Enerpac Tool Group Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Restructuring Charges (Notes)

Restructuring Charges (Notes)

3 Months Ended

Nov. 30, 2022

Restructuring and Related Activities [Abstract]

Restructuring and Related Activities Disclosure [Text Block]

Note 4. 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 restructuring plan focused on (i) the integration of the Enerpac and Hydratight businesses (IT&S segment), (ii) the strategic exit of certain commodity-type services in our North America Services operations (IT&S segment) and (iii) driving efficiencies within the overall corporate structure. In the third quarter of fiscal 2020, the Company announced the expansion and revision of this plan, which further simplified and flattened the corporate structure through elimination of redundancies between the segment and corporate functions, while enhancing our commercial and marketing processes to become even closer to our customers. Upon assessment of the Company's operating structure by the Company's new President and Chief Executive Officer (hired effective October 2021), the Company recorded $2.7 million of charges in the three months ended November 30, 2021 in order to further simplify and streamline the organizational structure. The total cumulative charges for the 2019 plan, which ended in the the third quarter of fiscal year 2022, were $18.0 million.

On June 27, 2022, the Company approved a new restructuring plan in connection with the initiatives identified as part of the ASCEND transformation program (see Note 3, “ASCEND Transformation Program”) to drive greater efficiency and productivity in global selling, general and administrative resources. The total costs of this plan were then estimated at $6 to $10 million, constituting predominately severance and other employee-related costs to be incurred as cash expenditures impacting both IT&S and Corporate. On September 23, 2022, the Company approved an updated restructuring plan. The costs of this updated plan (which includes the amounts for the plan approved in June) are estimated at $10 to $15 million. These costs are expected to be incurred over the expected duration of the transformation program, ending in the fourth quarter of fiscal year 2024. For the three months ended November 30, 2022, the Company recorded $1 million of restructuring charges associated with the ASCEND transformation program.

The following summarizes restructuring reserve activity (which for the three months ended November 30, 2021 excludes $0.7 million and $0.5 million of charges associated with the 2019 Plan for IT&S and Corporate, respectively, associated with the accelerated vesting of equity awards which has no impact on the restructuring reserve) for the IT&S segment and Corporate (in thousands):


	Three Months Ended November 30, 2022
	2019 Plan				ASCEND Plan
	IT&S		Corporate		IT&S		Corporate
Balance as of August 31, 2022	$	212	$	6	$	2,008	$	797
Restructuring charges	—		—		944		38
Cash payments	(19)		—		(1,211)		(117)
Impact of changes in foreign currency rates	4		—		67		—
Balance as of November 30, 2022	$	197	$	6	$	1,808	$	718


	Three Months Ended November 30, 2021
	IT&S		Corporate
Balance as of August 31, 2021	$	1,737	$	26
Restructuring charges	874		695
Cash payments	(609)		(8)

Impact of changes in foreign currency rates	(46)		—
Balance as of November 30, 2021	$	1,956	$	713

Total restructuring charges (inclusive of the Other segment) were $1.0 million and $2.7 million in the three months ended November 30, 2022 and 2021, respectively, being reported in "Restructuring charges."

ASCEND Transformation Program

Note 3. ASCEND Transformation Program

In March 2022, the Company announced the launch of ASCEND, a new transformation program focused on driving accelerated earnings growth and efficiency across the business with the goal of delivering an incremental $40 to $50 million of annual operating profit once fully implemented. As part of ASCEND, the Company is focusing on the following key initiatives: (i) accelerating organic growth go-to-market strategies, (ii) improving operational excellence and production efficiency by utilizing a lean approach and (iii) driving greater efficiency and productivity in SG&A by better leveraging resources to create a more efficient and agile organization.

The Company is implementing the program and anticipates investing approximately $60 to $65 million (as disclosed in Note 4, "Restructuring Charges," approximately $10 to $15 million of these investments will be in the form of restructuring charges) over the life of the program, which is expected to be finalized as we exit fiscal 2024. Elements of these investments could include such cash costs as capital expenditures, restructuring costs, third-party support, and incentive costs. Total program expenses were approximately $10.4 million for the three months ended November 30, 2022, of which $9.4 million were recorded within SG&A expenses and included third-party support costs and $1.0 million were recorded within restructuring expenses (see Note 4, "Restructuring Charges," below).