ENERPAC TOOL GROUP CORP

Previous wording

Consolidated net sales for the second quarter of fiscal 2024 were$138 million, a decrease of$4 million or 2% compared to the prior-year comparable period. The effect of the weakening U.S. dollar on foreign currency rates compared to the second quarter of fiscal 2023 was immaterial and the divestiture of the Cortland Industrial business during the fourth quarter of fiscal 2023 unfavorably impacted sales by$6 million or 4%, resulting in organic sales growth of 2% year-over-year. Management refers to sales adjusted to exclude the impact of these items (foreign currency changes and recent acquisitions and divestitures) as "organic sales" (which we formerly referred to as "core sales"). In the second quarter of fiscal 2024, product sales declined 3%, with an immaterial impact from foreign currency, and the divestiture of Cortland Industrial unfavorably impacting sales by $6 million, or 6%, resulting in product organic sales growth of 2%. The product organic sales growth is attributed to the impact of pricing actions and mix in IT&S products. Service sales increased 1% compared to the prior-year period, favorably impa cted by foreign currency rates of approximately $0.4 million, or 1%, resulting in 1% organic sales decline year-over-year. Gross profit as a percentage of sales was approximately 52% for the second quarter fiscal 2024 compared to 50% in the second quarter of fiscal 2023. The increase in gross profit as a percentage of sales was driven by operational improvements related to ASCEND, favorable sales mix, the impact of pricing actions, and the disposition of the Cortland Industrial business. Operating profit for the second quarter of fiscal year 2024 was $30 million, an increase of $16 million compared to the second quarter fiscal 2023. The increase in operating profit was driven by the aforementioned benefits in gross profit, as well as the decrease in Selling, general & administrative expense ("SG&A") by approximately $14 million year-over-year. The SG&A decreases were a result of $10 million in lower ASCEND transformation program charges, $3 million of lower restructuring charges, and decreases in personnel cost and indirect spend as the Company continues to responsibly manage its discretionary spending.

Current wording

Consolidated net sales for the third quarter of fiscal 2024 were$150 million, a decrease of$6 million or 4% compared to the prior-year comparable period. The effect of the strengthening U.S. dollar on foreign currency rates compared to the third quarter of fiscal 2023 unfavorably impacted sales by approximately$1 million or 1%, and the divestiture of the Cortland Industrial business during the fourth quarter of fiscal 2023 unfavorably impacted sales by$7 million, or 4%, resulting in organic sales growth of 1% year-over-year. Management refers to sales adjusted to exclude the impact of these items (foreign currency changes and recent acquisitions and divestitures) as "organic sales" (which we formerly referred to as "core sales"). In the third quarter of fiscal 2024, product sales declined $8 million, or 6%, with foreign currency unfavorably impacting sales approximately $1 million, and the divestiture of the Cortland Industrial business during the fourth quarter of fiscal 2023 unfavorably impacted sales by$7 million or 5%, resulting in flat product organic sales compared to the prior-year period. Although total product sales were flat, IT&S product sales increased from the prior-year, dueto the impact of pricing actions and mix within the IT&S product offerings. This increase was fully offset by sales decline in the Cortland Medical business. In the third quarter of fiscal 2024, service sales increased $2 million, or 7%, with immaterial impact of foreign currency, resulting in 7% organic sales growth year-over-year. Gross profit as a percentage of sales was approximately 52% for the third quarter of fiscal 2024 compared to 50% in the third quarter of fiscal 2023. The increase in gross profit as a percentage of sales was driven by operational improvements related to ASCEND, favorable sales mix, the impact of pricing actions, and the divestiture of the Cortland Industrial business. Operating profit for the third quarter of fiscal year 2024 was $33 million, an increase of $8 million compared to the third quarter of fiscal 2023. The increase in operating profit was mainly driven by a $7 million decrease in Selling, general & administrative expense ("SG&A") year-over-year. The SG&A decreases were a result of $4 million in lower ASCEND transformation program charges, $1 million of lower restructuring charges, and decreases in personnel costs and discretionary spend as the Company continues to responsibly manage its spending.

Previous wording

Consolidated net sales for the first half of fiscal 2024 were $280 million, a decrease of $1 million compared to the first half of fiscal 2023. The effect of the weakening U.S. dollar on foreign currency rates compared to the first half of fiscal 2023 favorably impacted net sales by $3 million, or 1%, and the divestiture of Cortland Industrial unfavorably impacted sales by $13 million, or 5%, resulting in organic sales growth of 4%. Compared to the prior-year period, in the first half of fiscal 2024, product sales declined 2%, with the effect of foreign currency rates unfavorably impacting sales by $1 million, or 1%, and the divestiture of Cortland Industrial unfavorably impacting product sales by $13 million, or 6%, resulting in product organic sales growth of 3%. Service sales increased 7% compared to the prior-year period, favorably impacted by foreign currency rates of approximately $1 million, or 1%, resulting in 5% organic sales decline year-over-year. Year-to-date gross profit as a percentage of sales of 52% was approximately 300 basis points higher in fiscal 2024 compared to approximately 49% in the first half of fiscal 2023. The gross profit percent increase is driven by operational improvement, favorable sales mix and the disposition of the Cortland Industrial business in the fourth quarter or fiscal 2023. SG&A has decreased$22 million year-over-year as a result of$18 million of lower ASCEND transformation program charges, restructuring charges, bad debt benefit and personnel costs from actions taken in the ASCEND transformation program.

