Business Wire | Dec 21, 2020 08:30AM EST

Enerpac Tool Group Reports First Quarter Fiscal 2021 Results

Dec. 21, 2020

MILWAUKEE--(BUSINESS WIRE)--Dec. 21, 2020--Enerpac Tool Group Corp. (NYSE: EPAC) (the "Company"), today announced results for its fiscal first quarter ended November 30, 2020.

"We are pleased with the continued sequential improvement in sales and profit that we are delivering across the business as we benefit from the strategic actions taken over the last year. Our teams continued their strong execution by investing prudently in our business, supporting our customers and managing costs during these unprecedented times. This has enabled us to achieve another quarter of favorable decremental margins, sustain new product development and commercial effectiveness and generate cash flow from operations in the quarter. Looking ahead, we are seeing improved confidence in some of our end markets as well as in our customers' ability to navigate the challenges of the pandemic. While we are not out of the woods, we are pleased with our progress, especially in our European region where we returned to pre-COVID levels in the quarter," said Randy Baker, Enerpac Tool Group's President and CEO.

Mr. Baker continued, "I want to thank all the Enerpac Tool Group team members worldwide for their efforts during these challenging times. With the significant adjustments our associates have had to make to support the business whether they are working from home or in a company location, these last nine months have put a tremendous amount of pressure on our workforce. I am proud of what our team has accomplished in these unprecedented circumstances. We have consistently met our customers' needs, taken swift cost actions to right size the business, and protected our balance sheet. Those actions have positioned the company for success and ensured that we are able to continue executing our long-term strategy. And, amidst these achievements, we have put the safety and health of our employees and their families first."

Consolidated Results from Continuing Operations

(US$ in millions, except per share)

Three Months Ended November 30,

2020 2019

Net Sales $119.4 $146.7

Net Income $4.8 $6.4

Earnings Per Share $0.08 $0.11

Adjusted Diluted Earnings Per Share $0.09 $0.12

* Consolidated net sales from continuing operations for the first quarter were $119.4 million compared to $146.7 million in the prior year first quarter. Core sales decreased 18% year-over-year, with product sales down 16% and service down 24%. The net impact of acquisitions and divestitures/strategic exits decreased net sales by an additional 2%, and the impact of foreign currency had a minimal impact on net sales. * Fiscal 2021 first quarter net income from continuing operations and diluted earnings per share from continuing operations were $4.8 million and $0.08, respectively, compared to net income from continuing operations of $6.4 million and diluted earnings per share from continuing operations of $0.11 in the first quarter of fiscal 2020. Fiscal 2021 first quarter net income from continuing operations included: An impairment & divestiture charge of $0.1 million ($0.1 million or $0.00 per share, after tax); and Restructuring charges of $0.2 million ($0.2 million or $0.00 per share, after tax), primarily related to footprint optimization. * Fiscal 2020 first quarter net income from continuing operations included a net impairment and divestiture gain of $1.4 million ($1.1 million or $0.02 per share, after tax), restructuring charges of $2.0 million ($1.8 million or $0.02 per share, after tax) related to the restructuring plan announced in fiscal 2019 and facility consolidations, and accelerated debt issuance costs of $0.6 million ($0.5 million or $0.01 per share, after tax) related to the payoff of the term loan. * Excluding restructuring and impairment & divestiture charges, adjusted diluted EPS from continuing operations was $0.09 for the first quarter of fiscal 2021 compared to $0.12 in the comparable prior year period.

Industrial Tools & Services

(US$ in millions)

Three Months Ended November 30,

2020 2019

Sales $112.2 $135.6

Operating Profit $17.2 $26.1

Adjusted Op Profit ^(1) $17.4 $25.9

Adjusted Op Profit % ^(1) 15.5% 19.1%

^(1) Excludes $0.1 million of restructuring charges and $0.1 million ofimpairment & divestiturecharges in the first quarter of fiscal 2021 compared to $1.2 million ofrestructuring charges and $1.4million of net impairment & divestiture gains in the three months endedNovember 30, 2019.

* First quarter fiscal 2021 net sales were $112.2 million, 17% lower than the prior fiscal year's first quarter net sales. Core sales decreased 17% year-over-year, while the net impact of acquisitions and divestitures/strategic exits decreased net sales 2% and the impact of foreign currency increased net sales 2%. * The decrease in revenue is attributable to the decline in demand driven by the COVID-19 pandemic and continued sluggish oil prices. * Adjusted operating profit margin of 15.5% in the quarter decreased year-over-year primarily due to reduced sales volume, partially offset by significant savings from effective cost management and restructuring initiatives.

Corporate Expenses and Income Taxes (excluding restructuring items)

* Corporate expenses from continuing operations of $6.3 million for the first quarter of fiscal 2021 were $5.1 million lower than the comparable prior year period, primarily resulting from lower operating costs due to the prior-year divestiture of the former Engineered Components and Systems (EC&S) segment, savings from restructuring initiatives and lower incentive compensation and consulting costs. * The first quarter effective income tax rate from continuing operations of approximately 31% was higher than the first quarter fiscal 2020 rate of approximately 12%.

Discontinued Operations

Discontinued operations represent operating results for the divested EC&S segment through the October 31, 2019 completion date of the divestiture, as well as impacts from certain retained liabilities subsequent to the completion date.

Balance Sheet and Leverage

(US$ in millions)

Period Ended

November 30, August 31, November 30, 2020 2020 2019

Cash Balance $158.6 $152.2 $206.8

Debt Balance $255.0 $255.0 $286.2

Net Debt to Adjusted EBITDA** 1.9 1.8 0.8

Net debt at November 30, 2020 was approximately $96 million (total debt of $255 million less $159 million of cash), which decreased approximately $6 million from the prior quarter. Net Debt to Adjusted EBITDA from continuing operations was 1.9x at November 30, 2020.

**Calculated in accordance with the terms of the Company's March 2019 SeniorCredit Facility

Outlook

Due to ongoing uncertainty and lack of forward visibility into market conditions caused by the COVID-19 pandemic, Enerpac Tool Group continues not to provide fiscal 2021 financial guidance.

Mr. Baker said, "As we progress into our second quarter, we expect that first quarter trends will continue, moderating our typical seasonality. While the uncertainty around the effects of the pandemic may impact the positive trends we are seeing today, we are confident in our ability to make the appropriate adjustments to our business.

"Longer-term, we remain committed to the financial goals presented at our 2019 investor day, including delivering above market core growth, margin expansion, strong cash flow generation and best-in-class returns through disciplined capital allocation.

"The COVID-19 pandemic has shifted our timeline to achieve these objectives, but the fundamental strength and value opportunity of the long-term vision remains sound and we will re-establish the timing to achieve these goals as soon as practicable once the market has appropriately recovered. We remain confident in the strength of the Enerpac business and are committed to our long-term strategy, while we manage through the current dynamic market environment, to deliver shareholder value."

Conference Call Information

An investor conference call is scheduled for 10:00 am CT today, December 21, 2020. Webcast information and conference call materials are available on the Enerpac Tool Group company website (www.enerpactoolgroup.com).

Safe Harbor Statement

Certain of the above comments represent forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Management cautions that these statements are based on current estimates of future performance and are highly dependent upon a variety of factors, which could cause actual results to differ from these estimates. Among other risks and uncertainties, Enerpac Tool Group's results are subject to risks and uncertainties arising from general economic conditions, the COVID-19 pandemic, including the impact of the pandemic or related government responses on the Company's business, the businesses of the Company's customers and vendors, employee mobility, and whether the Company's business and those of its customers and vendors will continue to be treated as "essential" operations under government orders restricting business activities or, even if so treated, whether site-specific health and safety concerns related to COVID-19 might otherwise require operations to be halted for some period of time, volatile oil pricing, variation in demand from customers, the impact of geopolitical activity on the economy, continued market acceptance of the Company's new product introductions, the successful integration of acquisitions, restructuring, operating margin risk due to competitive pricing and operating efficiencies, supply chain risk, material and labor cost increases, tax law changes, foreign currency fluctuations and interest rate risk. See the Company's Form 10-K for the fiscal year ended August 31, 2020 filed with the Securities and Exchange Commission for further information regarding risk factors. Enerpac Tool Group disclaims any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

