ENERPAC TOOL GROUP CORP

Previous wording

Enerpac Tool Group Corp. is a premier industrial tools, services, technology, and solutions company serving a broad and diverse set of customers and end markets for mission-critical applications in more than 100 countries. The Company makes complex, often hazardous jobs possible safely and efficiently. The Company's businesses are global leaders 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, the Industrial Tools & Services Segment ("IT&S"). The IT&S 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 oil & gas/petrochemical; general industrial; industrial maintenance, repair and operations (“MRO”), machining & manufacturing; power generation, infrastructure, mining and other markets. Financial information related to the Company's reportable segment is included in Note 12, "Segment Information" in the notes to the condensed consolidated financial statements. The Company has an Other operating segment, which does not meet the criteria to be considered a reportable segment.

Current wording

Enerpac Tool Group Corp. is a premier industrial tools, services, technology, and solutions provider serving a broad and diverse set of customers and end markets for mission-critical applications in more than 100 countries. Enerpac Tool Group's businesses are global leaders in providing 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. During fiscal 2025, the Company is scheduled to relocate our headquarters to Milwaukee, Wisconsin. The Company has one reportable segment, the Industrial Tools & Services Segment ("IT&S"). The IT&S 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 refinery/petrochemical; general industrial; industrial maintenance, repair and operations (“MRO”), machining & manufacturing; power generation, infrastructure, mining and other markets. Financial information related to the Company's reportable segment is included in Note 12,“Segment Information” in the notes to the condensed consolidated financial statements. The Company has an Other operating segment, which does not meet the criteria to be considered a reportable segment.

Previous wording

In March 2022, the Company announced the start of its ASCEND transformation program (“ASCEND”). ASCEND’s key initiatives include accelerating organic growth strategies, improving operational excellence and production efficiency by utilizing a Lean approach, and driving greater efficiency and productivity in selling, general and administrative expense by better leveraging resources to create a more efficient and agile organization. In support of the ASCEND initiatives, the Company anticipates investing

Current wording

In March 2022, the Company announced the start of its ASCEND transformation program (“ASCEND”), initially estimating an incremental $40 to $50 million of annual operating profit once fully implemented. ASCEND’s key initiatives include accelerating organic growth strategies, improving operational excellence and production efficiency by utilizing a Lean approach, and driving greater efficiency and productivity in selling, general and administrative expense by better leveraging resources to create a more efficient and agile organization. At that time, the Company anticipated investing $60 to $65 million through the end of fiscal 2024 to complete these actions.

Previous wording

In June 2022, the Company approved a restructuring plan in connection with the initiatives identified as part of the ASCEND transformation program (see Note 3, “ASCEND Transformation Program” in the notes to the consolidated financial statements) to drive greater efficiency and productivity in global selling, general and administrative resources. The total costs of this plan were then estimated at $6 to $10 million, constituting predominately severance and other employee-related costs to be incurred as cash expenditures and impacting both IT&S and Corporate. On September 23, 2022, the Company approved an updated restructuring plan. The restructuring costs of this updated plan (which includes the amounts for the plan approved in June 2022) are estimated at $10 to $15 million. These costs are expected to be incurred over the expected duration of the transformation program, ending in the fourth quarter of fiscal 2024. For fiscal 2024, we expect to incur $10 to $15 million of ASCEND transformation program costs, which is inclusive of $3 to $5 million of restructuring costs.

Current wording

In June 2022, the Company approved a restructuring plan in connection with the initiatives identified as part of the ASCEND transformation program to drive greater efficiency and productivity in global selling, general and administrative resources. The total costs of this plan were then estimated at $6 to $10 million, constituting predominately severance and other employee-related costs to be incurred as cash expenditures and impacting both IT&S and Corporate (see Note 3, “ASCEND Transformation Program” in the notes to the consolidated financial statements). These costs were incorporated into the initial investment of $60 to $65 million.

Previous 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.

Current wording

Consolidated net sales for the first quarter of fiscal 2025 were $145 million, an increase of $3 million, or 2%, compared to the prior-year comparable period. The effect of foreign currency rates compared to the U.S. dollar unfavorably impacted sales by $1 million, or 1%, and the acquisition of DTA at the beginning of the first quarter favorably impacted first quarter sales by $3 million, or 2%. This resulted in an organic sales decline of approximately 1% in the quarter. Management refers to sales adjusted to exclude the impact of these items (foreign currency changes and recent acquisitions and divestitures) as "organic sales". In the first quarter, product sales grew $1 million, or 1%, while foreign currency unfavorably impacted sales by $1 million, or 1%. The acquisition of DTA (which falls under our Heavy Lifting Technology product line within product) favorably impacted product sales by $3 million, or 3%, resulting in a 3% decline of organic product sales compared to the first quarter of fiscal 2024. The organic product sales decrease is driven by the IT&S segment while Other product sales were favorable to the prior year. Service sales increased $2 million, or 6%, in the quarter with foreign currency impact nearly flat; organic sales for Service were up 6% compared to the prior-year period. Gross profit as a percentage of sales was approximately 51% for the first quarter of fiscal 2025 compared to 52% in the first quarter of fiscal 2024. The decrease in gross profit margin is due to unfavorable sales mix.

