 million (7%) and $3 million (10%) in the three and six month periods, due to higher medical demand along with improving offshore oil & gas rope and cable activity. Energy segment operating loss was $5 million and $1 million for the three months ended ~~February 28, 2018 and 2017, respectively. Year-to-date operating loss was $4~~

million and operating profit was $3 million for fiscal 2018 and 2017, respectively. Operating losses in the three and six month periods included impairment and divestiture charges of $3 million related to the Viking divestiture. Excluding the impairment and divestiture charge, Energy segment results were an operating loss of $2 million and $1 million for the three and six months ended February 28, 2018. The adjusted operating losses for fiscal 2018 were the result of lower volumes and increased restructuring charges, partially offset by the absence of prior year Viking losses and the benefit of prior cost reduction actions. Restructuring costs to consolidate facilities and reduce headcount were $3 million for the six months ended February 28, 2018 and insignificant for the six months ended February 28,November 30, 2017.

Engineered ~~Solutions~~Components & Systems Segment

The ~~Engineered Solutions~~EC&S segment is a leading global designer, manufacturer and assembler of system critical position and motion control systems, high performance ropes, cables and umbilicals and other customized industrial ~~products~~components, to various vehicle, construction, agricultural, energy, medical and other niche markets. The segment focuses on providing technical and highly engineered products, including actuation systems, mechanical power transmission products, engine air flow management systems, human to machine interface solutions, ~~and~~ other rugged electronic instrumentation, concrete tensioning and rope and cable. Products in the EC&S segment are primarily marketed directly to ~~OEM customers.~~OEMs and other diverse customers through our technical sales organization. The following table sets forth comparative results of operations for the ~~Engineered Solutions~~EC&S segment (in millions):

Three Months Ended February 28, Six Months Ended February 28,
2018 2017 2018 2017
Net sales $ 110
$ 94
$ 226
$ 188
Operating profit 2
2
9
3
Operating profit % 2.0 % 1.9 % 3.8 % 1.4 %



	Three Months Ended November 30,
	2018			2017
Net sales	$	144		$	147
Operating (loss) profit	(28		)	4
Operating (loss) profit %	(19.7		)%	2.7		%

~~Engineered Solutions~~First quarter EC&S segment net sales decreased $3 million (2%) to $144 million versus the prior year. Excluding the 2% unfavorable impact of foreign currency rate changes and the 2% decrease in sales from the Viking business we divested in fiscal 2018, core sales increased ~~$16 million (17%) to $110 million~~2% for the three months ended November 30, 2018. Core sales growth of 8% in the Off-Highway product line was driven by price increases initiated in the second ~~quarter, while year-to-date sales~~half of fiscal 2018 and increased $38 million (20%) to $226 million. Excluding the 7% and 5% favorable impact of changes in foreign currency exchange rates for the three and six months ended February 28, 2018, respectively, core sales increased 10% for the second quarter and 15% year-to-date. Strong sales and growth continued globally across our Agricultural, Off-Highway and Other product linevolume associated with ~~core sales increasing $6 million (13%) and $14 million (16%) for the three and six months ended February 28, 2018.~~ new platform wins. The On-Highway product line core sales ~~increased $4~~decreased 4% due to the expected decline in sales to the China truck market and the moderation in sales to the European truck market. The Concrete Tensioning product line experienced strong double-digit core sales growth (14%) due to market share recovery, whereas, the Rope & Cable Solutions product line experienced slight core sales growth (1%). Fiscal 2018 operating loss included impairment & divestiture charges of $36 million ~~(7%)~~related to the anticipated sale of our Precision Hayes and Cortland businesses. Excluding the impairment & divestiture charges, the EC&S segment operating profit margin was 6.0% and 3.5% for the ~~second quarter and $15 million (14%) year-to-date due to high growth in Europe, partially offset by anticipated lower China volumes. Operating profit was $9 million and $3 million for the six~~three months ended ~~February 28,~~November 30, 2018 and 2017, respectively, which is ~~primarily~~ the result of ~~higher volumes.~~pricing and sales mix, the absence of prior year Viking losses and net benefits of prior period restructuring initiatives. Restructuring charges were ~~insignificant for the six months ended February 28, 2018~~$0.4 million and $4$1.1 million for the ~~six~~three months ended ~~February 28, 2017.~~November 30, 2018 and 2017, respectively.

