What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-10-20 compared with 2022-10-25 · 226 added, 278 removed, 915 unchanged (36% of the section changed)

3 unchanged sentences

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, 2023, 2022 and 2021

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

Consolidated Statements of Comprehensive Income (Loss ) for the years ended August 31, 2023, 2022 and 2021

Consolidated Balance Sheets as of August 31, 2023 and 2022

8 unchanged sentences

Opinion on the Financial Statements

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.

We have audited the accompanying consolidated balance sheets of Enerpac Tool Group and Subsidiaries (the Company) as of August 31, 2023 and August 31, 2022, the related consolidated statements of earnings, comprehensive statement of income (loss), shareholders’ equity and cash flows for each of the three years in the period ended August 31, 2023, 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, 2023 and August 31, 2022, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2023, in conformity with U.S.

generally accepted accounting principles.

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and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of August 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of August 31, 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.

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, 2023 and August 31, 2022, and the related consolidated statements of earnings, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended August 31, 2023, and the related notes and financial statement schedule listed in the accompanying index at Item 15(a)(2) and our report dated October 20, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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October 20, 2023

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.

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 audit 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 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.

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Restructuring charges 7,096 8,135 2,392

Impairment & divestiture charges (benefit) 2,413 6,198 ( 3,159 )

Impairment & divestiture (benefit) charges ( 6,155 ) 2,413 6,198

Operating profit 83,922 30,660 51,113

Financing costs, net 12,389 4,386 5,266

Other expense (income), net 2,282 1,872 ( 2,886 )

Other expense, net 2,635 2,282 1,872

Earnings before income tax expense 68,898 23,992 43,975

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ENERPAC TOOL GROUP CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

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Net income $ 46,561 $ 15,686 $ 38,077

Other comprehensive (loss) income, net of tax

Other comprehensive income (loss), net of tax

Foreign currency translation adjustments 12,887 ( 46,092 ) 5,910

Recognition of foreign currency translation losses from divested businesses — — 51,994

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

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

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

Cash flow hedges ( 375 ) — —

Pension and other postretirement benefit plans 1,239 4,115 1,830

Total other comprehensive income (loss), net of tax 13,751 ( 41,977 ) 7,740

Comprehensive income (loss) $ 60,312 $ ( 26,291 ) $ 45,817

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

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Accrued compensation and benefits 33,194 21,390

Current maturities of long-term debt 3,750 —

Short-term debt — 4,000

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

Impairment & divestiture charges (benefit), net of tax effect 2,413 5,586 ( 2,506 )

Impairment & divestiture (benefit) charges, net of tax effect ( 6,155 ) 2,413 5,586

Depreciation and amortization 16,313 19,600 21,611

Stock-based compensation expense 8,574 13,619 9,215

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

Provision (benefit) for deferred income taxes 460 ( 5,291 ) 9,639

Amortization of debt issuance costs 902 480 480

Provision for bad debts 803 13,856 —

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

Other non-cash charges (benefits) 1,569 ( 344 ) ( 9,172 )

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

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Cash used in operating activities - discontinued operations ( 970 ) ( 510 ) ( 677 )

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

Cash provided by operating activities 77,603 51,736 54,183

Investing Activities

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

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

Proceeds from sale of business, net of transaction costs 20,057 — —

Other investing activities — — ( 710 )

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

Cash provided by (used in) investing activities - continuing operations 11,342 ( 7,241 ) 13,301

Cash provided by (used in) investing activities 11,342 ( 7,241 ) 13,301

Financing Activities

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Principal repayments on revolving credit facility ( 53,000 ) ( 60,000 ) ( 90,000 )

Swingline borrowings/repayments, net 4,000 — —

Swingline (repayments) borrowings, net ( 4,000 ) 4,000 —

Principal repayments on term loan ( 1,250 ) — —

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

Proceeds from issuance of term loan 200,000 — —

Payment for redemption of revolver ( 200,000 ) — —

Payment of debt issuance costs ( 2,486 ) — —

Purchase of treasury shares ( 57,662 ) ( 75,112 ) —

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Effect of exchange rate changes on cash ( 2,099 ) ( 11,946 ) 2,214

Net decrease in cash and cash equivalents ( 19,653 ) ( 11,818 ) ( 58,981 )

Net increase (decrease) from cash and cash equivalents 33,716 ( 19,653 ) ( 11,818 )

Cash and cash equivalents - beginning of period 120,699 140,352 152,170

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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 earnings — — — — 15,686 — — — 15,686

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

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

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

1 unchanged sentence

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

Treasury stock repurchases — — — ( 75,112 ) — — — — ( 75,112 )

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

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

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

2 unchanged sentences

Net earnings — — — — 46,561 — — — 46,561

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

Other comprehensive income, net of tax — — — — — 13,751 — — 13,751

Stock contribution to employee benefit plans and other 9 2 191 — — — — — 193

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Stock based compensation expense — — 8,699 — — — — — 8,699

Stock option exercises 43 8 965 — — — — — 973

Tax effect related to net share settlement of equity awards — — ( 2,624 ) — — — — — ( 2,624 )

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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 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.

