ENERPAC TOOL GROUP CORP 10-K

Item 8. Financial Statements and Supplementary Data Page INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm 27 Consolidated Statements of Operations for the years ended August 31, 2020, 2019 and 2018 29 Consolidated Statements of Comprehensive Income (Loss) for the years ended August 31, 20 20 , 201 9 and 201 8 30 Consolidated Balance Sheets as of August 31, 20 20 a nd 201 9 31 Consolidated Statements of Cash Flows for the years ended August 31, 20 20 , 201 9 and 201 8 32 Consolidated Statements of Shareholders’ Equity for the years ended August 31, 20 20 , 201 9 and 201 8 33 Notes to consolidated financial statements 34 INDEX TO FINANCIAL STATEMENT SCHEDULE Schedule II—Valuation and Qualifying Accounts for the years ended August 31, 20 20 , 201 9 and 201 8 61 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. 26 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Enerpac Tool Group Corp. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Enerpac Tool Group Corp. and its subsidiaries (the “Company”) as of August 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of shareholders’ equity and of cash flows for each of the three years in the period ended August 31, 2020, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of August 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of August 31, 2020 and 2019 , and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Change in Accounting Principle As discussed in Note 1 to the consolidated statements, the Company changed the manner in which it accounts for leases in 2020. Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded HTL Group from its assessment of internal control over financial reporting as of August 31, 2020 because it was acquired by the Company in a purchase business combination during 2020. We have also excluded HTL Group from our audit of internal control over financial reporting. HTL Group is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 2% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended August 31, 2020. 27 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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters 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 accounts or disclosures to which it relates. Goodwill Impairment Assessment – Certain Reporting Unit within the Other Segment As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated goodwill balance was $281.2 million as of August 31, 2020. Goodwill associated with the Other segment was $17.6 million. 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. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded. 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. The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of a certain reporting unit within the Other segment is a critical audit matter are the significant judgment by management when developing the fair value measurement of the reporting unit; this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence related to the forecasted revenues and operating profit margins assumptions. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the reporting unit. These procedures also included, among others, testing management’s process for developing the fair value estimate; evaluating the appropriateness of the discounted cash flow model; testing the completeness and accuracy of underlying data used in the model; and evaluating the reasonableness of significant assumptions used by management related to the forecasted revenues and operating profit margins. Evaluating management’s assumptions related to the forecasted revenues and operating profit margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. /s/ PricewaterhouseCoopers LLP Milwaukee, Wisconsin October 26, 2020 We have served as the Company’s auditor since 1997. 28 ENERPAC TOOL GROUP CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Year Ended August 31, 2020 2019 2018 Net sales Product $ 379,899 $ 478,946 $ 489,623 Service & rental 113,393 175,812 151,680 Total net sales 493,292 654,758 641,303 Cost of products sold Product 204,524 247,771 264,878 Service & rental 71,575 114,335 93,141 Total cost of products sold 276,099 362,106 358,019 Gross profit 217,193 292,652 283,284 Selling, administrative and engineering expenses 180,513 209,231 210,256 Amortization of intangible assets 8,323 8,922 9,280 Restructuring charges 7,335 4,156 10,555 Impairment & divestiture (benefit) charges ( 3,159 ) 22,827 2,987 Operating profit 24,181 47,516 50,206 Financing costs, net 19,218 28,163 30,872 Other (income) expense, net ( 2,886 ) 629 138 Earnings before income tax expense 7,849 18,724 19,196 Income tax expense 2,292 10,657 14,450 Net earnings from continuing operations 5,557 8,067 4,746 Loss from discontinued operations, net of income taxes ( 4,834 ) ( 257,212 ) ( 26,394 ) Net earnings (loss) $ 723 $ ( 249,145 ) $ ( 21,648 ) Earnings per share from continuing operations Basic $ 0.09 $ 0.13 $ 0.08 Diluted $ 0.09 $ 0.13 $ 0.08 Loss per share from discontinued operations Basic ( 0.08 ) ( 4.21 ) ( 0.44 ) Diluted ( 0.08 ) ( 4.18 ) ( 0.43 ) Earnings (loss) per share Basic 0.01 ( 4.07 ) ( 0.36 ) Diluted 0.01 ( 4.04 ) ( 0.35 ) Weighted average common shares outstanding Basic 59,952 61,151 60,441 Diluted 60,269 61,607 61,028 The accompanying notes are an integral part of these consolidated financial statements. 29 ENERPAC TOOL GROUP CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Twelve Months Ended 2020 2019 2018 Net income (loss) $ 723 $ ( 249,145 ) $ ( 21,648 ) Other comprehensive income, net of tax Foreign currency translation adjustments 23,224 ( 27,527 ) 49,307 Recognition of foreign currency translation losses from divested businesses 51,994 34,909 — Pension, other postretirement benefit plans, and cash flow hedges ( 603 ) ( 4,809 ) 3,709 Total other comprehensive income, net of tax 74,615 2,573 53,016 Comprehensive income (loss) $ 75,338 $ ( 246,572 ) $ 31,368 The accompanying notes are an integral part of these consolidated financial statements. 30 ENERPAC TOOL GROUP CORP. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) August 31, 2020 2019 A S S E T S Current assets Cash and cash equivalents $ 152,170 $ 211,151 Accounts receivable, net 84,170 125,883 Inventories, net 69,171 77,187 Assets from discontinued operations — 285,578 Other current assets 35,621 30,526 Total current assets 341,132 730,325 Property, plant and equipment, net 61,405 56,729 Goodwill 281,154 260,415 Other intangible assets, net 62,382 52,375 Other long-term assets 78,221 24,430 Total assets $ 824,294 $ 1,124,274 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 $ 45,069 $ 76,914 Accrued compensation and benefits 17,793 26,421 Current maturities of debt — 7,500 Income taxes payable 1,937 4,838 Liabilities from discontinued operations — 143,763 Other current liabilities 40,723 40,965 Total current liabilities 105,522 300,401 Long-term debt, net 255,000 452,945 Deferred income taxes 1,708 1,564 Pension and postretirement benefit liabilities 20,190 20,213 Other long-term liabilities 82,648 47,972 Total liabilities 465,068 823,095 Commitments and contingencies (Note 16) Shareholders’ equity Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 82,593,945 and 81,920,679 shares, respectively 16,519 16,384 Additional paid-in capital 193,492 181,213 Treasury stock, at cost, 22,799,230 and 21,455,568 shares, respectively ( 667,732 ) ( 640,212 ) Retained earnings 917,671 915,466 Accumulated other comprehensive loss ( 100,724 ) ( 171,672 ) Stock held in trust ( 2,562 ) ( 3,070 ) Deferred compensation liability 2,562 3,070 Total shareholders' equity 359,226 301,179 Total liabilities and shareholders' equity $ 824,294 $ 1,124,274 The accompanying notes are an integral part of these consolidated financial statements. 31 ENERPAC TOOL GROUP CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended August 31, 2020 2019 2018 Operating Activities Net earnings (loss) $ 723 $ ( 249,145 ) $ ( 21,648 ) Less: Net loss from discontinued operations ( 4,834 ) ( 257,212 ) ( 26,394 ) Net earnings from continuing operations 5,557 8,067 4,746 Adjustments to reconcile net earnings to net cash provided by operating activities - continuing operations: Impairment & divestiture (benefit) charges, net of tax effect ( 2,506 ) 20,930 12,385 Depreciation and amortization 20,720 20,217 20,405 Stock-based compensation expense 9,624 10,882 11,333 (Benefit) provision for deferred income taxes ( 7,819 ) 3,955 5,588 Amortization of debt issuance costs 2,549 1,200 2,399 Other non-cash charges 1,204 405 285 Changes in components of working capital and other, excluding acquisitions and divestitures: Accounts receivable 44,749 ( 4,993 ) ( 7,462 ) Inventories 8,960 ( 7,760 ) ( 1,142 ) Trade accounts payable ( 32,081 ) 6,858 ( 1,872 ) Prepaid expenses and other assets 7,828 5,269 ( 3,868 ) Income tax accounts ( 7,306 ) ( 913 ) 17,354 Accrued compensation and benefits ( 9,845 ) ( 8,368 ) 1,609 Other accrued liabilities ( 23,635 ) ( 14,846 ) 10,156 Cash provided by operating activities - continuing operations 17,999 40,903 71,916 Cash (used in) provided by operating activities - discontinued operations ( 21,158 ) 12,942 34,177 Cash (used in) provided by operating activities ( 3,159 ) 53,845 106,093 Investing Activities Capital expenditures ( 12,053 ) ( 14,923 ) ( 11,021 ) Proceeds from sale of property, plant and equipment 708 1,462 104 Rental asset buyout for Viking divestiture — — ( 27,718 ) Proceeds from sale of business/product line 10,226 — 8,902 Cash paid for business acquisitions, net of cash acquired ( 33,298 ) — ( 23,218 ) Other investing activities ( 710 ) — — Cash used in investing activities - continuing operations ( 35,127 ) ( 13,461 ) ( 52,951 ) Cash provided by (used in) investing activities - discontinued operations 211,200 24,507 ( 9,800 ) Cash provided by (used in) investing activities 176,073 11,046 ( 62,751 ) Financing Activities Borrowings on revolving credit facility 395,000 — — Principal payments on revolving credit facility ( 140,000 ) — — Redemption of 5.625% Senior Notes ( 287,559 ) — — Principal repayment on term loan ( 175,000 ) ( 72,500 ) ( 30,000 ) Payment for redemption of term loan — ( 200,000 ) — Proceeds from issuance of term loan — 200,000 — Purchase of treasury shares ( 27,520 ) ( 22,481 ) — Taxes paid related to the net share settlement of equity awards ( 4,286 ) ( 1,872 ) ( 1,284 ) Stock option exercises & other 3,092 1,900 15,681 Payment of cash dividend ( 2,419 ) ( 2,439 ) ( 2,390 ) Payment of debt issuance costs ( 234 ) ( 2,125 ) — Cash used in financing activities - continuing operations ( 238,926 ) ( 99,517 ) ( 17,993 ) Cash used in financing activities - discontinued operations — — — Cash used in financing activities ( 238,926 ) ( 99,517 ) ( 17,993 ) Effect of exchange rate changes on cash 7,031 ( 4,713 ) ( 4,430 ) Net (decrease) increase in cash and cash equivalents ( 58,981 ) ( 39,339 ) 20,919 Cash and cash equivalents - beginning of period 211,151 250,490 229,571 Cash and cash equivalents - end of period $ 152,170 $ 211,151 $ 250,490 The accompanying notes are an integral part of these consolidated financial statements. 