Non-GAAP Financial Information

This press release contains financial measures that are not measures presented in conformity with GAAP. They include EBITDA from continuing operations, adjusted EBITDA from continuing operations, adjusted earnings (loss) from continuing operations, adjusted diluted earnings (loss) per share from continuing operations, adjusted operating profit from continuing operations, segment adjusted operating profit and net debt. This press release includes reconciliations of these non-GAAP measures to the most comparable GAAP measure, including in the tables attached to this press release. Management believes these non-GAAP measures are commonly used financial measures for investors to evaluate Enerpac Tool Group's operating performance and financial position with respect to the periods presented and, when read in conjunction with the condensed consolidated financial statements, present a useful tool to evaluate ongoing operations and provide investors with metrics they can use to evaluate aspects of the Company's performance from period to period. In addition, these are some of the financial metrics management uses in internal evaluations of the overall performance of the Company's business. Management acknowledges that there are many items that impact a company's reported results and the adjustments reflected in these non-GAAP measures are not intended to present all items that may have impacted these results. In addition, these non-GAAP measures are not necessarily comparable to similarly titled measures used by other companies.

About Enerpac Tool Group

Enerpac Tool Group Corp. is a premier industrial tools and services company serving a broad and diverse set of customers in more than 100 countries. The Company's businesses are global leaders in 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. Enerpac Tool Group trades on the NYSE under the symbol EPAC. For further information on Enerpac Tool Group and its businesses, visit the Company's website at www.enerpactoolgroup.com.

Enerpac Tool Group Corp.

Condensed Consolidated Balance Sheets

(Dollars in thousands)

(Unaudited)

November 30, August 31,

2020 2020

ASSETSCurrent assetsCash and cash equivalents $ 158,568 $ 152,170

Accounts receivable, net 90,531 84,170

Inventories, net 70,701 69,171

Other current assets 38,015 35,621

Total current assets 357,815 341,132

Property, plant and equipment, net 60,219 61,405

Goodwill 280,977 281,154

Other intangible assets, net 60,097 62,382

Other long-term assets 79,467 78,221

Total assets $ 838,575 $ 824,294

LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilitiesTrade accounts payable $ 46,954 $ 45,069

Accrued compensation and benefits 18,222 17,793

Current maturities of debt - -

Income taxes payable 2,557 1,937

Other current liabilities 41,971 40,723

Total current liabilities 109,704 105,522

Long-term debt, net 255,000 255,000

Deferred income taxes 1,707 1,708

Pension and postretirement benefit liabilities 19,507 20,190

Other long-term liabilities 84,711 82,648

Total liabilities 470,629 465,068

Shareholders' equityCapital stock 16,525 16,519

Additional paid-in capital 195,979 193,492

Treasury stock (667,732 ) (667,732 )

Retained earnings 922,269 917,671

Accumulated other comprehensive loss (99,095 ) (100,724 )

Stock held in trust (2,643 ) (2,562 )

Deferred compensation liability 2,643 2,562

Total shareholders' equity 367,946 359,226

Total liabilities and shareholders' equity $ 838,575 $ 824,294

Enerpac Tool Group Corp.Condensed Consolidated Statements of Operations(Dollars in thousands, except per share amounts)(Unaudited) Three Months Ended

November November 30, 30,

2020 2019

Net sales $ 119,430 $ 146,674

Cost of products sold 64,166 77,986

Gross profit 55,264 68,688

Selling, administrative and engineering expenses 43,710 51,831

Amortization of intangible assets 2,136 1,872

Restructuring charges 210 1,972

Impairment & divestiture charges (benefit) 139 (1,356 )

Operating profit 9,069 14,369

Financing costs, net 1,716 6,729

Other expense, net 273 318

Income before income tax expense 7,080 7,322

Income tax expense 2,258 950

Earnings from continuing operations 4,822 6,372

Loss from discontinued operations, net of income (224 ) (4,251 )taxesNet earnings $ 4,598 $ 2,121