(the “Company”) is a premier industrial tools, services, technology and solutions company serving a broad and diverse set of customers in more than 100 countries.

The Company has one reportable segment, Industrial Tools & Services ("IT&S"), and an Other operating segment, which does not meet the criteria to be considered a reportable segment.

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

Consolidation and Presentation:

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All intercompany balances, transactions and profits have been eliminated in consolidation.

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 Earnings.

The terms the "Company," "we," and "our" refer to Enerpac Tool Group Corp.

and its subsidiaries, unless the context requires that such terms refer only to Enerpac Tool Group Corp.

Reference to fiscal years, such as "fiscal 2023," are to the fiscal year ending on August 31 of the specified year.

On October 31, 2019, as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the sale of the businesses comprising its former Engineered Components & Systems ("EC&S") segment.This divestiture represented a strategic shift in our operations,and accordingly the results of the former EC&S segment through the date of divestiture and subsequent impacts to the financial results from retained liabilities are recorded in "Loss from discontinued operations, net of income taxes" within the Consolidated Statements of Earnings.

On July 11, 2023, the Company completed the sale of the Cortland Industrial business, which had been included in the Other operating segment.

Cash Equivalents:

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

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

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

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

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

A portion of U.S.

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Plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets, ranging from ten to forty years for buildings and improvements and two to fifteen years for machinery and equipment.

Equipment includes assets which are rented to customers of our IT&S segment.

Equipment includes assets which are rented to customers of the IT&S segment.

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

1 unchanged sentence

The following is a summary of the Company's components of property, plant and equipment (in thousands):

August 31, 2022 August 31, 2021

Land, buildings and improvements $ 14,070 $ 14,121

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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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Company and any prepaid lease payments less any incentives received.

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

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

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

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

The following is a rollforward of the changes in product warranty reserves for fiscal years 2022 and 2021 (in thousands):

The following is a roll-forward of the changes in product warranty reserves for fiscal 2023 and 2022 (in thousands):

Beginning balance $ 1,140 $ 1,300

1 unchanged sentence

Warranty payments and costs incurred ( 723 ) ( 911 )

Warranty activity for divested businesses ( 10 ) —

Impact of changes in foreign currency rates 31 ( 136 )

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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.

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.

Accounts receivable are stated net of an allowance for doubtful accounts of $ 16.8 million and $ 17.5 million at August 31, 2023 and 2022, respectively.

1 unchanged sentence

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:

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Other income and expense primarily consists of net foreign currency exchange transaction losses of $ 2.1 million, $ 1.5 million and $ 1.8 million in fiscal 2023, 2022 and 2021, respectively.

In addition, as a result of the EC&S divestiture and the transition services agreement entered into with the buyer, the Company recorded $4.9 million of other income from providing the agreed upon services in fiscal 2020.

Financing Costs:

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Pension and other postretirement benefit plans 18,394 18,883

Cash flow hedges 548 —

Accumulated other comprehensive loss $ 121,210 $ 134,961

Use of Estimates:

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.

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

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

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

As such, judgment and estimates are required to disaggregate product and service & rental cost of sales including allocating indirect and facility overhead costs between cost of product sales and the cost of service & rental sales.

Changes in these judgments and estimates could materially change the allocation of the indirect and facility overhead costs to the different sales categories and the resulting ratio of cost of sales to net sales by category.

Because the sales mix heavily favors the product category, a change in the mix of cost of sales between the sales categories would have a more significant impact on the ratio of cost of sales to net sales for the service & rental category.

As such, judgment and estimates are required to disaggregate product and service & rental cost of

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Recently Adopted Accounting Pronouncements

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):

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

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

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

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

The guidance is also effective through December 31, 2022.

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

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

sales including allocating indirect and facility overhead costs between cost of product sales and the cost of service & rental sales.

Revenue from Contracts with Customers

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

For a majority of the Company’s custom products, machine hours and labor hours (efforts-expended measurement) are used as a measure of progress.

For a majority of these customized products, machine hours and labor hours (efforts-expended measurement) are used as a measure of progress.

Service & Rental Sales :

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

Revenue from rental contracts (less than a year and non-customized products) is generally recognized ratably over the contract term, depicting the customer’s consumption of the benefit related to the rental equipment.

Revenue from rental contracts (less than one year and non-customized products) is generally recognized ratably over the contract term, depicting the customer’s consumption of the benefit related to the rental equipment.

