What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-10-25 compared with 2021-10-25 · 278 added, 294 removed, 915 unchanged (38% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

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

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

Reports of Independent Registered Public Accounting Firm (Ernst & Young LLP:

PCAOB ID 42 )

Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP:

PCAOB ID 238 )

Consolidated Statements of Earnings for the years ended August 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive (Loss) Income for the years ended August 31, 2022, 2021 and 2020

Consolidated Balance Sheets as of August 31, 2022 and 2021

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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.

We have audited the accompanying consolidated balance sheets of Enerpac Tool Group and Subsidiaries (the Company) as of August 31, 2022 and August 31, 2021, the related consolidated statements of earnings, c omprehensive income (loss), shareholders’' equity and cash flows for the years ended August 31, 2022, and August 31, 2021 and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 31, 2022 and August 31, 2021, and the results of its operations and its cash flows for the years ended August 31, 2022, and August 31, 2021 , in conformity with U.S.

generally accepted accounting principles.

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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.

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

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

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

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

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

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

Our 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.

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

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

Our 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.

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

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

Critical Audit Matter

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

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

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

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

Valuation of Goodwill within the IT&S Segment

Description of

At August 31, 2022, the Company’s consolidated goodwill balance was $257.9 million.

Goodwill associated with the IT&S segment was $246.7 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.

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

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

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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.

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

We also involved our valuation specialists to review certain significant assumptions.

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

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

We reconciled the fair value of the reporting units in the 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.

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

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

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Report of Independent Registered Public Accounting Firm

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

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 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 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.

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.

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and Subsidiaries’ (the Company) maintained, in all material respects, effective internal control over financial reporting as of August 31, 2022, 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of August 31, 2022 and August 31, 2021, the related consolidate d statements of earnings, c omprehensive income (loss), stockholders’ equity and cash flows for the years ended August 31, 2022, and August 31, 2021, and the related notes and financial statement schedule listed in the accompanying index and our report dated October 25, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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October 25, 2022

Report of Independent Registered Public Accounting Firm

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

Opinion on the Financial Statements

We have audited the consolidated statements of earnings, of comprehensive (loss) income, of shareholders’ equity and of cash flows of Enerpac Tool Group Corp.

and its subsidiaries (the “Company”) for the year ended August 31, 2020, including the related notes and schedule of valuation and qualifying accounts for the year 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 results of operations and cash flows of the Company for the year ended August 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

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 audit.

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

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

Our audit 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 audit 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.

We believe that our audit provides 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.

ENERPAC TOOL GROUP CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF EARNINGS

(in thousands, except per share amounts)

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Loss from discontinued operations, net of income taxes ( 3,905 ) ( 2,135 ) ( 4,834 )

Net earnings (loss) $ 38,077 $ 723 $ ( 249,145 )

Net earnings $ 15,686 $ 38,077 $ 723

Earnings per share from continuing operations

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Diluted $ ( 0.07 ) $ ( 0.04 ) $ ( 0.08 )

Earnings (loss) per share

Earnings per share

Basic $ 0.26 $ 0.63 $ 0.01

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ENERPAC TOOL GROUP CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

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2022 2021 2020

Net income (loss) $ 38,077 $ 723 $ ( 249,145 )

Other comprehensive income, net of tax

Net income $ 15,686 $ 38,077 $ 723

Other comprehensive (loss) income, net of tax

Foreign currency translation adjustments ( 46,092 ) 5,910 23,224

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Pension, other postretirement benefit plans, and cash flow hedges 4,115 1,830 ( 603 )

Total other comprehensive income, net of tax 7,740 74,615 2,573

Comprehensive income (loss) $ 45,817 $ 75,338 $ ( 246,572 )

Total other comprehensive (loss) income, net of tax ( 41,977 ) 7,740 74,615

Comprehensive (loss) income $ ( 26,291 ) $ 45,817 $ 75,338

The accompanying notes are an integral part of these consolidated financial statements.

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Accrued compensation and benefits 21,390 21,597

Short-term debt 4,000 —

Income taxes payable 4,594 5,674

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Operating Activities

Net earnings (loss) $ 38,077 $ 723 $ ( 249,145 )

Net earnings $ 15,686 $ 38,077 $ 723

Net loss from discontinued operations ( 3,905 ) ( 2,135 ) ( 4,834 )

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Stock-based compensation expense 13,619 9,215 9,624

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

(Benefit) provision for deferred income taxes ( 5,291 ) 9,639 ( 7,819 )

Amortization of debt issuance costs 480 480 2,549

Provision for bad debts 13,856 — —

Other non-cash (benefits) charges ( 344 ) ( 9,172 ) 1,204

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Cash provided by operating activities - continuing operations 52,246 54,860 17,999

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

Cash used in operating activities - discontinued operations ( 510 ) ( 677 ) ( 21,158 )

Cash provided by (used in) operating activities 51,736 54,183 ( 3,159 )

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Other investing activities — — ( 710 )

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

Cash (used in) provided by investing activities - continuing operations ( 7,241 ) 13,301 ( 35,127 )

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

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

Cash (used in) provided by investing activities ( 7,241 ) 13,301 176,073

Financing Activities

Borrowings on revolving credit facility 85,000 10,000 395,000

Principal repayments on revolving credit facility ( 60,000 ) ( 90,000 ) ( 140,000 )

Swingline borrowings/repayments, net 4,000 — —

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

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

Redemption of 5.625% Senior Notes — — ( 287,559 )

Payment for redemption of term loan — — ( 200,000 )

Proceeds from issuance of term loan — — 200,000

Purchase of treasury shares ( 75,112 ) — ( 27,520 )

