What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-10-21 compared with 2023-10-20 · 194 added, 199 removed, 942 unchanged (29% of the section changed)

8 unchanged sentences

Consolidated Statements of Shareholders’ Equity for the years ended August 31, 202 4 , 202 3 and 20 2 2

Notes to consolidated financial statements

Notes to C onsolidated F inancial S tatements

INDEX TO FINANCIAL STATEMENT SCHEDULE

2 unchanged sentences

Report of Independent Registered Public Accounting Firm

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

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

Opinion on the Financial Statements

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

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

(the Company) as of August 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive statement of income (loss), shareholders’ equity and cash flows for each of the three years in the period ended August 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at August 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended August 31, 2024, in conformity with U.S.

generally accepted accounting principles.

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

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

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

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

1 unchanged sentence

Description of

At August 31, 2023, the Company’s consolidated goodwill balance was $266.5 million.

the Matter At August 31, 2024, the Company’s consolidated goodwill balance was $269.6 million.

Goodwill associated with the IT&S segment was $256.0 million.

1 unchanged sentence

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

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

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

How We Addressed the Matter in Our Audit

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

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

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

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

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

8 unchanged sentences

Report of Independent Registered Public Accounting Firm

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

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

Opinion on Internal Control Over Financial Reporting

We have audited Enerpac Tool Group Corp.

and Subsidiaries’ internal control over financial reporting as of August 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

’ s internal control over financial reporting as of August 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Enerpac Tool Group Corp.

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, 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.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of August 31, 2024, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of August 31, 2024 and 2023, the related consolidated statements of earnings, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended August 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated October 21, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Restructuring charges 7,400 7,096 8,135

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

Impairment & divestiture charges (benefit) 147 ( 6,155 ) 2,413

Operating profit 121,587 83,922 30,660

4 unchanged sentences

Net earnings from continuing operations 82,207 53,649 19,591

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

Earnings (loss) from discontinued operations, net of income taxes 3,542 ( 7,088 ) ( 3,905 )

Net earnings $ 85,749 $ 46,561 $ 15,686

2 unchanged sentences

Diluted $ 1.50 $ 0.94 $ 0.33

Loss per share from discontinued operations

Earnings (loss) per share from discontinued operations

Basic $ 0.07 $ ( 0.13 ) $ ( 0.07 )

39 unchanged sentences

Current maturities of long-term debt 5,000 3,750

Short-term debt — 4,000

Income taxes payable 5,321 3,771

6 unchanged sentences

Total liabilities 385,349 435,977

Commitments and contingencies (Note 16)

Shareholders’ equity

16 unchanged sentences

Net earnings $ 85,749 $ 46,561 $ 15,686

Net loss from discontinued operations ( 7,088 ) ( 3,905 ) ( 2,135 )

Net earnings (loss) from discontinued operations 3,542 ( 7,088 ) ( 3,905 )

Net earnings from continuing operations 82,207 53,649 19,591

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

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

Impairment & divestiture charges (benefit) 147 ( 6,155 ) 2,413

Depreciation and amortization 13,275 16,313 19,600

18 unchanged sentences

Proceeds from sale of property, plant and equipment — 685 1,176

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

Working capital adjustment from the sale of business ( 1,133 ) — —

Purchase of business assets ( 1,402 ) — —

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

Cash 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

Cash (used in) provided by investing activities - continuing operations ( 13,946 ) 11,342 ( 7,241 )

Cash (used in) provided by investing activities ( 13,946 ) 11,342 ( 7,241 )

Financing Activities

1 unchanged sentence

Principal repayments on revolving credit facility ( 78,743 ) ( 53,000 ) ( 60,000 )

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

Principal repayments on term loan ( 3,750 ) ( 1,250 ) —

1 unchanged sentence

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

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

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

3 unchanged sentences

Cash used in financing activities - continuing operations ( 56,266 ) ( 53,130 ) ( 52,202 )

Cash provided by financing activities - discontinued operations — — 750

Cash used in financing activities ( 56,266 ) ( 53,130 ) ( 52,202 )

18 unchanged sentences

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

3 unchanged sentences

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 )