Disaggregated Revenue and Performance Obligations

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See Note 15, "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):

Year Ended August 31,

2023 2022 2021

Revenues recognized at point in time $ 482,506 $ 442,832 $ 396,457

8 unchanged sentences

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

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

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

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

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

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 $ 16.8 million and $ 17.5 million at August 31, 2023 and 2022, 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.

As indicated in the "Concentration of Credit Risk" section below, as of August 31, 2023 and 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 "Selling, general and administrative expenses" ("SG&A expenses") in the Condensed Consolidated Statements of Earnings) a reserve of $ 13.2 million based on the consideration of the factors listed below, which fully reserves for the outstanding account receivable balance for this agent.

The allowance for doubtful accounts for this particular agent as of August 31, 2023 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.

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As of August 31, 2023 the Company was exposed to a concentration of credit risk as a result of the payment delinquency of one of our agents whose accounts receivable represent 11.3 % of the Company's outstanding accounts receivable.

As of August 31, 2023, the Company has fully reserved for the amounts due from this agent.

Contract Assets:

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The majority of these contracts relate to long-term customer contracts (project durations of greater than three months) and are recognized over time.

The Company estimates that the $ 2.8 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)

The Company estimates that the $ 2.9 million will be recognized in net sales from satisfying those performance obligations within the next twelve months.

Timing of Performance Obligations Satisfied at a Point in Time:

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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.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

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 estimated incremental $ 40 to $ 50 million of annual operating profit once fully implemented.

In March 2023, the Company announced this estimate had been revised to an incremental $ 50 to $ 60 million of annual operating profit as a result of additional ASCEND initiatives and high success rate.

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).

(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 expenses by better leveraging resources to create a more efficient and agile organization.

The Company is implementing the program and originally anticipated investing approximately $ 60 to $ 65 million and in March 2023 anticipated that this investment would increase to $ 70 to $ 75 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 (which incentives are not available for the senior management team).

Total program expenses were approximately $ 43.1 million and $ 16.7 million for the year ended August 31, 2023 and 2022.

Of the total ASCEND program expenses for the year ended August 31, 2023, $ 34.5 million were recorded within SG&A expenses and $ 0.9 million recorded within cost of goods sold and $ 7.7 million were recorded within restructuring expenses (see Note 4, "Restructuring Charges," below).

Of the total ASCEND program expenses for the year ended August 31, 2022, $ 13.6 million were recorded within SG&A expenses and $ 3.1 million were recorded within restructuring expenses (see Note 4, "Restructuring Charges," below).

For fiscal 2024, we expect to incur $ 10 to $ 15 million of ASCEND transformation program costs, this range is inclusive of $ 3 to $ 5 million of restructuring costs.

Restructuring Charges

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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 .

Upon assessment of the Company's operating structure by the Company's new President & Chief Executive Officer (hired effective October 2021), the Company recorded a benefit of less than $ 0.1 million and $ 5.2 million of charges for the year ended August 31, 2023, and 2022, respectively, in order to further simplify and streamline the organizational structure.

Restructuring charges associated with the fiscal 2019 plan were $ 2.1 million for the year ended August 31, 2021.

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

On June 27, 2022, the Company approved a 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.

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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

These costs are expected to be incurred over the expected duration of the transformation program, ending in the fourth quarter of fiscal 2024.

For the year ended August 31, 2023 and 2022 , the Company recorded $ 7.7 million and $ 3.1 million of restructuring charges associated with the ASCEND transformation program.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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):

The following summarizes restructuring reserve activity for the IT&S segment and Corporate (which for the year ended August 31, 2023 excludes $ 0.6 million of charges associated with ASCEND transformation plan for Corporate, and 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) (in thousands):

Year Ended August 31, 2023

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Cash payments ( 99 ) — ( 5,453 ) ( 1,779 )

Other non-cash uses of reserve ( 84 ) — ( 498 ) —

Impact of changes in foreign currency rates 3 — 146 2

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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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Balance as of August 31, 2022 $ 212 $ 6 $ 2,008 $ 797

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.

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

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

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

The intangible assets were comprised of $ 3.3 million of indefinite-lived tradenames, $ 12.1 million of amortizable customer relationships and $ 0.7 million of amortizable patents.

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

This acquisition generated net sales of $ 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.

Total restructuring charges (inclusive of the Other operating segment) for the year ended August 31, 2023 were $ 7.7 million which included approximately $ 0.6 million of charges being reported in the Consolidated Statements of Operations in "Cost of products sold," with the balance of the charges reported on "Restructuring charges." Total restructuring charges (inclusive of the Other operating segment) being reported in "Restructuring charges" were $ 8.1 million and $ 2.4 million for the year ended August 31, 2022 and 2021, respectively .