32 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, 2017 80,200 $ 16,040 $ 138,449 $ ( 617,731 ) $ 1,191,042 $ ( 227,261 ) $ ( 2,696 ) $ 2,696 $ 500,539 Net loss — — — — ( 21,648 ) — — — ( 21,648 ) Other comprehensive income, net of tax — — — — — 53,016 — — 53,016 Stock contribution to employee benefit plans and other 20 4 535 — — — — — 539 Restricted stock awards 400 80 ( 80 ) — — — — — — Cash dividend ($0.04 per share) — — — — ( 2,439 ) — — — ( 2,439 ) Stock based compensation expense — — 14,457 — — — — — 14,457 Stock option exercises 780 156 14,984 — — — — — 15,140 Tax effect related to net share settlement of equity awards — — ( 1,281 ) — — — — — ( 1,281 ) Stock issued to, acquired for and distributed from rabbi trust 25 5 384 — — — 246 ( 246 ) 389 Balance at August 31, 2018 81,424 16,285 167,448 ( 617,731 ) 1,166,955 ( 174,245 ) ( 2,450 ) 2,450 558,712 Net loss — — — — ( 249,145 ) — — — ( 249,145 ) Other comprehensive income, net of tax — — — — — 2,573 — — 2,573 Stock contribution to employee benefit plans and other 20 4 492 — — — — — 496 Restricted stock awards 375 75 ( 75 ) — — — — — — Cash dividend ($0.04 per share) — — — — ( 2,419 ) — — — ( 2,419 ) Treasury stock repurchases — — — ( 22,481 ) — — — — ( 22,481 ) Stock based compensation expense — — 13,318 — — — — — 13,318 Stock option exercises 65 13 1,391 — — — — — 1,404 Tax effect related to net share settlement of equity awards — — ( 1,872 ) — — — — — ( 1,872 ) Stock issued to, acquired for and distributed from rabbi trust 35 7 511 — — — ( 620 ) 620 518 Adoption of accounting standards — — — — 75 — — — 75 Balance at August 31, 2019 81,919 16,384 181,213 ( 640,212 ) 915,466 ( 171,672 ) ( 3,070 ) 3,070 301,179 Net income — — — — 723 — — — 723 Other comprehensive income, net of tax — — — — — 74,615 — — 74,615 Stock contribution to employee benefit plans and other 23 5 456 — — — — — 461 Restricted stock awards 484 96 ( 96 ) — — — — — — Cash dividend ($0.04 per share) — — — — ( 2,391 ) — — — ( 2,391 ) Treasury stock repurchases — — — ( 27,520 ) — — — — ( 27,520 ) Stock based compensation expense — — 13,309 — — — — — 13,309 Stock option exercises 145 29 2,602 — — — — — 2,631 Tax effect related to net share settlement of equity awards — — ( 4,286 ) — — — — — ( 4,286 ) Stock issued to, acquired for and distributed from rabbi trust 23 5 294 — — — 508 ( 508 ) 299 Adoption of accounting standards (Note 1) — — — — 3,873 ( 3,667 ) — — 206 Balance at August 31, 2020 82,594 $ 16,519 $ 193,492 $ ( 667,732 ) $ 917,671 $ ( 100,724 ) $ ( 2,562 ) $ 2,562 $ 359,226 The accompanying notes are an integral part of these consolidated financial statements. 33 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies Nature of Operations: Enerpac Tool Group Corp. (the “Company”), formerly known as Actuant Corporation, is a global manufacturer of a broad range of industrial products and solutions, organized into two operating segments. The Industrial Tools & Services segment ("IT&S"), the Company's only reportable segment, is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the industrial, maintenance, infrastructure, oil & gas, energy 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 Company has two operating segments: Industrial Tools & Services ("IT&S") and Other, with IT&S representing the only reportable segment. At August 31, 2019, the Company's former Engineered Components & Systems ("EC&S") segment was considered held for sale and was subsequently divested on October 31, 2019. As the divestiture represented a strategic shift in our operations, the results of the former segment through the date of divestiture and subsequent impacts to the financial results from retained liabilities are recorded in "Loss from discontinued operations, net of income taxes" within the Consolidated Statements of Operations. Further, the assets and liabilities, respectively, of the former segment are reflected as "Assets from discontinued operations" and "Liabilities from discontinued operations" on the Consolidated Balance Sheets at August 31, 2019. The results of the Cortland Fibron and Precision Hayes businesses which were a component of the EC&S segment prior to their divestiture in the year ended August 31, 2019, were also part of the strategic shift, as such, they are also reflected in "Loss from discontinued operations, net of income taxes" within the Consolidated Statements of Operations. 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, and are stated at the lower of cost or market. Inventory cost is determined using the last-in, first-out (“LIFO”) method for a portion of the U.S. owned inventory ( 44.1 % and 47.9 % of total inventories in 2020 and 2019, respectively). The first-in, first-out or average cost methods are used for all other inventories. If the LIFO method were not used, inventory balances would be higher than reported amounts in the consolidated balance sheets by $ 10.2 million and $ 10.3 million at August 31, 2020 and 2019, 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 (joint integrity tools) which are rented to customers of our 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 $ 12.4 million, $ 11.3 million and $ 11.1 million for the years ended August 31, 2020, 2019 and 2018, respectively. The following is a summary of the Company's components of property, plant and equipment (in thousands): August 31, 2020 August 31, 2019 Land, buildings and improvements $ 33,548 $ 29,661 Machinery and equipment 134,536 140,083 Gross property, plant and equipment 168,084 169,744 Less: Accumulated depreciation ( 106,679 ) ( 113,015 ) Property, plant and equipment, net $ 61,405 $ 56,729 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 34 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 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. 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 rollforward of the changes in product warranty reserves for fiscal years 2020 and 2019 (in thousands): 2020 2019 Beginning balance $ 1,145 $ 931 Provision for warranties 677 1,326 Warranty payments and costs incurred ( 934 ) ( 1,077 ) Warranty activity for divested businesses ( 27 ) — Impact of changes in foreign currency rates 31 ( 35 ) Ending balance $ 892 $ 1,145 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 balance sheet. 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 other security for receivables and provides for an allowance for doubtful accounts based on historical experience and a review of its existing receivables. Accounts receivable are stated net of an allowance for doubtful accounts of $ 5.0 million and $ 5.1 million at August 31, 2020 and 2019, 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 Operations. 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 Operations in "Cost of products sold." Research and Development Costs: Research and development costs consist primarily of an allocation of overall 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 $ 7.3 million, $ 9.3 million and $ 8.7 million in fiscal 2020, 2019 and 2018, 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. 35 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Other Income/Expense: Other income and expense primarily consists of net foreign currency exchange transaction losses of $ 2.6 million an d $ 0.2 million in fiscal 2020 and 2019, respectively, with a gain of less than $ 0.1 million in fiscal 2018. In addition, as a result of the EC&S divestiture and the transition services agreement entered into with the buyer, the Company recorded $ 4.9 million of other income from providing the agreed upon services in fiscal 2020 . Financing Costs: Financing costs represent interest expense, financing fees and amortization of debt issuance costs, net of interest income. Interest income was $ 0.8 million, $ 0.7 million and $ 1.2 million for fiscal 2020, 2019 and 2018, 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 has not provided for any residual U.S. income taxes on unremitted earnings of non-U.S. subsidiaries, as such earnings are intended to be indefinitely reinvested. The Company recognizes interest and penalties related to unrecognized tax benefits in income 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 Operations. 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, 2020 2019 Foreign currency translation adjustments $ 75,896 $ 151,115 Pension and other postretirement benefit plans 24,750 20,557 Unrecognized losses on cash flow hedges 78 — Accumulated other comprehensive loss $ 100,724 $ 171,672 Use of Estimates: The preparation of financial statements in conformity with 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 doubtful accounts, 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 COVID-19 pandemic has caused additional uncertainty with respect to certain estimates. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning the COVID-19 pandemic and the additional actions taken to contain it or treat it, as well as the severity and duration of the economic impact on local, regional, national and international customers, suppliers and markets. As such, there could be a material adverse impact on the Company's financial condition or results of operations. Management has made estimates of the impact of the COVID-19 pandemic on our financial statements and there may be changes to those estimates in future periods as new information becomes available. Actual results could differ materially and adversely from those estimates and assumptions, and such results could materially affect the Company’s consolidated net income, financial position, or cash flows. 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 significant indirect and facility overhead costs 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. In addition, due to the recent 36 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) changes in our business model, which includes the integration of the Enerpac and Hydratight businesses within the IT&S segment, the decision to exit certain non-strategic businesses and product lines, and the restructuring actions taken by the Company, the historical ratios of cost of sales to net sales by category may not be indicative of future ratios of cost of sales to net sales by category. New Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (and subsequently ASU 2018-01 and ASU 2019-01), to increase transparency and comparability among organizations by recognizing all lease transactions on the balance sheet as a lease liability and a right-of-use (“ROU”) asset. The amendments also expanded disclosure requirements for key information about leasing arrangements. On September 1, 2019, the Company adopted the standard using a modified retrospective approach and elected the package of practical expedients allowing us to not reassess whether any expired or existing contracts contain leases, the lease classification for any expired or existing leases, and initial direct costs for leases that commenced prior to September 1, 2019. In addition, we elected not to recognize ROU assets or lease liabilities for leases containing terms of 12 months or less and not separate lease components from non-lease components for all asset classes. The Company updated its standard lease accounting policy to address the new standard, revised the Company’s business processes and controls to align to the updated policy and new standard and completed the implementation of and data input into the Company’s lease accounting software solution. The most significant impact of the standard on the Company was the recognition of a $ 60.8 million ROU asset and operating lease liability on the Consolidated Balance Sheets at adoption. The standard did not have a significant impact on our Consolidated Statements of Operations or Consolidated Statements of Cash Flows. In addition, as a result of sale leaseback transactions in previous years for which gains were deferred and under the new standard would have been recognized, the Company recorded an increase to retained earnings of $ 0.2 million in the first quarter of fiscal 2020, which represents the recognition of these previously deferred gains. See Note 1 0 , “Leases” for further discussion of the Company’s operating leases. In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings in their consolidated financial statements. The Company adopted the guidance on September 1, 2019 and recorded an increase to retained earnings with an offsetting increase in accumulated other comprehensive loss of $ 3.7 million. on the adoption date. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which adds an impairment model that is based on expected losses rather than incurred losses and is called the Current Expected Credit Losses (“CECL”) model. This impairment model is applicable to loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables as well as any other financial asset with the contractual right to receive cash. Under the new model, an allowance equal to the estimate of lifetime expected credit losses is recognized which will result in more timely loss recognition. The guidance is intended to reduce complexity by decreasing the number of credit impairment models. This guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings in the period of adoption. The Company is required to adopt this new guidance in the first quarter of 2021. The Company reviewed the impact of this ASU on its consolidated financial statements and concluded that any cumulative-effect adjustment would be immaterial. Note 2. Revenue from Contracts with Customers Nature of Goods and Services The Company generates its revenue under two principal activities, which are discussed below: Product Sales: Sales of tools, heavy-lifting solutions, and rope and cable solutions are recorded when control is transferred to the customer (i.e., performance obligation has been satisfied). For the majority of the Company’s product sales, revenue is recognized at a point in time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company to the customer. For certain other products that are highly customized and have a limited alternative use, and for which the Company has an enforceable right of reimbursement for performance completed to date, revenue is recognized over time. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over-time revenue associated with these custom products. For a majority of the Company’s custom products, machine hours and labor hours (efforts-expended measurement) are used as a measure of progress. Service & Rental Sales : Service contracts consist of providing highly trained technicians to perform bolting, technical services, machining and joint integrity work for our customers. These revenues are recognized over time as our customers simultaneously receive and consume the benefits provided by the Company. We consider the input measure (efforts-expended 37 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) or cost-to-cost) or output measure as a fair measure of progress for the recognition of over-time revenue associated with service contracts. For a majority of the Company’s service contracts, labor hours (efforts-expended measurement) is used as the measure of progress when it is determined to be a better depiction of the transfer of control to the customer due to the timing and pattern of labor hours incurred. Revenue from rental contracts (less than a year and non-customized products) is generally recognized ratably over the contract term, depicting the customer’s consumption of the benefit related to the rental equipment. Disaggregated Revenue and Performance Obligations The Company disaggregates revenue from contracts with customers by reportable segment and product line and by the timing of when goods and services are transferred. See Note 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, 2020 2019 Revenues recognized at point in time $ 361,359 $ 453,427 Revenues recognized over time 131,933 201,331 Total $ 493,292 $ 654,758 Contract Balances The Company's contract assets and liabilities are as follows (in thousands): August 31, 2020 2019 Receivables, which are included in accounts receivable, net $ 84,170 $ 125,883 Contract assets, which are included in other current assets 6,145 3,747 Contract liabilities, which are included in other current liabilities 2,145 3,707 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. 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. The increase in this balance from August 31, 2019 to August 31, 2020 is a result of the contractual timing of billings on certain large contracts. Contract Liabilities: As of August 31, 2020, the Company had certain contracts where there were unsatisfied performance obligations and the Company had received cash consideration from customers before the performance obligations were satisfied . The majority of these contracts relate to long-term customer contracts (project durations of greater than three months) and are recognized over time. The Company estimates that the $ 2.1 million will be recognized in net sales from satisfying those performance obligations within the next twelve months with an immaterial amount recognized in periods thereafter. 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 38 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed. Note 3. Restructuring Charges The Company has undertaken or committed to various restructuring initiatives including workforce reductions; leadership changes; plant consolidations to reduce manufacturing overhead; satellite office closures; the continued movement of production and product sourcing to low-cost alternatives; and the centralization and standardization of certain administrative functions. Liabilities for severance will generally be paid within twelve months, while future lease payments related to facilities vacated as a result of restructuring will be paid over the underlying remaining lease terms. During fiscal 2019, the Company announced a new restructuring plan focused on i) the integration of the Enerpac and Hydratight businesses (IT&S segment), ii) the strategic exit of certain commodity type services in our North America Services operations (IT&S segment) and iii) driving efficiencies within the overall corporate structure. In the third quarter of fiscal 2020, the Company announced the expansion and revision of this plan, which further simplifies and flattens the Corporate structure through elimination of redundancies between the segment and corporate functions, while enhancing our commercial and marketing processes to become even closer to our customers. Restructuring charges associated with this plan were $ 6.6 million for the year ended August 31, 2020 . The Company recorded total restructuring charges of $ 4.2 million for the year ended August 31, 2019. The following rollforwards summarize restructuring reserve activity for the IT&S reportable segment and corporate (in thousands): Year Ended August 31, 2019 Industrial Tools & Services Corporate Total Balance as of August 31, 2018 $ 1,687 $ 46 $ 1,733 Restructuring charges 4,161 — 4,161 Cash payments ( 2,954 ) ( 46 ) ( 3,000 ) Other non-cash uses/reclasses of reserve 54 — 54 Impact of changes in foreign currency rates ( 36 ) — ( 36 ) Balance as of August 31, 2019 $ 2,912 $ — $ 2,912 Year Ended August 31, 2020 Industrial Tools & Services Corporate Total Balance as of August 31, 2019 $ 2,912 $ — $ 2,912 Restructuring charges 4,520 2,073 6,593 Cash payments ( 5,458 ) ( 1,286 ) ( 6,744 ) Other non-cash uses of reserve (1) ( 554 ) ( 521 ) ( 1,075 ) Impact of changes in foreign currency rates 23 1 24 Balance as of August 31, 2020 $ 1,443 $ 267 $ 1,710 (1) Majority of non-cash uses of reserve represents accelerated equity vesting with employee severance agreements. In the year ended August 31, 2020, the Company recorded $ 1.6 million of restructuring expenses related to Cortland U.S. (Other segment) of which $ 0.8 million was reported in the Consolidated Statements of Operations in "Cost of products sold". Restructuring reserves for Cortland U.S. were $ 0.4 million and $ 0.9 million for the year ended August 31, 2020 and 2019, respectively. There were inconsequential restructuring charges recorded within the Other segment associated with the legacy restructuring initiatives in the year ended August 31, 2019. Total restructuring charges (inclusive of the Other segment) were $ 8.1 million for the year ended August 31, 2020, with approximately $ 0.8 million of the restructuring charges being reported in the Consolidated Statements of Operations in "Cost of products sold," with the balance of the charges reported in "Restructuring charges." 39 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Note 4. Acquisitions Fiscal 2020 Acquisition On January 7, 2020 , the Company acquired 100% of the stock of HTL Group ("HTL"), a provider of controlled bolting products, calibration and repair services, and tool rental services. The tuck-in acquisition of HTL provides the Company with a complete line of bolting products and enhances our European rental capabilities. The Company acquired all of the assets and assumed certain liabilities of HTL for a final purchase price of $ 33.3 million (inclusive of the settlement of working capital adjustments). The final purchase price allocation resulted in $ 11.3 million of goodwill (which is not deductible for tax purposes), $ 16.1 million of intangible assets, and $ 6.7 million of property, plant and equipment. The intangible assets were comprised of $ 3.3 million of indefinite-lived tradenames, $ 12.1 million of amortizable customer relationships and $ 0.7 million of amortizable patents. The impact on the remaining balance sheet line items was not material. This acquisition generated net sales of $ 6.3 million for the year ended August 31, 2020 which are reported within the IT&S reportable segment. This acquisition does not meet the significance tests to require pro forma financial information otherwise required for acquisitions. Fiscal 2018 Acquisitions The Company acquired the stock and certain assets of Mirage Machines, Ltd. ("Mirage") on December 1, 2017 for a purchase price of $ 17.4 million, net of cash acquired. This IT&S segment tuck-in acquisition is a provider of industrial and energy maintenance tools. The final purchase price allocation resulted in $ 10.3 million of goodwill (which is not deductible for tax purposes) and $ 4.1 million of intangible assets. The intangible assets were comprised