What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-10-25 compared with 2020-10-26 · 358 added, 403 removed, 851 unchanged (47% of the section changed)

4 unchanged sentences

Consolidated Statements of Comprehensive Income (Loss) for the years ended August 31, 2021, 2020 and 2019

Consolidated Balance Sheets as of August 31, 20 20 a nd 201 9

Consolidated Balance Sheets as of August 31, 2021 and 2020

Consolidated Statements of Cash Flows for the years ended August 31, 2021, 2020 and 2019

5 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Enerpac Tool Group Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Enerpac Tool Group Corp.

and subsidiaries (the Company) as of August 31, 2021 and the related consolidated statements of operations, of comprehensive income (loss), of cash flows, and of shareholders’ equity in the year ended August 31, 2021, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 31, 2021, and the results of its operations and its cash flows for the year ended August 31, 2021, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of August 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated October 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Goodwill in Other Segment

Description of the Matter At August 31, 2021, the Company’s consolidated goodwill balance was $277.6 million.

Goodwill associated with the Other segment was $12.5 million.

As disclosed in Note 1 to the financial statements, Management tests goodwill for impairment annually during the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

In estimating fair value, management utilizes a discounted cash flow model, which is dependent on a number of assumptions, most significantly forecasted revenues and operating profit margins, and the weighted average cost of capital.

Auditing management’s goodwill impairment test within the Other segment was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting units.

In particular, the fair value estimate was sensitive to significant assumptions over forecasted revenues, operating profit margins, and the weighted average cost of capital.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management's review of the significant assumptions used to develop the fair value estimates and controls over the completeness and accuracy of the underlying data used in the valuation.

To test the estimated fair value of the Company’s reporting units within the Other segment, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the completeness and accuracy of the underlying data used by the Company in its analysis.

We involved our valuation specialists to review the Company’s valuation model, methodology, and the significant assumptions.

We compared the significant assumptions used by management to current industry and economic trends.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions.

We reconciled the fair value of the reporting units in the Other segment to their carrying value and tested the Company’s determination of the assets and liabilities used within the reporting units that are the basis for the carrying value.

In addition, we tested management’s reconciliation of the fair value of all the reporting units to the market capitalization of the Company and assessed the adequacy of the Company’s goodwill valuation disclosures.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2020.

Milwaukee, Wisconsin

October 25, 2021

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.

Opinion on the Financial Statements

We have audited the consolidated balance sheet of Enerpac Tool Group Corp.

and its subsidiaries (the “Company”) as of August 31, 2020, and the related consolidated statements of operations, comprehensive income (loss), of shareholders’ equity and of cash flows for each of the two years in the period ended August 31, 2020, including the related notes and schedule of valuation and qualifying accounts as of and for each of the two years in the period ended August 31, 2020 listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2020, and the results of its operations and its cash flows for each of the two years in the period ended August 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

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.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements 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.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the 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.

We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Milwaukee, Wisconsin

October 26, 2020

We served as the Company's auditor from 1997 to 2020.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Enerpac Tool Group Corp.

Opinion on Internal Control over Financial Reporting

We have audited Enerpac Tool Group Corp.

and subsidiaries’ internal control over financial reporting as of August 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Enerpac Tool Group Corp.

and subsidiaries’ (the Company) maintained, in all material respects, effective internal control over financial reporting as of August 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of August 31, 2021 and the related consolidated statements of operations, comprehensive income (loss), cash flows, and shareholders’ equity in the year ended August 31, 2021, and the related notes and financial statement schedule listed in the accompanying index and our report dated October 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (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.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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.

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

/s/ Ernst & Young LLP

Milwaukee, Wisconsin

October 25, 2021

We have served as the Company’s auditor since 1997.

ENERPAC TOOL GROUP CORP.

11 unchanged sentences

Gross profit 243,156 217,193 292,652

Selling, administrative and engineering expenses 180,513 209,231 210,256

Selling, general and administrative expenses 175,277 180,513 209,231

Amortization of intangible assets 8,176 8,323 8,922

Restructuring charges 2,392 7,335 4,156

Impairment & divestiture (benefit) charges ( 3,159 ) 22,827 2,987

Impairment & divestiture charges (benefit) 6,198 ( 3,159 ) 22,827

Operating profit 51,113 24,181 47,516

Financing costs, net 5,266 19,218 28,163

Other (income) expense, net ( 2,886 ) 629 138

Other expense (income), net 1,872 ( 2,886 ) 629

Earnings before income tax expense 43,975 7,849 18,724

19 unchanged sentences

(in thousands)

Twelve Months Ended

Year Ended August 31,

2021 2020 2019

14 unchanged sentences

Inventories, net 75,347 69,171

Assets from discontinued operations — 285,578

Other current assets 38,503 35,621

9 unchanged sentences

Accrued compensation and benefits 21,597 17,793

Current maturities of debt — 7,500

Income taxes payable 5,674 1,937

Liabilities from discontinued operations — 143,763

Other current liabilities 45,535 40,723

26 unchanged sentences

Net earnings from continuing operations 40,212 5,557 8,067

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

Adjustments to reconcile net earnings from continuing operations to net cash provided by operating activities - continuing operations:

Impairment & divestiture charges (benefit), net of tax effect 5,586 ( 2,506 ) 20,930

Depreciation and amortization 21,611 20,720 20,217

Stock-based compensation expense 9,215 9,624 10,882

(Benefit) provision for deferred income taxes ( 7,819 ) 3,955 5,588

Provision (benefit) for deferred income taxes 9,639 ( 7,819 ) 3,955

Amortization of debt issuance costs 480 2,549 1,200

Other non-cash charges 1,204 405 285

Other non-cash (benefits) charges ( 9,172 ) 1,204 405

Changes in components of working capital and other, excluding acquisitions and divestitures:

