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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
——————————— 
FORM 10-Q
 ————————————
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2021
OR
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, WISCONSIN 53051
Mailing address: P. O. Box 3241, Milwaukee, Wisconsin 53201
(Address of principal executive offices)
(262) 293-1500
(Registrant’s telephone number, including area code)
  ————————————
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker Symbol(s)Name of each exchange on which registered
Class A common stock, $0.20 par value per shareEPACNYSE
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 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 “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
        
Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller 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 22, 2021 was 60,120,512.


Table of Contents
TABLE OF CONTENTS
 
 Page No.
       Item 6—Exhibits

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;
decreased demand from 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;
potential increases in the costs of commodities and raw materials, or substantial decreases in their availability;
uncertainty over global tariffs, or the financial impact of tariffs;
a material disruption at a significant manufacturing facility;
heavy reliance on suppliers for components used in the manufacture and sale of our products, including a supply chain interruption due to the COVID-19 pandemic or political tensions;
competition in the markets we serve;
currency exchange rate fluctuations, export and import restrictions, transportation disruptions or shortages, and other risks inherent in our international operations;
1


regulatory and legal developments;
litigation, including product liability and warranty claims;
failure to 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;
if the operating performance of our businesses were to fall significantly below normalized levels, the potential for a non-cash impairment charge of goodwill 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;
inadequate intellectual property protection or infringement of the intellectual property of others; and
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 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 practicable after such reports are electronically filed with the SEC.
2


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 EndedSix Months Ended
 February 28, 2021February 29, 2020February 28, 2021February 29, 2020
Net sales $120,654 $133,386 $240,084 $280,060 
Cost of products sold65,878 71,293 130,044 149,278 
Gross profit54,776 62,093 110,040 130,782 
Selling, general and administrative expenses45,883 50,245 89,593 102,076 
Amortization of intangible assets2,136 2,120 4,272 3,993 
Restructuring charges649 1,929 859 3,900 
Impairment & divestiture charges (benefit)401 (768)539 (2,124)
Operating profit5,707 8,567 14,777 22,937 
Financing costs, net1,338 4,630 3,055 11,359 
Other expense (income), net784 (787)1,058 (468)
Earnings before income tax expense3,585 4,724 10,664 12,046 
Income tax expense1 806 2,258 1,756 
Net earnings from continuing operations3,584 3,918 8,406 10,290 
Loss from discontinued operations, net of income taxes(402)(1,756)(626)(6,007)
Net earnings$3,182 $2,162 $7,780 $4,283 
Earnings per share from continuing operations
Basic$0.06 $0.07 $0.14 $0.17 
Diluted$0.06 $0.06 $0.14 $0.17 
Loss per share from discontinued operations
Basic$(0.01)$(0.03)$(0.01)$(0.10)
Diluted$(0.01)$(0.03)$(0.01)$(0.10)
Earnings per share
Basic$0.05 $0.04 $0.13 $0.07 
Diluted$0.05 $0.04 $0.13 $0.07 
Weighted average common shares outstanding
Basic59,938 60,130 59,874 60,106 
Diluted60,269 60,513 60,180 60,557 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


ENERPAC TOOL GROUP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
 Three Months EndedSix Months Ended
 February 28, 2021February 29, 2020February 28, 2021February 29, 2020
Net earnings$3,182 $2,162 $7,780 $4,283 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments9,034 (3,246)10,434 5,246 
Recognition of foreign currency translation losses from divested businesses   51,994 
Pension, other postretirement benefit plans, and cash flow hedges123 194 352 635 
Total other comprehensive income (loss), net of tax9,157 (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.

4


ENERPAC TOOL GROUP CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
February 28, 2021August 31, 2020
ASSETS
Current assets
Cash and cash equivalents$115,254 $152,170 
Accounts receivable, net94,984 84,170 
Inventories, net71,774 69,171 
Other current assets43,431 35,621 
Total current assets325,443 341,132 
Property, plant and equipment, net61,258 61,405 
Goodwill284,731 281,154 
Other intangible assets, net58,980 62,382 
Other long-term assets78,589 78,221 
Total assets$809,001 $824,294 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable$49,736 $45,069 
Accrued compensation and benefits21,769 17,793 
Income taxes payable3,945 1,937 
Other current liabilities39,805 40,723 
Total current liabilities115,255 105,522 
Long-term debt, net210,000 255,000 
Deferred income taxes1,731 1,708 
Pension and postretirement benefit liabilities19,164 20,190 
Other long-term liabilities81,458 82,648 
Total liabilities427,608 465,068 
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, respectively16,576 16,519 
Additional paid-in capital197,036 193,492 
Treasury stock, at cost, 22,799,230 shares(667,732)(667,732)
Retained earnings925,451 917,671 
Accumulated other comprehensive loss(89,938)(100,724)
Stock held in trust(2,996)(2,562)
Deferred compensation liability2,996 2,562 
Total shareholders' equity381,393 359,226 
Total liabilities and shareholders’ equity$809,001 $824,294 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