Earnings from continuing operations per shareBasic $ 0.08 $ 0.11

Diluted 0.08 0.11

Loss from discontinued operationsBasic $ (0.00 ) $ (0.07 )

Diluted (0.00 ) (0.07 )

Earnings per shareBasic $ 0.08 $ 0.04

Diluted 0.08 0.03

Weighted average common shares outstandingBasic 59,811 60,081

Diluted 60,092 60,601

Enerpac Tool Group Corp.Condensed Consolidated Statements of Cash Flows(In thousands)(Unaudited) Three Months Ended

November November 30, 30,

2020 2019

Operating ActivitiesCash provided by (used in) operating activities - $ 8,892 $ (4,095 )continuing operationsCash used in operating activities - discontinued (225 ) (18,832 )operationsCash provided by (used in) operating activities 8,667 (22,927 )

Investing ActivitiesCapital expenditures (1,905 ) (3,187 )

Proceeds from sale of property, plant and equipment 47 162

Proceeds from sale of business, net of transaction - 8,726 costsCash (used in) provided by investing activities - (1,858 ) 5,701 continuing operationsCash provided by investing activities - discontinued - 207,641 operationsCash (used in) provided by investing activities (1,858 ) 213,342

Financing ActivitiesPrincipal repayments on term loan - (175,000 )

Borrowings on revolving credit facility 10,000 100,000

Principal repayments on revolving credit facility (10,000 ) (100,000 )

Purchase of treasury shares - (17,805 )

Stock options, taxes paid related to the net share (174 ) 2 settlement of equity awards & otherPayment of cash dividend (2,394 ) (2,419 )

Cash used in financing activities - continuing (2,568 ) (195,222 )operationsCash provided by financing activities - discontinued 750 - operationsCash used in financing activities (1,818 ) (195,222 )

Effect of exchange rate changes on cash 1,407 436

Net cash increase (decrease) from continuing 5,873 (193,180 )operationsNet cash increase from discontinued operations 525 188,809

Net increase (decrease) from cash and cash 6,398 (4,371 )equivalentsCash and cash equivalents - beginning of period 152,170 211,151

Cash and cash equivalents - end of period $ 158,568 $ 206,780

Enerpac Tool Group Corp.Supplemental Unaudited DataReconciliation of GAAP Measures to Non-GAAP Measures(Dollars in thousands) Fiscal 2020 Fiscal 2021 Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTALSalesIndustrial Tool & $ 135,592 $ 123,361 $ 92,865 $ 103,044 $ 454,863 $ 112,175 $ - $ - $ - $ 112,175 Services SegmentOther 11,082 10,025 9,014 8,309 38,429 7,255 - - - 7,255

Total $ 146,674 $ 133,386 $ 101,879 $ 111,353 $ 493,292 $ 119,430 $ - $ - $ - $ 119,430

% Sales GrowthIndustrial Tool & -9 % -17 % -44 % -29 % -25 % -17 % - - - -17 %Services SegmentOther 12 % -2 % -21 % -39 % -15 % -35 % - - - -35 %

Total -7 % -17 % -43 % -30 % -25 % -19 % - - - -19 %

Operating Profit(Loss) from ContinuingOperationsIndustrial Tool & $ 25,928 $ 20,963 $ 8,228 $ 12,166 $ 67,284 $ 17,362 $ - $ - $ - $ 17,362 Services SegmentOther 399 (684 ) 21 (1,371 ) (1,635 ) (1,662 ) - - - (1,662 )

Corporate / General (11,342 ) (10,349 ) (8,197 ) (6,158 ) (36,045 ) (6,282 ) - - - (6,282 )

Adjusted operating $ 14,985 $ 9,930 $ 52 $ 4,637 $ 29,604 $ 9,418 $ - $ - $ - $ 9,418 profitImpairment & 1,356 768 1,443 (408 ) 3,159 (139 ) - - - (139 )divestiture chargesRestructuring & other (1,972 ) (1,929 ) (3,292 ) (987 ) (8,179 ) (210 ) - - - (210 )exit charges (1)Purchase accounting - (202 ) (201 ) - (403 ) - - - - - inventory step-upchargeOperating profit $ 14,369 $ 8,567 $ (1,998 ) $ 3,242 $ 24,181 $ 9,069 $ - $ - $ - $ 9,069 (loss) Adjusted OperatingProfit %Industrial Tool & 19.1 % 17.0 % 8.9 % 11.8 % 14.8 % 15.5 % - - - 15.5 %Services SegmentOther 3.6 % -6.8 % 0.2 % -16.5 % -4.3 % -22.9 % - - - -22.9 %