8 unchanged sentences

Cash (used in) provided by operating activities - discontinued operations ( 677 ) ( 21,158 ) 12,942

Cash (used in) provided by operating activities ( 3,159 ) 53,845 106,093

Cash provided by (used in) operating activities 54,183 ( 3,159 ) 53,845

Investing Activities

1 unchanged sentence

Proceeds from sale of property, plant and equipment 22,409 708 1,462

Rental asset buyout for Viking divestiture — — ( 27,718 )

Proceeds from sale of business/product line 10,226 — 8,902

Proceeds from company owned life insurance policies 2,911 — —

Cash paid for business acquisitions, net of cash acquired — ( 33,298 ) —

Proceeds from sale of business, net of transaction costs — 10,226 —

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 )

Cash provided by (used in) investing activities - continuing operations 13,301 ( 35,127 ) ( 13,461 )

Cash provided by investing activities - discontinued operations — 211,200 24,507

Cash provided by investing activities 13,301 176,073 11,046

Financing Activities

Principal repayments on revolving credit facility ( 90,000 ) ( 140,000 ) —

Principal repayments on term loan — ( 175,000 ) ( 72,500 )

Borrowings on revolving credit facility 10,000 395,000 —

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 )

1 unchanged sentence

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

Stock options, taxes paid related to the net share settlement of equity awards & other 128 ( 1,428 ) ( 2,097 )

Payment of cash dividend ( 2,394 ) ( 2,419 ) ( 2,439 )

Payment of debt issuance costs ( 234 ) ( 2,125 ) —

Cash used in financing activities - continuing operations ( 82,266 ) ( 238,926 ) ( 99,517 )

Cash used in financing activities - discontinued operations — — —

Cash provided by financing activities - discontinued operations 750 — —

Cash used in financing activities ( 81,516 ) ( 238,926 ) ( 99,517 )

Effect of exchange rate changes on cash 2,214 7,031 ( 4,713 )

Net (decrease) increase in cash and cash equivalents ( 58,981 ) ( 39,339 ) 20,919

Net decrease in cash and cash equivalents ( 11,818 ) ( 58,981 ) ( 39,339 )

Cash and cash equivalents - beginning of period 152,170 211,151 250,490

9 unchanged sentences

Comprehensive

Trust Deferred

Loss Stock Held In Trust Deferred

Liability Total

7 unchanged sentences

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

2 unchanged sentences

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 loss — — — — ( 249,145 ) — — — ( 249,145 )

Net income — — — — 723 — — — 723

Other comprehensive income, net of tax — — — — — 74,615 — — 74,615

19 unchanged sentences

Stock issued to, acquired for and distributed from rabbi trust 25 5 218 — — — ( 505 ) 505 223

Adoption of accounting standards (Note 1) — — — — 3,873 ( 3,667 ) — — 206

Balance at August 31, 2021 83,022 $ 16,604 $ 202,971 $ ( 667,732 ) $ 953,339 $ ( 92,984 ) $ ( 3,067 ) $ 3,067 $ 412,198

5 unchanged sentences

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.

(the “Company”), 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 infrastructure, industrial maintenance, infrastructure, repair, and operations, oil & gas, mining and alternative and renewable energy and construction markets.

Consolidation and Presentation:

2 unchanged sentences

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.

The Company has updated our historical caption of "Selling, administrative and engineering expenses" in the

Consolidated Statements of Operations to "Selling, general and administrative expenses." There has been no change to the

composition of expenses within the caption in the current or historical periods presented.

Cash Equivalents:

The Company considers all highly liquid investments with original maturities of 90 days or less to be cash equivalents.

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.

Inventories are comprised of material, direct labor and manufacturing overhead.

A majority of inventory is recorded on the first-in, first-out or average cost method and is stated at the lower of cost or net realizable value.

A portion of U.S.

owned inventory is determined using the last-in, first-out (“LIFO”) method ( 48.4 % a nd 44.1 % of total inventories as of August 31, 2021 and 2020, respectively).

If the LIFO method were not used, inventory balances would be higher than reported amounts in the consolidated balance sheets b y $ 15.9 million and $ 10.2 million at August 31, 2021 and 2020, respectively.

The nature of the Company’s products is such that they generally have a very short production cycle.

6 unchanged sentences

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.

Equipment includes assets 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 le ase.

Depreciation expense was $ 13.4 million, $ 12.4 million and $ 11.3 million for the years ended August 31, 2021, 2020 and 2019, respectively.

6 unchanged sentences

Property, plant and equipment, net $ 48,590 $ 61,405

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

We determine if an arrangement contains a lease in whole or in part at the inception of the contract and identify classification of the lease as financing or operating.

We account for the underlying operating lease asset at the individual lease level.

Operating leases are recorded as operating lease right-to-use (“ROU”) assets in “Other long-term assets” and operating lease liabilities in “Other current liabilities” and “Other long-term liabilities” on the Consolidated Balance Sheets.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

purchased customer relationships, patents, trademarks and tradenames, are amortized over periods from one to twenty-five years.

All leases greater than 12 months result in recognition of a ROU asset and a liability at the lease commencement date and are recorded at the present value of the future minimum lease payments over the lease term.

The lease term is equal to the initial term at commencement plus any renewal or extension options that the Company is reasonably certain will be exercised.

ROU assets at the date of commencement are equal to the amount of the initial lease liability, the initial direct costs incurred by the Company and any prepaid lease payments less any incentives received.

Lease expense for operating leases is recognized on a straight-line basis over the lease term or remaining useful life.

As most of our leases do not provide the information required to determine the implicit rate, we utilize a consolidated group incremental borrowing rate for all leases as the Company has centralized treasury operations.

