UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February ~~29, 2020~~28, 2021



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-11288

————————————

ENERPAC TOOL GROUP CORP.

(Exact name of registrant as specified in its charter)

————————————



Wisconsin						39-0168610
(State of incorporation)						(I.R.S. Employer Id. No.)

N86 W12500 WESTBROOK CROSSING

MENOMONEE FALLS,, WISCONSIN53051

Mailing address: P. O. Box 3241, Milwaukee, Wisconsin 53201

(Address of principal executive offices)

(~~262~~) (262) 293-1500

(Registrant’s telephone number, including area code)

————————————

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Ticker Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.20 par value per share	EPAC	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of ~~“accelerated~~“large accelerated filer,” ~~“large accelerated~~“accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ¨ No ☒

The number of shares outstanding of the registrant’s Class A Common Stock as of March ~~20, 2020~~22, 2021 was ~~59,748,495.~~

60,120,512.

Table of Contents

TABLE OF CONTENTS


		Page No.

Forward-Looking Statements and Cautionary Factors		1

Part I—Financial Information

		~~Page No.~~

~~Part I—Financial Information~~

Item 1—Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations		3

Condensed Consolidated Statements of Comprehensive Income (Loss) ~~Income~~		4

Condensed Consolidated Balance Sheets		5

Condensed Consolidated Statements of Cash Flows		6

Notes to the Condensed Consolidated Financial Statements		7

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations		2320

Item 3—Quantitative and Qualitative Disclosures about Market Risk		2925

Item 4—Controls and Procedures		2925

Part II—Other Information

~~Item 1A.—Risk Factors~~	30

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds		3026

Item 6—Exhibits		3026

~~FORWARD LOOKING~~

FORWARD-LOOKING STATEMENTS AND CAUTIONARY FACTORS

This quarterly report on Form 10-Q contains certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include statements regarding expected financial results and other planned events, including, but not limited to, anticipated liquidity, anticipated restructuring costs and related savings, anticipated future charges and anticipated capital expenditures. Words such as “may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “objective,” “plan,” “project” and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual future events or results may differ materially from these statements. We disclaim any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

The following is a list of factors, among others, that could cause actual results to differ materially from the forward-looking statements:

•the extent to which the COVID-19 pandemic continues to impact our employees, operations, customers and suppliers;

•the deterioration of, or instability in, the domestic and international economy;

~~potential impact on our business~~•decreased demand from ~~global pandemics, including COVID-19;~~customers in the oil & gas industry as a result of significant volatility in oil prices resulting from disruptions in the oil markets;

•the continuation of challenging conditions in our various end markets;

~~our ability to execute restructuring actions and the realization of anticipated cost savings;~~

~~competition~~•potential increases in the ~~markets we serve;~~costs of commodities and raw materials, or substantial decreases in their availability;

~~failure to develop new products and market acceptance~~•uncertainty over global tariffs, or the financial impact of ~~existing and new products;~~tariffs;

•a material disruption at a significant manufacturing facility;

•heavy reliance on suppliers for components used in the manufacture and sale of our ~~products;~~

~~operating margin risk~~products, including a supply chain interruption due to ~~competitive pricing, operating inefficiencies, production levels and increases~~the COVID-19 pandemic or political tensions;

•competition in the ~~costs of commodities and raw materials;~~markets we serve;

~~uncertainty over global tariffs, or the financial impact of tariffs;~~

~~our international operations present special risks, including~~ •currency exchange rate fluctuations, ~~and~~ export and import ~~restrictions;~~restrictions, transportation disruptions or shortages, and other risks inherent in our international operations;

•regulatory and legal ~~developments,~~developments;

•litigation, including ~~changes~~product liability and warranty claims;

•failure to ~~United States taxation rules;~~develop new products and the extent of market acceptance of new products;

•our ability to successfully identify, consummate and integrate acquisitions and realize anticipated benefits/results from acquired companies as part of our portfolio management process;

•the effects of divestitures and/or discontinued operations, including retained liabilities from, or indemnification obligations with respect to, businesses that we sell;

~~the potential for a non-cash asset impairment charge,~~ •if the operating performance ~~for~~of our businesses were to fall significantly below ~~current~~normalized levels, orthe potential for a non-cash impairment charge of goodwill ~~and~~and/or other intangible assets, as they represent a substantial amount of our total assets;

•our ability to comply with the covenants in our debt agreements and fluctuations in interest rates;

•our ability to attract, develop, and retain qualified employees;

•a significant failure in our information technology (IT) infrastructure, such as unauthorized access to financial and other sensitive data or cybersecurity threats;

~~litigation, including product liability and warranty claims;~~

~~our ability to attract, develop, and retain qualified employees;~~

•inadequate intellectual property protection or ~~if our products are deemed to infringe on~~infringement of the intellectual property of others; and

~~our ability to comply with the covenants in our debt agreements and fluctuations in interest rates; and~~

~~numerous~~ •other matters, including those of a political, economic, business, competitive and regulatory nature contained from time to time in our U.S. Securities and Exchange Commission ("SEC") filings, including, but not limited to, those factors listed in the "Risk Factors" section within Item 1A of Part I of the Form 10-K filed with the SEC on October ~~28, 2019 and those factors contained within Part II, Item 1A herein.~~26, 2020.

When used herein, the terms “we,” “us,” “our” and the “Company” refer to Enerpac Tool Group Corp. and its subsidiaries. Enerpac Tool Group Corp. provides free-of-charge access to its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto, through its website, www.enerpactoolgroup.com, as soon as reasonably ~~practical~~practicable after such reports are electronically filed with the SEC.

PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended					Six Months Ended							Three Months Ended				Six Months Ended
	February 29, 2020			February 28, 2019		February 29, 2020			February 28, 2019				February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Net sales	$	133,386		$	159,788	$	280,060		$	318,340		Net sales	$	120,654	$	133,386	$	240,084	$	280,060
Cost of products sold	71,293			88,473		149,278			176,712			Cost of products sold	65,878		71,293		130,044		149,278
Gross profit	62,093			71,315		130,782			141,628			Gross profit	54,776		62,093		110,040		130,782

Selling, administrative and engineering expenses	50,245			53,433		102,076			106,554
Selling, general and administrative expenses												Selling, general and administrative expenses	45,883		50,245		89,593		102,076
Amortization of intangible assets	2,120			1,854		3,993			4,151			Amortization of intangible assets	2,136		2,120		4,272		3,993
Restructuring charges	1,929			46		3,900			17			Restructuring charges	649		1,929		859		3,900
Impairment & divestiture (benefit) charges	(768		)	3,543		(2,124		)	27,019
Impairment & divestiture charges (benefit)												Impairment & divestiture charges (benefit)	401		(768)		539		(2,124)
Operating profit	8,567			12,439		22,937			3,887			Operating profit	5,707		8,567		14,777		22,937
Financing costs, net	4,630			7,157		11,359			14,455			Financing costs, net	1,338		4,630		3,055		11,359
Other (income) expense, net	(787		)	515		(468		)	1,021
Earnings (loss) before income tax expense	4,724			4,767		12,046			(11,589		)
Other expense (income), net												Other expense (income), net	784		(787)		1,058		(468)
Earnings before income tax expense												Earnings before income tax expense	3,585		4,724		10,664		12,046
Income tax expense	806			4,002		1,756			4,068			Income tax expense	1		806		2,258		1,756
Net earnings (loss) from continuing operations	3,918			765		10,290			(15,657		)
(Loss) earnings from discontinued operations, net of income taxes	(1,756		)	1,988		(6,007		)	958
Net earnings (loss)	$	2,162		$	2,753	$	4,283		$	(14,699	)
Net earnings from continuing operations												Net earnings from continuing operations	3,584		3,918		8,406		10,290
Loss from discontinued operations, net of income taxes												Loss from discontinued operations, net of income taxes	(402)		(1,756)		(626)		(6,007)
Net earnings												Net earnings	$	3,182	$	2,162	$	7,780	$	4,283

Earnings (loss) per share from continuing operations
Earnings per share from continuing operations												Earnings per share from continuing operations
Basic	$	0.07		$	0.01	$	0.17		$	(0.26	)	Basic	$	0.06	$	0.07	$	0.14	$	0.17
Diluted	$	0.06		$	0.01	$	0.17		$	(0.26	)	Diluted	$	0.06	$	0.06	$	0.14	$	0.17

(Loss) earnings per share from discontinued operations
Loss per share from discontinued operations												Loss per share from discontinued operations
Basic	$	(0.03	)	$	0.03	$	(0.10	)	$	0.02		Basic	$	(0.01)	$	(0.03)	$	(0.01)	$	(0.10)
Diluted	$	(0.03	)	$	0.03	$	(0.10	)	$	0.02		Diluted	$	(0.01)	$	(0.03)	$	(0.01)	$	(0.10)

Earnings (loss) per share
Earnings per share												Earnings per share
Basic	$	0.04		$	0.04	$	0.07		$	(0.24	)	Basic	$	0.05	$	0.04	$	0.13	$	0.07
Diluted	$	0.04		$	0.04	$	0.07		$	(0.24	)	Diluted	$	0.05	$	0.04	$	0.13	$	0.07

Weighted average common shares outstanding												Weighted average common shares outstanding
Basic	60,130			61,243		60,106			61,137			Basic	59,938		60,130		59,874		60,106
Diluted	60,513			61,607		60,557			61,137			Diluted	60,269		60,513		60,180		60,557

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

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

(In thousands)

(Unaudited)

Three Months Ended Six Months Ended
February 29, 2020 February 28, 2019 February 29, 2020 February 28, 2019
Net earnings (loss) $ 2,162
$ 2,753
$ 4,283
$ (14,699 )
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments (3,246 ) 7,433
5,246
(743 )
Recognition of foreign currency translation losses from divested businesses —
34,909
51,994
34,909
Pension and other postretirement benefit plans 194
95
635
327
Total other comprehensive (loss) income, net of tax (3,052 ) 42,437
57,875
34,493
Comprehensive (loss) income $ (890 ) $ 45,190
$ 62,158
$ 19,794


	Three Months Ended				Six Months Ended
	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Net earnings	$	3,182	$	2,162	$	7,780	$	4,283
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	9,034		(3,246)		10,434		5,246
Recognition of foreign currency translation losses from divested businesses	0		0		0		51,994
Pension, other postretirement benefit plans, and cash flow hedges	123		194		352		635
Total other comprehensive income (loss), net of tax	9,157		(3,052)		10,786		57,875
Comprehensive income (loss)	$	12,339	$	(890)	$	18,566	$	62,158

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

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

February 29, 2020 August 31, 2019
ASSETS
Current assets
Cash and cash equivalents $ 163,437
$ 211,151
Accounts receivable, net 113,294
125,883
Inventories, net 78,046
77,187
Assets from discontinued operations —
285,578
Other current assets 43,386
30,526
Total current assets 398,163
730,325
Property, plant and equipment, net 63,065
56,729
Goodwill 271,828
260,415
Other intangible assets, net 66,501
52,375
Other long-term assets 79,785
24,430
Total assets $ 879,342
$ 1,124,274
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable $ 62,291
$ 76,914
Accrued compensation and benefits 19,333
26,421
Current maturities of debt —
7,500
Income taxes payable 4,250
4,838
Liabilities from discontinued operations —
143,763
Other current liabilities 43,687
40,965
Total current liabilities 129,561
300,401
Long-term debt, net 286,367
452,945
Deferred income taxes 1,782
1,564
Pension and postretirement benefit liabilities 19,742
20,213
Other long-term liabilities 87,525
47,972
Total liabilities 524,977
823,095
Commitments and contingencies (Note 14)
Shareholders’ equity
Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 82,539,940 and 81,920,679 shares, respectively 16,508
16,384
Additional paid-in capital 189,716
181,213
Treasury stock, at cost, 22,295,357 and 21,455,568 shares, respectively (658,017 ) (640,212 )
Retained earnings 923,622
915,466
Accumulated other comprehensive loss (117,464 ) (171,672 )
Stock held in trust (2,434 ) (3,070 )
Deferred compensation liability 2,434
3,070
Total shareholders' equity 354,365
301,179
Total liabilities and shareholders’ equity $ 879,342
$ 1,124,274


	February 28, 2021		August 31, 2020
ASSETS
Current assets
Cash and cash equivalents	$	115,254	$	152,170
Accounts receivable, net	94,984		84,170
Inventories, net	71,774		69,171
Other current assets	43,431		35,621
Total current assets	325,443		341,132
Property, plant and equipment, net	61,258		61,405
Goodwill	284,731		281,154
Other intangible assets, net	58,980		62,382
Other long-term assets	78,589		78,221
Total assets	$	809,001	$	824,294
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable	$	49,736	$	45,069
Accrued compensation and benefits	21,769		17,793
Income taxes payable	3,945		1,937
Other current liabilities	39,805		40,723
Total current liabilities	115,255		105,522
Long-term debt, net	210,000		255,000
Deferred income taxes	1,731		1,708
Pension and postretirement benefit liabilities	19,164		20,190
Other long-term liabilities	81,458		82,648
Total liabilities	427,608		465,068
Commitments and contingencies (Note 14)
Shareholders’ equity
Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 82,879,445 and 82,593,945 shares, respectively	16,576		16,519
Additional paid-in capital	197,036		193,492
Treasury stock, at cost, 22,799,230 shares	(667,732)		(667,732)
Retained earnings	925,451		917,671
Accumulated other comprehensive loss	(89,938)		(100,724)
Stock held in trust	(2,996)		(2,562)
Deferred compensation liability	2,996		2,562
Total shareholders' equity	381,393		359,226
Total liabilities and shareholders’ equity	$	809,001	$	824,294

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

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended							Six Months Ended
	February 29, 2020			February 28, 2019				February 28, 2021		February 29, 2020
Operating Activities							Operating Activities
Net earnings (loss)	$	4,283		$	(14,699	)
Less: Net (loss) earnings from discontinued operations	(6,007		)	958
Net earnings (loss) from continuing operations	10,290			(15,657		)
Adjustments to reconcile net earnings to net cash provided by operating activities - continuing operations:
Impairment & divestiture (benefit) charges, net of tax effect	(1,629		)	27,019
Net earnings							Net earnings	$	7,780	$	4,283
Less: Net loss from discontinued operations							Less: Net loss from discontinued operations	(626)		(6,007)
Net earnings from continuing operations							Net earnings from continuing operations	8,406		10,290
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities - continuing operations:							Adjustments to reconcile net earnings to net cash provided by (used in) operating activities - continuing operations:
Impairment & divestiture charges (benefit), net of tax effect							Impairment & divestiture charges (benefit), net of tax effect	482		(1,629)
Depreciation and amortization	10,056			9,361			Depreciation and amortization	10,966		10,056
Stock-based compensation expense	5,945			5,265			Stock-based compensation expense	5,228		5,945
Benefit for deferred income taxes	(1,094		)	(4,249		)	Benefit for deferred income taxes	(398)		(1,094)
Amortization of debt issuance costs	1,132			602			Amortization of debt issuance costs	240		1,132
Other non-cash charges	409			55			Other non-cash charges	514		409
Changes in components of working capital and other, excluding acquisitions and divestitures:							Changes in components of working capital and other, excluding acquisitions and divestitures:
Accounts receivable	13,956			(10,591		)	Accounts receivable	(9,920)		13,956
Inventories	(1,898		)	(10,057		)	Inventories	(1,505)		(1,898)
Trade accounts payable	(14,364		)	(918		)	Trade accounts payable	4,114		(14,364)
Prepaid expenses and other assets	(3,103		)	(10,105		)	Prepaid expenses and other assets	(7,047)		(3,103)
Income tax accounts	(9,927		)	858			Income tax accounts	692		(9,927)
Accrued compensation and benefits	(8,012		)	(18,657		)	Accrued compensation and benefits	3,785		(8,012)
Other accrued liabilities	(10,065		)	2,029			Other accrued liabilities	(2,057)		(10,065)
Cash used in operating activities - continuing operations	(8,304		)	(25,045		)
Cash provided by (used in) operating activities - continuing operations							Cash provided by (used in) operating activities - continuing operations	13,500		(8,304)
Cash used in operating activities - discontinued operations	(20,437		)	(26,269		)	Cash used in operating activities - discontinued operations	(254)		(20,437)
Cash used in operating activities	(28,741		)	(51,314		)
Cash provided by (used in) operating activities							Cash provided by (used in) operating activities	13,246		(28,741)