ENERPAC TOOL GROUP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Six Months Ended
 February 28, 2021February 29, 2020
Operating Activities
Net earnings$7,780 $4,283 
Less: Net loss from discontinued operations(626)(6,007)
Net earnings from continuing operations8,406 10,290 
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities - continuing operations:
Impairment & divestiture charges (benefit), net of tax effect482 (1,629)
Depreciation and amortization10,966 10,056 
Stock-based compensation expense5,228 5,945 
Benefit for deferred income taxes(398)(1,094)
Amortization of debt issuance costs240 1,132 
Other non-cash charges514 409 
Changes in components of working capital and other, excluding acquisitions and divestitures:
Accounts receivable(9,920)13,956 
Inventories(1,505)(1,898)
Trade accounts payable4,114 (14,364)
Prepaid expenses and other assets(7,047)(3,103)
Income tax accounts692 (9,927)
Accrued compensation and benefits3,785 (8,012)
Other accrued liabilities(2,057)(10,065)
Cash provided by (used in) operating activities - continuing operations13,500 (8,304)
Cash used in operating activities - discontinued operations(254)(20,437)
Cash provided by (used in) operating activities13,246 (28,741)
Investing Activities
Capital expenditures(5,630)(6,967)
Proceeds from sale of property, plant and equipment595 450 
Lease buyout for divested business (575)
Proceeds from sale of business/product line 8,726 
Cash paid for business acquisitions, net of cash acquired (33,444)
Cash used in investing activities - continuing operations(5,035)(31,810)
Cash provided by investing activities - discontinued operations 208,391 
Cash (used in) provided by investing activities (5,035)176,581 
Financing Activities
Principal repayment on term loan (175,000)
Borrowings on revolving credit facility10,000 100,000 
Principal repayments on revolving credit facility(55,000)(100,000)
Purchase of treasury shares (17,805)
Taxes paid related to the net share settlement of equity awards(1,981)(4,063)
Stock option exercises & other182 2,888 
Payment of cash dividend(2,394)(2,419)
Cash used in financing activities - continuing operations(49,193)(196,399)
Cash provided by financing activities - discontinued operations750  
Cash used in financing activities (48,443)(196,399)
Effect of exchange rate changes on cash3,316 845 
Net decrease in cash and cash equivalents(36,916)(47,714)
Cash and cash equivalents - beginning of period152,170 211,151 
Cash and cash equivalents - end of period$115,254 $163,437 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