Discontinued Operations and Other Divestiture Activities

Discontinued Operations

On October 31, 2019 , as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the sale of the businesses comprising its former EC&S segment to wholly owned subsidiaries of BRWS Parent LLC, a Delaware limited liability company and affiliate of One Rock Capital Partners II, LP, for a sales price of approximately $ 215.8 million, inclusive of $ 1.3 million of purchase price from the customary finalization of working capital negotiations.

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

On October 31, 2019 , as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the sale of the businesses comprising its former EC&S segment.

This divestiture was considered part of our strategic shift to become a pure-play industrial tools and services company, and therefore, the results of operations are recorded as a component of "Loss from discontinued operations, net of income taxes" in the Condensed Consolidated Statements of Earnings for all periods presented.

All discontinued operations activity included within the Condensed Consolidated Statements of Earnings and the Condensed Consolidated Statements of Cash Flows for the periods presented relate to impacts from certain retained liabilities.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

the Consolidated Statements of Cash Flows).

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

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

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

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2023 2022 2021

Net sales $ — $ — $ 67,010

Cost of products sold — — 49,749

Gross profit — — 17,261

Selling, general and administrative expenses 10,069 4,842 1,456

Restructuring benefit — — ( 11 )

Impairment & divestiture charges — — 28,972

Impairment & divestiture benefit ( 1,530 ) — —

Operating loss ( 8,539 ) ( 4,842 ) ( 1,456 )

Financing costs, net — — 14

Other income, net 372 — —

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 US 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.

Loss before income tax benefit ( 8,911 ) ( 4,842 ) ( 1,456 )

Income tax (benefit) loss ( 1,823 ) ( 937 ) 679

Loss from discontinued operations, net of income taxes $ ( 7,088 ) $ ( 3,905 ) $ ( 2,135 )

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 Earnings.

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

The Company completed the divestiture of the Milwaukee Cylinder business on December 2,

2019 for a negligible amount.

The Company recorded impairment & divestiture charges of $ 4.5 million for the year ended August 31, 2020 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.

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.

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 for the year ended August 31, 2020) are not material to the consolidated financial results.

On July 11, 2023 , the Company completed the sale of the Cortland Industrial business, which had been included in the Other operating segment, for net cash proceeds of $ 20.1 million.

In connection with the completion of the sale, the Company recorded a net gain of $ 6.2 million.

The historical results of the Cortland Industrial business (which had net sales of $ 22.7 million, $ 26.2 million, and $ 23.7 million for the year ended August 31, 2023, 2022 and 2021, respectively) are not material to the consolidated financial results.

Goodwill, Intangible Assets and Long-Lived Assets

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Balance as of August 31, 2022 246,740 11,209 257,949

Impairment charge — ( 1,297 ) ( 1,297 )

Impact of changes in foreign currency rates 8,546 — 8,546

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$ 144,140 $ 106,802 $ 37,338 $ 174,215 $ 132,708 $ 41,507

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

The Company estimates amortization expense for future years to be:

$ 3.3 million in fiscal 2024, $ 2.9 million in fiscal 2025, $ 1.9 million in fiscal 2026, $ 1.8 million in fiscal 2027, $ 1.6 million in fiscal 2028 and $ 2.5 million in aggregate thereafter.

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

Fiscal 2022 Impairment Charges

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

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

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 Earnings.

Fiscal 2023 Impairment Charges

In conjunction with our annual goodwill impairment assessment , the Company did not record any charges in fiscal 2023.

Fiscal 2022 Impairment Charges

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 operating segment) within "Impairment & divestiture (benefit) charges" in the Consolidated Statements of Earnings.

In addition, during fiscal 2022, the Company recorded an impairment charge of $ 1.1 million on indefinite lived intangible assets;

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

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

Previous Senior Credit Facility

Short-term debt $ — $ 4,000

Senior Credit Facility

Revolver — 200,000

Total Debt $ 204,000 $ 175,000

New Senior Credit Facility

Revolver 16,000 —

Term Loan 198,750 —

Total Senior Indebtedness 214,750 204,000

Current maturities of long-term debt ( 3,750 ) —

Short-term debt — ( 4,000 )

Debt issuance costs ( 663 ) —

Total long-term debt, less current maturities $ 210,337 $ 200,000

Senior Credit Facility

In March 2019, the Company entered into a senior credit facility (the "Senior Credit Facility") with a syndicate of banks, to among other things, (i) expand the multi-currency revolving line of credit from $ 300 million to $ 400 million, (ii) extend the maturity of the Company's Senior Credit Facility from May 2020 to March 2024 (no required principal payments prior to maturity) and (iii) modify certain other provisions of the credit agreement including a reduction in pricing.