of $ 2.3 million of indefinite-lived tradenames and $ 1.8 million of amortizable customer relationships. The Company acquired the stock of Equalizer International, Limited ("Equalizer") on May 11, 2018 for a purchase price of $ 5.8 million, net of cash acquired. This IT&S segment tuck-in acquisition is a provider of industrial and energy maintenance tools, expanding our pipe and flange alignment offerings. The final purchase price allocation resulted in $ 2.4 million of goodwill (a portion of which is not deductible for tax purposes) and $ 2.1 million of intangible assets. The intangible assets were comprised of $ 0.8 million of indefinite lived tradenames and $ 1.3 million of amortizable customer relationships and patents. The Company incurred acquisition transaction costs of $ 1.1 million for the year ended August 31, 2018 (included in "Selling, administrative and engineering expenses" in the Consolidated Statements of Operations) related to these acquisitions. The acquired businesses generated combined net sales of $ 5.1 million, $ 14.1 million and $ 9.4 million for the year ended August 31, 2020, 2019 and 2018, respectively. The acquisitions individually and in the aggregate do not meet the significance tests to require pro forma financial information otherwise required for acquisitions. Note 5. Discontinued Operations and Other Divestiture Activities Discontinued Operations On October 31, 2019 , as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the sale of the businesses comprising its former Engineered Components & Systems ("EC&S") segment to wholly owned subsidiaries of BRWS Parent LLC, a Delaware limited liability company and affiliate of One Rock Capital Partners II, LP, for a sales price of approximately $ 215.8 million (inclusive of the settlement of working capital adjustments). Approximately $ 3.0 million of the purchase price was to be paid in four equal quarterly installments after closing, of which $ 0.7 million is outstanding as of August 31, 2020. In connection with the completion of the sale, the Company recorded a net loss of $ 4.7 million compr ised of a loss of $ 23.0 million representing the excess of the net assets (exclusive of deferred tax assets and liabilities associated with subsidiaries of the Company whose stock was sold as part of the transaction) as compared to the purchase price less costs to sell and the recognition in earnings of the cumulative effect of foreign currency exchange gains and losses during the year largely offset by an income tax benefit of $ 18.3 million associated with the write off of the net deferred tax liability on subsidiaries of the EC&S segment for which the stock was divested. The Company also recognized an additional $ 3.3 million of impairment & divestiture costs associated with the accelerated vesting of restricted stock awards associated with employees terminated as part of the transaction and $ 2.7 million of additional divestiture charges which were necessary to complete the transaction. At August 31, 2019, the EC&S segment met the criteria for assets held-for-sale treatment. As a result, the Company recognized impairment & divestiture charges in fiscal 2019 of $ 264.5 million which consisted of $ 210.0 million representing the excess net book value of the net assets over the anticipated sales proceeds less costs to sell and $ 54.5 million representing the recognition in earnings of the cumulative effect of foreign currency exchange losses previously recorded in equity since acquisition. 40 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) On December 31, 2018 , the Company completed the sale of the Precision Hayes International business for $ 23.6 million cash, net of final transaction costs, working capital adjustments, accelerated vesting of equity compensation, retention bonuses and other adjustments. The Company recorded $ 9.5 million of impairment & divestiture charges during the fiscal year representing the excess of the net book value of the assets held for sale less the anticipated proceeds, less costs to sell. During the fourth quarter of fiscal 2018, the Company recognized impairment & divestiture charges of $ 23.7 million relating to the excess of net book value of assets over anticipated proceeds which consisted of i) $ 17.5 million related to goodwill, ii) $ 5.0 million related to amortizable intangible assets and ii) $ 1.2 million related to fixed asset impairment. The Company also completed the sale of the Cortland Fibron business on December 19, 2018 for $ 12.5 million in cash. The Company recognized $ 1.7 million of impairment & divestiture charges in fiscal 2019 representing the excess net book value of the net assets less the proceeds from sale, net of transaction costs. Additionally, due to the business meeting the criteria for asset held for sale treatment at August 31, 2018, the Company recognized impairment & divestiture charges in fiscal 2018 of $ 46.3 million which consisted of i) $ 35.3 million related to the recognition in earnings of the cumulative effect of foreign currency rate changes since acquisition; ii) $ 10.5 million representing the excess of the net book value of assets held for sale to the anticipated proceeds and iii) $ 0.5 million of other divestiture charges. As the aforementioned divestitures were a part of our strategic shift to become a pure-play industrial tools and services company, the results of their operations (including the stated impairment & divestiture charges) are recorded as a component of "Loss from discontinued operations" in the Consolidated Statements of Operations for all periods presented. The following is a summary of the assets and liabilities of discontinued operations (in thousands): August 31, 2019 Accounts receivable, net $ 52,802 Inventories, net 76,825 Other current assets 8,058 Property, plant & equipment, net 32,172 Goodwill 16,862 Other intangible assets, net 93,314 Other long-term assets 5,545 Assets of discontinued operations $ 285,578 Trade accounts payable $ 43,628 Accrued compensation and benefits 12,101 Reserve for cumulative translation adjustment 54,469 Other current liabilities 12,101 Deferred income taxes 20,029 Pension and postretirement benefit liabilities 1,344 Other long-term liabilities 91 Liabilities of discontinued operations $ 143,763 41 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following represents the detail of "Loss from discontinued operations, net of income taxes" within the Consolidated Statements of Operations (in thousands): Year Ended August 31, 2020 * 2019 2018 Net sales $ 67,010 $ 459,144 $ 541,308 Cost of products sold 49,749 344,563 409,332 Gross profit 17,261 114,581 131,976 Selling, administrative and engineering expenses 11,561 68,339 81,188 Amortization of intangible assets — 5,666 11,285 Restructuring (benefit) charges ( 11 ) 1,779 1,440 Impairment & divestiture charges ** 28,972 286,175 70,071 Operating loss ( 23,261 ) ( 247,378 ) ( 32,008 ) Financing costs, net 14 124 619 Other (income) expense, net ( 104 ) 1,922 ( 759 ) Loss before income tax (benefit) expense ( 23,171 ) ( 249,424 ) ( 31,868 ) Income tax (benefit) expense ( 18,337 ) 7,788 ( 5,474 ) Net loss from discontinued operations $ ( 4,834 ) $ ( 257,212 ) $ ( 26,394 ) * "Loss from discontinued operations, net of income taxes" for the year ended August 31, 2020 includes the results of the EC&S segment for the two months ended October 31, 2019 (the divestiture date) as well as the ancillary impacts from certain retained liabilities subsequent to the divestiture. As a result of the classification of the segment as assets and liabilities held for sale for the two months ended October 31, 2019, the Company did not record amortization or depreciation expense in the results of operations in accordance with GAAP. ** In addition to the impairment & divestiture charges discussed above, the Company also incurred approximately $ 10.5 million of divestiture charges in fiscal 2019 related to the, at the time, anticipated divestiture of EC&S. Other Divestiture Activities On September 20, 2019 , the Company completed the sale of the UNI-LIFT product line, a component of our Milwaukee Cylinder business (IT&S segment) for net cash proceeds of $ 7.5 million (inclusive of the settlement of working capital adjustments and the buyer achieving certain criteria which met the requirement for payment of $ 1.5 million of contingent proceeds). The transaction resulted in an impairment & divestiture benefit of $ 6.3 million for the year ended August 31, 2020 recorded as an "Impairment & divestiture benefit" within the Consolidated Statements of Operations. After the sale of the UNI-LIFT product line, the Company determined that the remaining Milwaukee Cylinder business was a non-core asset, did not align with the strategic objectives of the Company and, as a result, the Company committed to a plan to sell this business. The Company completed the divestiture of the Milwaukee Cylinder business on December 2, 2019 for a negligible amount. The Company recorded impairment & divestiture charges of $ 4.5 million for the year ended August 31, 2020 predominately comprised of impairment charges of $ 2.5 million representing the excess of net assets held for sale compared to the net proceeds and $ 1.7 million associated with our requirement to withdraw from the multi-employer pension plan associated with that business and $ 0.3 million of other divestiture related charges and true-ups of retained liabilities. The historical results of the Milwaukee Cylinder business, inclusive of the UNI-LIFT product line, (which had net sales of $ 2.9 million, $ 13.2 million and $ 11.1 million in the year ended August 31, 2020, 2019 and 2018, respectively) are not material to the consolidated financial results. On October 22, 2019 , the Company completed the sale of the Connectors product lin e (IT&S segment) for ne t cash proceeds of $ 2.7 million, which resulted in an impairment & divestiture benefit of $ 1.0 million in the year ended August 31, 2020. The historical results of the Connectors product line (which had net sales of $ 0.2 million, $ 5.0 million and $ 0.2 million for the year ended August 31, 2020, 2019 and 2018, respectively) are not material to the consolidated financial results. 