6 unchanged sentences

Cash dividend ($0.04 per share) — — — — ( 2,148 ) — — — ( 2,148 )

Treasury stock repurchases — — — ( 57,662 ) — — — — ( 57,662 )

Stock based compensation expense — — 10,931 — — — — — 10,931

2 unchanged sentences

Stock issued to, acquired for and distributed from rabbi trust 30 7 348 — — — ( 293 ) 293 355

Treasury stock repurchases — — — ( 38,354 ) — — — — ( 38,354 )

Treasury stock retired ( 30,082 ) ( 6,017 ) — 838,860 ( 832,843 ) — — — —

Balance at August 31, 2024 54,235 $ 10,847 $ 235,660 $ — $ 261,870 $ ( 116,398 ) $ ( 3,777 ) $ 3,777 $ 391,979

7 unchanged sentences

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.

The IT&S segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the refinery/petrochemical;

general industrial;

industrial MRO;

machining & manufacturing;

power generation;

infrastructure;

mining and other markets

Consolidation and Presentation:

5 unchanged sentences

Reference to fiscal years, such as "fiscal 2024," are to the fiscal year ending on August 31 of the specified year.

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

This divestiture represented a strategic shift in our operations, and accordingly the results of the former EC&S segment through the date of divestiture and subsequent impacts to the financial results from retained liabilities are recorded in "Earnings (loss) from discontinued operations, net of income taxes" within the Consolidated Statements of Earnings.

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

67 unchanged sentences

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

The Company generally does not require collateral or

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.

other security for receivables and provides for an allowance for credit losses based on historical experience and a review of its existing receivables.

Accounts receivable are stated net of an allowance for credit losses of $ 15.9 million and $ 16.8 million at August 31, 2024 and 2023, respectively.

Taxes Collected:

6 unchanged sentences

Such costs incurred in the development of new products or significant improvements to existing products were $ 12.4 million , $ 9.0 million and $ 7.3 million in fiscal 2024, 2023 and 2022, respectively.

The Company also incurs significant costs in connection with fulfilling custom orders and developing solutions for unique customer needs which are not included in these research and development expense totals.

The Company also incurs significant costs in connection with fulfilling custom orders an d developing solutions for unique customer needs which are not included in these research and development expense totals.

Other Income/Expense:

12 unchanged sentences

A valuation allowance is established for deferred tax assets for which realization is not more likely than not of being realized.

The Company has not provided for any residual U.S.

income taxes on unremitted earnings of non-U.S.

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

The Company's general policy is for non-U.S.

subsidiary earnings to be indefinitely reinvested to the extent the remittance results in an incremental U.S.

tax liability.

However, the Company routinely analyzes the factors surrounding global cash needs and future cash utilization to determine if exceptions exist and establishes deferred tax liabilities for associated future tax costs.

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

12 unchanged sentences

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.

The Company regularly evaluates the estimates and assumptions related to the allowance for credit losses, inventory valuation, warranty reserves, goodwill, intangible and long-lived asset valuations, employee benefit plan liabilities, over-time revenue recognition, income tax liabilities, deferred tax assets and related valuation allowances, uncertain tax positions, restructuring reserves, and litigation and other loss contingencies.

The Company manages the profitability of its product and service & rental categories on a combined basis given the complexity of the business model.

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

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)

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

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.

31 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 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

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

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

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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.

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

The allowance for credit losses was $ 15.9 million and $ 16.8 million at August 31, 2024 and 2023, respectively.

As indicated in the "Concentration of Credit Risk" section below, as of August 31, 2024 and 2023, the Company was exposed to a concentration of credit risk with an agent as a result of its continued payment delinquency.

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

The allowance for 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.

The allowance for credit losses for this particular agent remained unchanged as of August 31, 2024 represents management's best estimate of the amount probable of collection and considers various factors with respect to this matter, including, but not limited to, (i) the lack of payment by the agent since the fiscal quarter ended February 28, 2021;

(ii) our due diligence on balances due to the agent from its end customers related to sales of our services and products and the known markup on those sales from the agent to end customer;

(iii) the status of ongoing negotiations with the agent to secure payments;

(iv) legal recourse available to secure payment;

and (v) the agent is currently in bankruptcy proceedings.