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

At August 31, 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.

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.

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

In addition, a non-use fee is pa yable quarterly on the average unused amount of the revolving line of credit under the previous senior credit facility ranging from 0.15 % to 0.3 % pe r annum, based on the Company's net leverage.

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

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 covenants period during which certain material acquisitions occur and the next succeeding four testing periods) or (ii) the interest coverage ratio, determined as of the end of each of its fiscal quarters, to be less than 3.00 to 1.00 .

Borrowings under the 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.

The Company was in compliance with all financial covenants under the new facility at August 31, 2023.

The previous senior credit facility provided the option for future expansion, subject to certain conditions, through a $ 300 million accordion.

Borrowi ngs under the previous 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 under the previous senior credit facility ranging from 0.15 % to 0.3 % per annum, based on the Company's net leverage.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

At August 31, 2023, under the new senior credit facility, there were $ 200 million in borrowings outstanding under the term l oans, $ 16.0 million in borrowings outstanding under the revolving line of credit and $ 381.5 million available for borrowing under the revolving line of credi t facility after reduction for $ 2.5 million of outstanding letters of credit issued under the facility.

Prior to this refinancing, the Company's previous senior credit facility matured in March 2024, and provided a $ 400 million revolving line of credit, a $ 200 million term loan and the option for expansion, subject to certain conditions, through a $ 300 million accordion.

Borrowings 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 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 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.

The previous senior credit facility contained two financial covenants, which were a maximum leverage ratio of 3.75 :1 and a minimum interest coverage ratio of 3.5 :1.

Certain transactions resulted in 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.

Cash Paid for Interest

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Foreign currency exchange contracts and interest rate swaps are recorded at fair value.

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 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 Company's foreign currency exchange contracts was a net liability of less than $ 0.1 million at both August 31, 2023 and 2022 .

The fair value of the Company's interest rate swap (see Note 9, “Derivatives” , for further information on the Company's interest rate swap) was an asset of $ 0.7 million at August 31, 2023.

The fair value of the Company's net investment hedge (see Note 9, “Derivatives” for further information on the Company's net investment hedge) was a liability of $ 1.2 million at August 31, 2023.

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

As discussed in Note 6, “Goodwill, Intangible Assets and Long-Lived Assets” , the Company recorded impairments to intangibles and goodwill in the years ended August 31, 2023 and 2022 .

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 Earnings).

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 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):

These derivative gains and losses offset foreign currency gains and losses from the related revaluation of non-functional currency assets and liabilities (amounts incl uded in "Other expense, net" in the Consolidated Statements of Earnings).

dollar equivalent notional value of these short duration foreign currenc y exchange contracts was $ 13.8 million and $ 16.7 million at August 31, 2023 and 2022, respectively.

The fair value of outstanding foreign currency exchange contracts was a net liability of less than $ 0.1 million at August 31, 2023 and 2022 .

Net foreign currency loss (gain)

(included in "Other expense, net" in the Consolidated Statements of Earnings) related to these derivative instruments are as follows (in thousands):

Year Ended August 31,

2023 2022 2021

Foreign Currency losses $ ( 319 ) $ ( 63 ) $ ( 594 )

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

Foreign Currency loss (gain) $ 945 $ ( 319 ) $ ( 63 )

During December 2022, the Company entered into an interest rate swap for the notional amount of $ 60.0 million at a fixed interest rate of 4.022 % to hedge the floating interest rate of the Company's term loan with a maturity date of November 30, 2025.

The interest rate swap was designated and qualified as a cash flow hedge.

The Company uses the interest rate swap for the management of interest rate risk exposure, as an interest rate swap effectively converts a portion of the Company's debt from a floating to a fixed rate.

The Company records the fair value of the interest rate swap as an asset or liability on its balance sheet.

The change in the fair value of the interest rate swap, a net gain of $ 0.5 million for the year ended August 31, 2023 , is recorded in other comprehensive income (loss).

The Company also uses interest-rate derivatives to hedge portions of our net investments in non-U.S.

subsidiaries (net investment hedge) against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S.

For derivatives that are designated and qualify as a net investment hedge in a foreign operation the net gains or losses attributable to the hedge changes are recorded in other comprehensive income (loss) where they offset gains and losses recorded on our net investments where the entity has non-U.S.

dollar functional currency.

As of August 31, 2023 , the notional amount of cross-currency swaps designated as net investment hedges was $ 30.5 million.

The change in the fair value of the net investment hedge, a net loss of $ 0.9 million for the year ended August 31, 2023 , is recorded in other comprehensive income (loss).

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

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

The change in the fair value of the interest rate swap, a gain of $ 0.1 million in the year ended August 31, 2021 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 (loss).

