UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)


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

For the quarterly period ended ~~May 31,~~November 30, 2021


☐			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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ENERPAC TOOL GROUP CORP.

(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)

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Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Ticker Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.20 par value per share	EPAC	NYSE

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 every Interactive Data File required to be submitted 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 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 “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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. ☐

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

The number of shares outstanding of the registrant’s Class A Common Stock as of ~~June 24,~~December 17, 2021 was ~~60,202,564.~~60,319,046.

Table of Contents

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 anticipated capital expenditures. Words such as “may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “objective,” “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:

•the extent to which the COVID-19 pandemic continues (including new variants of COVID-19 such as the recent Delta and Omicron variants) to impact our employees, operations, customers and suppliers;

•potential increases in the costs of commodities and raw materials, or substantial decreases in their availability;

•heavy reliance on suppliers for components used in the manufacture and sale of our products, including a supply chain interruption due to material and cargo shortages, the COVID-19 pandemic, political tensions, or other causes;

•~~potential increases in the costs of commodities and raw materials, or substantial decreases in their availability;~~

•~~the extent to which the COVID-19 pandemic continues to impact our employees, operations, customers and suppliers;~~

•the deterioration of, or instability in, the domestic and international ~~economy;~~economy and/or in our various end markets;

•decreased demand from customers in the oil & gas industry as a result of significant volatility in oil prices resulting from disruptions in the oil markets;

•uncertainty over global tariffs, or the ~~continuation~~financial impact of ~~challenging conditions in our various end markets;~~tariffs;

•~~our ability~~failure to ~~attract, develop, and retain qualified employees;~~

•collect on accounts receivable, including in certain foreign jurisdictions where sales are concentrated to a ~~material disruption at a significant manufacturing facility;~~

•~~competition in the markets we serve;~~limited number of distributors or agents;

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

•a material disruption at a significant manufacturing facility;

•~~uncertainty over global tariffs, or~~competition in the ~~financial impact of tariffs;~~markets we serve;

•currency exchange rate fluctuations, export and import restrictions, transportation disruptions or shortages, and other risks inherent in our international operations;

•~~regulatory and legal developments;~~

•~~litigation, including product liability and warranty claims;~~

•failure to develop new products and the extent of market acceptance of new products;

•our ability to successfully identify, consummate and 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;

•if the operating performance of our businesses were to fall significantly below normalized levels, the potential for a non-cash impairment charge of goodwill and/or other intangible assets, as they represent a substantial amount of our total assets;

•regulatory and legal developments, including litigation, such as product liability and warranty claims;

•our ability to comply with the covenants in our debt agreements and fluctuations in interest rates;

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

•inadequate intellectual property protection or infringement of the intellectual property of others; and

•other matters, including those of a political, economic, business, competitive and regulatory nature contained from time to time in our 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 our Form 10-K filed with the SEC on October ~~26, 2020.~~25, 2021.

When used herein, the terms “we,” “us,” “our” and the “Company” refer to Enerpac Tool Group Corp. and its subsidiaries. Reference to fiscal years, such as "fiscal 2022," are to the fiscal year ending on August 31 of the specified year. Enerpac Tool Group Corp. 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.enerpactoolgroup.com, as soon as reasonably practicable after such reports are electronically filed with the SEC.

PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~EARNINGS

(In thousands, except per share amounts)

(Unaudited)


		Three Months Ended May 31,				Nine Months Ended May 31,					Three Months Ended November 30,
		2021		2020		2021		2020			2021		2020
Net sales	Net sales	$	143,149	$	101,879	$	383,233	$	381,939	Net sales	$	130,903	$	119,430
Cost of products sold	Cost of products sold	76,302		59,932		206,346		209,211		Cost of products sold	71,277		64,166
Gross profit	Gross profit	66,847		41,947		176,887		172,728		Gross profit	59,626		55,264

Selling, general and administrative expenses	Selling, general and administrative expenses	40,468		40,766		130,061		142,842		Selling, general and administrative expenses	48,477		43,710
Amortization of intangible assets	Amortization of intangible assets	2,061		2,174		6,333		6,167		Amortization of intangible assets	2,005		2,136
Restructuring charges	Restructuring charges	1,571		2,448		2,430		6,348		Restructuring charges	2,737		210
Impairment & divestiture (benefit) charges		0		(1,443)		539		(3,567)
Operating profit (loss)		22,747		(1,998)		37,524		20,938
Impairment & divestiture charges										Impairment & divestiture charges	—		139
Operating profit										Operating profit	6,407		9,069
Financing costs, net	Financing costs, net	1,340		4,552		4,395		15,911		Financing costs, net	961		1,716
Other expense (income), net		540		(1,213)		1,598		(1,682)
Earnings (loss) before income tax expense		20,867		(5,337)		31,531		6,709
Income tax (benefit) expense		(4,390)		(407)		(2,132)		1,349
Net earnings (loss) from continuing operations		25,257		(4,930)		33,663		5,360
Other expense, net										Other expense, net	480		273
Earnings before income tax expense										Earnings before income tax expense	4,966		7,080
Income tax expense										Income tax expense	1,781		2,258
Net earnings from continuing operations										Net earnings from continuing operations	3,185		4,822
Loss from discontinued operations, net of income taxes	Loss from discontinued operations, net of income taxes	(226)		(69)		(852)		(6,076)		Loss from discontinued operations, net of income taxes	(397)		(224)
Net earnings (loss)		$	25,031	$	(4,999)	$	32,811	$	(716)
Net earnings										Net earnings	$	2,788	$	4,598

Earnings (loss) per share from continuing operations
Earnings per share from continuing operations										Earnings per share from continuing operations
Basic	Basic	$	0.42	$	(0.08)	$	0.56	$	0.09	Basic	$	0.05	$	0.08
Diluted	Diluted	$	0.42	$	(0.08)	$	0.56	$	0.09	Diluted	$	0.05	$	0.08

Loss per share from discontinued operations	Loss per share from discontinued operations									Loss per share from discontinued operations
Basic	Basic	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.10)	Basic	$	(0.01)	$	(0.00)
Diluted	Diluted	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.10)	Diluted	$	(0.01)	$	(0.00)

Earnings (loss) per share
Earnings per share*										Earnings per share*
Basic	Basic	$	0.42	$	(0.08)	$	0.55	$	(0.01)	Basic	$	0.05	$	0.08
Diluted	Diluted	$	0.41	$	(0.08)	$	0.54	$	(0.01)	Diluted	$	0.05	$	0.08

Weighted average common shares outstanding	Weighted average common shares outstanding									Weighted average common shares outstanding
Basic	Basic	60,144		59,826		59,964		60,012		Basic	60,261		59,811
Diluted	Diluted	60,574		59,826		60,312		60,358		Diluted	60,621		60,092

*The total of Earnings per share from continuing operations and Loss per share from discontinued operations may not equal Earnings per share due to rounding.										*The total of Earnings per share from continuing operations and Loss per share from discontinued operations may not equal Earnings per share due to rounding.

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERPAC TOOL GROUP CORP.

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

(In thousands)

(Unaudited)

Three Months Ended May 31, Nine Months Ended May 31,
2021 2020 2021 2020
Net earnings (loss) $ 25,031 $ (4,999) $ 32,811 $ (716)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments 6,373 (6,779) 16,807 (1,533)
Recognition of foreign currency translation losses from divested businesses 0 0 0 51,994
Pension, other postretirement benefit plans, and cash flow hedges 165 193 517 828
Total other comprehensive income (loss), net of tax 6,538 (6,586) 17,324 51,289
Comprehensive income (loss) $ 31,569 $ (11,585) $ 50,135 $ 50,573


	Three Months Ended November 30,
	2021		2020
Net earnings	$	2,788	$	4,598
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments	(10,380)		1,400
Pension, other postretirement benefit plans, and cash flow hedges	336		229
Total other comprehensive (loss) income, net of tax	(10,044)		1,629
Comprehensive (loss) income	$	(7,256)	$	6,227

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


		May 31, 2021		August 31, 2020			November 30, 2021		August 31, 2021
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	136,279	$	152,170	Cash and cash equivalents	$	126,533	$	140,352
Accounts receivable, net	Accounts receivable, net	112,590		84,170		Accounts receivable, net	112,293		103,233
Inventories, net	Inventories, net	74,743		69,171		Inventories, net	83,614		75,347
Other current assets	Other current assets	48,205		35,621		Other current assets	38,649		38,503
Total current assets	Total current assets	371,817		341,132		Total current assets	361,089		357,435
Property, plant and equipment, net	Property, plant and equipment, net	50,147		61,405		Property, plant and equipment, net	47,732		48,590
Goodwill	Goodwill	286,933		281,154		Goodwill	273,297		277,593
Other intangible assets, net	Other intangible assets, net	57,626		62,382		Other intangible assets, net	51,400		54,545
Other long-term assets	Other long-term assets	76,179		78,221		Other long-term assets	78,950		82,084
Total assets	Total assets	$	842,702	$	824,294	Total assets	$	812,468	$	820,247
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities	Current liabilities					Current liabilities
Trade accounts payable	Trade accounts payable	$	59,898	$	45,069	Trade accounts payable	$	63,474	$	61,958
Accrued compensation and benefits	Accrued compensation and benefits	22,136		17,793		Accrued compensation and benefits	17,712		21,597
Income taxes payable	Income taxes payable	7,656		1,937		Income taxes payable	5,378		5,674
Other current liabilities	Other current liabilities	44,753		40,723		Other current liabilities	45,072		45,535
Total current liabilities	Total current liabilities	134,443		105,522		Total current liabilities	131,636		134,764
Long-term debt, net	Long-term debt, net	195,000		255,000		Long-term debt, net	175,000		175,000
Deferred income taxes	Deferred income taxes	2,514		1,708		Deferred income taxes	4,354		4,397
Pension and postretirement benefit liabilities	Pension and postretirement benefit liabilities	19,200		20,190		Pension and postretirement benefit liabilities	17,356		17,783
Other long-term liabilities	Other long-term liabilities	74,634		82,648		Other long-term liabilities	74,316		76,105
Total liabilities	Total liabilities	425,791		465,068		Total liabilities	402,662		408,049
Commitments and contingencies (Note 14)
Commitments and contingencies (Note 13)						Commitments and contingencies (Note 13)
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 82,990,629 and 82,593,945 shares, respectively		16,598		16,519
Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 83,092,053 and 83,021,654 shares, respectively						Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 83,092,053 and 83,021,654 shares, respectively	16,622		16,604
Additional paid-in capital	Additional paid-in capital	200,963		193,492		Additional paid-in capital	207,817		202,971
Treasury stock, at cost, 22,799,230 shares	Treasury stock, at cost, 22,799,230 shares	(667,732)		(667,732)		Treasury stock, at cost, 22,799,230 shares	(667,732)		(667,732)
Retained earnings	Retained earnings	950,482		917,671		Retained earnings	956,127		953,339
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(83,400)		(100,724)		Accumulated other comprehensive loss	(103,028)		(92,984)
Stock held in trust	Stock held in trust	(2,999)		(2,562)		Stock held in trust	(3,092)		(3,067)
Deferred compensation liability	Deferred compensation liability	2,999		2,562		Deferred compensation liability	3,092		3,067
Total shareholders' equity	Total shareholders' equity	416,911		359,226		Total shareholders' equity	409,806		412,198
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	842,702	$	824,294	Total liabilities and shareholders’ equity	$	812,468	$	820,247