42 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) During the year ended August 31, 2020, the Company modified estimates on outstanding legal matters associated with previously divested businesses, as such, recorded a net impairment & divestiture benefit of $ 0.5 million in the year ended August 31, 2020. On December 1, 2017 , the Company completed the sale of the Viking business (Other Segment) for net cash proceeds of $ 8.8 million, which resulted in an after-tax impairment & divestiture charge of $ 12.4 million in fiscal 2018, comprised of real estate lease exit charges of $ 3.0 million related to retained facilities that became vacant as a result of the Viking divestiture and approximately $ 9.4 million of associated discrete income tax expense. The historical results of the Viking business (which had net sales of $ 2.7 million in the year ended August 31, 2018) 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. T he changes in the carrying amount of goodwill for the years ended August 31, 2020 and 2019 by operating segment are as follows (in thousands): Industrial Tools & Services Other Total Balance as of August 31, 2018 $ 248,705 $ 31,427 $ 280,132 Purchase accounting adjustments 253 — 253 Impairment charge — ( 13,678 ) ( 13,678 ) Impact of changes in foreign currency rates ( 6,085 ) ( 207 ) ( 6,292 ) Balance as of August 31, 2019 242,873 17,542 260,415 Acquisition of HTL Group (Note 4) 11,261 — 11,261 Impairment charge — — — Impact of changes in foreign currency rates 9,403 75 9,478 Balance as of August 31, 2020 $ 263,537 $ 17,617 $ 281,154 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, 2020 August 31, 2019 Gross Accumulated Amortization Net Book Value Gross Accumulated Amortization Net Book Value Amortizable intangible assets: Customer relationships 14 $ 141,853 $ 106,491 $ 35,362 $ 126,229 $ 96,817 $ 29,412 Patents 12 14,365 13,228 1,137 13,227 12,276 951 Trademarks and tradenames* 12 3,277 2,257 1,020 4,513 2,921 1,592 Indefinite lived intangible assets: Tradenames N/A 24,863 — 24,863 20,420 — 20,420 $ 184,358 $ 121,976 $ 62,382 $ 164,389 $ 112,014 $ 52,375 *The decrease in the Gross Carrying Value and Accumulated Amortization of Trademarks and tradenames is a result of the Milwaukee Cylinder divestiture on December 2, 2019 as discussed in Note 5, "Discontinued Operations and Other Divestiture Activities." The Company recorded a full impairment of the tradename in the first quarter in order to write the net assets of the business down to the expected sales proceeds in advance of the divestiture. The Company estimates that amortization expense for future years is estimated to be $ 8.2 million in fiscal year 2021, $ 7.4 million in fiscal year 2022, $ 5.8 million in fiscal 2023, $ 4.2 million in fiscal 2024, $ 3.4 million in fiscal 2025 and $ 8.5 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. Fiscal 2019 Impairment Charges Within the Other segment, the Company recognized a $ 13.7 million Goodwill impairment charge related to Cortland U.S. in conjunction with triggering events identified during the fiscal year. 43 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) In the fourth quarter of fiscal 2019, the Company's branding strategy was revised such that two secondary tradenames previously considered to have indefinite lives were to be phased out and re-branded over the course of fiscal 2020. As such, the Company recorded an impairment & divestiture charge of $ 2.6 million based on the estimated remaining fair value of the respective tradenames. In addition, based on restructuring actions taken in the fourth quarter of fiscal 2019 related to the North America Services operations, the Company concluded that the fair value of a customer relationship intangible was less than the current net book value, and therefore, a $ 6.2 million impairment & divestiture charge was recorded. The tradename and customer relationships impairments both related to assets within the IT&S segment. Note 7. Debt The following is a summary of the Company’s long-term indebtedness (in thousands): August 31, 2020 2019 Senior Credit Facility Revolver $ 255,000 $ — Term Loan — 175,000 Total Senior Credit Facility 255,000 175,000 5.625% Senior Notes — 287,559 Total Senior Indebtedness 255,000 462,559 Less: Current maturities of long-term debt — ( 7,500 ) Debt issuance costs — ( 2,114 ) Total long-term debt, less current maturities $ 255,000 $ 452,945 Senior Credit Facility In March 2019, the Company entered into a Senior Credit Facility with a syndicate of banks, to among other things, i) expand the multi-currency revolving line of credit from $ 300 million to $ 400 million, ii) extend the maturity of the Company's Senior Credit Facility from May 2020 to March 2024 and iii) modify certain other provisions of the credit agreement including a reduction in pricing. The Senior Credit Facility was initially comprised of a $ 400 million revolving line of credit and a $ 200 million term loan. At August 31, 2020, there were $ 255 million borrowings under the revolving line of credit and no borrowings under the term loan. As of that date, $ 139.9 million was available for borrowing under the revolving line of credit. The Senior Credit Facility also provides the option for future expansion, subject to certain conditions, through a $ 300 million accordion and/or a $ 200 million incremental term loan. Borrowings under the Senior Credit Facility bear interest at a variable rate based on LIBOR or a base rate, ranging from 1.125 % to 2.00 % in the case of loans bearing interest at LIBOR and from 0.125 % to 1.00 % in the case of loans bearing interest at the base rate. In addition, a non-use fee was payable quarterly on the average unused amount of the revolving line of credit ranging from 0.15 % to 0.3 % per annum, based on the Company's net leverage. In November 2019, the Company used the proceeds from the sale of the EC&S segment to pay off the outstanding principal balance on the term loan. In conjunction with the repayment, the Company expensed, within "Financing costs, net" in the Consolidated Statements of Operations, the remaining $ 0.6 million of associated capitalized debt issuance costs. In order to reduce interest costs, in June 2020, the Company borrowed $ 295 million under the Senior Credit Facility revolving line of credit, which was used by the Company to redeem all of the outstanding Senior Notes plus accrued interest. In conjunction with the redemption of the Senior Notes, the Company expensed, within "Financing costs, net" in the Consolidated Statements of Operations, the remaining $ 1.0 million of associated capitalized debt issuance costs. The Senior Credit Facility contains two financial covenants which are a maximum leverage ratio of 3.75 :1 and a minimum interest coverage ratio of 3.5 :1. Certain transactions lead to adjustments to the underlying ratio, including an increase to the leverage ratio from 3.75 to 4.25 during the four fiscal quarters after a significant acquisition. The sale of the EC&S segment triggered a reduction of the minimum interest coverage ratio from 3.5 to 3.0 for any fiscal quarter ending within twelve months after the sale of the EC&S segment. In April 2020, the Company proactively amended its Senior Credit Facility to extend the interest coverage ratio at 3.0 for an additional 12 months through October 2021 to mitigate risks associated with the potential impact of the COVID-19 pandemic. The Company was in compliance with all financial covenants at August 31, 2020. Borrowings under the Senior Credit Facility are secured by substantially all personal property assets of the Company and its domestic subsidiary guarantors and certain equity interests owned by the foreign law pledgors. 44 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Senior Notes On April 16, 2012, the Company issued $ 300 million of 5.625 % Senior Notes due 2022 (the “Senior Notes”), none of which remain outstanding. The Senior Notes included a call feature that allowed the Company to redeem them anytime on or after June 15, 2017 at stated redemption prices that reduced to 100 % on June 15, 2020, plus accrued and unpaid interest. In order to reduce interest costs, in June 2020, the Company redeemed all of the outstanding Senior Notes at a price equal to 100 % of the principal amount thereof, plus the settlement of accrued and unpaid interest. Cash Paid for Interest The Company made cash interest payments of $ 18.7 million, $ 26.3 million and $ 28.8 million in fiscal 2020, 2019 and 2018, 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, 2020 and 2019 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 asset of $ 0.2 million at August 31, 2020 and a net asset of less than $ 0.1 million at August 31, 2019. The fair value of the Company's interest rate swap (see Note 9, "Derivatives", for further information on the Company's interest rate swap) was a net liability of $ 0.1 million at August 31, 2020. The fair value of the foreign currency exchange and interest rate swaps contracts were based on quoted inactive market prices and therefore classified as Level 2 within the valuation hierarchy. The fair value of the Company’s outstanding Senior Notes was $ 291.5 million at August 31, 2019. The fair value of the Senior Notes was based on quoted inactive market prices and are therefore classified as Level 2 within the valuation hierarchy. As discussed in Note 4, "Acquisitions" , the Company acquired HTL Group and recorded the assets acquired and liabilities assumed at fair value, of which the most significant judgments were associated with intangible assets (including tradenames, customer relationships and patents) and property, plant and equipment. As discussed in Note 6, “Goodwill, Intangible Assets and Long-Lived Assets” , the Company recorded impairment on indefinite-lived tradenames and customer relationships in the fourth quarter of fiscal 2019. The fair value of the tradenames, customer relationships and patents acquired and/or impaired were determined utilizing generally accepted valuation techniques, specifically, forecasting future revenues and/or using a market royalty rate. The fair value of property, plant and equipment were also determined utilizing generally accepted valuation techniques, specifically utilizing an approach of assessing the replacement/reproduction cost of a new asset and adjusting for the asset's current physical deterioration. These valuations represent Level 3 assets measured at fair value on a nonrecurring basis. 