Investing Activities							Investing Activities
Capital expenditures	(6,967		)	(8,686		)	Capital expenditures	(5,630)		(6,967)
Proceeds from sale of property, plant and equipment	450			51			Proceeds from sale of property, plant and equipment	595		450
Lease buyout for divested business	(575		)	—			Lease buyout for divested business	0		(575)
Proceeds from sale of business/product line	8,726			—			Proceeds from sale of business/product line	0		8,726
Cash paid for business acquisitions, net of cash acquired	(33,444		)	—			Cash paid for business acquisitions, net of cash acquired	0		(33,444)
Cash used in investing activities - continuing operations	(31,810		)	(8,635		)	Cash used in investing activities - continuing operations	(5,035)		(31,810)
Cash provided by investing activities - discontinued operations	208,391			29,179			Cash provided by investing activities - discontinued operations	0		208,391
Cash provided by investing activities	176,581			20,544
Cash (used in) provided by investing activities							Cash (used in) provided by investing activities	(5,035)		176,581

Financing Activities							Financing Activities
Principal repayment on term loan	(175,000		)	(47,500		)	Principal repayment on term loan	0		(175,000)
Borrowings on revolving credit facility	100,000			—			Borrowings on revolving credit facility	10,000		100,000
Principal repayments on revolving credit facility	(100,000		)	—			Principal repayments on revolving credit facility	(55,000)		(100,000)
Purchase of treasury shares	(17,805		)	—			Purchase of treasury shares	0		(17,805)
Taxes paid related to the net share settlement of equity awards	(4,063		)	(1,489		)	Taxes paid related to the net share settlement of equity awards	(1,981)		(4,063)
Stock option exercises & other	2,888			1,031			Stock option exercises & other	182		2,888
Payment of cash dividend	(2,419		)	(2,439		)	Payment of cash dividend	(2,394)		(2,419)
Cash used in financing activities - continuing operations	(196,399		)	(50,397		)	Cash used in financing activities - continuing operations	(49,193)		(196,399)
Cash used in financing activities - discontinued operations	—			—
Cash provided by financing activities - discontinued operations							Cash provided by financing activities - discontinued operations	750		0
Cash used in financing activities	(196,399		)	(50,397		)	Cash used in financing activities	(48,443)		(196,399)

Effect of exchange rate changes on cash	845			1,065			Effect of exchange rate changes on cash	3,316		845
Net decrease in cash and cash equivalents	(47,714		)	(80,102		)	Net decrease in cash and cash equivalents	(36,916)		(47,714)
Cash and cash equivalents - beginning of period	211,151			250,490			Cash and cash equivalents - beginning of period	152,170		211,151
Cash and cash equivalents - end of period	$	163,437		$	170,388		Cash and cash equivalents - end of period	$	115,254	$	163,437

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

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

General

Enerpac Tool Group Corp. ("Company") is a premier industrial tools and services company serving a broad and diverse set of customers in more than 100 countries. The Company has two operating segments, Industrial Tools & Service ("IT&S") and Other, with the IT&S segment representing the only reportable segment.

The accompanying unaudited condensed consolidated financial statements of ~~Enerpac Tool Group Corp. (“~~the Company~~” "we," or "us"), formerly known as Actuant Corporation,~~ have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The condensed consolidated balance sheet data as of August 31, ~~2019~~2020 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes in the Company’s fiscal ~~2019~~2020 Annual Report on Form 10-K.

In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for the three and six months ended February ~~29, 2020~~28, 2021 are not necessarily indicative of the results that may be expected for the entire fiscal year ending August 31, ~~2020.~~2021. The COVID-19 pandemic has negatively impacted, and is likely to continue to negatively impact, the global economy. The Company's operating results and financial position will be subject to the general economic conditions created by the pandemic, and the timing and extent to which the pandemic will ultimately impact the Company's business will depend on future developments, including the distribution and effectiveness of vaccines and therapeutics in minimizing its negative effects on macroeconomic conditions, which still remain uncertain.

~~New Accounting Pronouncements~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ (and subsequently ASU 2018-01 and ASU 2019-01), to increase transparency and comparability among organizations by recognizing all lease transactions on the balance sheet as a lease liability and a right-of-use (“ROU”) asset. The amendments also expanded disclosure requirements for key information about leasing arrangements. On September 1, 2019, the Company adopted the standard using a modified retrospective approach and through implementing selected third-party lease software utilized as a central repository for all leases. The Company ~~elected~~has updated our historical caption of "Selling, administrative and engineering expenses" in the package of practical expedients allowing us to not reassess whether any expired or existing contracts contain leases, the lease classification for any expired or existing leases, and initial direct costs for leases that commenced prior to September 1, 2019. In addition, we elected not to recognize ROU assets or lease liabilities for leases containing terms of 12 months or less and not separate lease components from non-lease components for all asset classes. The Company updated its standard lease accounting policy to address the new standard, revised the Company’s business processes and controls to align to the updated policy and new standard and completed the implementation of and data input into the Company’s lease accounting software solution. The most significant impact of the standard on the Company was the recognition of a $60.8 million ROU asset and operating lease liability on the Condensed Consolidated Balance Sheets at adoption. The standard did not have a significant impact on our Condensed Consolidated Statements of Operations to "Selling, general and administrative expenses." There has been no change to the composition of expenses within the caption in the current or ~~Condensed Consolidated Statements~~historical periods.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of ~~Cash Flows. In addition,~~Credit Losses on Financial Instruments (“ASU 2016-13”), which adds an impairment model that is based on expected losses rather than incurred losses and is called the Current Expected Credit Losses (“CECL”) model. This impairment model is applicable to loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables as well as any other financial asset with the contractual right to receive cash. Under the new model, an allowance equal to the estimate of lifetime expected credit losses is recognized, which will result in more timely loss recognition. The guidance is intended to reduce complexity by decreasing the number of credit impairment models. The Company adopted the guidance on September 1, 2020 using the modified retrospective approach and there was no impact to the financial statements as a result of ~~sale leaseback~~the adoption.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for a limited time to ease the potential burden of accounting for reference rate reform on financial reporting. This guidance applies to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates. The guidance is effective beginning on March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 allowing entities to apply certain aspects of ASC 848 (previously ASU 2020-4) to all derivative instruments that undergo a modification of the interest rate used for discounting, margining or contract price alignment as a result of the reference reform. The guidance is also effective through December 31, 2022. The Company has not utilized any of the optional expedients or exceptions available under this guidance. The Company will continue to assess whether this guidance is applicable throughout the effective period.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in ~~previous years~~this update simplify the accounting for ~~which gains were deferred~~income taxes by removing certain exceptions and ~~under the new standard would have been recognized,~~amending and clarifying existing guidance. The guidance is effective for the Company ~~recorded an increase to retained earnings of $0.2 million~~ in the first quarter of fiscal ~~2020, which represents~~2022 with early adoption permitted. The Company is currently assessing the ~~recognition~~impact of ~~these previously deferred gains. See~~ ~~Note 15, “Leases”~~ ~~for further discussion of the Company’s operating leases.~~

~~In February 2018, the FASB issued~~this ASU ~~2018-02, Income Statement-Reporting Comprehensive Income (Topic 220):~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,~~ ~~which allows companies to reclassify stranded income tax effects resulting from the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings in their~~on its condensed consolidated financial statements. The Company adopted the guidance on September1, 2019 and recorded an increase to retained earnings with an offsetting increase in accumulated other comprehensive loss of $3.7 million on the adoption date.

Accumulated Other Comprehensive Loss

The following is a summary of the Company's accumulated other comprehensive loss (in thousands):

February 29, 2020 August 31, 2019
Foreign currency translation adjustments $ 93,875
$ 151,115
Pension and other postretirement benefit plans, net of tax 23,589
20,557
Accumulated other comprehensive loss $ 117,464
$ 171,672


	February 28, 2021		August 31, 2020
Foreign currency translation adjustments	$	65,463	$	75,896
Pension and other postretirement benefit plans, net of tax	24,425		24,750
Unrecognized losses on cash flow hedges	50		78
Accumulated other comprehensive loss	$	89,938	$	100,724

Property Plant and Equipment

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

February 29, 2020 August 31, 2019
Land, buildings and improvements $ 31,901
$ 29,661
Machinery and equipment 140,071
140,083
Gross property, plant and equipment 171,972
169,744
Less: Accumulated depreciation (108,907 ) (113,015 )
Property, plant and equipment, net $ 63,065
$ 56,729


	February 28, 2021		August 31, 2020
Land, buildings and improvements	$	34,447	$	33,548
Machinery and equipment	144,288		134,536
Gross property, plant and equipment	178,735		168,084
Less: Accumulated depreciation	(117,477)		(106,679)
Property, plant and equipment, net	$	61,258	$	61,405

Subsequent Events

During March 2021, the Company received notice that an ongoing audit has been successfully closed which will result in the recognition of unrecognized tax benefits of approximately $5.0 million during the three months ending May 31, 2021.

Note 2. Revenue ~~Recognition~~from Contracts with Customers

Nature of Goods and Services

The Company generates its revenue under two principal activities, which are discussed below:

Product Sales: Sales of tools, heavy-lifting solutions, and rope and cable solutions are recorded when control is transferred to the customer (i.e., performance obligation has been satisfied). For the majority of the Company’s product sales, revenue is recognized at a point in time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company to the customer. ~~Due to the~~For certain other products that are highly customized ~~nature~~ and have a limited alternative use, ~~of certain products,~~and for which the Company has an enforceable right of reimbursement for performance completed to date, revenue is recognized over time. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of ~~over time~~over-time revenue associated with these custom products. For a majority of the Company’s custom products, machine hours and labor hours (efforts-expended measurement) are used as a measure of progress.

Service & Rental Sales: Service contracts consist of providing highly trained technicians to perform bolting, technical services, machining and ~~joint integrity~~joint-integrity work for our customers. These revenues are recognized over time as our customers simultaneously receive and consume the benefits provided by the Company. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of ~~over time~~over-time revenue associated with service contracts. For a majority of the Company’s service contracts, labor hours (efforts-expended measurement) is used as the measure of progress when it is determined to be a better depiction of the transfer of control to the customer due to the timing and pattern of labor hours incurred. Revenue from rental contracts (less than a year and non-customized products) is generally recognized ratably over the contract term, depicting the customer’s consumption of the benefit related to the rental equipment.

Disaggregated Revenue and Performance Obligations

The Company disaggregates revenue from contracts with customers by reportable segment and product line and by the timing of when goods and services are transferred. See Note 13, "Segment Information" for information regarding our revenue disaggregation by reportable segment and product line.

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

Three Months Ended Six Months Ended
February 29, 2020 February 28, 2019 February 29, 2020 February 28, 2019
Revenues recognized at point in time $ 97,189
$ 109,883
$ 202,001
$ 218,139
Revenues recognized over time 36,197
49,905
78,059
100,201
Total $ 133,386
$ 159,788
$ 280,060
$ 318,340


	Three Months Ended				Six Months Ended
	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Revenues recognized at point in time	$	90,726	$	97,189	$	177,506	$	202,001
Revenues recognized over time	29,928		36,197		62,578		78,059
Total	$	120,654	$	133,386	$	240,084	$	280,060

Contract Balances

The Company's contract assets and liabilities are as follows (in thousands):

February 29, 2020 August 31, 2019
Receivables, which are included in accounts receivable, net $ 113,294
$ 125,883
Contract assets, which are included in other current assets 5,177
3,747
Contract liabilities, which are included in other current liabilities 1,334
3,707


	February 28, 2021		August 31, 2020
Receivables, which are included in accounts receivable, net	$	94,984	$	84,170
Contract assets, which are included in other current assets	7,743		6,145
Contract liabilities, which are included in other current liabilities	3,014		2,145

Receivables: The Company performs its obligations under a contract with a customer by transferring goods or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. Accounts receivable, net is recorded at face amount of customer receivables less an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for expected losses as a result of customers’ inability to make required payments. Management evaluates the aging of customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of receivables that may not be collected in the future and records the appropriate provision. The allowance for doubtful accounts was $5.0 million at both February 28, 2021 and August 31, 2020.

Contract Assets: Contract assets relate to the Company’s rights to consideration for work completed but not billed as of the reporting date on contracts with customers. The contract assets are transferred to receivables when the rights become unconditional. The Company has contract assets on contracts that are generally long-term and have revenues that are recognized over time.

Contract Liabilities: As of February ~~29, 2020,~~28, 2021, the Company had certain contracts where there were unsatisfied performance obligations and the Company had received cash consideration from customers before the performance obligations were satisfied. The majority of these contracts relate to long-term customer contracts (project durations of greater than three months) and are recognized over time. The Company estimates that the ~~$1.3~~$3.0 million will be recognized in net sales from satisfying those performance obligations within the next twelve ~~months.~~months, with an immaterial amount recognized in periods after.

~~Significant Judgments~~

Timing of Performance Obligations Satisfied at a Point in Time: The Company evaluates when the customer obtains control of the product based on shipping terms, as control will transfer, depending upon such terms, at different points between the Company's manufacturing facility or warehouse and the customer’s location. The Company considers control to have transferred upon shipment or delivery because i)(i) the Company has a present right to payment at that time; ~~ii)~~(ii) the legal title has been transferred to the customer; ~~iii)~~(iii) the Company has transferred physical possession of the product to the customer; and ~~iv)~~(iv) the customer has significant risks and rewards of ownership of the product.

Variable Consideration: The Company estimates whether it will be subject to variable consideration under the terms of the contract and includes its estimate of variable consideration in the transaction price based on the expected value method when it is deemed probable of being realized based on historical experience and trends. Types of variable consideration may include rebates, incentives and discounts, among others, which are recorded as a reduction to net sales at the time when control of a performance obligation is transferred to the customer.

Practical Expedients & Exemptions: The Company elected to expense the incremental cost to obtaining a contract when the amortization period for such contracts would be one year or less. The Company does not disclose the value of unperformed obligations for i)(i) contracts with an original expected length of one year or less and ~~ii)~~(ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.

Note 3. Restructuring Charges

The Company has undertaken or committed to various restructuring initiatives, including workforce ~~reductions;~~reductions, leadership ~~changes;~~changes, plant consolidations to reduce manufacturing ~~overhead;~~overhead, satellite office ~~closures;~~closures, the continued movement of production and product sourcing to low-cost ~~alternatives;~~alternatives and the centralization and standardization of certain administrative functions. Liabilities for severance ~~will~~are generally to be paid within twelve months, while future lease payments related to facilities vacated as a result of restructuring ~~will~~are to be paid over the underlying remaining lease terms. During fiscal 2019, the Company announced a new restructuring plan focused on i)(i) the integration of the Enerpac and Hydratight businesses ~~(Industrial Tools & Service ("IT&S")~~(IT&S segment), ~~ii)~~(ii) the strategic exit of certain ~~commodity type~~commodity-type services in our North America Services operations (IT&S segment) and ~~iii)~~(iii) driving efficiencies within the overall corporate structure. ~~Total restructuring~~In the third quarter of fiscal 2020, the Company announced the expansion and revision of this plan, which further simplifies and flattens the corporate structure through elimination of redundancies between the segment and corporate functions, while enhancing our commercial and marketing processes to become even closer to our customers. Restructuring charges associated with this ~~restructuring~~ plan were ~~$1.7~~$0.6 million and ~~$3.1~~$0.7 million in ~~the~~ ~~three and six months ended February 29, 2020, respectively. The Company recorded total restructuring charges of $0.1 million in both~~ the three and six months ended February 28, ~~2019 associated with~~2021, respectively, and $1.7 million and $3.1 million in the ~~legacy restructuring initiatives.~~three and six months ended February 29, 2020, respectively.

The following summarizes restructuring reserve activity for the IT&S ~~reportable~~ segment and ~~corporate~~Corporate (in thousands):


								Six Months Ended February 28, 2021
	Six Months Ended February 29, 2020							IT&S		Corporate
	Industrial Tools & Services			Corporate
Balance as of August 31, 2019	$	2,912		$	—
Balance as of August 31, 2020							Balance as of August 31, 2020	$	1,443	$	267
Restructuring charges	2,189			939			Restructuring charges	688		9
Cash payments	(2,693		)	(628		)	Cash payments	(1,107)		(250)
Other non-cash uses of reserve	(406		)	(302		)
Other non-cash uses of reserve (1)							Other non-cash uses of reserve (1)	(14)		0
Impact of changes in foreign currency rates	(4		)	—			Impact of changes in foreign currency rates	15		0
Balance as of February 29, 2020	$	1,998		$	9
Balance as of February 28, 2021							Balance as of February 28, 2021	$	1,025	$	26


	Six Months Ended February 29, 2020
	IT&S		Corporate
Balance as of August 31, 2019	$	2,912	$	0
Restructuring charges	2,189		939
Cash payments	(2,693)		(628)
Other non-cash uses of reserve (1)	(406)		(302)
Impact of changes in foreign currency rates	(4)		0
Balance as of February 29, 2020	$	1,998	$	9

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

Six Months Ended February 28, 2019
Industrial Tools & Services Corporate
Balance as of August 31, 2018 $ 1,687
$ 46
Restructuring charges 20
—
Cash payments (1,115 ) (46 )
Other non-cash uses of reserve (12 ) —
Impact of changes in foreign currency rates (18 ) —
Balance as of February 28, 2019 $ 562
$ —

~~The three and six months ended February 29, 2020 included $0.3 million and $0.8 million~~Total restructuring charges (inclusive of ~~restructuring expenses related to Cortland U.S. (Other~~the Other segment)~~, respectively. Restructuring reserves for Cortland U.S.~~ being reported in "Restructuring charges" were $0.6 million and ~~$1.9~~$0.9 million ~~as of February 29, 2020 and August 31, 2019, respectively. There were inconsequential restructuring charges recorded within the Other segment associated with the legacy restructuring initiatives~~ in the three and six months ended February 28, ~~2019.~~2021, respectively, and $1.9 million and $3.9 million in the three and six months ended February 29, 2020, respectively.