The incremental borrowing rate is derived through a combination of inputs such as the Company's credit rating, impact of collaborated borrowing capabilities and lease term.

Leases with the duration of less than one-year are not recognized on the balance sheet and are expensed on a straight-line basis over the lease term.

In addition, we do not separate lease components from non-lease components for all asset classes.

Goodwill and Other Intangible Assets:

Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are subject to annual impairment testing.

Other intangible assets with definite lives, consisting primarily of purchased customer relationships, patents, trademarks and tradenames, are amortized over periods from one to twenty-five years.

The Company’s goodwill is tested for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

25 unchanged sentences

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.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

of its existing receivables.

Accounts receivable are stated net of an allowance for doubtful accounts of $ 4.2 million and $ 5.0 million at August 31, 2021 and 2020, 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.

T axes 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:

3 unchanged sentences

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.

Such costs incurred in the development of new products or significant improvements to existing pr oducts were $ 7.4 million, $ 7.3 million and $ 9.3 million in fiscal 2021, 2020 and 2019, 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.

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.

Other income and expense primarily consists of net foreign currency exchange transaction losses of $ 1.8 million, $ 2.6 million and $ 0.2 million in fiscal 2021, 2020 and 2019, respectively.

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 .

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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.

subsidiaries, as such earnings are intended to be indefinitely reinvested to the extent the remittance does not result in an incremental U.S.

tax liability.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense and treats any taxes due on future U.S.

inclusions in taxable income under the Global Intangible Low-Taxed Income ("GILTI") provision as a current period tax expense.

Foreign Currency Translation:

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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 COVID-19 pandemic has negatively impacted, and is likely to continue to negatively impact to varying extents, the global economy.

The Company's operating results and financial position will continue to be subject to the general economic conditions created by the pandemic, and the duration and extent to which the pandemic's effects impact the Company's business will depend on future developments, including the

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

distribution and long-term effectiveness of vaccines globally, the impact of COVID-19 variants, such as the Delta variant, and the impact of therapeutics in minimizing its negative effects on macroeconomic conditions, which still remain uncertain.

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.

This model includes providing integrated product and service solutions resulting in facilities that generate revenues from both product and service & rental categories, which also have indirect and facility overhead costs 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.

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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

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 addition, due to the recent 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.

Recently Adopted Accounting Pronouncements

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.

The Company adopted the guidance on September 1, 2020 using the modified retrospective approach and there was no impact to the financial statements as a result of the adoption.

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.

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See Note 10, “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):

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.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for a limited time to ease the potential burden of accounting for reference rate reform on financial reporting.

This guidance applies to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates.

The guidance is effective beginning on March 12, 2020 through December 31, 2022.

In January 2021, the FASB issued ASU 2021-01 allowing entities to apply certain aspects of ASC 848 (previously ASU 2020-4) to all derivative instruments that undergo a modification of the interest rate used for discounting, margining or contract price alignment as a result of the reference reform.

The guidance is also effective through December 31, 2022.

The Company has not utilized any of the optional expedients or exceptions available under this guidance.

The Company will continue to assess whether this guidance is applicable throughout the effective period.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The amendments in this update simplify the accounting for income taxes by removing certain exceptions and amending and clarifying existing guidance.

The guidance is effective for the Company in the first quarter of fiscal 2022 with early adoption permitted.

The adoption is not expected to have a material effect on our consolidated financial statements .

Revenue from Contracts with Customers

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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).

Sales of tools, heavy-lifting solutions, and rope solutions are recorded when control is transferred to the customer (i.e., performance obligation has been satisfied).

For the majority of the Company’s product sales, revenue is recognized at a point in time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company to the customer.

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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

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.

We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over-time revenue associated with service contracts.

For a majority of the Company’s service contracts, labor hours (efforts-expended measurement) is used as the measure of progress when it is determined to be a better depiction of the transfer of control to the customer due to the timing and pattern of labor hours incurred.

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The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established.

Accounts receivable, net is recorded at face amount of customer receivables less an allowance for doubtful accounts.

The Company maintains an allowance for doubtful accounts for expected losses as a result of customers’ inability to make required payments.

Management evaluates the aging of customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

amount of receivables that will not be collected in the future and records the appropriate provision.

The allowance for doubtful accounts was $ 4.2 million and $ 5.0 million at at August 31, 2021 and 2020, respectively.

Concentration of credit risk:

The Company sells products and services through distributors and agents.

In certain jurisdictions, those third parties represent a significant portion of our sales in their respective country which can pose a concentration of credit risk if these larger distributors or agents are not timely in their payments.

As of August 31, 2021 the Company was exposed to a concentration of credit risk as a result of the payment delinquency of one of our agents whose accounts receivable represent 10.4 % of the Company's outstanding accounts receivable.

Contract Assets:

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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:

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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

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.

The Company does not disclose the value of unperformed obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.

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.

The Company has undertaken or committed to various restructuring initiatives, including workforce reductions, leadership changes, plant consolidations to reduce manufacturing overhead, satellite office closures, the continued movement of production and product sourcing to low-cost alternatives and the centralization and standardization of certain administrative functions.

Liabilities for severance are generally to be paid within twelve months, while future lease payments related to facilities vacated as a result of restructuring are to be paid over the underlying remaining lease terms.

During fiscal 2019, the Company announced a new restructuring plan focused on (i) the integration of the Enerpac and Hydratight businesses (IT&S segment), (ii) the strategic exit of certain commodity-type services in our North America Services operations (IT&S segment) and (iii) driving efficiencies within the overall corporate structure.

In the third quarter of fiscal 2020, the Company announced the expansion and revision of this plan, which further simplifies 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.

Restructuring charges associated with this plan were $ 2.1 million and $ 6.6 million for the year ended August 31, 2021 and 2020, respectively.