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 the Company 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, 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 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 28, 2021 are not necessarily indicative of the results that may be expected for the entire fiscal year ending August 31, 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.
The Company has updated our historical caption of "Selling, administrative and engineering expenses" in the 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 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 Credit Losses on Financial Instruments (“ASU 2016-13”), which adds an impairment model that is based on expected losses rather than incurred losses and is called the Current Expected Credit Losses (“CECL”) model. This impairment model is applicable to loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables as well as any other financial asset with the contractual right to receive cash. Under the new model, an allowance equal to the estimate of lifetime expected credit losses is recognized, which will result in more timely loss recognition. The guidance is intended to reduce complexity by decreasing the number of credit impairment models. The Company adopted the guidance on September 1, 2020 using the modified retrospective approach and there was no impact to the financial statements as a result of the adoption.
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 this update simplify the accounting for income taxes by removing certain exceptions and amending and clarifying existing guidance. The guidance is effective for the Company in the first quarter of fiscal 2022 with early adoption permitted. The Company is currently assessing the impact of this ASU on its condensed consolidated financial statements.
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Accumulated Other Comprehensive Loss
The following is a summary of the Company's accumulated other comprehensive loss (in thousands):
February 28, 2021August 31, 2020
Foreign currency translation adjustments$65,463 $75,896 
Pension and other postretirement benefit plans, net of tax24,425 24,750 
Unrecognized losses on cash flow hedges50 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 28, 2021August 31, 2020
Land, buildings and improvements$34,447 $33,548 
Machinery and equipment144,288 134,536 
Gross property, plant and equipment178,735 168,084 
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 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. For certain other products that are highly customized and have a limited alternative use, 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 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 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 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.
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The following table presents information regarding revenues disaggregated by the timing of when goods and services are transferred (in thousands):
Three Months EndedSix Months Ended
February 28, 2021February 29, 2020February 28, 2021February 29, 2020
Revenues recognized at point in time$90,726 $97,189 $177,506 $202,001 
Revenues recognized over time29,928 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 28, 2021August 31, 2020
Receivables, which are included in accounts receivable, net$94,984 $84,170 
Contract assets, which are included in other current assets7,743 6,145 
Contract liabilities, which are included in other current liabilities3,014 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 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 $3.0 million will be recognized in net sales from satisfying those performance obligations within the next twelve months, with an immaterial amount recognized in periods after.
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) the Company has a present right to payment at that time; (ii) the legal title has been transferred to the customer; (iii) the Company has transferred physical possession of the product to the customer; and (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) contracts with an original expected length of one year or less and    (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.
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Note 3. Restructuring Charges
The Company has undertaken or committed to various restructuring initiatives, including workforce reductions, leadership changes, plant consolidations to reduce manufacturing overhead, satellite office closures, the continued movement of production and product sourcing to low-cost alternatives and the centralization and standardization of certain administrative functions. Liabilities for severance are generally to be paid within twelve months, while future lease payments related to facilities vacated as a result of restructuring are to be paid over the underlying remaining lease terms. During fiscal 2019, the Company announced a new restructuring plan focused on (i) the integration of the Enerpac and Hydratight businesses (IT&S segment), (ii) the strategic exit of certain commodity-type services in our North America Services operations (IT&S segment) and (iii) driving efficiencies within the overall corporate structure. In the third quarter of fiscal 2020, the Company announced the expansion and revision of this plan, which further simplifies and flattens the corporate structure through elimination of redundancies between the segment and corporate functions, while enhancing our commercial and marketing processes to become even closer to our customers. Restructuring charges associated with this plan were $0.6 million and $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.
The following summarizes restructuring reserve activity for the IT&S segment and Corporate (in thousands):
Six Months Ended February 28, 2021
IT&SCorporate
Balance as of August 31, 2020$1,443 $267 
Restructuring charges688 9 
Cash payments(1,107)(250)
Other non-cash uses of reserve (1)
(14) 
Impact of changes in foreign currency rates15  
Balance as of February 28, 2021$1,025 $26 
Six Months Ended February 29, 2020
IT&SCorporate
Balance as of August 31, 2019$2,912 $ 
Restructuring charges2,189 939 
Cash payments(2,693)(628)
Other non-cash uses of reserve (1)
(406)(302)
Impact of changes in foreign currency rates(4) 
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.