Corporate

Corporate expenses decreased $2by $3 million ~~and $6 million from the prior year for the three and six months ended February 28, 2018. The year-to-date decrease in corporate expenses was primarily due~~ to the benefit of executive cost reduction actions, lower incentive compensation and non-recurring director & officer transition charges of $8 million recognized in the prior year, offset by restructuring charges of $4 million, primarily related to executive leadership changes in the six months ended February 28, 2018.

~~Financing Costs, net~~

~~Net financing costs were $8 million and~~ $7 million for the three months ended ~~February 28,~~November 30, 2018. The year-over-year decrease related to restructuring charges of $4 million for executive leadership changes in fiscal 2018, offset by higher incentive compensation, legal fees and outside services in fiscal 2019.

Financing Costs, net

Net financing costs were $7.3 million and $7.5 million for the three months ended November 30, 2018 and 2017, respectively. ~~For the six months ended February 28, 2018 and 2017, net financing costs were $15 million and $14 million, respectively.~~

Income Tax Expense

The Company's income tax expense or benefit is impacted by a number of factors, including the amount of taxable earnings generated in foreign jurisdictions with tax rates that are lower than the U.S. federal statutory rate, permanent items, state tax rates, changes in tax laws, acquisitions and divestitures and the ability to utilize various tax credits and net operating loss carryforwards. The Company's global operations, acquisition activity and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Both ~~fiscal 2018~~the current and ~~2017~~prior year include the benefits of tax planning initiatives. Comparative earnings (loss) before income taxes, income tax ~~expense or~~ benefit and effective income tax rates are as follows ~~(amounts in~~(in millions):

Three Months Ended February 28, Six Months Ended February 28,
2018 2017 2018 2017
Earnings before income taxes $ 2
$ 5
$ 8
$ 7
Income tax expense (benefit) 20
—
21
(3 )
Effective income tax rate 1,226.1 % 3.8 % 253.8 % (38.6 )%



	Three Months Ended November 30,
	2018			2017
(Loss) earnings before income taxes	$	(18	)	$	7
Income tax (benefit) expense	—			2
Effective income tax rate	0.4		%	23.5		%

The ~~Company’s~~comparability of pre-tax earnings (loss), income tax expense (benefit) and the related effective income tax rates ~~during the three and six months ended February 28, 2018 were~~are impacted by the Tax Cuts and Jobs Act ~~(the “Act”), which was enacted into law on December 22, 2017. See further discussion~~as described in Note 12, “Income Taxes” in the notes to the condensed consolidated financial statements, along with impairment & divestiture charges. Results included $36 million ($34 million after tax) of impairment & divestiture charges for the ~~effects of~~three months ended November 30, 2018. Excluding the ~~Act under “Note 12. Income Taxes.”~~

~~The~~impairment & divestiture charges, the effective tax rate for the ~~six~~three months ended ~~February 28,~~November 30, 2018 was 253.8% compared to (38.6)% for the comparable prior year period. The effective tax rate for the current year results in significantly greater tax expense than the comparable prior year period due to recording the effects of the Act as described in "Note 12. Income Taxes." Additionally, the six months ended February 28, 2018 also include discrete income tax expense of $9 million related to the Viking divestiture and $2 million related to the shortfall of tax benefits on deductible equity compensation and expiration of unexercised stock options.13.4%. Both the current and prior year effective income tax rates were impacted by the proportion of earnings in foreign jurisdictions ~~(with~~with income tax rates ~~lower~~different than the U.S. federal income tax ~~rate)~~rate and the amount of income tax benefits ~~derived~~ from tax planning ~~initiatives which were comparable between years.~~initiatives. The Company's earnings (loss) before income tax includes approximately 70% and 80% of earnings from foreign jurisdictions for the estimated full-year fiscal 2019 and 2018, respectively. This foreign income tax rate differential had the effect of reducing the effective income tax rate from the 35% U.S. statutory tax rate by 12.2%, for the three months ended November 30, 2017; however, the impact of foreign rates as compared to the new U.S. statutory rate of 21% is minimal beginning in fiscal 2019. In addition to the ~~Company may release a material valuation allowance~~benefit of the foreign rate differential in ~~a foreign jurisdiction in late~~ fiscal 2018 orand tax planning initiatives (which yield an effective income tax rate lower than the federal income tax rate) in ~~fiscal 2019, if~~each year, the ~~Company determines~~income tax benefit for the three months ended November 30, 2018 is significantly impacted by a $3 million benefit related to the impairment & divestiture charges and a $1 million benefit related to realization of foreign tax credits carryforwards. The tax benefits related to tax planning initiatives are not expected to repeat in future periods due to certain tax attributes that ~~it is more likely than not the deferred~~are no longer available and subsequent changes in relevant tax ~~assets will be realized.~~laws.

