MILWAUKEE--(BUSINESS WIRE)--

Enerpac Tool Group Corp. (NYSE: EPAC) (the “Company”), today announced results for its fiscal 2020 third quarter ended May 31, 2020.

“The challenging and unprecedented macroeconomic environment caused by the COVID-19 pandemic significantly impacted our third quarter results. Consistent with sharp declines in order rates reported by other industrial companies in April, we saw order rate declines of 30-40% starting in late March through May. However, we remained focused on keeping our employees safe, serving our customers and preserving our ability to execute our strategy,” said Randy Baker, Enerpac Tool Group’s President and CEO.

Mr. Baker continued, “We took proactive steps to quickly address an abrupt and significant change in demand brought on by the pandemic. By adjusting our cost structure, we were able to achieve the low end of our target decremental margin range, preserve liquidity, and maintain a strong balance sheet. Our commitment to our strategy continues to pay off as we achieved a new product vitality in excess of 10% for the third quarter in a row. We believe the actions we have taken to date and our development of plans for a range of recovery scenarios position Enerpac Tool Group to excel as the market recovers from this global pandemic.”

• Consolidated net sales from continuing operations for the third quarter were $101.9 million, compared to $178.1 million in the prior year third quarter. Core sales decreased 38% year-over-year, with product sales down 35% and service down 47%. The net impact of acquisitions and divestitures/strategic exits decreased net sales by an additional 7%, and the impact of foreign currency benefited sales 2%.
• Fiscal 2020 third quarter net loss from continuing operations and loss per share from continuing operations were ($4.9) million and ($0.08), respectively, compared to net income from continuing operations and EPS of $26.9 million and $0.43, respectively, in the third quarter of fiscal 2019. Fiscal 2020 third quarter net loss from continuing operations included:
  • A net impairment and divestiture gain of $1.4 million ($1.0 million or $0.02 per share, after tax);
  • Restructuring charges of $3.3 million ($2.2 million or $0.04 per share, after tax), primarily related to the restructuring plan announced in March 2020 to reduce redundant segment and corporate costs along with facility consolidations; and
  • Purchase accounting charges of $0.2 million ($0.2 million after tax).
• Fiscal 2019 third quarter net income from continuing operations included an impairment benefit of $13.0 million ($13.0 million or $0.21 per share, after tax) related to the reversal of the held for sale treatment of the Cortland U.S. business, restructuring charges of $1.1 million ($0.8 million benefit or $0.01 per share, after tax) primarily related to IT&S restructuring, accelerated debt issuance costs of $0.5 million ($0.4 million or $0.01 per share, after tax) related to the modification of our revolving credit facilities, a depreciation/amortization true-up of $1.7 million ($1.3 million or $0.02 per share, after tax) resulting from Cortland assets being reclassified into assets held for use, and $3.1 million ($0.05 per share) of charges primarily related to U.S. tax reform.
• Excluding restructuring, impairment & divestiture charges and purchase accounting charges, adjusted loss per share from continuing operations was ($0.06) for the third quarter of fiscal 2020 compared to adjusted EPS of $0.29 in the comparable prior year period.
• Consolidated net sales for the nine months ended May 31, 2020 were $381.9 million, compared to $496.4 million in the prior year period. Core sales decreased 17% year-over-year, while the net impact of acquisitions and divestitures/strategic exits decreased net sales by 6% and the impact of foreign currency was minimal.
• Consolidated net income from continuing operations and EPS for the nine months ended May 31, 2020 were $5.4 million and $0.09, respectively, compared to net income from continuing operations and EPS of $11.2 million and $0.18, respectively, in the comparable prior year period.

• Third quarter fiscal 2020 net sales were $92.9 million, 44% lower than the prior fiscal year’s third quarter. Core sales decreased 39% year-over-year, while the net impact of acquisitions and divestitures/strategic exits decreased net sales 7% and the impact of foreign currency increased sales 2%.
• The decrease in revenue is attributable to the sharp and significant decline in demand driven by the COVID-19 pandemic, volatile oil pricing and the anticipated year-over-year service decline in the Middle East.
• Adjusted operating profit margin of 8.9% in the quarter decreased year-over-year primarily due to reduced volume, offset by a decrease in spend.

Corporate Expenses and Income Taxes (excluding restructuring items)

• Corporate expenses from continuing operations for the third quarter of fiscal 2020 were $8.2 million, $1.3 million lower than the comparable prior year period, primarily resulting from lower medical claims, reduced fees for third-party services, lower incentive compensation costs and restructuring actions.
• The third quarter effective income tax rate from continuing operations of approximately -7% was lower than the third quarter fiscal 2019 rate of approximately 19%.

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 the ancillary impacts from certain retained liabilities subsequent to the completion date. During the third quarter of fiscal 2020 we finalized the customary working capital settlement negotiations which provided an additional $1.3 million of proceeds as compared to the previously disclosed sales price. As a result, an additional gain on sale of $0.4 million was recorded through discontinued operations in the current quarter.

Net debt at May 31, 2020 was approximately $123 million (total debt of $287 million less $164 million of cash), which is consistent with the prior quarter. Net Debt to Adjusted EBITDA from continuing operations was 1.8x at May 31, 2020. As previously disclosed, the company purchased approximately 500,000 shares in the third quarter of fiscal 2020 at an average price of $19.25 for a total of $9.7 million.

**Adjusted EBITDA from continuing operations is calculated for the twelve months then ended.

Outlook

Given uncertainty related to the duration and magnitude of the COVID-19 global pandemic and the recovery of its core markets, the Company previously withdrew its full year financial guidance.

Mr. Baker said, “We are beginning to see increased business activity as economies gradually reopen in Asia, Europe and the U.S., which has translated into an improved sequential order rate. No region has normalized yet but we now see product order rates at approximately 20% below June of the prior year versus the 30-40% decline we experienced in April and May. While we are encouraged by recent commercial activity and improved order rates, it is still unclear whether current order rates will be sustained as well as when demand and market conditions will normalize to pre-pandemic conditions.”

Mr. Baker continued, “We will continue to navigate these uncertain times by remaining focused on employee safety and managing what we can control to drive long term shareholder value. We are confident in our strategy, which is supported by our strong balance sheet and our dedicated and talented workforce and we believe we are positioned well to succeed as the world recovers from the pandemic.”

Conference Call Information

An investor conference call is scheduled for 10:00 am CT today, June 25, 2020. Webcast information and conference call materials are available on the Enerpac Tool Group company website ().

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 reform, foreign currency fluctuations and interest rate risk. See the Company’s Form 10-K for the fiscal year ended August 31, 2019 and Form 10-Q for the period ended February 29, 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) per share from continuing operations, adjusted EPS, adjusted operating profit from continuing operations 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 factors 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 90 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 .

View source version on businesswire.com: