2024 ANNUAL REPORT
RAISING
THE
BAR
“IN OUR
CUSTOMER-DRIVEN
INNOVATION
EFFORTS
we continue to enjoy strong
market reception to Enerpac’s
innovative new products. In
2024, we introduced our first
battery-powered handheld
torque wrench, adding an
important product line to
Enerpac’s portfolio and
entering the market with clear
competitive advantages."
- PAUL STERNLIEB, PRESIDENT & CEO
2024 Annual Report | 1
Enerpac Tool Group
$590M
FY2024
Revenue
$147M
FY2024
Adj. EBITDA
110+
Years of
History
100+
Countries
Served
~2000
Global
Employees
~900
Distributors
~$2.6B
Market Cap*
~80% Product
~20% Service
FY2024 REVENUE MIX
PRODUCTS
SERVICE
AND RENTAL
EXTENSIVE GLOBAL
DISTRIBUTION
DIVERSIFIED
CUSTOMER BASE
Bolting, machining, joint
integrity
Cylinders/jacks, pumps, bolting
tools, presses, pullers, tools, Heavy
Lifting Technology (HLT), remote
and automated guided vehicles
~900 long-standing
distribution relationships
Specialty dealers
National distribution
Large OEMs
*As of December 10, 2024
+2.2%
FY2024
Organic Growth
GLOBAL LEADER IN INDUSTRIAL TOOLS & SERVICES
CORPORATE
PROFILE
Enerpac Tool Group Corporation 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 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.
2 | 2024 Annual Report
Enerpac Tool Group
ADJUSTED EPS*
FY2024 REVENUE
BY REGION
$(13)
$44
FREE CASH FLOW ($M)*
$42
FY20 FY21 FY22 FY23 FY24
FY20 FY21 FY22 FY23 FY24
$493
$529
$571
44.0%
46.0%
46.5%
GROSS PROFIT MARGIN
NET SALES ($M)
AND ORGANIC GROWTH
ADJ. EBITDA ($M)
AND MARGIN*
STRONG FINANCIAL RESULTS
Enerpac reported 2.2% organic growth in FY2024 while reaching our 25% adjusted EBITDA margin target a
year ahead of plan.
$598
49.3%
FY20 FY21 FY22 FY23 FY24
$52
$75
$83
$136
10.6%
14.1%
14.5%
22.8%
FY20 FY21 FY22 FY23 FY24
$0.18
$0.63
$0.81
$1.45
$69
FY20 FY21 FY22 FY23 FY24
FISCAL-YEAR TRENDS
47%
13%
40%
$590
51.1%
$147
25.0%
$1.72
$70
(20)%
5%
11%
8%
2%
Americas
APAC
EMEA
*See appendix for a reconcilliation of these measures to comparable measures under U.S. generally accepted accounting principles.
2024 Annual Report | 3
Enerpac Tool Group
FY2024 ACCOMPLISHMENTS
Implemented
Enerpac
Commercial
Excellence (ECX)
program to drive
commercial
performance
Increased employee
engagement scores for
the third year in a row
Achieved Adjusted
EBITDA margin of 25.0%,
an increase of 220 basis
points over prior year
Further improved
our safety
performance
Successfully concluded ASCEND program, a key enabler for driving above-
market growth and 1,100 basis points of margin expansion over the past
three years
Returned ~$40 million to
shareholders through our
share repurchase program
and dividends
RAISING THE BAR
EXPANSION IN TARGETED VERTICAL MARKETS
Collaborated with vertical market-focused channel partners to broaden our offerings as a solutions provider
Further expanded our custom solutions offering capabilities to serve as a broader solutions provider to target vertical
market end-users
DIGITAL TRANSFORMATION
Grew e-commerce revenue 43% year-over-year, delivering a 79% CAGR FY2021-24
Integrated Enerpac Connect wireless connectivity into the new SC and XC2 battery pumps
CUSTOMER-DRIVEN INNOVATION
Launched new battery line-up of products including BTW Torque Wrench series, along with SC and XC2 Cordless
Battery Pumps
Introduced several other new products including 100-ton Lock Grip Puller, 40-ton and 66-ton Pin Pullers, and the
Wheeled MRO Kit
EXPANSION IN ASIA PACIFIC
Improved sales coverage across key growth markets through additional channel partners in select geographies and
vertical markets
Continued to progress and execute our second brand strategy across the region
GROWTH STRATEGY PROGRESS
Launched battery-
powered wrenches
and pumps along with
significant portfolio
additions to our pullers,
MRO, and rail offerings
Launched
e-commerce in 18
additional countries
4 | 2024 Annual Report
ASCEND TO PEP: TRANSITION TO A
CONTINUOUS IMPROVEMENT MODEL
Enerpac Tool Group
Hundreds of initiatives across all functions and regions
Led by over 100 workstream leaders & initiative owners
with meaningful incentives tied to results
Utilized a formal stage-gate process to track progress:
idea business case plan implementation impact
Full-time global transformation office managed weekly
steering committee meetings with functional, regional,
and senior management ownership
Our ASCEND transformation program was a key enabler for delivering sustained change and performance
improvements across the organization, driving above-market growth and margin expansion. Following the
conclusion of ASCEND at the end of FY2024, we are applying its principles and rigor to a new continuous
improvement program, Powering Enerpac Performance (PEP).
Accelerating Growth
Execution and monitoring of growth strategy
Optimizing Operations
Continuous improvement projects in procurement and
manufacturing
Minimizing Inefficiencies
Continuing to streamline SG&A through increased
efficiency and productivity
Standardizing Processes
Driving further global standardization and simplification
leveraging 80/20 framework
Driving Sprint Projects
Focused execution to deliver rapid improvements
Solving Challenges
Structured problem-solving approach to determine true
root-cause and implement countermeasures
The natural extension of ASCEND, PEP
(Powering Enerpac Performance) continues
to drive process standardization and
simplification for maximum economies.
STRUCTURAL MARGIN
IMPROVEMENT
FY21 FY22 FY23 FY24
46.0%
46.5%
49.3%
GROSS PROFIT
(% NET SALES)
51.1%
FY21 FY22 FY23 FY24
34.1%
33.7%
28.2%
ADJUSTED SG&A*
(% NET SALES)
27.6%
*See appendix for a reconcilliation of these measures to comparable measures
under U.S. generally accepted accounting principles.
DISCIPLINED M&A APPROACH IN
ACTION: DTA ACQUISITION
2024 Annual Report | 5
Enerpac Tool Group
Our program provides a pathway to achieve growth, enhance competitive positioning, and
create value for shareholders as a part of our balanced capital allocation strategy.
Continuing pure-play strategy, but looking beyond tools and services
to solve customer needs in targeted vertical markets
Healthy pipeline with focus on our four key verticals of
infrastructure, rail, industrial MRO, and wind
M&A activity focused on solution offerings that address gaps in:
product offerings, market/vertical/geographies, and technology
Disciplined approach means any targets must meet strict strategic,
financial, and operational criteria
OUR DISCIPLINED M&A PROGRAM
DTA ACQUISTION
The acquisition of Madrid-based DTA provides a complement to Enerpac’s Heavy Lifting Technology
product line. Combining our existing focus on vertical lift with DTA’s specialization in horizontal movement
enables us to provide more comprehensive solutions for customers.
Transaction
Acquired for €24 million + potential earnout based upon achievement of three-
year targets
Strategic Fit
Combination of Enerpac’s vertical lift and DTA’s horizontal movement provides
comprehensive customer solutions
Revenue Synergies
Tap Enerpac’s global sales and strong distribution channel to expand
beyond Europe
Operating/Cost Synergies
Implement Enerpac’s disciplined operating processes and PEP, and leverage
shared procurement and back-office expense
Enerpac Tool Group offers exceptional value as a market share leader in a ~$4.5 billion, highly-fragmented
addressable market. We provide a premium product portfolio with significant breadth and depth, driving
highly attractive gross margins. Enerpac has a strong brand position, known for quality, durability, reliability,
and safety, and an exceptional channel partner network of over 900 distributors, enabling true global
coverage. The company’s strong balance sheet (0.2x net debt/adjusted EBITDA as of August 31, 2024*)
and solid free cash flow generation enables a balanced capital allocation approach with investments in
organic growth and strategic M&A, along with opportunistic share repurchases and dividends that returned
approximately $40 million to shareholders in FY2024.
6 | 2024 Annual Report
Enerpac Tool Group
PREMIER INDUSTRIAL SOLUTIONS PROVIDER
WELL-DEFINED ORGANIC GROWTH STRATEGY
EXCEPTIONAL CHANNEL PARTNER NETWORK
serving a broad and diverse set of customers globally for mission-critical applications
built over decades, creates competitive moat and enables truly global coverage
focused on expansion in targeted vertical markets, digital transformation, customer-driven innovation,
and expansion in Asia Pacific
SUCCESSFUL COMPLETION OF ASCEND TRANSFORMATION PROGRAM
has driven above-market growth and structurally improved margins, paving the way for Powering
Enerpac Performance (PEP) to drive continued growth and margin expansion
STRONG BALANCE SHEET & SOLID FREE CASH FLOW GENERATION
enables a balanced capital allocation approach: investments to drive organic growth, strategic M&A,
and opportunistic share repurchases
BALANCED CAPITAL ALLOCATION STRATEGY
Invest in Ourselves
Investments in Digital, Product Innovation, R&D,
and Operational Excellence Improvements
Disciplined M&A
Meeting strict strategic, financial, and
operational criteria
Maintain Our Strong
Balance Sheet
Target leverage of 1.5x – 2.5x
Opportunistically Returning
Capital to Shareholders
~2.7 million shares remaining on current 10
million share repurchase authorization
STRONG INVESTMENT POTENTIAL
*Calculated in accordance with the terms of the Company's September 2022 Senior Credit Facility.
2024 Annual Report | 7
Dear Fellow Shareholders:
I’m pleased to report another strong year for Enerpac Tool Group in Fiscal Year 2024. Significantly,
the close of the fiscal year also marked the end of our ASCEND transformation program, which
helped us drive meaningful growth and profitability. We are extending many of ASCEND's principles
and practices through a new continuous improvement program called Powering Enerpac Performance
(“PEP”), which I will discuss later in this letter. In FY2024 we also saw excellent progress in bringing
new products to the market, driving growth in our key vertical markets, and executing a compelling
acquisition (which we completed on September 4, 2024) that will expand our Heavy Lifting
Technology business in exciting ways.
FISCAL YEAR 2024 FINANCIAL RESULTS
In FY2024 we continued to “raise the bar” and add to the momentum of the prior two years. Organic
revenue grew 2.2 percent, including 2.7 percent growth in our core Industrial Tools and Services (ITS)
business. Moreover, because of our continued ability to capture efficiencies at the gross profit and
SG&A lines, we enjoyed further expansion in profitability, achieving adjusted EBITDA growth of 8
percent. This represents an adjusted EBITDA margin of 25.0 percent, an improvement of 220 basis
points over the prior year.
Within ITS, organic product and service revenue grew 1.7 percent and 6.6 percent, respectively. Due
to the sale of Cortland Industrial in late FY2023, total net sales for the company declined 1.5 percent
for the year.
We continued to make progress in improving operating efficiency and SG&A productivity. In
FY2024, gross margins expanded 180 basis points to 51.1 percent. This was driven by operational
improvements related to the ASCEND transformation, as well as other actions, including the impact
of pricing and the disposition of Cortland Industrial. Similarly, we continued to benefit from initiatives
that improved SG&A productivity. Adjusted SG&A expense declined 4 percent year-over-year. As a
percent of sales, it improved 60 basis points to 27.6 percent.
On a GAAP basis, diluted earnings per share from continuing operations totaled $1.50 for FY2024
while adjusted EPS increased 19 percent from $1.45 to $1.72, which benefited from a lower effective
tax rate and a 4 percent lower share count. The effective tax rate for adjusted EPS was 21.6 percent
in FY2024 as compared to 23.2 percent in FY2023.
We also delivered free cash flow of $70 million in FY2024. That represents a conversion rate of 82
percent of net earnings, in line with our expectations as we continued to invest in ASCEND during
the year. With the ASCEND program now behind us, we have targeted at least a 100% free cash flow
conversion by the end of FY2026.
Finally, we were pleased to return approximately $40 million to shareholders through the repurchase
of 1.3 million shares and $2 million in dividend payments.
Enerpac Tool Group
CEO LETTER
CEO LETTER
Paul Sternlieb
President and Chief Executive Officer
8 | 2024 Annual Report
Enerpac Tool Group
CEO LETTER
REGIONAL GROWTH
The revenue growth across our three regions was mixed. FY2024 revenue in the Americas was up in
the low single digits. In Asia Pacific – our smallest region – full-year revenue declined in the mid-single
digits. Performance in the region continued to be impacted by softness in the mining sector. However,
we continued to work on adding distributors and expanding commercial support. In the Europe,
Middle East, and Africa (EMEA) region, we continued to
enjoy strong performance, with high single-digit revenue
growth for the year. The gains were broad based across
end markets. Additionally, with the recent introduction
of e-commerce in Europe and the roll out of Enerpac
Commercial Excellence, or ECX – which establishes a
more disciplined sales process – we believe we will capture
further market share going forward.
A SUCCESSFUL CONCLUSION TO ASCEND
We captured significant gains since we launched our ASCEND transformation program in FY2022. As
of year-end FY2024, we reached the official conclusion of the program, with a total investment of $75
million. Since FY2021, adjusted EBITDA roughly doubled from $75 million to $147 million in FY2024,
with margin expansion of approximately 1,100 basis points. That represents benefits well above our
initial target of $40 to $50 million and in excess of our revised target of $50 to $60 million. And with
the full-year adjusted EBITDA margin of 25 percent in FY2024 we achieved that objective a year
ahead of plan.
INTRODUCTION OF POWERING ENERPAC PERFORMANCE (PEP)
We are committed to capturing further growth and margin
improvement. That effort will be enabled by what we call
Powering Enerpac Performance, or PEP, which is our continuous
improvement program and a natural extension of ASCEND. With
PEP, we are focused on standardization and simplification of all
processes – from procurement to manufacturing to finance and
marketing, eliminating unnecessary steps, reducing complexity,
and ensuring best practices are consistently applied across the
organization. PEP also means challenging ourselves as we drive innovation, improve customer
satisfaction, and unlock additional opportunities for growth. PEP will utilize the same framework,
tools, and methodology that we established for ASCEND, with the same level of rigor. I’m excited
about this journey of continuous improvement and the benefits that will accrue.
PROGRESS IN KEY VERTICAL MARKETS
As part of Enerpac’s four pillar growth strategy, we have targeted four key vertical markets:
Infrastructure, Rail, Wind, and Industrial MRO. On the infrastructure front, we were excited to share
that Enerpac’s hydraulic solutions have been selected as part of the Fehmarn Belt tunnel. This project
– which will connect Denmark to Germany – represents the largest global infrastructure project
and the longest immersed tunnel, spanning 11 miles of sub-sea construction. Enerpac’s hydraulic
solutions were selected for a critical aspect of the construction, to precisely align the 78 concrete
tunnel elements, each weighing 79,000 tons. It is yet another example of our products in mission-
critical applications, applying our technology to help customers address complex challenges where
safety and reliability are paramount.
ECX
ENERPAC COMMERCIAL EXCELLENCE
DRIVING COMMERCIAL
PERFORMANCE IMPROVEMENT
2024 Annual Report | 9
In FY2024, we expanded our reach into the rail market by investing
significant time to collect "voice of customer" research, gaining valuable
insight into how Enerpac can best serve the market. As a result, we
introduced an enhanced TL-248 Track Tool Lift System to market in
the Americas with improved lifting points as well as additional product
offerings and accessories. Another new product aiming to serve the
rail heavy industrial tool market, the RP70A Rail Stressor, is used to
pull together heavy railroad tracks for stressing and thermite welding.
We’re excited that the RP70A launched with the important Network Rail
Certificate of Acceptance.
Regarding the wind market, we are encouraged by new U.S. Federal Energy Regulatory Commission
rules that overhaul how the electric grid is planned and funded. This change could spur thousands
of miles of new high-voltage power lines and make it easier to add more wind energy to the grid,
eliminating a barrier to new project development. One recent example of Enerpac’s success in
the wind sector is our Tower Flange Alignment (TFA) tool. TFAs – designed specifically for wind
towers – are used to mitigate the impact of misalignment of turbine sections and to solve design
and manufacturing errors. Our TFAs have now been widely employed by major wind turbine
manufacturers because of their compact, integrated solution and safety features.
CUSTOMER-DRIVEN INNOVATION
In another pillar of our growth strategy, customer-driven innovation, we
continued to enjoy strong market reception to Enerpac’s innovative new
products. In April, we introduced our first battery-operated handheld torque
wrench, the BTW Series, adding an important product line to Enerpac’s
portfolio. Our entry into this important and growing category included the
roll out of a full range of sizes. Moreover, we entered the market with clear
competitive advantages. Our battery-operated torque wrenches feature
meticulous calibration at 60 distinct points – far beyond the standard seven
points of competing products – and an impressive +/- 5 percent torque
accuracy across their operational range. The most significant differentiator
is our tool's ease of use. As reflected in our tag line, “Ready. Set. Torque.”,
our products are designed for easy setup, in contrast to competitive tools
that can have rigorous configuration requirements and complex features that
often make them extremely difficult or time consuming to operate. Our array
of battery-operated torque wrenches has been ramping up well with a broad
application across many of our end markets including the wind segment.
At the same time, other products we introduced earlier in FY2024 – including the 100-ton hydraulic
Lock Grip puller, the 40-ton Hydraulic Pin Puller Kits, and the two new battery powered pumps –
have also been well received by the marketplace. Overall, we were pleased with the progress of our
innovation program and the very positive reception we saw from customers.
EXPANDING E-COMMERCE THROUGH DIGITAL TRANSFORMATION
Another key growth pillar is digital transformation. In FY2024, e-commerce revenue increased 43
percent year-over-year. We continued to see strong return-on-advertising-spend (ROAS) from our
investments here. We also benefited from our outbound targeted advertising for new products and
our vertical marketing campaigns in rail and wind. In fact, since launching these digital campaigns,
we generated over 20 million impressions and nearly 1,000 leads. In late FY2024, we also launched
our e-commerce site in Europe across 18 countries. The continued strong growth in e-commerce
is establishing a meaningful channel. Moreover, the direct connection we gain provides valuable
customer insight that we incorporate into our marketing and product innovation.
Enerpac Tool Group
CEO LETTER
TL-248 Track Tool Lift System
BTW500 Torque Wrench
10 | 2024 Annual Report
DTA ACQUISITION
We were also excited about the acquisition of DTA, which we
announced in early September. DTA’s product line provides an
excellent complement to Enerpac’s Heavy Lifting Technology.
Combining our focus on vertical lift with DTA’s specialization in
horizontal movement enables us to provide more comprehensive
solutions for customers. We anticipate meaningful revenue synergies
as we seek to greatly expand DTA’s sales and distribution capabilities
and reach beyond Europe, which accounts for approximately 90% of
its sales. On the cost side, we believe DTA will benefit from Enerpac’s
disciplined operating processes while leveraging shared procurement
and back-office expenses.
OUR CONTINUED EFFORTS IN CORPORATE RESPONSIBILITY
Enerpac Tool Group released our first ever report focused on corporate responsibility in FY2024,
which reflected the results of great efforts we’ve made in the areas of the environment, sustainability,
and governance over the past several years. As we navigate an ever-evolving global landscape,
we recognize the importance of transparency and accountability in addressing the corporate
responsibility-related issues that matter most to all our stakeholders. The insights shared in our
corporate responsibility report are the result of a comprehensive process that involved engaging key
stakeholders and incorporating recognized reporting frameworks and industry guidance. Moreover,
Enerpac Tool Group conducted a sustainability audit with an outside partner, which yielded a clear
set of key priorities going forward. We understand that success is not solely measured by financial
performance, but also by our impact on our communities and the world.
FINAL THOUGHTS
I am very proud of our team's accomplishments. From product innovation and e-commerce to new
commercial tools and ongoing efficiency gains, all have enabled us to deliver strong results. As we
drive further execution of our growth strategy along with additional standardization and simplification
efforts, we will continue to fuel Enerpac’s performance and advance our long-term growth and
profitability objectives. I would like to express my sincere thanks to our global team for all their
dedication and hard work in serving our customers and shareholders every day.
Sincerely,
Paul Sternlieb
President and Chief Executive Officer
Enerpac Tool Group Corp.
Enerpac Tool Group
CEO LETTER
DTA Electric Transporter
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to to
Commission File No. 1-11288
ENERPAC TOOL GROUP CORP.
(Exact name of Registrant as specified in its charter)
Wisconsin
39-0168610
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification 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)
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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes ☐ No ☒
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, and (2) has been subject to such filing requirements for the
past 90 days. Yes ☒ 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 and post such files). Yes ☒ 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.
Yes ☐ No ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of
the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant
to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):
Yes ☐ No ☒
As of February 29, 2024, the last business day of the registrant's second fiscal quarter, the aggregate market value of the
shares of Class A common stock (based upon the closing price on the New York Stock Exchange on February 29, 2024) held
by non-affiliates of the Registrant was approximately $1.81 billion.
There were 54,194,247 shares of the Registrant’s Class A Common Stock outstanding as of October 14, 2024.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 6, 2025
are incorporated by reference into Part III hereof.
TABLE OF CONTENTS
PART I
Item 1.
Business
1
Item 1A. Risk Factors
6
Item 1B. Unresolved Staff Comments
14
Item 1C. Cybersecurity
14
Item 2.
Properties
15
Item 3.
Legal Proceedings
15
Item 4.
Mine Safety Disclosures
16
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity
Securities
17
Item 6.
[Reserved]
19
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
28
Item 8.
Financial Statements and Supplementary Data
29
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
61
Item 9A. Controls and Procedures
61
Item 9B. Other Information
61
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
61
PART III
Item 10.
Directors; Executive Officers and Corporate Governance
62
Item 11.
Executive Compensation
62
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
62
Item 13.
Certain Relationships and Related Transactions, and Director Independence
62
Item 14.
Principal Accountant Fees and Services
62
PART IV
Item 15.
Exhibits and Financial Statement Schedules
63
Item 16.
Form 10-K Summary
67
Enerpac Tool Group Corp. provides free-of-charge access to our annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments thereto, through our investor website, ir.enerpactoolgroup.com, as soon as
reasonably practical after such reports are electronically filed with the Securities and Exchange Commission.
FORWARD LOOKING STATEMENTS AND CAUTIONARY FACTORS
This annual report on Form 10-K 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. The terms
“may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “objective,” “plan,” “project” and similar
expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to
inherent risks and uncertainties that may cause actual results or events to differ materially from those contemplated by
such forward-looking statements. In addition to the assumptions and other factors referred to specifically in connection
with such statements, factors that may cause actual results or events to differ materially from those contemplated by
such forward-looking statements include, without limitation, general economic uncertainty, market conditions in the
industrial, oil & gas, energy, power generation, infrastructure, commercial construction, truck and automotive
industries, supply chain risks, including disruptions in deliveries from suppliers due to political tensions or the
imposition, or threat of imposition, of tariffs, which could be affected by the outcome of the upcoming U.S. presidential
election, the impact of geopolitical activity, including the invasion of Ukraine by Russia and international sanctions
imposed in response thereto, as well as armed conflicts involving the Middle East, including the impact on shipping in
the Red Sea, the ability of the Company to achieve its plans or objectives related to its growth strategy, market
acceptance of existing and new products, market acceptance of price increases, successful integration of acquisitions, the
impact of dispositions and restructurings, the ability of the Company to continue to achieve its objectives related to the
ASCEND program, including any assumptions underlying its calculation of expected incremental operating profit or
program investment, operating margin risk due to competitive pricing and operating efficiencies, risks related to
reliance on independent agents and distributors for the distribution and service of products, material, labor, or
overhead cost increases, tax law changes, foreign currency risk, interest rate risk, commodity risk, tariffs, litigation
matters, cybersecurity risks, impairment of goodwill or other intangible assets, the Company’s ability to access capital
markets and other factors that may be referred to or noted in the Company’s reports filed with the Securities and
Exchange Commission from time to time, including those described under "Item 1A. Risk Factors" of this annual
report on Form 10-K. We disclaim any obligation, except to the extent required by applicable law, to publicly update or
revise any forward-looking statements as a result of new information, future events or any other reason.
When used herein, the terms “we,” “us,” “our,” “Enerpac,” and the “Company” refer to Enerpac Tool Group
Corp. and its subsidiaries. Reference to fiscal years, such as “fiscal 2024,” are to the fiscal year ending on August 31 of
the specified year.
PART I
Item 1. Business
General
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 ("IT&S") Segment. 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 15, "Business Segment, Geographic and Customer Information" in the notes to the consolidated financial statements. The
Company has an Other operating segment, which does not meet the criteria to be considered a reportable segment.
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.
During the fourth quarter of fiscal 2019, we entered into a Securities Purchase Agreement ("SPA") to sell the remaining
businesses within our legacy Engineered Components & Systems ("EC&S") segment. We closed the transaction during our first
quarter of fiscal 2020. The divestiture of the EC&S segment was a strategic shift to become a pure-play industrial tools and
services company. As such, retained liabilities associated with the former EC&S segment are considered discontinued
operations in all periods presented herein.
1
Our Business Model
Our long-term goal is to create sustainable returns for our shareholders through above-market growth in our core business,
expanding our margins, generating strong cash flow, and being disciplined in the deployment of our capital. We intend to grow
through execution of our organic growth strategy, focused on key vertical markets that benefit from long-term macro trends,
driving customer driven innovation, expansion of our digital ecosystem to acquire and engage customers, and an expansion in
emerging markets such as Asia Pacific. In addition to organic growth, we also focus on margin expansion through operational
efficiency techniques, including lean, continuous improvement and 80/20, to drive productivity and lower costs, as well as
optimizing our selling, general and administrative expenses through consolidation and shared service implementation. We also
apply these techniques and pricing actions to offset commodity increases and inflationary pricing. Finally, cash flow generation
is critical to achieving our financial and long-term strategic objectives. We believe driving profitable growth and margin
expansion will result in cash flow generation, which we seek to supplement through minimizing primary working capital. We
intend to allocate the cash flow that results from the execution of our strategy in a disciplined way toward investment in our
businesses, maintaining our strong balance sheet, disciplined M&A and opportunistically returning capital to shareholders. We
anticipate the compounding effect of reinvesting in our business will fuel further growth and profitable returns.
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 the time, the Company anticipated investing $60 to $65 million
through the end of fiscal 2024 to complete these actions.