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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 earnings — — — — 723 — — — 723

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

Stock contribution to employee benefit plans and other 23 5 456 — — — — — 461

Restricted stock awards 375 75 ( 75 ) — — — — — —

Vesting of equity awards 484 96 ( 96 ) — — — — — —

Cash dividend ($0.04 per share) — — — — ( 2,391 ) — — — ( 2,391 )

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Balance at August 31, 2020 82,594 16,519 193,492 ( 667,732 ) 917,671 ( 100,724 ) ( 2,562 ) 2,562 359,226

Net income — — — — 723 — — — 723

Net earnings — — — — 38,077 — — — 38,077

Other comprehensive income, net of tax — — — — — 7,740 — — 7,740

Stock contribution to employee benefit plans and other 17 4 359 — — — — — 363

Restricted stock awards 484 96 ( 96 ) — — — — — —

Vesting of equity awards 282 56 ( 56 ) — — — — — —

Cash dividend ($0.04 per share) — — — — ( 2,409 ) — — — ( 2,409 )

Treasury stock repurchases — — — ( 27,520 ) — — — — ( 27,520 )

Stock based compensation expense — — 9,215 — — — — — 9,215

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

Adoption of accounting standards — — — — 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

Net income — — — — 38,077 — — — 38,077

Other comprehensive income, net of tax — — — — — 7,740 — — 7,740

Net earnings — — — — 15,686 — — — 15,686

Other comprehensive loss, net of tax — — — — — ( 41,977 ) — — ( 41,977 )

Stock contribution to employee benefit plans and other 15 3 266 — — — — — 269

Restricted stock awards 282 56 ( 56 ) — — — — — —

Vesting of equity awards 350 70 ( 70 ) — — — — — —

Cash dividend ($0.04 per share) — — — — ( 2,274 ) — — — ( 2,274 )

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Stock based compensation expense — — 13,619 — — — — — 13,619

Stock option exercises 104 20 2,188 — — — — — 2,208

Tax effect related to net share settlement of equity awards — — ( 3,950 ) — — — — — ( 3,950 )

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Enerpac Tool Group Corp.

(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.

(the “Company”), is a global manufacturer of a broad range of industrial products and solutions, organized into six operating segments.

In accordance with generally accepted accounting principle in the United States ("US GAAP"), four of these operating segments have been aggregated into the Company's only reportable segment, the Industrial Tools & Services segment ("IT&S").

IT&S 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, repair, and operations, oil & gas, mining, alternative and renewable energ y, and civil construction markets.

Consolidation and Presentation:

The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned.

T he consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned.

The results of companies acquired or disposed of during the year are included in the consolidated financial statements from the effective date of acquisition or until the date of divestiture.

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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.

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:

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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.

owned inventory is determined using the last-in, first-out (“LIFO”) method ( 51.7 % and 48.4 % of total inventories as of August 31, 2022 and 2021, respectively).

If the LIFO method were not used, inventory balances would be higher than reported amounts in the consolidated balance sheets by $ 19.0 million and $ 15.9 million at August 31, 2022 and 2021, respectively.

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

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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.

Leasehold improvements are amortized over the shorter of the life of the related asset or the term of the lease.

Depreciation expense was $ 12.3 million, $ 13.4 million and $ 12.4 million for the years ended August 31, 2022, 2021 and 2020, respectively.

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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)

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

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.

ROU assets at the date of commencement are equal to the amount of the initial lease liability, the initial direct costs incurred by the

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

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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.

G oodwill 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.

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The Company performs impairment reviews for its reporting units using a fair value method based on management’s judgments and assumptions.

In estimating the fair value, the Company utilizes a discounted cash flow model, which is dependent on a number of assumptions, most significantly forecasted revenues and operating profit margins, and the weighted average cost of capital, or a market value approach if appropriate information is available as of the goodwill impairment assessment date.

The estimated fair value of the reporting unit is compared to the carrying amount of the reporting unit, including goodwill.

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Product Warranty Costs :

The Company generally offers its customers an assurance warranty on products sold, although warranty periods may vary by product type and application.

The Company generally offers its customers an assurance warranty on products sold, although warranty periods may vary by pr oduct type and application.

The reserve for future warranty claims, which is recorded within the "Other current liabilities" line on the Consolidated Balance Sheets, is based on historical claim rates and current warranty cost experience.

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Warranty payments and costs incurred ( 911 ) ( 1,171 )

Warranty activity for divested businesses — ( 27 )

Impact of changes in foreign currency rates ( 136 ) ( 1 )

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The period of time between invoicing and when payment is due is not significant, as our standard payment terms are less than one year.

Amounts billed and due from customers are classified as receivables on the balance sheet.

Amounts billed and due from customers are classified as receivables on the Consolidated Balance Sheets.

Customer sales are recorded net of allowances for returns and discounts, which are recognized as a deduction from sales at the time of sale.

The Company commits to one-time or on-going trade discounts and promotions with customers that require the Company to estimate and accrue the ultimate costs of such programs.The Company generally does not require collateral or other security for receivables and provides for an allowance for doubtful accounts based on historical experience and a review

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

of its existing receivables.

The Company commits to one-time or on-going trade discounts and promotions with customers that require the Company to estimate and accrue the ultimate costs of such programs.

The Company generally does not require collateral or other security for receivables and provides for an allowance for doubtful accounts based on historical experience and a review of its existing receivables.

Accounts receivable are stated net of an allowance for doubtful accounts of $ 17.5 million and $ 4.2 million at August 31, 2022 and 2021, respectively.

Taxes Collected:

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.