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

11 unchanged sentences

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

The Company estimates that $ 2.3 million will be recognized in net sales from satisfying those performance obligations within the next twelve months.

Timing of Performance Obligations Satisfied at a Point in Time:

10 unchanged sentences

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

ASCEND Transformation Program

In March 2022, the Company announced the start of its ASCEND transformation program, initially estimating an incremental $ 40 to $ 50 million of annual operating profit once fully implemented.

ASCEND’s key initiatives include accelerating organic growth strategies, improving operational excellence and production efficiency by utilizing a Lean approach, and driving greater efficiency and productivity in selling, general and administrative expense by better leveraging resources to create a more efficient and agile organization.

At the time the company anticipated investing $ 60 to $ 65 million through the end of fiscal 2024 to complete these actions.

In June 2022, the Company approved a restructuring plan in connection with the initiatives identified as part of the ASCEND transformation program to drive greater efficiency and productivity in global selling, general and administrative

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 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 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.

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

(see Note 4, “Restructuring Charges” in the notes to the consolidated financial statements).

These costs were incorporated into the initial investment of $ 60 to $ 65 million.

In September 2022, the Company approved an update to the restructuring plan to a range of $ 10 to $ 15 million;

these costs were still incorporated into the initial investment value and the range did not change at that time.

In March 2023, the investment range increased from the initial $ 60 to $ 65 million, to $ 70 to $ 75 million inclusive of the $ 10 to $ 15 million of the previously announced restructuring over the life of the program.

The following summarizes ASCEND transformation charges (in thousands):

Year-Ended August 31,

2024 2023 2022 Program to Date

ASCEND Expense recorded in Cost of products sold $ 1,018 $ 924 $ 6 $ 1,948

ASCEND Expense recorded in SG&A expenses 6,029 34,495 13,610 54,134

Total ASCEND Expense 7,047 35,419 13,616 56,082

Recorded with Restructuring charges 7,843 7,719 3,050 18,612

Total ASCEND Transformation Charges $ 14,890 $ 43,138 $ 16,666 $ 74,694

Restructuring Charges

1 unchanged sentence

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

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

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 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 Company recorded $ 5.2 million of charges for the year ended August 31, 2022 in order to further simplify and streamline the organizational structure.

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

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

The total costs of this plan were then estimated at $ 6 to $ 10.0 million, constituting predominately severance and other employee-related costs to be incurred as cash expenditures impacting both IT&S and Corporate.

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

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

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

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

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

In September 2022, the Company approved an update to the restructuring plan to a range of $ 10 to $ 15 million;

these costs were still incorporated into the initial investment value and the range did not change at that time.

For the year ended August 31, 2024, 2023 and 2022, the Company recorded $ 7.8 million, $ 7.7 million and $ 3.1 million, respectively, of restructuring charges associated with the ASCEND transformation program.

The total cumulative charges for the ASCEND transformation program, which ended in the fourth quarter of fiscal 2024, that related to restructuring were $ 18.6 million.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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):

The following summarizes restructuring reserve activity (which for the year ended August 31, 2023 excludes $ 0.6 million of charges associated with ASCEND transformation plan for Corporate associated with the accelerated vesting of equity awards which has no impact on the restructuring reserve) (in thousands):

Year Ended August 31, 2024

2019 Plan ASCEND Plan

IT&S Corporate IT&S Corporate

IT&S Corporate

Balance as of August 31, 2023 $ 2,238 $ 74

10 unchanged sentences

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

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

Impact of changes in foreign currency rates 3 — 146 2

Balance as of August 31, 2023 $ — $ — $ 2,238 $ 74

Total restructuring charges (inclusive of the Other operating segment) for the 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 .

Total restructuring charges (inclusive of the Other operating segment) for the years ended August 31, 2024 and 2023 were $ 7.8 million and $ 7.7 million, respectively, which included approximately $ 0.4 million and $ 0.6 million of charges being reported in the Consolidated Statements of Operations in "Cost of products sold," with the balance of the charges reported on "Restructuring charges." Total restructuring charges (inclusive of the Other operating segment) being reported in "Restructuring charges " were $ 8.1 million for the year ended August 31, 2022.