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 4, “Restructuring
Charges” in the notes to the consolidated financial statements). These costs were incorporated into the initial investment of $60
to $65 million.
In September 2022, the Company approved an update to the restructuring plan to a range of $10 to $15 million; these
costs were still incorporated into the initial investment value, and the range did not change at that time.
In March 2023, the Company increased the anticipated investment range to $70 to $75 million, inclusive of the $10 to $15
million of the previously announced restructuring, over the life of the program.
In October 2023, the Company announced that during fiscal 2023, the Company had realized approximately $54 million
of annual operating profit from execution of the ASCEND program and would no longer be breaking out the ASCEND benefit
from results going into fiscal 2024. Through fiscal 2023, the Company invested approximately $60 million as part of the
program, both through program charges and restructuring. Through fiscal 2024, the Company has invested approximately $75
million as part of the program, consisting of $19 million through restructuring and $56 million in ASCEND transformation
program charges.
Description of Business Segments
Industrial Tools & Services Reportable Segment
IT&S 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. Examples of our products include high-force hydraulic and mechanical tools (cylinders,
pumps, valves, bolt tensioners, specialty tools and other miscellaneous products), which are designed to allow users to apply
controlled force and motion to increase productivity, reduce labor costs and make work safer and easier to perform. These tools
operate at very high pressures of approximately 5,000 to 12,000 pounds per square inch. With our products used in a wide
variety of end markets, they are often deployed in harsh operating conditions, such as machining, infrastructure maintenance
and repair, and refining, and petrochemical production, where safety is a key differentiator. As a result, we hold ourselves to a
world-class safety standard to protect both our employees and those using our products and services.
On the services side of the segment, our highly trained technicians provide maintenance and manpower services on
customer assets to meet their specific needs including bolting, machining, and joint integrity. We also provide rental services
for certain of our products.
Our branded tools and services are primarily marketed through the ENERPAC®, HYDRATIGHT®, LARZEP &
DESIGN® and SIMPLEX® brand names.
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The segment delivers products and services primarily through our world-class, global network of distributors, as well as
direct sales to OEMs and select end users. Examples of industrial distributors include W.W. Grainger, MSC and Blackwoods.
Other Operating Segment
Cortland Biomedical is a full-service biomedical textile product development company and represents the Other operating
segment. Cortland Biomedical does not meet the quantitative or qualitative thresholds to be considered a reportable segment
and, since the business is not closely related to the IT&S segment, results are not aggregated to be included in the results of the
IT&S reportable segment. On July 11, 2023, the Company completed the sale of the Cortland Industrial business (see Note 5,
"Discontinued Operations and Other Divestiture Activities" in the notes to the consolidated financial statements). Certain
information related to the Other operating segment is disclosed within Note 15, "Business Segment, Geographic, and Customer
Information" in the notes to the consolidated financial statements in order to comply with requirements under generally
accepted accounting principles in the United States ("US GAAP") to reconcile certain required disclosures to the Consolidated
Financial Statements.
Acquisitions and Divestitures
For a summary of recent divestiture transactions impacting continuing operations, see Note 5, "Discontinued Operations
and Other Divestiture Activities" in the notes to the consolidated financial statements.
International Business
Our products and services are generally available globally, with our principal markets outside the United States being
Europe, the Middle East and Asia. In fiscal 2024, we derived 38% of our net sales from the United States, 29% from Europe,
15% from the Middle East, 10% from Asia and 8% from other geographic areas. We have operations around the world that
allow us to draw on the skills of a global workforce, provide flexibility to our operations, drive economies of scale, provide
revenue streams that may help offset economic trends that are specific to individual countries, and facilitate access to new
markets. Although international operations are subject to certain risks, we continue to believe that a global presence is key to
maintaining strong relationships with many of our global customers and suppliers. Financial information related to the
Company's geographic footprint of our continuing operations is included in Note 15, "Business Segment, Geographic and
Customer Information" in the notes to the consolidated financial statements.
Product Development and Engineering
We conduct research and development activities to develop new products and to enhance the functionality, effectiveness,
ease of use and reliability of our existing products. We believe that our engineering and research and development efforts have
been, and continue to be, key drivers of our success in the marketplace. Our advanced design and engineering capabilities
contribute to the development of innovative and highly engineered products, maintain our technological leadership and enhance
our ability to provide customers with unique and customized solutions and products. We anticipate that we will continue to
make significant expenditures for research and development as we seek to provide new innovative tools and services to grow
our market share. Research and development ("R&D") costs are expensed as incurred. R&D costs were $12 million in fiscal
2024, $9 million in fiscal 2023 and $7 million in fiscal 2022.
The Company holds numerous patents and trademarks. While no individual patent is believed to be of such importance
that its termination would have a material adverse effect on our business, the termination of certain of our trademarks, including
ENERPAC®, SIMPLEX®, HYDRATIGHT® and LARZEP & DESIGN®, could have a material adverse effect on our
business.
Competition
The markets for our products are highly competitive. We provide a diverse and broad range of industrial products and
services to numerous global end markets, many of which are highly fragmented. Although we face larger competitors in several
served markets, some of our competition is comprised of smaller companies which may lack the footprint or financial resources
to serve global customers. We compete for business principally on the basis of customer service, product quality and
availability, and engineering and research and development expertise. In addition, we believe that our cost structure, strategic
global sourcing capabilities and global distribution support our competitive position.
3
Manufacturing and Operations
While we do have manufacturing capabilities including machining and fabrication, our manufacturing consists primarily
of light assembly of components we source from a network of global suppliers. We have implemented single piece flow
processes in most of our plants which reduces inventory levels, lowers re-work costs and shortens lead times to customers.
Components are built to our highly engineered specifications by a variety of suppliers in best-cost locations including various
countries in Asia. We have built strong relationships with our key suppliers and, while we single source certain of our
components, in many cases there are several qualified alternative sources.
Raw Material Costs, Inflation and Tariffs
We source materials and components from a network of global suppliers. These items are typically available from
multiple suppliers. Raw materials that go into the components we source, such as steel, aluminum, plastic resin, brass, steel wire
and rubber, are subject to price fluctuations and tariffs, which could have an impact on our results. We have been able to offset
the impact of inflation with pricing actions, manufacturing efficiencies and other cost reductions. In addition, several of our
products have been subject to tariffs, but to date we have been able to offset the majority of additional costs from tariffs through
price increases. We continue to manage our supply chain to mitigate ongoing risks associated with the evolving geopolitical and
inflationary environments.
Order Backlogs and Seasonality
Our operating segments have a relatively short order-to-ship cycle. We had order backlogs of $41 million and $54 million
at August 31, 2024 and 2023, respectively. The decrease in our order backlog during the fiscal year was primarily due to
continued effort to decrease inventory levels globally. Assuming no significant supply chain constraints arise after the date of
this report, substantially all of the backlog at August 31, 2024 is expected to be filled within twelve months.
While we typically experience a stronger second half to our fiscal year, our consolidated sales are not subject to
significant seasonal fluctuations.
Percentages of Sales by Fiscal Quarter
2024
2023
Quarter 1 (September - November)
24%
23%
Quarter 2 (December - February)
23%
24%
Quarter 3 (March - May)
26%
26%
Quarter 4 (June - August)
27%
27%
100%
100%
Human Capital Management
The goal of our human capital management strategy and practices is for Enerpac to be considered an employer of choice,
and our initiatives and programs are predicated on making this objective a reality.
The talent that makes up our workforce (approximately 2,000 employees as of August 31, 2024) is critical to the success
of our company and the ability to deliver shareholder value. Our talent development framework is built around a robust
performance management and development structure. Together with their leaders, employees establish annual goals and
objectives that align directly with our organizational commitments. We monitor progress throughout the year, with candid and
frequent dialogue encouraged along the way, and, new for fiscal 2024, a formal check-in process at the mid-year point to
facilitate a clear understanding of goals and the status of progress toward achieving those goals. Bi-annually, our Executive
Leadership Team ("ELT") reviews the skills we require to execute our corporate strategy and key role requirements to identify
development opportunities for our emerging talent. Annually, we conduct performance review and succession planning, and we
promote a long-term career development view by encouraging the creation of unique individual development plans. Training
opportunities for all levels of the organization are available and focus on skill, competency and leadership development. We
believe in coaching and the sharing of perspectives, and we facilitate mentorship opportunities for the benefit of our workforce.
We are committed to devoting the time, resources and planning necessary to maximize the potential of our employees' career
development, as well as address the future skill needs of our organization.
We offer competitive compensation and benefits tailored to the geographical markets and industries in which we operate.
In the U.S., employees who work more than 30 hours per week are eligible for a comprehensive menu of benefits, including
healthcare (health, dental, and vision) coverage, health savings accounts with $500/$1,000 employer funding, dependent care
and healthcare flexible spending accounts, company-paid short-term disability, long-term disability, company-paid base life and
accidental disability insurance, voluntary life coverage up to 6x annual salary, spousal and dependent life coverage. Employees
are offered thirteen paid holidays, and three weeks of paid time off, military leave, a 401(k) retirement plan with a Company
match and immediate vesting, access to our employee assistance program, an annual bonus program with broad participation,
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equity incentive programs, an employee stock purchase plan (ESPP) that allows employees to buy company shares at a 15%
discount (up from 10% in the last fiscal year), and flexible work arrangements. Both part time and full-time employees are
eligible for adoption assistance and up to 12 weeks of parental leave, of which six weeks are paid for full time employees at an
employee's full salary. We offer tuition reimbursement up to $5,250 for associate and undergraduate programs and $7,500 for
graduate programs, while also offering the same level of reimbursement to part time workers as full-time workers. We also
offer a dependent scholarship of up to $2,500 for both part-time and full-time employees. We continue to evaluate
enhancements to our compensation and benefit programs in all locations to ensure we remain competitive and meet the needs of
our employees.
Diversity, Inclusion & Belonging. Diversity, Inclusion & Belonging ("DI&B") remains a focus area as we strive to foster
an inclusive culture of belonging. In addition, our Board reflects a diverse set of Directors, including three female (30%) and
one racially diverse (10%) individual. We believe a continued focus on DI&B aligns with our values and provides a competitive
advantage, enabling us to attract exceptional talent, leverage diverse perspectives, and ultimately drive value creation for our
shareholders.
Employee Safety. The safety, health, and well-being of our employees, contractors, and visitors at our sites globally is our
top priority and a principle that is deeply embedded in our culture. Our leaders and employees at all levels embrace our health,
safety, security, environment, and quality (“HSSEQ”) programs, which translates into an enterprise-wide obligation to provide
healthy, safe and productive work environments for our employees and deliver high standards of safety and quality in the
products, services and solutions for our customers and end-users. At the heart of our HSSEQ efforts is a desire to foster a
culture of continuous improvement and employee empowerment through training, frequent and constructive management
engagement, a risk-based evaluation of business activities and behaviors, and the deployment of programs and resources to
mitigate those risks. We continually track and report our performance, including thorough reviews of incidents, near-misses,
and quality issues; and management accountability and discussion of these improvement opportunities is a cornerstone of all
business reviews. We finished the year with a total case incident rate (TCIR) of 0.50. This is a decrease year-over-year as fiscal
2023 had a TCIR of 0.64. This puts our performance in the top quartile in comparison to the BLS NAICS bracket for
Machinery Manufacturing (333) for companies with greater than 1,000 employees.
Executive Officers of the Registrant
The names, ages and positions of all of the executive officers of the Company as of October 15, 2024 are listed below.
Name
Age
Position
Paul E. Sternlieb
52
President and Chief Executive Officer
P. Shannon Burns
54
Interim Principal Financial Officer and Head of Financial Planning, Operations and
Decision Support
Eric T. Chack
46
Executive Vice President - Operations
James P. Denis
50
Executive Vice President, General Counsel, Company Secretary & Chief Compliance
Counsel
Benjamin J. Topercer
47
Executive Vice President and Chief Human Resource Officer
Paul Sternlieb, President and Chief Executive Officer, was appointed President and Chief Executive Officer of the
Company in October 2021. Prior to joining the Company, Mr. Sternlieb served as Executive Vice President ("EVP") and
President, Protein, at John Bean Technologies Corporation ("JBT") since October 2017. Prior to JBT, Mr. Sternlieb was Group
President, Global Cooking in the Food Equipment Group at Illinois Tool Works since 2014. He served as a Vice President &
General Manager with Danaher from 2011 to 2014. Before Danaher, he held management roles with the H.J. Heinz Company, a
leading food production company, and was a consultant with McKinsey & Company.
P. Shannon Burns, Interim Principal Financial Officer and Head of Financial Planning, Operations and Decision Support,
was appointed as the Company’s Interim Principal Financial Officer by the Board of Directors effective March 1, 2024. Prior to
his appointment, Mr. Burns served as Head of Financial Planning, Operations, and Decision Support since joining the Company
in November 2022. Prior to joining the Company, Mr. Burns was with Harley-Davidson Motor Company, holding various
positions in Finance and Investor Relations from August 2011 through November 2022. From June 2007 to August 2011, Mr.
Burns was with MillerCoors Brewing Company, serving as a Manager, following ten years with Ernst & Young and seven
years with American Express Financial Advisors.
Eric T. Chack, Executive Vice President - Operations, joined the Company in July 2024 and leads all aspects of Enerpac’s
global operations, including oversight for manufacturing, procurement, logistics, continuous improvement, quality, and
reliability. Prior to joining Enerpac, Mr. Chack was SVP Supply Chain for Mohawk Industries. Before his time at Mohawk, Mr.
Chack was SVP Global Operations & Supply Chain for Briggs & Stratton and held global operations leadership roles at SPX
Corporation and IDEX Corporation. He has extensive experience building, developing, and optimizing the performance of
world-class operations teams. In addition, he served as an Infantry Officer in the Marine Corps.
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James Denis, EVP, General Counsel, Company Secretary & Chief Compliance Counsel, has served in this capacity since
September 2022. He joined the Company in 2013 as our Global Litigation Counsel and was promoted to Regional General
Counsel for the Americas and APAC in October 2018 and Assistant General Counsel in March 2020. In December 2021, he
was appointed Acting General Counsel and Corporate Secretary. Before joining the Company, Mr. Denis was a shareholder
with the law firm of Reinhart Boerner Van Deuren s.c., where he was a member of the firm’s Products Liability and Insurance
Risk Management Teams.
Benjamin Topercer, EVP and Chief Human Resource Officer, joined the Company in February 2022 and leads the global
human resources function, including our global HSSEQ organization, as well as our DEIB initiatives and communications
function. From June 2016 until he joined Enerpac, Mr. Topercer was the Chief Human Resource Officer for Vantage Specialty
Chemicals, a manufacturer of specialty chemicals and ingredients included in consumer and industrial products. Prior to joining
Vantage, he served in various human resources management roles for Premier Farnell Corporation, a distributor of electronic
components, including as Global Head of HR for its sales, marketing, e-commerce and technology groups and specified
business units, from September 2013 to June 2016. Prior to that, Mr. Topercer served as Director, Human Resources for Eaton
Corporation, and its predecessor, Cooper Industries, from July 2011 to September 2013. Prior to that, he served in positions of
progressive responsibility in the human resources group of Henkel Corporation from September 2004 to July 2011 and at
Rexam Sussex from March 2000 to September 2004.
Item 1A. Risk Factors
The risks and uncertainties described below are those that we have identified as material but are not the only risks and
uncertainties facing the Company. If any of the events contemplated by the following risks occurs, our business, financial
condition, or results of operations could be materially adversely affected. Additional risks and uncertainties not currently known
to us, or that we currently believe are immaterial, also may adversely impact our business, including our ability to execute our
strategic growth and profitability objectives.
Risks Related to Economic Conditions
Supply chain issues, including shortages of adequate component supply or that increase our costs or cause delays in our
ability to fulfill orders, or a failure by us to estimate customer demand properly, could have an adverse impact on our
business and operating results and our relationships with customers.
We rely on our supply chain for components and raw materials to manufacture our products and provide services to our
customers, and this reliance could have an adverse impact on our business and operating results. We may experience a
reduction or interruption in supply due to factors beyond our control, including as a result of geopolitical conflicts and the
imposition of international sanctions in response thereto, a significant natural disaster, pandemics, or shortages in global freight
capacity. Our vendors may be unable or unwilling to meet our demand for raw materials or components, or significantly
increase lead times for deliveries, which may be unable to offset through alternate sources of supply, Further, vendors may
impose significant increases in the price of critical components and raw materials that we may be unable to pass along to our
customers. In addition, a failure by us to appropriately forecast or adjust our requirements for components or raw materials
based on our business needs and volatility in demand for our products may impact our ability to timely procure raw materials
and components necessary to maintain desired productivity in our operations. These supply chain issues could materially
adversely affect our business, operating results, and financial condition and could materially damage customer relationships.
We procure certain components for our products from single or limited suppliers. In the event of supply disruptions from
these suppliers, we may not be able to diversify our supply base for such components in a timely manner or may experience
quality issues with alternate sources. Further, we procure a significant portion of our components from suppliers located in
China, and we are therefore exposed to potential disruptions in deliveries from these suppliers due to political tensions with
China, geopolitical risks, government-mandated facility closures in China, energy shortages or other causes. Our growth and
ability to meet customer demand depend in large part on our ability to obtain timely deliveries of components and raw materials
from our suppliers, and significant disruptions in their supply could materially adversely affect our business, operating results,
and financial condition and could materially damage customer relationships.
We have in the recent past experienced supply shortages and inflationary pressures for certain components and raw
materials that were important to our manufacturing process due to a number of the factors described above. Growth in the
global economy may exacerbate these pressures on us and our suppliers, and we expect these supply chain challenges and cost
impacts may continue to impact us in the future. Although we have generally secured additional supply from existing or
alternate suppliers or taken other mitigating actions when such disruptions have occurred in past periods, there is no guarantee
we can continue to do so in the future, and our business, results of operations, and financial condition could be adversely
affected. When facing component supply-related challenges, we may also increase our inventories and purchase commitments
to shorten lead times and increase the likelihood of maintaining adequate inventories to meet customer expectations. If the
demand for our products is less than our expectations or if we otherwise fail to anticipate customer demand properly, an
6
oversupply of components could result in inventory levels that could also lead to significant excess and obsolete inventory
charges and adversely affect our operating and financial results.
Deterioration of, or instability in, the domestic and international economy and challenging end-market conditions could
impact our ability to grow the business and adversely impact our financial condition, results of operations and cash flows
and our ability to execute our strategy.
Our businesses and operating results have been, and will continue to be, affected by domestic and international economic
conditions. The level of demand for our products is affected by general economic and business conditions in our served end
markets. A substantial portion of our revenues is derived from customers in cyclical industries (such as the industrial and oil &
gas sectors) that typically are adversely affected in periods of economic contraction or volatility. In such periods, our customers
may experience deterioration of their businesses, which may reduce or delay our sales. We have experienced contraction and
challenging demand conditions in many of our served markets historically, and it is reasonably possible that we could
experience such conditions in the future, which may adversely affect our financial condition, results of operations and cash
flows and our ability to execute our strategy.
Disruptions in global oil markets have adversely affected our business and results of operations and similar events in the
future may adversely affect our business and results.
A portion of our revenues is derived from customers in the midstream and downstream oil & gas industry. Disruptions in
the global oil & gas markets (such as those due to the Ukraine/Russia conflict and the resulting international sanctions and the
armed conflicts in the Middle East) and other changes in demand for oil can negatively affect oil prices and negatively affect
cash flows for many of those customers. This has resulted in, and in the future could result in, lower capital expenditures and
project modifications, delays or cancellations by those customers, reducing the demand for certain of our products serving that
end market, which could adversely affect our results of operations and financial condition.
Uncertainty over global tariffs, or the financial impact of tariffs, may negatively affect our results.
Changes in U.S. domestic and global tariff frameworks have increased our costs of producing goods and resulted in
additional risks to our supply chain. We have developed and implemented strategies to mitigate previously implemented and, in
some cases, proposed tariff increases, but there is no assurance we will be able to continue to mitigate prolonged tariffs. The
outcome of the 2024 U.S. presidential elections may have a significant impact on U.S. domestic and global tariffs. Uncertainties
about future tariff changes could result in mitigation actions that prove to be ineffective or detrimental to our business.
Risks Related to Our Business and Operations
Logistics challenges, including global freight capacity shortages, could increase our freight costs or cause delays in our
ability to fulfill orders and could have an adverse impact on our business and operating results.
The Company’s ability to import products in a timely and cost-effective manner has been, and may continue to be,
adversely affected by shortages of freight capacity, delays at ports, port strikes, and other issues that otherwise affect
transportation and warehousing providers. For example, the armed conflicts in the Middle East and the associated attacks on
commercial ships in the Red Sea has caused global increases in shipping costs, as well as significant delays for some shipments.
Globally, the shipping industry faces other challenges, including labor disputes at major ports and railways and weather-related
disruptions, such as droughts in Panama reducing capacity in the Panama Canal. These issues could delay importation of
products or require the Company to locate alternative ports or warehousing providers to avoid disruption to customers. These
alternatives may not be available on short notice or could result in higher freight and logistics costs, which could have an
adverse impact on the Company’s business and financial condition.
We face collection risk for receivables in foreign jurisdictions.
We sell products and services through distributors and agents. In certain jurisdictions, those third parties represent a
significant portion of our sales in their respective country. Collection times for receivables in many foreign jurisdictions may
often be substantially longer than those in the United States (though typically less than one year). Further, for certain of our
services business agency relationships, we utilize intermediary agents and are dependent on our agents to collect payment on
our behalf. The indirect sales channels expose us to the credit risk of both our channel partners and end customers and increase
the risk of delayed payments or uncollectible balances. For example, during the year ended August 31, 2022, we recognized a
$13.2 million bad debt reserve as a result of the continued payment delinquency of one of our agents. A liquidity event or
dispute involving one of our channel partners may adversely affect our results of operations and financial condition.
If we fail to retain the agents and distributors upon whom we rely to market our products and services, we may be unable to
effectively market our products and services and our revenue and profitability may decline.
The marketing success of many of our businesses in the U.S. and abroad depends largely upon our independent agents’
and distributors’ sales and service expertise and relationships with customers in our end markets. Many of these agents have
7
developed strong ties to existing and potential customers because of their detailed knowledge of our products. A loss of a
significant number of these agents or distributors, or of a particular agent or distributor in a key market or with key customer
relationships, could significantly inhibit our ability to effectively market our products, which could have a material adverse
effect on our business, financial condition, results of operations and cash flows.
Cybersecurity vulnerabilities, threats and more sophisticated and targeted computer crime could pose a risk to our systems,
networks, operations, products, solutions, services and data.
Increased global cybersecurity threats, computer viruses and more sophisticated and targeted cyber-related attacks, as well
as cybersecurity failures resulting from human error, vulnerabilities and technological errors, including the errors of third-party
software providers, pose a risk to our systems, including third-party vendor operated systems, operations and products and
potentially those of our business partners. An attack also could result in losses due to an inability to recover lost data, software
and key documentation, ransomware payments, security breaches, theft, lost or corrupted data, misappropriation of sensitive,
confidential or personal data or information, loss of trade secrets and commercially valuable information, reputational harm,
including loss of confidence by our customers, suppliers and employees in our ability to adequately protect their information,
fines, production downtimes and operational disruptions. The development and adoption of generative artificial intelligence
("AI") technologies exacerbates these risks and may give rise to new tools for threat actors to attack and disrupt our systems.
We attempt to mitigate these risks by employing measures including employee training, network monitoring and testing,
maintenance of protective systems, contingency planning, and the engagement of third-party experts, but we remain potentially
vulnerable to additional known or unknown threats. We anticipate that meaningful investments in our operating technology
infrastructure will be necessary as we continue to evaluate our vulnerabilities and take actions to safeguard our systems.
Further, while we currently maintain insurance coverage that, subject to its terms and conditions, is intended to address costs
associated with certain aspects of cybersecurity incidents and information systems failures, this insurance coverage may not,
depending on the specific facts and circumstances surrounding an incident, cover all losses or all types of claims that arise from
an incident, or the damage to our reputation that may result from an incident. There is no assurance the financial or operational
impact from such threats or events will not be material.
We may not be able to maintain operational improvements from our ASCEND transformation program and from
restructuring actions.
In March 2022, we announced the launch of ASCEND, a transformation program focused on driving accelerated earnings
growth and efficiency across the business with the goal of delivering improved annual operating profit once fully implemented.
The ASCEND program focused on the following key initiatives: (i) accelerating organic growth strategies, (ii) improving
operational excellence and production efficiency by utilizing a lean approach and (iii) driving greater efficiency and
productivity in selling, general and administrative expenses. In addition, we implemented other plans that incurred restructuring
costs to (i) eliminate redundancies in our corporate or regional structures, (ii) eliminate excess capacity in our facilities as a
result of integration of acquisitions or divestitures of product lines, or (iii) eliminate product or service lines that did not meet
targeted profitability metrics. Although we expect that the improved operating profit, cost savings and realization of efficiencies
will continue to provide annual benefit, we may not fully maintain these improvements (see Note 3. "ASCEND Transformation
Program" and Note 4, "Restructuring Charges," in the notes to the consolidated financial statements and "Business Update"
within Item 7 for further discussion of the ASCEND program and other current restructuring activities).
A material disruption at a significant manufacturing facility could adversely affect our ability to generate sales and result in
increased costs that we cannot recover.
Our financial performance could be adversely affected due to our inability to meet customer demand for our products or
services in the event of a material disruption at one of our significant manufacturing or services facilities. Equipment failures,
natural disasters, health issues (including pandemics like COVID-19), power outages, fires, explosions, terrorism, adverse
weather conditions, labor disputes or other events could create a material disruption. Interruptions to production could increase
our cost of sales, harm our reputation and adversely affect our ability to attract or retain our customers. Our business continuity
plans may not be sufficient to address disruptions attributable to such risks. Any interruption in production capability could
require us to make substantial capital expenditures to remedy the situation, which could adversely affect our financial condition
and results of operations.
Our business operates in highly competitive markets, so we may be forced to cut prices or incur additional costs.
Our business generally faces substantial competition, domestically and internationally, in our end markets. We may lose
market share in certain businesses or be forced to reduce prices or incur increased costs to maintain existing business. We
compete globally on the basis of product design, quality, availability, performance and customer service. Present or future
competitors in our markets may have new technologies or more attractive products and services or greater financial, technical or
other resources which could put us at a competitive disadvantage. In addition, some of our competitors may be willing to reduce
prices and accept lower margins to compete with us.
8
Our international operations pose political, currency and other risks.