Taxes collected by the Company from a customer concurrent with revenue-producing activities are excluded from "Net sales" within the Consolidated Statements of Earnings.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Shipping and Handling Costs:

The Company records costs associated with shipping its products after control over a product has transferred to a customer and are accounted for as fulfillment costs.

These costs are reported in the Consolidated Statements of Operations in "Cost of products sold."

These costs are reported in the Consolidated Statements of Earnings in "Cost of products sold."

Research and Development Costs:

Research and development costs consist primarily of 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 pr oducts were $ 7.4 million, $ 7.3 million and $ 9.3 million in fiscal 2021, 2020 and 2019, respectively.

Research and development costs consist primarily of engineering and development resources and are expensed as incurred.

Such costs incurred in the development of new products or significant improvements to existing products were $ 7.3 million, $ 7.4 million and $ 7.3 million in fiscal 2022, 2021 and 2020, 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.

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Income Taxes:

The provision for income taxes includes federal, state, local and non-U.S.

T he provision for income taxes includes federal, state, local and non-U.S.

taxes on income.

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The financial statements of the Company’s foreign operations are translated into U.S.

dollars using the exchange rate at each balance sheet date for assets and liabilities and an appropriate weighted average exchange rate for each applicable period within the Consolidated Statements of Operations.

Translation adjustments are reflected in the Consolidated Balance Sheets and Consolidated Statements of Shareholders' Equity caption “Accumulated other comprehensive loss.”

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Pension and other postretirement benefit plans 18,883 22,998

Unrecognized losses on cash flow hedges — 78

Accumulated other comprehensive loss $ 134,961 $ 92,984

Use of Estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

Th e preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

The Company regularly evaluates the estimates and assumptions related to the allowance for 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 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.

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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 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.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

The amendments also expanded disclosure requirements for key information about leasing arrangements.

On September 1, 2019, the Company adopted the standard using a modified retrospective approach and elected the package of practical expedients allowing us to not reassess whether any expired or existing contracts contain leases, the lease classification for any expired or existing leases, and initial direct costs for leases that commenced prior to September 1, 2019.

In addition, we elected not to recognize ROU assets or lease liabilities for leases containing terms of 12 months or less and not separate lease components from non-lease components for all asset classes.

The Company updated its standard lease accounting policy to address the new standard, revised the Company’s business processes and controls to align to the updated policy and new standard and completed the implementation of and data input into the Company’s lease accounting software solution.

The most significant impact of the standard on the Company was the recognition of a $ 60.8 million ROU asset and operating lease liability on the Consolidated Balance Sheets at adoption.

The standard did not have a significant impact on our Consolidated Statements of Operations or Consolidated Statements of Cash Flows.

In addition, as a result of sale leaseback transactions in previous years for which gains were deferred and under the new standard would have been recognized, the Company recorded an increase to retained earnings of $ 0.2 million in the first quarter of fiscal 2020, which represents the recognition of these previously deferred gains.

See Note 10, “Leases” for further discussion of the Company’s operating leases.

In December 2019, the Financial Accounting Standards Board ("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 Company adopted this guidance on September 1, 2021.

The adoption did not have a material effect on our consolidated financial statements.

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends ASC 805 to require an acquirer to, at the date of acquisition, recognize and measure contract assets and contract liabilities acquired in accordance with ASU 2014-9, Revenue from Contracts with Customers (Topic 606) as if the entity had originated the contracts.

The guidance is effective for fiscal years beginning after December 15, 2022.

The Company will adopt this guidance in the event of a business combination subsequent to the effective date of the guidance.

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

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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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See Note 16, "Business Segment, Geographic and Customer Information" for information regarding our revenue disaggregation by reportable segment and product line.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table presents information regarding revenues disaggregated by the timing of when goods and services are transferred (in thousands):

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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.

Management evaluates the aging of customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of receivables that will not be collected in the future and records the appropriate provision.

The allowance for doubtful accounts was $ 17.5 million and $ 4.2 million at August 31, 2022 and 2021, respectively.

As indicated in the "Concentration of Credit Risk" section below, as of August 31, 2022, the Company was exposed to a concentration of credit risk with an agent as a result of its continued payment delinquency.

During the year ended August 31, 2022, the Company recorded through bad debt expense (included in SG&A in the Condensed Consolidated Statements of Earnings) a reserve of $ 13.2 million based on the consideration of the factors listed below, which fully reserves for the outstanding account receivable balance for this agent.

The allowance for doubtful accounts for this particular agent as of August 31, 2022 represents management's best estimate of the amount probable of collection and considers various factors with respect to this matter, including, but not limited to, (i) the lack of payment by the agent since the fiscal quarter ended February 28, 2021, (ii) our due diligence on balances due to the agent from its end customers related to sales of our services and products and the known markup on those sales from the agent to end customer, (iii) the status of ongoing negotiations with the agent to secure payments and (iv) legal recourse available to secure payment.

Actual collections from the agent may differ from the Company's estimate.

Concentration of Credit Risk:

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The Company estimates that the $ 2.8 million will be recognized in net sales from satisfying those performance obligations within the next twelve months with an immaterial amount recognized in periods thereafter.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Timing of Performance Obligations Satisfied at a Point in Time:

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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.

ASCEND Transformation Program

In March 2022, the Company announced the launch of ASCEND, a new transformation program focused on driving accelerated earnings growth and efficiency across the business with the goal of delivering an incremental $ 40 to $ 50 million of annual operating profit once fully implemented.