Current wording

Consolidated net sales were $431 million for the nine months ended May 31, 2024, a decrease of $7 million compared to nine months ended May 31, 2023. The effect of the weakening U.S. dollar on foreign currency rates compared to the same nine months of fiscal 2023 favorably impacted net sales by $2 million, or 0.4%, and the divestiture of Cortland Industrial unfavorably impacted sales by $20 million, or 5%, resulting in organic sales growth of 3%. Compared to the prior-year period, product sales declined 4% for thenine months ended May 31, 2024, with the effect of foreign currency rates unfavorably impacting sales by approximately $1 million, or 0.2%, and the divestiture of Cortland Industrial unfavorably impacting product sales by $20 million, or 6%, resulting in product organic sales growth of 2%. Service sales increased 7% compared to the prior-year period, favorably impacted by foreign currency rates of approximately $1 million, or 2%, resulting in 6% organic sales growth year-over-year. Year-to-date gross profit as a percentage of sales of 52% was approximately 250 basis points higher for thenine months ended May 31, 2024 compared to approximately 49% for the nine months ended May 31, 2023. The gross profit percent increase is driven by operational improvement, favorable sales mix and the divestiture of the Cortland Industrial business in the fourth quarter or fiscal 2023. SG&A has decreased $31 million year-over-year as a result of $22 million of lower ASCEND transformation program charges, $2 million of lower restructuring charges, personnel cost and discretionary spend as the Company continues to responsibly manage its spending.

Previous wording

IT&S segment net sales for the second quarter of fiscal 2024 increased by $4 million, or 3%, compared to the second quarter of fiscal 2023. The weakening of the U.S. dollar immaterially impacted sales, resulting in 3% organic sales growth. Organic sales growth was driven by the impact of pricing actions and favorable mix. Operating profit was $37 million compared to $30 million in the second quarter of fiscal 2023. This increase was due to pricing actions, mix and reduction in SG&A.

Current wording

IT&S segment net sales for the third quarter of fiscal 2024 increased by $2 million, or 1%, compared to the third quarter of fiscal 2023. The strengthening of the U.S. dollar unfavorably impacted sales by approximately $1 million or 1%, resulting in 2% organic sales growth. Organic sales growth was driven by the impact of pricing actions and favorable mix. Operating profit was $41 million compared to $36 million in the third quarter of fiscal 2023. This increase was due to pricing actions, mix and reduction in SG&A.

Previous wording

IT&S segment net sales for the first half of fiscal 2024 increased by $14 million, or 5%, compared to the first half of fiscal 2023. The weakening of the U.S. dollar favorably impacted sales by approximately $3 million or 1%, resulting in 4% organic sales growth. Organic sales growth was driven by the impact of pricing actions and favorable mix. Operating profit was $73 million compared to $57 million in the first half of fiscal 2023. The increase was due to pricing actions and mix and reduction in SG&A.

Current wording

IT&S segment net sales for the nine months ended May 31, 2024 increased by $15 million, or 4%, compared to the nine months ended May 31, 2023. The weakening of the U.S. dollar favorably impacted sales by approximately $2 million or 0.2%, resulting in 3% organic sales growth. Organic sales growth was driven by the impact of pricing actions and favorable mix. Operating profit was $114 million compared to $93 million in the first nine months of fiscal 2023. The increase was due to pricing actions and mix and reduction in SG&A.

Previous wording

Corporate expenses were $8 million and $18 million for the second quarter of fiscal 2024 and 2023, respectively, and $17 million compared to $33 million for the first half of fiscal 2024 and 2023, respectively. The decrease in expenses for both the second quarter and first half of the fiscal year were driven by lower ASCEND transformation program charges.

Current wording

Corporate expenses were $9 million and $13 million for the third quarter of fiscal 2024 and 2023, respectively, and $26 million compared to $46 million for the nine months ended May 31, 2024 and 2023, respectively. The decrease in expenses for both the three and nine months ended May 31, 2024 were driven by lower ASCEND transformation program charges.

Previous wording

Net financing costs were $4 million and $3 million for the three months ended February 29, 2024 and February 28, 2023, respectively. Financing costs increased due to higher debt balances and higher interest rates.

Current wording

Net financing costs were $3 million in both the three months ended May 31, 2024 and 2023. For the nine months ended May 31, 2024 and 2023, net financing costs were $11 million and $9 million, respectively. Financing costs increased due to higher debt balances and higher interest rates.