Restructuring expenses related to Cortland U.S. (Other segment) were less than $0.1 million and $0.2 million in the three and six months ended February 28, 2021, respectively, and $0.3 million and $0.8 million in the three and six months ended February 29, 2020, respectively. Restructuring reserves for Cortland U.S. were $0.2 million and $0.4 million as of February 28, 2021 and August 31, 2020, respectively.

Note 4. Acquisitions

On January 7, 2020,, the Company acquired 100% of the stock of HTL Group ("HTL"), a provider of controlled bolting products, ~~and~~ calibration and repair services, ~~as well as a strong~~and tool rental ~~business.~~services. The tuck-in acquisition of HTL ~~now provides~~provided the Company with a complete ~~bolting~~ line of bolting products and ~~enhances~~enhanced our European rental capabilities. The Company acquired all of the assets and assumed certain liabilities of HTL for a final purchase price of ~~$33.4 million, net of cash acquired.~~$33.3 million. The ~~preliminary~~final purchase price allocation resulted in ~~$8.6~~$11.3 million of goodwill (which is not deductible for tax purposes), ~~$18.0~~$16.1 million of intangible assets, and ~~$7.3~~$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. ~~The intangible assets were comprised~~

This acquisition generated net sales of ~~$3.7~~$3.0 million ~~of indefinite-lived tradenames, $13.6~~and $5.5 million of amortizable customer relationships and $0.7 million of amortizable patents. The fair values of the assets acquired and liabilities assumed are based on preliminary estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While the Company believes these preliminary estimates provide a reasonable basis for estimating the fair value of the assets acquired and liabilities assumed, it will continue to evaluate available information prior to finalization of the amounts. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of rental assets acquired (component of property, plant, and equipment), intangible assets and the resulting impact on deferred income tax assets and liabilities.

~~The Company incurred transaction costs of $0.2 million for both~~ the three and six months ended February ~~29, 2020 (included in "Selling, administrative~~28, 2021, respectively, and ~~engineering expenses" in the Condensed Consolidated Statements of Operations) related to this acquisition.~~

~~This acquisition generated net sales of~~ $2.0 million for the three months ended February 29, 2020, which are reported within the IT&S reportable segment. This acquisition does not meet the significance tests to require pro forma financial information otherwise required for acquisitions.

Note 5. Discontinued Operations and Other Divestiture Activities

Discontinued Operations

On October 31, 2019,, as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the ~~previously announced~~ sale of the businesses comprising its former Engineered Components & Systems ("EC&S") segment to wholly owned subsidiaries of BRWS Parent LLC, a Delaware limited liability company and affiliate of One Rock Capital Partners II, LP, for a sales price of $215.8 million, inclusive of $1.3 million of purchase price from the customary finalization of ~~approximately $214.5 million (which included approximately~~working capital negotiations in the third quarter of fiscal 2020. Approximately $3.0 million ~~to be~~of the purchase price was paid in four equal quarterly installments after closing, of which the last $0.7 million was received in the ~~three~~six months ended February ~~29, 2020)~~28, 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 the Condensed Consolidated Statements of Cash Flows). In connection with the completion of the sale ~~in the three months ended November 30, 2019,~~and after consideration of working capital adjustments, the Company recorded, in fiscal 2020, a net loss of ~~$4.2~~$4.7 million, comprised of a loss of ~~$22.4~~$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 ~~quarter~~year, largely offset by an income tax benefit of ~~$18.2~~$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 ~~in the three months ended November 30, 2019~~ associated with the accelerated vesting of restricted stock awards ~~associated with~~for employees terminated as part of the transaction and $2.7 million of additional divestiture charges which were necessary to complete the transaction. In the three months ended February 29, 2020, the Company also incurred approximately $0.3 million of additional miscellaneous divestiture related costs. The final loss on the sale is subject to the customary negotiation of final working capital amounts.

During the first quarter of fiscal 2019, the Company determined that the Precision Hayes 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 sale of the Precision Hayes business on~~ ~~December 31, 2018~~ for $23.6 million cash net of final transaction costs, working capital adjustments, accelerated vesting of equity compensation, retention bonuses and other adjustments which were recognized within the second quarter of fiscal 2019. The Company recorded $0.0 million and $9.5 million of impairment & divestiture charges during the three and six months ended February 28, 2019, respectively, of which the charges for the six-month period represented the excess of the net book value of the net assets held for sale less the anticipated proceeds, less costs to sell.

~~The Company completed the sale of the Cortland Fibron business on~~ ~~December 19, 2018~~ ~~for $12.5 million in cash. During the three and six months ended February 28, 2019, the Company recognized $2.6 million and $4.3 million of impairment & divestiture charges~~maintains financial exposure associated with ~~the~~this divestiture ~~of the Cortland Fibron business.~~

~~In addition~~due to ~~the above disclosed matters, the Company also incurred $0.9 million and $2.5 million of divestiture related costs during the three and six months ended February 29, 2020, respectively.~~certain retained liabilities.

As the aforementioned ~~divestitures were~~divestiture was a part of our strategic shift to become a pure-play industrial tools and services company, the results of their operations (including the stated impairment & divestiture charges) are recorded as a component of "Loss from discontinued operations" in the Condensed Consolidated Statements of Operations for all periods presented.

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

Three Months Ended Six Months Ended
February 29, 2020* February 28, 2019 February 29, 2020* February 28, 2019
Net sales $ —
$ 112,119
$ 67,010
$ 246,099
Cost of products sold —
85,948
49,749
185,232
Gross profit —
26,171
17,261
60,867

Selling, administrative and engineering expenses 619
17,312
11,451
37,383
Amortization of intangible assets —
1,587
—
3,569
Restructuring charges (benefit) —
14
(11 ) 446
Impairment & divestiture charges 314
3,344
28,730
16,319
Operating (loss) earnings (933 ) 3,914
(22,909 ) 3,150
Financing (benefits) costs, net —
(4 ) 14
(7 )
Other expense (income), net —
141
(104 ) 547
(Loss) earnings before income tax expense (benefit) (933 ) 3,777
(22,819 ) 2,610
Income tax expense (benefit) 823
1,789
(16,812 ) 1,652
Net (loss) earnings from discontinued operations $ (1,756 ) $ 1,988
$ (6,007 ) $ 958


	Three Months Ended				Six Months Ended
	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020 *
Net sales	$	0	$	0	$	0	$	67,010
Cost of products sold	0		0		0		49,749
Gross profit	0		0		0		17,261

Selling, general and administrative expenses	559		619		854		11,451
Amortization of intangible assets	0		0		0		0
Restructuring benefit	0		0		0		(11)
Impairment & divestiture charges	0		314		0		28,730
Operating loss	(559)		(933)		(854)		(22,909)
Financing costs, net	0		0		0		14
Other loss, net	0		0		0		(104)
Loss before income tax (benefit) expense	(559)		(933)		(854)		(22,819)
Income tax (benefit) expense	(157)		823		(228)		(16,812)
Loss from discontinued operations, net of income taxes	$	(402)	$	(1,756)	$	(626)	$	(6,007)

* ~~"(Loss) earnings~~"Loss from discontinued operations, net of income taxes" for the ~~periods presented~~six-month period in fiscal 2020 ~~include~~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 U.S. GAAP. Furthermore, the Company excluded EC&S segment employees from the fiscal 2020 bonus compensation plan, hence there are no expenses associated with the plan for that period.

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 initial net cash proceeds of $6.0 million, which resulted in an impairment & divestiture benefit of $4.6 million in the three months ended November 30, 2019. In the three months ended February 29, 2020, the Company recorded

an additional benefit of $0.1 million related to agreement with the buyer on final working capital amounts and various other benefits. In March 2020, the buyer of the UNI-LIFT product line extended a long-term supply agreement with a significant customer. Pursuant to the ~~sales~~divestiture agreement, this action triggered the requirement for the buyer to pay $1.5 million of contingent proceeds, ~~and payment~~which was ~~subsequently~~ received by the ~~Company. These contingent proceeds were not reflected~~Company in the three months ended May 31, 2020 and recorded as an "Impairment & divestiture benefit" within the ~~condensed consolidated financial statements as~~Condensed Consolidated Statements of ~~and for the periods ended February 29, 2020, but will be reflected within the condensed consolidated financial statements as of and for the periods ending May 31, 2020.~~Operations in that period.

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. WeThe Company recorded impairment & divestiture charges of $4.6 million in the three months ended November 30, 2019, 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, $1.9 million associated with our ~~requirement to withdraw~~withdrawal from the multi-employer pension plan associated with that business and $0.2 million of other divestiture related charges. The Company completed the divestiture of the Milwaukee Cylinder business on December 2, 2019 for a negligible amount. In the three months ended February 29, 2020, the Company recorded inconsequential amounts of impairment & divestiture ~~charges.~~ charges associated with this divestiture.

The historical results of the Milwaukee Cylinder business, inclusive of the UNI-LIFT product line, (which had net sales of ~~$4.3 million in the three months ended February 28, 2019 and~~ $2.9 ~~million and $7.1~~ million in the six months ended February 29, ~~2020 and February 28, 2019, respectively)~~2020) are not material to the condensed 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 $1.3 million in the three months ended November ~~30.~~30, 2019. During the three months ended February 29, 2020, the Company recorded $0.1 million of impairment & divestiture charges related to a working capital adjustment. The historical results of the Connectors product line (which had net sales of ~~$1.0 million in the three months ended February 28, 2019 and~~ $0.2 ~~million and $2.5~~ million in the six months ended February 29, ~~2020 and February 28, 2019, respectively)~~2020) are not material to the condensed consolidated financial results.

At February 29, 2020, the Company determined that it was no longer probable that a loss will occur related to an outstanding legal matter associated with a previously divested business, as such, recorded an impairment & divestiture benefit of $0.8 million in the three and six months ended February 29, 2020.

Note 6. Goodwill, Intangible Assets and Long-Lived Assets

Changes in the gross carrying value of goodwill and intangible assets result from changes in foreign currency exchange rates, business acquisitions, divestitures and impairment charges. The changes in the carrying amount of goodwill for the six months ended February ~~29, 2020~~28, 2021 are as follows (in thousands):

Industrial Tools & Services Other Total
Balance as of August 31, 2019 $ 242,873
$ 17,542
$ 260,415
Acquisition of HTL Group (Note 4) 8,595
—
8,595
Impact of changes in foreign currency rates 2,815
3
2,818
Balance as of February 29, 2020 $ 254,283
$ 17,545
$ 271,828


	IT&S		Other		Total
Balance as of August 31, 2020	$	263,537	$	17,617	$	281,154
Impact of changes in foreign currency rates	3,566		11		3,577
Balance as of February 28, 2021	$	267,103	$	17,628	$	284,731

The gross carrying value and accumulated amortization of the Company’s intangible assets are as follows (in thousands):

February 29, 2020 August 31, 2019

Weighted Average
Amortization
Period (Years)

Gross
Carrying
Value

Accumulated
Amortization

Net
Book
Value

Gross
Carrying
Value

Accumulated
Amortization

Net
Book
Value
Amortizable intangible assets:
Customer relationships 14 $ 140,239
$ 100,895
$ 39,344
$ 126,229
$ 96,817
$ 29,412
Patents 12 14,068
12,723
1,345
13,227
12,276
951
Trademarks and tradenames* 12 3,202
2,019
1,183
4,513
2,921
1,592
Indefinite lived intangible assets:
Tradenames N/A 24,629
—
24,629
20,420
—
20,420
$ 182,138
$ 115,637
$ 66,501
$ 164,389
$ 112,014
$ 52,375

*The decrease in the Gross Carrying Value and Accumulated Amortization of Trademarks and tradenames is a result of the Milwaukee Cylinder business being held for sale as of November 30, 2019 and the impairment charge discussed in ~~Note 5, "Discontinued Operations and Other Divestiture Activities."~~ ~~included the Trademarks and tradenames associated with that business being fully impaired.~~


		February 28, 2021						August 31, 2020
	Weighted Average Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization		Net Book Value		Gross Carrying Value		Accumulated Amortization		Net Book Value
Amortizable intangible assets:
Customer relationships	14	$	143,325	$	111,267	$	32,058	$	141,853	$	106,491	$	35,362
Patents	12	14,547		13,635		912		14,365		13,228		1,137
Trademarks and tradenames	12	3,321		2,352		969		3,277		2,257		1,020
Indefinite lived intangible assets:
Tradenames	N/A	25,041		0		25,041		24,863		0		24,863
		$	186,234	$	127,254	$	58,980	$	184,358	$	121,976	$	62,382

The Company estimates that amortization expense will be ~~$4.5~~$4.0 million for the remaining six months of fiscal ~~2020.~~2021. Amortization expense for future years is estimated to be: ~~$8.0 million in fiscal 2021, $7.3~~$7.4 million in fiscal 2022, ~~$5.8~~$5.9 million in fiscal 2023, ~~$4.2~~$4.3 million in fiscal 2024, ~~$3.4~~$3.5 million in fiscal 2025, $2.1 million in fiscal 2026 and ~~$8.7~~$6.7 million cumulatively thereafter. The future amortization expense amounts represent estimates and may be impacted by future acquisitions, ~~adjustments to preliminary purchase accounting estimates,~~ divestitures, or changes in foreign currency exchange rates, among other causes.

~~Fiscal 2019 Impairment Charges~~

Within the Other segment, the Company recognized $3.5 million and $13.7 million of Goodwill impairment charges for the three and six months ended February 28, 2019 related to the Cortland U.S. business in conjunction with triggering events identified during the periods.

Note 7. Product Warranty Costs

The Company generally offers its customers an assurance warranty on products sold, although warranty periods may vary by product type and application. The reserve for future warranty claims, which is recorded within the "Other current liabilities" line in the Condensed Consolidated Balance Sheets, is based on historical claim rates and current warranty cost experience. The following summarizes the changes in product warranty reserves for the six months ended February ~~29, 2020~~28, 2021 and February ~~28, 2019,~~29, 2020, respectively (in thousands):

Six Months Ended
February 29, 2020 February 28, 2019
Beginning balance $ 1,145
$ 931
Provision for warranties 135
807
Warranty payments and costs incurred (418 ) (525 )
Warranty activity for divested businesses (27 ) —
Reclass of liabilities held for sale —
(33 )
Impact of changes in foreign currency rates —

(9 )
Ending balance $ 835
$ 1,171


	Six Months Ended
	February 28, 2021		February 29, 2020
Beginning balance	$	892	$	1,145
Provision for warranties	704		135
Warranty payments and costs incurred	(609)		(418)
Warranty activity for divested businesses	0		(27)
Impact of changes in foreign currency rates	18		0
Ending balance	$	1,005	$	835

Note 8. Debt

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

February 29, 2020 August 31, 2019
Senior Credit Facility
Revolver $ —
$ —
Term Loan —
175,000
Total Senior Credit Facility —
175,000
5.625% Senior Notes 287,559
287,559
Total Senior Indebtedness 287,559
462,559
Less: Current maturities of long-term debt —
(7,500 )
Debt issuance costs (1,192 ) (2,114 )
Total long-term debt, less current maturities $ 286,367
$ 452,945


	February 28, 2021		August 31, 2020
Senior Credit Facility
Revolver	$	210,000	$	255,000
Term Loan	0		0
Total Senior Credit Facility	210,000		255,000
Less: Current maturities of long-term debt	0		0
Debt issuance costs	0		0
Total long-term debt, less current maturities	$	210,000	$	255,000

Senior Credit Facility

~~The~~In March 2019, the Company entered into a Senior Credit Facility with a syndicate of banks to, among other things, (i) expand the multi-currency revolving line of credit from $300 million to $400 million, (ii) extend the maturity of the Company's ~~$600 million~~Senior Credit Facility from May 2020 to March 2024 and (iii) modify certain other provisions of the credit agreement including a reduction in pricing. The Senior Credit Facility is comprised of a $400 million revolving line of credit and previously provided for a $200 million term ~~loan which was scheduled to mature in March 2024. It~~loan.