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 (income) expense" in the Consolidated Statements of Operations). The U.S. dollar equivalent notional value of these short duration foreign currency exchange contracts was $ 16.7 million and $ 13.3 million at August 31, 2020 and 2019, respectively. The fair value of outstanding foreign currency exchange contracts was an asset of $ 0.2 million at August 31, 2020 and an asset of less than $ 0.1 million at August 31, 45 2019. Net foreign currency (losses) gains (included in "Other (income) expense" in the Consolidated Statements of Operations) related to these derivative instruments are as follows (in thousands): Year Ended August 31, 2020 2019 2018 Foreign Currency (losses) gains $ ( 594 ) $ ( 292 ) $ 249 The Company also used foreign currency forward exchange contracts 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 in the year ended August 31, 2020. The change in the value of foreign currency forward exchange contracts designated as net investment hedges are recorded in accumulated other comprehensive loss where they offset gains and losses recorded on our net investments where the entity has a non-U.S. dollar functional curren cy. As of August 31, 2020, the Company had no outstanding foreign currency forward exchange contracts designated as net investment hedges. The Company recorded through accumulated other comprehensive income (loss) a loss of $ 0.5 million for the year ended August 31, 2020 related to net investment hedges. The Company is the fixed-rate payor on an interest rate swap contract that fixes the LIBOR-based index used to determine the interest rates charged on a total of $ 100.0 million of the Company's LIBOR-based variable rate borrowings on the revolving line of credit. The contract carries a fixed rate of 0.259 % and expires in August 2021. The swap agreement qualifies as a hedging instrument and has been designated as a cash flow hedge of forecasted LIBOR-based interest payments. The change in the fair value of the interest rate swap, a loss of $ 0.1 million, is recorded in accumulated other comprehensive loss ("AOCL") and recorded through accumulated other comprehensive income (loss). The Company expects to reclassify the loss of $ 0.1 million out of AOCL and into earnings during the next 12 months. The Company’s LIBOR-based variable rate borrowings outstanding with terms matching the pay-fixed interest rate swap as of August 31, 2020 were $ 180.0 million. Note 10. Leases The Company adopted ASC 842 on September 1, 2019 using a modified retrospective approach and as a result did not adjust prior per iods. See Note 1 , “Summary of Significant Accounting Policies” for further discussion of the adoption. As of August 31, 2020, the Company ha d operating leases for real estate, vehicles, manufacturing equipment, IT equipment and office equipment. The Company did not have any financing leases during the year ended August 31, 2020. Our real estate leases are generally for offic e, warehouse and manufacturing facilities typically ranging in term from 3 to 15 years and may contain renewal options for periods up to 5 years at our discretion. Our equipment leases are generally for vehicles, manufacturing and IT equipment typically ranging in term from 3 to 7 years and may contain renewal options for periods up to one year 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. 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. ROU assets represent our right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. We account for the underlying operating lease asset at the individual lease level. Operating leases are recorded as operating lease ROU assets in “Other long-term assets” and operating lease liabilities in “Other current liabilities” and “Other long-term liabilities” on the Consolidated Balance Sheets. 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. The Company considers contract modifications when there is a change to the contractual terms, scope of the lease or the consideration given. In the event the right to use an additional asset is granted and the lease payments associated with the additional asset are commensurate with the ROU asset’s standalone price, the modification is accounted for as a separate 46 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) contract and the original contract remains unchanged. In the event that a single lease is modified, the Company reassesses the classification of the modified lease as of the effective date of the modification based on the modified terms and accounts for initial direct costs, lease incentives and any other payments made to or by the Company in connection with the modification in the same manner that items would be accounted for in connection with a new lease. If there is an additional ROU asset included, the lease term is extended or reduced, or the consideration is the only change in the contract, the Company reallocates the remaining consideration in the contract and remeasures the lease liability using a discount rate determined at the effective date of the modification. The remeasured lease liability for the modified lease is an adjustment to the corresponding ROU asset and does not impact the Consolidated Statements of Operations. In the event of a full or partial termination, the carrying value of the ROU asset decreases on a basis proportionate to the full or partial termination and any difference between the reduction in the lease liability and the proportionate reduction of the ROU asset is recognized as a gain or loss at the effective date of the modification. The Company elected not to recognize leases with the duration of less than one-year on its balance sheet and continues to expense such leases on a straight-line basis over the lease term. The components of lease expense for the year ended August 31, 2020 were as follows (in thousands): Year Ended August 31, 2020 Lease Cost: Operating lease cost $ 15,713 Short-term lease cost 1,508 Variable lease cost 2,244 Supplemental cash flow and other information related to leases were as follows (in thousands): Year Ended August 31, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 15,768 Right-of-use assets obtained in exchange for new lease liabilities: Operating leases 5,727 Supplemental balance sheet information related to leases were as follows (in thousands): August 31, 2020 Operating leases: Other long-term assets $ 48,733 Other current liabilities 11,870 Other long-term liabilities 38,079 Total operating lease liabilities $ 49,949 Weighted Average Remaining Lease Term (in years): Operating leases 7.6 years Weighted Average Discount Rate: Operating leases 4.4 % 47 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) A summary of the future minimum lease payments due under operating leases with terms of more than one year at August 31, 2020 is as follows (in thousands): Operating Leases 2021 $ 13,640 2022 9,798 2023 7,671 2024 6,161 2025 4,650 Thereafter 17,290 Total minimum lease payments 59,210 Less imputed interest ( 9,261 ) Present value of net minimum lease payments $ 49,949 As of August 31, 2020, we have an additional operating lease of $ 1.6 million, for real estate, that has not yet commenced and therefore is not reflected on the consolidated balance sheet nor in the tables above. This operating lease commences in the year ending August 31, 2021 with a lease term of 5 years. A summary of the future minimum lease payments due under operating leases with terms of more than one year at August 31, 2019 is as follows (in thousands): Operating Leases 2020 $ 15,792 2021 12,266 2022 10,111 2023 6,865 2024 5,177 Thereafter 21,620 Present value of net minimum lease payments $ 71,831 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): 2020 2019 Reconciliation of benefit obligations: Benefit obligation at beginning of year $ 47,400 $ 43,280 Interest cost 1,331 1,694 Actuarial loss 4,131 5,339 Benefits paid ( 3,222 ) ( 2,913 ) Benefit obligation at end of year $ 49,640 $ 47,400 Reconciliation of plan assets: Fair value of plan assets at beginning of year $ 40,412 $ 40,244 Actual return on plan assets 2,562 2,972 Company contributions 183 108 Benefits paid from plan assets ( 3,222 ) ( 2,912 ) Fair value of plan assets at end of year 39,935 40,412 Funded status of the plans (underfunded) $ ( 9,705 ) $ ( 6,988 ) 48 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table provides detail on the Company’s domestic net periodic benefit expense (in thousands): Year ended August 31, 2020 2019 2018 Interest cost $ 1,331 $ 1,694 $ 1,633 Expected return on assets ( 1,770 ) ( 2,208 ) ( 2,668 ) Amortization of actuarial loss 1,212 990 1,127 Net periodic benefit expense $ 773 $ 476 $ 92 As of August 31, 2020 and 2019, $ 21.4 million and $ 16.1 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 2021, $ 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: 2020 2019 2018 Assumptions for benefit obligations: Discount rate 2.40 % 2.90 % 4.05 % Assumptions for net periodic benefit cost: Discount rate 2.90 % 4.05 % 3.60 % Expected return on plan assets 4.60 % 5.75 % 7.00 % Prior to fiscal 2019, the Company focused on employing a total-return-on-investment approach for its pension plan assets whereby a mix of equity and fixed income investments were used to maximize the long-term return for plan assets, at prudent levels of risk. During fiscal 2019, the Company made a strategic decision to shift the focus to an objective 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%. At this time, the plan portfolio is significantly invested in duration-matched fixed income securities, which aligns to the plan's asset investment mix of 70 % fixed income securities and 30 % 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, 2020, the Company’s overall expected long-term rate of return for assets in U.S. pension plans was 4.20 %. 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. 49 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The U.S. pension plan investment allocations by asset category were as follows (in thousands): Year Ended August 31, 2020 % 2019 % Cash and cash equivalents $ — — % $ 304 0.8 % Income receivable 55 0.1 — — Fixed income securities: U.S. Treasury Securities 5,206 13.0 — — Corporate Bonds — — 5,127 12.7 Mutual funds 23,091 57.9 23,206 57.4 28,297 70.9 28,333 70.1 Equity securities: Mutual funds 11,583 29.0 11,775 29.1 Total plan assets $ 39,935 100.0 % $ 40,412 100.0 % 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 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 $ 2.9 million for fiscal 2021 and $ 3.0 million per year for each of the next four years and $ 14.7 million in aggregate for the following five years. The Company made a contribution of $ 0.6 million to the U.S. pension plans in September of fiscal 2021. Foreign Defined Benefit Pension Plans The Company has eight 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 current employees and are 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 foreign defined benefit pension plans as of the respective August 31 measurement date (in thousands): 2020 2019 Reconciliation of benefit obligations: Benefit obligation at beginning of year $ 15,103 $ 13,056 Employer service costs 284 450 Interest cost 171 257 Actuarial (gain)/loss ( 495 ) 2,594 Benefits paid ( 300 ) ( 421 ) Plan amendments — 89 Curtailments ( 1,687 ) ( 107 ) Currency impact 1,221 ( 815 ) Benefit obligation at end of year $ 14,297 $ 15,103 Reconciliation of plan assets: Fair value of plan assets at beginning of year $ 8,118 $ 7,902 Actual return on plan assets 69 752 Company contributions 323 374 Benefits paid from plan assets ( 300 ) ( 421 ) Currency impact 770 ( 489 ) Fair value of plan assets at end of year 8,980 8,118 Funded status of the plans (underfunded) $ ( 5,317 ) $ ( 6,985 ) 50 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following table provides detail on the Company’s foreign net periodic benefit expense (in thousands): Year ended August 31, 2020 2019 2018 Employer service costs $ 284 $ 450 $ 440 Interest cost 171 257 278 Expected return on assets ( 357 ) ( 345 ) ( 366 ) Amortization of net prior service credit ( 18 ) ( 65 ) ( 69 ) Amortization of net loss 205 263 306 (Income) or cost of special events ( 728 ) ( 56 ) 18 Net periodic benefit (income) expense $ ( 443 ) $ 504 $ 607 The weighted average discount rate utilized for determining the benefit obligation at August 31, 2020 and 2019 was 1.4 % and 1.1 %, 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 3.9 %. During fiscal 2021, the Company anticipates contributing $ 0.2 million to these pension plans. In fiscal 2020, the Company moved certain employees in a foreign pension plan into a multi-employer pension plan which triggered a curtailment. The curtailment resulted in a reduction to the projected benefit obligation of that plan of $ 1.7 million, of which $ 0.7 million was recorded as a component of Other (income) expense, net within the Consolidated Statements of Operations and the remaining $ 1.0 million was recorded through Other comprehensive income (loss) on the Consolidated Statements of Comprehensive Income (Loss). Projected benefit payments to participants in the these foreign plans are $ 0.4 million for fiscal 2021, $ 0.3 million in each of the following four fiscal years and $ 1.9 million in aggregate for the following five years. 