Discontinued Operations and Other Divestiture Activities

1 unchanged sentence

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.

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

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

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

Year Ended August 31,

2024 2023 2022

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

Selling, general and administrative (benefit) expenses $ ( 6,054 ) $ 10,069 $ 4,842

Impairment & divestiture benefit — ( 1,530 ) —

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

Operating income (loss) 6,054 ( 8,539 ) ( 4,842 )

Other income, net — 372 —

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 )

Earnings (loss) before income tax benefit 6,054 ( 8,911 ) ( 4,842 )

Income tax expense (benefit) 2,512 ( 1,823 ) ( 937 )

Earnings (loss) from discontinued operations, net of income taxes $ 3,542 $ ( 7,088 ) $ ( 3,905 )

Other Divestiture Activities

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

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

In connection with the completion of the sale, the Company recorded a net gain of $ 6.0 million, inclusive of $ 0.1 million of purchase price from the customary finalization of working

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

capital negotiations in the first quarter of fiscal 2024.

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

Goodwill, Intangible Assets and Long-Lived Assets

3 unchanged sentences

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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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)

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.

In conjunction with our annual goodwill impairment assessment , the Company did not record any charges in fiscal 2024 or 2023.

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

Previous Senior Credit Facility

Short-term debt $ — $ 4,000

Revolver — 200,000

New Senior Credit Facility

Senior Credit Facility

Revolver — 16,000

2 unchanged sentences

Current maturities of long-term debt ( 5,000 ) ( 3,750 )

Short-term debt — ( 4,000 )

Debt issuance costs ( 497 ) ( 663 )

Total long-term debt, less current maturities $ 189,503 $ 210,337

Senior Credit Facility

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

Senior Credit Facility

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

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

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

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

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

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

The Company was in compliance with all covenants under the facility at August 31, 2024.

At August 31, 2024, there were $ 195.0 million in borrowings outstanding under the term l oans, no borrowings outstanding under the revolving line of credit and $ 397.6 million available for borrowing under the revolving line of credi t facility after reduction for $ 2.4 million of outstanding letters of credit issued under the facility.

Cash Paid for Interest

The Company made cash interest payments of $ 10.6 million , $ 3.1 million and $ 3.7 million in fiscal 2023, 2022 and 2021, respectively.

The Company made cash net interest payments of $ 12.4 million , $ 10.6 million and $ 3.1 million in fiscal 2024, 2023 and 2022, respectively.

Fair Value Measurements

5 unchanged sentences

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

The fair value of the Company's foreign currency exchange contracts was a net liability of less than $ 0.1 million at 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.

The fair value of property, plant and equipment were also determined utilizing generally accepted valuation techniques, specifically utilizing an approach of assessing the replacement/reproduction cost of a new asset and adjusting for the asset's current physical deterioration.

These valuations represent Level 3 assets measured at fair value on a nonrecurring basis.

The fair value of the Company's foreign currency exchange contracts was a net liability of $ 0.3 million and l ess than $ 0.1 million at August 31, 2024 and 2023, respectively .

The fair value of the Company's interest rate swap and net investment hedge was an asset of less than $ 0.1 million and a liability of $ 1.6 million at August 31, 2024 and an asset of $ 0.7 million and a liability of $ 1.2 million at August 31, 2023 (see Note 9, “Derivatives” for further information on the Company's interest rate swap and net investment hedge.) The fair value of all derivative contracts were based on quoted inactive market prices and therefore classified as Level 2 within the valuation hierarchy.

All derivatives are recognized in the balance sheet at their estimated fair value.

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dollar equivalent notional value of these short duration foreign currenc y exchange contracts was $ 15.6 million and $ 13.8 million at August 31, 2024 and 2023, 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):

The fair value of outstanding foreign currency

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

exchange contracts was a net liability of $ 0.3 million and less than $ 0.1 million at August 31, 2024 and 2023, respectively .

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

Year Ended August 31,

1 unchanged sentence

Foreign currency loss (gain) $ 863 $ 945 $ ( 319 )

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.