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Nine Months Ended May 31,					Three Months Ended November 30,
		2021		2020			2021		2020
Operating Activities	Operating Activities					Operating Activities
Net earnings (loss)		$	32,811	$	(716)
Net earnings						Net earnings	$	2,788	$	4,598
Less: Net loss from discontinued operations	Less: Net loss from discontinued operations	(852)		(6,076)		Less: Net loss from discontinued operations	(397)		(224)
Net earnings from continuing operations	Net earnings from continuing operations	33,663		5,360		Net earnings from continuing operations	3,185		4,822
Adjustments to reconcile net earnings to net cash provided by operating activities - continuing operations:
Impairment & divestiture charges (benefit), net of tax effect		482		(2,717)
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities - continuing operations:						Adjustments to reconcile net earnings to net cash (used in) provided by operating activities - continuing operations:
Impairment & divestiture charges, net of tax effect						Impairment & divestiture charges, net of tax effect	—		139
Depreciation and amortization	Depreciation and amortization	16,438		15,373		Depreciation and amortization	5,175		5,458
Stock-based compensation expense	Stock-based compensation expense	7,385		9,129		Stock-based compensation expense	6,147		2,581
Benefit for deferred income taxes		7,475		1,218
Provision for (benefit from) deferred income taxes						Provision for (benefit from) deferred income taxes	423		(264)
Amortization of debt issuance costs	Amortization of debt issuance costs	360		1,367		Amortization of debt issuance costs	120		120
Other non-cash (benefits) charges	Other non-cash (benefits) charges	(9,135)		1,169		Other non-cash (benefits) charges	(13)		226
Changes in components of working capital and other, excluding acquisitions and divestitures:
Changes in components of working capital and other:						Changes in components of working capital and other:
Accounts receivable	Accounts receivable	(26,692)		32,745		Accounts receivable	(10,801)		(6,268)
Inventories	Inventories	(3,667)		(4,166)		Inventories	(9,823)		(1,387)
Trade accounts payable	Trade accounts payable	14,095		(24,246)		Trade accounts payable	2,358		1,847
Prepaid expenses and other assets	Prepaid expenses and other assets	(13,795)		1,605		Prepaid expenses and other assets	140		(6,297)
Income tax accounts	Income tax accounts	(8,639)		(13,986)		Income tax accounts	682		2,466
Accrued compensation and benefits	Accrued compensation and benefits	3,875		(12,342)		Accrued compensation and benefits	(3,509)		379
Other accrued liabilities	Other accrued liabilities	3,524		(5,148)		Other accrued liabilities	1,975		5,070
Cash provided by operating activities - continuing operations		25,369		5,361
Cash (used in) provided by operating activities - continuing operations						Cash (used in) provided by operating activities - continuing operations	(3,941)		8,892
Cash used in operating activities - discontinued operations	Cash used in operating activities - discontinued operations	(480)		(21,064)		Cash used in operating activities - discontinued operations	(785)		(225)
Cash provided by (used in) operating activities		24,889		(15,703)
Cash (used in) provided by operating activities						Cash (used in) provided by operating activities	(4,726)		8,667

Investing Activities	Investing Activities					Investing Activities
Capital expenditures	Capital expenditures	(9,504)		(9,308)		Capital expenditures	(3,293)		(1,905)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	22,401		635		Proceeds from sale of property, plant and equipment	133		47
Lease buyout for divested business		0		(575)
Proceeds from company owned life insurance policies		2,911		0
Proceeds from sale of business/product line		0		10,226
Cash paid for business acquisitions, net of cash acquired		0		(33,434)
Cash provided by (used in) investing activities - continuing operations		15,808		(32,456)
Cash used in investing activities - continuing operations						Cash used in investing activities - continuing operations	(3,160)		(1,858)
Cash provided by investing activities - discontinued operations	Cash provided by investing activities - discontinued operations	0		208,391		Cash provided by investing activities - discontinued operations	—		—
Cash provided by investing activities		15,808		175,935
Cash used in investing activities						Cash used in investing activities	(3,160)		(1,858)

Financing Activities	Financing Activities					Financing Activities
Principal repayment on term loan		0		(175,000)
Borrowings on revolving credit facility	Borrowings on revolving credit facility	10,000		100,000		Borrowings on revolving credit facility	5,000		10,000
Principal repayments on revolving credit facility	Principal repayments on revolving credit facility	(70,000)		(100,000)		Principal repayments on revolving credit facility	(5,000)		(10,000)
Purchase of treasury shares		0		(27,520)
Stock options, taxes paid related to the net share settlement of equity awards & other		(32)		(1,459)
Taxes paid related to the net share settlement of equity awards						Taxes paid related to the net share settlement of equity awards	(1,393)		(275)
Stock option exercises & other						Stock option exercises & other	85		101
Payment of cash dividend	Payment of cash dividend	(2,394)		(2,419)		Payment of cash dividend	(2,409)		(2,394)
Cash used in financing activities - continuing operations	Cash used in financing activities - continuing operations	(62,426)		(206,398)		Cash used in financing activities - continuing operations	(3,717)		(2,568)
Cash provided by financing activities - discontinued operations	Cash provided by financing activities - discontinued operations	750		0		Cash provided by financing activities - discontinued operations	—		750
Cash used in financing activities	Cash used in financing activities	(61,676)		(206,398)		Cash used in financing activities	(3,717)		(1,818)

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	5,088		(1,382)		Effect of exchange rate changes on cash	(2,216)		1,407
Net decrease in cash and cash equivalents		(15,891)		(47,548)
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(13,819)		6,398
Cash and cash equivalents - beginning of period	Cash and cash equivalents - beginning of period	152,170		211,151		Cash and cash equivalents - beginning of period	140,352		152,170
Cash and cash equivalents - end of period	Cash and cash equivalents - end of period	$	136,279	$	163,603	Cash and cash equivalents - end of period	$	126,533	$	158,568

The accompanying notes are an integral part of these condensed consolidated financial statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

General

Enerpac Tool Group Corp. ("Company") is a premier industrial tools and services company serving a broad and diverse set of customers in more than 100 countries. The Company has two operating segments, Industrial Tools & Service ("IT&S") and Other, with the IT&S segment representing the only reportable segment.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles ("GAAP") 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 GAAP for complete financial statements. The condensed consolidated balance sheet data as of August 31, ~~2020~~2021 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes in the Company’s fiscal ~~2020~~2021 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 nine~~ months ended ~~May 31,~~November 30, 2021 are not necessarily indicative of the results that may be expected for the entire fiscal year ending August 31, ~~2021.~~2022. The COVID-19 pandemic has negatively impacted, and is likely to continue to negatively impact to varying extents, the global economy. The Company's operating results and financial position will continue to be subject to the general economic conditions created by the pandemic, including the current supply chain and logistics environment caused by the sharp increase in demand as global economies recover. The duration and extent to which the pandemic's effects impact the Company's business will depend on future developments ~~including the distribution and effectiveness of vaccines globally and therapeutics in minimizing its negative effects on macroeconomic conditions,~~ which still remain uncertain.

The Company has updated our historical caption of "Selling, administrative and engineering expenses" in the Condensed Consolidated Statements of Operations to "Selling, general and administrative expenses." There has been no change to the composition of expenses within the caption in the current or historical periods presented.

Recently Adopted Accounting Pronouncements

In ~~June 2016,~~December 2019, the ~~FASB issued~~Financial Accounting Standards ~~Update~~Board ("~~ASU"~~FASB") ~~2016-13, Financial Instruments – Credit Losses~~issued ASU 2019-12, Income Taxes (Topic ~~326)~~740): ~~Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which adds an impairment model that is based on expected losses rather than incurred losses~~Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions and is called the Current Expected Credit Losses (“CECL”) model. This impairment model is applicable to loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables as well as any other financial asset with the contractual right to receive cash. Under the new model, an allowance equal to the estimate of lifetime expected credit losses is recognized, which will result in more timely loss recognition. The guidance is intended to reduce complexity by decreasing the number of credit impairment models.amending and clarifying existing guidance. The Company adopted ~~the~~this guidance on September 1, ~~2020 using the modified retrospective approach and there was no impact to the~~2021. The adoption did not have a material effect on our consolidated financial ~~statements as a result of the adoption.~~statements.

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends ASC 805 to require an acquirer to, at the date of acquisition, recognize and measure contract assets and contract liabilities acquired in accordance with ASU 2014-9, Revenue from Contracts with Customers (Topic 606) as if the entity had originated the contracts. The guidance is effective for fiscal years beginning after December 15, 2022. The Company will adopt this guidance in the event of a business combination subsequent to the effective date of the guidance.

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for a limited time to ease the potential burden of accounting for reference rate reform on financial reporting. This guidance applies to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates. The guidance is effective beginning on March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 allowing entities to apply certain aspects of ASC 848 (previously ASU 2020-4) to all derivative instruments that undergo a modification of the interest rate used for discounting, margining or contract price alignment as a result of the reference reform. The guidance is also effective through December 31, 2022. The Company has not utilized any of the optional expedients or exceptions available under this guidance. The Company will continue to assess whether this guidance is applicable throughout the effective period.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions and amending and clarifying existing guidance. The guidance is effective for the Company in the first quarter of fiscal 2022 with early adoption permitted. The Company is currently assessing the impact of this ASU on its condensed consolidated financial statements.

Accumulated Other Comprehensive Loss

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


		May 31, 2021		August 31, 2020			November 30, 2021		August 31, 2021
Foreign currency translation adjustments	Foreign currency translation adjustments	$	59,089	$	75,896	Foreign currency translation adjustments	$	80,366	$	69,986
Pension and other postretirement benefit plans, net of tax	Pension and other postretirement benefit plans, net of tax	24,281		24,750		Pension and other postretirement benefit plans, net of tax	22,662		22,998
Unrecognized losses on cash flow hedges		30		78
Accumulated other comprehensive loss	Accumulated other comprehensive loss	$	83,400	$	100,724	Accumulated other comprehensive loss	$	103,028	$	92,984

Property Plant and Equipment

The following is a summary of the Company's components of property, plant and equipment (in thousands):


		May 31, 2021		August 31, 2020			November 30, 2021		August 31, 2021
Land, buildings and improvements	Land, buildings and improvements	$	15,627	$	33,548	Land, buildings and improvements	$	16,488	$	16,617
Machinery and equipment	Machinery and equipment	147,525		134,536		Machinery and equipment	145,458		145,541
Gross property, plant and equipment	Gross property, plant and equipment	163,152		168,084		Gross property, plant and equipment	161,946		162,158
Less: Accumulated depreciation	Less: Accumulated depreciation	(113,005)		(106,679)		Less: Accumulated depreciation	(114,214)		(113,568)
Property, plant and equipment, net	Property, plant and equipment, net	$	50,147	$	61,405	Property, plant and equipment, net	$	47,732	$	48,590

Note 2. Revenue from Contracts with Customers

Nature of Goods and Services

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

Product Sales: Sales of tools, heavy-lifting solutions, and rope and cable solutions are recorded when control is transferred to the customer (i.e., performance obligation has been satisfied). 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. For certain other products that are highly customized and have a limited alternative use, and 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 Company’s custom products, machine hours and labor hours (efforts-expended measurement) are used as a measure of 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.

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. See Note ~~13,~~12, "Segment Information" for information regarding our revenue disaggregation by reportable segment and product line.

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

Three Months Ended May 31, Nine Months Ended May 31,
2021 2020 2021 2020
Revenues recognized at point in time $ 107,316 $ 73,412 $ 284,823 $ 275,413
Revenues recognized over time 35,833 28,467 98,410 106,526
Total $ 143,149 $ 101,879 $ 383,233 $ 381,939


	Three Months Ended November 30,
	2021		2020
Revenues recognized at point in time	$	100,174	$	86,780
Revenues recognized over time	30,729		32,650
Total	$	130,903	$	119,430

Contract Balances

The Company's contract assets and liabilities are as follows (in thousands):


		May 31, 2021		August 31, 2020			November 30, 2021		August 31, 2021
Receivables, which are included in accounts receivable, net	Receivables, which are included in accounts receivable, net	$	112,590	$	84,170	Receivables, which are included in accounts receivable, net	$	112,293	$	103,233
Contract assets, which are included in other current assets	Contract assets, which are included in other current assets	7,000		6,145		Contract assets, which are included in other current assets	2,428		8,551
Contract liabilities, which are included in other current liabilities	Contract liabilities, which are included in other current liabilities	3,506		2,145		Contract liabilities, which are included in other current liabilities	3,939		3,410

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

transferred and a receivable for the Company is established. Accounts receivable, net is recorded at face amount of customer receivables less an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for expected losses as a result of customers’ inability to make required payments. Management evaluates the aging of customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of receivables that may not be collected in the future and records the appropriate provision. The allowance for doubtful ~~accounts~~accounts was $4.3 million and $~~4.5 million~~ ~~and $5.0~~4.2 million at at ~~May 31,~~November 30, 2021 and August 31, ~~2020,~~2021, respectively. As indicated in the "Concentration of Credit Risk" section below, the Company continues to negotiate terms to secure payment with an agent whose continued payment delinquency has created a concentration of credit risk. The allowance for doubtful accounts as of November 30, 2021 represents management's best estimate of the amount probable of collection and considers various factors including, but not limited to, (i) the lack of payment in the nine-month period ended November 30, 2021, (ii) our due diligence on balances due to our agents from their end customers related to sales of our services and products and the known markup on those sales from agent to end customer, (iii) the status of ongoing negotiations with the agent to secure payments and (iv) legal recourse available to secure payment. Actual collections from the agent may differ from the Company's estimate.