Total restructuring charges (inclusive of the Other segment) being reported in "Restructuring charges" were $0.6 million and $0.9 million in the three and six months ended February 28, 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, calibration and repair services, and tool rental services. The tuck-in acquisition of HTL provided the Company with a complete line of bolting products and enhanced our European rental capabilities. The Company acquired all of the assets and assumed certain liabilities of HTL for a final purchase price of $33.3 million. The final purchase price allocation resulted in $11.3 million of goodwill (which is not deductible for tax purposes), $16.1 million of intangible assets, and $6.7 million of property, plant and equipment. The intangible assets were comprised of $3.3 million of indefinite-lived tradenames, $12.1 million of amortizable customer relationships and $0.7 million of amortizable patents. The impact on the remaining balance sheet line items was not material.
This acquisition generated net sales of $3.0 million and $5.5 million for the three and six months ended February 28, 2021, respectively, and $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.
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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 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 working capital negotiations in the third quarter of fiscal 2020. Approximately $3.0 million of the purchase price was paid in four equal quarterly installments after closing, of which the last $0.7 million was received in the six months ended February 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 and after consideration of working capital adjustments, the Company recorded, in fiscal 2020, a net loss of $4.7 million, comprised of a loss of $23.0 million representing the excess of the net assets (exclusive of deferred tax assets and liabilities associated with subsidiaries of the Company whose stock was sold as part of the transaction) as compared to the purchase price less costs to sell and the recognition in earnings of the cumulative effect of foreign currency exchange gains and losses during the year, largely offset by an income tax benefit of $18.3 million associated with the write off of the net deferred tax liability on subsidiaries of the EC&S segment for which the stock was divested. The Company also recognized in conjunction with the completion of the sale an additional $3.3 million of impairment & divestiture costs associated with the accelerated vesting of restricted stock awards for employees terminated as part of the transaction and $2.7 million of additional divestiture charges which were necessary to complete the transaction. The Company maintains financial exposure associated with this divestiture due to certain retained liabilities.
As the aforementioned 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 from discontinued operations, net of income taxes" within the Condensed Consolidated Statements of Operations (in thousands):
Three Months EndedSix Months Ended
February 28, 2021February 29, 2020February 28, 2021February 29, 2020 *
Net sales $ $ $ $67,010 
Cost of products sold   49,749 
Gross profit   17,261 
Selling, general and administrative expenses559 619 854 11,451 
Amortization of intangible assets    
Restructuring benefit   (11)
Impairment & divestiture charges 314  28,730 
Operating loss(559)(933)(854)(22,909)
Financing costs, net   14 
Other loss, net   (104)
Loss before income tax (benefit) expense(559)(933)(854)(22,819)
Income tax (benefit) expense (157)823 (228)(16,812)
Loss from discontinued operations, net of income taxes$(402)$(1,756)$(626)$(6,007)
* "Loss from discontinued operations, net of income taxes" for the six-month period in fiscal 2020 presented in the table above includes the results of the EC&S segment for the two months ended October 31, 2019 (the divestiture date) as well as the ancillary impacts from certain retained liabilities subsequent to the divestiture. As a result of the classification of the segment as assets and liabilities held for sale for the two months ended October 31, 2019, the Company did not record amortization or depreciation expense in the results of operations in accordance with 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
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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 divestiture agreement, this action triggered the requirement for the buyer to pay $1.5 million of contingent proceeds, which was received by the Company in the three months ended May 31, 2020 and recorded as an "Impairment & divestiture benefit" within the Condensed Consolidated Statements of 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. The 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 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 associated with this divestiture.
The historical results of the Milwaukee Cylinder business, inclusive of the UNI-LIFT product line, (which had net sales of $2.9 million in the six months ended February 29, 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, 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 $0.2 million in the six months ended February 29, 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 28, 2021 are as follows (in thousands):
IT&SOtherTotal
Balance as of August 31, 2020$263,537 $17,617 $281,154 
Impact of changes in foreign currency rates3,566 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 28, 2021August 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 relationships14$143,325 $111,267 $32,058 $141,853 $106,491 $35,362 
Patents1214,547 13,635 912 14,365 13,228 1,137 
Trademarks and tradenames123,321 2,352 969 3,277 2,257 1,020 
Indefinite lived intangible assets:
TradenamesN/A25,041  25,041 24,863  24,863 
$186,234 $127,254 $58,980 $184,358 $121,976 $62,382 
The Company estimates that amortization expense will be $4.0 million for the remaining six months of fiscal 2021. Amortization expense for future years is estimated to be: $7.4 million in fiscal 2022, $5.9 million in fiscal 2023, $4.3 million in fiscal 2024, $3.5 million in fiscal 2025, $2.1 million in fiscal 2026 and $6.7 million cumulatively thereafter. The future amortization expense amounts represent estimates and may be impacted by future acquisitions, divestitures, or changes in foreign currency exchange rates, among other causes.
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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 28, 2021 and February 29, 2020, respectively (in thousands):
 Six Months Ended
 February 28, 2021February 29, 2020
Beginning balance$892 $1,145 
Provision for warranties704 135 
Warranty payments and costs incurred(609)(418)
Warranty activity for divested businesses (27)