Adjusted Operating 10.2 % 7.4 % 0.1 % 4.2 % 6.0 % 7.9 % - - - 7.9 %Profit % EBITDA from ContinuingOperations (2)Earnings (loss) from $ 6,372 $ 3,918 $ (4,930 ) $ 197 $ 5,557 $ 4,822 $ - $ - $ - $ 4,822 continuing operationsFinancing costs, net 6,729 4,630 4,552 3,307 19,218 1,716 - - - 1,716

Income tax expense 950 806 (407 ) 943 2,292 2,258 - - - 2,258 (benefit)Depreciation & 4,779 5,277 5,318 5,347 20,720 5,458 - - - 5,458 amortizationEBITDA $ 18,830 $ 14,631 $ 4,533 $ 9,794 $ 47,787 $ 14,254 $ - $ - $ - $ 14,254

Adjusted EBITDA fromContinuing Operations(2)Industrial Tool & $ 28,996 $ 24,022 $ 11,906 $ 15,938 $ 80,862 $ 21,002 $ - $ - $ - $ 21,002 Services SegmentOther 1,275 244 926 (449 ) 1,996 (740 ) - - - (740 )

Corporate / General (10,825 ) (8,272 ) (6,249 ) (5,058 ) (30,406 ) (5,659 ) - - - (5,659 )

Adjusted EBITDA $ 19,446 $ 15,994 $ 6,583 $ 10,431 $ 52,452 $ 14,603 $ - $ - $ - $ 14,603

Impairment & 1,356 768 1,443 (408 ) 3,159 (139 ) - - - (139 )divestiture chargesRestructuring & other (1,972 ) (1,929 ) (3,292 ) (987 ) (8,179 ) (210 ) - - - (210 )exit charges (1)Purchase accounting - (202 ) (201 ) - (403 ) - - - - - inventory step-upchargePension curtailment - - - 758 758 - - - - -

EBITDA $ 18,830 $ 14,631 $ 4,533 $ 9,794 $ 47,787 $ 14,254 $ - $ - $ - $ 14,254

Adjusted EBITDA %Industrial Tool & 21.4 % 19.5 % 12.8 % 15.5 % 17.8 % 18.7 % - - - 18.7 %Services SegmentOther 11.5 % 2.4 % 10.3 % -5.4 % 5.2 % -10.2 % - - - -10.2 %