Previous wording

The IT&S segment is a global supplier of branded hydraulic and mechanical tools and services to a broad array of end markets, including oil & gas/petrochemical; general industrial; industrial MRO, machining & manufacturing; power generation, infrastructure, mining and other markets. Its primary products include branded tools, cylinders, pumps, hydraulic torque wrenches, highly engineered heavy lifting technology solutions and other tools (Product product line). 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 (dollars in millions):

Current wording

The IT&S segment is a global supplier of branded hydraulic and mechanical tools and services to a broad array of end markets, including refinery/petrochemical; general industrial; industrial MRO; machining & manufacturing; power generation; infrastructure; mining; and other markets. Our primary products include branded tools, cylinders, pumps, hydraulic torque wrenches, highly engineered heavy lifting technology solutions and other tools (Product product line). The segment provides maintenance and manpower services on customer assets to meet their specific needs and rental services for certain of our products (Service & Rental product line). The following table sets forth the results of operations for the IT&S segment (dollars in millions):

Previous 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.

Current wording

IT&S segment net sales for the first quarter of fiscal 2025 increased by $3 million, or 2%, compared to the first quarter of fiscal 2024. The strengthening of the U.S. dollar unfavorably impacted sales by approximately $1 million, or 1%, while the acquisition of DTA favorably impacted sales by $3 million, or 2%, resulting in organic sales decline of approximately 1%. The organic sales decline was driven by unfavorable product sales within the Americas region. Operating profit was $38 million compared to $36 million in the first quarter of fiscal 2024. This increase was due to reduction in SG&A.

Previous 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.

Current wording

Corporate expenses were $8 million and $9 million in for the first quarter of fiscal 2025 and 2024, respectively. The decrease in expenses was driven by lower ASCEND transformation program charges.

Previous 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.

Current wording

Net financing costs were $3 million and $4 million in the three months ended November 30, 2024 and 2023, respectively. Financing costs decreased due to a mix of lower debt balances and lower interest rates.

Previous 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.

Current wording

The effective tax rate for the three months ended November 30, 2024 was 22.1%, compared to 23.6% 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 lower effective tax rate for the three months ended November 30, 2024 was primarily driven by the more favorable tax impact of stock compensation in comparison 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 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):

Current wording

At November 30, 2024, we had $131 million of cash and cash equivalents, of which $109 million was held by our foreign subsidiaries and $22 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 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.

Current wording

Net cash used in financing activities was $13 million for the three months ended November 30, 2024 compared to $2 million of net cash provided by financing activities for the three months ended November 30, 2023. The net cash used in financing activities for the three months ended November 30, 2024 was driven by $4 million of share repurchases, $5 million of taxes paid with respect to equity awards, net of proceeds from the exercise of stock options, and $2 million for the payment of the annual cash dividend. Net cash used in financing activities for the three months ended November 30, 2024 consisted of a $31 million net increase in total borrowings and $2 million of proceeds from the exercise of stock options offset by $26 million of payments to acquire treasury shares, $2 million payment for the annual cash dividend and $2 million for taxes paid with respect to equity awards.

Previous 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.

Current wording

At November 30, 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 November 30, 2024.

Previous 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.

Current wording

We had outstanding letters of credit of$2.9 million and surety bonds of$3.8 million at November 30, 2024 and$4.4 million of letters of credit and$3.8 million of surety bonds at August 31, 2024, the majority of which relate to commercial contracts and self-insured workers' compensation programs.

Previous wording

Our contractual obligations have not materially changed at May 31, 2024 from what was previously disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Contractual Obligations” in our fiscal 2023 Annual Report on Form 10-K.

Current wording

Our contractual obligations have not materially changed at November 30, 2024 from what was previously disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Contractual Obligations” in the fiscal 2024 Annual Report on Form 10-K.

Previous wording

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 II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our fiscal 2023 Annual Report on Form 10-K.

Current wording

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 II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the fiscal 2024 Annual Report on Form 10-K.