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 $ 2.4 million and $ 3.1 million at August 31, 2020 and 2019, 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 6.5 %, trending downward to 5.0 % by the year 2026, and remaining level thereafter. Net periodic benefit costs for other postretirement benefits was income of $ 0.3 million and $ 0.1 million for the year ended August 31, 2020 and 2019, respectively and expense of $ 0.1 million for the year-ended August 31, 2018. Benefit payments from the plan are funded through participant contributions and Company contributions. Benefit payments are projected to be $ 0.2 million in fiscal 2021. 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 response to the COVID-19 pandemic, the Company temporarily suspended its 401(k) match starting in May 2020, which has remained suspended. 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, 2020. 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. In both fiscal 2019 and 2018 the Company contributed $ 0.1 million to eligible participants; no contributions were made in fiscal 2020. Expense recognized related to the 401(k) plan totaled $ 1.4 million, $ 2.7 million and $ 3.1 million for the year ended August 31, 2020, 2019 and 2018, respectively. 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 $ 1.3 million and $ 1.6 million obligation at August 31, 2020 and 2019, 51 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) respective ly. Expense recognized for the SERP Plan was $ 0.3 million, $ 0.4 million and $ 0.3 million for fiscal 2020, 2019 and 2018, respectively. Deferred Compensatio n 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 that 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 $ 15.7 million and $ 18.4 million are included in the consolidated balance sheets at August 31, 2020 and 2019, respectively, to reflect the unfunded portion of the deferred compensation liability. The Company recorded expense in "Financing costs, net" of $ 1.1 million, $ 1.4 million and $ 1.5 million for the years ended August 31, 2020, 2019 and 2018, 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. Since no investment diversification is permitted within the trust, changes in fair value of Enerpac Tool Group common stock are not recognized. Note 12. Income Taxes Income tax expense from continuing operations is summarized as follows (in thousands) : Year ended August 31, 2020 2019 2018 Currently payable: Federal $ ( 35 ) $ ( 2,040 ) $ 291 Foreign 10,004 9,370 9,223 State 142 1,347 358 10,111 8,677 9,872 Deferred: Federal ( 7,791 ) ( 400 ) ( 1,143 ) Foreign ( 1,632 ) 2,172 5,807 State 1,604 208 ( 86 ) ( 7,819 ) 1,980 4,578 Income tax expense $ 2,292 $ 10,657 $ 14,450 52 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Income tax expense from continuing operations recognized in the accompanying consolidated statements of operations 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, 2020 2019 2018 Federal statutory rate 21.0 % 21.0 % 25.7 % State income taxes, net of Federal effect ( 0.6 ) ( 4.0 ) ( 0.5 ) Net effects of foreign tax rate differential and credits (1) 38.7 11.3 ( 12.2 ) Domestic manufacturing deduction — — ( 1.3 ) Foreign branch currency losses ( 0.4 ) — ( 2.1 ) Compensation adjustment 6.6 4.4 7.0 Impairment and other divestiture charges (2) 3.3 19.3 39.1 Valuation allowance additions and releases (3) ( 8.1 ) 3.9 20.3 Changes in liability for unrecognized tax benefits ( 5.3 ) 4.1 ( 34.1 ) U.S. tax reform, net impact (4) ( 32.5 ) ( 31.1 ) 2.4 Taxable liquidation of subsidiaries (5) 52.6 — 7.7 Foreign non-deductible expenses 7.4 16.2 12.0 Changes in tax rates ( 9.0 ) 1.7 ( 1.4 ) R&D credit, audits and adjustments (6) ( 38.9 ) 4.8 15.3 Other items ( 5.6 ) 5.3 ( 2.6 ) Effective income tax rate 29.2 % 56.9 % 75.3 % (1) The Company generated $ 5.4 million, $ 2.6 million and $ 1.5 million of withholding tax expense for fiscal 2020, 2019 and 2018, respectively, and $ 4.0 million, $ 3.5 million and $ 13.3 million of foreign-derived tax credits, excluding the impact of tax reform for fiscal 2020, 2019 and 2018, respectively. (2) Fiscal 2020, 2019 and 2018 pretax earnings include $( 3.2 ) million, $ 22.8 million and $ 3.0 million, respectively, in impairment & divestiture (benefits) charges related to goodwill, intangible assets, tangible assets and the cumulative effect of foreign currency rate changes of which $ 0.3 million, $ 14.0 million and $ 0.7 million, respectively, are not deductible for income tax purposes. (3) Incremental valuation allowances of $ 9.4 million and $ 1.7 million and $ 20.4 million were recorded in fiscal 2020, 2019 and 2018, respectively, due to uncertainty regarding realization of tax assets, which were offset by a reduction of $ 12.3 million, $ 2.9 million and $ 11.8 million of valuation allowances for fiscal 2020, 2019 and 2018, respectively. These amounts exclude valuation allowances against tax assets related to the tax reform. (4) During fiscal 2020, legislative changes and additional guidance related to proposed foreign tax credit regulations resulted in adjustments of $( 2.6 ) million related to the fiscal 2019 results. (5) During fiscal 2020 and 2018, the Company generated a net expense of $ 4.1 million and $ 1.5 million, respectively, as a result of taxable liquidations of subsidiaries. (6) During fiscal 2020, the Company generated $ 3.1 million of tax benefit related to R&D credits, audits and adjustments as compared to $ 0.9 million tax expense in fiscal 2019 and $ 2.9 million tax expense in fiscal 2018. 53 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities include the following items (in thousands): August 31, 2020 2019 Deferred income tax assets: Operating loss and tax credit carryforwards $ 99,905 $ 88,198 Compensation related liabilities 5,941 7,752 Postretirement benefits 9,068 9,289 Inventory 1,793 629 Lease liabilities 10,526 — Book reserves and other items 6,752 11,465 Total deferred income tax assets 133,985 117,333 Valuation allowance ( 70,414 ) ( 73,255 ) Net deferred income tax assets 63,571 44,078 Deferred income tax liabilities: Depreciation and amortization ( 31,457 ) ( 26,248 ) Lease assets ( 10,526 ) — Other items ( 702 ) ( 862 ) Deferred income tax liabilities ( 42,685 ) ( 27,110 ) Net deferred income tax asset (1) $ 20,886 $ 16,968 (1) The net deferred income tax asset is reflected on the balance sheet in two categories: an asset of $ 22.6 million and $ 18.4 million for fiscal 2020 and 2019, respectively, is included in "Other long-term assets" and a liability of $ 1.7 million and $ 1.6 million for fiscal 2020 and 2019, respectively, is included in "Deferred income taxes". The Company has $ 77.6 million of state net operating loss carryforwards, which are available to reduce future state tax liabilities. These state net operating loss carryforwards expire at various times through 2040. The Company also has $ 89.3 million of foreign loss carryforwards which are available to reduce certain future foreign tax liabilities. Approximately one-half of the foreign loss carryforwards are not subject to any expiration dates, while the other balances expire at various times through 2030. The valuation allowance represents a reserve for deferred tax assets, including loss carryforwards and foreign tax credits, for which utilization is uncertain. Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, are as follows (in thousands): 2020 2019 2018 Beginning balance $ 24,167 $ 24,359 $ 31,446 Increases based on tax positions related to the current year 869 2,169 2,599 Increase for tax positions taken in a prior period 304 1,422 359 Decrease for tax positions taken in a prior period — — ( 349 ) Decrease due to lapse of statute of limitations ( 2,334 ) ( 3,212 ) ( 9,163 ) Decrease due to settlements — ( 324 ) — Changes in foreign currency exchange rates 199 ( 247 ) ( 533 ) Ending balance $ 23,205 $ 24,167 $ 24,359 Substantially all of these unrecognized tax benefits, if recognized, would impact the effective income tax rate. As of August 31, 2020, 2019 and 2018, the Company recognized $ 4.5 million, $ 3.7 million and $ 3.0 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 2010. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $ 1.7 million throughout fiscal 2021. The Company’s policy is to remit earnings from foreign subsidiaries only to the extent the remittance does not result in an incremental U.S. tax liability. The Company does not currently provide for the additional U.S. and foreign income taxes which would become payable upon remission of undistributed earnings of foreign subsidiaries. If all undistributed earnings were remitted, an additional income tax provision of $ 2.4 million would have been necessary as of August 31, 2020. 54 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) E arnings (loss) before income taxes from continuing operations, are summarized as follows (in thousands): Year Ended August 31, 2020 2019 2018 Domestic $ ( 9,058 ) $ ( 715 ) $ 5,337 Foreign 16,907 19,439 13,859 $ 7,849 $ 18,724 $ 19,196 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 2020, domestic and foreign earnings included non-cash impairment and other divestiture benefits of $( 2.6 ) million and $( 0.6 ) million, respectively. In fiscal 2019, domestic and foreign earnings included non-cash impairment and other divestiture costs of $ 9.0 million and $ 13.8 million, respectively. In fiscal 2018, foreign earnings included $ 3.0 million of non-cash impairment & divestiture charges. Over 75 % of pre-tax earnings from continuing operations (excluding impairment & other divestiture charges) were generated in foreign jurisdictions with tax rates different than the U.S. federal income tax rate. Cash paid for income taxes, net of refunds, totaled $ 13.2 million, $ 15.4 million and $( 1.5 ) million (refund) during the years ended August 31, 2020, 2019 and 2018, respectively. Note 13. Capital Stock and Share Repurchases The authorized common stock of the Company as of August 31, 2020 consisted of 168,000,000 shares of Class A common stock, $ 0.20 par value, of which 82,593,945 and 59,794,715 shares were issued and outstanding, respectively; 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. During the year ended August 31, 2020, the Company repurchased 1,343,662 shares for $ 27.5 million. At August 31, 2020, cumulative shares repurchased under these authorizations totaled 22,799,230 , leaving 5,200,770 shares authorized for future buy backs. 