Contract Assets: Contract assets 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 has contract assets on contracts that are generally long-term and have revenues that are recognized over time.

Contract Liabilities: As of ~~May 31,~~November 30, 2021, the Company had certain contracts where there were unsatisfied performance obligations and the Company had received cash consideration from customers before the performance obligations were satisfied. The majority of these contracts relate to long-term customer contracts (project durations of greater than three months) and are recognized over time. The Company estimates that the $~~3.5~~3.9 million will be recognized in net sales from satisfying those performance obligations within the next twelve months, with an immaterial amount recognized in periods after.

Concentration of Credit Risk: The Company sells products and services through distributors and agents. In certain jurisdictions, those third parties represent a significant portion of our sales in their respective country which can pose a concentration of credit risk if these larger distributors or agents are not timely in their payments. As of November 30, 2021, the Company was exposed to a concentration of credit risk as a result of the continued payment delinquency of one of our agents with whom we continue to negotiate a plan to secure payments. This agent's accounts receivable represent 10.6% of the Company's outstanding accounts receivable.

Timing of Performance Obligations Satisfied at a Point in Time: The Company evaluates when the customer obtains control of the product based on shipping terms, as control will transfer, depending upon such terms, at different points between the Company's manufacturing facility or warehouse and the customer’s location. The 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 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 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 (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. Liabilities for severance are generally to be paid within twelve months, while future lease payments related to facilities vacated as a result of restructuring are to be paid over the underlying remaining lease terms. During fiscal 2019, the Company announced a ~~new~~ restructuring plan focused on (i) the integration of the Enerpac and Hydratight businesses (IT&S segment), (ii) the strategic exit of certain commodity-type services in our North America Services operations (IT&S segment) and (iii) driving efficiencies within the overall corporate structure. In the third quarter of fiscal 2020, the Company announced the expansion and revision of this plan, which further ~~simplifies~~simplified and ~~flattens~~flattened the corporate structure through elimination of redundancies between the segment and corporate functions, while enhancing our commercial and marketing processes to become even closer to our customers. In November 2021, upon assessment of the the Company's operating structure by the Company's new President & Chief Executive Officer, the Company recorded $2.7 million of charges in the three months ended November 30, 2021 in order to further simplify and streamline the organizational structure. Restructuring charges associated with ~~this~~expansion of the fiscal 2019 plan were ~~$1.5 million and $2.2 million~~ ~~in the three and nine months ended May 31, 2021, respectively, and $2.5 million and $5.6~~ $0.1 million in the three ~~and nine~~ months ended ~~May 31, 2020, respectively.~~November 30, 2020.

The following summarizes restructuring reserve activity (which excludes $0.7 million and $0.5 million of charges for IT&S and Corporate, respectively, associated with the accelerated vesting of equity awards which has no impact on the restructuring reserve) for the IT&S segment and Corporate (in thousands):


		Nine Months Ended May 31, 2021					Three Months Ended November 30, 2021
		IT&S		Corporate			IT&S		Corporate
Balance as of August 31, 2020		$	1,443	$	267
Balance as of August 31, 2021						Balance as of August 31, 2021	$	1,737	$	26
Restructuring charges	Restructuring charges	2,180		9		Restructuring charges	874		695
Cash payments	Cash payments	(1,444)		(250)		Cash payments	(609)		(8)
Other non-cash uses of reserve (1)		(14)		0
Impact of changes in foreign currency rates	Impact of changes in foreign currency rates	49		0		Impact of changes in foreign currency rates	(46)		—
Balance as of May 31, 2021		$	2,214	$	26
Balance as of November 30, 2021						Balance as of November 30, 2021	$	1,956	$	713

Nine Months Ended May 31, 2020
IT&S Corporate
Balance as of August 31, 2019 $ 2,912 $ 0
Restructuring charges 4,019 1,590
Cash payments (4,265) (871)
Other non-cash uses of reserve (1)
(556) (484)
Impact of changes in foreign currency rates (23) 0
Balance as of May 31, 2020 $ 2,087 $ 235

~~(1)~~ ~~Majority of non-cash uses of reserve represents accelerated equity vesting with employee severance agreements.~~


	Three Months Ended November 30, 2020
	IT&S		Corporate
Balance as of August 31, 2020	$	1,443	$	267
Restructuring charges	66		—
Cash payments	(432)		(229)

Impact of changes in foreign currency rates	(4)		—
Balance as of November 30, 2020	$	1,073	$	38

Total restructuring charges (inclusive of the Other segment) ~~being reported in "Restructuring charges"~~ were ~~$1.6~~$2.7 million and ~~$2.5~~$0.2 million in the three ~~and nine~~ months ended ~~May 31,~~November 30, 2021 ~~respectively. Restructuring charges for the three~~ and ~~nine months ended May 31,~~ 2020, ~~were $3.3 million and $7.2 million,~~ respectively, ~~which included approximately $0.8 million of charges in each period~~ being ~~reported in the Consolidated Statements of Operations in "Cost of products sold," with the balance of the charges~~ reported in "Restructuring charges."

~~Restructuring expenses~~There were no restructuring charges related to Cortland U.S. (Other segment) in three months ended November 30, 2021. Restructuring expenses for Cortland U.S. were ~~less than~~ ~~$0.1~~$0.1 million ~~and $0.3 million~~ in the three ~~and nine~~ months ended ~~May 31, 2021, respectively. The three and nine months ended May 31,~~November 30, 2020 included $0.8 million (reported in the Condensed Consolidated Statements of Earnings in "Cost of products sold,") and $1.6 million, respectively, which included approximately $0.8 million of charges in each period being reported in the Consolidated Statements of Operations in "Cost of products sold," with the balance of the charges reported in "Restructuring charges.". Restructuring reserves for Cortland U.S. were $0.1 million a~~nd $0.4 million~~ as of ~~May 31,~~November 30, 2021 and August 31, ~~2020,~~2021, respectively.

Note 4. ~~Acquisitions~~

On January 7, 2020, the Company acquired 100% of the stock of HTL Group ("HTL"), a provider of controlled bolting products, calibration and repair services, and tool rental services. The acquisition of HTL provided the Company with a complete line of bolting products and enhanced our European rental capabilities. The Company acquired all of the assets and assumed certain liabilities of HTL for a final purchase price of $33.3 million. The final purchase price allocation resulted in $11.3 million of goodwill (which is not deductible for tax purposes), $16.1 million of intangible assets, and $6.7 million of property, plant and equipment. The intangible assets were comprised of $3.3 million of indefinite-lived tradenames, $12.1 million of amortizable customer relationships and $0.7 million of amortizable patents. The impact on the remaining balance sheet line items was not material.

~~This acquisition generated net sales of $3.7 million and $9.2 million for the three and nine months ended May 31, 2021, respectively, and $1.9 million and $3.9 million for the~~ ~~three and nine months ended May 31, 2020, which are reported within the IT&S reportable segment. This acquisition does not meet the significance tests to require pro forma financial information otherwise required for acquisitions.~~

~~Note 5. Discontinued Operations and Other Divestiture Activities~~

Discontinued Operations

On October 31, 2019, as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the sale of the businesses comprising its former Engineered Components & Systems ("EC&S") ~~segment~~segment. This divestiture was considered part of our strategic shift to ~~wholly owned subsidiaries of BRWS Parent LLC,~~become a ~~Delaware limited liability~~pure-play industrial tools and services company, and ~~affiliate~~therefore, the results of ~~One Rock Capital Partners II, LP, for~~operations are recorded as a ~~sales price~~component of ~~$215.8 million, inclusive~~"Loss from discontinued operations, net of ~~$1.3 million of purchase price from the customary finalization of working capital negotiations~~income taxes" in the ~~third quarter~~Condensed Consolidated Statements of ~~fiscal 2020. Approximately $3.0 million~~Operations for all periods presented. A component of the purchase price was ~~paid~~payable in four ~~equal~~ quarterly installments ~~after closing,~~ of which the ~~last~~final $0.7 million was received in the ~~nine~~three months ended ~~May 31, 2021~~November 30, 2020 (this final payment was received greater than one year from the divestiture date and, as such, is reflected in "Cash provided by financing activities - discontinued operations" within the Condensed Consolidated Statements of Cash Flows). In connection with the completion of the sale and after consideration of working capital adjustments, the Company recorded, in fiscal 2020, a net loss of $4.7 million, comprised of a loss of $23.0 million representing the excess of the net assets (exclusive of deferred tax assets and liabilities associated with subsidiaries of the Company whose stock was sold as part of the transaction) as compared to the purchase price less costs to sell and the recognition in earnings of the cumulative effect of foreign currency exchange gains and losses during the year, largely offset by an income tax benefit of $18.3 million associated with the write off of the net deferred tax liability on subsidiaries of the EC&S segment for which the stock was divested. The Company also recognized in conjunction with the completion of the sale an additional $3.3 million of impairment & divestiture costs associated with the accelerated vesting of restricted stock awards for employees terminated as part of the transaction and $2.7 million of additional divestiture charges which were necessary to complete the transaction. The Company maintains financial exposure associated with this divestiture due to certain retained liabilities.

~~As the aforementioned divestiture was a part of our strategic shift to become a pure-play industrial tools and services company, the results of EC&S~~All other discontinued operations ~~(including the stated impairment & divestiture charges) are recorded as a component of "Loss from discontinued operations" in~~activity included within the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Cash Flows for ~~all~~the periods ~~presented.~~presented relate to impacts from certain retained liabilities.

The following represents the detail of "Loss from discontinued operations, net of income taxes" within the Condensed Consolidated Statements of Operations (in thousands):

Three Months Ended May 31, Nine Months Ended May 31,
2021 2020 2021 2020
Net sales $ 0 $ 0 $ 0 $ 67,010
Cost of products sold 0 0 0 49,749
Gross profit 0 0 0 17,261
Selling, general and administrative expenses 102 116 956 11,567
Amortization of intangible assets 0 0 0 0
Restructuring benefit 0 0 0 (11)
Impairment & divestiture charges 0 (31) 0 28,699
Operating loss (102) (85) (956) (22,994)
Financing costs, net 0 0 0 14
Other loss, net 0 0 0 (104)
Loss before income tax expense (benefit) (102) (85) (956) (22,904)
Income tax expense (benefit) 124 (16) (104) (16,828)
Loss from discontinued operations, net of income taxes $ (226) $ (69) $ (852) $ (6,076)

* "Loss from discontinued operations, net of income taxes" for the nine-month period in fiscal 2020 presented in the table above includes the results of the EC&S segment for the two months ended October 31, 2019 (the divestiture date) as well as the ancillary impacts from certain retained liabilities subsequent to the divestiture. As a result of the classification of the segment as assets and liabilities held for sale for the two months ended October 31, 2019, the Company did not record amortization or depreciation expense in the results of operations in accordance with U.S. GAAP. Furthermore, the Company excluded EC&S segment employees from the fiscal 2020 bonus compensation plan, hence there are no expenses associated with the plan for that period.

~~Other Divestiture Activities~~

On September 20, 2019, the Company completed the sale of the UNI-LIFT product line, a component of our Milwaukee Cylinder business (IT&S segment), for initial net cash proceeds of $6.0 million, which resulted in an impairment & divestiture benefit of $4.6 million in the three months ended November 30, 2019. In the three months ended February 29, 2020, the Company recorded an additional benefit of $0.1 million related to agreement with the buyer on final working capital amounts and various other benefits. In March 2020, the buyer of the UNI-LIFT product line extended a long-term supply agreement with a significant customer. Pursuant

to the divestiture agreement, this action triggered the requirement for the buyer to pay $1.5 million of contingent proceeds, which was received by the Company in the three months ended May 31, 2020 and recorded as an "Impairment & divestiture benefit" within the Condensed Consolidated Statements of Operations in that period.

After the sale of the UNI-LIFT product line, the Company determined that the remaining Milwaukee Cylinder business was a non-core asset, did not align with the strategic objectives of the Company and, as a result, the Company committed to a plan to sell this business. The Company recorded impairment & divestiture charges of $4.6 million in the three months ended November 30, 2019, comprised of impairment charges of $2.5 million representing the excess of net assets held for sale compared to the anticipated proceeds less costs to sell, $1.9 million associated with our withdrawal from the multi-employer pension plan associated with that business and $0.2 million of other divestiture related charges. The Company completed the divestiture of the Milwaukee Cylinder business on December 2, 2019 for a negligible amount. ~~In the~~ ~~three months ended May 31, 2020, the Company recorded inconsequential amounts of impairment & divestiture charges associated with this divestiture.~~

The historical results of the Milwaukee Cylinder business, inclusive of the UNI-LIFT product line, (which had net sales of $2.9 million in the nine months ended May 31, 2020) are not material to the condensed consolidated financial results.