Cash Flows and Liquidity

At ~~February 28,~~November 30, 2018, we had $203 million of cash and cash equivalents. Cash and cash equivalents included ~~$149~~$162 million of cash held by our foreign subsidiaries and $4$41 million held domestically. We periodically utilize income tax ~~safe harbor~~safe-harbor provisions to make temporary short-term intercompany advances from our foreign subsidiaries to our U.S. parent. ~~At February 28, 2018, we did not have any~~There were no temporary intercompany advances ~~compared to the $5 million we had~~ outstanding at November 30, 2018 or August 31, ~~2017.~~2018. The following table summarizes our cash flows from operating, investing and financing activities (in millions):


	Six Months Ended February 28,						Three Months Ended November 30,
	2018			2017			2018			2017
Net cash (used in) provided by operating activities	$	(22	)	$	15
Net cash used in operating activities							$	(29	)	$	(20	)
Net cash used in investing activities	(48		)	(15		)	(8		)	(36		)
Net cash used in financing activities	(8		)	(5		)	(10		)	(8		)
Effect of exchange rates on cash	2			(3		)	—			(1		)
Net decrease in cash and cash equivalents	$	(76	)	$	(8	)	$	(47	)	$	(65	)

Cash flows used in operating activities were ~~$22~~$29 million for the ~~six~~three months ended ~~February 28, 2018, a decrease of $37~~November 30, 2018. Net cash used in operating activities increased $9 million ~~from~~as compared to the prior year primarily due to ~~lower cash earnings~~increased primary working capital investment and ~~cash used for inventories and accounts payable, partially offset by reduced cash tax payments.~~higher incentive compensation. Existing cash balances ~~along with $10 million from stock options exercises and $9 million from the sale of business,~~ funded the ~~$28 million rental asset lease buyout for the Viking divestiture, $17 million of business acquisitions, $13~~$8 million of capital expenditures, ~~and $15~~$8 million of principal loan ~~repayments.~~repayments and $2 million annual cash dividend.

Our Senior Credit Facility, which matures on May 8, 2020, includes a ~~$600~~$300 million ~~revolving credit facility, an amortizing~~revolver, a $300 million term loan and a $450 million expansion ~~option, subject to certain conditions.~~option. Quarterly principal payments of $4 million on the term loan commenced on June 30, 2016, increased to $8 million per quarter on June 30, 2017 and extend through March 31, 2020, with the remaining principal due at maturity. ~~At February 28, 2018, we had $154 million of cash and cash equivalents.~~ Unused revolver capacity was ~~$597~~$299 million at ~~February 28,~~November 30, 2018, of which ~~$84~~$238 million was available for borrowing.

We believe that the revolver,

combined with our existing cash on hand and anticipated operating cash ~~flow~~flows, will be adequate to meet operating, debt service, acquisition and capital expenditure funding requirements for the foreseeable future.

Primary Working Capital Management

We use primary working capital as a percentage of sales (PWC %) as a key metric of working capital management. We define this metric as the sum of net accounts receivable and net inventory less accounts payable, divided by the past three months sales annualized. The second quarter working capital increase compared to August 31, 2017 is the result of core sales growth and seasonal inventory build most notable within the Industrial and Engineered Solutions segments. The following table shows a comparison of primary working capital (in millions):


	February 28, 2018			PWC%		August 31, 2017			PWC%		November 30, 2018			PWC%		August 31, 2018			PWC%
Accounts receivable, net	$	211		19	%	$	190		17	%	$	191		16	%	$	188		16	%
Inventory, net	166			15	%	144			13	%	155			13	%	156			13	%
Accounts payable	(137		)	(12	)%	(133		)	(12	)%	(124		)	(10	)%	(131		)	(11	)%
Net primary working capital	$	240		22	%	$	201		18	%	$	222		19	%	$	213		18	%

Commitments and Contingencies

We have operations in numerous geographic locations that are subject to a range of environmental laws and regulations. Environmental expenditures over the past two years have not been material and we believe that such costs will not have a material adverse effect on our financial position, results of operations or cash flows.