As part of ASCEND, the Company is focusing on the following key initiatives:

(i) accelerating organic growth go-to-market strategies, (ii) improving operational excellence and production efficiency by utilizing a lean approach and (iii) driving greater efficiency and productivity in SG&A by better leveraging resources to create a more efficient and agile organization.

The Company is implementing the program and anticipates investing approximately $ 60 to $ 65 million (as disclosed in Note 4 , " Restructuring Charges ," approximately $ 10 to $ 15 million of these investments will be in the form of restructuring charges) over the life of the program, which is expected to be finalized as we exit fiscal 2024.

Elements of these investments could include such cash costs as capital expenditures, restructuring costs, third-party support, and incentive costs.

Total program expenses were approximately $ 17 million for the year ended August 31, 2022, of which $ 14 million were recorded within SG&A expenses and were largely comprised of third party support costs and $ 3 million were recorded within restructuring expenses (see Note 4, "Restructuring Charges," below).

Restructuring Charges

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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 $ 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.

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

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

Upon assessment of the Company's operating structure by the Company's new President & Chief Executive Officer (hired effective October 2021), the Company recorded $ 5.2 million of charges for the year ended August 31, 2022 in order to further simplify and streamline the organizational structure.

Restructuring charges associated the fiscal 2019 plan were $ 2.1 million and $ 6.6 million for the year ended August 31, 2021 and 2020, respectively.

The total cumulative charges for the 2019 plan, which ended in the third quarter of fiscal year 2022, were $ 18.0 million .

On June 27, 2022, the Company approved a new restructuring plan in connection with the initiatives identified as part of the ASCEND transformation program (see Note 3, “ASCEND Transformation Program” ) to drive greater efficiency and productivity in global selling, general and administrative resources.

The total costs of this plan were then estimated at $ 6 to $ 10 million, constituting predominately severance and other employee-related costs to be incurred as cash expenditures impacting both IT&S and Corporate.

On September 23, 2022, the Company approved an updated restructuring plan.

The costs of this updated plan (which includes the amounts for the plan approved in June) are estimated at $ 10 to $ 15 million.

These costs are expected to be incurred over the expected duration of the transformation program, ending in the fourth quarter of fiscal year

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):

For the year ended August 31, 2022, the Company recorded $ 3.0 million of restructuring charges associated with the ASCEND transformation program.

The following summarizes restructuring reserve activity (which for the year ended August 31, 2022 excludes $ 0.8 million and $ 0.5 million of charges associated with the 2019 Plan for IT&S and Corporate, respectively, associated with the accelerated vesting of equity awards which has no impact on the restructuring reserve) for the IT&S segment and Corporate (in thousands):

Year Ended August 31, 2022

IT&S Corporate

2019 Plan ASCEND Plan

IT&S Corporate IT&S Corporate

Balance as of August 31, 2021 $ 1,737 $ 26 $ — $ —

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Cash payments ( 1,791 ) ( 250 )

Other non-cash uses of reserve (1)

( 554 ) ( 521 )

Impact of changes in foreign currency rates ( 11 ) —

Balance as of August 31, 2021 $ 1,737 $ 26

(1) Majority of non-cash uses of reserve represents accelerated equity vesting with employee severance agreements.

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.

Total restructuring charges (inclusive of the Other segment) being reported in "Restructuring charges" were $ 8.1 million and $ 2.4 million for the years ended August 31, 2022 and 2021, respectively.

There was a restructuring benefit of less than $ 0.1 million related to the Other Segment in the year ended August 31, 2022 and restructuring charges of $ 0.3 million in the year ended August 31, 2021 .

Restructuring reserves for the Other Segment were negligible for both the years ended August 31, 2022 and 2021.

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.

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The impact on the remaining balance sheet line items was not material.

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 generated net sales of $ 11.0 million, $ 13.6 million and $ 6.3 million for the year ended August 31, 2022, 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.

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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.

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 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.

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.

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following represents the detail of "Loss from discontinued operations, net of income taxes" within the Consolidated Statements of Operations (in thousands):

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 Earnings for the periods subsequent to the divestiture.

The following represents the detail of "Loss from discontinued operations, net of income taxes" within the Consolidated Statements of Earnings (in thousands):

Year Ended August 31,

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Selling, general and administrative expenses 4,842 1,456 11,561

Amortization of intangible assets — — 5,666

Restructuring (benefit) charges — ( 11 ) 1,779

Restructuring benefit — — ( 11 )

Impairment & divestiture charges — — 28,972

— 28,972 286,175

Operating loss ( 4,842 ) ( 1,456 ) ( 23,261 )

Financing costs, net — — 14

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

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

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

Other income, net — — ( 104 )

Loss before income tax (benefit) expense ( 4,842 ) ( 1,456 ) ( 23,171 )

Income tax (benefit) expense ( 937 ) 679 ( 18,337 )

Net loss from discontinued operations $ ( 3,905 ) $ ( 2,135 ) $ ( 4,834 )

* "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.

Other Divestiture Activities

On September 20, 2019 , the Company completed the sale of the UNI-LIFT product line, a component of our Milwaukee Cylinder business (IT&S segment), for net cash proceeds of $ 7.5 million (inclusive of the settlement of working capital adjustments and the buyer achieving certain criteria which met the requirement for payment of $ 1.5 million of contingent proceeds).

The transaction resulted in an impairment & divestiture benefit of $ 6.3 million for the year ended August 31, 2020 recorded as an "Impairment & divestiture benefit" within the Consolidated Statements of Operations.

After the sale of the UNI-LIFT product line, the Company determined that the remaining Milwaukee Cylinder business was a non-core asset, did not align with the strategic objectives of the Company and, as a result, the Company committed to a plan to sell this business.