We expect sales from and into foreign markets to continue to represent a significant portion of our revenue. In addition,
many of our manufacturing operations and suppliers are located outside the United States, including China, the United
Kingdom and the Netherlands. Our sales and operating activities outside of the U.S. are, and will continue to be, subject to a
number of risks, including:
•
unfavorable fluctuations in foreign currency exchange rates;
•
adverse changes in foreign tax, legal and regulatory requirements;
•
export and import restrictions and controls on repatriation of cash;
•
political and economic instability;
•
difficulty in protecting intellectual property;
•
government embargoes, tariffs and trade protection measures, such as “anti-dumping” duties applicable to classes of
products, and import or export licensing requirements, as well as the imposition of trade sanctions against a class of
products imported from or sold and exported to, or the loss of “normal trade relations” status with, countries in which
we conduct business, that could significantly increase our cost of products or otherwise reduce our sales and harm our
business;
•
cultural norms and expectations that may sometimes be inconsistent with our Code of Conduct and our requirements
about the manner in which our employees, agents and distributors conduct business;
•
differing labor regulations; and
•
acts of hostility, terror or war.
Our operations outside the United States require us to comply with a number of United States and international
regulations. For example, we are subject to the Foreign Corrupt Practices Act (the “FCPA”), which prohibits United States
companies or their agents and employees from providing anything of value to a foreign official for the purposes of influencing
any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person
or corporate entity, or obtain any unfair advantage. Our activities in countries outside the United States create the risk of
unauthorized payments or offers of payments by one of our employees or agents that could be in violation of the FCPA, even
though these parties are not always subject to our control. We have internal control policies and procedures and have
implemented training and compliance programs with respect to the FCPA. However, we cannot assure that our policies,
procedures and programs always will protect us from reckless or criminal acts committed by our employees or agents. In the
event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-
corruption laws, including the FCPA, we may be required to investigate or have outside counsel investigate the relevant facts
and circumstances. In addition, we are subject to and must comply with all applicable export controls and economic sanctions
laws and embargoes imposed by the United States and other various governments. Changes in export control or trade sanctions
laws may restrict our business practices, including cessation of business activities in sanctioned countries or with sanctioned
entities, and may result in modifications to compliance programs and increase compliance costs, and violations of these laws or
regulations may subject us to fines, penalties and other sanctions, such as loss of authorizations needed to conduct aspects of
our international business or debarments from export privileges. Violations of the FCPA or export controls or sanctions laws
and regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could
negatively affect our business, financial condition, results of operations, and cash flows.
We intend to continue to pursue international growth opportunities, which could increase our exposure to risks associated
with international sales and operations. As we expand our international operations, we may also encounter new risks that could
adversely affect our revenues and profitability. Failure to properly manage these risks could adversely affect our business,
financial condition, results of operations and cash flows. In addition, United States tax reform has significantly changed how
foreign operations are taxed in the United States. Therefore, we continue to review our organizational structure, and changes to
where income is generated, which changes may have a material adverse effect on our liquidity and results of operations.
Our customers and other business partners often require terms and conditions that expose us to significant risks and
liabilities.
We operate in end markets and industries in which our customers and business partners seek to contractually shift
significant risks associated with their operations or projects to us. We structure our commercial and contracting practices to
assess and manage the risks we are assuming, but we cannot assure that material liabilities will not arise from our contracts with
our business partners. Also, our contracting standards may be more stringent than those of certain competitors, and as a result,
we may experience market share losses or the reduction in growth opportunities.
9
Imposition of climate-related laws and regulations that disadvantage the oil & gas industry compared to other industries or
consumer behavior that reduces demand for petroleum products may have an adverse impact on our results of operations.
A significant portion of our revenues are derived from the sale of products and services to end users in the oil & gas
industry. Accordingly, our results of operations may be adversely affected by the imposition of climate-related laws and
regulations that disadvantage the oil & gas industry compared to other industries and have the effect of reducing the production
of petroleum products. In addition, a reduction in the production of petroleum products as a result of consumer behavior that
embraces alternative sources of energy over oil & gas could similarly adversely affect our results of operations by reducing the
demand for our products and services.
Risks Related to the Execution of Our Strategy
If we fail to develop new products, or customers do not accept our new products, our business could be adversely affected.
Our ability to develop innovative new products can affect our competitive position and often requires the investment of
significant resources. Difficulties or delays in research, development, production or commercialization of new products, or
failure to gain market acceptance of new products and technologies, may reduce future sales and adversely affect our
competitive position. There can be no assurance that we will have sufficient resources to make such investments, that we will
be able to make the technological advances necessary to maintain competitive advantages or that we can recover major research
and development expenses. If we fail to make innovations, launch products with quality problems, experience development cost
overruns, or the market does not accept our new products, then our financial condition, results of operations, cash flows and
liquidity could be adversely affected.
Our growth strategy includes strategic acquisitions, which we may not be able to consummate.
We plan to make acquisitions to grow our business, enhance our global market position and broaden our industrial tools
product offerings. Our ability to successfully execute acquisitions will be impacted by factors including the availability of
financing on terms acceptable to us, the potential reduction of our ability or willingness to incur debt to fund acquisitions, the
reluctance of target companies to sell in current markets, our ability to identify acquisition candidates that meet our valuation
parameters and increased competition for acquisitions. Failure to effectively execute our acquisition strategy could have an
adverse effect on our competitive position, reputation, financial condition, results of operations, cash flows and liquidity.
We may not be able to realize planned benefits from acquired companies.
We may not be able to realize planned benefits from acquired companies. Achieving those benefits depends on the timely,
efficient and successful execution of a number of post-acquisition events, including integrating the acquired business into the
Company. Factors that could affect our ability to achieve these benefits include:
•
difficulties in integrating and managing personnel, financial reporting and other systems used by the acquired
businesses;
•
the failure of acquired businesses to perform in accordance with our expectations;
•
failure to achieve anticipated synergies between our business units and the business units of acquired businesses;
•
the loss of customers of acquired businesses;
•
the loss of key managers and employees of acquired businesses; or
•
other material adverse events in the acquired businesses.
The process of integrating acquired businesses into our existing operations also may require additional financial resources
and attention from management that would otherwise be available for the ongoing development or expansion of our existing
operations. Although we expect to successfully integrate any acquired businesses, we may not achieve the desired net benefit in
the timeframe planned. If acquired businesses do not operate as we anticipate, it could materially impact our business, financial
condition and results of operations.
The indemnification provisions of acquisition agreements may result in unexpected liabilities.
Certain acquisition agreements from past acquisitions require the former owners to indemnify us against certain liabilities
related to the operation of each of their companies. In most of these agreements, the liability of the former owners is limited to
specific warranties given in the agreement as well as in amount and duration. Certain former owners also may not be able to
meet their indemnification responsibilities. We may be subject to the same risk with respect to future acquisitions as well. As a
result of those limitations, we may face unexpected liabilities that adversely affect our profitability and financial position.
10
Divestitures and discontinued operations could negatively impact our business, and retained liabilities from businesses that
we have sold could adversely affect our financial results.
In connection with the execution of our strategy to become a pure-play industrial tools and services company, we have
completed several divestitures, including the divestiture of our former EC&S segment. These divestitures pose risks and
challenges that could negatively impact our business, including retained liabilities related to divested businesses, obligations to
indemnify buyers against contingent liabilities and potential disputes with buyers.
If we do not realize the expected benefits of these divestitures or our post-completion liabilities and continuing obligations
are substantial and exceed our expectations, our financial position, results of operations and cash flows could be negatively
impacted. Any divestiture may result in a dilutive impact to our future earnings if we are unable to offset the dilutive impact
from the loss of revenue and profits associated with the divestiture, as well as significant write-offs, including those related to
goodwill and other intangible assets, which could have a material adverse effect on our results of operations and financial
condition.
Our goodwill and other intangible assets represent a substantial amount of our total assets.
Our total assets reflect substantial intangible assets, primarily goodwill. As of August 31, 2024, goodwill and other
intangible assets totaled $306 million, or 39% of our total assets. The goodwill results from acquisitions, representing the
excess of the purchase price over the fair value of the net tangible and other identifiable intangible assets we have acquired. We
assess annually, and more frequently if a triggering event occurs, whether there has been impairment in the value of our
goodwill or indefinite-lived intangible assets. If future operating performance at one or more of our reporting units were to fall
below current levels, we could be required to recognize a non-cash charge to operating earnings to impair the related goodwill
or other intangible assets. See Note 6, "Goodwill, Intangible Assets and Long-Lived Assets" in the notes to the consolidated
financial statements and "Critical Accounting Estimates" for further discussion on goodwill, intangible asset and long-lived
asset impairments. Any future goodwill or intangible asset impairments could negatively affect our financial condition and
results of operations.
Risks Related to Legal, Compliance and Regulatory Matters
We are subject to many laws and regulations that may change in ways that are detrimental to our competitiveness or results.
Our businesses are subject to regulation under a broad range of U.S. and foreign laws and regulations. Some of those laws
and regulations may change in ways that will require us to modify our business practices and objectives in ways that adversely
impact our financial condition or results of operations, including by restricting existing activities and products, subjecting our
operations to escalating costs or prohibiting us from operating in certain jurisdictions. Examples of laws or regulations that may
have an adverse effect on our operations, financial condition and growth strategies include tax law, export and import controls,
anti-corruption law, competition law, data privacy regulations, currency controls and economic or political sanctions. In
addition, changes in laws or regulations, for example, the proposed regulations of the Securities and Exchange Commission
with respect to climate-related disclosures, may significantly increase our costs, adversely affecting our results of operations.
Legal compliance risks could result in significant costs to our business or cause us to restrict current activities or curtail
growth plans.
We directly or indirectly operate in industries, markets and jurisdictions in which we are exposed to compliance risks and
that are subject to significant scrutiny by regulators, governmental authorities and other persons. We structure and strengthen
our risk management and compliance programs to mitigate such risks and foster compliance with all applicable laws, but our
practices may not be sufficient to eliminate these risks. The global and diverse nature of our operations, the complex and high-
risk nature of some of our markets, our reliance on third-party agents and representatives to support sales and other business
activities, and increasingly stringent laws and enforcement activities could result in violations of law, enforcement actions or
private litigation resulting in significant defense and investigation costs, fines and penalties, and a broad range of remedial
actions, including potential restrictions on our operations and other adverse changes to our business plans. See Note 16,
"Commitments and Contingencies" in the notes to the consolidated financial statements for additional information about
compliance risks.
11
Health, safety and environmental laws and regulations may result in additional costs.
We are subject to federal, state, local and foreign laws and regulations governing public and worker health and safety.
Violations of these laws could result in significant harm and financial liabilities that could adversely affect our operating results
and reputation. Pursuant to such laws, governmental authorities have required us to contribute to the cost of investigating or
remediating certain matters at current or previously owned and operated sites. In addition, we have provided environmental
indemnities for previously owned operations in connection with the sale of certain businesses and product lines. Liability as an
owner or operator, or as an arranger for the treatment or disposal of hazardous substances, can be joint and several and can be
imposed without regard to fault. There is a risk that costs relating to these matters could be greater than what we currently
expect or exceed our insurance coverage, or that additional remediation and compliance obligations could arise which require
us to make material expenditures. More stringent environmental laws, unanticipated remediation requirements or the discovery
of previously unknown conditions could materially harm our financial condition and operating results. We are also required to
comply with environmental laws and regulations to maintain operating permits and licenses, some of which are subject to
discretionary renewal from time to time, for many of our businesses, and our business operations could be restricted if we are
unable to renew existing permits or to obtain any additional permits that we may require.
Unfavorable tax law changes may adversely affect results.
We are subject to income taxes in the United States and in various foreign jurisdictions. Domestic and international tax
liabilities are subject to the allocation of income among various tax jurisdictions. Our effective tax rate could be adversely
affected by changes in tax law (including a potential increase in the U.S. federal income tax rate or increased tariffs on goods
imported into the U.S.), the mix of earnings among countries with differing statutory tax rates, or changes in the valuation
allowance of deferred tax assets.
Costs and liabilities arising from legal proceedings could be material and adversely impact our financial results.
We are subject to legal and regulatory proceedings, including litigation asserting product liability and warranty claims.
Because our products are used in critical applications in demanding environments, including in the oil & gas industry, product
and service failures can have significant consequences and could result in significant product liability, warranty and other
claims against us, regardless of whether our products and services caused the incident that is the subject of the claim, and we
may have obligations to participate in the recall of products in which our products are components, if any of the components or
services we supply prove to be defective. We maintain insurance and have established reserves for these matters as appropriate
and in accordance with applicable accounting standards and practices. Insurance coverage, to the extent it is available, may not
cover all losses arising from such contingencies. Also, estimating legal reserves or possible losses involves significant judgment
and may not reflect the full range of uncertainties and unpredictable outcomes inherent in litigation and investigations, and the
actual losses arising from particular matters may exceed our current estimates and adversely affect our results of operations. We
also expect that additional legal proceedings and other contingencies will arise from time to time, and we cannot predict the
occurrence, magnitude and outcome of such additional matters. Moreover, we operate in jurisdictions where claims involving
us may be adjudicated within legal systems that are less developed and less reliable than those of the U.S. or other more
developed markets, and this can create additional uncertainty about the outcome of proceedings before courts or other
governmental bodies in such markets.
Risks Related to Our Capital Structure
Our indebtedness could harm our operating flexibility and competitive position.
We have incurred, and may in the future incur, significant indebtedness in connection with acquisitions or other strategic
growth initiatives. While at current debt levels we have significant flexibility on our financial debt covenants, should we incur
additional indebtedness to fund acquisitions or other strategic growth initiatives, our level of debt and the limitations imposed
on us by our debt agreements could adversely affect our operating flexibility and put us at a competitive disadvantage.
Our ability to make scheduled principal and interest payments, refinance our indebtedness and satisfy our other debt and
lease obligations will depend upon our future operating performance and credit market conditions, which could be adversely
affected by factors beyond our control. In addition, there can be no assurance that future borrowings or equity financings will be
available to us on favorable terms, or at all, for the payment or refinancing of our indebtedness. If we are unable to service our
indebtedness, our business, financial condition and results of operations will be adversely affected.
The financial and other covenants in our debt agreements may adversely affect us.
Our senior credit facility contains financial and other restrictive covenants. These covenants could limit our financial and
operating flexibility as well as our ability to plan for and react to market conditions, meet our capital needs and support our
strategic priorities and initiatives should we take on additional indebtedness for acquisition or other strategic objectives. Our
failure to comply with these covenants also could result in events of default which, if not cured or waived, could require us to
repay indebtedness before its due date, and we may not have the financial resources or otherwise be able to arrange alternative
12
financing to do so. Our compliance with the covenants of our senior credit facility may be adversely affected by severe market
contractions or disruptions to the extent they reduce our earnings for a prolonged period and we are not able to reduce our debt
levels or cost structure accordingly. Borrowings under our senior credit facility are secured by most domestic personal property
assets and are guaranteed by most of our domestic subsidiaries and by a pledge of the stock of most of our domestic and certain
foreign subsidiaries. If borrowings under our senior credit facility were declared or became due and payable immediately as the
result of an event of default and we were unable to repay or refinance those borrowings, our lenders could foreclose on the
pledged assets and stock. Any event that requires us to repay any of our debt before it is due could require us to borrow
additional amounts at unfavorable borrowing terms, cause a significant reduction in our liquidity and impair our ability to pay
amounts due on our indebtedness. Moreover, if we are required to repay any of our debt before it becomes due, we may be
unable to borrow additional amounts or otherwise obtain the cash necessary to repay that debt, when due, which could have a
material adverse effect on our business, financial condition and liquidity.
We may incur increased interest expense as a result of our variable rate debt.
Borrowings under our revolving line of credit and our $200 million term loan incur interest which is variable based on
fluctuations in the referenced Secured Overnight Financing Rate ("SOFR"). Increases in the referenced SOFR will increase our
borrowing costs and negatively impact financial results and cash flows.
Risks Related to Ownership of Our Common Stock
The market price of our common stock may be volatile.
A relatively small number of shares of our common stock are normally traded in any one day and higher volumes could
have a significant effect on the market price of our common stock. The market price of our common stock could fluctuate
significantly for many reasons, including in response to the risks described in this section and elsewhere in this report or for
reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our
customers, competitors or suppliers regarding their own performance, as well as industry conditions and general financial,
economic and political instability.
Because our quarterly revenues and operating results may vary significantly in future periods, our stock price may fluctuate.
Our revenue and operating results may vary significantly from quarter to quarter. A high proportion of our costs are fixed,
due in part to significant selling and manufacturing costs. Small declines in revenues could disproportionately affect operating
results in a quarter and the price of our common stock may fall. Other factors that could significantly affect quarterly operating
results include, but are not limited to:
•
demand for our products and services;
•
the timing of sales of our products and services;
•
changes in foreign currency exchange rates;
•
changes in applicable tax rates;
•
an impairment of goodwill or other intangible assets;
•
the occurrence of restructuring charges;
•
unanticipated delays or problems in introducing new products;
•
announcements by competitors of new products, services or technological innovations;
•
changes in our pricing policies or the pricing policies of our competitors;
•
increased expenses, whether related to sales and marketing, raw materials or supplies, labor matters, product
development or administration;
•
major changes in the level of economic activity in major regions of the world in which we do business;
•
costs related to possible future acquisitions or divestitures of technologies or businesses;
•
an increase in the number or magnitude of product liability or environmental claims; and
•
our ability to expand our operations and the amount and timing of expenditures related to expansion of our operations,
particularly outside the U.S.
Various provisions and laws could delay or prevent a change of control.
The anti-takeover provisions of our articles of incorporation and bylaws and provisions of Wisconsin corporation law
could delay or prevent a change of control or may impede the ability of the holders of our common stock to change our
management. In particular, our articles of incorporation and bylaws, among other things:
•
require a supermajority shareholder vote to approve a merger of the Company with another entity;
•
regulate how shareholders may present proposals or nominate directors for election at shareholders’ meetings; and
13
•
authorize our board of directors to issue preferred stock in one or more series, without shareholder approval.
General Risk Factors
Geopolitical unrest and terrorist activities may cause the economic conditions in the U.S. or abroad to deteriorate, which
could harm our business.
Terrorist attacks against targets in the U.S. or abroad, rumors or threats of war, other geopolitical activity or trade
disruptions, such as those caused by the Russia-Ukraine conflict, the armed conflicts in the Middle East, or any conflict or
threatened conflict between China and Taiwan, may cause general economic conditions in the U.S. or abroad to deteriorate. The
occurrence of any of these events could result in a prolonged economic slowdown or recession in the U.S. or in other areas and
could have a significant impact on our business, financial condition or results of operations.
Our inability to attract, develop and retain qualified employees could have a material adverse impact on our operations.
Our ability to deliver financial results and drive growth and pursue competitive advantages in our business substantially
depends on our ability to retain key employees and continually attract new talent to the business. If we experience losses of key
employees, such as our executives, or experience significant delays or difficulty in replacing them, our operations, competitive
position and financial results may be adversely affected. Competition for highly qualified personnel is intense, and our
competitors and other employers may attempt to hire our skilled and key employees. Additionally, we need qualified managers
and skilled employees with technical and manufacturing industry experience to operate our businesses successfully. From time
to time there may be shortages of skilled labor which may make it more difficult and expensive for us to attract and retain
qualified employees or lead to increased labor costs.
Our intellectual property portfolio may not prevent competitors from developing products and services similar to or
duplicative to ours, and the value of our intellectual property may be negatively impacted by external dependencies.
Our patents, trademarks and other intellectual property may not prevent competitors from independently developing or
selling products and services functionally equivalent or superior to our own or adequately deter misappropriation or improper
use of our innovations and technology. In addition, further steps we take to protect our intellectual property, including non-
disclosure agreements, may not prevent the misappropriation of our business critical secrets and information. In such
circumstances, our competitive position and the value of our brand may be negatively impacted.
Our competitors or other persons could assert that we have infringed their intellectual property rights.
We may be the target of enforcement of patents or other intellectual property rights by third parties. We have implemented
legal reviews and other controls in our new product development and marketing processes system to mitigate the risk of
infringing third-party rights, but those controls may not prove adequate or deter all claims. Responding to infringement claims,
regardless of their merits, can be expensive and time consuming. If we are found to infringe any third-party rights, we could be
required to pay substantial damages or we could be enjoined from offering some of our current products and services.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
We depend on integrated information systems to conduct our business. In order to defend against cybersecurity threats, we
have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity,
and availability of our critical systems and information. The frameworks used to design and assess our program include the
National Institute of Standards and Technology Cybersecurity Framework and Sarbanes Oxley. This does not imply that we
meet any particular technical standards, specifications, or requirements, only that we use these frameworks as a guide to help us
identify, assess, and manage cybersecurity risks relevant to our business.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program and shares
common methodologies, reporting channels, and governance processes that apply across the enterprise risk management
program to other legal, compliance, strategic, operational, and financial risk areas. Our cybersecurity risk management program
includes:
•
risk assessments designed to help identify material cybersecurity risks to our critical systems and information;
•
a security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our
security controls, and (3) our response to cybersecurity incidents;
•
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our
security controls;
14
•
cybersecurity awareness training of our employees, including our incident response personnel;
•
tabletop exercises conducted at the management level to ensure the Company is prepared in the event of a
cybersecurity incident and to help identify areas of improvement for the cyber security incident response and
risk management programs;
•
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents,
cybersecurity resilience and recovery; and
•
a third-party risk management process for service providers, suppliers, and vendors who access our critical
systems and data.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents,
that have materially affected us, including our operations, business strategy, results of operations, or financial condition. We
face risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations,
business strategy, results of operations, or financial condition. See Item 1A "Risk Factors".
Cybersecurity Governance
Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to its Audit Committee
oversight of cybersecurity and other information technology risks. Our Audit Committee oversees management’s
implementation of our cybersecurity risk management program.
Our Audit Committee receives regular reports from management on our cybersecurity risks, and our full Board receives a
periodic update. In addition, management updates the Audit Committee, as necessary, regarding any material cybersecurity
incidents, as well as significant incidents.
Our Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. Board
members receive presentations on cybersecurity topics from our Vice-President of Information Technology ("VPIT") and our
Director - Information Security ("DIS") or external experts as part of the Board’s continuing education on topics that impact
public companies.
Our management team, including our VPIT and DIS has overall responsibility for assessing and managing our material
risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program
and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our management
team’s experience includes extensive technology and finance leadership experience across multiple industries, experience in the
Legal, Risk and Compliance disciplines, and over 20 years of cybersecurity leadership experience for our VPIT.
Our management team is informed about and monitors the prevention, detection, mitigation, and remediation of key
cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat
intelligence and other information obtained from governmental, public or private sources, including external consultants
engaged by us, and alerts and reports produced by security tools deployed in the information technology environment.
Item 2. Properties
As of August 31, 2024, we owned or leased the following facilities (square footage in thousands):
Number of Locations
Square Footage
Distribution /
Sales /
Admin
Manufacturing
Total
Owned
Leased
Total
Industrial Tools & Services
10
35
45
132
1,181
1,313
Corporate and Other
2
2
4
26
173
199
12
37
49
158
1,354
1,512
We consider our facilities suitable and adequate for the purposes for which they are used and do not anticipate difficulty
in renewing existing leases as they expire or in finding alternative facilities. Our largest facilities are located in the United
States, the Netherlands, China and the United Kingdom. We also maintain a presence in Algeria, Australia, Brazil, France,
Germany, Kazakhstan, India, Italy, Japan, Norway, Poland, Saudi Arabia, Singapore, South Africa, South Korea, Spain and the
United Arab Emirates. See Note 10, “Leases” in the notes to the consolidated financial statements for information regarding our
lease commitments.
Item 3. Legal Proceedings
We are a party to various legal proceedings that have arisen in the normal course of business. These legal proceedings
typically include product liability, breaches of contract, employment, personal injury and other disputes.
15
We have recorded reserves for estimated losses based on the specific circumstances of each case. Such reserves are
recorded when it is probable that a loss has been incurred as of the balance sheet date and the amount of the loss can be
reasonably estimated. In our opinion, the resolution of these contingencies is not likely to have a material adverse effect on our
financial condition, results of operations or cash flows. Information with respect to contingencies arising from legal
proceedings, including governmental investigations, set forth in Note 16, “Commitments and Contingencies” in the notes to the
consolidated financial statements, is incorporated by reference.
Item 4. Mine Safety Disclosures
Not applicable.
16
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities
The Company’s Class A common stock is traded on the New York Stock Exchange under the symbol EPAC. As of
September 30, 2024, there were 672 shareholders of record of the Company's Class A common stock.
Dividends
In fiscal 2024, the Company declared a dividend of $0.04 per share of Class A common stock payable on October 18,
2024 to shareholders of record on October 7, 2024. In fiscal 2023, the Company declared a dividend of $0.04 per share of Class
A common stock payable on October 18, 2023 to shareholders of record on October 6, 2023.
Share Repurchases
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 30,082,181 shares of common stock for $839 million. In March 2022, the Company's Board of
Directors rescinded its prior share repurchase authorization and approved a new share repurchase program authorizing the
repurchase of a total of 10,000,000 shares of the Company's outstanding common stock. As of August 31, 2024, the maximum
number of shares that may yet be purchased under this authorization is 2,717,049 shares.
In December 2023, the Company's Board of Directors authorized the retirement of the Company's repurchased shares, and
the Company retired 29,841,209 treasury shares. The initial share retirement resulted in reductions of $6.0 million in Class A
Common Stock and $824.6 million in Retained Earnings reflected in the Condensed Consolidated Balance Sheets at August 31,
2024. Shares repurchased after December 18, 2023 were retired upon repurchase. In addition to the initial share retirement, the
Company repurchased and retired 240,972 shares during the year-ended August 31, 2024.
The following table summarizes share repurchases during the fourth quarter of fiscal 2024, all of which were purchased
under publicly announced share repurchase programs.
Period
Shares
Repurchased
Average Price Paid
per Share
Maximum Number
of Shares That May
Yet Be Purchased
Under the Program
June 1 to June 30, 2024
—
$
—
2,860,748
July 1 to July 31, 2024
—
—
2,860,748
August 1 to August 31, 2024
143,699
39.40
2,717,049
143,699
$
39.40
17
Performance Graph
The graph and table below compare the cumulative 5-year total return of the Company's Class A common stock with the
cumulative total returns of the Russell 2000 Index and the S&P 600 Industrial Index. They assume that the value of the
investment in our Class A common stock for the last trading day of each fiscal year, in each index, and in the peer group (in
each case, including reinvestment of dividends) was $100 on August 31, 2019 and tracks it through August 31, 2024.
Year Ended
Index Dollars
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Enerpac Tool Group Corp., the Russell 2000 Index, and the S&P 600 Industrials
Index
Enerpac Tool Group Corp.