As of August 31, 2023, the Company ha d operating leases for real estate, vehicles, manufacturing equipment, IT equipment and office equipment.

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

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Year Ended August 31,

2023 2022 2021

Operating lease cost $ 13,155 $ 14,316 $ 15,170

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Variable lease cost 4,411 3,609 3,086

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Supplemental cash flow and other information related to leases for the year ended August 31, 2023 and 2022 were as follows (in thousands):

Year Ended August 31,

2023 2022 2021

Cash paid for amounts included in the measurement of lease liabilities:

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Supplemental balance sheet information related to leases at August 31, 2023 and 2022 were as follows (in thousands):

August 31, 2022 August 31, 2021

Operating leases:

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The expected long-term rate of return is based on the portfolio as a whole and not on the sum of the returns on individual asset categories.

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

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

ENERPAC TOOL GROUP CORP.

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Projected benefit payments from plan assets to participants in the Company’s U.S.

pension plans are $ 3.0 million for fiscal 2023 and $ 3.1 million per year for each of the next four years and $ 14.1 million in aggregate for the following five years.

The Company made a contribution of $ 0.1 million to the U.S.

pension plans are $ 2.9 million for fiscal 2024, $ 3.0 million per year for each of the next three years, $ 2.9 million for fiscal 2028 and $ 13.4 million in aggregate for the following five years.

The Company plans to make a contribution of $ 0.4 million to the U.S.

pension plans in September of fiscal 2024.

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

The Company did not make a contribution to the plan in fiscal 2023 or fiscal 2022.

Foreign Defined Benefit Pension Plans

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

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

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

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Interest cost 306 159

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

Actuarial gain ( 494 ) ( 3,859 )

Benefits paid ( 256 ) ( 200 )

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Settlement 37 145 —

Income of special events — — ( 728 )

Net periodic benefit expense (income) $ 193 $ 110 $ ( 443 )

Net periodic benefit expense $ 171 $ 193 $ 110

The weighted average discount rate utilized for determining the benefit obligation at August 31, 2023 and 2022 was 4.3 % and 3.6 %, respectively.

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During fiscal 2024, the Company does not anticipate contributing to these pension plans.

In fiscal 2020, the Company moved certain employees in a foreign pension plan into a multi-employer pension plan which triggered a curtailment.

The curtailment resulted in a reduction to the projected benefit obligation of that plan of $ 1.7 million, of which $ 0.7 million was recorded as a component of Other 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.

Projected benefit payments to participants in the these f oreign plans are $ 0.3 million in each fiscal 2024, 2025, 2026 and 2027, $ 0.4 million in fiscal 2028 and $ 2.2 million in aggregate for the following five years.

Other Postretirement Health Benefit Plans

The Company provides other postretirement health benefits (“OPEB”) to certain existing and former employees of domestic businesses it acquired, who were entitled to such benefits prior to acquisition.

These unfunded plans had a benefit obligation of $ 1.9 million and $ 2.3 million at August 31, 2022 and 2021, respectively.

These unfunded plans had a benefit o bligation of $ 1.7 million and $ 1.9 million at August 31, 2023 and 2022, respectively.

These obligations are determined utilizing assumptions consistent with those used for our U.S.

pension plans and a health care cost trend rate of 7.0 %, trending downward to 5.0 % by the year 2026, and remaining level thereafter.

Net periodic benefit costs for other postretirement benefits was income of $ 0.1 million, $ 0.2 million and $ 0.3 million for the year ended August 31, 2022, 2021 and 2020, respectively.

Net periodic benefit costs for other postretirement benefits was income of $ 0.1 million in both years ended August 31, 2023 and 2022 and $ 0.2 million for the year ended August 31, 2021.

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

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These match contributions are made on every payroll run, meaning the contribution is immediately 100% vested.

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

In addition, the Company may make an annual, discretionary contribution of up to 3 % of employees' eligible pay to employees employed as of the end of the plan year.

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The Company also maintains a Restoration Plan that allows eligible highly compensated employees (as defined by the Internal Revenue Code) to receive a core contribution as if no IRS limits were in place.

Company contributions to the Restoration Plan are made in the form of its Class A common stock and contributed into each eligible participant’s deferred compensation plan.

Compan y contributions to the Restoration Plan are made in the form of its Class A common stock and contributed into each eligible participant’s deferred compensation plan.

The Company has not contributed in fiscal 2023, 2022 or fiscal 2021.

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.

Expense recognized related to the 401(k) plan totaled $ 2.1 million, $ 2.2 million and $ 1.1 million for the years ended August 31, 2023, 2022 and 2021, 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

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.

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 $ 1.0 million and $ 1.1 million obli gation at August 31, 2023 and 2022, respectively .