On October 22, 2019, the Company completed the sale of the Connectors product line (IT&S segment) for net cash proceeds of $2.7 million, which resulted in an impairment & divestiture benefit of $1.3 million in the three months ended November 30, 2019. During the nine months ended May 31, 2020, the Company recorded $0.1 million of impairment & divestiture charges related to a working capital adjustment. The historical results of the Connectors product line (which had net sales of $0.2 million in the nine months ended May 31, 2020) are not material to the condensed consolidated financial results.

At February 29, 2020, the Company determined that it was no longer probable that a loss will occur related to an outstanding legal matter associated with a previously divested business, as such, recorded an impairment & divestiture benefit of $0.8 million in the nine months ended May 31, 2020.


	Three Months Ended November 30,
	2021		2020
Selling, general and administrative expenses	$	503	$	295
Operating loss	(503)		(295)
Other loss, net	—		—
Loss before income tax benefit	(503)		(295)
Income tax benefit	(106)		(71)
Loss from discontinued operations, net of income taxes	$	(397)	$	(224)

Note 6.5. Goodwill, Intangible Assets and Long-Lived Assets

Changes in the gross carrying value of goodwill and intangible assets result from changes in foreign currency exchange rates, business acquisitions, divestitures and impairment charges. The changes in the carrying amount of goodwill for the ~~nine~~three months ended ~~May 31,~~November 30, 2021 are as follows (in thousands):

IT&S Other Total
Balance as of August 31, 2020 $ 263,537 $ 17,617 $ 281,154
Impact of changes in foreign currency rates 5,756 23 5,779
Balance as of May 31, 2021 $ 269,293 $ 17,640 $ 286,933


	IT&S		Other		Total
Balance as of August 31, 2021	$	265,087	$	12,506	$	277,593
Impact of changes in foreign currency rates	(4,296)		—		(4,296)
Balance as of November 30, 2021	$	260,791	$	12,506	$	273,297

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


			May 31, 2021						August 31, 2020								November 30, 2021						August 31, 2021
		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:	Amortizable intangible assets:														Amortizable intangible assets:
Customer relationships	Customer relationships	14	$	144,336	$	113,848	$	30,488	$	141,853	$	106,491	$	35,362	Customer relationships	14	$	140,576	$	115,162	$	25,414	$	142,453	$	114,463	$	27,990
Patents	Patents	12	14,645		13,793		852		14,365		13,228		1,137		Patents	12	14,252		13,497		755		14,492		13,688		804
Trademarks and tradenames	Trademarks and tradenames	12	3,360		2,409		951		3,277		2,257		1,020		Trademarks and tradenames	12	3,255		2,373		882		3,307		2,391		916
Indefinite lived intangible assets:	Indefinite lived intangible assets:														Indefinite lived intangible assets:
Tradenames	Tradenames	N/A	25,335		0		25,335		24,863		0		24,863		Tradenames	N/A	24,349		—		24,349		24,835		—		24,835
			$	187,676	$	130,050	$	57,626	$	184,358	$	121,976	$	62,382			$	182,432	$	131,032	$	51,400	$	185,087	$	130,542	$	54,545

The Company estimates that amortization expense will be ~~$1.9~~$5.4 million for the remaining ~~three~~nine months of fiscal ~~2021.~~2022. Amortization expense for future years is estimated to be: ~~$7.5 million in fiscal 2022, $6.0~~$5.8 million in fiscal 2023, ~~$4.3~~$4.1 million in fiscal 2024, ~~$3.6~~$3.4 million in fiscal 2025, ~~$2.1~~$2.0 million in fiscal 2026, $1.9 million in fiscal 2027 and ~~$6.9~~$4.5 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, among other causes.

1211

Note 7.6. Product Warranty Costs

The Company generally offers its customers an assurance warranty on products sold, although warranty periods may vary by product type and application. The reserve for future warranty claims, which is recorded within the "Other current liabilities" line in the Condensed Consolidated Balance Sheets, is based on historical claim rates and current warranty cost experience. The following summarizes the changes in product warranty reserves for the ~~nine~~three months ended ~~May 31,~~November 30, 2021 and 2020, respectively (in thousands):


		Nine Months Ended May 31,					Three Months Ended November 30,
		2021		2020			2021		2020
Beginning balance	Beginning balance	$	892	$	1,145	Beginning balance	$	1,300	$	892
Provision for warranties	Provision for warranties	1,151		354		Provision for warranties	395		464
Warranty payments and costs incurred	Warranty payments and costs incurred	(893)		(735)		Warranty payments and costs incurred	(230)		(399)
Warranty activity for divested businesses		0		(27)
Impact of changes in foreign currency rates	Impact of changes in foreign currency rates	30		1		Impact of changes in foreign currency rates	(31)		2
Ending balance	Ending balance	$	1,180	$	738	Ending balance	$	1,434	$	959

Note 8.7. Debt

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

May 31, 2021 August 31, 2020
Senior Credit Facility
Revolver $ 195,000 $ 255,000
Term Loan 0 0
Total Senior Credit Facility 195,000 255,000
Less: Current maturities of long-term debt 0 0
Debt issuance costs 0 0
Total long-term debt, less current maturities $ 195,000 $ 255,000


	November 30, 2021		August 31, 2021
Senior Credit Facility
Revolver	$	175,000	$	175,000
Total long-term debt, less current maturities	$	175,000	$	175,000

Senior Credit Facility

In March 2019, the Company entered into a ~~Senior~~senior credit facility (the “Senior Credit ~~Facility~~Facility”) with a syndicate of banks, to among other things, (i) expand the multi-currency revolving line of credit from $300 million to $400 million, (ii) extend the maturity of the Company's Senior Credit Facility from May 2020 to March 2024 (no required principal payments prior to maturity) and (iii) modify certain other provisions of the credit agreement including a reduction in pricing. The Senior Credit Facility iswas initially comprised of a $400 million revolving line of credit and ~~previously provided for~~ a $200 million term loan.

At November 30, 2021, there was $175.0 million of borrowings under the revolving line of credit and $219.8 million of available borrowing capacity under the revolving line of credit after reduction for $5.2 million of outstanding letters of credit issued under the Senior Credit Facility.

The Senior Credit Facility also provides the option for future expansion, subject to certain conditions, through a $300 million accordion and/or a $200 million incremental term loan. Borrowings under the Senior Credit Facility bear interest at a variable rate based on LIBOR or a base rate, ranging from 1.125% to 2.00% in the case of loans bearing interest at LIBOR and from 0.125% to 1.00% in the case of loans bearing interest at the base rate. In addition, a non-use fee is payable quarterly on the average unused amount of the revolving line of credit ranging from 0.15% to 0.3% per annum, based on the Company's net leverage.

In November 2019, the Company used the proceeds from the sale of the EC&S segment to pay off the outstanding principal balance on the term loan. In conjunction with the repayment, the Company expensed, within, “Financing costs, net” in the Condensed Consolidated Statements of Operations, the remaining $0.6 million of associated capitalized debt issuance costs. To reduce interest costs, the Company paid down ~~$15 million and $60 million~~ on the revolving line of credit in the three and nine months ended May 31, 2021, respectively, with available cash on hand. At May 31, 2021, there was $195.0 million of borrowings under the revolving line of credit and ~~$200.5 million~~ ~~of available borrowing capacity under the revolving line of credit.~~

The Senior Credit Facility contains two financial covenants, which are a maximum leverage ratio of 3.75:1 and a minimum interest coverage ratio of 3.5:1. Certain transactions lead to adjustments to the underlying ratios, including an increase to the leverage ratio from 3.75 to 4.25 during the four fiscal quarters after a significant acquisition. The sale of the EC&S segment triggered a reduction of the minimum interest coverage ratio from 3.5 to 3.0 for any fiscal quarter ending within twelve months after the sale of the EC&S segment. In April 2020, the Company proactively amended its Senior Credit Facility to extend the interest coverage ratio at 3.0 for an additional 12 months through October 2021 to mitigate risks associated with the potential impact of the COVID-19 pandemic.

The Company was in compliance with all financial covenants at ~~May 31,~~November 30, 2021. Borrowings under the Senior Credit Facility are secured by substantially all personal property assets of the Company and its domestic subsidiary guarantors and certain equity interests owned by the foreign law pledgors.

~~Senior Notes~~

On April 16, 2012, the Company issued $300 million of 5.625% Senior Notes due 2022 (the “Senior Notes”), of which NaN remained outstanding as of May 31, 2021. The Senior Notes included a call feature that allowed the Company to redeem them anytime on or after June 15, 2017 at stated redemption prices that reduced to 100% on June 15, 2020, plus accrued and unpaid interest. In order to reduce interest costs, in June 2020, the Company redeemed all of the outstanding Senior Notes at a price equal to 100% of the principal amount thereof, plus the settlement of accrued and unpaid interest.

Note 9.8. Fair Value Measurements

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 unadjusted 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 participants 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 ~~May 31,~~November 30, 2021 and August 31, ~~2020~~2021 due to their short-term nature and/or the fact that the interest rates approximated market rates. Foreign currency exchange contracts and interest rate swaps are recorded at fair value. The fair value of the Company's foreign currency exchange contracts ~~was a net asset of less than $0.2 million at both May 31, 2021 and August 31, 2020. The fair value of the Company's interest rate swap (see~~ ~~Note 10, “Derivatives”, for further information on the Company's interest rate swap)~~ was a net liability of less than ~~$0.1 million~~ ~~at May 31, 2021 and~~ $0.1 million at both November 30, 2021 and August 31, ~~2020. The~~2021. The fair value of the foreign currency exchange and interest rate swap contracts were based on quoted inactive market prices and therefore classified as Level 2 within the valuation hierarchy.

Note ~~10.~~9. Derivatives

All derivatives are recognized in the balance sheet at their estimated fair value. The Company does not enter into derivatives for speculative purposes. Changes in the fair value of derivatives (not designated as hedges) are recorded in earnings along with the gain or loss on the hedged asset or liability.

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 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 Statements of Operations). The U.S. dollar equivalent notional value of these short duration foreign currency exchange contracts was ~~$16.0~~$13.6 million and ~~$16.7~~$16.0 million at ~~May 31,~~November 30, 2021 and August 31, ~~2020,~~2021, respectively. The fair value of outstanding foreign currency exchange ~~contracts~~contracts was a net ~~asset~~liability of less than ~~$0.2~~$0.1 million at both ~~May 31,~~November 30, 2021 and August 31, ~~2020.~~2021. Net foreign currency gain (loss) (included in ~~"Other~~"Other (income) expense" in the Condensed Consolidated Statements of Operations) related to these derivative instruments were as follows (in thousands):

Three Months Ended Nine Months Ended
May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020
Foreign currency gain (loss), net $ 7 $ (842) $ 67 $ (1,393)


	Three Months Ended November 30,
	2021		2020
Foreign currency loss, net	$	(181)	$	(49)

The Company ~~is the~~was a fixed-rate payor on an interest rate swap contract that ~~fixes~~fixed the LIBOR-based index used to determine the interest rates charged on a total of $100.0 million of the Company's LIBOR-based variable rate borrowings on the revolving line of credit. The contract ~~carries~~carried a fixed rate of 0.259% and ~~expires~~expired in August 2021. The swap agreement ~~qualifies~~qualified as a hedging instrument and ~~has been~~was designated as a cash flow hedge of forecasted LIBOR-based interest payments. The change in the fair value of the interest rate swap, a gain of less than $0.1 million in the ~~$0.1 million~~ ~~in both the~~ three ~~and nine~~ months ended ~~May 31, 2021 is~~November 30, 2020 was recorded in other comprehensive income (loss). ~~The Company expects to reclassify the loss of less than~~ ~~$0.1 million~~ ~~out of accumulated other comprehensive loss ("AOCL") and into Financing costs, net, during the remainder of the fiscal year.~~ The Company’s LIBOR-based variable rate borrowings outstanding with terms matching the pay-fixed interest rate swap as of May 31, 2021 and August 31, 2020 were $140.0 million and $180.0 million, respectively.