Impact of changes in foreign currency rates18  
Ending balance$1,005 $835 
Note 8. Debt
The following is a summary of the Company’s long-term indebtedness (in thousands):
February 28, 2021August 31, 2020
Senior Credit Facility
Revolver$210,000 $255,000 
Term Loan  
Total Senior Credit Facility210,000 255,000 
Less: Current maturities of long-term debt  
Debt issuance costs  
Total long-term debt, less current maturities$210,000 $255,000 
Senior Credit Facility
In March 2019, the Company entered into a Senior Credit Facility with a syndicate of banks to, among other things, (i) expand the multi-currency revolving line of credit from $300 million to $400 million, (ii) extend the maturity of the Company's Senior Credit Facility from May 2020 to March 2024 and (iii) modify certain other provisions of the credit agreement including a reduction in pricing. The Senior Credit Facility is comprised of a $400 million revolving line of credit and previously provided for a $200 million term loan.
The Senior Credit Facility also provides the option for future expansion, subject to certain conditions, through a $300 million accordion and/or a $200 million incremental term loan. Borrowings under the Senior Credit Facility bear interest at a variable rate based on LIBOR or a base rate, ranging from 1.125% to 2.00% in the case of loans bearing interest at LIBOR and from 0.125% to 1.00% in the case of loans bearing interest at the base rate. 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.
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. Certain transactions lead to adjustments to the underlying ratios, including an increase to the leverage ratio from 3.75 to 4.25 during the four fiscal quarters after a significant acquisition. The sale of the EC&S segment triggered a reduction of the minimum interest coverage ratio from 3.5 to 3.0 for any fiscal quarter ending within twelve months after the sale of the EC&S segment. In April 2020, the Company proactively amended its Senior Credit Facility to extend the interest coverage ratio at 3.0 for an additional 12 months through October 2021 to mitigate risks associated with the potential impact of the COVID-19 pandemic.
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The Company was in compliance with all financial covenants at February 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.
Senior Notes
On April 16, 2012, the Company issued $300 million of 5.625% Senior Notes due 2022 (the “Senior Notes”), of which none remained outstanding as of February 28, 2021. The Senior Notes included a call feature that allowed the Company to redeem them anytime on or after June 15, 2017 at stated redemption prices that reduced to 100% on June 15, 2020, plus accrued and unpaid interest. In order to reduce interest costs, in June 2020, the Company redeemed all of the outstanding Senior Notes at a price equal to 100% of the principal amount thereof, plus the settlement of accrued and unpaid interest.
Note 9. Fair Value 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, accounts payable and variable rate long-term debt approximated book value at both February 28, 2021 and August 31, 2020 due to their short-term nature and/or the fact that the interest rates approximated market 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 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, 2020. The fair value of the foreign currency exchange and interest rate swap contracts were based on quoted inactive market prices and 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 $13.4 million and $16.7 million at February 28, 2021 and August 31, 2020, respectively. The fair value of outstanding foreign currency exchange contracts was a net asset of less than $0.1 million and $0.2 million at February 28, 2021 and August 31, 2020, respectively. Net foreign currency gain (loss) (included in "Other expense" in the Condensed Consolidated Statements of Operations) related to these derivative instruments were as follows (in thousands):
 Three Months EndedSix Months Ended
 February 28, 2021February 29, 2020February 28, 2021February 29, 2020
Foreign currency gain (loss), net$109 $(376)$61 $(551)
The Company is the fixed-rate payor on an interest rate swap contract that fixes the LIBOR-based index used to determine the interest rates charged on a total of $100.0 million of the Company's LIBOR-based variable rate borrowings on the revolving line of credit. The contract carries a fixed rate of 0.259% and expires in August 2021. The swap agreement qualifies as a hedging instrument and has been designated as a cash flow hedge of forecasted LIBOR-based interest payments. The change in the fair value of the interest rate swap, a 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 loss ("AOCL") and into Financing costs, net, during the 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 28, 2021 and August 31, 2020 were $145.0 million and $180.0 million, respectively.
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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 22,799,230 shares of common stock for $667.7 million. As of February 28, 2021, the maximum number of shares that may yet be purchased under the programs is 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 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 EndedSix Months Ended
 February 28, 2021February 29, 2020February 28, 2021February 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 - basic59,938 60,130 59,874 60,106 
Net effect of dilutive securities - stock based compensation plans331 383 306 451 
Weighted average common shares outstanding - diluted60,269 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 

15


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 StockAdditional
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, 202082,625 $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 other4 1 80 — — — — — 81 
Vesting of restricted stock awards235 47 (47)— — — — —  
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 trust15 3 83 — — — (353)353 86 
Balance at February 28, 202182,879 $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 StockAdditional
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, 201982,248 $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 other5 1 125 — — — — — 126 
Vesting of restricted stock awards259 52 (52)— — — — —  
Stock based compensation expense— — 3,093 — — — — — 3,093 
Stock option exercises17 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 trust11 2 84 — — — 723 (723)86 
Balance at February 29, 202082,540 $16,508 $189,716 $(658,017)$923,622 $