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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)

The historical results of the Milwaukee Cylinder business, inclusive of the UNI-LIFT product line, (which had net sales of $ 2.9 million in the year ended August 31, 2020) are not material to the consolidated financial results.

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

Goodwill, Intangible Assets and Long-Lived Assets

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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 )

Impact of changes in foreign currency rates 1,550 545 2,095

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$ 174,215 $ 132,708 $ 41,507 $ 185,087 $ 130,542 $ 54,545

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 Company estimates that amortization expense for future years is estimated to be:

$ 5.2 million in fiscal 2023, $ 3.6 million in fiscal 2024, $ 3.0 million in fiscal 2025, $ 1.8 million in fiscal 2026, $ 1.7 million in fiscal 2027 and $ 4.0 million in aggregate thereafter.

The future amortization expense amounts represent estimates and may be impacted by future acquisitions, divestitures or changes in foreign currency exchange rates, among other causes.

Fiscal 2022 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.

The carryover effects from the COVID-19 pandemic coupled with current year labor, supply chain and inflation challenges had a more than anticipated effect on the Cortland Industrial business.

Therefore, in conjunction with our annual goodwill impairment assessment , the Company recognized a $ 1.3 million goodwill impairment charge associated with the Cortland Industrial reporting unit (Other Segment) within "Impairment & divestiture charges (benefit)" in the Consolidated Statements of Earnings.

In addition, during fiscal 2022, the Company recorded "Impairment & divestiture charges" of $ 1.1 million on indefinite lived intangible assets;

$ 0.8 million was related to a customer relationship intangible asset whereby the Company ceased operations in the country associated with said customers and $ 0.3 million was related to tradename intangible asset on a discontinued secondary brand.

Fiscal 2021 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.

In the fourth quarter of fiscal 2019, the Company's branding strategy was revised such that two secondary tradenames previously considered to have indefinite lives were to be phased out and re-branded over the course of fiscal 2020.

As such, the Company recorded an impairment & divestiture charge of $ 2.6 million based on the estimated remaining fair value of the respective tradenames.

In addition, based on restructuring actions taken in the fourth quarter of fiscal 2019 related to the North America Services operations, the Company concluded that the fair value of a customer relationship intangible was less than the current net book value, and therefore, a $ 6.2 million impairment & divestiture charge was recorded.

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

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.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

pace initially projected.

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

Short-term debt $ 4,000 $ —

Senior Credit Facility

Revolver 200,000 175,000

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

Total Debt $ 204,000 $ 175,000

Senior Credit Facility

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The Senior Credit Facility was initially comprised of a $ 400 million revolving line of credit and a $ 200 million term loan.

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, 2022, there were $ 200 million borrowings under the revolving line of credit and $ 190.8 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.

Borrowings under the Senior Credit Facility bear interest at a variable rate based on LIBOR or a base rate, ranging from 1.125 % to 2.00 % in the case of loans bearing interest at LIBOR and from 0.125 % to 1.00 % in the case of loans bearing interest at the base rate.

Additionally, at August 31, 2022, there was $ 4 million borrowings against our Credit Facility swingline, which has been reflected as "Short-term debt" on the Consolidated Balance Sheets.

The Senior Credit Facility provided the option for future expansion, subject to certain conditions, through a $ 300 million accordion and/or a $ 200 million incremental term loan.

Borrowings under the Senior Credit Facility bore interest at a variable rate based on LIBOR or a base rate, ranging from 1.125 % to 2.00 % in the case of loans bearing interest at LIBOR and from 0.125 % to 1.00 % in the case of loans bearing interest at the base rate.

In addition, a non-use fee was payable quarterly on the average unused amount of the revolving line of credit ranging from 0.15 % to 0.3 % per annum, based on the Company's net leverage.

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.

In April 2020, the Company proactively amended its Senior Credit Facility to extend the interest coverage ratio at 3.0 for an additional 12 months through October 2021 to mitigate risks associated with the potential impact of the COVID-19 pandemic.

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

The Senior Credit Facility provided for adjustments to the underlying ratios in connection with certain transaction, including an increase to the leverage ratio from 3.75 to 4.25 during the four fiscal quarters after a significant acquisition.

The Company was in compliance with all financial covenants at August 31, 2022.

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.

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.

In order to reduce interest costs, in June 2020, the Company redeemed all of the outstanding Senior Notes at a price equal to 100 % of the principal amount thereof, plus the settlement of accrued and unpaid interest.

Borrowings under the Senior Credit Facility were 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.

On September 9, 2022, the Company refinanced the Senior Credit Facility with a new $ 600 million senior credit facility, comprised of a $ 400 million revolving line of credit and a $ 200 million term loan, which will mature in September 2027.

See Note 18, "Subsequent Event" in the notes to the consolidated financial statements for further details.

Cash Paid for Interest

The Company made cash interest payments of $ 3.1 million, $ 3.7 million and $ 18.7 million in fiscal 2022, 2021 and 2020, 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 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.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The fair value of the Company's foreign currency exchange contracts was a net asset of less than $ 0.1 million at August 31, 2022 and a net liability of less than $ 0.1 million at August 31, 2021.

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 5, "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.

As discussed in Note 7, “Goodwill, Intangible Assets and Long-Lived Assets” , the Company recorded impairments to goodwill in the years ended August 31, 2022 and 2021.

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.

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The effects of changes in exchange rates are reflected concurrently in earnings for both the fair value of the foreign currency exchange contracts and the related non-functional currency asset or liability.