We ~~remain~~are contingently liable for certain lease payments ofunder leases within businesses ~~that~~ we previously divested or ~~spun-off, in the event that such~~spun-off. If any of these businesses ~~are unable to~~do not fulfill their future lease payment obligations under a lease, we could be liable for such obligations. ~~The discounted~~As of November 30, 2018, the present value of future minimum lease payments, ~~for these leases was $12 million~~ using a weighted average discount rate of ~~3.15% at February 28, 2018.~~3.35%, on previously divested or spun-off businesses was $10 million.

We had outstanding letters of credit ~~outstanding of approximately $23~~totaling $16 million and ~~$22~~$24 million at ~~February 28,~~November 30, 2018 and August 31, ~~2017,~~2018, respectively, the majority of which relate to commercial contracts and self-insured ~~workers~~workers' compensation programs.

We are also subject to certain contingencies with respect to legal proceedings and regulatory matters which are described in Note 14, "Commitments and Contingencies" in the notes to the condensed consolidated financial statements. In the opinion of management, the resolutions of these contingencies are not expected to have a material adverse effect on the Company's financial position, results of operations or cash flows.

Contractual Obligations

Our contractual obligations have not materially changed in fiscal ~~2018~~2019 and are discussed in Part 1, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Contractual Obligations” in our Annual Report on Form 10-K for the year ended August 31, ~~2017.~~2018.

Critical Accounting Policies

The following policies are considered by management to be the most critical in understanding judgments involved in the preparation of our condensed consolidated financial statements and uncertainties that could impact our results of operations, financial position and cash flow. For information about more of the Company’s policies, methodology and assumptions related to critical accounting policies refer to the Critical Accounting Policies in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Annual Report on Form 10-K for the year ended August 31, 2018.

Goodwill and Long-lived Assets:

Goodwill Impairment Review and Estimates: A considerable amount of management judgment and assumptions are required in performing the impairment tests, principally in determining the fair value of each reporting unit and the indefinite lived intangible assets. While we believe our judgments and assumptions are reasonable, different assumptions could change the estimated fair values and, therefore, impairment charges could be required. Significant negative industry or economic trends, disruptions to the Company's business, loss of significant customers, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets or in entity structure and divestitures may adversely impact the assumptions used in the valuations and ultimately result in future impairment charges.

In estimating the fair value of a reporting unit, we generally use a discounted cash flow model, which calculates fair value as the sum of the projected discounted cash flows over a discrete seven year period plus an estimated terminal value. In certain circumstances, we also review a market approach in which a trading multiple is applied to either forecasted EBITDA (earnings before interest, income taxes, depreciation and amortization) or anticipated proceeds of the reporting unit to arrive at the estimated fair value. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded. The estimated fair value represents the amount we believe a reporting unit could be bought or sold for in a current transaction between willing parties on an arms-length basis.

Fiscal 2019 Impairment Charge: During the first quarter of fiscal 2019, we determined the Precision Hayes and Cortland U.S. businesses met the criteria for assets held for sale treatment at November 30, 2018 resulting in interim “triggering events” which required review of recoverability of goodwill and long-lived assets for two reporting units (Precision Hayes and Cortland). See Note 5, “Divestiture Activities” in the notes to the condensed consolidated financial statements for further discussion.

Precision Hayes Reporting Unit: The Precision Hayes reporting unit recognized impairment charges in conjunction with Precision Hayes’s held for sale classification, resulting in a $9 million impairment charge representing the excess net book value of assets held for sale over anticipated proceeds. There was no impairment charges related to goodwill.

Cortland Reporting Unit: A change in the estimate for Cortland Fibron anticipated proceeds combined with the Cortland U.S. held for sale treatment resulted in a $12 million impairment charge representing the excess net book value of assets held for sale over anticipated proceeds. This impairment charge included $10 million related to goodwill. Subsequent to these impairment charges, there is $20 million remaining goodwill related to the Cortland reporting unit, which is recorded within the "Assets held for sale" line on the Condensed Consolidated Balance Sheets.

Fiscal 2018 Impairment Charge: Our fourth quarter fiscal 2018 impairment review resulted in a review of the recoverability of the goodwill and long-lived assets of two reporting units (Precision Hayes and Cortland).