The Senior Credit Facility also provides the option for future expansion, subject to certain conditions, through a $300 million accordion ~~on the revolving line of credit.~~and/or a $200 million incremental term loan. Borrowings under the Senior Credit Facility bear interest at a variable rate based on LIBOR or a base rate, ~~with interest rate spreads above LIBOR or the base rate being subject to adjustments based on the Company's net leverage ratio,~~ ranging from 1.125% to 2.00% in the case of loans bearing interest at LIBOR and from ~~1.25%~~0.125% to 1.00% in the case of loans bearing interest at the base rate. In addition, a non-use fee is 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 ratio.~~leverage.

In November 2019, the Company used the proceeds from the sale of the EC&S segment to pay off the outstanding principal balance on the term loan. In conjunction with the repayment, the Company expensed, within, “Financing costs, net” in the Condensed Consolidated Statements of Operations, the remaining $0.6 million of associated capitalized debt issuance costs. To reduce interest costs, the Company paid down $45 million on the revolving line of credit in the three months ended February 28, 2021 with available cash on hand. At February 28, 2021, there was $210.0 million of borrowings under the revolving line of credit and $185.7 million of available borrowing capacity under the revolving line of credit.

The Senior Credit Facility contains two financial covenants, which are a maximum leverage ratio of 3.75:1 and a minimum interest coverage ratio of 3.5:1. ~~For each covenant, certain~~Certain transactions lead to adjustments to the underlying ratios, including an increase to the leverage ratio ~~including~~from 3.75 to 4.25 during the four fiscal quarters after a significant acquisition. The sale of the EC&S segment triggered a reduction of the minimum interest coverage ratio from 3.5 to 3.0 for any fiscal quarter ending within twelve months after the sale of the EC&S ~~segment and~~segment. In April 2020, the Company proactively amended its Senior Credit Facility to extend the interest coverage ratio at 3.0 for an ~~increase~~additional 12 months through October 2021 to mitigate risks associated with the ~~leverage ratio from 3.75 to 4.25 during~~potential impact of the ~~four fiscal quarters after a significant acquisition.~~COVID-19 pandemic.

The Company was in compliance with all financial covenants at February ~~29, 2020.~~28, 2021. Borrowings under the Senior Credit Facility are secured by substantially all personal property assets of the Company and its domestic subsidiary guarantors and certain equity interests owned by the foreign law pledgors.

In November 2019, the Company used the proceeds from the sale of the EC&S segment to pay off the outstanding principal balance on the term loan. In conjunction, we expensed the remaining $0.6 million of associated capitalized debt issuance costs. As of February 29, 2020, the unused credit line and amount available for borrowing under the revolving line of credit was $394.9 million.

Senior Notes

On April 16, 2012, the Company issued $300 million of 5.625% Senior Notes due 2022 (the “Senior Notes”), of which ~~$287.6 million remain outstanding.~~NaN remained outstanding as of February 28, 2021. The Senior Notes ~~require no principal installments prior to their~~ ~~June 15, 2022~~ ~~maturity, require semiannual interest payments in December and June of each year and contain certain financial and non-financial covenants. The Senior Notes include~~included a call feature that ~~allows~~allowed the Company to ~~repurchase~~redeem them anytime on or after June 15, 2017 at stated redemption prices ~~currently at 100.9% and reducing~~that reduced to ~~100.0%~~100% on June 15, 2020, plus accrued and unpaid interest. In order to reduce interest costs, in June 2020, the Company redeemed all of the outstanding Senior Notes at a price equal to 100% of the principal amount thereof, plus the settlement of accrued and unpaid interest.

Note 9. Fair Value ~~Measurement~~Measurements

The Company assesses the inputs used to measure the fair value of financial assets and liabilities using a three-tier hierarchy. Level 1 inputs include unadjusted quoted prices for identical instruments and are the most observable. Level 2 inputs include quoted prices for similar assets and observable inputs such as interest rates, foreign currency exchange rates, commodity rates and yield curves. Level 3 inputs are not observable in the market and include management’s own judgments about the assumptions market participants would use in pricing an asset or liability.

The fair value of the Company’s cash and cash equivalents, accounts receivable, ~~and~~ accounts payable ~~approximated book value at both February 29, 2020~~ and ~~August 31, 2019 due to their short-term nature. The fair value of~~ variable rate long-term debt approximated book value at both February 28, 2021 and August 31, ~~2019 as~~2020 due to their short-term nature and/or the fact that the interest ~~rate~~rates approximated market ~~rates (the Company had no variable rate debt outstanding as of February 29, 2020).~~rates. Foreign currency exchange contracts and interest rate swaps are recorded at fair value. The fair value of the Company's foreign currency exchange contracts was a net ~~liability of $0.1 million at February 29, 2020 and a net~~ asset of less than $0.1 million and $0.2 million at February 28, 2021 and August 31, 2020, respectively. The fair value of the Company's interest rate swap (see Note 10, “Derivatives”, for further information on the Company's interest rate swap) was a net liability of less than $0.1 million at February 28, 2021 and $0.1 million at August 31, ~~2019.~~2020. The fair value of the foreign currency exchange and interest rate swap contracts ~~was~~were based on quoted inactive market prices and is therefore classified as Level 2 within the valuation hierarchy. The fair value of the Company’s outstanding Senior Notes was $289.8 million and $291.5 million at February 29, 2020 and August 31, 2019, respectively. The fair value of the Senior Notes was based on quoted inactive market prices and are therefore classified as Level 2 within the valuation hierarchy.

Note 10. Derivatives

All derivatives are recognized in the balance sheet at their estimated fair value. The Company does not enter into derivatives for speculative purposes. Changes in the fair value of derivatives (not designated as hedges) are recorded in earnings along with the gain or loss on the hedged asset or liability.

The Company is exposed to market risk for changes in foreign currency exchange rates due to the global nature of its operations. In order to manage this risk, the Company utilizes foreign currency exchange contracts to reduce the exchange rate risk associated with recognized non-functional currency balances. The effects of changes in exchange rates are reflected concurrently in earnings for both the fair value of the foreign currency exchange contracts and the related non-functional currency asset or liability. These derivative gains and losses offset foreign currency gains and losses from the related revaluation of non-functional currency assets and liabilities (amounts included in "Other (income) expense" in the Condensed Consolidated Statements of Operations). The U.S. dollar equivalent notional value of these short duration foreign currency exchange contracts was ~~$116.1~~$13.4 million and ~~$13.3~~$16.7 million at February ~~29, 2020~~28, 2021 and August 31, ~~2019,~~2020, respectively. The fair value of outstanding foreign currency exchange contracts was a net ~~liability of $0.1 million in February 29, 2020 and a net~~ asset of less than $0.1 million and $0.2 million at February 28, 2021 and August 31, ~~2019.~~2020, respectively. Net foreign currency gain (loss) ~~gain~~ (included in "Other expense" in the Condensed Consolidated Statements of Operations) related to these derivative instruments were as follows (in thousands):

Three Months Ended Six Months Ended
February 29, 2020 February 28, 2019 February 29, 2020 February 28, 2019
Foreign currency (loss) gain, net $ (376 ) $ 227
$ (551 ) $ (2 )


	Three Months Ended				Six Months Ended
	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Foreign currency gain (loss), net	$	109	$	(376)	$	61	$	(551)

The Company ~~also uses foreign currency forward exchange contracts~~is the fixed-rate payor on an interest rate swap contract that fixes the LIBOR-based index used to ~~hedge portions~~determine the interest rates charged on a total of ~~our net investments in non-U.S. subsidiaries (net investment hedge) against~~$100.0 million of the ~~effect of exchange~~Company's LIBOR-based variable rate ~~fluctuations~~borrowings on the ~~translation~~revolving line of ~~foreign currency balances to the U.S. dollar.~~credit. The contract carries a fixed rate of 0.259% and expires in August 2021. The swap agreement qualifies as a hedging instrument and has been designated as a cash flow hedge of forecasted LIBOR-based interest payments. The change in the fair value of ~~foreign currency forward exchange contracts designated as net investment hedges are~~the interest rate swap, a gain of less than $0.1 million in both the three and six months ended February 28, 2021 is recorded in other comprehensive income (loss). The Company expects to reclassify the loss of $0.1 million out of accumulated other comprehensive ~~income where they offset gains~~loss ("AOCL") and ~~losses recorded on our~~into Financing costs, net, ~~investments where~~during the ~~entity has a non-U.S. dollar functional currency. As~~remainder of the fiscal year. The Company’s LIBOR-based variable rate borrowings outstanding with terms matching the pay-fixed interest rate swap as of February ~~29,~~28, 2021 and August 31, 2020 the notional value of foreign currency forward exchange contracts designated as net investment hedges was $31.6 million. The Company recorded through accumulated other comprehensive income (loss) a loss of $0.2were $145.0 million ~~in the three months ended February 29, 2020.~~and $180.0 million, respectively.

Note 11. Earnings per Share and Shareholders' Equity

The Company's Board of Directors has authorized the repurchase of shares of the Company's common stock under publicly announced share repurchase programs. Since the inception of the initial share repurchase program in fiscal 2012, the Company has repurchased ~~22,295,357~~22,799,230 shares of common stock for ~~$658.0~~$667.7 million. As of February ~~29, 2020,~~28, 2021, the maximum number of shares that may yet be purchased under the programs is ~~5,704,643~~5,200,770 shares. The Company did not repurchase shares in the six months ended February 28, 2021. During the six months ended February 29, 2020, the Company repurchased 839,789 shares for $17.8 million. No shares were ~~purchased~~repurchased in the three months ended February 29, 2020.

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


	Three Months Ended				Six Months Ended
	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Numerator:
Net earnings from continuing operations	$	3,584	$	3,918	$	8,406	$	10,290
Net loss from discontinued operations	(402)		(1,756)		(626)		(6,007)
Net earnings	$	3,182	$	2,162	7,780		4,283

Denominator:
Weighted average common shares outstanding - basic	59,938		60,130		59,874		60,106
Net effect of dilutive securities - stock based compensation plans	331		383		306		451
Weighted average common shares outstanding - diluted	60,269		60,513		60,180		60,557

Earnings per common share from continuing operations:
Basic	$	0.06	$	0.07	$	0.14	$	0.17
Diluted	$	0.06	$	0.06	$	0.14	$	0.17

Loss per common share from discontinued operations:
Basic	$	(0.01)	$	(0.03)	$	(0.01)	$	(0.10)
Diluted	$	(0.01)	$	(0.03)	$	(0.01)	$	(0.10)

Earnings per common share:
Basic	$	0.05	$	0.04	$	0.13	$	0.07
Diluted	$	0.05	$	0.04	$	0.13	$	0.07

Anti-dilutive securities from stock based compensation plans (excluded from earnings per share calculation)	932		1,024		1,211		1,046

Three Months Ended Six Months Ended
February 29, 2020 February 28, 2019 February 29, 2020 February 28, 2019
Numerator:
Net earnings (loss) from continuing operations $ 3,918
$ 765
$ 10,290
$ (15,657 )
Net (loss) earnings from discontinued operations (1,756 ) 1,988
(6,007 ) 958
Net earnings (loss) 2,162
2,753
4,283
(14,699 )

Denominator:
Weighted average common shares outstanding - basic 60,130
61,243
60,106
61,137
Net effect of dilutive securities - stock based compensation plans 383
364
451
—
Weighted average common shares outstanding - diluted $ 60,513
$ 61,607
$ 60,557
$ 61,137

Earnings (loss) per common share from continuing operations:
Basic $ 0.07
$ 0.01
$ 0.17
$ (0.26 )
Diluted $ 0.06
$ 0.01
$ 0.17
$ (0.26 )

(Loss) earnings per common share from discontinued operations:
Basic $ (0.03 ) $ 0.03
$ (0.10 ) $ 0.02
Diluted $ (0.03 ) $ 0.03
$ (0.10 ) $ 0.02

Earnings (loss) per common share:
Basic $ 0.04
$ 0.04
$ 0.07
$ (0.24 )
Diluted $ 0.04
$ 0.04
$ 0.07
$ (0.24 )

Anti-dilutive securities from stock based compensation plans (excluded from earnings per share calculation) 1,024
1,503
1,046
2,986
The following table illustrates the changes in the balances of each component of shareholders' equity for the three months ended February 28, 2021 (in thousands):


	Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Stock Held in Trust		Deferred Compensation Liability		Total Shareholders’ Equity
	Issued Shares	Amount
Balance at November 30, 2020	82,625	$	16,525	$	195,979	$	(667,732)	$	922,269	$	(99,095)	$	(2,643)	$	2,643	$	367,946
Net earnings	—	—		—		—		3,182		—		—		—		3,182
Other comprehensive income, net of tax	—	—		—		—		—		9,157		—		—		9,157
Stock contribution to employee benefit plans and other	4	1		80		—		—		—		—		—		81
Vesting of restricted stock awards	235	47		(47)		—		—		—		—		—		0
Stock based compensation expense	—	—		2,647		—		—		—		—		—		2,647
Tax effect related to net share settlement of equity awards	—	—		(1,706)		—		—		—		—		—		(1,706)
Stock issued to, acquired for and distributed from rabbi trust	15	3		83		—		—		—		(353)		353		86
Balance at February 28, 2021	82,879	$	16,576	$	197,036	$	(667,732)	$	925,451	$	(89,938)	$	(2,996)	$	2,996	$	381,393

The following table illustrates the changes in the balances of each component of shareholders' equity for the three months ended February 29, 2020 (in thousands):

Common Stock Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Stock
Held in
Trust Deferred
Compensation
Liability Total
Shareholders’
Equity
Issued
Shares Amount
Balance at November 30, 2019 82,248
$ 16,450
$ 187,772
$ (658,017 ) $ 921,460
$ (114,412 ) $ (3,157 ) $ 3,157
$ 353,253
Net earnings —
—
—
—
2,162
—
—
—
2,162
Other comprehensive loss, net of tax —
—
—
—
—
(3,052 ) —
—
(3,052 )
Stock contribution to employee benefit plans and other 5
1
125
—
—
—
—
—
126
Restricted stock awards 259
52
(52 ) —
—
—
—
—
—
Stock based compensation expense —
—
3,093
—
—
—
—
—
3,093
Stock option exercises 17
3
119
—
—
—
—
—
122
Tax effect related to net share settlement of equity awards —
—
(1,425 ) —
—
—
—
—
(1,425 )
Stock issued to, acquired for and distributed from rabbi trust 11
2
84
—
—
—
723
(723 ) 86
Balance at February 29, 2020 82,540
$ 16,508
$ 189,716
$ (658,017 ) $ 923,622
$ (117,464 ) $ (2,434 ) $ 2,434
$ 354,365

~~The following table illustrates the changes in the balances of each component of shareholders' equity for the three months ended February 28, 2019 (in thousands):~~


	Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Stock Held in Trust		Deferred Compensation Liability		Total Shareholders’ Equity
	Issued Shares	Amount
Balance at November 30, 2019	82,248	$	16,450	$	187,772	$	(658,017)	$	921,460	$	(114,412)	$	(3,157)	$	3,157	$	353,253
Net earnings	—	—		—		—		2,162		—		—		—		2,162
Other comprehensive income, net of tax	—	—		—		—		—		(3,052)		—		—		(3,052)
Stock contribution to employee benefit plans and other	5	1		125		—		—		—		—		—		126
Vesting of restricted stock awards	259	52		(52)		—		—		—		—		—		0
Stock based compensation expense	—	—		3,093		—		—		—		—		—		3,093
Stock option exercises	17	3		119		—		—		—		—		—		122
Tax effect related to net share settlement of equity awards	—	—		(1,425)		—		—		—		—		—		(1,425)
Stock issued to, acquired for and distributed from rabbi trust	11	2		84		—		—		—		723		(723)		86
Balance at February 29, 2020	82,540	$	16,508	$	189,716	$	(658,017)	$	923,622	$	(117,464)	$	(2,434)	$	2,434	$	354,365

Common Stock Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Stock
Held in
Trust Deferred
Compensation
Liability Total
Shareholders’
Equity
Issued
Shares Amount
Balance at November 30, 2018 81,503
$ 16,301
$ 171,606
$ (617,731 ) $ 1,149,578
$ (182,189 ) $ (2,573 ) $ 2,573
$ 537,565
Net earnings —
—
—
—
2,753
—
—
—
2,753
Other comprehensive income, net of tax —
—
—
—
—
42,437
—
—
42,437
Stock contribution to employee benefit plans and other 6
1
125
—
—
—
—
—
126
Restricted stock awards 284
56
(56 ) —
—
—
—
—
—
Stock based compensation expense —
—
3,568
—
—
—
—
—
3,568
Stock option exercises 20
4
349
—
—
—
—
—
353
Tax effect related to net share settlement of equity awards —
—
(1,287 ) —
—
—
—
—
(1,287 )
Stock issued to, acquired for and distributed from rabbi trust 19
2
113
—
—
—
(416 ) 416
115
Balance at February 28, 2019 81,832
$ 16,364
$ 174,418
$ (617,731 ) $ 1,152,331
$ (139,752 ) $ (2,989 ) $ 2,989
$ 585,630