Expense recognized for the SERP Plan was $ 0.2 million in each of fiscal 2023 and 2022 and $ 0.1 million in fiscal 2021.

Deferred Compensation Plan

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

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

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

common stock.

The fixed income and mutual fund portion of the plan is unfunded, and therefore all compensation deferred under the plan is held by the Company and commingled with its general assets.

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The Company recorded expense in "Financing costs, net" of $ 0.9 million, $ 0.7 million and $ 1.2 million for the years ended August 31, 2023, 2022 and 2021, respectively, for the non-funded return on participant deferrals.

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

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

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

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

Because no investment diversification is permitted within the trust, changes in fair value of the Company's common stock are not recognized.

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

Year Ended August 31,

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Both domestic and foreign pre-tax earnings from continuing operations are impacted by changes in operating earnings, acquisition and divestiture activities, restructuring charges and the related benefits, growth investments, debt levels and the impact of changes in foreign currency exchange rates.

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

In fiscal 2023, domestic earnings included non-cash impairment and other divestiture benefits of $ 6.2 million.

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

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

Substantially all of the non-cash impairment and other divestiture charges (benefits) did not result in a tax expense (benefit).

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

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Valuation allowance additions and releases ( 0.8 ) 2.1 7.1

2.1 7.1 ( 8.1 )

Changes in liability for unrecognized tax benefits ( 0.1 ) 3.4 ( 18.5 )

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Effective income tax rate 22.1 % 18.3 % 8.6 %

(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.

(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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(1) Th e Company generated $ 1.6 million, $ 0.2 million and $ 1.1 million of U.S.

tax on non-U.S.

earnings, net of foreign tax credits for fiscal 2023, 2022 and 2021, respectively.

(2) During fiscal 2022, the Company generated a net benefit of $ 2.7 million as a result of taxable liquidations of subsidiaries.

(3) During fiscal 2023 and fiscal 2022, the Company generated $ 2.0 million and $ 1.6 million of tax benefit related to audits and adjustments as compared to a tax expense of $ 3.5 million in fiscal 2021.

Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities include the following items (in thousands):

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Lease liabilities 8,594 9,637

Research and development capitalization 4,544 —

Book reserves and other items 6,548 9,873

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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 ti mes through 2032.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

majority of the foreign loss carryforwards are not subject to any expiration dates, while the other balances expire at various times through 2030.

credit carryforwards expire at various times through 2033.

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

The Company’s policy is to remit earnings from foreign subsidiaries only to the extent the remittance does not result in an incremental U.S.

The Company’s policy is to remit earnings from foreign subsidiaries only to the extent the remittance does n ot result in an incremental U.S.

tax liability.

The Company does not currently provide for the additional U.S.

and foreign income taxes which would become payable upon remission of undistributed earnings of foreign subsidiaries.

and foreign income taxes that would become payable upon remission of undistributed earnings of foreign subsidiaries.

If all undistributed earnings were remitted, an additional income tax provision of $ 2.6 million would have been necessary as of August 31, 2023.

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Ending balance $ 14,754 $ 15,380 $ 15,658

Substantially all of these unrecognized tax benefits, if recognized, would impact the effective income tax rate.

Substantially all of these unreco gnized tax benefits, if recognized, would impact the effective income tax rate.

As of August 31, 2023, 2022 and 2021, the Company recognized $ 5.2 million, $ 4.5 million and $ 3.9 million, respectively, for interest and penalties related to unrecognized tax benefits.

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federal, state and foreign income tax examinations by tax authorities in major tax jurisdictions for years prior to fiscal 2011.

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.

The Company believes it is reasonably possible that the total amount of unrecognized tax benefits could decrease by up to $ 3.1 million throughout fiscal 2024.

Cash paid for income taxes, net of refunds, totaled $ 2.7 million, $ 5.7 million and $ 7.8 million during the years ended August 31, 2023, 2022 and 2021, 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 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.

The Company suspended the initial share repurchase program in response to the COVID-19 pandemic in the third quarter of fiscal 2020.

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

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

The Company repurchased 2,213,750 shares of its common stock for $ 57.7 million during the year ended August 31, 2023.

As of August 31, 2023, the maximum number of shares that may yet be purchased under this new program is 4,026,515 .

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

At August 31, 2022, 7,825,000 shares of Class A common stock were authorized for issuance under the Plan (including 3,500,000 shares that were authorized for issuance at the January 2021 annual meeting) plus an additional 1,800,000 shares being registered to cover shares, if any, that become issuable, pursuant to the terms of the Plan, upon the expiration, cancellation or forfeiture of existing awards under our previously registered stock plans.