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

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

The Company uses the interest rate swap for the management of interest rate risk exposure, as an interest rate swap effectively converts a portion of the Company's debt from a floating 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 change in the fair value of the interest rate swap, a net loss of $ 0.5 million and net gain of $ 0.5 million for the years ended August 31, 2024 and 2023, respectively , is recorded in other comprehensive income (loss).

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

3 unchanged sentences

As of August 31, 2024 , the notional amount of cross-currency swaps designated as net investment hedges was $ 30.5 million.

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

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 under its prior senior credit facility.

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 (loss).

The change in the fair value of the net investment hedge, a net loss of $ 0.3 million and $ 0.9 million for the years ended August 31, 2024 and 2023, respectively , is recorded in other comprehensive income (loss).

As of August 31, 2024, the Company ha d operating leases for real estate, vehicles, manufacturing equipment, IT equipment and office equipment.

5 unchanged sentences

In addition, our leases generally do not include material residual value guarantees or material restrictive covenants.

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

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

The gain is recorded in "Selling, general and administrative expenses" within the Consolidated Statements of 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.

The components of lease expense for the year ended August 31, 2023 and 2022 were as follows (in thousands):

The components of lease costs for the year ended August 31, 2024, 2023 and 2022 were as follows (in thousands):

Year Ended August 31,

3 unchanged sentences

Variable lease cost 2,850 4,411 3,609

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, 2024, 2023 and 2022 were as follows (in thousands):

5 unchanged sentences

Operating leases 3,075 1,654 4,584

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Supplemental balance sheet information related to leases at August 31, 2024 and 2023 were as follows (in thousands):

9 unchanged sentences

A summary of the future minimum lease payments due under operating leases with terms of more than one year at August 31, 2024 is as follows (in thousands):

Operating Leases

2025 $ 10,317

3 unchanged sentences

Present value of net minimum lease payments $ 34,618

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Employee Benefit Plans

17 unchanged sentences

Funded status of the plans (underfunded) $ ( 4,402 ) $ ( 4,674 )

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table provides detail on the Company’s domestic net periodic benefit expense (in thousands):

17 unchanged sentences

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

In fiscal 2023, the plan assets were invested in a mix of 60 % duration-matched fixed income securities and 40 % equity securities.

During fiscal 2022, the plan portfolio was invested in 50 % fixed income securities and 50 % equity securities.

In fiscal 2024 and 2023, the plan assets were invested in a mix of 50 % duration-matched fixed income securities and 50 % equity securities.

Cash balances are maintained at levels adequate to meet near-term plan expenses and benefit payments.

4 unchanged sentences

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

14 unchanged sentences

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

pension plans are $ 3.2 million for fiscal 2025, $ 3.1 million per year for fiscal 2026 and 2027, $ 3.0 million for fiscal 2028, $ 2.9 million for fiscal 2029 and $ 12.9 million in aggregate for the following five years.

The Company plans to make a contribution of $ 1.2 million to the U.S.

1 unchanged sentence

The Company did not make a contribution to the plan in fiscal 2024 or fiscal 2023.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Foreign Defined Benefit Pension Plans

19 unchanged sentences

Funded status of the plans (underfunded) $ ( 2,015 ) $ ( 1,889 )

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The following table provides detail on the Company’s foreign net periodic benefit expense (in thousands):

12 unchanged sentences

During fiscal 2025, the Company does not anticipate contributing to these pension plans.

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.

Projected benefit payments to participants in the these f oreign plans are $ 0.3 million for each of fiscal 2025, 2026, and 2027, $ 0.4 million for each of fiscal 2028 and 2029 and $ 2.3 million in aggregate for the five years thereafter.

Other Postretirement Health Benefit Plans

3 unchanged sentences

pension plans and a health care cost trend rate of 6.8 %, trending downward to 5.0 % by the year 2026, and remaining level thereafter.

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

Net periodic benefit costs for other postretirement benefits was income of $ 0.04 million in the year ended August 31, 2024, and $ 0.1 million for each of the fiscal years ended August 31, 2023 and 2022.

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

Benefit payments are projected to be $ 0.2 million in fiscal 2025.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Defined Contribution Benefit Plans

7 unchanged sentences

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

The discretionary contribution has a three-year vesting period.

The discretionary contrib ution has a three -year vesting period.