Significant charges associated with this plan are not expected in future periods.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following rollforwards summarize restructuring reserve activity for the IT&S reportable segment and corporate (in thousands):

Year Ended August 31, 2021

Industrial Tools & Services Corporate Total

IT&S Corporate

Balance as of August 31, 2020 $ 1,443 $ 267

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Cash payments ( 1,791 ) ( 250 )

Other non-cash uses/reclasses of reserve 54 — 54

Impact of changes in foreign currency rates ( 11 ) —

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Year Ended August 31, 2020

Industrial Tools & Services Corporate Total

IT&S Corporate

Balance as of August 31, 2019 $ 2,912 $ —

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(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.

Total restructuring charges (inclusive of the Other segment) being reported in "Restructuring charges" were $ 2.4 million for the year ended August 31, 2021.

Restructuring charges for the year ended August 31, 2020 were $ 8.1 million which included approximately $ 0.8 million of charges being reported in the Consolidated Statements of Operations in "Cost of products sold," with the balance of the charges reported in "Restructuring charges."

Restructuring expenses related to Cortland U.S.

(Other Segment) were $ 0.3 million in the year ended August 31, 2021.

The year ended August 31, 2020, included $ 1.6 million of restructuring charges which included approximately $ 0.8 million of charges reported in the Consolidated Statements of Operations in "Cost of products sold," with the balance of the charges reported in "Restructuring charges." Restructuring reserves for Cortland U.S.

were $ 0.1 million and $ 0.4 million for the year ended August 31, 2021 and 2020, 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."

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 acquisition of HTL provided the Company with a complete line of bolting products and enhanced our European rental capabilities.

The Company acquired all of the assets and assumed certain liabilities of HTL for a final purchase price of $ 33.3 million.

The final purchase price allocation resulted in $ 11.3 million of goodwill (which is not deductible for tax purposes), $ 16.1 million of intangible assets, and $ 6.7 million of property, plant and equipment.

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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 generated net sales of $ 13.6 million and $ 6.3 million for the year ended August 31, 2021 and 2020, respectively, 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.

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.

On October 31, 2019 , as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the sale of the businesses comprising its former EC&S segment 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 $ 1.3 million of purchase price from the customary finalization of working capital negotiations.

Approximately $ 3.0 million of the purchase price was to be paid in four equal quarterly installments after closing, of which $ 0.7 million was received in the year ended August 31, 2021 (this final payment was received greater than one year from the divestiture date and, as such, is reflected in "Cash provided by financing activities - discontinued operations" within

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

the Consolidated Statements of Cash Flows).

In connection with the completion of the sale and after consideration of working capital adjustments, the Company recorded, in fiscal 2020, a net loss of $ 4.7 million comprised of a loss of $ 23.0 million representing the excess of the net assets (exclusive of deferred tax assets and liabilities associated with subsidiaries of the Company whose stock was sold as part of the transaction) as compared to the purchase price less costs to sell and the recognition in earnings of the cumulative effect of foreign currency exchange gains and losses during the year largely offset by an income tax benefit of $ 18.3 million associated with the write off of the net deferred tax liability on subsidiaries of the EC&S segment for which the stock was divested.

The Company also recognized in conjunction with the completion of the sale an additional $ 3.3 million of impairment & divestiture costs associated with the accelerated vesting of restricted stock awards associated with employees terminated as part of the transaction and $ 2.7 million of additional divestiture charges which were necessary to complete the transaction.

The Company maintains financial exposure associated with this divestiture due to certain retained liabilities of which said activity is recorded in "loss from discontinued operations, net of income taxes" within the Consolidated Statements of Operations for the periods subsequent to the divestiture.

At August 31, 2019, the EC&S segment met the criteria for assets held-for-sale treatment.

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

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, net of income taxes" in the Consolidated Statements of Operations for all periods presented.

ENERPAC TOOL GROUP CORP.

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Gross profit — 17,261 114,581

Selling, administrative and engineering expenses 11,561 68,339 81,188

Selling, general and administrative expenses 1,456 11,561 68,339

Amortization of intangible assets — — 5,666

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Other (income) expense, net — ( 104 ) 1,922

Loss before income tax (benefit) expense ( 23,171 ) ( 249,424 ) ( 31,868 )

Income tax (benefit) expense ( 18,337 ) 7,788 ( 5,474 )

Loss before income tax expense (benefit) ( 1,456 ) ( 23,171 ) ( 249,424 )

Income tax expense (benefit) 679 ( 18,337 ) 7,788

Net loss from discontinued operations $ ( 2,135 ) $ ( 4,834 ) $ ( 257,212 )

* "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.

* "Loss from discontinued operations, net of income taxes" for the year ended August 31, 2020 presented in the table above includes the results of the EC&S segment for the two months ended October 31, 2019 (the divestiture date) as well as the ancillary impacts from certain retained liabilities subsequent to the divestiture.

As a result of the classification of the segment as assets and liabilities held for sale for the two months ended October 31, 2019, the Company did not record amortization or depreciation expense in the results of operations in accordance with GAAP.

Furthermore, the Company excluded EC&S segment employees from the fiscal 2020 bonus compensation plan, accordingly there are no expenses associated with the plan for that period.

** 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.

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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.

The Company recorded impairment & divestiture charges of $ 4.5 million for the year ended August 31, 2020 comprised of impairment charges of $ 2.5 million representing the excess of net assets held for sale compared to the anticipated proceeds less costs to sell, $ 1.7 million associated with our withdrawal 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 and $ 13.2 million in the year ended August 31, 2020 and 2019, respectively) are not material to the consolidated financial results.