Russell 2000
S&P 600 Industrial
8/19
8/20
8/21
8/22
8/23
8/24
$
$50
$100
$150
$200
$250
*$100 Invested on 8/31/19 in stock or index, including reinvestment of dividends.
Fiscal year ending August 31.
Copyright© 2024 Standard & Poor's, a division of S&P Global. All rights reserved.
Copyright© 2024 Russell Investment Group. All rights reserved.
8/19
8/20
8/21
8/22
8/23
8/24
Enerpac Tool Group Corp.
$
100.00
$
93.82
$
113.74
$
87.87
$
118.90
$
187.42
Russell 2000 Index
100.00
106.02
155.94
128.05
134.01
158.76
S&P 600 Industrial Index
100.00
103.94
150.50
139.60
168.90
213.20
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
18
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis is intended to assist the reader in understanding our results of
operations and financial condition. Management’s Discussion and Analysis is provided as a supplement to, and should be read
in conjunction with, our audited consolidated financial statements included in Item 8. "Financial Statements and Supplementary
Data".
Background
The Company has one reportable segment, the Industrial Tools & Service ("IT&S") segment, and an Other operating
segment, which does not meet the criteria to be considered a reportable segment. 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 15, "Business Segment, Geographic and Customer Information" in the notes to the consolidated financial
statements.
Business Update
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.
Our Business Model
Our long-term goal is to create sustainable returns for our shareholders through above-market growth in our core business,
expanding our margins, generating strong cash flow and being disciplined in the deployment of our capital. We intend to grow
through execution of our organic growth strategy, focused on key vertical markets that benefit from long-term macro trends,
driving customer driven innovation, expansion of our digital ecosystem to acquire and engage customers, and an expansion in
emerging markets such as Asia Pacific. In addition to organic growth, we also focus on margin expansion through operational
efficiency techniques, including lean, continuous improvement and 80/20, to drive productivity and lower costs, as well as
optimizing our selling, general and administrative expenses through consolidation and shared service implementation. We also
apply these techniques and pricing actions to offset commodity increases and inflationary pricing. Finally, cash flow generation
is critical to achieving our financial and long-term strategic objectives. We believe driving profitable growth and margin
expansion will result in cash flow generation, which we seek to supplement through minimizing primary working capital. We
intend to allocate the cash flow that results from the execution of our strategy in a disciplined way toward investment in our
businesses, maintaining our strong balance sheet, disciplined M&A and opportunistically returning capital to shareholders. We
anticipate the compounding effect of reinvesting in our business will fuel further growth and profitable returns.
General Business Update
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 the time the company anticipated investing $60 to $65 million
through the end of fiscal 2024 to complete these actions.
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 4,
“Restructuring Charges” in the notes to the consolidated financial statements). These costs were incorporated into the initial
investment of $60 to $65 million.
In September 2022, the Company approved an update to the restructuring plan to a range of $10 to $15 million; these
costs were still incorporated into the initial investment value and the range did not change at that time.
In March 2023, the Company increased the estimated investment range to $70 to $75 million, inclusive of the $10 to $15
million of the previously announced restructuring, over the life of the program.
19
In October 2023, the Company announced that during fiscal 2023, the Company had realized approximately $54 million
of annual operating profit from execution of the ASCEND program and would no longer be breaking out the ASCEND benefit
from results going into fiscal 2024. Through fiscal 2023, the Company invested approximately $60 million as part of the
program, both through program charges and restructuring. Through the end of fiscal 2024 when the ASCEND program
concluded, the Company has invested approximately $75 million as part of the program, consisting of $19 million through
restructuring and $56 million in ASCEND transformation program charges. The following summarizes ASCEND
transformation charges (in thousands):
Year-Ended August 31,
2024
2023
2022
Program to
Date
ASCEND Expense recorded in Cost of products sold
1,018
924
6
1,948
ASCEND Expense recorded in SG&A expenses
6,029
34,495
13,610
54,134
Total ASCEND Expense
7,047
35,419
13,616
56,082
Recorded with Restructuring charges
7,843
7,719
3,050
18,612
Total ASCEND Transformation Charges
$
14,890 $
43,138 $
16,666 $
74,694
Commencing in February 2022, in response to the armed conflict in Ukraine, many countries, including the member
countries of NATO, initiated a variety of sanctions and export controls targeting Russia and associated entities. Approximately
1% of our historical annual sales were to customers and distributors associated with Russia and we had approximately $0.5
million of receivables associated with those customers and distributors as of February 28, 2022. The sanctions currently in place
limit our ability to provide goods to those customers and distributors and banking sanctions effectively negate our ability to
collect those receivables; as such, we recorded a full allowance for credit losses against those receivables as of February 28,
2022 and indefinitely suspended doing business in Russia. We will continue to monitor the situation with Russia to assess when
and if we are able to resume business with those customers and distributors, including collection of the outstanding receivables.
We also continue to monitor and manage the ancillary impact of the Russia crisis on our business, which is primarily related to
supply chain, increased commodity and energy costs, foreign exchange rate volatility and dealer confidence, particularly in
Europe.
During the year ended August 31, 2022, the Company recorded through bad debt expense (included in "Selling, general
and administrative expenses" in the Condensed Consolidated Statements of Earnings) a reserve of $13 million to fully reserve
for the outstanding accounts receivable balance for an agent in our Europe/Middle East/Africa ("EMEA") region. The
allowance for credit losses for this particular agent remains unchanged during fiscal 2024 and represents management's best
estimate of the probable amount of collection and considers various factors with respect to this matter, including, but not limited
to, (i) the lack of payment by the agent since the fiscal quarter ended February 28, 2021, (ii) our due diligence on balances due
to the agent from its end customers related to sales of our services and products and the known markup on those sales from the
agent to end customers, (iii) the status of ongoing negotiations with the agent to secure payments, (iv) legal recourse available
to us to secure payment, and (v) the agent is currently in bankruptcy proceedings. Actual collections from the agent may differ
from the Company's estimate. We have completely ceased our relationship with this agent and have transitioned to serving our
regional customers through recently created direct operations within the region.
On October 31, 2019, the Company completed the 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 final working capital adjustments). The EC&S segment is treated as discontinued
operations in our financial statements for all periods included therein.
On July 11, 2023, the Company completed the sale of the Cortland Industrial business, for net proceeds of $20 million.
The Company recorded a net gain of $6 million, see additional discussion in Note 5, "Discontinued Operations and Other
Divestiture Activities" in the notes to the consolidated financial statements.
20
Historical Financial Data
The following table and corresponding year-over-year analysis sets forth our results of continuing operations (dollars
in millions, except per share amounts):
Year Ended August 31,
2024
2023
2022
Statements of Earnings Data: (1)
Net sales
$
590
100 % $
598
100 % $
571
100 %
Cost of products sold
288
49 %
303
51 %
306
54 %
Gross profit
301
51 %
295
49 %
265
46 %
Selling, general and administrative expenses
169
29 %
205
34 %
217
38 %
Amortization of intangible assets
3
1 %
5
1 %
7
1 %
Restructuring charges
7
1 %
7
1 %
8
1 %
Impairment & divestiture (benefit) charges
—
— %
(6)
(1) %
2
— %
Operating profit
122
21 %
84
14 %
31
5 %
Financing costs, net
14
2 %
12
2 %
4
1 %
Other expense, net
3
1 %
3
1 %
2
— %
Earnings before income tax expense
106
18 %
69
12 %
24
4 %
Income tax expense
23
4 %
15
3 %
4
1 %
Net earnings
$
82
14 % $
54
9 % $
20
3 %
Other Financial Data: (1)
Depreciation
$
10
$
11
$
12
Capital expenditures
11
9
8
(1) Results are from continuing operations and exclude the financial results of previously divested businesses reported as discontinued
operations. The summation of the individual components may not equal the total due to rounding.
Fiscal 2024 compared to Fiscal 2023
Consolidated net sales for fiscal 2024 were $590 million, 1% lower than the prior-year sales of $598 million. The impact
of foreign currency rates was nearly flat year-over-year, while the divestiture of the Cortland Industrial business during the
fourth quarter of fiscal 2023 unfavorably impacted fiscal 2024 sales by approximately $23 million, or 4%. 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". Product sales declined 3% compared to prior fiscal year to $474
million, with foreign currency impact of less than 1% and the Cortland Industrial divestiture unfavorably impacting sales by
5%, resulting in a 1% improvement in Product organic sales. The increase in Product organic sales was driven by pricing
actions and mix within the IT&S product offerings; however, this was partially offset by a decrease in organic sales in the
Cortland Medical business due to softness in demand related to certain surgical procedures utilizing Cortland Biomedical
products. Service sales were $116 million, an increase of 7% compared to the prior fiscal year. Foreign currency impact was
nearly flat, resulting in a 7% increase in organic Service sales over the prior fiscal year. The organic sales increase in the
Service business was due to strong growth within our EMEA region from increased work scopes, higher maintenance activity
in the North Sea and projects delayed from the prior fiscal year taking place during fiscal 2024.
Gross profit as a percentage of sales was approximately 51% in fiscal 2024, 2% higher than fiscal 2023. The increase in
gross profit is primarily attributed to operational improvements from the ASCEND transformation program, as well as pricing
actions and the disposition of Cortland Industrial.
Operating profit for fiscal 2024 was $122 million, approximately $38 million higher than the prior fiscal year of $84
million. Operating profit was impacted by the increased gross profit noted above, as well as a reduction of Selling, general &
administrative ("SG&A") expense of $36 million compared to the prior fiscal year. The SG&A decrease was primarily due to
lower ASCEND transformation program charges ($28 million), M&A charges ($1 million) and leadership transition charges
($1 million), as well as reduced incentive compensation expense.
21
Fiscal 2023 compared to Fiscal 2022
Consolidated net sales for fiscal 2023 were $598 million, 5% higher than the prior-year sales of $571 million. The impact
of foreign currency rates unfavorably impacted fiscal 2023 sales by approximately $11 million, or 2%, and the divestiture of the
Cortland Industrial business during the fourth quarter of fiscal 2023 unfavorably impacted sales by approximately $6 million, or
1%. Product sales growth was 8%, with foreign currency and the divestiture of the Cortland Industrial business both
unfavorably impacting sales by $9 million, or 3%, and $6 million, or 1%, respectively. The Product sales growth was primarily
due to pricing actions, with some volume contribution. Service sales declined 8%, unfavorably impacted by $2 million, or 1%,
due to foreign currency and our reduced activity in the EMEA region following implementation of an 80/20 analysis that drove
a more selective process for quoting projects, with a focus on more differentiated solutions.
Gross profit as a percentage of sales was approximately 49% in fiscal 2023, 3% higher than fiscal 2022. The increased
gross profit is primarily attributed to the pricing actions, with some volume contribution noted above and production
efficiencies implemented as part of the ASCEND transformation program, partially offset by additional costs associated with
the ASCEND transformation program.
Operating profit for fiscal 2023 was $84 million, approximately $53 million higher than the prior fiscal year of $31
million. Operating profit was impacted by the increased gross profit noted above, as well as a reduction of Selling, general &
administrative ("SG&A") expense of $12 million compared to the prior fiscal year. The SG&A decrease was primarily due to
personnel savings from the actions taken in the ASCEND transformation program, as well as prior-fiscal-year charges including
the EMEA agent specific reserve ($13 million) and leadership transition charges ($7 million), and a reduction of business
review charges related to external support for the deep dive holistic business review ($3 million). These reductions were
partially offset by increased incentive compensation expense and expense from the ASCEND transformation program
($21 million) compared to the prior fiscal year. Restructuring charges in fiscal 2023 decreased by $1 million to $7 million
compared to fiscal 2022. Impairment and divestitures charges (benefit) improved by $9 million due to the gain on sale recorded
from the Cortland Industrial divestiture in the fourth quarter of fiscal 2023.
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 refinery/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):
Year Ended August 31,
2024
2023
2022
Net Sales
$
571
$
555
$
527
Operating Profit
153
136
79
Operating Profit %
26.8 %
24.5 %
14.9 %
Fiscal 2024 compared to Fiscal 2023
Fiscal 2024 net sales were $571 million, an increase of $16 million, or 3% from fiscal 2023 sales of $555 million. Organic
sales also increased by 3%, as the impact of foreign currency was nearly flat. The increase in sales was predominately driven by
our Service business which had strong growth within our EMEA region from increased work scopes, higher maintenance
activity in the North Sea and projects delayed from the prior fiscal year taking place during fiscal 2024. Sales in the Product
business also increased, but not to the extent of the Service business. The growth in Product business sales was driven by
pricing actions and product mix within the IT&S product offerings.
Fiscal 2024 operating profit increased $17 million to $153 million. This increase was driven by the aforementioned
pricing actions, with some volume contribution and a reduction in SG&A expenses. The reduction of SG&A expense was from
reduced ASCEND Transformation Program charges ($4 million) and lower incentive compensation expense, partially offset by
slightly higher restructuring charges ($1 million) for this segment.
22
Fiscal 2023 compared to Fiscal 2022
Fiscal 2023 net sales were $555 million, an increase of $28 million, or 5%, from fiscal 2022 sales of $527 million, with
foreign currency rates unfavorably impacting sales by approximately $11 million, or 3%. The increase in sales was
predominately driven by growth in the Product business primarily due to pricing actions, with some volume contribution, which
was partially offset by the decline in the Service business due to the implementation of 80/20 analysis and a more selective
process for quoting projects in the EMEA region, with a focus on more differentiated solutions in the EMEA region.
Fiscal 2023 operating profit increased $57 million to $136 million. This increase was driven by the aforementioned
pricing actions, with some volume contribution and a reduction in SG&A expenses. The reduction of SG&A expense was a
result of a $13 million EMEA agent specific reserve and personnel savings from ASCEND actions, which were partially offset
by increased incentive compensation expense and higher costs for the ASCEND transformation program in fiscal 2023.
Corporate
Corporate consists of selling, general and administrative costs and expenses, including executive, legal, finance, human
resources, and information technology, that are not allocated to the segments based on their nature. Corporate expenses were
$36 million in fiscal 2024, which was $27 million lower than the fiscal 2023 expenses of $63 million. This decrease was
primarily due to a reduction in ASCEND transformation program charges in fiscal 2024 ($25 million).
Corporate expenses were $63 million in fiscal 2023 which was $14 million higher than the fiscal 2022 expenses of $49
million. This increase was primarily from ASCEND transformation program expenses ($15 million) and incentive
compensation expense. The increase in expense was partially offset by decreases in leadership transition charges ($7 million)
and in external support for the deep dive-holistic business review ($3 million).
Net financing costs were $14 million, $12 million and $4 million in fiscal years 2024, 2023 and 2022, respectively. The
increase in net financing costs for both fiscal 2023 to fiscal 2024 and fiscal 2022 to fiscal 2023 was due to the year-over-year
increase in interest rates and debt levels during each succeeding fiscal year.
Income Tax Expense
The Company's income tax expense is impacted by a number of factors, including, among others, the amount of taxable
earnings generated in foreign jurisdictions with tax rates that are different than the U.S. federal statutory rate, permanent items,
state tax rates, changes in tax laws, acquisitions and divestitures and the ability to utilize various tax credits and net operating
loss carryforwards. Income tax expense also includes the impact of provision to tax return adjustments, changes in valuation
allowances and reserve requirements for unrecognized tax benefits. Pre-tax earnings, income tax expense and effective income
tax rate from continuing operations for the past three fiscal years were as follows (dollars in thousands):
Year Ended August 31,
2024
2023
2022
Earnings before income tax expense
$ 105,519
$ 68,898
$ 23,992
Income tax expense
23,312
15,249
4,401
Effective income tax rate
22.1 %
22.1 %
18.3 %
The comparability of pre-tax earnings, income tax expense and the related effective income tax rates are impacted by
impairment and other divestiture charges and benefits. Fiscal 2024 results included less than $1 million of impairment and
divestiture charges, whereas fiscal 2023 results included $6 million of impairment and divestiture benefits and fiscal 2022
results included $2 million of impairment and divestiture charges. A substantial portion of these charges (benefits) do not result
in a tax expense or benefit. The fiscal 2024 tax provision included a tax benefit of $4 million related to the lapse of the statute
of limitations on uncertain tax positions and global tax planning initiatives. The fiscal 2023 tax provision included a tax benefit
of $2 million related to global tax planning initiatives, whereas the fiscal 2022 tax provision included a tax benefit of $3 million
related to global tax planning initiatives resulting from certain prior-year business losses for which no benefits were previously
recognized.
Both the fiscal 2024 and prior-year income tax provisions were impacted by the mix of earnings in foreign jurisdictions
with income tax rates different than the U.S. federal income tax rate and income tax benefits from global tax planning
initiatives. The fiscal 2024 and 2023 effective tax rate were both 22.1%. The fiscal 2024 effective tax rate was slightly higher
than the statutory 21% primarily as a result of state income taxes and taxes in foreign jurisdictions with rates higher than the
U.S. which were partially offset by one-time tax benefits related to the lapse of the statute of limitations on uncertain tax
positions and global tax planning initiatives that will not repeat in future periods due to certain tax attributes that are no longer
available.
23
Liquidity and Capital Resources
At August 31, 2024, cash and cash equivalents were $167 million, comprised of $111 million of cash held by foreign
subsidiaries and $56 million held domestically. The following table summarizes the cash flow attributable to operating,
investing and financing activities (in millions):
Year Ended August 31,
2024
2023
2022
Cash provided by operating activities
$
81
$
78
$
52
Cash (used in) provided by investing activities
(14)
11
(7)
Cash used in financing activities
(56)
(53)
(52)
Effect of exchange rate changes on cash
2
(2)
(12)
Net increase (decrease) from cash and cash equivalents
$
13
$
34
$
(20)
Cash flow provided by operations was $81 million for fiscal 2024 and $78 million for fiscal 2023. The $3 million increase
in cash flow from operations was primarily the result of $29 million of higher earnings from continuing operations, partially
offset by decreases in accrued compensation and benefits, principally due to lower incentive compensation expense, of $18
million, with the remainder due to a decrease in other accrued liabilities principally from reduced costs associated with
ASCEND. We had approximately $14 million of cash used in investing activities from continuing operations, which is a $25
million decrease from the prior fiscal year, due principally to the $20 million in proceeds from the sale of the Cortland
Industrial business in the fourth quarter of fiscal 2023, net of the $1 million in working capital adjustments settled during fiscal
2024 (see Note 5, "Discontinued Operations and Other Divestiture Activities" in the notes to the consolidated financial
statements for further detail on the divestiture). The remaining variance is due to higher capital expenditures in fiscal 2024
relating to build-out costs for the company's new headquarters location in Milwaukee, with an anticipated fiscal 2025 move-in
date, and purchase of the business assets of Track Tools during the first quarter of fiscal 2024.
Cash flow provided by operations was $78 million for fiscal 2023 and $52 million for fiscal 2022. The $26 million
increase in cash flow from operations was primarily the result of $34 million of higher earnings from continuing operations,
partially offset by an increase in accrued compensation and benefits, principally for incentive compensation, of $10 million. We
had approximately $11 million of cash provided by investing activities from continuing operations due to the proceeds from the
sale of the Cortland Industrial business in the fourth quarter of fiscal 2023 (see Note 5, "Discontinued Operations and Other
Divestiture Activities" in the notes to the consolidated financial statements for further detail on the divestiture), as year-over-
year cash used for investing in capital expenditures was nearly flat. Cash used in financing activities was $53 million, nearly
flat compared to the use of $52 million in the prior fiscal year; however the mix of usage in each fiscal year was different. In
fiscal 2023 we entered into a new debt agreement (see Note 7, "Debt" in the notes to the consolidated financial statements for
further details of the senior credit facility) resulting in a change of debt mix with the repayment of our outstanding revolver and
proceeds received from the issuance of a term loan. In fiscal 2023, the amount for our repurchases of shares of our Class A
common stock was lower than the prior fiscal year. During fiscal 2023, we paid $1 million on our term loan.
During fiscal 2023, the Company refinanced its credit facility resulting in an updated senior credit facility (the "Senior
Credit Facility") of $600 million, comprised of a $400 million revolving line of credit and a $200 million term loan, which will
mature in September 2027. Prior to this, the Company's senior credit facility was comprised of a $400 million revolving line of
credit and a $200 million term loan which were scheduled to mature in March 2024. The Senior Credit Facility contains
restrictive covenants and financial covenants. See Note 7, "Debt" in the notes to the consolidated financial statements for
further details of the Senior Credit Facility. The Company was in compliance with all covenants, including the financial
covenants, under the Senior Credit facility at August 31, 2024. The unused credit line and amount available for borrowing
under the revolving line of credit of the Senior Credit Facility was $398 million at August 31, 2024.
24
We believe that the revolving credit facility under the Senior Credit Facility, 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 as a key metric for working capital efficiency. 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 the components of our primary working capital (dollars in millions):
August 31, 2024
August 31, 2023
$
PWC %
$
PWC %
Accounts receivable, net
$
104
16 % $
98
15 %
Inventory, net
73
12 %
75
12 %
Accounts payable
(43)
(7) %
(51)
(8) %
Net primary working capital
$
134
21 % $
122
19 %
Total primary working capital was $134 million at August 31, 2024, which increased from $122 million at August 31,
2023. The primary working capital increase related to increased accounts receivable from timing of sales during the fourth
quarter, with a higher proportion of those sales being current at quarter-end and therefore not collectable within the fiscal year.
The decrease in inventory is due to continued work on inventory levels around the world. The reduction in payables is related to
the decrease in our ASCEND transformation program charges.
Capital Expenditures
The majority of our manufacturing activities consist of assembly operations. We believe that our capital expenditure
requirements are not as extensive as other industrial companies given the nature of our operations. Capital expenditures
associated with continuing operations were $11 million, $9 million and $8 million in fiscal 2024, 2023 and 2022, respectively.
During fiscal 2024 we began the build-out of a new downtown Milwaukee location for Enerpac Tool Group. We expect to
relocate our corporate headquarters to the building during fiscal 2025.
Commitments and Contingencies
Given our desire to allocate cash flow and revolver availability to fund growth initiatives, we have historically leased most
of our facilities and some operating equipment. We lease certain facilities, computers, equipment and vehicles under various
operating lease agreements, generally over periods ranging from one to twenty years. Under most arrangements, we pay the
property taxes, insurance, maintenance and expenses related to the leased property. Many of our leases include provisions that
enable us to renew the leases at contractually agreed rates or, less commonly, based upon market rental rates on the date of
expiration of the initial leases.
We had outstanding commercial letters of credit of $4 million and surety bonds of $4 million at August 31, 2024, while
we had $9 million of outstanding letters of credit at August 31, 2023. Most of these instruments relate to commercial contracts
and self-insured workers’ compensation programs.
Additional detail regarding contingencies is included in Note 16, "Commitments and Contingencies" in the notes to the
consolidated financial statements, which is incorporated by reference.
Contractual Obligations
Our predominant sources of contractual obligations include the payment of interest and principal on our outstanding line
of credit, our operating lease portfolio, certain employee-related benefit plans and agreements with certain suppliers related to
the procurement of inventory.
The timing of principal payments associated with our revolving line of credit are disclosed in Note 7, "Debt" in the notes
to the consolidated financial statements. We pay interest monthly based on prevailing interest rates at the time and the balance
outstanding on our revolving line of credit.
Our lease contracts are primarily for real estate, vehicles, and manufacturing equipment. See Note 10, "Leases" in the
notes to the consolidated financial statements for future minimum lease payments associated with our lease portfolio.
We have long-term obligations related to our deferred compensation, pension and postretirement plans that are
summarized in Note 11, “Employee Benefit Plans” in the notes to the consolidated financial statements.
25
As part of our global sourcing strategy, we have 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 to maintain the minimum level of inventory should
we discontinue manufacturing 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. These contracts allow for us to terminate
with appropriate notice so long as we utilize the remaining inventory on hand at the supplier and there are no overall minimum
volumes in these contracts other than what the supplier is required to maintain on hand at any given point in time.
Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with US GAAP. This requires management to make
estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates.
The following estimates are considered by management to be the most critical in understanding judgments involved in the
preparation of our consolidated financial statements and uncertainties that could impact our results of operations, financial
position and cash flow.
Accounts receivable, net: Accounts receivable, net is recorded based on the contractual value of our accounts receivable,
net of an estimated allowance for credit losses representing management’s best estimate of the amount of receivables that are
not probable of collection. Accounts receivable, net was $104 million as of August 31, 2024, which is net of a $16 million
allowance for credit losses. Our customer base generally consists of financially reputable distributors, agents, OEMs, and other
customers with whom we have long standing relationships, and historically we have not experienced significant write off of
accounts receivables as a percentage of our annual net sales (accounts receivable written off as a percentage of net sales was
less than 0.5% for each the years ended August 31, 2024, 2023, and 2022, respectively). As of August 31, 2024, the Company
continued to be exposed to a concentration of credit risk with an agent as a result of its continued payment delinquency. During
the year ended August 31, 2022, the Company recorded through bad debt expense (included in SG&A expenses in the
Condensed Consolidated Statements of Earnings) a reserve of $13 million for this agent based on the consideration of the
factors listed below, which fully reserves for this agent's outstanding account receivable balance. The allowance for credit
losses for this particular agent remained unchanged as of August 31, 2024 and continues to represent management's best
estimate of the amount probable of collection and considers various factors with respect to this matter, including, but not limited
to, (i) the lack of payment by the agent since the fiscal quarter ended February 28, 2021, (ii) our due diligence on balances due
to the agent from its end customers related to sales of our services and products and the known markup on those sales from the
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.
Inventories: Inventory cost is determined using the last-in, first-out (“LIFO”) method for a portion of U.S. owned
inventory (approximately 49% and 48% of total inventories at August 31, 2024 and 2023, respectively). If the LIFO method
were not used, inventory balances would be higher than amounts presented in the Consolidated Balance Sheet by $18 million at
both August 31, 2024 and 2023. We perform an analysis on historical sales usage of individual inventory items on hand and
record a reserve to adjust inventory cost to net realizable value, if necessary. The inventory valuation assumptions used are
based on historical experience. We believe that such estimates are made based on consistent and appropriate methods; however,
actual results may differ from these estimates under different assumptions or conditions.
Goodwill and Indefinite-lived intangibles:
Goodwill Impairment Review and Estimates: A considerable amount of management judgment is required in performing
the impairment tests, principally in determining the fair value of each reporting unit and the indefinite-lived intangible assets.
While we believe our judgments and assumptions are reasonable, different assumptions could change the estimated fair values
and, therefore, impairment charges could be required. Significant negative industry or economic trends, disruptions to the
Company's business, loss of significant customers, inability to effectively integrate acquired businesses, unexpected significant
changes or planned changes in use of the assets or in entity structure and divestitures may adversely impact the assumptions
used in the valuations and ultimately result in future impairment charges.