Note ~~11.~~10. Earnings per Share and Shareholders' Equity

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 22,799,230 shares of common stock for $667.7 million. As of ~~May 31,~~November 30, 2021, the maximum number of shares that may yet be purchased under the programs is 5,200,770 shares. The Company did not repurchase shares in ~~the nine months ended May 31, 2021. During~~either of the three months ended ~~May 31, 2020, the Company repurchased 839,789 shares for $17.8 million. The Company repurchased 1,343,662 shares for $27.5 million in the nine months ended May 31,~~November 30, 2021 or 2020.

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


		Three Months Ended May 31,				Nine Months Ended May 31,					Three Months Ended November 30,
		2021		2020		2021		2020			2021		2020
Numerator:	Numerator:									Numerator:
Net earnings (loss) from continuing operations		$	25,257	$	(4,930)	$	33,663	$	5,360
Net earnings from continuing operations										Net earnings from continuing operations	$	3,185	$	4,822
Net loss from discontinued operations	Net loss from discontinued operations	(226)		(69)		(852)		(6,076)		Net loss from discontinued operations	(397)		(224)
Net earnings (loss)		$	25,031	$	(4,999)	32,811		(716)
Net earnings										Net earnings	$	2,788	$	4,598

Denominator:	Denominator:									Denominator:
Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	60,144		59,826		59,964		60,012		Weighted average common shares outstanding - basic	60,261		59,811
Net effect of dilutive securities - stock based compensation plans	Net effect of dilutive securities - stock based compensation plans	430		0		348		346		Net effect of dilutive securities - stock based compensation plans	360		281
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	60,574		59,826		60,312		60,358		Weighted average common shares outstanding - diluted	60,621		60,092

Earnings (loss) per common share from continuing operations:
Earnings per common share from continuing operations:										Earnings per common share from continuing operations:
Basic	Basic	$	0.42	$	(0.08)	$	0.56	$	0.09	Basic	$	0.05	$	0.08
Diluted	Diluted	$	0.42	$	(0.08)	$	0.56	$	0.09	Diluted	$	0.05	$	0.08

Loss per common share from discontinued operations:	Loss per common share from discontinued operations:									Loss per common share from discontinued operations:
Basic	Basic	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.10)	Basic	$	(0.01)	$	0.00
Diluted	Diluted	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.10)	Diluted	$	(0.01)	$	0.00

Earnings (loss) per common share:
Earnings per common share:*										Earnings per common share:*
Basic	Basic	$	0.42	$	(0.08)	$	0.55	$	(0.01)	Basic	$	0.05	$	0.08
Diluted	Diluted	$	0.41	$	(0.08)	$	0.54	$	(0.01)	Diluted	$	0.05	$	0.08

Anti-dilutive securities from stock based compensation plans (excluded from earnings per share calculation)	Anti-dilutive securities from stock based compensation plans (excluded from earnings per share calculation)	548		2,479		990		1,435		Anti-dilutive securities from stock based compensation plans (excluded from earnings per share calculation)	846		1,490

*The total of Earnings per share from continuing operations and Loss per share from discontinued operations may not equal Earnings per share due to rounding.										*The total of Earnings per share from continuing operations and Loss per share from discontinued operations may not equal Earnings per share due to rounding.

The following table illustrates the changes in the balances of each component of shareholders' equity for the three months ended November 30, 2021 (in thousands):


	Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Stock Held in Trust		Deferred Compensation Liability		Total Shareholders’ Equity
	Issued Shares	Amount
Balance at August 31, 2021	83,022	$	16,604	$	202,971	$	(667,732)	$	953,339	$	(92,984)	$	(3,067)	$	3,067	$	412,198
Net earnings	—	—		—		—		2,788		—		—		—		2,788
Other comprehensive income, net of tax	—	—		—		—		—		(10,044)		—		—		(10,044)
Stock contribution to employee benefit plans and other	2	1		84		—		—		—		—		—		85
Restricted stock awards	67	17		(17)		—		—		—		—		—		—
Stock based compensation expense	—	—		6,147		—		—		—		—		—		6,147
Tax effect related to net share settlement of equity awards	—	—		(1,393)		—		—		—		—		—		(1,393)
Stock issued to, acquired for and distributed from rabbi trust	1	—		25		—		—		—		(25)		25		25
Balance at November 31, 2021	83,092	$	16,622	$	207,817	$	(667,732)	$	956,127	$	(103,028)	$	(3,092)	$	3,092	$	409,806

1514

The following table illustrates the changes in the balances of each component of shareholders' equity for the three months ended ~~May 31, 2021 (in thousands):~~

Common Stock Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Stock
Held in
Trust Deferred
Compensation
Liability Total
Shareholders’
Equity
Issued
Shares Amount
Balance at February 28, 2021 82,879 $ 16,576 $ 197,036 $ (667,732) $ 925,451 $ (89,938) $ (2,996) $ 2,996 $ 381,393
Net earnings — — — — 25,031 — — — 25,031
Other comprehensive income, net of tax — — — — — 6,538 — — 6,538
Stock contribution to employee benefit plans and other 5 1 96 — — — — — 97
Vesting of restricted stock awards 17 3 (3) — — — — — 0
Stock based compensation expense — — 2,157 — — — — — 2,157
Stock option exercises 89 18 2,008 — — — — — 2,026
Tax effect related to net share settlement of equity awards — — (356) — — — — — (356)
Stock issued to, acquired for and distributed from rabbi trust 1 0 25 — — — (3) 3 25
Balance at May 31, 2021 82,991 $ 16,598 $ 200,963 $ (667,732) $ 950,482 $ (83,400) $ (2,999) $ 2,999 $ 416,911

~~The following table illustrates the changes in the balances of each component of shareholders' equity for the three months ended May 31,~~November 30, 2020 (in thousands):


		Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Stock Held in Trust		Deferred Compensation Liability		Total Shareholders’ Equity			Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Stock Held in Trust		Deferred Compensation Liability		Total Shareholders’ Equity
		Issued Shares	Amount																	Issued Shares	Amount
Balance at February 29, 2020		82,540	$	16,508	$	189,716	$	(658,017)	$	923,622	$	(117,464)	$	(2,434)	$	2,434	$	354,365
Balance at August 31, 2020																			Balance at August 31, 2020	82,594	$	16,519	$	193,492	$	(667,732)	$	917,671	$	(100,724)	$	(2,562)	$	2,562	$	359,226
Net earnings	Net earnings	—	—		—		—		(4,999)		—		—		—		(4,999)		Net earnings	—	—		—		—		4,598		—		—		—		4,598
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—		—		—		(6,586)		—		—		(6,586)		Other comprehensive income, net of tax	—	—		—		—		—		1,629		—		—		1,629
Stock contribution to employee benefit plans and other	Stock contribution to employee benefit plans and other	6	1		96		—		—		—		—		—		97		Stock contribution to employee benefit plans and other	6	1		100		—		—		—		—		—		101
Vesting of restricted stock awards		13	3		(3)		—		—		—		—		—		0
Treasury stock repurchases		—	—		—		(9,715)		—		—		—		—		(9,715)
Restricted stock awards																			Restricted stock awards	20	4		(4)		—		—		—		—		—		—
Stock based compensation expense	Stock based compensation expense	—	—		3,184		—		—		—		—		—		3,184		Stock based compensation expense	—	—		2,581		—		—		—		—		—		2,581
Stock option exercises		0	0		0		—		—		—		—		—		0
Tax effect related to net share settlement of equity awards	Tax effect related to net share settlement of equity awards	—	—		(147)		—		—		—		—		—		(147)		Tax effect related to net share settlement of equity awards	—	—		(275)		—		—		—		—		—		(275)
Stock issued to, acquired for and distributed from rabbi trust	Stock issued to, acquired for and distributed from rabbi trust	4	1		82		—		—		—		(83)		83		83		Stock issued to, acquired for and distributed from rabbi trust	5	1		85		—		—		—		(81)		81		86
Balance at May 31, 2020		82,563	$	16,513	$	192,928	$	(667,732)	$	918,623	$	(124,050)	$	(2,517)	$	2,517	$	336,282
Balance at November 30, 2020																			Balance at November 30, 2020	82,625	$	16,525	$	195,979	$	(667,732)	$	922,269	$	(99,095)	$	(2,643)	$	2,643	$	367,946

Note 11. Income Taxes

The ~~following table illustrates the changes in the balances of each component of shareholders' equity for the~~ Company's glob~~nine months ended May 31, 2021~~ ~~(in thousands):~~

Common Stock Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Stock
Held in
Trust Deferred
Compensation
Liability Total
Shareholders’
Equity
Issued
Shares Amount
Balance at August 31, 2020 82,594 $ 16,519 $ 193,492 $ (667,732) $ 917,671 $ (100,724) $ (2,562) $ 2,562 $ 359,226
Net earnings — — — — 32,811 — — — 32,811
Other comprehensive income, net of tax — — — — — 17,324 — — 17,324
Stock contribution to employee benefit plans and other 15 3 276 — — — — — 279
Vesting of restricted stock awards 272 54 (54) — — — — — 0
Stock based compensation expense — — 7,384 — — — — — 7,384
Stock option exercises 89 18 2,008 — — — — — 2,026
Tax effect related to net share settlement of equity awards — — (2,337) — — — — — (2,337)
Stock issued to, acquired for and distributed from rabbi trust 21 4 194 — — — (437) 437 198
Balance at May 31, 2021 82,991 $ 16,598 $ 200,963 $ (667,732) $ 950,482 $ (83,400) $ (2,999) $ 2,999 $ 416,911

~~The following table illustrates the changes in the balances of each component of shareholders' equity for the~~ ~~nine months ended May 31, 2020~~ ~~(in thousands):~~

Common Stock Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Stock
Held in
Trust Deferred
Compensation
Liability Total
Shareholders’
Equity
Issued
Shares Amount
Balance at August 31, 2019 81,919 $ 16,384 $ 181,213 $ (640,212) $ 915,466 $ (171,672) $ (3,070) $ 3,070 $ 301,179
Net earnings — — — — (716) — — — (716)
Other comprehensive income, net of tax — — — — — 51,289 — — 51,289
Stock contribution to employee benefit plans and other 17 3 351 — — — — — 354
Vesting of restricted stock awards 462 93 (93) — — — — — 0
Treasury stock repurchases — — — (27,520) — — — — (27,520)
Stock based compensation expense — — 12,814 — — — — — 12,814
Stock option exercises 145 29 2,602 — — — — — 2,631
Tax effect related to net share settlement of equity awards — — (4,210) — — — — — (4,210)
Stock issued to, acquired for and distributed from rabbi trust 20 4 251 — — — 553 (553) 255
Adoption of accounting standards — — — — 3,873 (3,667) — — 206
Balance at May 31, 2020 82,563 $ 16,513 $ 192,928 $ (667,732) $ 918,623 $ (124,050) $ (2,517) $ 2,517 $ 336,282

~~Note 12. Income Taxes~~

~~The Company's global~~al operations, acquisition activity (as applicable) and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Comparative earnings ~~(loss)~~ before income taxes, income tax ~~(benefit)~~ expense and effective income tax rates from continuing operations are as follows (in thousands):

Three Months Ended May 31, Nine Months Ended May 31,
2021 2020 2021 2020
Earnings (loss) from continuing operations before income tax (benefit) expense $ 20,867 $ (5,337) $ 31,531 $ 6,709
Income tax (benefit) expense (4,390) (407) (2,132) 1,349
Effective income tax rate (21.0) % 7.6 % (6.8) % 20.1 %


	Three Months Ended November 30,
	2021			2020
Earnings from continuing operations before income tax expense	$	4,966		$	7,080
Income tax expense	1,781			2,258
Effective income tax rate	35.9		%	31.9		%

The Company’s earnings ~~(loss)~~ from continuing operations before income taxes include earnings from both U.S. and foreign ~~jurisdictions of approximately 75% of~~ ~~the consolidated total for each of the estimated full-year fiscal 2021 and full-year 2020.~~jurisdictions. Though most foreign tax rates are now in line with the U.S. tax rate of 21%, the annual effective tax rate is impacted by withholding taxes, losses in jurisdictions ~~where~~where no benefit can be realized, and various aspects of the U.S. Tax Cuts and Jobs Act, such as the Global Intangible Low-Taxed Income, Foreign-Derived Intangible Income and Base Erosion and Anti-Abuse Tax provisions.