A total of 7,825,000 shares of Class A common stock have been authorized for issuance under the Plan (including 3,500,000 shares that were authorized for issuance at the January 2021 annual meeting) plus shares, if any, that become issuable, pursuant to the terms of the Plan, upon the expiration, cancellation or forfeiture of awards under our previously registered stock plans outstanding at the time the Plan was first approved by the Company's shareholders.

At August 31, 2023, 3,365,219 shares were available for future award grants.

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Options generally have a maximum term of ten years , an exercise price equal to 100 % of the fair market value of the Company’s common stock at the date of grant and generally vest 50 % after three years and 100 % after five years.

The Company’s restricted stock grants prior to 2017 generally have similar vesting provisions as options, while grants thereafter generally vest in equal installments over a three-year period.

The Company’s restricted stock grants prior to fiscal 2017 generally have similar vesting provisions as options, while grants thereafter generally vest in equal installments over a three-year period.

The Performance Shares include a three -year performance period.

For 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.

For awards of Performance Shares granted in the year ended August 31, 2021, payout under the awards is based on the Company’s total shareholder return ("TSR") relative to the S&P 600 SmallCap Industrial index.

For the awards of Performance Shares granted in the year end ed August 31, 2022, payout under the awards is based 50 % on the relative TSR metric and 50 % on the Company's three-year average return on invested capital.

For awards of Performance Shares granted in the year ended August 31, 2023, payout under the awards is based 33.3 % on the relative TSR metric, 33.3 % on the Company's adjusted earnings per share and 33.3 % on the Company's three-year average return on invested capital.

The p rovisions 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.

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Cash receipts from exercise of options 973 — 2,208

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.

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 dat e and utilized an expected forfeiture rate of 12 % for each of the years ended for the years ended August 31, 2023, 2022 and 2021.

The fair value of Performance Shares with market vesting conditions, which includes the Performance Shares awarded in fiscal 2023, 2022 and 2021, is determined utilizing a Monte Carlo simulation model.

As of August 31, 2023, there was $ 9.4 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 1.6 years.

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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.

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

ENERPAC TOOL GROUP CORP.

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Operating Profit (Loss)

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

IT&S Segment $ 135,883 $ 78,735 $ 81,683

Other Segment 10,954 729 ( 10,420 )

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Depreciation and Amortization:

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

IT&S Segment $ 12,329 $ 14,498 $ 15,856

Other Segment 3,164 3,664 3,568

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Capital Expenditures:

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

IT&S Segment $ 7,779 $ 7,139 $ 10,918

Other Segment 599 710 768

1 unchanged sentence

$ 9,400 $ 8,417 $ 12,019

IT&S $ 618,412 $ 641,256

IT&S Segment $ 632,113 $ 618,412

Other Segment 28,127 46,428

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2023 2022 2021

United States $ 226,020 $ 188,070 $ 185,279

United States of America $ 231,093 $ 226,020 $ 188,070

United Kingdom 34,085 29,316 39,896

Germany 29,926 28,004 28,456

Canada 29,643 19,651 17,348

Australia 28,607 26,667 24,990

Saudi Arabia 25,762 20,892 16,715

Canada 19,651 17,348 15,924

Brazil 20,523 16,517 13,937

France 14,606 14,854 13,368

China 14,081 15,434 16,927

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Spain 1,484 1,413

Kazakhstan 1,028 1,552

All other 5,235 5,761

$ 38,968 $ 41,372

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.

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

Export sales from domestic operations were 9.9 %, 9.8 % and 7.2 % of total net sales from continuing operations in fiscal 2023, 2022 and 2021, respectively.

Commitments and Contingencies

The Company had outstanding letters of credit of $ 8.6 million and $ 10.7 million at August 31, 2023 and 2022, 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.

As part of the Company's global sourcing strategy, we have entered into agreements with certain sup pliers 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 manufacturing of a product during the contract period;

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In the opinion of management, resolution of these contingencies is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company remains contingently liable for lease payments under leases of businesses that it previously divested or spun-off in the event that such businesses are unable to fulfill their future lease payment obligations;

however, the Company does not believe it is probable that it will be required to satisfy these obligations.

Future minimum lease payments for these leases at August 31, 2022 were $ 3.7 million associated with monthly payments extending to fiscal 2025.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

1 unchanged sentence

Soil and groundwater contamination has been identified at certain facilities that we operate or formerly owned or operated.

We are also a party to certain state and local environmental matters, have provided environmental indemnifications for certain divested businesses and retain responsibility for certain potential environmental liabilities.

We are also a party to certain state and local environmental matters, have provided environmental indemnifications for certain divested businesses and retain responsibility

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

for certain potential environmental liabilities.

Management believes that such costs will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

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

The Company has not adjusted its estimate of financial penalties as a result of the completion of the investigation in the year ended August 31, 2023.

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.

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.

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