~~The following table illustrates the changes in the balances of each component of shareholders' equity for the six months ended February 29, 2020 (in thousands):~~

Common Stock Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Stock
Held in
Trust Deferred
Compensation
Liability Total
Shareholders’
Equity
Issued
Shares Amount
Balance at August 31, 2019 81,919
$ 16,384
$ 181,213
$ (640,212 ) $ 915,466
$ (171,672 ) $ (3,070 ) $ 3,070
$ 301,179
Net earnings —
—
—
—
4,283
—
—
—
4,283
Other comprehensive income, net of tax —
—
—
—
—
57,875
—
—
57,875
Stock contribution to employee benefit plans and other 11
2
255
—
—
—
—
—
257
Restricted stock awards 449
90
(90 ) —
—
—
—
—
—
Treasury stock repurchases —
—
—
(17,805 ) —
—
—
—
(17,805 )
Stock based compensation expense —
—
9,630
—
—
—
—
—
9,630
Stock option exercises 145
29
2,602
—
—
—
—
—
2,631
Tax effect related to net share settlement of equity awards —
—
(4,063 ) —
—
—
—
—
(4,063 )
Stock issued to, acquired for and distributed from rabbi trust 16
3
169
—
—
—
636
(636 ) 172
Adoption of accounting standards (Note 1) —
—
—
—
3,873
(3,667 ) —
—
206
Balance at February 29, 2020 82,540
$ 16,508
$ 189,716
$ (658,017 ) $ 923,622
$ (117,464 ) $ (2,434 ) $ 2,434
$ 354,365

The following table illustrates the changes in the balances of each component of shareholders' equity for the six months ended February 28, ~~2019~~2021 (in thousands):

Common Stock Additional
Paid-in
Capital Treasury
Stock Retained
Earnings Accumulated
Other
Comprehensive
Loss Stock
Held in
Trust Deferred
Compensation
Liability Total
Shareholders’
Equity
Issued
Shares Amount
Balance at August 31, 2018 81,424
$ 16,285
$ 167,448
$ (617,731 ) $ 1,166,955
$ (174,245 ) $ (2,450 ) $ 2,450
$ 558,712
Net loss —
—
—
—
(14,699 ) —
—
—
(14,699 )
Other comprehensive income, net of tax —
—
—
—
—
34,493
—
—
34,493
Stock contribution to employee benefit plans and other 10
2
242
—
—
—
—
—
244
Restricted stock awards 334
65
(65 ) —
—
—
—
—
—
Stock based compensation expense —
—
7,162
—
—
—
—
—
7,162
Stock option exercises 41
8
779
—
—
—
—
—
787
Tax effect related to net share settlement of equity awards —
—
(1,488 ) —
—
—
—
—
(1,488 )
Stock issued to, acquired for and distributed from rabbi trust 23
4
340
—
—
—
(539 ) 539
344
Adoption of accounting standards —
—
—
—
75
—
—
—
75
Balance at February 28, 2019 81,832
$ 16,364
$ 174,418
$ (617,731 ) $ 1,152,331
$ (139,752 ) $ (2,989 ) $ 2,989
$ 585,630


	Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Stock Held in Trust		Deferred Compensation Liability		Total Shareholders’ Equity
	Issued Shares	Amount
Balance at August 31, 2020	82,594	$	16,519	$	193,492	$	(667,732)	$	917,671	$	(100,724)	$	(2,562)	$	2,562	$	359,226
Net earnings	—	—		—		—		7,780		—		—		—		7,780
Other comprehensive income, net of tax	—	—		—		—		—		10,786		—		—		10,786
Stock contribution to employee benefit plans and other	10	2		180		—		—		—		—		—		182
Vesting of restricted stock awards	255	51		(51)		—		—		—		—		—		0
Stock based compensation expense	—	—		5,227		—		—		—		—		—		5,227
Tax effect related to net share settlement of equity awards	—	—		(1,981)		—		—		—		—		—		(1,981)
Stock issued to, acquired for and distributed from rabbi trust	20	4		169		—		—		—		(434)		434		173
Balance at February 28, 2021	82,879	16,576		$	197,036	$	(667,732)	$	925,451	$	(89,938)	$	(2,996)	$	2,996	$	381,393

The following table illustrates the changes in the balances of each component of shareholders' equity for the six months ended February 29, 2020 (in thousands):


	Common Stock			Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Stock Held in Trust		Deferred Compensation Liability		Total Shareholders’ Equity
	Issued Shares	Amount
Balance at August 31, 2019	81,919	$	16,384	$	181,213	$	(640,212)	$	915,466	$	(171,672)	$	(3,070)	$	3,070	$	301,179
Net earnings	—	—		—		—		4,283		—		—		—		4,283
Other comprehensive income, net of tax	—	—		—		—		—		57,875		—		—		57,875
Stock contribution to employee benefit plans and other	11	2		255		—		—		—		—		—		257
Vesting of restricted stock awards	449	90		(90)		—		—		—		—		—		0
Treasury stock repurchases	—	—		—		(17,805)		—		—		—		—		(17,805)
Stock based compensation expense	—	—		9,630		—		—		—		—		—		9,630
Stock option exercises	145	29		2,602		—		—		—		—		—		2,631
Tax effect related to net share settlement of equity awards	—	—		(4,063)		—		—		—		—		—		(4,063)
Stock issued to, acquired for and distributed from rabbi trust	16	3		169		—		—		—		636		(636)		172
Adoption of accounting standards	—	—		—		—		3,873		(3,667)		—		—		206
Balance at February 29, 2020	82,540	$	16,508	$	189,716	$	(658,017)	$	923,622	$	(117,464)	$	(2,434)	$	2,434	$	354,365

Note 12. Income Taxes

The Company's global operations, acquisition activity and specific tax attributes provide opportunities for continuous global tax planning initiatives to maximize tax credits and deductions. Comparative earnings ~~(loss)~~ before income taxes, income tax expense and effective income tax rates from continuing operations are as follows (in thousands):

Three Months Ended Six Months Ended
February 29, 2020 February 28, 2019 February 29, 2020 February 28, 2019
Earnings (loss) from continuing operations before income tax expense $ 4,724
$ 4,767
$ 12,046
$ (11,589 )
Income tax expense 806
4,002
1,756
4,068
Effective income tax rate 17.1 % 84.0 % 14.6 % (35.1 )%


	Three Months Ended						Six Months Ended
	February 28, 2021			February 29, 2020			February 28, 2021			February 29, 2020
Earnings from continuing operations before income tax expense	$	3,585		$	4,724		$	10,664		$	12,046
Income tax expense	1			806			2,258			1,756
Effective income tax rate	0.0		%	17.1		%	21.2		%	14.6		%

The Company’s earnings ~~(loss)~~ from continuing operations before income taxes ~~includes~~include earnings from foreign jurisdictions ~~in excess~~ of approximately 70% of the consolidated total for each of the estimated full-year fiscal ~~2020~~2021 and ~~2019. Overall,~~full-year 2020. Though most foreign tax rates are now in line with the U.S. tax rate of 21%, the annual effective tax rate is ~~not significantly~~ impacted by ~~differences~~withholding taxes, losses in ~~foreign tax rates now that~~jurisdictions where no benefit can be realized, and various aspects of the U.S. ~~tax rate of 21% is in line with~~Tax Cuts and Jobs Act, such as the ~~Company's average foreign tax rate. Both the current~~Global Intangible Low-Taxed Income, Foreign-Derived Intangible Income and prior year effective income tax rates were impacted by impairment & divestiture charges as well as accelerated debt issuance costs. Results included impairment & divestiture benefits of $0.8 million ($0.5 million after tax)Base Erosion and $2.1 million ($1.6 million after tax) for the three and six months ended February 29, 2020, respectively, as well as accelerated debt issuance costs of $0.6 million ($0.5 million after tax) for the six months ended February 29, 2020. This compares to impairment & divestiture charges of $3.5 million ($3.5 million after tax) and $27.0 million ($27.0 million after tax) for the three and six months ended February 28, 2019, respectively. Excluding the impairment & divestiture charges and accelerated debt issuance costs, theAnti-Abuse Tax provisions.

The effective tax rate ~~was 14.6% and 48.2%~~ for the three months ended February ~~29, 2020 and February~~ 28, ~~2019, respectively, and 13.4% and 26.4%~~2021 was 0.0%, compared to 17.1% for the ~~six months ended February 29, 2020 and February 28, 2019, respectively.~~comparable prior-year period. The ~~income~~effective tax ~~expense without impairment & divestiture charges~~rate for the ~~three~~current-year period was impacted by benefits from the vesting of stock options and ~~six months ended February 29, 2020 is~~tax planning initiatives that are not expected to repeat in future periods. The prior-year period was impacted by valuation allowance releases ~~related to operational improvements and~~associated with the ability to use tax attributes before expiration. The current-year period resulted in less tax expense than the comparable prior-year period primarily due to the impacts of COVID-19 on income, withholding tax, and tax exposures related to our mobile workforce.

The U.S. government continues to enact tax legislation containing provisions to support businesses during the COVID-19 pandemic, including deferment of the employer portion of certain payroll taxes, refundable payroll tax credits and technical amendments to tax depreciation methods for qualified improvement property. The enacted legislation did not have a material impact on our consolidated financial statements for the three months ended February 28, 2021. We are continuing to evaluate the future impact of the COVID-19-related tax legislation on our consolidated financial statements.

Note 13. Segment Information

The Company is a global manufacturer of a broad range of industrial products and solutions. The IT&S reportable segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools and in providing services and tool rental to the industrial, maintenance, infrastructure, oil & gas, energy and other markets. The Other operating segment is included for purposes of reconciliation of the respective balances below to the condensed consolidated financial statements.

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


	Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019				February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Net Sales by Reportable Segment & Product Line													Net Sales by Reportable Segment & Product Line
Industrial Tools & Services Segment
IT&S Segment													IT&S Segment
Product	$	93,364		$	105,584		$	189,727		$	208,353		Product	$	87,195	$	93,364	$	169,768	$	189,727
Service & Rental	29,997			43,937			69,226			89,824			Service & Rental	25,544		29,997		55,146		69,226
	123,361			149,521			258,953			298,177				112,739		123,361		224,914		258,953

Other Operating Segment	10,025			10,267			21,107			20,163			Other Operating Segment	7,915		10,025		15,170		21,107
	$	133,386		$	159,788		$	280,060		$	318,340			$	120,654	$	133,386	$	240,084	$	280,060

Operating Profit (Loss)													Operating Profit (Loss)
Industrial Tools & Services Segment	$	20,570		$	26,546		$	46,624		$	52,920
IT&S Segment													IT&S Segment	$	13,857	$	20,570	$	31,014	$	46,624
Other Operating Segment	(972		)	(2,447		)	(1,227		)	(26,408		)	Other Operating Segment	(1,873)		(972)		(3,682)		(1,227)
General Corporate	(11,031		)	(11,660		)	(22,460		)	(22,625		)	General Corporate	(6,277)		(11,031)		(12,555)		(22,460)
	$	8,567		$	12,439		$	22,937		$	3,887			$	5,707	$	8,567	$	14,777	$	22,937

February 29, 2020 August 31, 2019
Assets*
Industrial Tools & Services Segment $ 645,163
$ 553,615
Other Operating Segment 62,111
54,484
General Corporate 172,068
230,597
$ 879,342
$ 838,696


	February 28, 2021		August 31, 2020
Assets
IT&S Segment	$	615,018	$	592,086
Other Operating Segment	61,341		61,105
General Corporate	132,642		171,103
	$	809,001	$	824,294

*Excludes "Assets from discontinued operations" as of August 31, 2019.

In addition to the impact of changes in foreign currency exchange rates, the comparability of segment and product line information is impacted by acquisition/divestiture activities, impairment and divestiture charges, restructuring costs and related benefits. Corporate assets, which are not allocated, principally represent cash and cash equivalents, property, plant and equipment, Right of Use ("ROU") assets, capitalized debt issuance costs and deferred income taxes.

Note 14. Commitments and Contingencies

The Company had outstanding letters of credit of ~~$13.8~~$11.7 million and ~~$18.2~~$11.9 million at February ~~29, 2020~~28, 2021 and August 31, ~~2019~~,2020, respectively, the majority of which relate to commercial contracts and self-insured workers' compensation programs.

As part of the Company's global sourcing strategy, we have entered into agreements with certain suppliers that require the supplier to maintain minimum levels of inventory to support certain products for which we require a short lead time to fulfill customer orders. We have the ability to notify the supplier that they no longer need to maintain the minimum level of inventory should we discontinue manufacturing of a product during the contract ~~period,~~period; however, we must purchase the remaining minimum inventory levels the supplier was required to maintain within a defined period of time.

The Company is a party to various legal proceedings that have arisen in the normal course of business. These legal proceedings ~~typically~~ include regulatory matters, product liability, breaches of contract, employment, personal injury and other disputes. The Company has recorded reserves for loss contingencies based on the specific circumstances of each case. Such reserves are recorded when it is probable a loss has been incurred and can be reasonably estimated. The Company maintains a policy to exclude from such reserves an estimate of legal defense costs. In the opinion of management, resolution of these contingencies is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company remains contingently liable for lease payments under leases of businesses that it previously divested or spun-off in the event that such businesses are unable to fulfill their future lease payment ~~obligations,~~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 February ~~29, 2020~~28, 2021 were ~~$7.7~~$6.1 million associated with monthly payments extending to fiscal 2025.

As previously disclosed, the Company filed a voluntary self-disclosure ("VSD") with the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) in October 2018 regarding otherwise authorized sales of tools and other products totaling approximately $0.5 million by certain of its foreign subsidiaries to two Iranian distributors, which sales potentially fell outside the scope of General License H under the Iranian Transaction and Sanctions Regulations, 31 C.F.R. Part 560. The VSD also included information about additional transactions by certain of the Company's Dutch subsidiaries with a counterparty in Estonia that may have been in violation of E.O. 13685, as certain sales of products and services may have been diverted to the Crimea region of Ukraine. In February 2020, OFAC issued the Company a Cautionary Letter as its final enforcement response. Accordingly, the matter has concluded with no adverse impact to the Company's financial results.

~~Additionally, the~~ Company has self-disclosed ~~the~~ sales to ~~its~~an Estonian customer to relevant authorities in the Netherlands as potentially violating applicable Crimea sanctions laws in that country and the European ~~Union. The~~Union, as those sales were diverted to the Crimea region of Ukraine. While the investigation by authorities in the Netherlands is ongoing, ~~and may result in penalties. At this time,~~ the Company ~~cannot predict when the investigation~~has concluded that it is probable it will ~~be completed or reasonably estimate what penalties, if any, will be assessed.~~incur financial penalties. While there can be no assurance of the ultimate outcome of the Netherlands investigation, in the six months ended February 28, 2021, the Company recorded an expense representing its estimate of the financial penalty it may incur (no expense recorded in the three months ended February 28, 2021). The Company currently believes that there will be no material adverse effect on the Company's financial position, results of operations or cash ~~flows.~~flows from this matter.

Note 15. Leases

The ~~Company adopted ASC 842 on September 1, 2019 using a modified retrospective approach and as a result did not adjust prior periods. See~~ ~~Note 1, “Basis of Presentation”~~ ~~for further discussion of the adoption.~~

~~As of February 29, 2020, the~~ Company has operating leases for real estate, vehicles, manufacturing equipment, IT equipment and office ~~equipment. The~~equipment (the Company ~~did~~does not have any financing leases). Our leases ~~during the three and six months ended February 29, 2020. Our real estate leases are generally for office, warehouse and manufacturing facilities~~ typically ~~ranging~~range in term from 53 to 15 years and may contain renewal options for periods up to 35 years at our discretion. Our equipment leases are generally for vehicles, manufacturing and IT equipment typically ranging in term from 3 to 7 years and may contain renewal options for periods up to one year at our discretion. Our leases generally contain payments that are primarily fixed; however, certain lease arrangements contain variable payments, which are expensed as incurred and not included in the measurement of ROU assets and lease liabilities. These amounts include payments affected by changes in the Consumer Price Index and executory costs (such as real estate taxes, utilities and common-area maintenance), which are based on usage or performance. In addition, our leases generally do not include material residual value guarantees or material restrictive covenants.

We determine if an arrangement contains a lease in whole or in part at the inception of the contract and identify classification of the lease as financing or operating. ROU assets represent our right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. We account for the underlying operating lease asset at the individual lease level. Operating leases are recorded as operating lease ROU assets in “Other long-term assets” and operating lease liabilities in “Other current liabilities” and “Other long-term liabilities” of the Condensed Consolidated Balance Sheets.