On October 22, 2019 , the Company completed the sale of the Connectors product line (IT&S segment) for net cash proceeds of $ 2.7 million, which resulted in an impairment & divestiture benefit of $ 1.0 million in the year ended August 31, 2020.

The historical results of the Connectors product line (which had net sales of $ 0.2 million and $ 5.0 million for the year ended August 31, 2020 and 2019, respectively) are not material to the consolidated financial results.

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.

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

The changes in the carrying amount of goodwill for the years ended August 31, 2021 and 2020 by operating segment are as follows (in thousands):

IT&S Other Total

Balance as of August 31, 2019 $ 242,873 $ 17,542 $ 260,415

Purchase accounting adjustments 253 — 253

Impairment charge — ( 13,678 ) ( 13,678 )

Acquisition of HTL Group (Note 4) 11,261 — 11,261

Impact of changes in foreign currency rates 9,403 75 9,478

Balance as of August 31, 2020 263,537 17,617 281,154

Acquisition of HTL Group (Note 4) 11,261 — 11,261

Impairment charge — ( 5,656 ) ( 5,656 )

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$ 185,087 $ 130,542 $ 54,545 $ 184,358 $ 121,976 $ 62,382

*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 Company estimates that amortization expense for future years is estimated to be $ 7.5 million in fiscal 2022, $ 5.9 million in fiscal 2023, $ 4.2 million in fiscal 2024, $ 3.5 million in fiscal 2025, $ 2.0 million in fiscal 2026 and $ 6.6 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 2021 Impairment Charges

In the fourth quarter of fiscal 2021, the Cortland Industrial business lagged behind our IT&S segment with respect to recovery in demand from the COVID-19 pandemic.

Further, though volumes did increase from previous quarters, it became clear that the business was not on track to realize the annual savings from the prior years' footprint optimization actions at the pace initially projected.

Therefore, in conjunction with our annual goodwill impairment assessment , the Company recognized a $ 5.7 million goodwill impairment charge associated with the Cortland Industrial reporting unit (Other Segment) within "Impairment & divestiture charges (benefit)" in the Consolidated Statements of Operations.

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.

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.

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The tradename and customer relationships impairments both related to assets within the IT&S segment.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

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Revolver $ 175,000 $ 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

Current maturities of long-term debt — ( 7,500 )

Debt issuance costs — ( 2,114 )

Total long-term debt, less current maturities $ 175,000 $ 255,000

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.

In March 2019, the Company entered into a senior credit facility (the "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 (no required principal payments prior to maturity) and (iii) modify certain other provisions of the credit agreement including a reduction in pricing.

The Senior Credit Facility 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.

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 ($ 175.0 million).

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 June 2020, the Company borrowed $ 295.0 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 (see additional information on the Senior Notes below).

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.

To reduce interest costs the Company paid down $ 80.0 million on the revolving line of credit in the year ended August 31, 2021, with available cash on hand.

At August 31, 2021, there were $ 175 million borrowings under the revolving line of credit and $ 220.3 million of available borrowing capacity 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.

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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 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.

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 Senior Credit Facility contains two financial covenants which are a maximum leverage ratio of 3.75 :1 and a m inimum interest coverage ratio of 3.5 :1.

Certain transactions lead to adjustments to the underlying ratios, including an increase to the leverage ratio from 3.75 to 4.25 during the four fiscal quarters after a significant acquisition.

The sale of the EC&S segment triggered a reduction of the minimum interest coverage ratio from 3.5 to 3.0 for any fiscal quarter ending within twelve months after the sale of the EC&S segment.

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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.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

On April 16, 2012, the Company issued $ 300 million of 5.625 % Senior Notes due 2022 (the “Senior Notes”), none of which remain outstanding.

On April 16, 2012, the Company issued $ 300 million of 5.625 % Senior Notes due 2022 (the “Senior Notes”), of which none 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.

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The Company made cash interest payments of $ 3.7 million, $ 18.7 million and $ 26.3 million in fiscal 2021, 2020 and 2019, respectively.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Fair Value Measurements

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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 the Company's foreign currency exchange contracts was a net liability of less than $ 0.1 million at August 31, 2021 and a net asset of less than $ 0.2 million at August 31, 2020.

The fair value of the foreign currency exchange contracts were based on quoted inactive market prices and therefore classified as Level 2 within the valuation hierarchy.

As discussed in Note 4, "Acquisitions" , the Company acquired HTL Group in the year ended August 31, 2020 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 impairments to Goodwill in the year ended August 31, 2021 and on indefinite-lived tradenames and customer relationships in the fourth quarter of the year ended December 31, 2019.

The fair value of the Goodwill, 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.

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dollar equivalent notional value of these short duration foreign currency exchange contracts was $ 16.0 million and $ 16.7 million at August 31, 2021 and 2020, 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,

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):

The fair value of outstanding foreign currency exchange contracts was a liability of less than $ 0.1 million at August 31, 2021 and an asset of less than $ 0.2 million at August 31, 2020.

Net foreign currency losses (included in "Other expense (income)" in the Consolidated Statements of Operations) related to these derivative instruments are as follows (in thousands):

Year Ended August 31,

2021 2020 2019

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.

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.

Foreign Currency losses $ ( 63 ) $ ( 594 ) $ ( 292 )

The Company was the fixed-rate payor on an interest rate swap contract that fixed the LIBOR-based index used to determine the interest rates charged on a total of $ 100.0 million of the Company's LIBOR-based variable rate borrowings on the revolving line of credit.

The contract carried a fixed rate of 0.259 % and expired in August 2021.

The swap agreement qualified as a hedging instrument and was designated as a cash flow hedge of forecasted LIBOR-based interest payments.

The change in the fair value of the interest rate swap, a gain of $ 0.1 million and a loss of $ 0.1 million in the year ended August 31, 2021 and 2020, respectively, was recorded in other comprehensive income.