In estimating the fair value of a reporting unit, we generally use a discounted cash flow model, which calculates fair value
as the sum of the projected discounted cash flows over a discrete six-year period plus an estimated terminal value. Significant
assumptions include forecasted revenues, operating profit margins, and discount rates applied to the future cash flows based on
the respective reporting unit's estimated weighted average cost of capital. In certain circumstances, we also may review a
market approach in which a trading multiple is applied to either forecasted EBITDA (earnings before interest, income taxes,
depreciation and amortization) or anticipated proceeds of the reporting unit to arrive at the estimated fair value. If the fair value
of a reporting unit is less than its carrying value, an impairment loss is recorded. The estimated fair value represents the amount
we believe a reporting unit could be bought or sold for in a current transaction between willing parties on an arms-length basis.
26
Fiscal 2024 Impairment Charges: The fiscal 2024 annual review of reporting units performed in the fourth quarter did not
result in an impairment. All reporting units exceeded the carrying value by more than 85%.
Fiscal 2023 Impairment Charges: The fiscal 2023 annual review of reporting units performed in the fourth quarter did not
result in an impairment. All reporting units exceeded the carrying value by more than 65%.
Indefinite-lived intangibles (tradenames): Indefinite-lived intangible assets are also subject to annual impairment testing.
On an annual basis or more frequently if a triggering event occurs, the fair value of indefinite-lived intangible assets, based on a
relief of royalty valuation approach, are evaluated to determine if an impairment charge is required.
No impairment was recorded in fiscal 2024 or 2023 as a result of triggering events or the annual impairment review of
indefinite-lived intangible assets.
A considerable amount of management judgment is required in performing impairment tests, principally in determining
the fair value of each reporting unit and the indefinite-lived intangible assets. While we believe our judgments and assumptions
are reasonable, different assumptions could change the estimated fair values and, therefore, future additional impairment
charges could be required. Prolonged weakening industry or economic trends, disruptions to our business, loss of significant
customers, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in the use
of the assets or in entity structure and divestitures may adversely impact the assumptions used in the valuations and ultimately
result in future impairment charges.
Business Combinations and Purchase Accounting: Business combinations are accounted for using the acquisition method
of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their respective fair values. The
excess of the purchase price over the estimated fair value is recorded as goodwill. Assigning fair market values to the assets
acquired and liabilities assumed at the date of an acquisition requires knowledge of current market values and the values of
assets in use, and often requires the application of judgment regarding estimates and assumptions. While the ultimate
responsibility resides with management, for certain acquisitions we retain the services of certified valuation specialists to assist
with assigning estimated values to certain acquired assets and assumed liabilities, including intangible assets and tangible long-
lived assets. Acquired intangible assets, excluding goodwill, are valued using discounted cash flow methodology based on
future cash flows specific to the type of intangible asset purchased. This methodology incorporates various estimates and
assumptions, the most significant being projected revenue growth rates, profit margins and forecasted cash flows based on
discount rates and terminal growth rates.
Defined Benefit Plans: We provide a variety of benefits to employees and former employees including, in some cases,
pensions and postretirement health care. Plan assets and obligations are recorded based on an August 31 measurement date
utilizing various actuarial assumptions such as discount rates, assumed rates of return on plan assets and health care cost trend
rates. We determine the discount rate assumptions by referencing high-quality, long-term bond rates that are matched to the
duration of our benefit obligations, with appropriate consideration of local market factors, participant demographics and benefit
payment forecasts. At August 31, 2024 and 2023, the discount rates on domestic benefit plans were 5.0% and 5.4%,
respectively. In estimating the expected return on plan assets, we consider historical returns, forward-looking considerations,
inflation assumptions and the asset-allocation strategy in investing such assets. Domestic benefit plan assets consist primarily of
participating units in mutual funds with equity based strategies, mutual funds with fixed income based strategies, and U.S
treasury securities. The expected return on domestic benefit plan assets was 5.7% for each of the fiscal years ended August 31,
2024 and 2023. A 25 basis point change in the assumptions for the discount rate or expected return on plan assets would not
have materially changed the fiscal 2024 domestic benefit plan expense.
We review actuarial assumptions on an annual basis and make modifications based on current rates and trends, when
appropriate. As required by US GAAP, the effects of any modifications are recorded currently or amortized over future periods.
Based on information provided by independent actuaries and other relevant sources, we believe that the assumptions used are
reasonable; however, changes in these assumptions could impact our financial position, results of operations or cash flow. See
Note 11, “Employee Benefit Plans” in the notes to the consolidated financial statements for further discussion.
Income Taxes: Judgment is required to determine the annual effective income tax rate, deferred tax assets and liabilities,
reserves for unrecognized tax benefits and any valuation allowances recorded against net deferred tax assets. Our effective
income tax rate is based on annual income, statutory tax rates, tax planning opportunities available in the various jurisdictions in
which we operate and other adjustments. Our annual effective income tax rate includes the impact of discrete income tax
matters including adjustments to reserves for uncertain tax positions and the benefits of various income tax planning
activities. Tax regulations require items to be included in our tax returns at different times than these same items are reflected in
our consolidated financial statements. As a result, the effective income tax rate in our consolidated financial statements differs
from that reported in our tax returns. Some of these differences are permanent, such as expenses that are not tax deductible,
while others are temporary differences, such as amortization and depreciation expenses.
27
Temporary differences create deferred tax assets and liabilities, which are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We establish
valuation allowances for our deferred tax assets when the amount of expected future taxable income is not large enough to
utilize the entire deduction or credit. Relevant factors in determining the realizability of deferred tax assets include future
taxable income, the expected timing of the reversal of temporary differences, tax planning strategies and the expiration dates of
the various tax attributes.
Item 7A. 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—As of August 31, 2024, long-term debt consisted of no borrowings under the revolving line of credit
(variable rate debt) and $200 million of term-loan debt bearing interest based on SOFR (variable rate). An interest-rate swap
effectively converts the SOFR-based rate of $60 million of term borrowings under our credit facility to a fixed rate. A ten
percent increase in the average costs of our variable-rate debt would have resulted in a $2 million increase in financing costs for
the fiscal year ended August 31, 2024.
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, Saudi Arabia 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 9, “Derivatives” in the notes
to the consolidated financial statements 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 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, annual sales and operating profit were remeasured
assuming a ten percent reduction in foreign exchange rates compared to the U.S. dollar. Under this assumption, annual sales
would have been $3 million lower and operating profit would have been less than $1 million lower for the fiscal year ended
August 31, 2024. 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 actual sales or price
levels. Similarly, a ten percent decline in foreign currency exchange rates relative to the U.S. dollar on our August 31, 2024
financial position would result in a $35 million reduction to equity (accumulated other comprehensive loss), as a result of non-
U.S. dollar denominated assets and liabilities being translated into U.S. dollars, our reporting currency.
Commodity 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 timely pass along such commodity price
increases to customers to avoid profit margin erosion.
28
Item 8.
Financial Statements and Supplementary Data
Page
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm (Ernst & Young LLP: PCAOB ID 42)
30
Consolidated Statements of Earnings for the years ended August 31, 2024, 2023 and 2022
33
Consolidated Statements of Comprehensive Income (Loss) for the years ended August 31, 2024, 2023 and 2022
34
Consolidated Balance Sheets as of August 31, 2024 and 2023
35
Consolidated Statements of Cash Flows for the years ended August 31, 2024, 2023 and 2022
36
Consolidated Statements of Shareholders’ Equity for the years ended August 31, 2024, 2023 and 2022
37
Notes to Consolidated Financial Statements
38
INDEX TO FINANCIAL STATEMENT SCHEDULE
Schedule II—Valuation and Qualifying Accounts for the years ended August 31, 2024, 2023 and 2022
60
All other schedules are omitted because they are not applicable, not required or because the required information is included in
the consolidated financial statements or notes thereto.
29
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Enerpac Tool Group Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Enerpac Tool Group Corp. (the Company) as of August 31,
2024 and 2023, the related consolidated statements of earnings, comprehensive statement of income (loss), shareholders’ equity
and cash flows for each of the three years in the period ended August 31, 2024, and the related notes and financial statement
schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 31,
2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended August 31,
2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of August 31, 2024, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated October 21, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the account or disclosure to which it relates.
30
Valuation of Goodwill within the IT&S Segment
Description of
the Matter
At August 31, 2024, the Company’s consolidated goodwill balance was $269.6 million. Goodwill
associated with the IT&S segment was $256.0 million. As disclosed in Note 1 to the financial
statements, Management tests goodwill for impairment annually during the fourth quarter, or more
frequently if events or changes in circumstances indicate that goodwill might be impaired. In
estimating fair value, management utilizes a discounted cash flow model, which is dependent on a
number of assumptions, most significantly forecasted revenues and operating profit margins, and the
weighted average cost of capital.
Auditing management’s goodwill impairment test within the IT&S segment was complex and
highly judgmental due to the significant estimation required to determine the fair value of certain
reporting units evaluated for impairment using a quantitative assessment. In particular, the fair value
estimate was sensitive to significant assumptions over forecasted revenues, operating profit margins,
and the weighted average cost of capital.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s goodwill impairment review process, including controls over
management's review of the significant assumptions used to develop the fair value estimates and
controls over the completeness and accuracy of the underlying data used in the valuation.
To test the estimated fair value of the Company’s reporting units evaluated for impairment using a
quantitative assessment within the IT&S segment, we performed audit procedures that included,
among others, assessing methodologies and testing the significant assumptions discussed above and
the completeness and accuracy of the underlying data used by the Company in its analysis. We also
involved our valuation specialists to review certain significant assumptions. We compared the
significant assumptions used by management to current industry and economic trends. We assessed
the historical accuracy of management’s estimates and performed sensitivity analyses of significant
assumptions to evaluate the changes in the fair value of the reporting units that would result from
changes in the assumptions. We reconciled the fair value of the reporting units in the IT&S segment
to their carrying value and tested the Company’s determination of the assets and liabilities used
within the reporting units that are the basis for the carrying value. In addition, we tested
management’s reconciliation of the fair value of all the reporting units to the market capitalization
of the Company and assessed the adequacy of the Company’s goodwill valuation disclosures.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2020.
Milwaukee, Wisconsin
October 21, 2024
31
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Enerpac Tool Group Corp.
Opinion on Internal Control Over Financial Reporting
We have audited Enerpac Tool Group Corp.’s internal control over financial reporting as of August 31, 2024, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, Enerpac Tool Group Corp. (the Company) maintained, in
all material respects, effective internal control over financial reporting as of August 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of August 31, 2024 and 2023, the related consolidated statements
of earnings, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended
August 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated
October 21, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Milwaukee, Wisconsin
October 21, 2024
32
ENERPAC TOOL GROUP CORP.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
Year Ended August 31,
2024
2023
2022
Net sales
Product
$
474,004 $
490,629 $
454,126
Service & rental
115,506
107,575
117,097
Total net sales
589,510
598,204
571,223
Cost of products sold
Product
212,847
235,403
232,497
Service & rental
75,652
67,762
73,338
Total cost of products sold
288,499
303,165
305,835
Gross profit
301,011
295,039
265,388
Selling, general and administrative expenses
168,565
205,064
216,874
Amortization of intangible assets
3,312
5,112
7,306
Restructuring charges
7,400
7,096
8,135
Impairment & divestiture charges (benefit)
147
(6,155)
2,413
Operating profit
121,587
83,922
30,660
Financing costs, net
13,524
12,389
4,386
Other expense, net
2,544
2,635
2,282
Earnings before income tax expense
105,519
68,898
23,992
Income tax expense
23,312
15,249
4,401
Net earnings from continuing operations
82,207
53,649
19,591
Earnings (loss) from discontinued operations, net of income taxes
3,542
(7,088)
(3,905)
Net earnings
$
85,749 $
46,561 $
15,686
Earnings per share from continuing operations
Basic
$
1.51 $
0.95 $
0.33
Diluted
$
1.50 $
0.94 $
0.33
Earnings (loss) per share from discontinued operations
Basic
$
0.07 $
(0.13) $
(0.07)
Diluted
$
0.06 $
(0.12) $
(0.07)
Earnings per share
Basic
$
1.58 $
0.82 $
0.26
Diluted
$
1.56 $
0.82 $
0.26
Weighted average common shares outstanding
Basic
54,336
56,680
59,538
Diluted
54,862
57,117
59,909
The accompanying notes are an integral part of these consolidated financial statements.
33
ENERPAC TOOL GROUP CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Year Ended August 31,
2024
2023
2022
Net income
$
85,749 $
46,561 $
15,686
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments
3,053
12,887
(46,092)
Cash flow hedges
552
(375)
—
Pension and other postretirement benefit plans
1,207
1,239
4,115
Total other comprehensive income (loss), net of tax
4,812
13,751
(41,977)
Comprehensive income (loss)
$
90,561 $
60,312 $
(26,291)
The accompanying notes are an integral part of these consolidated financial statements.
34
ENERPAC TOOL GROUP CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
August 31,
2024
2023
A S S E T S
Current assets
Cash and cash equivalents
$ 167,094 $
154,415
Accounts receivable, net
104,335
97,649
Inventories, net
72,887
74,765
Other current assets
27,942
28,811
Total current assets
372,258
355,640
Property, plant and equipment, net
40,285
38,968
Goodwill
269,597
266,494
Other intangible assets, net
36,058
37,338
Other long-term assets
59,130
64,157
Total assets
$ 777,328 $
762,597
L I A B I L I T I E S A N D S H A R E H O L D E R S’ E Q U I T Y
Current Liabilities
Trade accounts payable
$
43,368 $
50,483
Accrued compensation and benefits
25,856
33,194
Current maturities of long-term debt
5,000
3,750
Income taxes payable
5,321
3,771
Other current liabilities
49,848
56,922
Total current liabilities
129,393
148,120
Long-term debt, net
189,503
210,337
Deferred income taxes
3,696
5,667
Pension and postretirement benefit liabilities
10,073
10,247
Other long-term liabilities
52,684
61,606
Total liabilities
385,349
435,977
Shareholders’ equity
Class A common stock, $0.20 par value per share, authorized 168,000,000
shares, issued 54,234,660 and 83,760,798 shares, respectively
10,847
16,752
Additional paid-in capital
235,660
220,472
Treasury stock, at cost, 0 and 28,772,715 shares, respectively
—
(800,506)
Retained earnings
261,870 1,011,112
Accumulated other comprehensive loss
(116,398)
(121,210)
Stock held in trust
(3,777)
(3,484)
Deferred compensation liability
3,777
3,484
Total shareholders' equity
391,979
326,620
Total liabilities and shareholders' equity
$ 777,328 $
762,597
The accompanying notes are an integral part of these consolidated financial statements.
35
ENERPAC TOOL GROUP CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended August 31,
2024
2023
2022
Operating Activities
Net earnings
$
85,749
$
46,561
$
15,686
Less: Net earnings (loss) from discontinued operations
3,542
(7,088)
(3,905)
Net earnings from continuing operations
82,207
53,649
19,591
Adjustments to reconcile net earnings from continuing operations to net cash provided by
operating activities - continuing operations:
Impairment & divestiture charges (benefit)
147
(6,155)
2,413
Depreciation and amortization
13,275
16,313
19,600
Stock-based compensation expense
10,931
8,574
13,619
Provision (benefit) for deferred income taxes
435
460
(5,291)
Amortization of debt issuance costs
586
902
480
Provision for bad debts
327
803
13,856
Other non-cash charges (benefits)
108
1,569
(344)
Changes in components of working capital and other, excluding acquisitions and divestitures:
Accounts receivable
(6,479)
5,169
(23,753)
Inventories
3,577
4,539
(16,036)
Trade accounts payable
(7,445)
(21,867)
9,658
Prepaid expenses and other assets
2,183
(3,764)
12,545
Income tax accounts
4,548
9,933
4,022
Accrued compensation and benefits
(7,198)
11,288
1,267
Other accrued liabilities
(13,186)
(2,840)
619
Cash provided by operating activities - continuing operations
84,016
78,573
52,246
Cash used in operating activities - discontinued operations
(2,697)
(970)
(510)
Cash provided by operating activities
81,319
77,603
51,736
Investing Activities
Capital expenditures
(11,411)
(9,400)
(8,417)
Proceeds from sale of property, plant and equipment
—
685
1,176
Working capital adjustment from the sale of business
(1,133)
—
—
Purchase of business assets
(1,402)
—
—
Proceeds from sale of business, net of transaction costs
—
20,057
—
Cash (used in) provided by investing activities - continuing operations
(13,946)
11,342
(7,241)
Cash (used in) provided by investing activities
(13,946)
11,342
(7,241)
Financing Activities
Borrowings on revolving credit facility
62,743
69,000
85,000
Principal repayments on revolving credit facility
(78,743)
(53,000)
(60,000)
Principal repayments on term loan
(3,750)
(1,250)
—
Proceeds from issuance of term loan
—
200,000
—
Payment for redemption of revolver
—
(200,000)
—
Swingline (repayments) borrowings, net
—
(4,000)
4,000
Payment of debt issuance costs
—
(2,486)
—
Purchase of treasury shares
(38,354)
(57,662)
(75,112)
Stock options, taxes paid related to the net share settlement of equity awards & other
4,016
(1,458)
(3,681)
Payment of cash dividend
(2,178)
(2,274)
(2,409)
Cash used in financing activities - continuing operations
(56,266)
(53,130)
(52,202)
Cash used in financing activities
(56,266)
(53,130)
(52,202)
Effect of exchange rate changes on cash
1,572
(2,099)
(11,946)
Net increase (decrease) from cash and cash equivalents
12,679
33,716
(19,653)
Cash and cash equivalents - beginning of period
154,415
120,699
140,352
Cash and cash equivalents - end of period
$ 167,094
$ 154,415
$ 120,699
The accompanying notes are an integral part of these consolidated financial statements.
36
ENERPAC TOOL GROUP CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(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
—
—
—
—
15,686
—
—
—
15,686
Other comprehensive loss, net of tax
—
—
—
—
—
(41,977)
—
—
(41,977)
Stock contribution to employee benefit plans and other
15
3
266
—
—
—
—
—
269
Vesting of equity awards
350
70
(70)
—
—
—
—
—
—
Cash dividend ($0.04 per share)
—
—
—
—
(2,274)
—
—
—
(2,274)
Treasury stock repurchases
—
—
—
(75,112)
—
—
—
—
(75,112)
Stock based compensation expense
—
—
13,619
—
—
—
—
—
13,619
Tax effect related to net share settlement of equity awards
—
—
(3,950)
—
—
—
—
—
(3,950)
Stock issued to, acquired for and distributed from rabbi trust
10
2
150
—
—
—
(142)
142
152
Balance at August 31, 2022
83,397
16,679
212,986
(742,844)
966,751
(134,961)
(3,209)
3,209
318,611
Net earnings
—
—
—
—
46,561
—
—
—
46,561
Other comprehensive income, net of tax
—
—
—
—
—
13,751
—
—
13,751
Stock contribution to employee benefit plans and other
9
2
191
—
—
—
—
—
193
Vesting of equity awards
273
54
(54)
—
—
—
—
—
—
Cash dividend ($0.04 per share)
—
—
—
—
(2,200)
—
—
—
(2,200)
Treasury stock repurchases
—
—
—
(57,662)
—
—
—
—
(57,662)
Stock based compensation expense
—
—
8,699
—
—
—
—
—
8,699
Stock option exercises
43
8
965
—
—
—
—
—
973
Tax effect related to net share settlement of equity awards
—
—
(2,624)
—
—
—
—
—
(2,624)
Stock issued to, acquired for and distributed from rabbi trust
39
9
309
—
—
—
(275)
275
318
Balance at August 31, 2023
83,761
16,752
220,472
(800,506) 1,011,112
(121,210)
(3,484)
3,484
326,620
Net earnings
—
—
—
—
85,749
—
—
—
85,749
Other comprehensive income, net of tax
—
—
—
—
—
4,812
—
—
4,812
Stock contribution to employee benefit plans and other
7
2
227
—
—
—
—
—
229
Vesting of equity awards
238
47
(47)
—
—
—
—
—
—
Cash dividend ($0.04 per share)
—
—
—
—
(2,148)
—
—
—
(2,148)
Stock based compensation expense
—
—
10,931
—
—
—
—
—
10,931
Stock option exercises
281
56
6,851
—
—
—
—
—
6,907
Tax effect related to net share settlement of equity awards
—
—
(3,122)
—
—
—
—
—
(3,122)
Stock issued to, acquired for and distributed from rabbi trust
30
7
348
—
—
—
(293)
293
355
Treasury stock repurchases
—
—
—
(38,354)
—
—
—
—
(38,354)
Treasury stock retired
(30,082)
(6,017)
—
838,860
(832,843)
—
—
—
—
Balance at August 31, 2024
54,235
$ 10,847
$ 235,660
$
—
$ 261,870
$
(116,398) $
(3,777) $
3,777
$
391,979
The accompanying notes are an integral part of these consolidated financial statements.
37
Note 1. Summary of Significant Accounting Policies
Nature of Operations: Enerpac Tool Group Corp. (the “Company”) is a premier industrial tools, services, technology and
solutions company serving a broad and diverse set of customers in more than 100 countries. The Company has one reportable
segment, Industrial Tools & Services ("IT&S"), and an Other operating segment, which does not meet the criteria to be
considered a reportable segment. 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 MRO; machining & manufacturing; power generation; infrastructure; mining and other markets
Consolidation and Presentation: The consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned. The results of companies acquired or disposed of during the year are included in
the consolidated financial statements from the effective date of acquisition or until the date of divestiture. All intercompany
balances, transactions and profits have been eliminated in consolidation. The terms the "Company," "we," and "our" refer to
Enerpac Tool Group Corp. and its subsidiaries, unless the context requires that such terms refer only to Enerpac Tool Group
Corp. Reference to fiscal years, such as "fiscal 2024," are to the fiscal year ending on August 31 of the specified year.
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.
This divestiture represented a strategic shift in our operations, and accordingly the results of the former EC&S segment through
the date of divestiture and subsequent impacts to the financial results from retained liabilities are recorded in "Earnings (loss)
from discontinued operations, net of income taxes" within the Consolidated Statements of Earnings.
On July 11, 2023, the Company completed the sale of the Cortland Industrial business, which had been included in the
Other operating segment.
Cash Equivalents: The Company considers all highly liquid investments with original maturities of 90 days or less to be
cash equivalents.
Inventories: Inventories are comprised of material, direct labor and manufacturing overhead. A portion of inventory is
recorded on the first-in, first-out or average cost method and is stated at the lower of cost or net realizable value. A portion of
U.S. owned inventory is determined using the last-in, first-out (“LIFO”) method (48.7% and 48.1% of total inventories as of
August 31, 2024 and 2023, respectively). If the LIFO method were not used, inventory balances would be higher than reported
amounts in the consolidated balance sheets by $17.8 million and $17.6 million at August 31, 2024 and 2023, respectively.
The nature of the Company’s products is such that they generally have a very short production cycle. Consequently, the
amount of work-in-process at any point in time is minimal. In addition, many parts or components are ultimately either sold
individually or assembled with other parts making a distinction between raw materials and finished goods impractical to
determine. Certain locations maintain and manage their inventories using a job cost system where the distinction of categories
of inventory by state of completion is also not available. As a result of these factors, it is neither practical nor cost effective to
segregate the amounts of raw materials, work-in-process or finished goods inventories at the respective balance sheet dates, as
segregation would only be possible as the result of physical inventories which are taken at dates different from the balance sheet
dates.
Property, Plant and Equipment: Property, plant and equipment are stated at cost. Plant and equipment are depreciated on
a straight-line basis over the estimated useful lives of the assets, ranging from ten to forty years for buildings and improvements
and two to fifteen years for machinery and equipment. Equipment includes assets which are rented to customers of the IT&S
segment. Leasehold improvements are amortized over the shorter of the life of the related asset or the term of the lease.
Depreciation expense was $10.0 million, $11.2 million and $12.3 million for the years ended August 31, 2024, 2023 and 2022,
respectively. The following is a summary of the Company's components of property, plant and equipment (in thousands):
August 31,
2024
2023
Land, buildings and improvements
$
14,670
$
14,070
Machinery and equipment
145,604
136,566
Gross property, plant and equipment
160,274
150,636
Less: Accumulated depreciation
(119,989)
(111,668)
Property, plant and equipment, net
$
40,285
$
38,968
Leases: We determine if an arrangement contains a lease in whole or in part at the inception of the contract and identify
classification of the lease as financing or operating. We account for the underlying operating lease asset at the individual lease
level. Operating leases are recorded as operating lease right-of-use (“ROU”) assets in “Other long-term assets” and operating
lease liabilities in “Other current liabilities” and “Other long-term liabilities” on the Consolidated Balance Sheets.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
38
All leases greater than 12 months result in recognition of a ROU asset and a liability at the lease commencement date and
are recorded at the present value of the future minimum lease payments over the lease term. The lease term is equal to the initial
term at commencement plus any renewal or extension options that the Company is reasonably certain will be exercised. ROU
assets at the date of commencement are equal to the amount of the initial lease liability, the initial direct costs incurred by the
Company and any prepaid lease payments less any incentives received. Lease expense for operating leases is recognized on a
straight-line basis over the lease term or remaining useful life. As most of our leases do not provide the information required to
determine the implicit rate, we utilize a consolidated group incremental borrowing rate for all leases as the Company has
centralized treasury operations. The incremental borrowing rate is derived through a combination of inputs such as the
Company's credit rating, impact of collaborated borrowing capabilities and lease term.
Leases with the duration of less than one-year are not recognized on the balance sheet and are expensed on a straight-line
basis over the lease term. In addition, we do not separate lease components from non-lease components for all asset classes.
Goodwill and Other Intangible Assets: Goodwill and other intangible assets with indefinite lives are not subject to
amortization, but are subject to annual impairment testing. Other intangible assets with definite lives, consisting primarily of
purchased customer relationships, patents, trademarks and tradenames, are amortized over periods from one to twenty-five
years.
The Company’s goodwill is tested for impairment annually, during the fourth quarter, or more frequently if events or
changes in circumstances indicate that goodwill might be impaired. The Company performs impairment reviews for its
reporting units using a fair value method based on management’s judgments and assumptions. In estimating the fair value, the
Company utilizes a discounted cash flow model, which is dependent on a number of assumptions, most significantly forecasted
revenues and operating profit margins, and the weighted average cost of capital, or a market value approach if appropriate
information is available as of the goodwill impairment assessment date. The estimated fair value of the reporting unit is
compared to the carrying amount of the reporting unit, including goodwill. If the carrying value of the reporting unit exceeds its
fair value, an impairment loss is recorded and should not exceed the total amount of the goodwill allocated to the reporting unit.