Precision Hayes Reporting Unit:Changes in certain assumptions used in our annual goodwill impairment analysis, which are linked, in part, to recent market share losses, resulted in a fair value estimate of the Precision Hayes reporting unit lower than its carrying value during the fourth quarter of fiscal 2018. As a result, we recognized a $17 million impairment charge related to the goodwill of the Precision Hayes business, which represented the entire goodwill balance of the reporting unit.

Cortland Reporting Unit:The Cortland reporting unit recognized impairment charges in conjunction with Cortland Fibron’s held for sale classification, resulting in a $10 million impairment charge representing the excess of net book value of assets held for sale over anticipated proceeds. This impairment charge included $4 million related to goodwill.

Indefinite-lived intangibles (tradenames): Indefinite-lived intangible assets are also subject to annual impairment testing. On an annual basis or more frequently if a triggering event occurs, the fair value of indefinite lived assets, based on a relief of royalty valuation approach, are evaluated to determine if an impairment charge is required. We recognized impairment charges during the fourth quarter of fiscal 2018 to write-down the value of tradenames by $7 million in relation to the Cortland Fibron held for sale treatment.

Long-lived Assets (fixed assets and amortizable intangible assets): We also review long-lived assets for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. If such indicators are present, we perform undiscounted operating cash flow analyses to determine if impairment exists. If impairment is determined to exist, any related impairment loss is calculated based on fair value.

Fiscal 2019 Impairment Charge: During the first quarter of fiscal 2019, related to the held for sale treatment of our Precision Hayes business, we recognized a $9 million long-lived asset impairment consisting of $8 million and $1 million on amortizable intangible assets and fixed assets (primarily machinery and equipment), respectively, representing the excess net book value of assets held for sale over anticipated proceeds.

Fiscal 2018 Impairment Charge: In relation to the held for sale treatment of our Cortland businesses, we recognized $13 million of non-cash impairment charges, which related to the recognition in earnings of the cumulative effect of foreign currency rate changes since acquisition at November 30, 2018.

During the fourth quarter of fiscal 2018, the undiscounted operating cash flows of the Precision Hayes business did not exceed its carrying value resulting in a long-lived asset impairment charge of $6 million, consisting of $5 million and $1 million on amortizable intangible assets and fixed assets (primarily machinery and equipment), respectively. Also in the fourth quarter of fiscal 2018 and related to the held for sale treatment of our Cortland Fibron business, we recognized a $46 million long-lived asset impairment, representing the excess of net book value of assets held for sale over anticipated proceeds, which consisted of $35 million related to the recognition in earnings of the cumulative effect of foreign currency rate changes since acquisition.

Refer to the Critical Accounting Policies in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report on Form 10-K for the year ended August 31, ~~2017~~2018 for information about more of the Company’s policies, methodology and assumptions related to critical accounting policies.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

The diverse nature of our business activities necessitates the management of various financial and market risks, including those related to changes in interest rates, foreign currency exchange rates and commodity costs.

Interest Rate Risk: We manage interest expense using a mixture of fixed-rate and variable-rate debt. A change in interest rates impacts the fair value of our 5.625% Senior Notes, but not our earnings or cash flow, because the interest rate on such debt is fixed. Our variable-rate debt obligations consist primarily of revolver and term loan borrowings under our Senior Credit Facility. A ten percent increase in the average cost of our variable rate debt would result in a corresponding $0.3 million ~~and $0.6 million~~ increase in financing costs for the three ~~and six~~ months ended ~~February 28, 2018, respectively.~~November 30, 2018.

Foreign Currency Risk: We maintain operations in the U.S. and various foreign countries. Our more significant non-U.S. operations are located in Australia, the Netherlands, the United Kingdom, Mexico, United Arab Emirates and China, and have foreign currency risk relating to receipts from customers, payments to suppliers and intercompany transactions denominated in foreign currencies. Under certain conditions, we enter into hedging transactions (primarily foreign currency exchange contracts) that enable us to mitigate the potential adverse impact of foreign currency exchange rate risk (see Note 10, “Derivatives” for further information). We do not engage in trading or other speculative activities with these transactions, as established policies require that these hedging transactions relate to specific currency exposures.