55 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Earnings Per Share The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts): Year Ended August 31, 2020 2019 2018 Numerator: Net earnings from continuing operations $ 5,557 $ 8,067 $ 4,746 Net loss from discontinued operations ( 4,834 ) ( 257,212 ) ( 26,394 ) Net earnings (loss) 723 ( 249,145 ) ( 21,648 ) Denominator: Weighted average common shares outstanding - basic 59,952 61,151 60,441 Net effect of dilutive securities - stock based compensation plans 317 456 587 Weighted average common shares outstanding - diluted 60,269 61,607 61,028 Earnings per common share from continuing operations: Basic $ 0.09 $ 0.13 $ 0.08 Diluted $ 0.09 $ 0.13 $ 0.08 Loss per common share from discontinued operations: Basic $ ( 0.08 ) $ ( 4.21 ) $ ( 0.44 ) Diluted $ ( 0.08 ) $ ( 4.18 ) $ ( 0.43 ) Loss per common share: Basic $ 0.01 $ ( 4.07 ) $ ( 0.36 ) Diluted $ 0.01 $ ( 4.04 ) $ ( 0.35 ) Anti-dilutive securities- stock based compensation plans (excluding from earnings per share calculation) 1,532 1,239 1,477 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 (the “Plan”). At August 31, 2020, 4,325,000 shares of Class A c ommon stock were authorized for issuance under the Plan plus an additional 1,800,000 shares being registered to cover shares, if any, that become issuable, pursuant to the terms of the Plan, upon the expiration, cancellation or forfeiture of existing awards under our previously registered stock plans. At August 31, 2020, 2,362,855 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 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, with vesting based 50 % on achievement of an absolute free cash flow conversion target and 50 % on the Company’s total shareholder return ("TSR") relative to the S&P 600 SmallCap Industrial index. The provisions of share-based awards may vary by individual grant with respect to vesting period, dividend and voting rights, performance conditions and forfeitures. 56 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) A summary of restricted stock units and performance shares activity during fiscal 2020 is as follows: Number of Shares Weighted-Average Fair Value at Grant Date (Per Share) Outstanding on August 31, 2019 1,280,826 $ 23.87 Granted 460,800 24.10 Forfeited ( 85,750 ) 23.29 Vested ( 669,755 ) 23.77 Outstanding on August 31, 2020 986,121 $ 24.10 A summary of stock option activity during fiscal 2020 is as follows: Shares Weighted-Average Exercise Price (Per Share) Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding on September 1, 2019 1,606,543 $ 25.88 Granted — — Exercised ( 145,113 ) 19.77 Forfeited — — Expired ( 6,389 ) 35.68 Outstanding on August 31, 2020 1,455,041 $ 26.45 3.5 * Exercisable on August 31, 2020 1,323,188 $ 26.55 3.3 * *At August 31, 2020, all outstanding options had a strike price that was higher than the value of the Company's stock, therefore the aggregate intrinsic value was $ 0 . Intrinsic value is the difference between the market value of the stock at August 31, 2020 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, 2020 2019 2018 Intrinsic value of options exercised $ 803 $ 429 5,284 Cash receipts from exercise of options 2,631 1,404 15,140 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 8 % for the year ended August 31, 2020 and 10 % for both years ended August 31, 2019 and 2018. The fair value of Performance Shares with market vesting conditions is determined utilizing a Monte Carlo simulation model. Stock based compensation expense is determined using a binomial pricing model for options, however there were no options granted in fiscal 2020, 2019 or 2018. As of August 31, 2020, there was $ 13.6 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 1.8 years. The total fair value of share-based awards that vested during the fiscal years ended August 31, 2020 and 2019 was $ 18.2 million and $ 11.9 million, respectively. 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 industrial, maintenance, infrastructure, oil & gas, energy and other markets. The Other segment is included for purposes of reconciliation of the respective balances below to the consolidated financial statements. 57 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following tables summarize financial information by reportable segment and product line (in thousands): Year Ended August 31, 2020 2019 2018 Net Sales by Reportable Segment & Product Line Industrial Tools & Services Segment Product $ 341,470 $ 433,703 $ 439,405 Service & Rental 113,393 175,812 151,680 454,863 609,515 591,085 Other Operating Segment 38,429 45,243 50,218 $ 493,292 $ 654,758 $ 641,303 Operating Profit (Loss) Industrial Tools & Services $ 65,549 $ 101,411 $ 99,432 Other Operating Segment ( 3,420 ) ( 11,821 ) ( 5,690 ) General Corporate ( 37,948 ) ( 42,076 ) ( 43,536 ) $ 24,181 $ 47,516 $ 50,206 Depreciation and Amortization: Industrial Tools & Services $ 14,854 $ 14,762 $ 15,301 Other Operating Segment 3,620 3,408 3,122 General Corporate 2,246 2,047 1,982 $ 20,720 $ 20,217 $ 20,405 Capital Expenditures: Industrial Tools & Services $ 7,282 $ 9,945 $ 7,799 Other Operating Segment 2,625 3,917 1,295 General Corporate 2,146 1,061 1,927 $ 12,053 $ 14,923 $ 11,021 August 31, 2020 2019 Assets:* Industrial Tools & Services $ 592,086 $ 553,615 Other Operating Segment 61,105 54,484 General Corporate 171,103 230,597 $ 824,294 $ 838,696 *Excludes "Assets from discontinued operations" as of August 31, 2019. 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 (year ended August 31, 2020), capitalized debt issuance costs and deferred income taxes. 58 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) The following tables summarize net sales and property, plant and equipment by geographic region (in thousands): Year Ended August 31, 2020 2019 2018 Net Sales: United States $ 185,279 $ 249,644 $ 236,036 Germany 24,401 26,445 30,643 United Kingdom 24,033 30,127 35,388 Saudi Arabia 19,787 21,625 20,749 Australia 19,332 25,749 30,796 Brazil 16,413 18,779 17,900 Canada 15,924 18,686 20,172 China 15,058 18,548 19,239 All other 173,065 245,155 230,380 $ 493,292 $ 654,758 $ 641,303 August 31, 2020 2019 Property, Plant and Equipment, net: United States $ 21,410 $ 21,047 China 12,248 12,179 United Kingdom 9,654 2,983 UAE 7,525 8,734 Netherlands 2,546 2,720 Kazakhstan 2,052 2,635 Brazil 1,784 2,851 Spain 1,705 1,244 All other 2,481 2,336 $ 61,405 $ 56,729 The Company’s largest customer accounted for approximately 3.0 % of sales in each of the last three fiscal years. Export sales from domestic operatio ns were 7.3 %, 7.4 % and 7.9 % of total net sales from continuing operations in fiscal 2020, 2019 and 2018, respectively. Note 16. Commitments and Contingencies The Company had outstanding letters of credit of $ 11.9 million and $ 18.2 million at August 31, 2020 and 2019, respectively, the majority of which relate to commercial contracts and self-insured workers' compensation programs. As part of the Company's global sourcing strategy, we have entered into agreements with certain suppliers that require the supplier to maintain minimum levels of inventory to support certain products for which we require a short lead time to fulfill customer orders. We have the ability to notify the supplier that they no longer need maintain the minimum level of inventory should we discontinue manufacture 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 typically include product liability, breaches of contract, employment, personal injury and other disputes. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable a loss has been incurred and can be reasonably estimated. The Company maintains a policy to exclude from such reserves an estimate of legal defense costs. In the opinion of management, resolution of these contingencies is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company remains contingently liable for lease payments under leases of businesses that it previously divested or spun-off in the event that such businesses are unable to fulfill their future lease payment obligations, however, the Company does not believe it is probable that it will be required to satisfy these obligations. Future minimum lease payments for these leases at August 31, 2020 was $ 6.9 million associated with monthly payments extending to fiscal 2025. 59 ENERPAC TOOL GROUP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 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 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, the Company self-disclosed in fiscal 2019 the sales to an Estonian customer to relevant authorities in the Netherlands as potentially violating applicable sanctions laws in that country and the European Union. The investigation by authorities in the Netherlands is ongoing and also may result in penalties. At this time, the Company cannot predict when the investigation will be completed or reasonably estimate what penalties, if any, will be assessed. While there can be no assurance of the ultimate outcome of the Netherlands investigation, the Company currently believes that there will be no material adverse effect on the Company's financial position, results of operations or cash flows. Note 17. Quarterly Financial Data (Unaudited) Quarterly financial data for fiscal 2020 and fiscal 2019 is as follows: Year to date August 31, 2020 First Second Third Fourth Total Net sales $ 146,674 $ 133,386 $ 101,879 $ 111,353 $ 493,292 Gross profit 68,688 62,093 41,947 44,465 217,193 Net earnings (loss) from continuing operations 6,372 3,918 ( 4,930 ) 197 5,557 Net earnings (loss) per share from continuing operations: Basic $ 0.11 $ 0.07 $ ( 0.08 ) $ 0.00 $ 0.09 Diluted $ 0.11 $ 0.06 $ ( 0.08 ) $ 0.00 $ 0.09 Year to date August 31, 2019 First Second Third Fourth Total Net sales $ 158,551 $ 159,788 $ 178,095 $ 158,324 $ 654,758 Gross profit 70,312 71,316 81,954 69,070 292,652 Net (loss) earnings from continuing operations ( 16,423 ) 765 26,858 ( 3,133 ) 8,067 Net (loss) earnings per share from continuing operations: Basic $ ( 0.27 ) $ 0.01 $ 0.44 $ ( 0.05 ) $ 0.13 Diluted $ ( 0.27 ) $ 0.01 $ 0.43 $ ( 0.05 ) $ 0.13 The total of the individual quarters may not equal the annual or year-to-date total due to rounding. During the year ended August 31, 2020, the Company recognized an impairment and divestiture benefit of $ 3.2 million of which $ 1.4 million was recorded in the first quarter, $ 0.8 million in the second quarter, $ 1.4 million in the third quarter and a charge of $ 0.4 million in the fourth quarter (see Note 5, "Discontinued Operations and Other Divestiture Activities" ). During the year ended August 31, 2019, the Company recognized impairment and divestiture charges of $ 22.8 million of which $ 23.5 million was recorded in the first quarter, $ 6.1 million in the second quarter, a benefit of $ 13.0 million in the third quarter and a charge of $ 6.2 million in the fourth quarter (see Note 5, "Discontinued Operations and Other Divestiture Activities" ). 60 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, 2020 $ 5,141 $ 682 $ ( 1 ) $ ( 726 ) $ ( 105 ) $ 4,991 August 31, 2019 4,958 1,114 — ( 833 ) ( 98 ) 5,141 August 31, 2018 10,488 ( 1,732 ) 76 ( 3,571 ) ( 303 ) 4,958 Valuation allowance—Income taxes August 31, 2020 $ 73,255 $ 9,383 $ — $ ( 12,337 ) $ 113 $ 70,414 August 31, 2019 32,426 43,693 — ( 2,864 ) — 73,255 August 31, 2018 16,758 27,504 — ( 11,836 ) — 32,426 61 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.