All leases greater than 12 months result in recognition of a ROU asset and a liability at the lease commencement date and are recorded at the present value of the future minimum lease payments over the lease term. The lease term is equal to the initial term at commencement plus any renewal or extension options that the Company is reasonably certain will be exercised. ROU assets at the date of commencement are equal to the amount of the initial lease liability, the initial direct costs incurred by the Company and any prepaid lease payments less any incentives received. Lease expense for operating leases is recognized on a straight-line basis over the lease term or remaining useful life. As most of our leases do not provide the information required to determine the implicit rate, we utilize a consolidated group incremental borrowing rate for all leases as the Company has centralized treasury operations. The incremental borrowing rate is derived through a combination of inputs such as the Company's credit rating, impact of collaborated borrowing capabilities and lease term.

The Company considers contract modifications when there is a change to the contractual terms, scope of the lease or the consideration given. In the event the right to use an additional asset is granted and the lease payments associated with the additional asset are commensurate with the ROU asset’s standalone price, the modification is accounted for as a separate contract and the original contract remains unchanged. In the event that a single lease is modified, the Company reassesses the classification of the modified lease as of the effective date of the modification based on the modified terms and accounts for initial direct costs, lease incentives and any other payments made to or by the Company in connection with the modification in the same manner that items would be accounted for in connection with a new lease. If there is an additional ROU asset included, the lease term is extended or reduced, or the consideration is the only change in the contract, the Company reallocates the remaining consideration in the contract and remeasures the lease liability using a discount rate determined at the effective date of the modification. The remeasured lease liability for the modified lease is an adjustment to the corresponding ROU asset and does not impact the Condensed Consolidated

Statements of Operations. In the event of a full or partial termination, the carrying value of the ROU asset decreases on a basis proportionate to the full or partial termination and any difference between the reduction in the lease liability and the proportionate reduction of the ROU asset is recognized as a gain or loss at the effective date of the modification.

~~The Company elected not to recognize short-term leases on its balance sheet and continues to expense such leases on a straight-line basis over the lease term.~~

The components of lease expense ~~for the three and six months ended February 29, 2020~~ were as follows (in thousands):


	Three Months Ended				Six Months Ended
	February 28, 2021		February 29, 2020		February 28, 2021		February 29, 2020
Lease Cost:
Operating lease cost	$	3,766	$	3,894	$	7,471	$	8,147
Short-term lease cost	397		310		810		765
Variable lease cost	865		564		1,747		1,033

Three Months Ended February 29, 2020 Six Months Ended February 29, 2020
Lease Cost:
Operating lease cost $ 3,894
$ 8,147
Short-term lease cost 310
765
Variable lease cost 564
1,033

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


	Six Months Ended
	February 28, 2021		February 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	7,486	$	8,141

Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	1,360		4,532

Six Months Ended February 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 8,141

Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases 4,532

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

February 29, 2020
Operating leases:
Other long-term assets $ 53,555

Other current liabilities 13,131
Other long-term liabilities 42,105
Total operating lease liabilities $ 55,236

Weighted Average Remaining Lease Term (in years):
Operating leases 7.7 years

Weighted Average Discount Rate:
Operating leases 4.33 %

~~A summary of the future minimum lease payments due under operating leases with terms of more than one year at February 29, 2020 is as follows (in thousands):~~

Operating Leases
2020 (excluding the six months ended February 29, 2020) $ 7,929
2021 13,133
2022 9,232
2023 7,120
2024 5,746
Thereafter 22,507
Total minimum lease payments 65,667
Less imputed interest (10,431 )
Present value of net minimum lease payments $ 55,236

~~A summary of the future minimum lease payments due under operating leases with terms of more than one year at August 31, 2019 is as follows (in thousands):~~

Operating Leases
2020 $ 15,792
2021 12,266
2022 10,111
2023 6,865
2024 5,177
Thereafter 21,620
Present value of net minimum lease payments $ 71,831

~~Note 16. Subsequent Events~~

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic. COVID-19 continues to spread throughout the world and has led certain countries or jurisdictions within to restrict travel or social gatherings (including at places of business). In addition, in March 2020, as a result of the weakened demand for oil resulting from COVID-19 in addition to political tensions between several large oil producing countries, there has been a substantial decline in oil prices. The Company's results of operations and financial condition will be negatively impacted through the duration of the pandemic and the low oil prices, but that impact cannot be reasonably estimated due to uncertainty associated with i) the duration of the pandemic (though expected to be short term) and the low oil prices and ii) the extent of the impact during the duration on the Company's facilities and employees, customer demand, and availability of materials through supply channels. As such, there could be a material adverse impact on the Company's financial condition or results of operations.

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Enerpac Tool Group Corp. is a premier industrial tools and services company serving a broad and diverse set of customers in more than 90100 countries. The Company is a global leader in the engineering and manufacturing of high pressure hydraulic tools, controlled force products and solutions for precise positioning of heavy loads that help customers safely and reliably tackle some of the most challenging jobs around the world. The Company was founded in 1910 and is headquartered in Menomonee Falls, Wisconsin. The Company has one reportable segment, ~~Industrial Tools & Service ("~~IT~~&S").~~&S. This segment is primarily engaged in the design, manufacture and distribution of branded hydraulic and mechanical tools, as well as providing services and tool rental to the industrial, maintenance, infrastructure, oil & gas, energy and other markets. Financial information related to the Company's reportable segment is included in Note 13, "Segment Information" in the notes to the condensed consolidated financial statements.

Our businesses provide an array of products and services across multiple markets and geographies, which results in significant diversification. The IT&S segment ~~continues~~and the Company are well-positioned to ~~have exposure within~~drive shareholder value through a sustainable business strategy built on well-established brands, broad global distribution and end-markets, clear focus on the ~~broad industrial landscape, energy~~core tools and ~~infrastructure markets. We~~services business and disciplined capital deployment.

COVID-19 Update

During largely the second half of fiscal 2020 and through the first two quarters of fiscal 2021, our business, like many others around the world, has experienced significant negative financial impacts from the COVID-19 pandemic. Our key manufacturing facilities globally continue to ~~execute~~operate with additional precautions in place to ensure the safety of our ~~strategy~~employees, and we have continued to ~~drive best in class returns~~supply our customers with the products and services they require. However, demand for our ~~shareholders, demonstrated~~products and services has been significantly impacted, and, despite the ongoing distribution of vaccines globally, we expect demand will continue to be impacted to some extent for the remainder of the pandemic, albeit it at varying levels geographically and by market. In order to help mitigate the negative financial impact caused by the pandemic, we have executed a number of temporary cash and cost-savings measures. As our ~~acquisition of HTL Group. While we are confident~~business has seen continuous, sequential improvement in our financial results since the progress we are making on our strategy, the recent market interruption from both the COVID-19 pandemic and volatile oil pricing, currently we are unable to provide specific estimates on fiscal 2020 core sales growth, operating profit, or other financial metrics. For the remainderthird quarter of fiscal 2020, we ~~are taking~~have eliminated certain of the temporary cost savings actions put in place; however, we continue to execute on certain measures including applications for governmental assistance programs and cuts to discretionary spend where practical. We believe ~~will achieve~~that the essential products and services we provide, along with our ~~targeted EBITDA margin run rate of 20%.~~current strong balance sheet, have the Company well positioned for long-term growth and strategic execution as we exit the pandemic.

General Business Update

On October 31, 2019, the Company completed the previously announced sale of 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 purchase price of approximately ~~$215~~$216 million (inclusive of working capital adjustments that were finalized in the third quarter of fiscal 2020), with approximately $3 million which was due in four equal quarterly installments, ~~through October 31, 2020.~~the last of which was received in the first fiscal quarter of 2021.

On March 21, 2019, wethe Company announced a restructuring plan focused on i)(i) the integration of the Enerpac and Hydratight businesses (IT&S segment), ~~ii)~~(ii) the strategic exit of certain ~~commodity type~~commodity-type services in our North America Services ~~operation~~operations (IT&S segment), and ~~iii)~~(iii) driving efficiencies within the overall corporate structure. In the third quarter of fiscal 2020, the Company announced the expansion and revision of this plan, which further simplifies and flattens the corporate structure through elimination of redundancies between the segment and corporate functions, while enhancing our commercial and marketing processes to become even closer to our customers. Total restructuring charges associated with this restructuring plan were $2$0.6 million and $3$0.7 million in the three and six months ended February 28, 2021, respectively, and $1.7 million and $3.1 million in the three and six months ended February 29, 2020, respectively, related primarily to headcount reductions and facility consolidations. ~~The Company still expects to achieve a total of $12-$15 million of~~We anticipate achieving annual savings ~~with total restructuring costs~~ of ~~$10-$15 million. After~~$12 million to $15 million from the ~~announcement and execution~~first phase of the ~~remaining actions in March 2020, we will effectively be completed with this restructuring~~plan and anticipate an additional annual savings of $12 million to $15

million from the expansion and revision of the plan. The annual benefit of these gross cost savings may be impacted by a number of factors, including ~~sales and production volume variances and~~ annual incentive compensation differentials.

The Company also incurred less than $1 million of restructuring costs within the Other operating segment in the three and six months ended February 29, 2020 associated with a facilities consolidation. The consolidation is in the final stages and we expect to incur less than $1 million of additional restructuring charges over the remainder of fiscal 2020. We anticipate realizing approximately $3 million of annual savings associated with the actions and expect to start realizing these savings in fiscal 2020.

Given our global footprint, changes in foreign currency exchange rates could have a significant impact on our financial results, financial position and cash flow. Changes in foreign currency exchange rates will continue to add volatility as over one-half of our sales are generated outside of the United States in currencies other than the U.S. dollar. The weakening of the U.S. dollar favorably impacts our sales and cash flow ~~and earnings~~ given the translation of our international results into U.S. dollars. This also results in lower costs for certain international operations, which incur costs or purchase components in U.S. dollars, and increases the dollar value of assets (including cash) and liabilities of our international operations. A strengthening of the U.S. dollar has the opposite effect on our sales, cash flow, earnings and financial position.

Results of Operations

The following table sets forth our results of continuing operations (in millions, except per share amounts):

Three Months Ended Six Months Ended
February 29, 2020 February 28, 2019 February 29, 2020 February 28, 2019
Net sales $ 133
100 % $ 160
100 % $ 280
100 % $ 318
100 %
Cost of products sold 71
54 % 89
56 % 149
53 % 176
55 %
Gross profit 62
47 % 71
44 % 131
47 % 142
45 %
Selling, administrative and engineering
expenses
50
38 % 53
33 % 102
36 % 107
34 %
Amortization of intangible assets 2
2 % 2
1 % 4
1 % 4
1 %
Restructuring charges 2
2 % —
— % 4
1 % —
— %
Impairment & divestiture (benefits) charges (1 ) (1 )% 4
3 % (2 ) (1 )% 27
8 %
Operating profit 9
7 % 12
8 % 23
8 % 4
1 %
Financing costs, net 5
4 % 7
4 % 11
4 % 14
4 %
Other (income) expense, net (1 ) (1 )% —
— % —
— % 2
1 %
Earnings (loss) before income tax expense 5
4 % 5
3 % 12
4 % (12 ) (4 )%
Income tax expense 1
1 % 4
3 % 2
1 % 4
1 %
Net earnings (loss) from continuing operations 4
3 % 1
1 % 10
4 % (16 ) (5 )%

Diluted earnings (loss) per share from continuing operations $ 0.06
$ 0.01
$ 0.17
$ (0.26 )


	Three Months Ended								Six Months Ended
	February 28, 2021				February 29, 2020				February 28, 2021				February 29, 2020
Net sales	$	121	100	%	$	133	100	%	$	240	100	%	$	280	100	%
Cost of products sold	66		54	%	71		54	%	130		54	%	149		53	%
Gross profit	55		45	%	62		47	%	110		46	%	131		47	%
Selling, general and administrative expenses	46		38	%	50		38	%	90		38	%	102		36	%
Amortization of intangible assets	2		2	%	2		2	%	4		2	%	4		1	%
Restructuring charges	1		1	%	2		2	%	1		0	%	4		1	%
Impairment & divestiture charges (benefits)	0		0	%	(1)		(1)	%	0		0	%	(2)		(1)	%
Operating profit	6		5	%	9		7	%	15		6	%	23		8	%
Financing costs, net	1		1	%	5		4	%	3		1	%	11		4	%
Other expense (income), net	1		1	%	(1)		(1)	%	1		0	%	0		0	%
Earnings before income tax expense	4		3	%	5		4	%	11		5	%	12		4	%
Income tax expense	0		0	%	1		1	%	3		1	%	2		1	%
Net earnings from continuing operations	4		3	%	4		3	%	8		3	%	10		4	%

Diluted earnings per share from continuing operations	$	0.06			$	0.06			$	0.14			$	0.17

Consolidated net sales for the second quarter of fiscal ~~2020~~2021 were ~~$133~~$121 million, a decrease of ~~$27~~$12 million ~~(17%~~(10%) from the ~~prior year comparative.~~prior-year comparable period. Core sales decreased $15 million ~~(10%~~(11%) ~~after adjusting for the $12 million (8%) decrease from~~and divested product lines and the strategic exits of certain service offerings ~~and a $2~~net of sales from acquisitions decreased net sales $1 million (1%) ~~increase~~, while the impact from ~~the HTL Group acquisition and minimal changes in~~ foreign currency ~~exchange rates.~~rates benefited net sales by 2%. The decrease in core sales was due to the steep reduction in sales volume attributable to the impact of the COVID-19 pandemic on macroeconomic conditions as well as limitations on our ability to access job sites, including, but not limited to, full border closures in the Middle East. Core products sales were down 11% and core service sales were down 12% as compared to the same period in the prior year. Gross profit margins ~~increased 3%~~decreased 2% as a result of ~~the aforementioned divested product lines~~manufacturing sales mix and ~~strategic exits.~~manufacturing variances. Operating profit was $3 million lower in the second quarter of fiscal ~~2020~~2021 as compared to the second quarter of fiscal ~~2019~~2020 largely as a result of the ~~decreased volumes as well as increased restructuring charges associated with our restructuring plan announced~~$7 million decrease in ~~March 2019,~~gross profit resulting from the steep sales decline, partially offset by ~~lower Selling,~~the realization of savings from restructuring actions reducing selling, general and administrative ~~and engineering expenses~~ ("~~SAE"~~SG&A") costs, ~~resulting from that restructuring plan~~in addition to lower discretionary spend including travel and decreased impairment & divestiture charges ($4 million of charges in fiscal 2019 as a result of the held for sale treatment of the Cortland U.S. business as compared to a net $1 million benefit in the current year from divestiture activities associated with non-core product lines and business).entertainment expenses.

Consolidated net sales for the six months ended February ~~29, 2020~~28, 2021 decreased ~~$38~~$39 million ~~(12%~~(14%) ~~to $280 million in fiscal 2020.~~from the prior-year comparable period. Core sales decreased ~~$16~~$40 million ~~(5%~~(15%) ~~after adjusting for the $21 million (7%) decrease from~~and divested product lines and the strategic exits of certain service offerings ~~and a $2~~net of sales from acquisitions decreased net sales $5 million ~~(1%~~(2%) ~~increase from~~, while the ~~HTL Group acquisition. Changes in~~impact of foreign currency ~~exchange~~ rates ~~had minimal~~benefited net sales by 3%. The decrease in core sales was due to the steep reduction in sales volume attributable to the impact of the COVID-19 pandemic on macroeconomic conditions, including, but not limited to, ~~net sales.~~depressed oil prices largely in the first quarter, as well as limitations on our ability to access job sites such as in the Middle East where full border closures occurred at times during the second quarter. Core products sales declined 12% and core service sales decreased 19%. Gross profit margins ~~increased 2%~~decreased 1% as a result of sales mix and manufacturing variances. Operating profit was $8 million lower in the first half of fiscal 2021 as compared to the first half of fiscal 2020 largely as a result of the ~~aforementioned divested product lines and strategic exits. Operating profit was higher in fiscal 2020 as compared to fiscal 2019 largely as a result of impairment & divestiture charges of $27~~$21 million ~~(largely a result of the held for sale treatment of Cortland U.S. business) in fiscal 2019 offset by the~~ decrease in ~~volume.~~gross profit resulting from the steep sales decline, partially offset through both short and long-term cost savings actions including the realization of savings from restructuring actions, lower travel and entertainment expenses, and other discretionary spending initiatives.