Previous wording

The effective tax rate for the three months ended February 29, 2024 was 29.3%, compared to 29.5% for the comparable prior-year period. The effective tax rate in each time period was impacted by year-to-date losses and deductions in jurisdictions where no tax benefit can be realized. The effective tax rate for the three months ended February 29, 2024 was comparable to the prior period and generally higher than the effective tax rate for thesix months ended February 29, 2024, due to the unfavorable impact of stock compensation that is concentrated in the second quarter. Both the current and prior-year effective income tax rates include the impact of non-recurring items.

Current wording

The effective tax rate for the three months ended May 31, 2024 was 23.1%, compared to 21.6% for the comparable prior-year period. The effective tax rate in each time period was impacted by year-to-date losses and deductions in jurisdictions where no tax benefit can be realized. The higher effective tax rate for the three months ended May 31, 2024 was primarily driven by the full year impacts of withholding tax related to current and future distributions, while the effective tax rate for thenine months ended May 31, 2024 is comparable to the prior-year period. Both the current and prior-year effective income tax rates include the impact of non-recurring items.

Previous wording

At February 29, 2024, we had $154 million of cash and cash equivalents, of which $143 million was held by our foreign subsidiaries and $11 million was held domestically. The following table summarizes our cash flows provided by operating, investing and financing activities (dollars in millions):

Current wording

At May 31, 2024, we had $132 million of cash and cash equivalents, of which $120 million was held by our foreign subsidiaries and $12 million was held domestically. The following table summarizes our cash flows provided by operating, investing and financing activities (dollars in millions):

Previous wording

Net cash provided by operating activities was$7 million for the six months ended February 29, 2024 and$10 million February 28, 2023, respectively. Cash flow from operations was lower than the prior year driven by higher accounts receivable balances, higher incentive compensation payments partially offset by lower ASCEND transformation program.

Current wording

Net cash provided by operating activities was$37 million for the nine months ended May 31, 2024 and$27 million May 31, 2023, respectively. Cash flow from operations was higher than the prior year driven by higher earnings in between the comparable periods.

Previous wording

Net cash used in investing activities was $6 million for the six months ended February 29, 2024 and $5 million for thesix months ended February 28, 2023. The first half of fiscal year 2024 investing activities included capital expenditures, purchase of business assets and final payments received from the sale of the Cortland Industrial business in July 2023. The prior year first half cash flows used in investing were for capital expenditures.

Current wording

Net cash used in investing activities was $8 million for both the nine months ended May 31, 2024 and 2023, respectively. The first nine months of fiscal year 2024 investing activities included capital expenditures, purchase of business assets and final payments received from the sale of the Cortland Industrial business in July 2023. The prior-year nine-month period cash flows used in investing were for capital expenditures.

Previous wording

Net cash used in financing activities was $2 million for the six months ended February 29, 2024 compared to less than $1 million of net cash used in financing activities for the six months ended February 28, 2023. The net cash used in financing activities for the six months ended February 29, 2024 included a $32 million net increase in total borrowings, offset by $30 million of payments to acquire treasury shares, annual cash dividend payments of $2 million and $1 million principal repayments on the term loan. Net cash used in financing activities for the six months ended February 28, 2023 consisted of $6 million increase in total borrowings offset by $2 million in debt issuance costs, $2 million payment of the annual cash dividend and net $1 million of stock options and taxes paid on equity awards.

Current wording

Net cash used in financing activities was $51 million for the nine months ended May 31, 2024 compared to $4 million of net cash provided by financing activities for the nine months ended May 31, 2023. The net cash used in financing activities for the nine months ended May 31, 2024 is mainly driven by the $19 million of net payments on borrowings and $32 million of payments to acquire treasury shares. Net cash used in financing activities for the nine months ended May 31, 2023 consisted of $31 million increase in total borrowings offset by $21 million of payments to acquire treasury shares, $2 million in debt issuance costs, $2 million payment of the annual cash dividend and net $1 million of stock options and taxes paid on equity awards.

Previous wording

At February 29, 2024, there were $48 million of borrowings and $351 million available under the revolving line of credit facility after reduction for $1 million of outstanding letters of credit issued under the senior credit facility. The Company was in compliance with all covenants under the senior credit facility at February 29, 2024.

Current wording

At May 31, 2024, there were no borrowings and $399 million available under the revolving line of credit facility after reduction for $1 million of outstanding letters of credit issued under the senior credit facility. The Company was in compliance with all covenants under the senior credit facility at May 31, 2024.

Previous wording

We had outstanding letters of credit totaling$7 million and $9 million at February 29, 2024 and August 31, 2023, respectively, the majority of which relate to commercial contracts and self-insured workers' compensation programs.

Current wording

We had outstanding letters of credit totaling$8 million and $9 million at May 31, 2024 and August 31, 2023, respectively, the majority of which relate to commercial contracts and self-insured workers' compensation programs.