The effective tax rate for the three months ended ~~May 31,~~November 30, 2021 was ~~(21.0)%~~35.9%, compared to ~~7.6%~~31.9% for the comparable prior-year period. Overall, both time periods are significantly impacted by year-to-date losses and deductions in jurisdictions where no tax benefit can be realized. The increase in the effective tax rate for the ~~current-year~~three months ended November 30, 2021 relative to the prior comparable period was ~~impacted by a $5 million~~ ~~benefit~~primarily driven by revaluing tax ~~planning strategies and the carryback of net losses that offset income from taxable years where the rate was 35%. In addition, an $8 million~~ ~~benefit~~ ~~was driven by uncertain tax position releases~~assets due to ~~audit closures. These benefits were offset by a $3 million~~ tax ~~expense related to the gain on sale of our manufacturing facility in China (see~~ ~~Note 15, "Leases"~~). The prior-year period was impacted by decreased profitability due to the COVID-19 pandemic, the impact of benefits related to uncertain tax position releases due to expirations of statute of limitations, and valuation allowance releases associated with the ability to use tax attributes before expiration. Bothrate changes. Additionally, both the current and prior-year effective income tax rates were impacted by ~~tax benefits that are~~ non-recurring ~~and not anticipated to impact future years.~~items.

Note ~~13.~~12. Segment Information

The Company is a global manufacturer of a broad range of industrial products and solutions. The IT&S reportable segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the industrial, maintenance, infrastructure, oil & gas, alternative energy and other markets. The Other operating segment is included for purposes of reconciliation of the respective balances below to the condensed consolidated financial statements.

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


		Three Months Ended May 31,				Nine Months Ended May 31,					Three Months Ended November 30,
		2021		2020		2021		2020			2021		2020
Net Sales by Reportable Segment & Product Line	Net Sales by Reportable Segment & Product Line									Net Sales by Reportable Segment & Product Line
IT&S Segment	IT&S Segment									IT&S Segment
Product	Product	$	102,224	$	67,957	$	271,992	$	257,685	Product	$	92,350	$	82,573
Service & Rental	Service & Rental	31,176		24,908		86,322		94,134		Service & Rental	28,963		29,602
		133,400		92,865		358,314		351,819			121,313		112,175

Other Operating Segment	Other Operating Segment	9,749		9,014		24,919		30,120		Other Operating Segment	9,590		7,255
		$	143,149	$	101,879	$	383,233	$	381,939		$	130,903	$	119,430

Operating Profit (Loss)	Operating Profit (Loss)									Operating Profit (Loss)
IT&S Segment	IT&S Segment	$	23,812	$	7,639	$	54,826	$	54,263	IT&S Segment	$	18,064	$	17,157
Other Operating Segment	Other Operating Segment	(65)		(790)		(3,747)		(2,017)		Other Operating Segment	(1,257)		(1,809)
General Corporate	General Corporate	(1,000)		(8,847)		(13,555)		(31,308)		General Corporate	(10,400)		(6,279)
		$	22,747	$	(1,998)	$	37,524	$	20,938		$	6,407	$	9,069


		May 31, 2021		August 31, 2020			November 30, 2021		August 31, 2021
Assets	Assets					Assets
IT&S Segment	IT&S Segment	$	656,165	$	592,086	IT&S Segment	$	644,138	$	641,256
Other Operating Segment	Other Operating Segment	59,403		61,105		Other Operating Segment	52,524		52,745
General Corporate	General Corporate	127,134		171,103		General Corporate	115,806		126,246
		$	842,702	$	824,294		$	812,468	$	820,247

In addition to the impact of changes in foreign currency exchange rates, the comparability of segment and product line information is impacted by acquisition/divestiture activities, impairment and divestiture charges, restructuring costs and related benefits. Corporate assets, which are not allocated, principally represent cash and cash equivalents, property, plant and equipment, Right of Use ("ROU") assets, capitalized debt issuance costs and deferred income taxes.

Note ~~14.~~13. Commitments and Contingencies

The ~~Company~~Company had outstanding letters of credit of ~~$16.0~~$11.6 million and $11.9 million at ~~May 31,~~November 30, 2021 and August 31, ~~2020,~~2021, respectively, the majority of which relate to commercial contracts and self-insured workers' compensation programs.

As part of the Company's global sourcing strategy, we have ~~entered~~entered into agreements with certain suppliers that require the supplier to maintain minimum levels of inventory to support certain products for which we require a short lead time to fulfill customer orders. We have the ability to notify the supplier that they no longer need maintain the minimum level of inventory should we discontinue manufacturing of a product during the contract period; however, we must purchase the remaining minimum inventory levels the supplier was required to maintain within a defined period of time.

The Company is a party to various legal proceedings that have arisen in the normal course of business. These legal proceedings include regulatory matters, product liability, 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 a loss has been incurred and can be reasonably estimated. The Company maintains a policy to exclude from such reserves an estimate of legal defense costs. In the opinion of management, resolution of these contingencies is not expected to have a material adverse effect on the Company’s financial 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; however, the Company does not believe it is probable that it will be required to satisfy these obligations. Future minimum lease payments for these leases at ~~May 31,~~November 30, 2021 were ~~$5.7~~$4.9 million associated with monthly payments extending to fiscal 2025.

~~The~~Additionally, in fiscal 2019, the Company ~~has~~ self-disclosed sales to an Estonian customer to relevant authorities in the Netherlands as potentially violating applicable Crimea sanctions laws in that country and the European Union, as those products were used in the Crimea region of Ukraine. While the investigation by authorities in the Netherlands is ongoing, the Company has concluded that it is

probable it will incur financial penalties. While there can be no assurance of the ultimate outcome of the Netherlands investigation, in the ~~nine~~three months ended ~~May 31, 2021,~~November 30, 2020, the Company recorded an expense representing its estimate of the financial penalty it may incur (no ~~expense~~adjustment to the estimate was recorded in the three months ended ~~May 31, 2021)~~November 30, 2021). The Company currently believes that there will be no material adverse effect on the Company's financial position, results of operations or cash flows from this matter.

Note ~~15.~~14. Leases

The Company has operating leases for real estate, vehicles, manufacturing equipment, IT equipment and office equipment (the Company does not have any financing leases). Our leases typically range in term from 3 to 15 years and may contain renewal options for periods up to 5 years at our discretion. Operating leases are recorded as operating lease ROU assets in “Other long-term assets” and operating lease liabilities in “Other current liabilities” and “Other long-term liabilities” of the Condensed Consolidated Balance Sheets.

The components of lease expense were as follows (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended November 30,
		May 31, 2021		May 31, 2020		May 31, 2021		May 31, 2020			2021		2020
Lease Cost:	Lease Cost:									Lease Cost:
Operating lease cost	Operating lease cost	$	3,861	$	3,818	$	11,333	$	11,966	Operating lease cost	$	3,725	$	3,706
Short-term lease cost	Short-term lease cost	431		343		1,241		1,108		Short-term lease cost	450		413
Variable lease cost	Variable lease cost	803		447		2,550		1,480		Variable lease cost	903		882

In the three months ended May 31, 2021, the Company sold and subsequently leased back a portion of our manufacturing facility in China as part of our global footprint rationalization initiative. In connection with the transaction, the Company recognized a gain of $10.0 million. The Company also incurred $4.6 million of closing related costs and value-added and land taxes associated with this transaction for a net gain of $5.4 million which is recorded in "Selling, general and administrative expenses" within the Condensed Consolidated Statements of Operations.

Supplemental cash flow and other information related to leases were as follows (in thousands):


		Nine Months Ended					Three Months Ended November 30,
		May 31, 2021		May 31, 2020			2021		2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	11,336	$	11,908	Operating cash flows from operating leases	$	3,611	$	3,705

Right-of-use assets obtained in exchange for new lease liabilities:	Right-of-use assets obtained in exchange for new lease liabilities:					Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	Operating leases	5,468		4,773		Operating leases	810		541

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

Enerpac Tool Group Corp. is a premier industrial tools and services company serving a broad and diverse set of customers in more than 100 countries. The Company is a global leader in the engineering and manufacturing of high pressure hydraulic tools, controlled force products and solutions for precise positioning of heavy loads that help customers safely and reliably tackle some of the most challenging jobs around the world. The Company was founded in 1910 and is headquartered in Menomonee Falls, Wisconsin. The Company has one reportable segment, IT&S. This segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools, as well as providing services and tool rental to the industrial, maintenance, infrastructure, oil & gas, alternative energy and other markets. Financial information related to the Company's reportable segment is included in Note ~~13,~~12, "Segment 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. The IT&S segment and the Company are well-positioned to drive shareholder value through a sustainable business strategy built on well-established brands, broad global distribution and end-markets, clear focus on the core tools and services business and disciplined capital deployment.

~~COVID-19~~Our Business Model

Our long-term goal is to create shareholder value and best in class returns through growth of our core businesses, driving efficiency and profitability, generating strong cash flow, and being disciplined in the deployment of our capital.We intend to leverage our strong brand, market positions, and dealer and distribution networks to generate organic core sales growth that exceeds end-market growth rates. Organic growth is accomplished through a combination of market share capture and product innovation, as well as market expansion into new vertical markets, emerging industries and new geographic regions. In addition to organic growth, we also focus on profit margin expansion by utilizing continuous improvement techniques to drive productivity and lower costs and by enacting routine pricing initiatives to generate price realization and offset cost increases, such as commodity and tariff increases and general inflation. Finally, cash flow generation is critical to achieving our financial and long-term strategic objectives. Strong cash

flow generation is achieved by maximizing returns on assets and minimizing primary working capital needs. The cash flow that results from efficient asset management and improved profitability is used to fund internal growth opportunities, strategic acquisitions, pay down of debt and opportunistic returns for shareholders.

General Business Update

During largely the second half of fiscal 2020 and through the first two quarters of fiscal 2021, our business, like many others around the world, experienced significant negative financial impacts from the COVID-19 pandemic. InBeginning in the third quarter of fiscal 2021, we returned to year-over-year core growth in all regions. ~~We saw~~In the first quarter of fiscal 2022, we continued to see strong growth in the Americas, ~~and Europe,~~ however, there are still portions of our Middle East and Asia Pacific regions in which we operate that remain challenged by pandemic-related lockdowns or the lingering economic effects of the ~~pandemic.~~pandemic and growth. We continued to see growth in our standard product offerings in our European markets, but saw a year-over-year decrease in our service and rental sales as well as our heavy-lifting sales due to large projects in the first quarter of fiscal 2021 that did not repeat. Our key manufacturing facilities continue to operate with additional precautions in place to ensure the safety of our employees and prevent production ~~disruptions,~~disruptions. Like many other businesses around the world, increased demand as global economies have returned to more normalized levels has stressed our supply chain, and increased demand and pandemic related factors have also created challenges in freight lines and the overall logistics environment. We are closely monitoring our supply chain in order to ensure we ~~have been able~~can maintain competitive lead times and deliver products to ~~meet~~customers timely. Despite pandemic related demand challenges in certain regions and the supply chain and logistics challenges we are currently experiencing, our ~~customers' demand for~~balance sheet remains strong and the ~~products and services they require. The~~ Company ~~is well positioned~~continues to ~~execute~~focus on the execution of our strategic growth initiatives asin the markets we ~~serve continue to recover across the globe. With our strong balance sheet, we~~serve. We remain focused on new product development, driving organic growth and pursuing disciplined acquisition opportunities.

~~General Business Update~~

On October 31, 2019, the Company completed the previously announced sale of its former EC&S segment to wholly owned subsidiaries of BRWS Parent LLC, a Delaware limited liability company and affiliate of One Rock Capital Partners II, LP, for a purchase price of approximately $216 million (inclusive of working capital adjustments that were finalized in the third quarter of fiscal 2020), with approximately $3 million which was due in four equal quarterly installments, the last of which was received in the first fiscal quarter of 2021.