These derivative gains and losses offset foreign currency gains and losses from the related revaluation of non-functional currency assets and liabilities (amounts included in "Other (income) expense" in the Consolidated Statements of Operations).

dollar equivalent notional value of these short duration foreign currency exchange contracts was $ 16.7 million and $ 16.0 million at August 31, 2022 and 2021, respectively.

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):

The fair value of outstanding foreign currency exchange contracts was an asset less than $ 0.1 million at August 31, 2022 and a liability of less than $ 0.1 million at August 31, 2021.

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

Year Ended August 31,

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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.

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

As of August 31, 2022, the Company ha d operating leases for real estate, vehicles, manufacturing equipment, IT equipment and office equipment.

The Company did not have significant finance leases during the year ended August 31, 2022 .

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

Our leases generally contain payments that are primarily fixed;

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The components of lease expense for the year ended August 31, 2022 and 2021 were as follows (in thousands):

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Total operating lease liabilities $ 44,186 $ 52,485

Weighted Average Remaining Lease Term (in years):

Weighted Average Remaining Lease Term:

Operating leases 6.4 years 6.7 years

1 unchanged sentence

Operating leases 4.4 % 4.3 %

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

A summary of the future minimum lease payments due under operating leases with terms of more than one year at August 31, 2022 is as follows (in thousands):

5 unchanged sentences

Present value of net minimum lease payments $ 44,186

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 fiscal 2022 with a lease term of 6.3 years.

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Employee Benefit Plans

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During fiscal 2023, $ 0.9 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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Expected return on plan assets 5.45 % 4.20 % 4.60 %

Prior to fiscal 2019, the Company focused on employing a total-return-on-investment approach for its pension plan assets whereby a mix of equity and fixed income investments were used to maximize the long-term return for plan assets, at prudent levels of risk.

During fiscal 2019, the Company made a strategic decision to shift the focus to an objective to achieve an asset and liability duration match so that interim fluctuations in funded status should be limited by increasing the correlation between assets and liabilities.

The Company's objective for its pension plan is to achieve an asset and liability duration match so that interim fluctuations in funded status should be limited by increasing the correlation between assets and liabilities.

As such, the plan assets are invested to maintain funded ratios over the long term, while managing the risk that funded ratios fall meaningfully below 100%.

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.

In fiscal 2022, the plan assets were invested in a mix of 50 % duration-matched fixed income securities and 50 % equity securities.

During fiscal 2021, the plan portfolio was invested in 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 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):

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

Year Ended August 31,

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Total plan assets $ 31,166 100.0 % $ 39,696 100.0 %

The fair value of mutual funds are based on unadjusted quoted market prices and therefore are classified as Level 1 within the fair value hierarchy under GAAP.

The fair value of mutual funds are based on unadjusted quoted market prices and therefore are classified as Level 1 within the fair value hierarchy under US GAAP.

Treasury Securities and Corporate Bonds are valued using Level 2 inputs, as defined in Note 9, “Fair Value Measurements.”

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pension plans in September of fiscal 2022.

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The Company does not plan to make a contribution to the plan in fiscal 2023.

Foreign Defined Benefit Pension Plans

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Interest cost 159 198

Actuarial loss/(gain) 51 ( 495 )

Actuarial (gain)/loss ( 3,859 ) 51

Benefits paid ( 200 ) ( 293 )

Plan amendments — —

Curtailments — ( 1,687 )

Settlements ( 480 ) —

Currency impact ( 2,114 ) 52

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Funded status of the plans (underfunded) $ ( 1,808 ) $ ( 5,025 )

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):

6 unchanged sentences

Amortization of net loss 112 139 205

Settlement 145 — —

Income of special events — — ( 728 )

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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 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)

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 Earnings 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 fiscal 2023, $ 0.2 million in each fiscal 2024, 2025 and 2026, $ 0.3 million in fiscal 2027 and $ 1.8 million in aggregate for the following five years.

Other Postretirement Health Benefit Plans

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

no contributions were made in fiscal 2021 or 2020.

The Company has not contributed in fiscal 2022, 2021 or fiscal 2020.

Expense recognized related to the 401(k) plan totaled $ 2.2 million, $ 1.1 million and $ 1.4 million for the year ended August 31, 2022, 2021 and 2020, respectively.

In addition to the 401(k) plan, the Company sponsors a non-qualified supplemental executive retirement plan (“the SERP Plan”).

The SERP Plan is an unfunded defined contribution plan that covers certain current and former executive employees and has an annual contribution formula based on age and years of service (with Company contributions ranging from 3 % to 6 % of eligible wages).

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

The SERP Plan is an unfunded defined contribution plan that covers certain current and former executive employees

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 $ 1.1 million and $ 1.3 million obligation at August 31, 2022 and 2021, respectively .

Expense recognized for the SERP Plan was $ 0.2 million, $ 0.1 million and $ 0.3 million for fiscal 2022, 2021 and 2020, respectively.

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Company common stock contributions to fund the plan are held in a rabbi trust, accounted for in a manner similar to treasury stock and are recorded at cost in “Stock held in trust” within shareholders’ equity on the Consolidated Balance Sheets with the corresponding deferred compensation liability also recorded within shareholders’ equity on the Consolidated Balance Sheets.

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

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

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In fiscal 2022, domestic and foreign earnings included non-cash impairment and other divestiture charges of $ 1.3 million and $ 1.1 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.

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 $( 2.6 ) million and $( 0.6 ) million of non-cash impairment and other divestiture benefits.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Income tax expense from continuing operations recognized in the accompanying consolidated statements of operations differs from the amounts computed by applying the federal income tax rate to earnings from continuing operations before income tax expense.