Segment Results

~~Industrial Tools & Services~~IT&S Segment

The IT&S segment is a global supplier of branded hydraulic and mechanical tools and services to a broad array of end markets, including industrial, energy, mining and production automation markets. Its primary products include ~~branded tools,~~pumps, cylinders, hydraulic torque wrenches, highly engineered heavy lifting technology solutions and ~~hydraulic torque wrenches~~other tools (Product product line). On the services side, we provide ~~energy~~ maintenance and manpower services to meet customer-specific needs and rental capabilities for certain of our products (Service & Rental product line). The following table sets forth the results of operations for the IT&S segment (in millions):


	Three Months Ended						Six Months Ended
	February 28, 2021			February 29, 2020			February 28, 2021			February 29, 2020
Net sales	$	113		$	123		$	225		$	259
Operating profit	14			21			31			47
Operating profit %	12.3		%	16.7		%	13.8		%	18.0		%

Three Months Ended Six Months Ended
February 29,
2020 February 28,
2019 February 29,
2020 February 28,
2019
Net sales $ 123
$ 150
$ 259
$ 298
Operating profit 21
27
47
53
Operating profit % 16.7 % 17.8 % 18.0 % 17.7 %

IT&S segment net sales for the second quarter of fiscal ~~2020~~2021 decreased by ~~$27~~$10 million ~~(17%~~(9%). Core sales decreased ~~$17~~$13 million ~~year-over-year (11%~~year over year (10%)~~. Strategic~~ primarily due to the sharp decline in volume from the impact of the COVID-19 pandemic on macroeconomic conditions as well as limitations on our ability to access job sites, including, but not limited to, full border closures in the Middle East. Strategic exits and divestitures of non-core product lines ~~accounted for an additional $12 million (8%) decrease, offset~~net of sales from acquisitions decreased net sales by ~~an increase of $2~~$1 million (1%) ~~associated with~~, while the ~~acquisition~~impact of ~~HTL Group. Changes in~~ foreign currency ~~had an inconsequential impact. The core~~rates benefited net sales decrease of 11% was predominantly a result of the continued global economic uncertainty primarily in North America, the Middle East and Asia and significantly lower year-over-year service sales as large projects in the Middle East and Asia in fiscal 2019 did not repeat in fiscal 2020.by 2%.

Operating profit %percentage decreased ~~1.1%~~4.4% from the ~~prior year comparative primarily~~prior-year period due to reduced ~~volumes.~~volume as well as product mix and manufacturing variances. The decrease in SG&A costs period over period from the benefit of restructuring actions was offset by the change in discrete impairment & divestiture charges (benefits) period over period.

Year-to-date IT&S segment net sales decreased by ~~$39~~$34 million (13%). Core sales decreased $34 million year over year (14%) due to ~~$259 million~~the sharp decline in ~~fiscal 2020.~~volume from the impact of the COVID-19 pandemic on macroeconomic conditions, including, but not limited to, depressed oil prices largely in the first quarter, as well as limitations on our ability to access job sites such as in the Middle East where full border closures occurred at times during the second quarter. Strategic exits and divestitures of non-core product lines net of sales from acquisitions accounted for ~~$21~~an additional $5 million ~~(7%~~(2%) ~~of the~~ decrease, while ~~core~~the impact of foreign currency rates benefited net sales by 2%.

Operating profit percentage decreased ~~$16 million (6%) year-over-year. These decreases were~~4.2% from the prior-year period due to reduced volumes as well as product mix and manufacturing variances, partially offset ~~due to the $2.0 million (1%) of net sales from the acquisition of HTL Group. Changes in foreign currency had minimal impact on net sales. The 6% decrease in core sales predominantly was~~by lower SG&A costs as a result of the ~~global economic uncertainty, predominantly~~realization of savings from restructuring actions, decreases in ~~North America,~~travel and ~~significantly lower year-over-year service sales as large projects in the Middle East and Asia in fiscal 2019 did not repeat in fiscal 2020.~~

~~Year-to-date operating profit decreased $6 million from the prior year. The-year-to-date operating profit decrease was a result of the decrease in core sales, slightly offset by lower SAE~~entertainment expenses, and ~~the strategic exit and divestiture of certain non-core product lines.~~other discretionary spending initiatives.

Corporate

Corporate expenses ~~decreased by $0.6~~were $6 million and ~~$0.2~~$11 million in the three months ended February 28, 2021 and February 29, 2020, respectively, and $13 million and $22 million in the six months ended February 28, 2021 and February 29, 2020, respectively. This represents a decrease of $5 million and $9 million for the three and six months ended February ~~29, 2020,~~28, 2021, respectively. The ~~quarter-to-date decrease was~~decreases for the both the three and six month periods were the result of ~~positive experience~~the realization of savings from restructuring actions and reductions in ~~medical claims, reduced business travel~~discretionary spend, including consulting services and lower legal costs, offset by $0.7 million of restructuring charges taken in the quarter as part of our strategic efforts to drive efficiency in the overall Corporate structure. The year-to-date decrease is a result of the positive experience in medical claims, reduced business travel and lower legal costs, offset by $1 million of restructuring expenses associated with our strategic efforts to drive efficiency in the overall corporate structure and an increase in business development costs, ~~including~~of which business development costs ~~directly~~in the fiscal 2020 periods included costs associated with the eventual acquisition of HTL ~~group.~~Group in January 2020.

Financing Costs, net

Net financing costs were ~~$4.6~~$1 million and ~~$7.2~~$5 million for the three months ended February ~~29, 2020~~28, 2021 and February ~~28, 2019,~~29, 2020, respectively. For the six months ended February ~~29, 2020~~28, 2021 and February ~~28, 2019,~~29, 2020 net financing costs were ~~$11.4~~$3 million and ~~$14.5~~$11 million,

respectively. Financing costs decreased as a result of ~~lower outstanding balances on our Senior Credit Facility during~~ the ~~three and six months ended February 29, 2020, especially in the three months ended February 29, 2020 as a result of the early~~cash pay off of ~~the remaining balance on the~~our outstanding term loan in ~~early November. The benefit from lower cash interest expense was partially offset~~November 2019 and, in the ~~six months ended February 29,~~fourth quarter of fiscal 2020, asthe retirement of our 5.625% Senior Notes through drawing on our revolving line of credit, which maintains a ~~result of expensing~~lower interest rate in the ~~remaining~~current interest rate environment. We also expensed $0.6 million of capitalized debt issuance costs associated with the ~~term loan upon the~~ early pay off of the outstanding principal ~~balance.~~balance on the term loan in the six months ended February 29, 2020.

Income Tax Expense


														Three Months Ended						Six Months Ended
	Three Months Ended						Six Months Ended							February 28, 2021			February 29, 2020			February 28, 2021			February 29, 2020
	February 29, 2020			February 28, 2019			February 29, 2020			February 28, 2019
Earnings (loss) from continuing operations before income tax expense	$	5		$	5		$	12		$	(12	)
Earnings from continuing operations before income tax expense													Earnings from continuing operations before income tax expense	$	4		$	5		$	11		$	12
Income tax expense	1			4			2			4			Income tax expense	0			1			2			2
Effective income tax rate	17.1		%	84.0		%	14.6		%	(35.1		)%	Effective income tax rate	0.0		%	17.1		%	21.2		%	14.6		%

The U.S. government continues to enact tax legislation containing provisions to support businesses during the COVID-19 pandemic, including deferment of the employer portion of certain payroll taxes, refundable payroll tax credits, refundable payroll tax credits, and technical amendments to tax depreciation methods for qualified improvement property. The enacted legislation did not have a material impact on our consolidated financial statements for the three months ended February 28, 2021. We are continuing to evaluate the future impact of the COVID-19-related tax legislation on our consolidated financial statements.

Cash Flows and Liquidity

At February ~~29, 2020,~~28, 2021, we had ~~$163~~$115 million of cash and cash ~~equivalents. Cash and cash~~ equivalents ~~included $154~~of which $103 million ~~of cash~~was held by our foreign subsidiaries and $9$12 million was held domestically. The following table summarizes our cash flows provided by (used in) ~~provided by~~ operating, investing and financing activities (in millions):

Six Months Ended
February 29,
2020 February 28,
2019
Net cash used in operating activities $ (29 ) $ (51 )
Net cash provided by investing activities 177
21
Net cash used in financing activities (196 ) (50 )
Effect of exchange rates on cash —
—
Net decrease in cash and cash equivalents* $ (48 ) $ (80 )

*The table above includes activity associated with our discontinued operations (former EC&S segment), which was operational for the full period in the six months ended February 28, 2019 and included normal activity through the divestiture on October 31, 2019 in the six month period ended February 29, 2020 and ancillary cash flow impacts subsequent to the divestiture date.


	Six Months Ended
	February 28, 2021		February 29, 2020
Net cash provided by (used in) operating activities	$	13	$	(29)
Net cash (used in) provided by investing activities	(5)		177
Net cash used in financing activities	(48)		(196)
Effect of exchange rates on cash	3		—
Net decrease in cash and cash equivalents	$	(37)	$	(48)

Net cash ~~used in~~provided by operating activities was ~~$29~~$13 million for the six months ended February ~~29, 2020~~28, 2021 as compared to ~~$51~~$29 million net cash used in operating activities for the six months ended February 29, 2020. The change year over year is predominantly a result of the divestiture of the EC&S segment, which generated a use of cash of $19 million in the first quarter of fiscal 2020 prior to its divestiture, the reduction in our interest cost which has generated cash interest savings of $7 million year over year, the termination of our fiscal 2020 bonus program in response to the COVID-19 pandemic, which resulted in no bonus payment in the first quarter of fiscal 2021 ($6 million paid in the first quarter of fiscal 2020 associated with the fiscal 2019 bonus program), and a decrease in cash taxes paid of $6 million year over year.

Net cash used in investing activities was $5 million for the six months ended February 28, 2019. The net use of cash is consistent with historical results of operations in the period as a result the payment of our annual bonus compensation and build of working capital. The decrease in cash used by operating activities in fiscal 20202021 as compared to ~~fiscal 2019~~$177 million net cash provided by investing activities for the six months ended February 29, 2020. The cash provided by investing activities in the

prior-year period was a result of improved working capital management in our continuing operations whereby primary working capital was a use of cash of $22 million in fiscal 2019 as compared to a use of cash of $2 million in fiscal 2020, the benefitgenerated from the ~~divestiture~~sale of our EC&S segment ~~which historically generated negative~~as well as our Connectors and UNI-LIFT product lines, slightly offset by cash ~~flows from operations during this period,~~used for capital expenditures. We did not have any divestiture activity in the first two quarters of fiscal 2021 and ~~a decrease in bonus compensation paid in fiscal 2020 as compared to that paid in fiscal 2019.~~

~~Net cash provided by investing activities was $177~~have incurred approximately $5 million ~~in fiscal 2020 as compared to $21 million in fiscal 2019. The increase~~ of ~~$156 million was a result of proceeds~~capital expenditures, net of ~~transactions costs~~proceeds from the sale of ~~the EC&S segment ($209 million)~~property, plant, and non-core product lines ($9 million) in fiscal 2020, offset by the cash outflow from the acquisition of HTL Group in January 2020 ($33 million) and the cash inflow from the sale of Cortland Fibron and Precision Hayes International for combined net proceeds of $36 million in the six months ended February 28, 2019.equipment.

Net cash used in financing activities was $48 million for the six months ended February 28, 2021 compared to $196 million for the six months ended February 29, ~~2020 compared to $50 million for the six months ended February 28, 2019.~~2020. The cash used in financing activities ~~for~~in fiscal 2020 consisted primarily of the early pay off of the outstanding principal balance on the term loan of $175 million, ~~and treasury~~$18 million of share repurchases, and $2 million for the payment of ~~$18~~our annual dividend. Net fiscal 2021 cash flow used in financing activities resulted primarily from the $45 million ~~which compared~~principal payment on our outstanding credit facility with excess cash on hand to ~~$48~~reduce interest costs, as well as $2 million ~~of principal repayments on the term loan in the six months ended February 28, 2019 and no share repurchase activity.~~

for our annual dividend.

The Company's ~~$600 million~~ Senior Credit Facility is comprised of a $400 million revolving line of credit and previously provided for a $200 million term loan, ~~which was~~both scheduled to mature in March 2024 (see Note 8, "Debt" in the notes to the condensed consolidated financial statements for further details of the Senior Credit Facility). As previously noted, the Company paid off the outstanding principal balance on the term loan in November 2019. Further, as noted in Note 8, "Debt", on June 15, 2020, the Company borrowed $295 million under the Senior Credit Facility revolving line of credit to fund the redemption of all of the outstanding Senior Notes at par, plus the remaining accrued and unpaid interest. Outstanding borrowings under the Senior Credit Facility revolving line of credit were $210 million as of February 28, 2021. The unused credit line and amount available for borrowing under the revolving line of credit was ~~$395~~$186 million at February ~~29, 2020.~~28, 2021.

We believe that the revolving credit line, ~~of credit,~~ combined with our existing cash on hand and anticipated operating cash flows, will be adequate to meet operating, debt service, acquisition and capital expenditure funding requirements for the foreseeable future.

Primary Working Capital Management

We use primary working capital as a percentage of sales (PWC %) as a key metric of working capital management. We define this metric as the sum of net accounts receivable and net inventory less accounts payable, divided by the past three months sales annualized. The following table shows a comparison of primary working capital (in millions):


	February 29, 2020			PWC%		August 31, 2019			PWC%			February 28, 2021		PWC%		August 31, 2020		PWC%
Accounts receivable, net	$	113		21	%	$	126		20	%	Accounts receivable, net	$	95	20	%	$	84	19	%
Inventory, net	78			15	%	77			12	%	Inventory, net	72		15	%	69		16	%
Accounts payable	(62		)	(12	)%	(77		)	(12	)%	Accounts payable	(50)		(10)	%	(45)		(10)	%
Net primary working capital	$	129		24	%	$	126		20	%	Net primary working capital	$	117	25	%	$	108	25	%

Commitments and Contingencies

We are contingently liable for certain lease payments under leases within businesses we previously divested or spun-off. If any of these businesses do not fulfill their future lease payment obligations under a lease, we could be liable for such 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 February ~~29, 2020~~28, 2021 were $8$6 million with monthly payments extending to fiscal 2025.

We had outstanding letters of credit totaling ~~$14 million and $18~~$12 million at both February ~~29, 2020~~28, 2021 and August 31, ~~2019, respectively,~~2020, the majority of which relate to commercial contracts and self-insured workers' compensation programs.

We are also subject to certain contingencies with respect to legal proceedings and regulatory matters which are described in Note 14, "Commitments and Contingencies" in the notes to the condensed consolidated financial statements. While there can be no assurance of the ultimate outcome of these matters, the Company believes that there will be no material adverse effect on the Company's results of operations, financial position or cash flows.

Contractual Obligations

Our contractual obligations have not materially changed in fiscal ~~2020~~2021 from what was previously disclosed in Part 1, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Contractual Obligations” in our Annual Report on Form 10-K for the year ended August 31, ~~2019 as a result of the divestiture of our EC&S segment, specifically related to lease commitments disclosed therein. See~~ ~~Note 15, "Leases"~~ ~~in the notes to the condensed consolidated financial statements for disclosure of our future contractual obligations from our continuing operations with respect to Leases as of February 29,~~ 2020.

~~Supplemental Guarantor Financial Information~~

~~As discussed in~~ ~~Note 8, “Debt”~~, on April 16, 2012, Enerpac Tool Group Corp. (the “Parent”) issued $300 million of the Senior Notes, of which $288 million remained outstanding as of February 29, 2020. Certain material, domestic wholly owned subsidiaries (the “Guarantors”) fully and unconditionally guarantee the Senior Notes on a joint and several basis. There are no significant restrictions on the ability of the Guarantors to make distributions to the Parent. The other subsidiaries of the Company do not guarantee the Senior Notes (such subsidiaries are referred to as the "non-Guarantors").

The Guarantors jointly and severally, and fully and unconditionally, guarantee the payment of the principal and premium, if any, and interest on the Senior Notes when due, whether at stated maturity of the Senior Notes, by acceleration, call for redemption or otherwise, together with interest on the overdue principal, if any, and interest on any overdue interest, to the extent lawful, and all other obligations of the Company to the holders of the Senior Notes and to the trustee under the indenture governing the Senior Notes (the “Indenture”) (all such obligations guaranteed by the Guarantors are referred to as the “Guaranteed Obligations”). The guarantees are senior unsecured obligations of each Guarantor and rank equal with all existing and future senior debt of such Guarantor and senior to all subordinated debt of such Guarantor. The guarantees are effectively subordinated to any secured debt of such Guarantor to the extent of the assets securing such debt.