On March 21, 2019, the Company announced a restructuring plan focused on (i) the integration of the Enerpac and Hydratight businesses (IT&S segment), (ii) the strategic exit of certain commodity-type services in our North America Services operations (IT&S segment) and (iii) driving efficiencies within the overall corporate structure. In the third quarter of fiscal 2020, the Company announced the expansion and revision of this plan, which further simplifies and flattens the corporate structure through elimination of redundancies between the segment and corporate functions, while enhancing our commercial and marketing processes to become even closer to our customers. Total restructuring charges associated with this restructuring plan were $1.5 million and $2.2 million in the three and nine months ended May 31, 2021, respectively, and $2.5 million and $5.6 million in the three and nine months ended May 31, 2020, respectively, related primarily to headcount reductions and facility consolidations. We anticipate achieving annual savings of

~~$12 million to $15 million from the first phase of the plan and anticipate an additional annual savings of $12 million to $15 million from the expansion and revision of the plan.~~ ~~The annual benefit of these gross cost savings may be impacted by a number of factors, including annual incentive compensation differentials.~~

Given our global 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 and cash flow 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 continuing operations (in millions, except per share amounts):


		Three Months Ended May 31,								Nine Months Ended May 31,									Three Months Ended November 30,
		2021				2020				2021				2020					2021				2020
Net sales	Net sales	$	143	100	%	$	102	100	%	$	383	100	%	$	382	100	%	Net sales	$	131	100	%	$	119	100	%
Cost of products sold	Cost of products sold	76		53	%	60		59	%	206		54	%	209		55	%	Cost of products sold	71		54	%	64		54	%
Gross profit	Gross profit	67		47	%	42		41	%	177		46	%	173		45	%	Gross profit	60		46	%	55		46	%
Selling, general and administrative expenses	Selling, general and administrative expenses	40		28	%	41		40	%	130		34	%	143		37	%	Selling, general and administrative expenses	49		37	%	44		37	%
Amortization of intangible assets	Amortization of intangible assets	2		1	%	2		2	%	6		2	%	6		2	%	Amortization of intangible assets	2		2	%	2		2	%
Restructuring charges	Restructuring charges	2		1	%	2		2	%	2		1	%	6		2	%	Restructuring charges	3		2	%	0		0	%
Impairment & divestiture charges (benefits)	Impairment & divestiture charges (benefits)	0		0	%	(1)		(1)	%	1		0	%	(4)		(1)	%	Impairment & divestiture charges (benefits)	0		0	%	0		0	%
Operating profit (loss)		23		16	%	(2)		(2)	%	38		10	%	21		5	%
Operating profit																		Operating profit	6		5	%	9		8	%
Financing costs, net	Financing costs, net	1		1	%	4		4	%	4		1	%	16		4	%	Financing costs, net	1		1	%	2		2	%
Other expense (income), net		1		1	%	(1)		(1)	%	2		1	%	(2)		(1)	%
Other expense, net																		Other expense, net	0		0	%	0		0	%
Earnings (loss) before income tax (benefit) expense	Earnings (loss) before income tax (benefit) expense	21		15	%	(5)		(5)	%	32		8	%	7		2	%	Earnings (loss) before income tax (benefit) expense	5		4	%	7		6	%
Income tax (benefit) expense		(4)		(3)	%	—		—	%	(2)		(1)	%	1		—	%
Net earnings (loss) from continuing operations		25		17	%	(5)		(5)	%	34		9	%	5		1	%
Income tax expense																		Income tax expense	2		2	%	2		2	%
Net earnings from continuing operations																		Net earnings from continuing operations	3		2	%	5		4	%

Diluted earnings (loss) per share from continuing operations		$	0.42			$	(0.08)			$	0.56			$	0.09
Diluted earnings per share from continuing operations																		Diluted earnings per share from continuing operations	$	0.05			$	0.08

Consolidated net sales for the ~~third~~first quarter of fiscal ~~2021~~2022 were ~~$143~~$131 million, an increase of ~~$41~~$12 million, ~~(41%)~~or 10%, from the prior-year comparable period. Core sales increased ~~$38~~$11 million, ~~(36%) and divested product lines and the strategic exits of certain service offerings net of sales from acquisitions decreased net sales $1 million (1%)~~or 9%, ~~while the~~with minimal impact from foreign currency ~~rates benefited net sales by 6%.~~rates. The increase in core sales was due to the substantial increase in sales volume resulting from pandemic-related market recovery most notably in North America, and to a lesser extent, the results of pricing actions in response to increasing costs of raw materials, components, and freight. The continuation of supply chain and logistics challenges seen in the fourth quarter of fiscal 2021 led to longer lead times throughout the quarter and larger than usual backlogs at November 30, 2021, which negatively impacted the quarter as ~~we saw economies recover and business activities normalize from~~compared to the ~~COVID-19 pandemic across many parts~~first quarter of ~~the world, but there are still some regions that remain challenged by pandemic related lockdowns and economic impacts.~~fiscal 2021. Core products sales ~~were up 40% and~~increased 14%, while core service sales ~~were up 23%~~declined 3% as compared to the same period in the prior year. Gross profit margins remained flat as compared to the prior-year first quarter, as pricing actions were wholly offset by increased 6%costs in the supply chain and logistics environments. Operating profit was $3 million lower in the first quarter of fiscal 2022 as compared to the first quarter of fiscal 2021. Selling, general, and administrative expenses increased $4 million primarily due to executive transition costs and non-repeating temporary cost savings actions taken in the first quarter of fiscal 2021 in response to the COVID-19 pandemic. Restructuring charges also increased $3 million as compared to the prior period as a result of charges to streamline and flatten the organizational structure in the first quarter of fiscal 2022. These increases in selling, general, and

administrative expenses and restructuring charges more than offset the $5 million increase in gross profit as a result of the higher ~~absorption of fixed costs from higher sales volumes. Operating profit was $25 million higher in the third quarter of fiscal 2021 as compared to the third quarter of fiscal 2020~~ as a result of the increase in gross profit. Although Selling, general, and administrative (SG&A) expenses were relatively consistent period to period, the savings from short-term COVID-19 actions generated in the third quarter of fiscal 2020 were approximately equal to the gain on the sale of our manufacturing facility in China, net of transaction costs and value-added taxes associated with the transaction in the third quarter of fiscal 2021.

Consolidated net sales for the nine months ended May 31, 2021 increased $1 million (less than 1%) from the prior-year comparable period. Core sales decreased $4 million (1%) and divested product lines and the strategic exits of certain service offerings net of sales from acquisitions decreased net sales $3 million (1%), while the impact of foreign currency rates benefited net sales by 2%. Core sales volumes were substantially depressed in the first two quarters of fiscal 2021 as compared to the prior year due to the lingering impacts of the COVID-19 pandemic which first significantly impacted core sales in the third quarter of fiscal 2020; however, we saw a significant increase in sales volumes in the ~~third~~first quarter of fiscal 2021 as compared to the third quarter of fiscal 2020 as economies recovered from the pandemic which led to core sales decreasing 1% for the nine months ended May 31, 2021. Core products sales increased 1% and core service sales decreased 8%. Gross profit margins increased 1% as a result of ~~the mix of product and service.~~ ~~Operating profit was $17 million higher in the nine months ended May 31, 2021 as compared to the prior-year comparable period due to $4 million of additional gross profit and SG&A savings realized~~ through both short and long-term cost savings actions, including the realization of savings from restructuring actions, lower travel and entertainment expenses, and other discretionary spending initiatives combined with the gain on the sale of our manufacturing facility in China.2022.

Segment Results

IT&S Segment

The IT&S segment is a global supplier of branded hydraulic and mechanical tools and services to a broad array of end markets, including infrastructure, industrial maintenance, repair, and operations, oil & gas, mining, alternative and renewable energy ~~mining~~ and ~~production automation~~construction markets. Its primary products include ~~pumps,~~branded tools, cylinders, hydraulic torque wrenches, highly engineered heavy lifting technology solutions and other tools (Product product line). On the service and rental side, the segment provides 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 IT&S segment (in millions):


		Three Months Ended May 31,						Nine Months Ended May 31,							Three Months Ended November 30,
		2021			2020			2021			2020				2021			2020
Net sales	Net sales	$	133		$	93		$	358		$	352		Net sales	$	121		$	112
Operating profit	Operating profit	24			8			55			54			Operating profit	18			17
Operating profit %	Operating profit %	17.9		%	8.2		%	15.3		%	15.4		%	Operating profit %	14.9		%	15.3		%

IT&S segment net sales for the ~~third~~first quarter of fiscal ~~2021~~2022 increased by ~~$40~~$9 million, ~~(44%)~~or 8%. Core sales increased ~~$37~~$9 million, or 8%, year over year ~~(39%) as a result of~~due to the substantial increase in sales volume ~~as we saw economies recover~~resulting from pandemic-related market recovery most notably in North America, and ~~business activities normalize~~to a lesser extent, the results of pricing actions in response to increasing costs of raw materials, components, and freight. The continuation of supply chain and logistics challenges from the ~~COVID-19 pandemic across many parts of the world, but there are still some regions that remain challenged by pandemic related lockdowns.~~ ~~Strategic exits and divestitures of non-core product lines net of sales from acquisitions decreased net sales by $1 million (1%), while the impact of foreign currency rates benefited net sales by 6%.~~

~~Operating profit percentage increased 9.7% from the prior-year quarter~~ ~~due to the substantial increase in sales volumes.~~

Year-to-date IT&S segment net sales increased by $6 million (2%). Core sales increased $1 million year over year (less than 1%). The first two quarters of fiscal 2021 were depressed as a result of the pandemic as compared to the comparable period in the prior year which operated under normal operating conditions. However, we saw a return to near pre-pandemic volume levels in the thirdfourth quarter of fiscal 2021 ~~as compared~~led to longer lead times throughout the ~~third~~quarter and larger than usual backlogs at November 30, 2021, which negatively impacted the first quarter of fiscal 2020 which was the period where net sales volumes were most negatively impacted by the pandemic, hence the overall less than 1% increase in core sales when comparing year-to-date fiscal 2021 to fiscal 2020. Strategic exits and divestitures of non-core product lines net of sales from acquisitions accounted for a $3 million (1%) decrease, while the impact of foreign currency rates benefited net sales by 3%.2022.

Operating profit percentage decreased ~~0.1%~~0.4% from the prior-year ~~nine-month period.~~quarter as pricing actions were wholly offset by the increased costs in the supply chain and logistics environments.

Corporate

Corporate expenses were $1$10 million and $9$6 million in the three months ended ~~May 31,~~November 30, 2021 and 2020, respectively, ~~and $14~~which represents an increase of $4 million ~~and $31 million in the nine months ended May 31, 2021 and 2020, respectively. This represents a decrease of $8 million and $17 million for the three and nine months ended May 31, 2021, respectively.~~year over year. The ~~decrease~~increase for the three months ended ~~May 31,~~November 30, 2021 was a result of ~~the gain, net of transaction~~executive transition costs and value-added taxes, resulting from the sale of our manufacturing facility in China. In addition to the gain from the sale, the decrease in the nine month period also benefited from the realization of savings from as well as restructuring ~~actions and reductions in discretionary spend, including consulting services. Corporate development and Board search~~ costs incurred ~~in fiscal 2021 were also lower than acquisition due diligence and other acquisition related costs incurred in fiscal 2020~~ associated with our newly announced restructuring program to flatten and simplify the ~~acquisition of HTL Group in January 2020.~~

organizational structure.

Financing Costs, net

Net financing costs were $1 million and $5$2 million for the three months ended ~~May 31,~~November 30, 2021 and 2020, respectively. ~~For the nine months ended May 31, 2021 and 2020 net financing costs were $4 million and $16 million, respectively.~~ Financing costs decreased as ~~a result of~~ the ~~cash pay off of~~outstanding amount on our ~~outstanding term loan in November 2019 and, in~~revolver decreased $80 million as compared to the ~~fourth~~first quarter of fiscal 2020, the retirement of our 5.625% Senior Notes through drawing on our revolving line of credit, which maintains a lower interest rate in the current interest rate environment. We have also reduced the principal on our outstanding credit facility by $60 million in fiscal 2021 through utilization of cash from operations.2021.

Income Tax Expense

The Company's global operations, acquisition activity (as applicable) and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Comparative earnings ~~(loss)~~ before income taxes, income tax ~~(benefit)~~ expense and effective income tax rates from continuing operations are as follows (in thousands):

Three Months Ended May 31, Nine Months Ended May 31,
2021 2020 2021 2020
Earnings (loss) from continuing operations before income tax (benefit) expense $ 21 $ (5) $ 32 $ 7
Income tax (benefit) expense (4) — (2) 1
Effective income tax rate (21.0) % 7.6 % (6.8) % 20.1 %


	Three Months Ended November 30,
	2021			2020
Earnings from continuing operations before income tax expense	$	5		$	7
Income tax expense	2			2
Effective income tax rate	35.9		%	31.9		%

The Company’s earnings ~~(loss)~~ from continuing operations before income taxes include earnings from both U.S. and foreign ~~jurisdictions of approximately~~ ~~75%~~ ~~of the consolidated total for each of the estimated full-year fiscal 2021 and full-year 2020.~~jurisdictions. Though most foreign tax rates are now in line with the U.S. tax rate of 21%, the annual effective tax rate is impacted by withholding taxes, losses in jurisdictions ~~where~~where no benefit can be realized, and various aspects of the U.S. Tax Cuts and Jobs Act, such as the Global Intangible Low-Taxed Income, Foreign-Derived Intangible Income and Base Erosion and Anti-Abuse Tax provisions.