The strengthening of the U.S. dollar against most currencies can have an unfavorable impact on our results of operations and financial position as foreign denominated operating results are translated into U.S. dollars. To illustrate the potential impact of changes in foreign currency exchange rates on the translation of our results of operations, quarterly sales and operating profit were remeasured assuming a ten percent decrease in all foreign exchange rates compared with the U.S. dollar. Using this assumption, quarterly sales would have been lower by ~~$14~~$13 million and operating ~~profit~~loss would have been lower by $4$1 million, respectively, for the three months ended ~~February 28,~~November 30, 2018. This sensitivity analysis assumes that each exchange rate would change in the same direction relative to the U.S. dollar and excludes the potential effects that changes in foreign currency exchange rates may have on sales levels or local currency prices. Similarly, a ten percent decline in foreign currency exchange rates versus the U.S. dollar would result in a ~~$65~~$49 million reduction to equity (accumulated other comprehensive loss) as of ~~February 28,~~November 30, 2018, as a result of non U.S. dollar denominated assets and liabilities being translated into U.S. dollars, our reporting currency.

Commodity Cost Risk: We source a wide variety of materials and components from a network of global suppliers. While such materials are typically available from numerous suppliers, commodity raw materials, such as steel and plastic resin, are subject to price fluctuations, which could have a negative impact on our results. We strive to pass along such commodity price increases to customers to avoid profit margin erosion.

Item 4 – Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). There have been no changes in our internal control over financial reporting that occurred during the quarter ended ~~February 28,~~November 30, 2018 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

The Company's Board of Directors has authorized the repurchase of shares of the Company’s common stock under publicly announced share repurchase programs. Since the inception of the initial share repurchase program in fiscal 2012, the Company has repurchased 20,439,434 shares of common stock for $618 million. As of ~~February 28,~~November 30, 2018, the maximum number of shares that may yet be purchased under the programs is 7,560,566 shares. There were no share repurchases in the three and ~~six~~nine months ended ~~February 28,~~November 30, 2018.

Item 6 – Exhibits

(a) Exhibits

See “Index to Exhibits” on page 34, which is incorporated herein by reference.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	ACTUANT CORPORATION
	(Registrant)
Date: ~~April 9, 2018~~January 4, 2019	By:	/S/ ~~RICK T. DILLON~~Fabrizio Rasetti
		~~Rick T. Dillon~~Fabrizio Rasetti
		Executive Vice President, General Counsel and ~~Chief Financial Officer~~
		~~(Principal Financial Officer)~~Secretary

ACTUANT CORPORATION

(the “Registrant”)

(Commission File No. 1-11288)

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED ~~FEBRUARY 28,~~NOVEMBER 30, 2018

INDEX TO EXHIBITS




Exhibit	Description	~~Incorporated Herein By Reference To~~	Filed Herewith	Furnished Herewith
~~10.1~~	~~First Amendment to the Actuant Corporation 2017 Omnibus Incentive Plan~~	~~Exhibit A to the Definitive Proxy Statement related to the Company's 2018 Annual Meeting of Shareholders, which was filed with the SEC on December 4, 2017~~

~~10.2~~	~~Agreement by and between Actuant Corporation and Southeastern Capital Management dated March 20, 2018~~	~~Exhibit 10.1 of Registrant's Form 8-K filed on March 21, 2018~~

~~10.3~~	~~Offer letter by and between Actuant Corporation and John Jeffery Schmaling dated January 18, 2018.~~		X

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		X

32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002			X

32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002			X

101	The following materials from the Actuant Corporation Form 10-Q for the quarter ended ~~February 28,~~November 30, 2018 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive (Loss) Income, ~~(Loss),~~ (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements.	X
		X



	Page No.

Part I—Financial Information

Item 1—Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations	3

Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~	4

Condensed Consolidated Balance Sheets	5

Condensed Consolidated Statements of Cash Flows	6

Notes to Condensed Consolidated Financial Statements	7

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3—Quantitative and Qualitative Disclosures about Market Risk	30

Item 4—Controls and Procedures	31

Part II—Other Information

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 6—Exhibits	32



	Total
Accounts receivable, net	$	1,090
Inventories, net	3,004
Other current assets	90
Property, plant & equipment	2,014
Goodwill	8,856
Other intangible assets, net	4,126
Trade accounts payable	(1,299		)
Accrued compensation and benefits	(97		)
Income taxes payable	(586		)
Deferred income taxes	(681		)
Cash paid, net of cash acquired	$	16,517



	February 28, 2018		August 31, 2017
Assets by Segment:
Industrial	$	324,477	$	329,134
Energy	464,018		482,963
Engineered Solutions	548,547		531,068
General Corporate	143,263		173,790
	$	1,480,305	$	1,516,955

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