As of August 31, 2021, 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.

The Company did not have significant finance leases during the year ended August 31, 2021 .

Our leases typically range in term from 3 to 15 years and may contain renewal options for periods up to 5 years at our

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Our leases generally contain payments that are primarily fixed;

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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.

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.

Lease expense for operating leases is recognized on a straight-line basis over the lease term or remaining useful life.

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

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):

During the year ended August 31, 2021, the Company sold and subsequently leased back a portion of its manufacturing facility in China as part of a global footprint rationalization initiative.

In connection with the transaction, the Company recognized a gain of $ 10.0 million.

The gain is recorded in "Selling, general and administrative expenses" within the Consolidated Statements of Operations and in "Other non-cash (benefits) charges" within the Consolidated Statements of Cash Flows.

The Company also incurred $ 4.6 million of closing related costs and value-added and land taxes associated with this transaction also included in "Selling, general and administrative expenses" within the Consolidated Statements of Operations.

The components of lease expense for the year ended August 31, 2021 and 2020 were as follows (in thousands):

Year Ended August 31,

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Variable lease cost 3,086 2,244

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

Supplemental cash flow and other information related to leases for the year ended August 31, 2021 and 2020 were as follows (in thousands):

Year Ended August 31,

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Operating leases 9,197 5,727

Supplemental balance sheet information related to leases were as follows (in thousands):

August 31, 2020

Supplemental balance sheet information related to leases at August 31, 2021 and 2020 were as follows (in thousands):

August 31, 2021 August 31, 2020

Operating leases:

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Weighted Average Remaining Lease Term (in years):

Operating leases 7.6 years

Operating leases 6.7 years 7.6 years

Weighted Average Discount Rate:

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As of August 31, 2021, we have an additional operating lease of $ 2.4 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

Thereafter 21,620

Present value of net minimum lease payments $ 71,831

This operating lease commences in fiscal 2022 with a lease term of 6.3 years.

All other leases not yet commenced are considered immaterial to our financial statements

Employee Benefit Plans

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Interest cost 1,156 1,331

Actuarial loss 4,131 5,339

Actuarial (gain) loss ( 729 ) 4,131

Benefits paid ( 2,920 ) ( 3,222 )

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Funded status of the plans (underfunded) $ ( 7,451 ) $ ( 9,705 )

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):

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During fiscal 2022, $ 1.2 million of these actuarial losses are expected to be recognized in net periodic benefit cost.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Weighted-average assumptions used to determine U.S.

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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.

At this time, the plan portfolio is significantly invested in duration-matched fixed income securities, which aligns to the plan's previously planned 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.

Based on the current funded status of the plan, the plan will rebalance with an investment mix of 50 % fixed income securities and 50 % equity securities by the end of the period ending November 30, 2021.

Investment risk is measured and monitored on an ongoing basis.

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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.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The target return is based on historical returns adjusted to reflect the current view of the long-term investment market and our updated 50% investment mix between fixed income and equity securities.

pension plan investment allocations by asset category were as follows (in thousands):

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pension plans in September of fiscal 2021.

The Company plans to contribute $ 0.1 million to the plan in fiscal 2022.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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):

The Company has eight significant foreign defined benefit pension plans which cover certain existing and former employees of businesses outside the U.S.

Most of the participants in the foreign defined benefit pension plans are inactive and no longer earning additional benefits.

The following table provides detail of changes in the projected benefit obligations, the fair value of plan assets and the funded status of the Company’s significant foreign defined benefit pension plans as of the respective August 31 measurement date (in thousands):

Reconciliation of benefit obligations:

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Interest cost 198 171

Actuarial (gain)/loss ( 495 ) 2,594

Actuarial loss/(gain) 51 ( 495 )

Benefits paid ( 293 ) ( 300 )

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Funded status of the plans (underfunded) $ ( 5,025 ) $ ( 5,317 )

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):

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Amortization of net loss 139 205 263

(Income) or cost of special events ( 728 ) ( 56 ) 18

Net periodic benefit (income) expense $ ( 443 ) $ 504 $ 607

Income of special events — ( 728 ) ( 56 )

Net periodic benefit expense (income) $ 110 $ ( 443 ) $ 504

The weighted average discount rate utilized for determining the benefit obligation at August 31, 2021 and 2020 was 1.3 % and 1.4 %, respectively.

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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.

During fiscal 2022, the Company does not anticipate contributing 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.

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 expense (income), net within the Consolidated Statements of Operations and the remaining $ 1.0 million was recorded through Other comprehensive income on the Consolidated Statements of Comprehensive Income (Loss).

Projected benefit payments to participants in the these foreign plans are $ 0.3 million in each of the following five fiscal years and $ 2.2 million in aggregate for the following five years.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Other Postretirement Health Benefit Plans

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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.

Net periodic benefit costs for other postretirement benefits was income of $ 0.2 million, $ 0.3 million and $ 0.1 million for the year ended August 31, 2021, 2020 and 2019, respectively.

Benefit payments from the plan are funded through participant contributions and Company contributions.

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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 response to the COVID-19 pandemic, the Company temporarily suspended its 401(k) match in May 2020 (fiscal 2020) and reinstated the 401(k) match in January 2021 (fiscal 2021).

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.

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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.

In fiscal 2019 the Company contributed $ 0.1 million to eligible participants;

no contributions were made in fiscal 2021 or 2020.

Expense recognized related to the 401(k) plan totaled $ 1.1 million, $ 1.4 million and $ 2.7 million for the year ended August 31, 2021, 2020 and 2019, respectively.

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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,

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

respective ly.

This unfunded plan had a $ 1.3 million obligation at both August 31, 2021 and 2020 .