Income tax expense from continuing operations recognized in the accompanying consolidated statements of earnings differs from the amounts computed by applying the federal income tax rate to earnings from continuing operations before income tax expense.

A reconciliation of income taxes at the federal statutory rate to the effective tax rate is summarized in the following table:

4 unchanged sentences

Tax on foreign earnings (1)

2.8 38.7 20.6

Foreign derived intangible income deduction ( 4.5 ) ( 3.2 ) —

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Taxable liquidation of subsidiaries (4)

( 11.4 ) — 52.6

Foreign non-deductible expenses 8.5 1.2 7.4

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Effective income tax rate 18.3 % 8.6 % 29.2 %

(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.

(1) The Company generated $ 1.3 million, $ 1.7 million and $ 5.4 million of withholding tax expense for fiscal 2022, 2021 and 2020, respectively, and $ 2.3 million, $ 4.6 million and $ 4.0 million of foreign-derived tax credits for fiscal 2022, 2021 and 2020, respectively.

(2) Fiscal 2022, 2021 and 2020 pretax earnings include $ 2.4 million, $ 6.2 million and $( 3.2 ) 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 $ 1.3 million, $ 3.5 million and $ 0.3 million, respectively, are not deductible for income tax purposes.

(3) Incremental valuation allowances of $ 0.9 million and $ 4.9 million and $ 9.4 million were recorded in fiscal 2022, 2021 and 2020, respectively, due to uncertainty regarding realization of tax assets, which were offset by a reduction of $ 5.5 million, $ 9.1 million and $ 12.3 million of valuation allowances for fiscal 2022, 2021 and 2020, respectively.

These amounts exclude valuation allowances against tax assets related to the tax reform.

(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.

(4) During fiscal 2022 and 2020, the Company generated a net benefit of $ 2.7 million and a net expense of $ 4.1 million, respectively, as a result of taxable liquidations of subsidiaries.

(5) During fiscal 2022, the Company generated $ 1.6 million of tax benefit related to audits and adjustments as compared to a tax expense of $ 3.5 million in fiscal 2021 and a tax benefit of $ 2.2 million in fiscal 2020.

ENERPAC TOOL GROUP CORP.

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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.

Over half of the foreign loss carryforwards are not subject to any expiration dates, while the other balances expire at various ti mes through 2032.

credit carryforwards expire at various times through 2032.

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Increase for tax positions taken in a prior period 1,084 7 304

Decrease for tax positions taken in a prior period ( 57 ) — —

Decrease due to lapse of statute of limitations ( 1,271 ) ( 7,931 ) ( 2,334 )

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federal, state and foreign income tax examinations by tax authorities in major tax jurisdictions for years prior to fiscal 2010.

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $ 2.2 million throughout fiscal 2023.

Cash paid for income taxes, net of refunds, totaled $ 5.7 million, $ 7.8 million and $ 13.2 million during the years ended August 31, 2022, 2021 and 2020, respectively.

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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.

The Company suspended the initial share repurchase program in response to the COVID-19 pandemic in the third quarter of fiscal 2020 and, accordingly, did not repurchase shares during the year ended August 31, 2021.

In March 2022, the Company's Board of Directors rescinded its prior share repurchase authorization and approved a new share repurchase program authorizing the repurchase of a total of 10,000,000 shares of the Company's outstanding common stock.

The Company has repurchased 3,759,735 shares for $ 75.1 million during the year ended August 31, 2022.

As of August 31, 2022, the maximum number of shares that may yet be purchased under this new program is 6,240,265 .

Since the inception of the initial share repurchase program in fiscal 2012, the Company has repurchased 26,558,965 shares of common stock for $ 742.8 million.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Earnings Per Share

The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):

The reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share amounts):

Year Ended August 31,

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Net loss from discontinued operations ( 3,905 ) ( 2,135 ) ( 4,834 )

Net earnings (loss) $ 38,077 $ 723 $ ( 249,145 )

Net earnings $ 15,686 $ 38,077 $ 723

Weighted average common shares outstanding - basic 59,538 60,024 59,952

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Diluted $ ( 0.07 ) $ ( 0.04 ) $ ( 0.08 )

Loss per common share:

Earnings per common share:

Basic $ 0.26 $ 0.63 $ 0.01

Diluted $ 0.26 $ 0.63 $ 0.01

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)

Anti-dilutive securities- stock based compensation plans (excluded from earnings per share calculation) 946 880 1,532

Share based awards may be granted to key employees and directors under the Enerpac Tool Group Corp.

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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 Performance Shares issued prior to the year ended August 31, 2021, the awards 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.

For the year ended August 31, 2022, the awards were based 50 % on the relative TSR metric and 50 % on the Company's three-year average return on invested capital.

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

A summary of restricted stock units and performance shares activity during fiscal 2022 is as follows:

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Cash receipts from exercise of options — 2,208 2,631

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 Company generally records compensation expense over the vesting period for restricted stock unit awards based on the market value of the Company's Class A common stock on the grant date and utilized an expected forfeiture rate of 12 % for both the years ended for the years ended August 31, 2022 and 2021 and 8 % for the year ended August 31, 2020.

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 2021, 2020 and 2019.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

As of August 31, 2022, there was $ 10.6 million of total unrecognized compensation cost related to share-based awards, including stock options, restricted stock, restricted stock units and performance shares, which will be recognized over a weighted average period of 1.9 years.

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The Company is a global manufacturer of a broad range of industrial products and solutions.

The IT&S reportable segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the industrial, maintenance, infrastructure, oil & gas, energy and other markets.

The IT&S reportable segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the infrastructure, industrial maintenance, repair and operations, oil & gas, mining, alternative and renewable energy, civil construction and other markets.