The effective tax rate for the three months ended ~~May 31,~~November 30, 2021 was ~~(21.0)%~~35.9%, compared to ~~7.6%~~31.9% for the comparable prior-year period. Overall, both time periods are significantly impacted by year-to-date losses and deductions in jurisdictions where no tax benefit can be realized. The increase in the effective tax rate for the ~~current-year~~three months ended November 30, 2021 relative to the prior comparable period was ~~impacted by a $5 million~~ ~~benefit~~primarily driven by revaluing tax ~~planning strategies and the carryback of net losses that offset income from taxable years where the rate was 35%. In addition, an $8 million~~ ~~benefit~~ ~~was driven by uncertain tax position releases~~assets due to ~~audit closures. These benefits were offset by a $3 million~~ tax expense related to the gain on sale of our manufacturing facility in China. The prior-year period was impacted by decreased profitability due to the COVID-19 pandemic, the impact of benefits related to uncertain tax position releases due to expirations of statute of limitations, and valuation allowance releases associated with the ability to use tax attributes before expiration. Bothrate changes. Additionally, both the current and prior-year effective income tax rates were impacted by ~~tax benefits that are~~ non-recurring ~~and not anticipated to impact future years.~~items.

Cash Flows and Liquidity

At ~~May 31,~~November 30, 2021, we had ~~$136~~$127 million of cash and cash equivalents of which ~~$124~~$125 million was held by our foreign subsidiaries and ~~$12~~$2 million was held domestically. The following table summarizes our cash flows provided by ~~(used in)~~ operating, investing and financing activities (in millions):

Nine Months Ended May 31,
2021 2020
Net cash provided by (used in) operating activities $ 25 $ (16)
Net cash provided by investing activities 16 176
Net cash used in financing activities (62) (206)
Effect of exchange rates on cash 5 (2)
Net decrease in cash and cash equivalents $ (16) $ (48)


	Three Months Ended November 30,
	2021		2020
Cash (used in) provided by operating activities	$	(5)	$	9
Cash used in investing activities	(3)		(2)
Cash used in financing activities	(4)		(2)
Effect of exchange rate changes on cash	(2)		1
Net (decrease) increase in cash and cash equivalents	$	(14)	$	6

Net cash used in operating activities was $5 million for the three months ended November 30, 2021 as compared to $9 million net cash provided by operating activities ~~was $25 million~~ for the ~~nine~~three months ended ~~May 31, 2021 as compared to $16 million net cash used in operating activities for the nine months ended May 31,~~November 30, 2020. ~~The change year over year~~This is ~~predominantly~~ a result of the ~~divestiture of the EC&S segment, which generated a use of cash of $19 million~~payout in the first quarter of fiscal ~~2020 prior to its divestiture,~~2022 of the ~~reduction in our interest cost which has generated cash interest savings of $12 million year over year, the termination of our~~fiscal 2021 annual bonus plan (the fiscal 2020 bonus ~~program~~plan was suspended in response to the COVID-19 pandemic, ~~which resulted in~~as such, there was no ~~bonus~~such payment in the first quarter of fiscal ~~2021 ($6 million paid~~2021), as well as greater cash used for primary working capital in the first quarter of fiscal ~~2020~~2022, predominantly associated with increased inventory as a result of logistics challenges and increased accounts receivable due to the ~~fiscal 2019 bonus program), and~~timing of billings on a ~~decrease~~large contract in ~~cash taxes paid of $6 million year over year.~~Europe.

Net cash ~~provided by~~used in investing activities was ~~$16~~$3 million for the ~~nine~~three months ended ~~May 31,~~November 30, 2021 as compared to ~~$176~~$2 million ~~net~~for the three months ended November 30, 2020. The cash ~~provided by~~used in investing activities for ~~the nine months ended May 31, 2020. The cash provided by investing activities in the~~

~~prior-year period was generated from the sale of our EC&S segment as well as our Connectors and UNI-LIFT product lines, slightly offset by cash used~~both fiscal years primarily related to capital expenditures, for ~~capital expenditures. In fiscal 2021,~~which we sold our manufacturing facility in China for approximately $22 million and received approximately $3 million in proceeds associated with the death benefit for life insurance on legacy officers of the Company, which was offset by approximately $10 million ofhave currently approved higher capital expenditures in fiscal 2022 as economic conditions normalize with respect to the ~~fiscal year.~~COVID-19 pandemic.

Net cash used in financing activities was $4 million for the three months ended November 30, 2021 compared to $2 million for the three months ended November 30, 2020. The net cash used in financing activities ~~was $62 million~~ for the ~~nine months ended May 31, 2021 compared to $206~~first quarter of fiscal 2022 predominantly consisted of $2 million paid for the nine months ended May 31, 2020. The cash used in financing activities in fiscal 2020 consisted primarily of the early pay off of the outstanding principal balance on the term loan of $175 million, $18 million of share repurchases,annual dividend and $2 million for taxes paid related to the ~~payment~~net share settlement of ~~our annual dividend. Net~~equity awards. The net cash used in the first quarter of fiscal 2021 cash flow used in financing activities resulted primarily from the $60 million in net principal payments on our outstanding credit facility with excess cash on hand to reduce interest costs, as well aspredominantly consisted of $2 million paid for ~~our~~the annual ~~dividend.~~dividend partially offset by receipt of $1 million for the final installment payment on the sale of the former EC&S segment.

The Company's Senior Credit Facility is comprised of a $400 million revolving line of credit and previously provided for a $200 million term loan, both scheduled to mature in March 2024 (see Note 8,7, "Debt" in the notes to the condensed consolidated financial statements for further details of the Senior Credit Facility). ~~As previously noted, the Company paid off the outstanding principal balance on the term loan in November 2019. Further, as noted in~~ ~~Note 8, "Debt", on June 15, 2020, the Company borrowed $295 million~~ ~~under the Senior Credit Facility revolving line of credit to fund the redemption of all of the outstanding Senior Notes at par, plus the remaining accrued and unpaid interest.~~ Outstanding borrowings under the Senior Credit Facility revolving line of credit were ~~$195~~$175 million as of ~~May 31,~~November 30, 2021. The unused credit line and amount available for borrowing under the revolving line of credit was ~~$201~~$220 million at ~~May 31, 2021.~~November 30, 2021 after reduction for $5 million of outstanding letters of credit issued under the Senior Credit Facility.

We believe that the revolving credit line, combined with our existing cash on hand and anticipated operating cash 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 following table shows a comparison of primary working capital (in millions):


		May 31, 2021		PWC%		August 31, 2020		PWC%			November 30, 2021		PWC%		August 31, 2021		PWC%
Accounts receivable, net	Accounts receivable, net	$	113	20	%	$	84	19	%	Accounts receivable, net	$	112	21	%	$	103	18	%
Inventory, net	Inventory, net	75		13	%	69		16	%	Inventory, net	84		16	%	75		13	%
Accounts payable	Accounts payable	(60)		(11)	%	(45)		(10)	%	Accounts payable	(63)		(12)	%	(62)		(11)	%
Net primary working capital	Net primary working capital	$	128	22	%	$	108	25	%	Net primary working capital	$	133	25	%	$	116	20	%

Commitments and Contingencies

We are contingently liable for certain lease payments under leases within businesses we previously divested or spun-off. If any of these businesses do not fulfill their future lease payment obligations under a lease, we could be liable for such obligations, however, the Company does not believe it is probable that it will be required to satisfy these obligations. Future minimum lease payments for these leases at ~~May 31,~~November 30, 2021 were $6$5 million with monthly payments extending to fiscal 2025.

We had outstanding letters of credit totaling ~~$16 million and~~ $12 million at ~~May 31,~~both November 30, 2021 and August 31, ~~2020, respectively,~~2021, the majority of which relate to commercial contracts and self-insured workers' compensation programs.

We are also subject to certain contingencies with respect to legal proceedings and regulatory matters which are described in Note ~~14,~~13, "Commitments and Contingencies" in the notes to the condensed consolidated financial statements. While there can be no assurance of the ultimate outcome of these matters, the Company believes that there will be no material adverse effect on the Company's results of operations, financial position or cash flows.

Contractual Obligations

Our contractual obligations have not materially changed ~~in fiscal~~at November 30, 2021 from what was previously disclosed 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, ~~2020.~~2021.

Critical Accounting Estimates

Management has evaluated the accounting estimates used in the preparation of the Company's condensed consolidated financial statements and related notes and believe those estimates to be reasonable and appropriate. Certain of these accounting estimates 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 Part 1, 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, ~~2020.~~2021.

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: In the current economic environment, we manage interest expense using a mixture of variable-rate debt and fixed-interest-rate swaps. As of ~~May 31,~~November 30, 2021, ~~long term~~long-term debt consisted of ~~$195~~$175 million of borrowing under the revolving line of credit (variable rate debt). ~~We are the fixed rate payor on an interest-rate swap that effectively fixes the LIBOR-based index on $100 million of borrowings under our revolving line of credit.~~

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, United Arab Emirates and China, and we 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,~~9, “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 pe~~rcent~~ percent decrease in all foreign exchange rates compared with the U.S. dollar. Using this assumption, quarterly sales would have been lower by $7by $6 millionand operating profit would have been lower by $1 million, respectively, for the three months ended ~~May 31,~~November 30, 2021. 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~~$36~~ $43 millionreduction to equity (accumulated other comprehensive loss) as of ~~May 31,~~November 30, 2021, 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 ~~May 31,~~November 30, 2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

2522

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 22,799,230 shares of common stock for $668 million. As of ~~May 31,~~November 30, 2021, the maximum number of shares that may yet be purchased under the programs is 5,200,770 shares. There were no share repurchases in the three months ended ~~May 31,~~November 30, 2021.

Item 6 – Exhibits

Exhibit

Description

Incorporated Herein By Reference To

Filed
Herewith

Furnished Herewith

2.1

Securities Purchase Agreement, dated as of July 8, 2019, by and between Actuant Corporation, BRWS Parent LLC, Actuant France SAS and Actuant Holdings AB

Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on July 9, 2019

10.1

Letter agreement dated September 22, 2021 between Paul E. Sternlieb and Enerpac Tool Group Corp.

Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on September 29, 2021

10.2

Letter agreement dated September 23, 2021 between Randal W. Baker and Enerpac Tool Group Corp.

Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on September 29, 2021

31.1

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

31.2

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

32.1

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

32.2

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

101

The following materials from the Enerpac Tool Group Corp. Form 10-Q for the three ~~and nine~~ months ended ~~May 31,~~November 30, 2021 formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) the Condensed Consolidated Statements of ~~Operations,~~Earnings, (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 the Condensed Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101)

2623

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.


	ENERPAC TOOL GROUP CORP.
	(Registrant)
Date: ~~June 30,~~December 23, 2021	By:	/S/ BRYAN R. JOHNSON
		Bryan R. Johnson
		VP of Finance and Principal Accounting Officer

2724


			Page No.

Forward-Looking Statements and Cautionary Factors			1

Part I—Financial Information

Item 1—Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Statements of ~~Operations~~Earnings			3

Condensed Consolidated Statements of Comprehensive Income (Loss)			4

Condensed Consolidated Balance Sheets			5

Condensed Consolidated Statements of Cash Flows			6

Notes to the Condensed Consolidated Financial Statements			7

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations			2017

Item 3—Quantitative and Qualitative Disclosures about Market Risk			2521

Item 4—Controls and Procedures			2522

Part II—Other Information

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds			2623

Item 6—Exhibits			2623


	Nine Months Ended May 31, 2020
	IT&S		Corporate
Balance as of August 31, 2019	$	2,912	$	0
Restructuring charges	4,019		1,590
Cash payments	(4,265)		(871)
Other non-cash uses of reserve (1)	(556)		(484)
Impact of changes in foreign currency rates	(23)		0
Balance as of May 31, 2020	$	2,087	$	235