Indefinite-lived intangible assets are also subject to an annual impairment test. On an annual basis, or more frequently if events
or changes in circumstances indicate that the asset might be impaired, the fair value of the indefinite-lived intangible assets are
evaluated by the Company to determine if an impairment charge is required. A considerable amount of management judgment
is required in performing impairment tests, principally in determining the fair value of each reporting unit and the indefinite-
lived intangible assets.
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 on the Consolidated Balance Sheets, is based on historical claim rates and current warranty
cost experience. The following is a roll-forward of the changes in product warranty reserves for fiscal 2024 and 2023 (in
thousands):
August 31,
2024
2023
Beginning balance
$
856
$
1,140
Provision for warranties
371
418
Warranty payments and costs incurred
(699)
(723)
Warranty activity for divested businesses
—
(10)
Impact of changes in foreign currency rates
6
31
Ending balance
$
534
$
856
Revenue from Contracts with Customers: The Company recognizes revenue when it satisfies a performance obligation in
a contract by transferring control of a distinct good or service to a customer. A contract’s transaction price is allocated to each
distinct performance obligation and revenue is measured based on the consideration that the Company expects to be entitled to
in exchange for the goods or services transferred. When contracts include multiple products or services to be delivered to the
customer, the consideration for each element is generally allocated on the standalone transaction prices of the separate
performance obligations, using the adjusted market assessment approach.
Under normal circumstances, the Company invoices the customer once transfer of control has occurred and has a right to
payment. The typical payment terms vary based on the customer and the types of goods and services in the contract. The period
of time between invoicing and when payment is due is not significant, as our standard payment terms are less than one year.
Amounts billed and due from customers are classified as receivables on the Consolidated Balance Sheets.
Customer sales are recorded net of allowances for returns and discounts, which are recognized as a deduction from sales
at the time of sale. The Company commits to one-time or on-going trade discounts and promotions with customers that require
the Company to estimate and accrue the ultimate costs of such programs. The Company generally does not require collateral or
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
39
other security for receivables and provides for an allowance for credit losses based on historical experience and a review of its
existing receivables. Accounts receivable are stated net of an allowance for credit losses of $15.9 million and $16.8 million at
August 31, 2024 and 2023, respectively.
Taxes Collected: Taxes collected by the Company from a customer concurrent with revenue-producing activities are
excluded from "Net sales" within the Consolidated Statements of Earnings.
Shipping and Handling Costs: The Company records costs associated with shipping its products after control over a
product has transferred to a customer and are accounted for as fulfillment costs. These costs are reported in the Consolidated
Statements of Earnings in "Cost of products sold."
Research and Development Costs: Research and development costs consist primarily of engineering and development
resources and are expensed as incurred. Such costs incurred in the development of new products or significant improvements to
existing products were $12.4 million, $9.0 million and $7.3 million in fiscal 2024, 2023 and 2022, respectively. The Company
also incurs significant costs in connection with fulfilling custom orders and developing solutions for unique customer needs
which are not included in these research and development expense totals.
Other Income/Expense: Other income and expense primarily consists of net foreign currency exchange transaction losses
of $2.1 million, $2.1 million and $1.5 million in fiscal 2024, 2023 and 2022, respectively.
Financing Costs: Financing costs represent interest expense, financing fees and amortization of debt issuance costs, net of
interest income. Interest income was $2.5 million, $2.6 million and $1.3 million for fiscal 2024, 2023 and 2022, respectively.
Income Taxes: The provision for income taxes includes federal, state, local and non-U.S. taxes on income. Tax credits,
primarily for non-U.S. earnings, are recognized as a reduction of the provision for income taxes in the year in which they are
available for U.S. tax purposes. Deferred taxes are provided on temporary differences between assets and liabilities for financial
and tax reporting purposes as measured by enacted tax rates expected to apply when temporary differences are settled or
realized. Future tax benefits are recognized to the extent that realization of those benefits is considered to be more likely than
not. A valuation allowance is established for deferred tax assets for which realization is not more likely than not of being
realized. The Company's general policy is for non-U.S. subsidiary earnings to be indefinitely reinvested to the extent the
remittance results in an incremental U.S. tax liability. However, the Company routinely analyzes the factors surrounding global
cash needs and future cash utilization to determine if exceptions exist and establishes deferred tax liabilities for associated
future tax costs. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense and
treats any taxes due on future U.S. inclusions in taxable income under the Global Intangible Low-Taxed Income ("GILTI")
provision as a current period tax expense.
Foreign Currency Translation: The financial statements of the Company’s foreign operations are translated into U.S.
dollars using the exchange rate at each balance sheet date for assets and liabilities and an appropriate weighted average
exchange rate for each applicable period within the Consolidated Statements of Earnings. Translation adjustments are reflected
in the Consolidated Balance Sheets and Consolidated Statements of Shareholders' Equity caption “Accumulated other
comprehensive loss.”
Accumulated Other Comprehensive Loss: The following is a summary of the components included within accumulated
other comprehensive loss (in thousands):
August 31,
2024
2023
Foreign currency translation adjustments
$
99,215
$
102,268
Pension and other postretirement benefit plans
17,187
18,394
Cash flow hedges
(4)
548
Accumulated other comprehensive loss
$
116,398
$
121,210
Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles in
the United States ("US GAAP") requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting periods. The Company regularly evaluates the estimates and
assumptions related to the allowance for credit losses, inventory valuation, warranty reserves, goodwill, intangible and long-
lived asset valuations, employee benefit plan liabilities, over-time revenue recognition, income tax liabilities, deferred tax assets
and related valuation allowances, uncertain tax positions, restructuring reserves, and litigation and other loss contingencies.
The Company manages the profitability of its product and service & rental categories on a combined basis given the
complexity of the business model. This model includes providing integrated product and service solutions resulting in facilities
that generate revenues from both product and service & rental categories, which also have indirect and facility overhead costs
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
40
included in cost of sales. As such, judgment and estimates are required to disaggregate product and service & rental cost of
sales including allocating indirect and facility overhead costs between cost of product sales and the cost of service & rental
sales. Changes in these judgments and estimates could materially change the allocation of the indirect and facility overhead
costs to the different sales categories and the resulting ratio of cost of sales to net sales by category. Because the sales mix
heavily favors the product category, a change in the mix of cost of sales between the sales categories would have a more
significant impact on the ratio of cost of sales to net sales for the service & rental category.
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 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 these
customized 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 one 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 15, "Business Segment, Geographic and Customer 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):
Year Ended August 31,
2024
2023
2022
Revenues recognized at point in time
$
456,890
$
482,506
$
442,832
Revenues recognized over time
132,620
115,698
128,391
Total
$
589,510
$
598,204
$
571,223
Contract Balances
The Company's contract assets and liabilities are as follows (in thousands):
August 31,
2024
2023
Receivables, which are included in accounts receivable, net
$
104,335
$
97,649
Contract assets, which are included in other current assets
4,531
3,989
Contract liabilities, which are included in other current liabilities
2,329
2,927
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 credit losses. The Company maintains an allowance for credit losses 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
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
41
receivables that will not be collected in the future and records the appropriate provision. The allowance for credit losses was
$15.9 million and $16.8 million at August 31, 2024 and 2023, respectively.
As indicated in the "Concentration of Credit Risk" section below, as of August 31, 2024 and 2023, the Company was
exposed to a concentration of credit risk with an agent as a result of its continued payment delinquency. During the year ended
August 31, 2022, the Company recorded through bad debt expense (included in "Selling, general and administrative
expenses" ("SG&A expenses") in the Condensed Consolidated Statements of Earnings) a reserve of $13.2 million based on the
consideration of the factors listed below, which fully reserves for the outstanding account receivable balance for this agent. The
allowance for credit losses for this particular agent remained unchanged as of August 31, 2024 represents management's best
estimate of the amount probable of collection and considers various factors with respect to this matter, including, but not limited
to, (i) the lack of payment by the agent since the fiscal quarter ended February 28, 2021; (ii) our due diligence on balances due
to the agent from its end customers related to sales of our services and products and the known markup on those sales from the
agent to end customer; (iii) the status of ongoing negotiations with the agent to secure payments; (iv) legal recourse available to
secure payment; and (v) the agent is currently in bankruptcy proceedings. Actual collections from the agent may differ from the
Company's estimate.
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 August 31, 2024 the
Company was exposed to a concentration of credit risk as a result of the payment delinquency of one of our agents whose
accounts receivable represent 10.9% of the Company's outstanding accounts receivable. As of August 31, 2024, the Company
has fully reserved for the amounts due from this agent.
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 August 31, 2024, 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 $2.3 million will be recognized in net sales from satisfying those
performance obligations within the next twelve months.
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. ASCEND Transformation Program
In March 2022, the Company announced the start of its ASCEND transformation program, 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 the time the company anticipated investing $60 to $65 million
through the end of fiscal 2024 to complete these actions.
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
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
42
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 4,
“Restructuring Charges” in the notes to the consolidated financial statements). These costs were incorporated into the initial
investment of $60 to $65 million.
In September 2022, the Company approved an update to the restructuring plan to a range of $10 to $15 million; these
costs were still incorporated into the initial investment value and the range did not change at that time.
In March 2023, the investment range increased from the initial $60 to $65 million, to $70 to $75 million inclusive of the
$10 to $15 million of the previously announced restructuring over the life of the program.
The following summarizes ASCEND transformation charges (in thousands):
Year-Ended August 31,
2024
2023
2022
Program to
Date
ASCEND Expense recorded in Cost of products sold
$
1,018 $
924 $
6 $
1,948
ASCEND Expense recorded in SG&A expenses
6,029
34,495
13,610
54,134
Total ASCEND Expense
7,047
35,419
13,616
56,082
Recorded with Restructuring charges
7,843
7,719
3,050
18,612
Total ASCEND Transformation Charges
$
14,890 $
43,138 $
16,666 $
74,694
Note 4. 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 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, with further expansion in fiscal
2020 and fiscal 2022. The Company recorded $5.2 million of charges for the year ended August 31, 2022 in order to further
simplify and streamline the organizational structure. The total cumulative charges for the 2019 plan, which ended in the third
quarter of fiscal 2022, were $18.0 million.
On June 27, 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”) 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.
In September 2022, the Company approved an update to the restructuring plan to a range of $10 to $15 million; these
costs were still incorporated into the initial investment value and the range did not change at that time.
For the year ended August 31, 2024, 2023 and 2022, the Company recorded $7.8 million, $7.7 million and $3.1 million,
respectively, of restructuring charges associated with the ASCEND transformation program. The total cumulative charges for
the ASCEND transformation program, which ended in the fourth quarter of fiscal 2024, that related to restructuring were $18.6
million.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
43
The following summarizes restructuring reserve activity (which for the year ended August 31, 2023 excludes $0.6 million
of charges associated with ASCEND transformation plan for Corporate associated with the accelerated vesting of equity awards
which has no impact on the restructuring reserve) (in thousands):
Year Ended August 31,
2024
IT&S
Corporate
Balance as of August 31, 2023
$
2,238
$
74
Restructuring charges
7,244
552
Cash payments
(5,352)
(429)
Other non-cash uses of reserve
(635)
—
Impact of changes in foreign currency rates
32
—
Balance as of August 31, 2024
$
3,527
$
197
Year Ended August 31, 2023
2019 Plan
ASCEND Plan
IT&S
Corporate
IT&S
Corporate
Balance as of August 31, 2022
$
212
$
6
$
2,008
$
797
Restructuring charges
(32)
(6)
6,035
1,054
Cash payments
(99)
—
(5,453)
(1,779)
Other non-cash uses of reserve
(84)
—
(498)
—
Impact of changes in foreign currency rates
3
—
146
2
Balance as of August 31, 2023
$
—
$
—
$
2,238
$
74
Total restructuring charges (inclusive of the Other operating segment) for the years ended August 31, 2024 and 2023 were
$7.8 million and $7.7 million, respectively, which included approximately $0.4 million and $0.6 million of charges being
reported in the Consolidated Statements of Operations in "Cost of products sold," with the balance of the charges reported on
"Restructuring charges." Total restructuring charges (inclusive of the Other operating segment) being reported in "Restructuring
charges" were $8.1 million for the year ended August 31, 2022.
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 EC&S segment. This divestiture was considered part of
our strategic shift to become a pure-play industrial tools and services company, and therefore, the results of operations are
recorded as a component of "Earnings (loss) from discontinued operations, net of income taxes" in the Condensed Consolidated
Statements of Earnings for all periods presented. All discontinued operations activity included within the Condensed
Consolidated Statements of Earnings and the Condensed Consolidated Statements of Cash Flows for the periods presented
relate to impacts from certain retained liabilities.
The following represents the detail of "Earnings (loss) from discontinued operations, net of income taxes" within the
Consolidated Statements of Earnings (in thousands):
Year Ended August 31,
2024
2023
2022
Selling, general and administrative (benefit) expenses
$
(6,054) $
10,069 $
4,842
Impairment & divestiture benefit
—
(1,530)
—
Operating income (loss)
6,054
(8,539)
(4,842)
Other income, net
—
372
—
Earnings (loss) before income tax benefit
6,054
(8,911)
(4,842)
Income tax expense (benefit)
2,512
(1,823)
(937)
Earnings (loss) from discontinued operations, net of income taxes
$
3,542 $
(7,088) $
(3,905)
Other Divestiture Activities
On July 11, 2023, the Company completed the sale of the Cortland Industrial business, which had been included in the
Other operating segment, for net cash proceeds of $20.1 million. In connection with the completion of the sale, the Company
recorded a net gain of $6.0 million, inclusive of $0.1 million of purchase price from the customary finalization of working
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
44
capital negotiations in the first quarter of fiscal 2024.The historical results of the Cortland Industrial business (which had net
sales of $22.7 million, and $26.2 million for the year ended August 31, 2023 and 2022, respectively) are not material to the
consolidated financial results.
Note 6. 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 years
ended August 31, 2024 and 2023 by operating segment are as follows (in thousands):
IT&S
Other
Total
Balance as of August 31, 2022
$
246,740
$
11,209
$
257,949
Impact of changes in foreign currency rates
8,546
—
8,546
Balance as of August 31, 2023
255,285
11,209
266,494
Impact of changes in foreign currency rates
3,103
—
3,103
Balance as of August 31, 2024
$
258,388
$
11,209
$
269,597
The gross carrying value and accumulated amortization of the Company’s intangible assets are as follows (in thousands):
Weighted
Average
Amortization
Period
(Year)
August 31, 2024
August 31, 2023
Gross
Accumulated
Amortization
Net Book
Value
Gross
Accumulated
Amortization
Net Book
Value
Amortizable intangible assets:
Customer relationships
14
$ 109,582
$
99,530
$ 10,052
$ 108,292
$
95,395
$ 12,897
Patents
13
9,916
9,408
508
9,769
9,210
559
Trademarks and tradenames
14
2,764
2,308
456
2,734
2,197
537
Indefinite lived intangible assets:
Tradenames
N/A
25,042
—
25,042
23,345
—
23,345
$ 147,304
$
111,246
$ 36,058
$ 144,140
$
106,802
$ 37,338
The Company estimates amortization expense for future years to be: $2.9 million in fiscal 2025, $1.9 million in fiscal
2026, $1.9 million in fiscal 2027, $1.7 million in fiscal 2028, $1.6 million in fiscal 2029 and $1.0 million in aggregate
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.
In conjunction with our annual goodwill impairment assessment, the Company did not record any charges in fiscal 2024
or 2023.
Note 7. Debt
The following is a summary of the Company’s indebtedness (in thousands):
August 31,
2024
2023
Senior Credit Facility
Revolver
—
16,000
Term Loan
195,000
198,750
Total Senior Indebtedness
195,000
214,750
Less: Current maturities of long-term debt
(5,000)
(3,750)
Debt issuance costs
(497)
(663)
Total long-term debt, less current maturities
$
189,503
$
210,337
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
45
Senior Credit Facility
On September 9, 2022, the Company refinanced its previous senior credit facility with a new $600 million senior credit
facility, comprised of a $400 million revolving line of credit and a $200 million term loan, which is scheduled to mature in
September 2027. The Company has the option to request up to $300 million of additional revolving commitments and/or term
loans under the credit facility, subject to customary conditions, including the commitment of the participating lenders. This
facility replaces LIBOR with adjusted term SOFR as the interest rate benchmark and provides for interest rate margins above
adjusted term SOFR ranging from 1.125% to 1.875% per annum depending on the Company’s net leverage ratio. 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. Borrowings under the credit facility bear interest at adjusted term SOFR plus
1.125% per annum.
The facility contains financial covenants requiring the Company to not permit (i) the net leverage ratio, determined as of
the end of each of its fiscal quarters, to exceed 3.75 to 1.00 (or, at the Company’s election and subject to certain conditions,
4.25 to 1.00 for the covenants period during which certain material acquisitions occur and the next succeeding four testing
periods) or (ii) the interest coverage ratio, determined as of the end of each of its fiscal quarters, to be less than 3.00 to 1.00.
Borrowings under the facility are secured by substantially all personal property assets of the Company and its domestic
subsidiary guarantors (other than certain specified excluded assets) and certain of the equity interests of certain subsidiaries of
the Company. The Company was in compliance with all covenants under the facility at August 31, 2024.
At August 31, 2024, there were $195.0 million in borrowings outstanding under the term loans, no borrowings
outstanding under the revolving line of credit and $397.6 million available for borrowing under the revolving line of credit
facility after reduction for $2.4 million of outstanding letters of credit issued under the facility.
Cash Paid for Interest
The Company made cash net interest payments of $12.4 million, $10.6 million and $3.1 million in fiscal 2024, 2023 and
2022, respectively.
Note 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 August 31, 2024 and 2023 due to their short-term nature and 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 liability of $0.3 million and less than $0.1
million at August 31, 2024 and 2023, respectively.
The fair value of the Company's interest rate swap and net investment hedge was an asset of less than $0.1 million and a
liability of $1.6 million at August 31, 2024 and an asset of $0.7 million and a liability of $1.2 million at August 31, 2023 (see
Note 9, “Derivatives” for further information on the Company's interest rate swap and net investment hedge.) The fair value of
all derivative contracts were based on quoted inactive market prices and therefore classified as Level 2 within the valuation
hierarchy.
Note 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 expense, net" in the Consolidated
Statements of Earnings). The U.S. dollar equivalent notional value of these short duration foreign currency exchange contracts
was $15.6 million and $13.8 million at August 31, 2024 and 2023, respectively. The fair value of outstanding foreign currency
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
46
exchange contracts was a net liability of $0.3 million and less than $0.1 million at August 31, 2024 and 2023, respectively. Net
foreign currency loss (gain) (included in "Other expense, net" in the Consolidated Statements of Earnings) related to these
derivative instruments are as follows (in thousands):
Year Ended August 31,
2024
2023
2022
Foreign currency loss (gain)
$
863
$
945
$
(319)
During December 2022, the Company entered into an interest rate swap, with a maturity date of November 30, 2025, for
the notional amount of $60.0 million at a fixed interest rate of 4.022% to hedge the floating interest rate of the Company's term
loan. The interest rate swap was designated and qualified as a cash flow hedge. The Company uses the interest rate swap for the
management of interest rate risk exposure, as an interest rate swap effectively converts a portion of the Company's debt from a
floating rate to a fixed rate.
The Company records the fair value of the interest rate swap as an asset or liability on its balance sheet. The change in the
fair value of the interest rate swap, a net loss of $0.5 million and net gain of $0.5 million for the years ended August 31, 2024
and 2023, respectively, is recorded in other comprehensive income (loss).
The Company also uses interest-rate derivatives to hedge portions of our net investments in non-U.S. subsidiaries (net
investment hedge) against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S.
dollar. For derivatives that are designated and qualify as a net investment hedge in a foreign operation the net gains or losses
attributable to the hedge changes are recorded in other comprehensive income (loss) where they offset gains and losses recorded
on our net investments where the entity has non-U.S. dollar functional currency. As of August 31, 2024, the notional amount of
cross-currency swaps designated as net investment hedges was $30.5 million. The change in the fair value of the net investment
hedge, a net loss of $0.3 million and $0.9 million for the years ended August 31, 2024 and 2023, respectively, is recorded in
other comprehensive income (loss).
Note 10. Leases
As of August 31, 2024, the Company had operating leases for real estate, vehicles, manufacturing equipment, IT
equipment and office equipment. The Company did not have significant finance leases during the year ended August 31, 2024.
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. Our leases generally contain payments that are primarily fixed; however, certain lease arrangements contain variable
payments, which are expensed as incurred and not included in the measurement of ROU assets and lease liabilities. These
amounts include payments affected by changes in the Consumer Price Index and executory costs (such as real estate taxes,
utilities and common-area maintenance), which are based on usage or performance. In addition, our leases generally do not
include material residual value guarantees or material restrictive covenants.
The components of lease costs for the year ended August 31, 2024, 2023 and 2022 were as follows (in thousands):
Year Ended August 31,
2024
2023
2022
Operating lease cost
$
12,610
$
13,155
$
14,316
Short-term lease cost
2,042
2,318
1,714
Variable lease cost
2,850
4,411
3,609
Supplemental cash flow and other information related to leases for the year ended August 31, 2024, 2023 and 2022 were
as follows (in thousands):
Year Ended August 31,
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
12,119 $
13,153 $
14,166
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases
3,075
1,654
4,584
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
47
Supplemental balance sheet information related to leases at August 31, 2024 and 2023 were as follows (in thousands):
August 31,
2024
2023
Operating leases:
Other long-term assets
$ 32,961
$ 37,714
Other current liabilities
9,464
9,786
Other long-term liabilities
25,154
29,245
Total operating lease liabilities
$ 34,618
$ 39,031
Weighted Average Remaining Lease Term:
Operating leases
7.0 years
6.5 years
Weighted Average Discount Rate:
Operating leases
5.5 %
5.0 %
A summary of the future minimum lease payments due under operating leases with terms of more than one year at
August 31, 2024 is as follows (in thousands):
2025
$
10,317
2026
7,912
2027
4,983
2028
4,197
2029
3,053
Thereafter
13,369
Total minimum lease payments
43,831
Less imputed interest
(9,213)
Present value of net minimum lease payments
$
34,618
Note 11. Employee Benefit Plans
U.S. Defined Benefit Pension Plans
All of the U.S. defined benefit pension plans are frozen, and as a result, plan participants no longer earn additional
benefits. The following table provides detail of changes in the projected benefit obligations, the fair value of plan assets and the
funded status of the Company’s U.S. defined benefit pension plans as of the respective August 31 measurement date (in
thousands):
2024
2023
Reconciliation of benefit obligations:
Benefit obligation at beginning of year
$
33,204
$
37,135
Interest cost
1,716
1,694
Actuarial (gain) loss
1,273
(2,337)
Benefits paid
(3,337)
(3,288)
Benefit obligation at end of year
$
32,856
$
33,204
Reconciliation of plan assets:
Fair value of plan assets at beginning of year
$
28,530
$
31,166
Actual return on plan assets
2,839
545
Company contributions
421
108
Benefits paid from plan assets
(3,336)
(3,289)
Fair value of plan assets at end of year
28,454
28,530
Funded status of the plans (underfunded)
$
(4,402) $
(4,674)
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
48
The following table provides detail on the Company’s domestic net periodic benefit expense (in thousands):
Year ended August 31,
2024
2023
2022
Interest cost
$
1,716
$
1,694
$
1,165
Expected return on assets
(1,743)
(1,984)
(2,060)
Amortization of actuarial loss
928
878
1,219
Net periodic benefit expense
$
901
$
588
$
324
As of August 31, 2024 and 2023, $16.3 million and $16.9 million, respectively, of pension plan actuarial losses, which
have not yet been recognized in net periodic benefit cost, were included in accumulated other comprehensive loss, net of
income taxes. During fiscal 2025, $1.3 million of these actuarial losses are expected to be recognized in net periodic benefit
cost.
Weighted-average assumptions used to determine U.S. pension plan obligations as of August 31 and weighted-average
assumptions used to determine net periodic benefit cost for the years ended August 31 are as follows:
2024
2023
2022
Assumptions for benefit obligations:
Discount rate
5.00 %
5.40 %
4.75 %
Assumptions for net periodic benefit cost:
Discount rate
5.40 %
4.75 %
2.55 %
Expected return on plan assets
5.70 %
5.70 %
5.45 %
The Company's objective for its pension plan is to achieve an asset and liability duration match so that interim fluctuations
in funded status should be limited by increasing the correlation between assets and liabilities. As such, the plan assets are
invested to maintain funded ratios over the long term, while managing the risk that funded ratios fall meaningfully below 100%.
In fiscal 2024 and 2023, the plan assets were invested in a mix of 50% duration-matched fixed income securities and 50%
equity securities. Cash balances are maintained at levels adequate to meet near-term plan expenses and benefit payments.
Investment risk is measured and monitored on an ongoing basis. At August 31, 2024, the Company’s overall expected long-
term rate of return for assets in U.S. pension plans was 6.20%. The expected long-term rate of return is based on the portfolio as
a whole and not on the sum of the returns on individual asset categories. The target return is based on historical returns adjusted
to reflect the current view of the long-term investment market and our 50% investment mix between fixed income and equity
securities.
The U.S. pension plan investment allocations by asset category were as follows (dollars in thousands):
Year Ended August 31,
2024
%
2023
%
Cash and cash equivalents
$
—
—%
$
51
0.2%
Income receivable
46
0.2
40
0.1
Fixed income securities:
U.S. Treasury Securities
3,320
11.7
4,659
16.3
Corporate Bonds
—
—
—
—
Mutual funds
12,095
42.5
11,269
39.5
15,415
54.2
15,928
55.8
Equity securities:
Mutual funds
12,993
45.6
12,511
43.9
Total plan assets
$
28,454
100%
$
28,530
100%
The fair value of mutual funds are based on unadjusted quoted market prices and therefore are classified as Level 1 within
the fair value hierarchy under US GAAP. U.S. Treasury Securities and Corporate Bonds are valued using Level 2 inputs, as
defined in Note 8, “Fair Value Measurements.”