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):

5 unchanged sentences

527,342 493,125 454,863

Other Operating Segment 35,535 38,429 45,243

Other Segment 43,881 35,535 38,429

$ 571,223 $ 528,660 $ 493,292

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IT&S $ 78,735 $ 81,683 $ 65,549

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

Other Segment 729 ( 10,420 ) ( 3,420 )

General Corporate ( 48,804 ) ( 20,150 ) ( 37,948 )

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IT&S $ 14,498 $ 15,856 $ 14,854

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

Other Segment 3,664 3,568 3,620

General Corporate 1,438 2,187 2,246

2 unchanged sentences

IT&S $ 7,139 $ 10,918 $ 7,282

Other Operating Segment 768 2,625 3,917

Other Segment 710 768 2,625

General Corporate 568 333 2,146

1 unchanged sentence

IT&S $ 618,412 $ 641,256

Other Operating Segment 52,745 61,105

Other Segment 46,428 52,745

General Corporate 92,472 126,246

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

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

Year Ended August 31,

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Australia 26,667 24,990 19,332

Canada 17,348 15,924 18,686

China 16,927 15,058 18,548

Saudi Arabia 20,892 16,715 19,787

Canada 19,651 17,348 15,924

Brazil 16,517 13,937 16,413

China 15,434 16,927 15,058

All other 188,722 182,321 173,065

4 unchanged sentences

UAE 4,407 6,448

Netherlands 2,625 2,546

Brazil 2,873 2,248

Kazakhstan 1,552 2,052

Netherlands 1,965 2,625

Spain 1,413 1,506

Australia 751 1,014

China 750 12,248

Kazakhstan 1,028 1,552

All other 4,731 3,451

$ 41,372 $ 48,590

The Company’s largest customer accounted for approximately 3 % of sales in each of the last three fiscal years.

The Company’s largest customer accounted for approximat ely 3 % of sales in each of the last three fiscal years.

Export sales from domestic operatio ns were 9.8 %, 7.2 % and 7.3 % of total net sales from continuing operations in fiscal 2022, 2021 and 2020, respectively.

Commitments and Contingencies

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.

The Company had outstanding letters of credit of $ 10.7 million and $ 11.9 million at August 31, 2022 and 2021, respectively, the majority of which relate to commercial contracts and self-insured workers' compensation programs.

As part of the Company's global sourcing strategy, we have entered into agreements with certain suppliers that require the supplier to maintain minimum levels of inventory to support certain products for which we require a short lead time to fulfill customer orders.

We have the ability to notify the supplier that they no longer need maintain the minimum level of inventory should we discontinue manufacture of a product during the contract period, however, we must purchase the remaining minimum inventory levels the supplier was required to maintain within a defined period of time.

We have the ability to notify the supplier that they no longer need maintain the minimum level of inventory should we discontinue manufacturing of a product during the contract period;

however, we must purchase the remaining minimum inventory levels the supplier was required to maintain within a defined period of time.

The Company is a party to various legal proceedings that have arisen in the normal course of business.

These legal proceedings typically include product liability, breaches of contract, employment, personal injury and other disputes.

These legal proceedings include regulatory matters, product liability, breaches of contract, employment, personal injury and other disputes.

The Company has recorded reserves for loss contingencies based on the specific circumstances of each case.

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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

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, 2022 were $ 3.7 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 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.

Additionally, in fiscal 2019, the Company provided voluntary self-disclosures to both Dutch and U.S.

authorities related to sales of products and services linked to the Crimea region of Ukraine, which sales potentially violated European Union and U.S.

sanctions provisions.

Although the U.S.

investigation closed without further implication, the Dutch investigation continued.

The Dutch Investigator concluded his investigation in March 2022 and provided the results to the Public Prosecutor’s office for review.

Specifically, the Investigator concluded that the sales transactions violated EU sanctions.

The conclusion in the Investigator's report was consistent with the Company's understanding of what could be stated in the report and was the basis to record an expense in the fiscal year ended August 31, 2021, representing the low end of a reasonable range of financial penalties the Company may incur as no other point within the range was deemed more probable.

The Company has not adjusted its estimate of financial penalties as a result of the completion of the investigation in the year ended August 31, 2022.

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

Subsequent Event

On September 9, 2022, the Company refinanced its credit facility resulting in a new $ 600 million senior credit facility, comprised of a $ 400 million revolving line of credit and a $ 200 million term loan, which will mature in September 2027.

The Company has the option to request up to $ 300 million of additional revolving commitments and/or term loans under the new facility, subject to customary conditions, including the commitment of the participating lenders.

The new facility replaces LIBOR with adjusted term SOFR as the interest rate benchmark and provides for interest rate margins above adjusted term SOFR ranging from 1.125 % to 1.875 % per annum depending on the Company’s net leverage ratio.

Borrowings under the new facility initially bear interest at adjusted term SOFR plus 1.125 % per annum.

In addition, the new facility contains financial covenants requiring the Company to not permit (i) the net leverage ratio, determined as of the end of each of its fiscal quarters, to exceed 3.75 to 1.00 (or, at the Company’s election and subject to certain conditions, 4.25 to 1.00 for the testing period during which certain material acquisitions occur and the next succeeding four testing periods) or (ii) the interest coverage ratio, determined as of the end of each of its fiscal quarters, to be less than 3.00 to 1.00.

Borrowings under the new facility are secured by substantially all personal property assets of the Company and its domestic subsidiary guarantors (other than certain specified excluded assets) and certain of the equity interests of certain subsidiaries of the Company.

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