Expense recognized for the SERP Plan was $ 0.1 million, $ 0.3 million and $ 0.4 million for fiscal 2021, 2020 and 2019, respectively.

Deferred Compensatio n Plan

Deferred Compensation Plan

The Company maintains a deferred compensation plan to allow eligible U.S.

employees to defer receipt of current cash compensation and restricted stock units vesting in order to provide future savings benefits.

Eligibility is limited to employees that earn compensation that exceeds certain pre-defined levels.

Eligibility is limited to employees who earn compensation that exceeds certain pre-defined levels.

Participants have the option to invest their deferrals in a fixed income investment, a defined set of mutual funds, and/or, with respect to deferrals of restricted stock units, in Company common stock.

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Since no investment diversification is permitted within the trust, changes in fair value of Enerpac Tool Group common stock are not recognized.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Earnings (loss) before income taxes from continuing operations, are summarized as follows (in thousands):

Year Ended August 31,

2021 2020 2019

Domestic $ 1,292 $ ( 9,058 ) $ ( 715 )

Foreign 42,683 16,907 19,439

$ 43,975 $ 7,849 $ 18,724

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 2021, domestic and foreign earnings included non-cash impairment and other divestiture charges of $ 4.7 million and $ 1.5 million, respectively.

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 $ 9.0 million and $ 13.8 million of non-cash impairment and other divestiture costs.

Income tax expense from continuing operations is summarized as follows (in thousands):

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State income taxes, net of Federal effect ( 0.2 ) ( 0.6 ) ( 4.0 )

Net effects of foreign tax rate differential and credits (1)

Tax on foreign earnings (1)

2.8 38.7 20.6

Domestic manufacturing deduction — — ( 1.3 )

Foreign branch currency losses ( 0.4 ) — ( 2.1 )

Foreign derived intangible income deduction ( 3.2 ) — ( 9.3 )

Compensation adjustment 3.1 6.6 4.4

Impairment and other divestiture charges (2)

3.3 19.3 39.1

Valuation allowance additions and releases (3)

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Changes in liability for unrecognized tax benefits ( 18.5 ) ( 5.3 ) 4.1

tax reform, net impact (4)

( 32.5 ) ( 31.1 ) 2.4

legislative changes, net impact ( 9.8 ) ( 32.5 ) ( 31.1 )

Taxable liquidation of subsidiaries (4)

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Changes in tax rates ( 3.4 ) ( 9.0 ) 1.7

R&D credit, audits and adjustments (6)

Audits and adjustments (5)

8.0 ( 27.4 ) 10.0

Research and development tax credit ( 1.8 ) ( 11.5 ) ( 5.2 )

Other items 0.7 ( 6.0 ) 3.3

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(1) The Company generated $ 1.7 million, $ 5.4 million and $ 2.6 million of withholding tax expense for fiscal 2021, 2020 and 2019, respectively, and $ 4.6 million, $ 4.0 million and $ 3.5 million of foreign-derived tax credits, excluding the impact of tax reform for fiscal 2021, 2020 and 2019, 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.

(2) Fiscal 2021, 2020 and 2019 pretax earnings include $ 6.2 million, $( 3.2 ) million and $ 22.8 million, respectively, in impairment & divestiture charges (benefits) related to goodwill, intangible assets, tangible assets and the cumulative effect of foreign currency rate changes of which $ 3.5 million, $ 0.3 million and $ 14.0 million, respectively, are not deductible for income tax purposes.

(3) Incremental valuation allowances of $ 4.9 million and $ 9.4 million and $ 1.7 million were recorded in fiscal 2021, 2020 and 2019, respectively, due to uncertainty regarding realization of tax assets, which were offset by a reduction of $ 9.1 million, $ 12.3 million and $ 2.9 million of valuation allowances for fiscal 2021, 2020 and 2019, 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.

(4) During fiscal 2020, the Company generated a net expense of $ 4.1 million as a result of taxable liquidations of subsidiaries.

(5) During fiscal 2021, the Company generated $ 3.5 million of tax benefit related to audits and adjustments as compared to a tax benefit of $ 2.2 million in fiscal 2020 and a tax expense of $ 1.9 million in fiscal 2019.

ENERPAC TOOL GROUP CORP.

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an asset of $ 14.8 million and $ 22.6 million for fiscal 2021 and 2020, respectively, is included in "Other long-term assets" and a liability of $ 4.4 million and $ 1.7 million for fiscal 2021 and 2020, 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.

The Company has $ 65.1 million and $ 2.4 million of gross state net operating loss and credit carryforwards, respectively, which are available to reduce future state tax liabilities.

These state net operating loss carryforwards expire at various times through 2041.

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 Company also has $ 86.3 million and $ 7.8 million of foreign loss and credit carryforwards, respectively, and $ 3.4 million of U.S.

credit carryforwards which are available to reduce certain future foreign and U.S.

tax liabilities.

Over half of the foreign loss carryforwards are not subject to any expiration dates, while the other balances expire at various times through 2031.

credit carryforwards expire at various times through 2040.

The valuation allowance represents a reserve for deferred tax assets, including loss carryforwards and foreign tax credits, for which utilization is uncertain.

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 $ 3.7 million would have been necessary as of August 31, 2021.

Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, are as follows (in thousands):

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Increase for tax positions taken in a prior period 7 304 1,422

Decrease for tax positions taken in a prior period — — ( 349 )

Decrease due to lapse of statute of limitations ( 7,931 ) ( 2,334 ) ( 3,212 )

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The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $ 1.0 million throughout fiscal 2022.

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.

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

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.

Cash paid for income taxes, net of refunds, totaled $ 7.8 million, $ 13.2 million and $ 15.4 million during the years ended August 31, 2021, 2020 and 2019, respectively.