Projected benefit payments from plan assets to participants in the Company’s U.S. pension plans are $3.2 million for
fiscal 2025, $3.1 million per year for fiscal 2026 and 2027, $3.0 million for fiscal 2028, $2.9 million for fiscal 2029 and $12.9
million in aggregate for the following five years. The Company plans to make a contribution of $1.2 million to the U.S. pension
plans in September of fiscal 2025. The Company did not make a contribution to the plan in fiscal 2024 or fiscal 2023.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
49
Foreign Defined Benefit Pension Plans
The Company has seven significant foreign defined benefit pension plans which cover certain existing and former
employees of businesses outside the U.S. Most of the participants in the foreign defined benefit pension plans are inactive and
no longer earning additional benefits. The following table provides detail of changes in the projected benefit obligations, the
fair value of plan assets and the funded status of the Company’s significant foreign defined benefit pension plans as of the
respective August 31 measurement date (in thousands):
2024
2023
Reconciliation of benefit obligations:
Benefit obligation at beginning of year
$
8,085
$
8,017
Employer service costs
144
60
Interest cost
344
306
Actuarial gain
(1)
(494)
Benefits paid
(261)
(256)
Settlements
—
(213)
Currency impact
199
665
Benefit obligation at end of year
$
8,510
$
8,085
Reconciliation of plan assets:
Fair value of plan assets at beginning of year
$
6,195
$
6,208
Actual return on plan assets
323
(359)
Company contributions
69
286
Benefits paid from plan assets
(261)
(469)
Currency impact
169
529
Fair value of plan assets at end of year
6,495
6,195
Funded status of the plans (underfunded)
$
(2,015) $
(1,889)
The following table provides detail on the Company’s foreign net periodic benefit expense (in thousands):
Year ended August 31,
2024
2023
2022
Employer service costs
$
144
$
60
$
90
Interest cost
344
306
159
Expected return on assets
(252)
(245)
(316)
Amortization of net prior service credit
4
3
3
Amortization of net loss
21
10
112
Settlement
—
37
145
Net periodic benefit expense
$
261
$
171
$
193
The weighted average discount rate utilized for determining the benefit obligation at August 31, 2024 and 2023 was 4.1%
and 4.3%, respectively. The plan assets of these foreign pension plans consist primarily of participating units in fixed income
and equity securities and insurance contracts. The Company’s overall expected long-term rate of return on these investments is
4.1%. During fiscal 2025, the Company does not anticipate contributing to these pension plans.
Projected benefit payments to participants in the these foreign plans are $0.3 million for each of fiscal 2025, 2026, and
2027, $0.4 million for each of fiscal 2028 and 2029 and $2.3 million in aggregate for the five years thereafter.
Other Postretirement Health Benefit Plans
The Company provides other postretirement health benefits (“OPEB”) to certain existing and former employees of
domestic businesses it acquired, who were entitled to such benefits prior to acquisition. These unfunded plans had a benefit
obligation of $1.6 million and $1.7 million at August 31, 2024 and 2023, respectively. These obligations are determined
utilizing assumptions consistent with those used for our U.S. pension plans and a health care cost trend rate of 6.8%, trending
downward to 5.0% by the year 2026, and remaining level thereafter. Net periodic benefit costs for other postretirement benefits
was income of $0.04 million in the year ended August 31, 2024, and $0.1 million for each of the fiscal years ended August 31,
2023 and 2022. Benefit payments from the plan are funded through participant contributions and Company contributions.
Benefit payments are projected to be $0.2 million in fiscal 2025.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
50
Defined Contribution Benefit Plans
The Company maintains a 401(k) plan for substantially all full time U.S. employees (the “401(k) Plan”). Under plan
provisions, the Company can fund either cash or issue new shares of Class A common stock for its contributions. Amounts are
allocated to accounts set aside for each employee’s retirement. Employees generally may contribute up to 50% of their
compensation to individual accounts within the 401(k) Plan.
While contributions vary, the Company's match contribution is $0.50 for every $1 contributed by employees, up to 8% of
the employees' eligible pay. These match contributions are made on every payroll run, meaning the contribution is immediately
100% vested. In addition, the Company may make an annual, discretionary contribution of up to 3% of employees' eligible pay
to employees employed as of the end of the plan year. The discretionary contribution has a three-year vesting period. The
Company elected not to provide a discretionary contribution for the year ended August 31, 2024. The Company also maintains
a Restoration Plan that allows eligible highly compensated employees (as defined by the Internal Revenue Code) to receive a
core contribution as if no IRS limits were in place. Company contributions to the Restoration Plan are made in the form of its
Class A common stock and contributed into each eligible participant’s deferred compensation plan. The Company has not
contributed in fiscal 2024, 2023 or fiscal 2022. Expense recognized related to the 401(k) plan totaled $2.1 million for each of
the fiscal years ended August 31, 2024 and 2023, and $2.2 million for the fiscal year ended August 31, 2022.
In addition to the 401(k) plan, the Company sponsors a non-qualified supplemental executive retirement plan (“the SERP
Plan”). The SERP Plan is an unfunded defined contribution plan that covers certain current and former executive employees
and has an annual contribution formula based on age and years of service (with Company contributions ranging from 3% to 6%
of eligible wages). This unfunded plan had a $0.9 million and $1.0 million obligation at August 31, 2024 and 2023,
respectively. Expense recognized for the SERP Plan was $0.3 million in fiscal 2024, and $0.2 million in each of fiscal 2023 and
2022.
Deferred Compensation Plan
The Company maintains a deferred compensation plan to allow eligible U.S. employees to defer receipt of current cash
compensation and restricted stock units vesting in order to provide future savings benefits. Eligibility is limited to employees
who earn compensation that exceeds certain pre-defined levels. Participants have the option to invest their deferrals in a fixed
income investment, a defined set of mutual funds, and/or, with respect to deferrals of restricted stock units, in Company
common stock. The fixed income and mutual fund portion of the plan is unfunded, and therefore all compensation deferred
under the plan is held by the Company and commingled with its general assets. Liabilities of $9.3 million and $11.0 million are
included in the Consolidated Balance Sheets at August 31, 2024 and 2023, respectively, to reflect the unfunded portion of the
deferred compensation liability. The Company recorded expense in "Financing costs, net" of $0.9 million, $0.9 million and $0.7
million for the years ended August 31, 2024, 2023 and 2022, respectively, for the non-funded return on participant deferrals.
Company common stock contributions to fund the plan are held in a rabbi trust, accounted for in a manner similar to treasury
stock and are recorded at cost in “Stock held in trust” within shareholders’ equity on the Consolidated Balance Sheets with the
corresponding deferred compensation liability also recorded within shareholders’ equity on the Consolidated Balance Sheets.
Because no investment diversification is permitted within the trust, changes in fair value of the Company's common stock are
not recognized.
Note 12. Income Taxes
Earnings before income taxes from continuing operations, are summarized as follows (in thousands):
Year Ended August 31,
2024
2023
2022
Domestic
$
59,688
$
26,442
$
10,176
Foreign
45,831
42,456
13,816
$
105,519
$
68,898
$
23,992
Both domestic and foreign pre-tax earnings from continuing operations are impacted by changes in operating earnings,
acquisition and divestiture activities, restructuring charges and the related benefits, growth investments, debt levels and the
impact of changes in foreign currency exchange rates. In fiscal 2024, domestic earnings included non-cash impairment and
other divestiture charges of $0.1 million. In fiscal 2023, domestic earnings included non-cash impairment and other divestiture
benefits of $6.2 million. In fiscal 2022, domestic and foreign earnings included $1.3 million and $1.1 million of non-cash
impairment and other divestiture charges, respectively. Substantially all of the non-cash impairment and other divestiture
charges (benefits) did not result in a tax expense (benefit).
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
51
Income tax expense from continuing operations is summarized as follows (in thousands):
Year ended August 31,
2024
2023
2022
Currently payable:
Federal
$
10,106
$
5,181
$
1,765
Foreign
11,599
9,240
7,824
State
1,172
319
164
22,877
14,740
9,753
Deferred:
Federal
(1,086)
(2,935)
1,580
Foreign
2,630
3,806
(7,538)
State
(1,109)
(362)
606
435
509
(5,352)
Income tax expense
$
23,312
$
15,249
$
4,401
Income tax expense from continuing operations recognized in the accompanying consolidated statements of earnings
differs from the amounts computed by applying the federal income tax rate to earnings from continuing operations before
income tax expense. A reconciliation of income taxes at the federal statutory rate to the effective tax rate is summarized in the
following table:
Year ended August 31,
2024
2023
2022
Federal statutory rate
21.0 %
21.0 %
21.0 %
State income taxes, net of Federal effect
1.3
0.7
2.3
Tax on foreign earnings (1)
4.2
6.0
1.3
Foreign derived intangible income deduction
(2.3)
(3.1)
(4.5)
Compensation adjustment
2.0
1.5
6.6
Impairment and other divestiture charges
—
—
1.1
Valuation allowance additions and releases
(4.1)
(0.8)
2.1
Changes in liability for unrecognized tax benefits
(1.3)
(0.1)
3.4
Repatriation of foreign earnings
1.6
—
—
Taxable liquidation of subsidiaries (2)
—
0.1
(11.4)
Foreign non-deductible expenses
0.3
1.7
8.5
Changes in tax rates
—
(2.0)
(3.6)
Audits and adjustments (3)
0.4
(2.9)
(6.7)
Research and development tax credit
(0.6)
(0.7)
(2.5)
Other items
(0.4)
0.7
0.7
Effective income tax rate
22.1 %
22.1 %
18.3 %
(1) The Company generated $3.4 million, $2.6 million and $1.5 million of withholding tax and U.S. tax on non-U.S. earnings,
net of foreign tax credits for fiscal 2024, 2023 and 2022, respectively.
(2) During fiscal 2022, the Company generated a net benefit of $2.7 million as a result of taxable liquidations of subsidiaries.
(3) During fiscal 2024, the Company generated a $0.4 million tax expense related to audits and adjustments as compared to a
tax benefit of $2.0 million and $1.6 million for fiscal 2023 and 2022, respectively.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
52
Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities include the following items
(in thousands):
August 31,
2024
2023
Deferred income tax assets:
Operating loss and tax credit carryforwards
$
73,406
$
70,933
Compensation related liabilities
4,440
7,372
Postretirement benefits
4,628
5,224
Inventory
977
1,715
Lease liabilities
8,063
8,594
Research and development capitalization
8,683
4,544
Book reserves and other items
5,096
6,548
Total deferred income tax assets
105,293
104,930
Valuation allowance
(57,743)
(61,432)
Net deferred income tax assets
47,550
43,498
Deferred income tax liabilities:
Depreciation and amortization
(25,920)
(23,844)
Lease assets
(7,918)
(8,594)
Other items
(2,716)
(1,020)
Deferred income tax liabilities
(36,554)
(33,458)
Net deferred income tax asset (1)
$
10,996
$
10,040
(1) The net deferred income tax asset is reflected on the balance sheet in two categories: an asset of $14.7 million and
$15.7 million for fiscal 2024 and 2023, respectively, is included in "Other long-term assets" and a liability of $3.7
million and $5.7 million for fiscal 2024 and 2023, respectively, is included in "Deferred income taxes".
The Company has $61.9 million and $2.5 million of gross state net operating loss and credit carryforwards, respectively,
which are available to reduce future state tax liabilities. These state net operating loss carryforwards expire at various times
through 2044. The Company also has $78.9 million and $7.6 million of foreign loss and credit carryforwards, respectively, and
$2.2 million of U.S. credit carryforwards, which are available to reduce certain future foreign and U.S. tax liabilities. The
majority of the foreign loss carryforwards are not subject to any expiration dates, while the other balances expire at various
times through 2034. The U.S. credit carryforwards expire at various times through 2034. The valuation allowance represents a
reserve for deferred tax assets, including loss carryforwards and foreign tax credits, for which utilization is uncertain.
In general, the Company’s practice is to reinvest the earnings of its non-U.S. subsidiaries within those operations.
Routinely, the Company analyzes the factors surrounding global cash needs and future cash utilization and determines if there
are any exceptions. As of August 31, 2024, certain jurisdictions met this exception. On the undistributed foreign earnings of
$11.3 million that are no longer permanently reinvested outside of the United States, the Company recorded a deferred tax
liability of $1.7 million. If all remaining undistributed earnings were remitted, an additional income tax provision of $0.6
million would have been necessary as of August 31, 2024.
Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, are as follows (in
thousands):
2024
2023
2022
Beginning balance
$ 14,754
$ 15,380
$ 15,658
Increases based on tax positions related to the current year
1,771
279
433
Increase for tax positions taken in a prior period
201
—
1,084
Decrease for tax positions taken in a prior period
—
(56)
(57)
Decrease due to lapse of statute of limitations
(3,054)
(951)
(1,271)
Decrease due to settlements
—
—
(31)
Changes in foreign currency exchange rates
41
102
(436)
Ending balance
$ 13,713
$ 14,754
$ 15,380
Substantially all of these unrecognized tax benefits, if recognized, would impact the effective income tax rate. As of
August 31, 2024, 2023 and 2022, the Company recognized $5.0 million, $5.2 million and $4.5 million, respectively, for interest
and penalties related to unrecognized tax benefits. The Company recognizes interest and penalties related to underpayment of
income taxes as a component of income tax expense. With few exceptions, the Company is no longer subject to U.S. federal,
state and foreign income tax examinations by tax authorities in major tax jurisdictions for years prior to fiscal 2012. The
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
53
Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $1.4
million throughout fiscal 2025.
Cash paid for income taxes, net of refunds, totaled $23.8 million, $2.7 million and $5.7 million during the years ended
August 31, 2024, 2023 and 2022, respectively.
Note 13. Capital Stock and Share Repurchases
The authorized common stock of the Company as of August 31, 2024 consisted of 168,000,000 shares of Class A
common stock, $0.20 par value, of which 54,234,660 shares were issued and outstanding; 1,500,000 shares of Class B common
stock, $0.20 par value, none of which are outstanding; and 160,000 shares of cumulative preferred stock, $1.00 par value
(“preferred stock”), none of which have been issued. Holders of both classes of the Company’s common stock are entitled to
dividends, as the Company’s Board of Directors may declare out of funds legally available, subject to any contractual
restrictions on the payment of dividends or other distributions on the common stock. If the Company were to issue any of its
preferred stock, no dividends could be paid or set apart on shares of common stock, unless paid in common stock, until
dividends on all of the issued and outstanding shares of preferred stock had been paid or set apart for payment and provision
had been made for any mandatory sinking fund payments.
The Company's Board of Directors approved four separate authorizations (September 2011, March 2014, October 2014
and March 2015) to repurchase up to 7,000,000 shares each of the Company’s outstanding common stock. The Company
suspended the initial share repurchase program in response to the COVID-19 pandemic in the third quarter of fiscal 2020. In
March 2022, the Company's Board of Directors rescinded its prior share repurchase authorization and approved a new share
repurchase program authorizing the repurchase of a total of 10,000,000 shares of the Company's outstanding common stock.
The Company repurchased 1,309,466 shares for $38.4 million in the year ended August 31, 2024. As of August 31, 2024, the
maximum number of shares that may yet be purchased under the program is 2,717,049 shares. Since the inception of the initial
share repurchase program in fiscal 2012, the Company has repurchased 30,082,181 shares of common stock for $838.9 million.
In December 2023, the Company's Board of Directors authorized the retirement of the Company's repurchased shares, and
the Company retired 29,841,209 treasury shares. The initial share retirement resulted in reductions of $6.0 million in Class A
Common Stock and $824.6 million in "Retained Earnings" reflected in the Condensed Consolidated Balance Sheets at August
31, 2024. Shares repurchased after December 18, 2023 were retired upon repurchase. In addition to the initial share retirement,
the Company repurchased and retired 240,972 shares during the year-ended August 31, 2024.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
54
Earnings Per Share
The reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share amounts):
Year Ended August 31,
2024
2023
2022
Numerator:
Net earnings from continuing operations
$
82,207
$
53,649
$
19,591
Net earnings (loss) from discontinued operations
3,542
(7,088)
(3,905)
Net earnings
$
85,749
$
46,561
$
15,686
Denominator:
Weighted average common shares outstanding - basic
54,336
56,680
59,538
Net effect of dilutive securities - stock based compensation plans
526
437
371
Weighted average common shares outstanding - diluted
54,862
57,117
59,909
Earnings per common share from continuing operations:
Basic
$
1.51
$
0.95
$
0.33
Diluted
$
1.50
$
0.94
$
0.33
Earnings (loss) per common share from discontinued operations:
Basic
$
0.07
$
(0.13) $
(0.07)
Diluted
$
0.06
$
(0.12) $
(0.07)
Earnings per common share:
Basic
$
1.58
$
0.82
$
0.26
Diluted
$
1.56
$
0.82
$
0.26
Anti-dilutive securities- stock based compensation plans (excluded from
earnings per share calculation)
96
891
946
Note 14. Stock Plans
Share based awards may be granted to key employees and directors under the Enerpac Tool Group Corp. 2017 Omnibus
Incentive Plan (as amended and restated November 9, 2020) (the “Plan”). A total of 7,825,000 shares of Class A common stock
have been authorized for issuance under the Plan (including 3,500,000 shares that were authorized for issuance at the January
2021 annual meeting) plus shares, if any, that become issuable, pursuant to the terms of the Plan, upon the expiration,
cancellation or forfeiture of awards under our previously registered stock plans outstanding at the time the Plan was first
approved by the Company's shareholders. At August 31, 2024, 3,191,321 shares were available for future award grants. The
Plan permits the Company to grant share-based awards, including stock options, restricted stock, restricted stock units and
performance shares (the "Performance Shares") to employees and directors. Options generally have a maximum term of ten
years, an exercise price equal to 100% of the fair market value of the Company’s common stock at the date of grant and
generally vest 50% after three years and 100% after five years. The Company’s restricted stock grants prior to fiscal 2017
generally have similar vesting provisions as options, while grants thereafter generally vest in equal installments over a three-
year period. The Performance Shares include a three-year performance period. For the awards of Performance Shares granted in
the year ended August 31, 2022, payout under the awards is based 50% on Company’s total shareholder return (“TSR”) relative
to the S&P 600 SmallCap Industrial metric and 50% on the Company's three-year average return on invested capital. For
awards of Performance Shares granted in the years ended August 31, 2024 and 2023, payout under the awards is based 33.3%
on the relative TSR metric, 33.3% on the Company's adjusted earnings per share and 33.3% on the Company's three-year
average return on invested capital. The provisions of share-based awards may vary by individual grant with respect to vesting
period, dividend and voting rights, performance conditions and forfeitures.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
55
A summary of restricted stock units and performance shares activity during fiscal 2024 is as follows:
Number of
Shares
Weighted-Average Fair
Value at Grant Date
(Per Share)
Outstanding on August 31, 2023
1,039,536
$22.26
Granted
336,040
29.34
Forfeited
(127,701)
23.40
Vested
(368,010)
21.41
Outstanding on August 31, 2024
879,865
$25.50
A summary of stock option activity during fiscal 2024 is as follows:
Shares
Weighted-
Average
Exercise Price
(Per Share)
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
Outstanding on September 1, 2023
629,407
$
27.18
Granted
—
—
Exercised
(287,791)
24.57
Forfeited
—
—
Expired
(115,767)
36.35
Outstanding on August 31, 2024
225,849
$
25.81
2.0
$
3,485,432
Exercisable on August 31, 2024
225,849
$
25.81
2.0
$
3,485,432
Intrinsic value is the difference between the market value of the stock at August 31, 2024 and the exercise price which is
aggregated for all options outstanding and exercisable. A summary of the total intrinsic value of options exercised and cash
receipts from options exercised is summarized below (in thousands, except per share amounts):
Year Ended August 31,
2024
2023
2022
Intrinsic value of options exercised
$
2,946
$
169
$
—
Cash receipts from exercise of options
6,907
973
—
The Company generally records compensation expense over the vesting period for restricted stock unit awards based on
the market value of the Company's Class A common stock on the grant date and utilized an expected forfeiture rate of 12% for
the years ended August 31, 2024, 2023 and 2022. The fair value of Performance Shares with market vesting conditions, which
includes the Performance Shares awarded in fiscal 2024, 2023 and 2022, is determined utilizing a Monte Carlo simulation
model.
As of August 31, 2024, there was $9.7 million of total unrecognized compensation cost related to share-based awards,
including stock options, restricted stock, restricted stock units and Performance Shares, which will be recognized over a
weighted average period of 1.5 years. The total fair value of share-based awards that vested during the fiscal years ended
August 31, 2024 and 2023 was $8.3 million and $9.8 million, respectively.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
56
Note 15. Business Segment, Geographic and Customer 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 infrastructure, industrial MRO, oil & gas, mining, alternative and renewable energy,
civil construction and other markets. The Other operating segment is included for purposes of reconciliation of the respective
balances below to the consolidated financial statements.
The following tables summarize financial information by reportable segment and product line (in thousands):
Year Ended August 31,
2024
2023
2022
Net Sales by Reportable Segment & Product Line
IT&S Segment
Product
$
455,647
$
447,603
$
410,245
Service & Rental
115,506
107,575
117,097
571,153
555,178
527,342
Other Segment
18,357
43,026
43,881
$
589,510
$
598,204
$
571,223
Operating Profit (Loss)
IT&S Segment
$
153,105
$
135,883
$
78,735
Other Segment
4,249
10,954
729
General Corporate
(35,767)
(62,915)
(48,805)
$
121,587
$
83,922
$
30,660
Depreciation and Amortization:
IT&S Segment
$
11,700
$
12,329
$
14,498
Other Segment
888
3,164
3,664
General Corporate
687
820
1,438
$
13,275
$
16,313
$
19,600
Capital Expenditures:
IT&S Segment
$
6,079
$
7,779
$
7,139
Other Segment
561
599
710
General Corporate
4,771
1,022
568
$
11,411
$
9,400
$
8,417
August 31,
2024
2023
Assets:
IT&S Segment
$
613,797
$
632,113
Other Segment
26,533
28,127
General Corporate
136,998
102,357
$
777,328
$
762,597
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, ROU assets, capitalized debt issuance costs and deferred income taxes.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
57
The following tables summarize net sales and property, plant and equipment by geographic region (in thousands):
Year Ended August 31,
2024
2023
2022
Net Sales:
United States of America
$
220,689
$
231,093
$
226,020
United Kingdom
36,290
34,085
29,316
Germany
34,700
29,926
28,004
Saudi Arabia
23,113
25,762
20,892
Brazil
22,769
20,523
16,517
Australia
22,165
28,607
26,667
Canada
19,248
29,643
19,651
China
16,258
14,081
15,434
France
16,133
14,606
14,854
All Other
178,145
169,877
173,868
$
589,510
$
598,204
$
571,223
August 31,
2024
2023
Property, Plant and Equipment, net:
United States
$
18,150
$
15,081
United Kingdom
7,599
7,543
UAE
3,130
4,004
Brazil
2,870
3,197
Netherlands
2,547
2,423
Spain
1,560
1,484
All other
4,429
5,235
$
40,285
$
38,968
The Company’s largest customer accounted for approximately 3% of sales in each of the last three fiscal years. Export
sales from domestic operations were 7.9%, 9.9% and 9.8% of total net sales from continuing operations in fiscal 2024, 2023
and 2022, respectively.
Note 16. Commitments and Contingencies
We had outstanding commercial letters of credit of $4.4 million and surety bonds of $3.8 million at August 31, 2024,
while we had $8.6 million of outstanding letters of credit at August 31, 2023. Most of these instruments relate to commercial
contracts and self-insured workers’ compensation programs.
As part of the Company's global sourcing strategy, we have 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 to 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 has facilities in numerous geographic locations that are subject to environmental laws and regulations.
Environmental expenditures over the past three years have not been material. Soil and groundwater contamination has been
identified at certain facilities that we operate or formerly owned or operated. We are also a party to certain state and local
environmental matters, have provided environmental indemnifications for certain divested businesses and retain responsibility
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
58
for certain potential environmental liabilities. Management believes that such costs will not have a material adverse effect on
the Company’s financial position, results of operations or cash flows.
Additionally, in fiscal 2019, the Company provided voluntary self-disclosures to both Dutch and U.S. authorities related
to sales of products and services linked to the Crimea region of Ukraine, which sales potentially violated European Union and
U.S. sanctions provisions. Although the U.S. investigation closed without further implication, the Dutch investigation
continued. The Dutch Investigator concluded his investigation in March 2022 and provided the results to the Public Prosecutor's
office for review. Specifically, the Investigator concluded that the sales transactions violated EU sanctions. The conclusion in
the Investigator's report was consistent with the Company's understanding of what could be stated in the report and supported
the Company to record an expense in the fiscal year-ended August 31, 2021, representing the low end of a reasonable range of
financial penalties the Company may incur as no other point within the range was deemed more probable. The Company has
not adjusted its estimate of financial penalties as a result of the completion of the investigation in the year ended August 31,
2024. While there can be no assurance of the ultimate outcome of the matter, 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 17. Subsequent Event
On September 4, 2024, the Company completed the acquisition of DTA the Smart Move, S.A., a global leader in the
industrial heavy loads transportation industry, designing and manufacturing mobile robotic solutions. The purchase price was
an initial €24 million payment plus potential earn-out to be paid at the end of year three that is tied to the achievement of certain
financial objectives with a maximum total purchase price of €36 million. The acquisition was funded with both cash on hand
and borrowings from our existing credit facility. The Company has not completed the analysis of identifying and estimating the
fair value of identifiable intangible assets acquired or the fair value of the earn-out obligation. We anticipate preparing a
preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of our first quarter
of fiscal 2025. The measurement period for the valuation of net assets acquired ends as soon as information on the facts and
circumstances that existed as of the acquisition date becomes available, but not to exceed 12 months following the acquisition
date. Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during the
periods in which the adjustments are determined.
ENERPAC TOOL GROUP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
59
ENERPAC TOOL GROUP CORP.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Additions
Deductions
Balance at
Beginning
of
Period
Charged to
Costs and
Expenses
(Income)
Acquisition/
(Divestiture)
Accounts
Written Off
Less
Recoveries
Other
Balance at
End of
Period
Allowance for losses—Trade accounts receivable
August 31, 2024
$
16,781
$
641
$
—
$
(1,473) $
(37) $
15,912
August 31, 2023
17,504
1,177
(32)
(2,230)
362
16,781
August 31, 2022
4,235
14,277
—
(350)
(658)
17,504
Valuation allowance—Income taxes
August 31, 2023
$
61,432
$
1,821
$
—
$
(5,511) $
1
$
57,743
August 31, 2022
61,630
3,305
—
(3,503)
—
61,432
August 31, 2021
66,155
925
—
(5,450)
—
61,630
60
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Interim Principal
Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is
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 report. Based on such evaluation, the Company’s Chief Executive Officer and Interim
Principal Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures
are effective in recording, processing, summarizing, and reporting, and reporting, within the time periods specified in the SEC's
rules and forms, information required to be disclosed by the Company in the reports that it files or submits under the Exchange
Act, and that such information is accumulated and communicated to the Chief Executive Officer and Interim Principal Financial
Officer, as appropriate, to allow timely discussions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
The Company’s 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). The Company’s management, with the participation of the
Company’s Chief Executive Officer and Interim Principal Financial Officer, has evaluated the effectiveness of the Company’s
internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Company’s management
has concluded that, as of August 31, 2024, the Company’s internal control over financial reporting was effective.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Ernst & Young, LLP, an independent registered public accounting firm, has audited the Company’s internal control over
financial reporting as of August 31, 2024, as stated in their report which is included herein.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of fiscal 2024
that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information
During the three months ended August 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f)
of the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or a adopted or terminated a “non-Rule
10b5-1 trading arrangement” (as such terms are defined in Item 408 of Regulation S-K).