The Company elected not to provide a discretionary contribution for the year ended August 31, 2024.

2 unchanged sentences

The Company has not contributed in fiscal 2024, 2023 or fiscal 2022.

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.

Expense recognized related to the 401(k) plan totaled $ 2.1 million for each of the fiscal years ended August 31, 2024 and 2023, and $ 2.2 million for the fiscal year ended August 31, 2022 .

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

1 unchanged sentence

This unfunded plan had a $ 0.9 million and $ 1.0 million obli gation at August 31, 2024 and 2023, 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.

Expense recognized for the SERP Plan was $ 0.3 million in fiscal 2024, and $ 0.2 million in each of fiscal 2023 and 2022.

Deferred Compensation Plan

2 unchanged sentences

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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 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.

10 unchanged sentences

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

In fiscal 2024, domestic earnings included non-cash impairment and other divestiture charges of $ 0.1 million.

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

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

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

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

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

11 unchanged sentences

Income tax expense $ 23,312 $ 15,249 $ 4,401

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

10 unchanged sentences

Changes in liability for unrecognized tax benefits ( 1.3 ) ( 0.1 ) 3.4

legislative changes, net impact — — ( 9.8 )

Repatriation of foreign earnings 1.6 — —

Taxable liquidation of subsidiaries (2)

7 unchanged sentences

Effective income tax rate 22.1 % 22.1 % 18.3 %

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

(1) Th e Company generated $ 3.4 million, $ 2.6 million and $ 1.5 million of withholding tax and U.S.

tax on non-U.S.

1 unchanged sentence

(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.

(3) During fiscal 2024, the Company generated a $ 0.4 million tax expense related to audits and adjustments as compared to a tax benefit of $ 2.0 million and $ 1.6 million for fiscal 2023 and 2022, respectively.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

24 unchanged sentences

tax liabilities.

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.

The majority of the foreign loss carryforwards are not subject to any expiration dates, while the other balances expire at various times through 2034.

credit carryforwards expire at various times through 2034.

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

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 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.

In general, the Company’s practice is to reinvest the earnings of its non-U.S.

subsidiaries within those operations.

Routinely, the Company analyzes the factors surrounding global cash needs and future cash utilization and determines if there are any exceptions.

As of August 31, 2024, certain jurisdictions met this exception.

On the undistributed foreign earnings of $ 11.3 million that are no longer permanently reinvested outside of the United States, the Company recorded a deferred tax liability of $ 1.7 million.

If all remaining undistributed earnings were remitted, an additional income tax provision of $ 0.6 million would have been necessary as of August 31, 2024.

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

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federal, state and foreign income tax examinations by tax authorities in major tax jurisdictions for years prior to fiscal 2012.

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.

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 $ 1.4 million throughout fiscal 2025.

Cash paid for income taxes, net of refunds, totaled $ 23.8 million, $ 2.7 million and $ 5.7 million during the years ended August 31, 2024, 2023 and 2022, respectively.

Capital Stock and Share Repurchases

The authorized common stock of the Company as of August 31, 2023 consisted of 168,000,000 shares of Class A common stock, $ 0.20 par value, of which 83,760,798 and 54,988,083 shares were issued and outstanding, respectively;

The authorized common stock of the Company as of August 31, 2024 consisted of 168,000,000 shares of Class A common stock, $ 0.20 par value, of which 54,234,660 shares were issued and outstanding;

1,500,000 shares of Class B common stock, $ 0.20 par value, none of which are outstanding;

5 unchanged sentences

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

The Company repurchased 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 .

The Company repurchased 1,309,466 shares for $ 38.4 million in the year ended August 31, 2024.

As of August 31, 2024, the maximum number of shares that may yet be purchased under the program is 2,717,049 shares.

Since the inception of the initial share repurchase program in fiscal 2012, the Company has repurchased 30,082,181 shares of common stock for $ 838.9 million.

In December 2023, the Company's Board of Directors authorized the retirement of the Company's repurchased shares, and the Company retired 29,841,209 treasury shares.

The initial share retirement resulted in reductions of $ 6.0 million in Class A Common Stock and $ 824.6 million in "Retained Earnings" reflected in the Condensed Consolidated Balance Sheets at August 31, 2024.