Capital Stock and Share Repurchases

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The Company's Board of Directors approved four separate authorizations (September 2011, March 2014, October 2014 and March 2015) to repurchase up to 7,000,000 shares each of the Company’s outstanding common stock.

The Company did not repurchase shares during the year ended August 31, 2021.

During the year ended August 31, 2020, the Company repurchased 1,343,662 shares for $ 27.5 million.

At August 31, 2021, cumulative shares repurchased under these authorizations totaled 22,799,230 , leaving 5,200,770 shares authorized for future buy backs.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Earnings Per Share

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Anti-dilutive securities- stock based compensation plans (excluding from earnings per share calculation) 880 1,532 1,239

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

2017 Omnibus Incentive Plan (as amended and restated November 9, 2020) (the “Plan”).

At August 31, 2021, 7,825,000 shares of Class A common stock were authorized for issuance under the Plan (including 3,500,000 shares that were authorized for issuance at the January 2021 annual meeting) 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, 2021, 5,177,996 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.

The Plan permits the Company to grant share-based awards, including stock options, restricted stock, restri cted 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 Performance Shares include a three -year performance period.

For shares issued prior to the year ended August 31, 2021, the awards contained were 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.

For the year ended August 31, 2021, all Performance Shares issued were based on the relative TSR metric.

The provisions of share-based awards may vary by individual grant with respect to vesting period, dividend and voting rights, performance conditions and forfeitures.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

A summary of restricted stock units and performance shares activity during fiscal 2021 is as follows:

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Exercisable on August 31, 2021 926,343 $ 26.67 3.5 $ 1,013,960

*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, 2021 and the exercise price which is aggregated for all options outstanding and exercisable.

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Cash receipts from exercise of options 2,208 2,631 1,404

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 Company generally records compensation expense over the vesting period for restricted stock unit awards based on the market value of the Company's Class A common stock on the grant date and utilized an expected forfeiture rate of 12 %, 8 % and 10 % for the years ended August 31, 2021, 2020 and 2019, respectively.

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.

Stock based compensation expense is determined using a binomial pricing model for options, however there were no options granted in fiscal 2021, 2020 and 2019.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

As of August 31, 2021, there was $ 12.7 million of total unrecognized compensation cost related to share-based awards, including stock options, restricted stock, restricted stock units and performance shares, which will be recognized over a weighted average period of 1.8 years.

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The Other segment is included for purposes of reconciliation of the respective balances below to the consolidated financial statements.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

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Net Sales by Reportable Segment & Product Line

Industrial Tools & Services Segment

Product $ 376,353 $ 341,470 $ 433,703

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Operating Profit (Loss)

Industrial Tools & Services $ 65,549 $ 101,411 $ 99,432

IT&S $ 81,683 $ 65,549 $ 101,411

Other Operating Segment ( 10,420 ) ( 3,420 ) ( 11,821 )

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Depreciation and Amortization:

Industrial Tools & Services $ 14,854 $ 14,762 $ 15,301

IT&S $ 15,856 $ 14,854 $ 14,762

Other Operating Segment 3,568 3,620 3,408

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Capital Expenditures:

Industrial Tools & Services $ 7,282 $ 9,945 $ 7,799

IT&S $ 10,918 $ 7,282 $ 9,945

Other Operating Segment 768 2,625 3,917

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$ 12,019 $ 12,053 $ 14,923

Industrial Tools & Services $ 592,086 $ 553,615

IT&S $ 641,256 $ 592,086

Other Operating Segment 52,745 61,105

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$ 820,247 $ 824,294

*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.

Corporate assets, which are not allocated, principally represent cash and cash equivalents, property, plant, and equipment, ROU assets, capitalized debt issuance costs and deferred income taxes.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following tables summarize net sales and property, plant and equipment by geographic region (in thousands):

The following tables summarize net sales and property, plant and equipme nt by geographic region (in thousands):

Year Ended August 31,

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United States $ 188,070 $ 185,279 $ 249,644

Germany 24,401 26,445 30,643

United Kingdom 39,896 24,033 30,127

Saudi Arabia 19,787 21,625 20,749

Germany 28,456 24,401 26,445

Australia 24,990 19,332 25,749

Brazil 16,413 18,779 17,900

Canada 17,348 15,924 18,686

China 16,927 15,058 18,548

Saudi Arabia 16,715 19,787 21,625

Brazil 13,937 16,413 18,779

All other 182,321 173,065 245,155

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United States $ 18,942 $ 21,410

China 12,248 12,179

United Kingdom 11,818 9,654

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Netherlands 2,625 2,546

Kazakhstan 2,052 2,635

Brazil 2,248 1,784

Kazakhstan 1,552 2,052

Spain 1,506 1,705

Australia 751 1,014

China 750 12,248

All other 1,950 1,467

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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.

The Company had outstanding letters of credit of $ 11.9 million at both August 31, 2021 and 2020, 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.

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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.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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, 2021 were $ 5.3 million associated with monthly payments extending to fiscal 2025.

The Company has facilities in numerous geographic locations that are subject to environmental laws and regulations.

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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.

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" ).

Additionally, the Company self-disclosed in fiscal 2019 the sales to an Estonian customer to relevant authorities in the Netherlands as potentially violating applicable Crimea sanctions laws in that country and the European Union, as those products were used in the Crimea region of Ukraine.

While the investigation by authorities in the Netherlands is ongoing, the Company has concluded that it is probable it will incur financial penalties.

While there can be no assurance of the ultimate outcome of the Netherlands investigation, in the year ended August 31, 2021 the Company recorded an expense representing its estimate of the financial penalty it may incur.

The Company currently believes that there will be no material adverse effect on the Company's financial position, results of operations or cash flows from this matter.

ENERPAC TOOL GROUP CORP.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data