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
61
PART III
Item 10. Directors; Executive Officers and Corporate Governance
Information about the Company’s directors is incorporated by reference to the “Proposal I: Election of Directors” section
of the Company’s Proxy Statement for its Annual Meeting of Shareholders to be held on February 6, 2025 (the “2025 Annual
Meeting Proxy Statement”). Information about the Company’s Audit Committee, including the members of the committee, and
the Company’s Audit Committee financial experts, is incorporated by reference to the “Proposal I: Election of Directors” and
“Corporate Governance Matters” sections of the Company’s 2025 Annual Meeting Proxy Statement. Information with respect
to the timeliness of filings by directors and executive officers of reports required under Section 16(a) of the Securities Exchange
Act of 1934, as amended, is incorporated by reference to the "Other Information—Delinquent Section 16(a) Reports" section of
the 2025 Annual Meeting Proxy Statement. Information about the Company’s executive officers required by this item is
contained in the discussion entitled “Executive Officers of the Registrant” in Part I hereof.
The Company has adopted a code of ethics that applies to its senior executive team, including its Chief Executive Officer,
Interim Principal Financial Officer and Corporate Controller. The code of ethics is posted on the Company’s website and is
available free of charge at www.enerpactoolgroup.com. The Company intends to satisfy the requirements under Item 5.05 of
Form 8-K regarding disclosure of amendments to, or waivers from, provisions of its code of ethics that apply to the Chief
Executive Officer, Interim Principal Financial Officer or Corporate Controller by posting such information on the Company’s
website.
The Company has adopted an insider trading policy addressing the purchase, sale and other disposition of the Company’s
securities by its officers, directors and employees that is reasonably designed to promote compliance with U.S. federal insider
trading laws, rules and regulations and the rules of the New York Stock Exchange. That policy is filed as Exhibit 19 to this
report.
Item 11. Executive Compensation
The information required by this item is incorporated by reference from the “Election of Directors,” “Corporate
Governance Matters,” “Executive Compensation” (other than the information appearing under the heading "Pay Versus
Performance") and "Non-Employee Director Compensation" sections of the 2025 Annual Meeting Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference from the “Certain Beneficial Owners” and “Executive
Compensation—Equity Compensation Plan Information” sections of the 2025 Annual Meeting Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference from the “Corporate Governance Matters—Certain
Relationships and Related Party Transactions” section of the 2025 Annual Meeting Proxy Statement.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference from the “Other Information—Independent Public
Accountants” section of the 2025 Annual Meeting Proxy Statement.
62
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of this report:
1. Consolidated Financial Statements
See “Index to Consolidated Financial Statements” set forth in Item 8, “Financial Statements and
Supplementary Data” for a list of financial statements filed as part of this report.
2. Financial Statement Schedules
See “Index to Financial Statement Schedule” set forth in Item 8, “Financial Statements and Supplementary
Data.”
3. 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
3.1
(a) Amended and Restated Articles of
Incorporation
Exhibit 4.9 to the Registrant's
Form 10-Q for the quarter ended
February 28, 2001
(b) Amendment to Amended and Restated
Articles of Incorporation
Exhibit 3.1(b) of the Registrant's
Form 10-K for the fiscal year
ended August 31, 2003
(c) Amendment to Amended and Restated
Articles of Incorporation
Exhibit 3.1 to the Registrant's
Form 10-K for the fiscal year
ended August 31, 2004
(d) Amendment to Amended and Restated
Articles of Incorporation
Exhibit 3.1 to the Registrant's
Form 8-K filed on July 18, 2006
(e) Amendment of Amended and Restated
Articles of Incorporation
Exhibit 3.1 to the Registrant's
Form 8-K filed on January 14,
2010
(f) Amendment of Amended and Restated
Articles of Incorporation
Exhibit 3.1 to the Registrant's
Form 8-K/A filed on January 30,
2020
3.2
Amended and Restated Bylaws, as amended
Exhibit 3.1 of the Registrant's
Form 8-K filed on August 1, 2022
4.1
Description of Registered Securities
Exhibit 4.1 to the Registrant's
Form 10-K for the fiscal year
ended August 31, 2020
63
Exhibit
Description
Incorporated Herein By Reference To
Filed
Herewith
Furnished
Herewith
10.1
Credit Agreement dated as of September 9,
2022 among Enerpac Tool Group Corp., the
initial subsidiary borrowers party thereto, the
guarantors party thereto, the lenders party
thereto, and PNC Bank, National Association,
as administrative agent
Exhibit 10.1 to the Registrant's
Current Report on Form 8-K filed
on September 15, 2022
10.2*
Outside Directors’ Deferred Compensation
Plan (as amended and restated effective July
23, 2021)
Exhibit 10.2 to the Registrant's
Form 10-K for the fiscal year
ended August 31, 2021
10.3*
Deferred Compensation Plan (conformed
through the fourth amendment)
Exhibit 10.2 to the Registrant's
Form 10-Q for the quarter ended
November 30, 2014
10.4*
Non-Qualified Deferred Compensation Plan
(conformed through the first amendment)
Exhibit 10.4 to the Registrant's
Form 10-K for the fiscal year
ended August 31, 2020
10.5*
2010 Employee Stock Purchase Plan (as
amended and restated December 1, 2023)
X
10.6*
Enerpac Tool Group Corp. 2017 Omnibus
Incentive Plan (as amended and restated
November 9, 2020)
Appendix A to the Proxy
Statement on Schedule 14A filed
by Enerpac Tool Group Corp. on
December 4, 2020
10.7**
2009 Omnibus Incentive Plan, conformed
through the Second Amendment thereto
Exhibit 99.1 to the Registrant's
Form 8-K filed on January 17,
2013
10.8*
(a) Amended and Restated 2001 Outside
Directors’ Stock Plan
Exhibit A to the Registrant's
Definitive Proxy Statement, dated
December 5, 2005
(b) First Amendment to the Amended and
Restated 2001 Outside Directors’ Stock Plan
dated December 25, 2008
Exhibit 10.10 to the Registrant's
Form 10-Q for the quarter ended
November 30, 2008
10.9*
Supplemental Executive Retirement Plan
(conformed through the first amendment)
Exhibit 10.3 to the Registrant's
Form 10-Q for the quarter ended
November 30, 2014
10.10*
Senior Officer Severance Plan
Exhibit 10.1 to the Registrant's
Current Report on Form 8-K filed
on July 31, 2019
10.11*
Form of Indemnification Agreement for
Directors and Officers
Exhibit 10.1 to the Registrant's
Form 8-K filed on August 2, 2018
10.12*
Form of Amended and Restated Change in
Control Agreement
Exhibit 10.1 to the Registrant’s
Form 8-K filed on August 1, 2017
64
Exhibit
Description
Incorporated Herein By Reference To
Filed
Herewith
Furnished
Herewith
10.13*
Executive Officer Bonus Plan
Exhibit B to the Registrant's
Definitive Proxy Statement dated
December 3, 2012
10.14*
(a) Form of NQSO Award (Director) under
the 2009 Omnibus Incentive Plan*
Exhibit 10.1(a) to the Registrant's
Form 10-Q for the quarter ended
February 28, 2014
(b) Form of NQSO Award (Officer) under the
2009 Omnibus Incentive Plan*
Exhibit 10.1(b) to the Registrant's
Form 10-Q for the quarter ended
February 28, 2014
10.15*
(a) Form RSA Award (Director) under the
2009 Omnibus Incentive Plan*
Exhibit 10.2(a) to the Registrant's
Form 10-Q for the quarter ended
February 28, 2014
(b) Form of RSA Award (Officer) under the
2009 Omnibus Incentive Plan*
Exhibit 10.2(b) to the Registrant's
Form 10-Q for the quarter ended
February 28, 2014
10.16*
(a) Form of RSU Award (Director) under the
2009 Omnibus Incentive Plan*
Exhibit 10.3(a) to the Registrant's
Form 10-Q for the quarter ended
February 28, 2014
(b) Form of RSU Award (Officer) under the
2009 Omnibus Incentive Plan*
Exhibit 10.3(b) to the Registrant's
Form 10-Q for the quarter ended
February 28, 2014
10.17*
(a) Form RSA Award (Director) under the
2017 Omnibus Incentive Plan
Exhibit 10.14 to the Registrant's
Form 10-K for the fiscal year
ended August 31, 2018
10.18*
(a) Form of RSU Award (Director) under the
2017 Omnibus Incentive Plan*
Exhibit 10.15(a) to the
Registrant's Form 10-K for the
fiscal year ended August 31, 2018
(b) Form of RSU Award (Officer) under the
2017 Omnibus Incentive Plan*
Exhibit 10.15(b) to the
Registrant's Form 10-K for the
fiscal year ended August 31, 2018
(c) Form of RSU Award (Officer) under the
2017 Omnibus Incentive Plan for awards
commencing in 2024)*
Exhibit 10.1 to the Registrant's
Form 10-Q for the quarter ended
May31, 2024
10.19*
(a) Form of PSU Award - Total Shareholder
Return (Officer) under the 2017 Omnibus
Incentive Plan*
Exhibit 10.16(a) to the
Registrant's Form 10-K for the
fiscal year ended August 31, 2018
(b) Form of PSU Award - Free Cash Flow
(Officer) under the 2017 Omnibus Incentive
Plan*
Exhibit 10.16(b) to the
Registrant's Form 10-K for the
fiscal year ended August 31, 2018
65
Exhibit
Description
Incorporated Herein By Reference To
Filed
Herewith
Furnished
Herewith
(c) Form of PSU Award - Total Shareholder
Return (Officer) under the 2017 Omnibus
Incentive Plan (for awards commencing in
2024)*
Exhibit 10.2 to the Registrant's
Form 10-Q for the quarter ended
May31, 2024
(d) Form of PSU Award - Return on Invested
Capital (Officer) under the 2017 Omnibus
Incentive Plan (for awards commencing in
2024)*
Exhibit 10.3 to the Registrant's
Form 10-Q for the quarter ended
May31, 2024
(e) Form of PSU Award - Earnings Per Share
(Officer) under the 2017 Omnibus Incentive
Plan (for awards commencing in 2024)*
Exhibit 10.4 to the Registrant's
Form 10-Q for the quarter ended
May31, 2024
10.20*
(a) Form of Restricted Stock Unit (RSU)
agreement under the 2017 Omnibus Incentive
Plan (Special Executive Grant)
Exhibit 10.1 to the Registrant's
Form 8-K filed on September 1,
2023
(b) Form of Performance Share Award
agreement under the 2017 Omnibus Incentive
Plan (Special Executive Grant)
Exhibit 10.2 to the Registrant's
Form 8-K filed on September 1,
2023
10.21*
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
10.22*
Letter agreement dated May 4, 2022 between
Anthony P. Colucci and Enerpac Tool Group
Corp.
10.23*
Letter agreement dated January 19, 2022
between Benjamin J. Topercer and Enerpac
Tool Group Corp.
Exhibit 10.23 to the Registrant's
Form 10-K for the fiscal year
ended August 31, 2022
10.24*
Letter agreement dated June 17, 2024
between Eric T. Chack and Enerpac Tool
Group Corp.
X
14
Code of Ethics Applicable to Senior Financial
Executives
Exhibit 14 of the Registrant’s
Form 10-K for the fiscal year
ended August 31, 2017
19
Enerpac Tool Group Corp. Insider Trading
Policy
X
21
Subsidiaries of the Registrant
X
23
Consent of Ernst & Young LLP
X
24
Power of Attorney
See signature
page of this
report
66
Exhibit
Description
Incorporated Herein By Reference To
Filed
Herewith
Furnished
Herewith
31.1
Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
X
31.2
Certification of Interim Principal Financial
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
X
32.1
Certification of Chief Executive Officer
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
X
32.2
Certification of Interim Principal Financial
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
X
97
Enerpac Tool Group Corp. Dodd-Frank
Clawback Policy
X
101
The following materials from the Enerpac
Tool Group Corp. Form 10-K for the year
ended August 31, 2024 formatted in Inline
Extensible Business Reporting Language
(Inline XBRL): (i) the Consolidated
Statements of Earnings, (ii) the Consolidated
Statements of Comprehensive Income (Loss),
(iii) the Consolidated Balance Sheets, (iv) the
Consolidated Statements of Cash Flows and
(v) the Notes to Consolidated Financial
Statements.
X
104
Cover Page Interactive Data File (formatted
as Inline XBRL and contained in the
Interactive Data Files submitted as Exhibit
101)
X
Item 16. Form 10-K Summary
None.
67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By:
/s/ P. SHANNON BURNS
P. Shannon Burns
Interim Principal Financial Officer and Head of Financial Planning,
Operations and Decision Support
Dated: October 21, 2024
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Paul E. Sternlieb, P. Shannon Burns and James P. Denis, and each of them, his true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments to this report, and to file the same, with all and any other regulatory
authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.*
68
Signature
Title
/s/ PAUL E. STERNLIEB
President and Chief Executive Officer, Director
Paul E. Sternlieb
(Principal Executive Officer)
/s/ ALFREDO ALTAVILLA
Director
Alfredo Altavilla
/s/ JUDY ALTMAIER
Director
Judy Altmaier
/s/ J. PALMER CLARKSON
Director
J. Palmer Clarkson
/s/ DANNY L. CUNNINGHAM
Director
Danny L. Cunningham
/s/ E. JAMES FERLAND
Chairman of the Board of Directors
E. James Ferland
/s/ COLLEEN M. HEALY
Director
Colleen M. Healy
/s/ RICHARD D. HOLDER
Director
Richard D. Holder
/s/ LYNN C. MINELLA
Director
Lynn C. Minella
/s/ SIDNEY S. SIMMONS
Director
Sidney S. Simmons
/s/ P. SHANNON BURNS
Interim Principal Financial Officer and Head of Financial
Planning, Operations and Decision Support
P. Shannon Burns
(Principal Financial Officer)
/s/ PATRICK J. DAWSON
Interim Principal Accounting Officer and Corporate
Controller
Patrick J. Dawson
(Principal Accounting Officer)
* Each of the above signatures is affixed as of October 21, 2024.
69
FY2020
FY2021
FY2022
FY2023
FY2024
Net Sales
$493,292
$528,660
$571,223
$598,204
$589,510
Organic Growth (Decline)
-20%
5%
11%
8%
2%
Gross Profit
217,193
243,156
265,388
295,039
301,011
Gross Profit %
44.0%
46.0%
46.5%
49.3%
51.1%
Organic Sales Growth (Decline)
FY2024
FY2023
% Change
Net Sales
$589,510
$598,204
-1%
Fx Impact
-
1,074
Divestiture
-
(22,737)
Organic Sales Growth (Decline)
$589,510
$576,541
2%
FY2023
FY2022
% Change
Net Sales
$598,204
$571,223
5%
Fx Impact
-
(10,998)
Divestiture
(121)
(5,556)
Organic Sales Growth (Decline)
$598,083
$554,669
8%
FY2022
FY2021
% Change
Net Sales
$571,223
$528,660
8%
Fx Impact
-
(14,565)
Organic Sales Growth (Decline)
$571,223
$514,095
11%
FY2021
FY2020
% Change
Net Sales
$528,660
$493,292
7%
Fx Impact
-
10,549
Acquisitions
(13,584)
(6,789)
Strategic Exits
-
(8,529)
Organic Sales Growth (Decline)
$515,076
$488,523
5%
FY2020
FY2019
% Change
Net Sales
$493,292
$654,758
-25%
Fx Impact
-
(6,471)
Acquisitions
(6,252)
-
Strategic Exits
(8,426)
(52,508)
Organic Sales Growth (Decline)
$478,614
$595,779
-20%
Organic Sales Growth (Decline) by Product Line
FY2024
FY2023
% Change
IT&S Net Sales
$571,152
$555,178
2.9%
Fx Impact
-
1,074
IT&S Organic Sales Growth (Decline)
$571,152
$556,252
2.7%
FY2024
FY2023
% Change
IT&S Product Net Sales
$455,646
$447,603
1.8%
Fx Impact
-
303
IT&S Product Organic Sales Growth (Decline)
$455,646
$447,906
1.7%
FY2024
FY2023
% Change
IT&S Service Net Sales
$115,506
$107,575
7%
Fx Impact
-
770
IT&S Service Organic Sales Growth (Decline)
$115,506
$108,345
7%
APPENDIX
Reconciliation of GAAP measure to Non-GAAP measures
(the following information is not included as part of Enerpac Tool Group's SEC Form 10-K)
(US$ in thousands)
EBITDA from Continuing Operations
FY2020
FY2021
FY2022
FY2023
FY2024
Earnings from continuing operations
5,557
$
40,212
$
19,591
$
53,649
$
82,207
$
Financing costs, net
19,218
5,266
4,386
12,389
13,524
Income tax expense
2,292
3,763
4,401
15,249
23,312
Depreciation & amortization
20,720
21,611
19,600
16,313
13,275
EBITDA
47,787
$
70,852
$
47,978
$
97,600
$
132,318
$
Adj EBITDA from Continuing Operations
EBITDA
47,787
$
70,852
$
47,978
$
97,600
$
132,318
$
Impairment & divestiture charges (benefit)
(3,159)
6,198
2,413
(6,155)
147
Restructuring charges
8,179
2,392
8,135
7,681
7,843
Gain on sale of facility, net of transaction charges
-
(5,359)
(585)
-
-
Leadership transition charges
-
609
8,269
783
-
Business review charges
-
-
3,002
-
-
ASCEND transformation program charges
-
-
13,616
35,419
7,047
Purchase accounting inventory step-up charge
403
-
-
-
-
Pension curtailment
(8)
-
-
-
-
M&A charges
-
-
-
1,015
121
Adj. EBITDA
52,452
$
74,692
$
82,828
$
136,343
$
147,476
$
Adj EBITDA %
10.6%
14.1%
14.5%
22.8%
25.0%
FY2020
FY2021
FY2022
FY2023
FY2024
Adjusted Earnings from Continuing Operations
Net Earnings
723
$
38,077
$
15,686
$
46,561
$
85,749
$
Loss from discontinued operations, net of income tax
(4,834)
(2,135)
(3,905)
(7,088)
3,542
Earnings from Continuing Operations
5,557
$
40,212
$
19,591
$
53,649
$
82,207
$
Impairment & divestiture charges (benefit)
(3,159)
6,198
2,413
(6,155)
147
Restructuring charges
8,179
2,392
8,135
7,681
7,843
Gain on sale of facility, net of transaction charges
-
(5,359)
(585)
-
-
Leadership transition charges
-
609
8,269
783
-
Business review charges
-
-
3,002
-
-
ASCEND transformation program charges
-
-
13,616
35,419
7,047
M&A charges
-
-
-
1,015
121
Accelerated debt issuance costs
1,666
-
-
317
-
Purchase accounting inventory step-up charge
403
-
-
-
-
Pension curtailment
(758)
-
-
-
-
Net tax effect of reconciling items above
(1,236)
1,984
(6,291)
(9,976)
(2,945)
Other income tax (benefit) expense
(74)
(8,155)
210
144
137
Adjusted Earnings from Continuing Operations
10,578
$
37,881
$
48,360
$
82,877
$
94,557
$
Adjusted Diluted Earnings per share from Continuing Operations
Net Earnings
0.01
$
0.63
$
0.26
$
0.82
$
1.56
$
Loss from discontinued operations, net of income tax
(0.08)
(0.04)
(0.07)
(0.12)
0.06
Earnings from Continuing Operations
0.09
0.67
0.33
0.94
1.50
Impairment & divestiture charges (benefit), net of tax effect
(0.04)
0.09
0.04
(0.11)
0.00
Restructuring charges, net of tax effect
0.11
0.03
0.11
0.11
0.11
Gain on sale of facility, net of transaction charges, net of tax effect
-
(0.04)
(0.01)
-
-
Leadership transition charges, net of tax effect
-
0.01
0.12
0.01
-
Business review charges, net of tax effect
-
-
0.04
-
-
Pension curtailment, net of tax effect
(0.01)
-
-
-
-
M&A charges, net of tax effect
-
-
-
0.01
-
ASCEND transformation program charges, net of tax effect
-
-
0.17
0.48
0.11
Accelerated debt issuance costs, net of tax effect
0.02
-
-
0.00
-
Purchase accounting inventory step-up charge, net of tax effect
0.01
-
-
-
-
Other income tax (benefit) expense
(0.00)
(0.14)
0.00
0.00
0.00
Adjusted Diluted Earnings per share from Continuing Operations
0.18
$
0.63
$
0.81
$
1.45
$
1.72
$
Reconciliation of GAAP measure to Non-GAAP measures
(the following information is not included as part of Enerpac Tool Group's SEC Form 10-K)
(US$ in thousands)
Free Cash Flow
FY2020
FY2021
FY2022
FY2023
FY2024
Cash (used in) provided by operating activities
(3,159)
54,183
51,736
77,603
81,319
Capital expenditures
(12,053)
(12,019)
(7,241)
(8,715)
(11,411)
Free Cash Flow
(13,017)
42,164
44,495
68,888
69,908
Adjusted Selling, general and administrative expenses
FY2021
FY2022
FY2023
FY2024
Selling, general and administrative expenses
175,277
$
216,874
$
205,064
$
168,566
$
Gain on sale of facility, net of transaction charges
5,360
585
-
-
Leadership transition charges
(609)
(8,269)
(783)
-
Business review charges
-
(3,002)
-
-
ASCEND transformation program charges
-
(13,610)
(34,495)
(6,029)
M&A charges
-
-
(1,015)
(121)
Adj. Selling, general and administrative expenses
180,028
$
192,578
$
168,771
$
162,415
$
Adj. Selling, general and administrative expenses %
34.1%
33.7%
28.2%
27.6%
Notes:
For all reconciliations of GAAP measures to non-GAAP measures, the summation of the individual components may not equal the total due to
rounding. With respect to the earnings per share reconciliations the impact of share dilution on the calculation of the net earnings or loss per
share on discontinued operations per share may result in the summation of these components not equaling the total earnings per share from
continuing operations.
Reconciliation of GAAP measure to Non-GAAP measures
(the following information is not included as part of Enerpac Tool Group's SEC Form 10-K)
(US$ in thousands)
Paul E. Sternlieb
Director, President and Chief Executive Officer
Eric T. Chack
Executive Vice President - Operations
James P. Denis
Executive Vice President, General Counsel, Corporate
Secretary & Chief Compliance Counsel
Darren M. Kozik
Executive Vice President, Chief Financial Officer
Benjamin J. Topercer
Executive Vice President, Chief Human Resource Officer
CORPORATE OFFICE
N86 W12500 Westbrook Crossing
Menomonee Falls, Wisconsin 53051
EXCHANGE
New York Stock Exchange
Ticker Symbol: EPAC
TRANSFER AGENT
EQ Shareowner Services
PO Box 64874
St. Paul, MN 55164
800.468.9716
INDEPENDENT ACCOUNTANT
Ernst & Young
833 East Michigan St.
Milwaukee, WI 53202
INVESTOR RELATIONS
Financial analysts & investors
should direct inquiries to:
Travis Williams
Senior Director of Investor Relations
investor.relations@enerpac.com
INDEPENDENT DIRECTORS
Alfredo Altavilla
Former Executive Chairman of Italia Transporto Aereo, S.p.A.
Judy L. Altmaier
Former President, Exmark Manufacturing Co.
J. Palmer Clarkson
Former President and CEO, Bridgestone HosePower, LLC
Danny L. Cunningham
Former Chief Risk Officer and Retired Partner of Deloitte &
Touche, LLP
E. James Ferland
Former Chairman and CEO of Babcock & Wilcox Enterprises, Inc.
Colleen Healy
Former CFO and Principal Accounting Officer of SailPoint
Technologies Holdings, Inc.
Richard D. Holder
CEO of Loparex, LLC
Lynn C. Minella
Former EVP and CHRO of Johnson Controls International plc
Sidney S. Simmons, II
Founder and Principal at Simmons Law
EXECUTIVE OFFICERS
This Annual Report contains forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. In addition to statements with respect
to guidance, the terms “outlook,” “guidance,” “may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “objective,” “plan,” “project” and similar expressions are intended
to identify forward-looking statements. Such forward-looking statements are subject to inherent risks and uncertainties that may cause actual results or events to differ materially
from those contemplated by such forward-looking statements. In addition to the assumptions and other factors referred to specifically in connection with such statements, risks and
uncertainties that may cause actual results or events to differ materially from those contemplated by such forward-looking statements include, without limitation, general economic
uncertainty, market conditions in the industrial, oil & gas, energy, power generation, infrastructure, commercial construction, truck and automotive industries, supply chain risks,
including disruptions in deliveries from suppliers due to political tensions or the imposition, or threat of imposition, of tariffs, which could be affected by the outcome of the 2024 U.S.
presidential election, the impact of geopolitical activity, including the invasion of Ukraine by Russia and international sanctions imposed in response thereto, as well as armed conflicts
in the Middle East, including the impact on shipping in the Red Sea, the ability of the Company to achieve its plans or objectives related to its growth strategy, market acceptance of
existing and new products, market acceptance of price increases, successful integration of acquisitions, the impact of dispositions and restructurings, the ability of the Company to
continue to achieve its plans or objectives related to the ASCEND program, including any assumptions underlying its calculation of expected incremental operating profit or program
investment, operating margin risk due to competitive pricing and operating efficiencies, risks related to reliance on independent agents and distributors for the distribution and
service of products, material, labor, or overhead cost increases, tax law changes, foreign currency risk, interest rate risk, commodity risk, tariffs, litigation matters, cybersecurity risk,
impairment of goodwill or other intangible assets, the Company’s ability to access capital markets and other risks and uncertainties that may be referred to or noted in the Company’s
reports filed with the Securities and Exchange Commission from time to time, including those described in the Company’s Form 10-K for the fiscal year ended August 31, 2024.
Enerpac Tool Group disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.
Enerpac Tool Group
CORPORATE INFORMATION
Company leadership and contact information
N86 W12500 Westbrook Crossing
Menomonee Falls, WI 53051
+1.262.293.1500
www.enerpactoolgroup.com