Shares repurchased after December 18, 2023 were retired upon repurchase.

In addition to the initial share retirement, the Company repurchased and retired 240,972 shares during the year-ended August 31, 2024.

ENERPAC TOOL GROUP CORP.

5 unchanged sentences

Net earnings from continuing operations $ 82,207 $ 53,649 $ 19,591

Net loss from discontinued operations ( 7,088 ) ( 3,905 ) ( 2,135 )

Net earnings (loss) from discontinued operations 3,542 ( 7,088 ) ( 3,905 )

Net earnings $ 85,749 $ 46,561 $ 15,686

5 unchanged sentences

Diluted $ 1.50 $ 0.94 $ 0.33

Loss per common share from discontinued operations:

Earnings (loss) per common share from discontinued operations:

Basic $ 0.07 $ ( 0.13 ) $ ( 0.07 )

12 unchanged sentences

The Performance Shares include a three -year performance period.

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.

For the awards of Performance Shares granted in the year end ed August 31, 2022 , payout under the awards is based 50 % on Company’s total shareholder return (“TSR”) relative to the S&P 600 SmallCap Industrial metric and 50 % on the Company's three-year average return on invested capital.

For awards of Performance Shares granted in the years ended August 31, 2024 and 2023 , payout under the awards is based 33.3 % on the relative TSR metric, 33.3 % on the Company's adjusted earnings per share and 33.3 % on the Company's three-year average return on invested capital.

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

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Cash receipts from exercise of options 6,907 973 —

The Company generally records compensation expense over the vesting period for restricted stock unit awards based on the market value of the Company's Class A common stock on the grant 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 2024, 2023 and 2022, is determined utilizing a Monte Carlo simulation model.

As of August 31, 2024, there was $ 9.7 million of total unrecognized compensation cost related to share-based awards, including stock options, restricted stock, restricted stock units and Performance Shares, which will be recognized over a weighted average period of 1.5 years.

The total fair value of share-based awards that vested during the fiscal years ended August 31, 2023 and 2022 was $ 9.8 million and $ 11.8 million, respectively.

The total fai r value of share-based awards that vested during the fiscal years ended August 31, 2024 and 2023 was $ 8.3 million and $ 9.8 million, respectively.

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Business Segment, Geographic and Customer Information

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

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

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

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

ENERPAC TOOL GROUP CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

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

36 unchanged sentences

Germany 34,700 29,926 28,004

Canada 29,643 19,651 17,348

Australia 28,607 26,667 24,990

Saudi Arabia 23,113 25,762 20,892

Brazil 22,769 20,523 16,517

France 14,606 14,854 13,368

Australia 22,165 28,607 26,667

Canada 19,248 29,643 19,651

China 16,258 14,081 15,434

France 16,133 14,606 14,854

All Other 178,145 169,877 173,868

12 unchanged sentences

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.

We had outstanding commercial letters of credit of $ 4.4 million and surety bonds of $ 3.8 million at August 31, 2024, while we had $ 8.6 million of outstanding letters of credit at August 31, 2023.

Most of these instruments relate to commercial contracts and self-insured workers’ compensation programs.

As part of the Company's global sourcing strategy, we have entered into agreements with certain 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;

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

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

23 unchanged sentences

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 4, 2024 , the Company completed the acquisition of DTA the Smart Move, S.A., a global leader in the industrial heavy loads transportation industry, designing and manufacturing mobile robotic solutions.

The purchase price was an initial € 24 million payment plus potential earn-out to be paid at the end of year three that is tied to the achievement of certain financial objectives with a maximum total purchase price of € 36 million.

The acquisition was funded with both cash on hand and borrowings from our existing credit facility.

The Company has not completed the analysis of identifying and estimating the fair value of identifiable intangible assets acquired or the fair value of the earn-out obligation.

We anticipate preparing a preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of our first quarter of fiscal 2025.

The measurement period for the valuation of net assets acquired ends as soon as information on the facts and circumstances that existed as of the acquisition date becomes available, but not to exceed 12 months following the acquisition date.

Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during the periods in which the adjustments are determined.

ENERPAC TOOL GROUP CORP.

15 unchanged sentences

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