Adjusted EBITDA % 13.3 % 12.0 % 6.5 % 9.4 % 10.6 % 12.2 % - - - 12.2 %

Notes:(1) Approximately $0.8 million of the Q3 fiscal 2020 restructuring & exitcharges were recorded in cost of products sold.(2) EBITDA represents net earnings (loss) from continuing operations beforefinancing costs, net, income tax (benefit) expense, and depreciation &amortization. EBITDA is not a calculation based upon GAAP. The amounts includedin the EBITDA and Adjusted EBITDA calculation, however, are derived fromamounts included in the Condensed Consolidated Statements of Operations. EBITDAshould not be considered as an alternative to net earnings (loss), operatingprofit (loss) or operating cash flows. The Company has presented EBITDA andadjusted EBITDA because it regularly reviews these performance measures. Inaddition, EBITDA and adjusted EBITDA are used by many of our investors andlenders, and are presented as a convenience to them. The EBITDA and adjustedEBITDA measures presented may not always be comparable to similarly titledmeasures reported by other companies due to differences in the components ofthe calculation.Enerpac Tool Group Corp.Supplemental Unaudited DataReconciliation of GAAP Measures to Non-GAAP Measures (Continued)(Dollars in thousands, except for per share amounts) Fiscal 2020 Fiscal 2021 Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTALAdjusted Earnings(Loss) (3)Net Earnings $ 2,121 $ 2,162 $ (4,999 ) $ 1,439 $ 723 $ 4,598 $ - $ - $ - $ 4,598 (Loss)Discontinued (4,251 ) (1,756 ) (69 ) 1,242 (4,834 ) (224 ) - - - (224 )Operations, net ofincome taxEarnings (Loss) $ 6,372 $ 3,918 $ (4,930 ) $ 197 $ 5,557 $ 4,822 $ - $ - $ - $ 4,822 from ContinuingOperationsImpairment & (1,356 ) (768 ) (1,443 ) 408 (3,159 ) 139 - - - 139 divestiturechargesRestructuring & 1,972 1,929 3,292 987 8,179 210 - - - 210 other exit chargesAccelerated debt 625 - - 1,041 1,666 - - - - - issuance costPurchaseaccounting - 202 201 - 403 - - - - - inventory step-upchargePension - - - (758 ) (758 ) - - - - - curtailmentNet tax effect of (52 ) (57 ) (624 ) (503 ) (1,236 ) (15 ) - - - (15 )reconciling itemsaboveOther income tax - (74 ) - - (74 ) - - - - - benefitAdjusted Earnings(Loss) from $ 7,561 $ 5,150 $ (3,504 ) $ 1,372 $ 10,578 $ 5,156 $ - $ - $ - $ 5,156 ContinuingOperations (4) Adjusted DilutedEarnings (loss)per share (3)Net Earnings $ 0.03 $ 0.04 $ (0.08 ) $ 0.02 $ 0.01 $ 0.08 $ - $ - $ - $ 0.08 (Loss)Discontinued (0.07 ) (0.03 ) 0.00 0.02 (0.08 ) (0.00 ) - - - 0.00 Operations, net ofincome taxEarnings (Loss) $ 0.11 $ 0.06 $ (0.08 ) $ 0.00 $ 0.09 $ 0.08 $ - $ - $ - $ 0.08 from ContinuingOperationsImpairment &divestiture (0.02 ) (0.01 ) (0.02 ) 0.00 (0.04 ) 0.00 - - - 0.00 charges, net oftax effectRestructuring &other exit 0.02 0.04 0.04 0.02 0.11 0.00 - - - 0.00 charges, net oftax effectAccelerated debt 0.01 - - 0.01 0.02 - - - - - issuance cost, netof tax effectPurchaseaccounting - 0.00 0.00 - 0.01 - - - - - inventory step-upcharge, net of taxeffectPension - - - (0.01 ) (0.01 ) - - - - - curtailment, netof tax effectOther income tax - 0.00 - - - - - - - - benefitAdjusted DilutedEarnings (Loss) $ 0.12 $ 0.09 $ (0.06 ) $ 0.02 $ 0.18 $ 0.09 $ - $ - $ - $ 0.09 per share fromContinuingOperations (4) Notes continued:(3) Adjusted earnings (loss) from continuing operations and adjusted dilutedearnings (loss) per share represent net earnings (loss) and diluted earnings(loss) per share per the Condensed Consolidated Statements of Operations net ofcharges or credits for items to be highlighted for comparability purposes.These measures are not calculated based upon generally accepted accountingprinciples (GAAP) and should not be considered as an alternative to netearnings (loss) or diluted earnings (loss) per share or as an indicator of theCompany's operating performance. However, this presentation is important toinvestors for understanding the operating results of the current portfolio ofEnerpac Tool Group companies.(4) Q3 Fiscal 2020 results included an adjusted loss from continuingoperations, therefore adjusted loss per share is not diluted and is, instead,calculated with basic shares. For all reconciliations of GAAP measures to Non-GAAP measures, the summation ofthe individual components may not equal the total due to rounding. With respectto the earnings per share reconciliations the impact of share dilution on thecalculation of the net earnings or loss per share and discontinued operationsper share may result in the summation of these components not equaling thetotal earnings (loss) per share from continuing operations. View source version on businesswire.com: https://www.businesswire.com/news/home/20201221005105/en/

CONTACT: Bobbi Belstner Director of Investor Relations and Strategy 262.293.1912