Each guarantee of a Guarantor is limited to an amount not to exceed the maximum amount that can be guaranteed that will not (after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of all other Guarantors in respect of the obligations of such other Guarantors under their respective guarantees of the Guaranteed Obligations) render the guarantee, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyances or fraudulent transfers. The Indenture provides that in the event of (a) a sale or other transfer or disposition of all of the capital stock of any Guarantor to any person (other than to the Company or one or more of its “Restricted Subsidiaries,” which term is defined in the Indenture) in compliance with the terms of the Indenture, (b) in the event all or substantially all the assets or capital stock of a Guarantor are sold or otherwise transferred, by way of merger, consolidation or otherwise, to such a person in compliance with the terms of the Indenture or (c) the release or discharge of such Guarantor from its guarantee of debt under the Senior Credit Facility or the replacement therefor (including by reason of the termination of the Senior Credit Facility and its replacement) or the guarantee that resulted in the obligation of such Guarantor to guarantee the Senior Notes, except a discharge or release by or as a result of payment under such guarantee, then such Guarantor (or the person concurrently acquiring such assets of such Guarantor) shall be deemed automatically and unconditionally released and discharged of any obligations under its guarantee; provided that, in the case of an event described in clauses (a) or (b) above, the Net Cash Proceeds (as defined in the Indenture) of such sale or other disposition are applied in accordance with the requirements of the Indenture.

The following tables present summarized financial information for the Parent and the Guarantors on a combined basis after elimination of (i) intercompany transactions and balances among the Parent and the Guarantors and (ii) equity in earnings from and investments in any subsidiary that is a non-Guarantor.

Summarized Statements of Operations
Six Months Ended
February 29, 2020
Net sales $ 98
Gross profit 65
Earnings (loss) from continuing operations* (3 )
Loss from discontinued operations (4 )
Net loss $ (7 )

*Includes $8 million of loss associated with intercompany expenses from non-guarantor subsidiaries.

Summarized Balance Sheet February 29, 2020 August 31, 2019
ASSETS
Current assets 90
272
Long-term assets 167
138

LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities 43
98
Long-term liabilities* 795
926

*Includes liabilities due to non-guarantor subsidiaries of $431 million and $416 million as of February 29, 2020 and August 31, 2019.

The Senior Notes are structurally subordinated to the indebtedness and other liabilities of the non-Guarantors. The non-Guarantors are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due pursuant to the Senior Notes or the Indenture, or to make any funds available therefor, whether by dividends, loans, distributions or other payments. Any right that the Company or the Guarantors have to receive any assets of any of the non-Guarantors upon the liquidation or reorganization of any non-Guarantor, and the consequent rights of holders of Senior Notes to realize proceeds from the sale of any of a non-Guarantor’s assets, would be effectively subordinated to the claims of such non-Guarantor’s creditors, including trade creditors and holders of preferred equity interests, if any, of such non-Guarantor. Accordingly, in the event of a bankruptcy, liquidation or reorganization of any of the non-Guarantors, the non-Guarantors will pay the holders of their debts, holders of preferred equity interests, if any, and their trade creditors before they will be able to distribute any of their assets to the Company or any of the Guarantors.

If a Guarantor were to become a debtor in a case under the U.S. Bankruptcy Code or encounter other financial difficulty, under federal or state fraudulent transfer or conveyance law, a court may avoid, subordinate or otherwise decline to enforce its guarantee of the Senior Notes. A court might do so if it is found that when such Guarantor entered into its guarantee of the Senior Notes, or in some states when payments became due under the Senior Notes, such Guarantor received less than reasonably equivalent value or fair consideration and either:

~~was insolvent or rendered insolvent by reason of such incurrence;~~

~~was left with unreasonably small or otherwise inadequate capital to conduct its business; or~~

~~believed or reasonably should have believed that it would incur debts beyond its ability to pay.~~

The court might also avoid the guarantee of the Senior Notes without regard to the above factors, if the court found that the Guarantor entered into its guarantee with actual intent to hinder, delay or defraud our creditors.

A court would likely find that a Guarantor did not receive reasonably equivalent value or fair consideration for its guarantee of the Senior Notes, if such Guarantor did not substantially benefit directly or indirectly from the funding made available by the issuance of the Senior Notes. If a court were to avoid a guarantee of the Senior Notes provided by a Guarantor, holders of the Senior Notes would no longer have any claim against such Guarantor. The measures of insolvency for purposes of these fraudulent transfer or conveyance laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer or conveyance has occurred, such that we cannot predict what standards a court would use to determine whether or not a Guarantor was solvent at the relevant time or, regardless of the standard that a court uses, that the guarantee of a Guarantor would not be subordinated to such Guarantor’s other debt. As noted above, each guarantee provided by a Guarantor includes a provision intended to limit the Guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer or conveyance. This provision may not be effective to protect those guarantees from being avoided under fraudulent transfer or conveyance law, or it may reduce that Guarantor’s obligation to an amount that effectively makes its guarantee worthless, and we cannot predict whether a court will ultimately find it to be effective.

On the basis of historical financial information, operating history and other factors, we believe that each of the Guarantors, after giving effect to the issuance of its guarantee of the Senior Notes when such guarantee was issued, was not insolvent, did not have unreasonably small capital for the business in which it engaged and did not and has not incurred debts beyond its ability to pay such debts as they mature. We cannot assure you, however, as to what standard a court would apply in making these determinations or that a court would agree with our conclusions in this regard.

Critical Accounting Estimates

Management has evaluated the accounting estimates used in the preparation of the Company's condensed consolidated financial statements and related notes and believe those estimates to be reasonable and appropriate. Certain of these accounting estimates are considered by management to be the most critical in understanding judgments involved in the preparation of our condensed consolidated financial statements and uncertainties that could impact our results of operations, financial position and cash flow. For information about more of the Company’s policies, methodology and assumptions related to critical accounting policies refer to the

Critical Accounting Policies in Part 1, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the Annual Report on Form 10-K for the year ended August 31, ~~2019.~~2020.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

The diverse nature of our business activities necessitates the management of various financial and market risks, including those related to changes in interest rates, foreign currency exchange rates and commodity costs.

Interest Rate Risk: WeIn the current economic environment, we manage interest expense using a mixture of ~~fixed-rate~~variable-rate debt and ~~variable-rate debt. A change in interest rates impacts the fair value of our 5.625% Senior Notes, but not our earnings or cash flow, because the interest rate on such debt is fixed.~~fixed-interest-rate swaps. As of February ~~29, 2020, our variable-rate funding sources~~28, 2021, long term debt consisted ~~primarily~~ of $210 million of borrowing under the revolving line of credit (variable rate debt). We are the fixed rate payor on an interest-rate swap that effectively fixes the LIBOR-based index on $100 million of borrowings under our ~~Senior Credit Facility. However, we do not have any borrowings outstanding on the~~ revolving line of ~~credit as of February 29, 2020.~~credit.

Foreign Currency Risk: We maintain operations in the U.S. and various foreign countries. Our more significant non-U.S. operations are located in Australia, the Netherlands, the United Kingdom, United Arab Emirates and China, and we have foreign currency risk relating to receipts from customers, payments to suppliers and intercompany transactions denominated in foreign currencies. Under certain conditions, we enter into hedging transactions (primarily foreign currency exchange contracts) that enable us to mitigate the potential adverse impact of foreign currency exchange rate risk (see Note 10, “Derivatives” for further information). We do not engage in trading or other speculative activities with these transactions, as established policies require that these hedging transactions relate to specific currency exposures.

The strengthening of the U.S. dollar against most currencies can have an unfavorable impact on our results of operations and financial position as foreign denominated operating results are translated into U.S. dollars. To illustrate the potential impact of changes in foreign currency exchange rates on the translation of our results of operations, quarterly sales and operating profit were remeasured assuming a ten ~~percent~~percent decrease in all foreign exchange rates compared with the U.S. dollar. Using this assumption, quarterly sales would have been lower byby $5 million and operating profit would have been lower by $2less than $1 million, respectively, for the three months ended February ~~29, 2020.~~28, 2021. This sensitivity analysis assumes that each exchange rate would change in the same direction relative to the U.S. dollar and excludes the potential effects that changes in foreign currency exchange rates may have on sales levels or local currency prices. Similarly, a ten percent decline in foreign currency exchange rates versus the U.S. dollar would result in a ~~$39~~ $34 million reduction to equity (accumulated other comprehensive loss) as of February ~~29, 2020,~~28, 2021, as a result of ~~non U.S.~~non-U.S. dollar denominated assets and liabilities being translated into U.S. dollars, our reporting currency.

Commodity Cost Risk: We source a wide variety of materials and components from a network of global suppliers. While such materials are typically available from numerous suppliers, commodity raw materials, such as steel and plastic resin, are subject to price fluctuations, which could have a negative impact on our results. We strive to pass along such commodity price increases to customers to avoid profit margin erosion.

Item 4 – Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). There have been no changes in our internal control over financial reporting that occurred during the quarter ended February ~~29, 2020~~28, 2021 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II—OTHER INFORMATION

~~Item 1A – Risk Factors~~

Our business, results of operations and financial condition may be adversely affected by global public health epidemics, including the strain of coronavirus known as COVID-19 and the recent disruption in the global oil markets and resulting substantial price decline.

Our business, consolidated results of operations and financial condition may be adversely affected if a global public health pandemic, including COVID-19, interferes with the ability of our employees, vendors, and customers to perform our and their respective responsibilities and obligations relative to the conduct of our business. A global public health pandemic, including COVID-19, poses the risk that we or our employees, vendors, customers may be prevented from conducting business activities for an indefinite period of time, including shutdowns that may be requested or mandated by governmental authorities, restrictions on travel to or from locations where we provide service, or restrictions on shipping products from certain jurisdictions where they are produced or into certain jurisdictions where customers are located. As a result of the decrease in demand for oil as a result of the disruption expected to be caused by COVID-19 in addition to political tensions between several large oil producing countries, there has been a substantial decline in oil prices. As indicated in Part I, Item 1A, "Risk Factors," of our Annual Report on Form 10-k for the fiscal year ended August 31, 2019, a substantial portion of our revenues are derived from customers in the oil & gas industry which are typically adversely affected when this industry is in a downward economic cycle. The extent to which the COVID-19 pandemic and the decline in oil prices will impact our business remains uncertain, however, there could be a material adverse impact on our financial condition or results of operations.

See Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended August 31, 2019. Except as required by the federal securities law, we undertake no obligation to update or revise any risk factor, whether as a result of new information, future events or otherwise.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

The Company's Board of Directors has authorized the repurchase of shares of the Company’s common stock under publicly announced share repurchase programs. Since the inception of the initial share repurchase program in fiscal 2012, the Company has repurchased ~~22,295,357~~22,799,230 shares of common stock for ~~$658.0~~$668 million. As of February ~~29, 2020,~~28, 2021, the maximum number of shares that may yet be purchased under the programs is ~~5,704,643~~5,200,770 shares. There were no share repurchases in the three months ended February ~~29, 2020~~28, 2021.

Item 6 – Exhibits

~~(a) Exhibits~~

~~See “Index to Exhibits” on page 32, which is incorporated herein by reference.~~

~~SIGNATURE~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~



	~~ENERPAC TOOL GROUP CORP.~~
	~~(Registrant)~~
~~Date: March 25, 2020~~	~~By:~~	~~/S/ BRYAN R. JOHNSON~~
		~~Bryan R. Johnson~~
		~~VP of Finance and Principal Accounting Officer~~

~~ENERPAC TOOL GROUP CORP.~~

~~(the “Registrant”)~~

~~(Commission File No. 1-11288)~~

~~QUARTERLY REPORT ON FORM 10-Q~~

~~FOR THE QUARTER ENDED FEBRAURY 29, 2020~~

~~INDEX TO EXHIBITS~~

Exhibit

Description

Incorporated Herein By Reference To

Filed

Herewith

Furnished Herewith

2.1

Securities Purchase Agreement, dated as of July 8, 2019, by and between Actuant Corporation, BRWS Parent LLC, Actuant France SAS and Actuant Holdings AB

Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on July 9, ~~2019.~~2019

~~3.1~~

~~(a) Amended and Restated Articles of Incorporation~~

~~Exhibit 4.9 to the Registrant's Form 10-Q for the quarter ended February 28, 2001~~

~~(b) Amendment to Amended and Restated Articles of Incorporation~~

~~Exhibit 3.1(b) to the Registrant's Form 10-K for the fiscal year ended August 31, 2003~~

~~(c) Amendment to Amended and Restated Articles of Incorporation~~

~~Exhibit 3.1 to the Registrant's Form 10-K for the fiscal year ended August 31, 2004~~

~~(d) Amendment to Amended and Restated Articles of Incorporation~~

~~Exhibit 3.1 to the Registrant's Form 8-K filed on July 18, 2006~~

~~(e) Amendment of Amended and Restated Articles of Incorporation~~

~~Exhibit 3.1 to the Registrant's Form 8-K filed on January 14, 2010~~

~~(e) Amendment of Amended and Restated Articles of Incorporation~~

~~Exhibit 3.1 to the Registrant's Form 8-K/A filed on January 30, 2020~~

~~3.2~~10.1

~~Amended~~Enerpac Tool Group Corp. 2017 Omnibus Incentive Plan (as amended and ~~Restated Bylaws, as amended~~restated November 9, 2020)

~~Exhibit 3.2 of~~Appendix A to the ~~Registrant's Form 8-K/A~~Proxy Statement on Schedule 14A filed by Enerpac Tool Group Corp. on ~~January 30,~~December 4, 2020

2231.1

~~List of Guarantor Subsidiaries~~

~~31.1~~

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~Exhibit~~

~~Description~~

~~Incorporated Herein By Reference To~~

Filed
Herewith

~~Furnished Herewith~~

101

The following materials from the Enerpac Tool Group Corp. Form 10-Q for the three months ended February ~~29, 2020~~28, 2021 formatted in Inline Extensible Business Reporting Language (Inline XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to the Condensed Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ENERPAC TOOL GROUP CORP.
	(Registrant)
Date: March 26, 2021	By:	/S/ BRYAN R. JOHNSON
		Bryan R. Johnson
		VP of Finance and Principal Accounting Officer



	Six Months Ended February 28, 2019
	Industrial Tools & Services			Corporate
Balance as of August 31, 2018	$	1,687		$	46
Restructuring charges	20			—
Cash payments	(1,115		)	(46		)
Other non-cash uses of reserve	(12		)	—
Impact of changes in foreign currency rates	(18		)	—
Balance as of February 28, 2019	$	562		$	—



	Three Months Ended						Six Months Ended
	February 29, 2020*			February 28, 2019			February 29, 2020*			February 28, 2019
Net sales	$	—		$	112,119		$	67,010		$	246,099
Cost of products sold	—			85,948			49,749			185,232
Gross profit	—			26,171			17,261			60,867

Selling, administrative and engineering expenses	619			17,312			11,451			37,383
Amortization of intangible assets	—			1,587			—			3,569
Restructuring charges (benefit)	—			14			(11		)	446
Impairment & divestiture charges	314			3,344			28,730			16,319
Operating (loss) earnings	(933		)	3,914			(22,909		)	3,150
Financing (benefits) costs, net	—			(4		)	14			(7		)
Other expense (income), net	—			141			(104		)	547
(Loss) earnings before income tax expense (benefit)	(933		)	3,777			(22,819		)	2,610
Income tax expense (benefit)	823			1,789			(16,812		)	1,652
Net (loss) earnings from discontinued operations	$	(1,756	)	$	1,988		$	(6,007	)	$	958



	February 29, 2020		August 31, 2019
Assets*
Industrial Tools & Services Segment	$	645,163	$	553,615
Other Operating Segment	62,111		54,484
General Corporate	172,068		230,597
	$	879,342	$	838,696



	Three Months Ended February 29, 2020		Six Months Ended February 29, 2020
Lease Cost:
Operating lease cost	$	3,894	$	8,147
Short-term lease cost	310		765
Variable lease cost	564		1,033



	February 29, 2020
Operating leases:
Other long-term assets	$	53,555

Other current liabilities	13,131
Other long-term liabilities	42,105
Total operating lease liabilities	$	55,236

Weighted Average Remaining Lease Term (in years):
Operating leases	7.7 years

Weighted Average Discount Rate:
Operating leases	4.33		%



	Operating Leases
2020 (excluding the six months ended February 29, 2020)	$	7,929
2021	13,133
2022	9,232
2023	7,120
2024	5,746
Thereafter	22,507
Total minimum lease payments	65,667
Less imputed interest	(10,431		)
Present value of net minimum lease payments	$	55,236



	Operating Leases
2020	$	15,792
2021	12,266
2022	10,111
2023	6,865
2024	5,177
Thereafter	21,620
Present value of net minimum lease payments	$	71,831



Summarized Statements of Operations	Six Months Ended February 29, 2020
Net sales	$	98
Gross profit	65
Earnings (loss) from continuing operations*	(3		)
Loss from discontinued operations	(4		)
Net loss	$	(7	)



Summarized Balance Sheet	February 29, 2020	August 31, 2019
ASSETS
Current assets	90	272
Long-term assets	167	138

LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities	43	98
Long-term liabilities*	795	926