Manufacturers

Enerpac Tool Group Reports 2Q Fiscal 2022 Results

MILWAUKEE — Enerpac Tool Group Corp. today announced results for its fiscal second quarter ended February 28, 2022.

“We are pleased to have achieved year-over-year core growth in all regions and encouraged by the sequential growth over the first quarter, despite the ongoing supply chain and logistic challenges,” said Paul Sternlieb, Enerpac Tool Group’s President & CEO. “We continue to see improvements in demand across several of our end markets but remain cautious as we head into the back half of our fiscal year given the continuing supply chain challenges and the very dynamic macroeconomic environment.”

Consolidated Results from Continuing Operations

(US$ in millions, except per share)

Three Months Ended

Six Months Ended

February 28,
2022

February 28,
2021

February 28,
2022

February 28,
2021

Net Sales

$136.6

$120.7

$267.5

$240.1

Net Income

$2.1

$3.6

$5.3

$8.4

Diluted Earnings Per Share

$0.03

$0.06

$0.09

$0.14

Adjusted Diluted Earnings Per Share

$0.14

$0.06

$0.30

$0.15

  • Consolidated net sales for the second quarter of fiscal 2022 were $136.6 million compared to $120.7 million in the prior year second quarter. Core sales improved 16% year over year, with product sales up 16% and service revenues up 13%. The impact from foreign currency exchange rates decreased net sales by 2% in the quarter.
  • Fiscal 2022 second quarter net income and diluted earnings per share were $2.1 million and $0.03, respectively, compared to net income and diluted EPS of $3.6 million and $0.06, respectively, in the second quarter of fiscal 2021. Fiscal 2022 second quarter net income included:
    • A restructuring charge of $1.8 million ($1.7 million, or $0.03 per share, after tax) attributable to further actions to flatten and simplify the organizational structure;
    • Impairment & divestiture charges of $1.1 million ($0.8 million, or $0.01 per share, after tax) related to intangible assets from historical acquisitions;
    • Business review charges of $2.5 million ($2.3 million, or $0.04 per share, after tax) related to external support for the deep dive business review;
    • Senior leadership transition charges of $1.7 million ($1.6 million, or $0.03 per share, after tax); and
    • Tax expense of $0.2 million ($0.00 per share) related to equity compensation deferred tax adjustments.
  • Fiscal 2021 second quarter net income included an impairment & divestiture charge of $0.4 million ($0.3 million, or $0.01 per share, after tax), restructuring charges of $0.6 million ($0.6 million, or $0.01 per share, after tax); and tax benefits of $0.6 million ($0.01 per share) related to equity compensation deferred tax adjustments.
  • Excluding the items detailed above, adjusted diluted EPS was $0.14 for the second quarter of fiscal 2022 compared to $0.06 in the comparable prior year period.
  • Consolidated net sales for the six months ended February 28, 2022 were $267.5 million, compared to $240.1 million in the comparable prior year period. Core sales increased 13% year over year, while the net impact of foreign currency decreased net sales 1%.
  • Fiscal 2022’s first half net income and diluted EPS were $5.3 million and $0.09, respectively, compared to net income and diluted EPS of $8.4 million and $0.14, respectively, in the comparable prior year period.

Industrial Tools & Services (IT&S)

(US$ in millions)

Three Months Ended

Six Months Ended

February 28,
2022

February 28,
2021

February 28,
2022

February 28,
2021

Net Sales

$125.9

$112.7

$247.3

$224.9

Operating Profit

$12.6

$13.9

$30.6

$31.0

Adjusted Op Profit (1)

$15.7

$14.9

$35.3

$32.2

Adjusted Op Profit % (1)

12.4%

13.2%

14.3%

14.3%

(1) Excludes $1.5 million of restructuring charges, $1.1 million of impairment & divestiture charges and $0.4 million of senior leadership transition charges in the second quarter of fiscal 2022 compared to $0.6 million of restructuring charges and $0.4 million of impairment & divestiture charges in the second quarter of fiscal 2021. The six months ended February 28, 2022 excludes $3.1 million of restructuring charges, $1.1 million of impairment & divestiture charges and $0.4 million of senior leadership transition charges compared to $0.7 million of restructuring charges and $0.5 million of impairment & divestiture charges in the prior year period.

  • Second quarter fiscal 2022 net sales were $125.9 million, 12% higher than the prior fiscal year’s second quarter net sales. Core sales increased 14% year over year.
  • The increase in revenue is attributable to the global market recovery from the COVID-19 pandemic and to a lesser extent the impact of pricing actions taken to offset inflationary pressures.
  • Adjusted operating profit margin decreased year over year to 12.4% primarily due to lower service mix/utilization and additional receivable reserves.

Corporate Expenses and Income Taxes from Continuing Operations

  • Corporate expenses were $8.4 million and $6.3 million for the second quarter of fiscal 2022 and fiscal 2021, respectively.
  • Adjusted corporate expenses(2) of $4.3 million for the second quarter of fiscal 2022 were $2.0 million lower than the comparable prior year period, primarily resulting from lower equity/incentive compensation and insurance costs.
  • The fiscal 2022 second quarter adjusted effective income tax rate from continuing operations of approximately 18% was higher than the second quarter fiscal 2021 adjusted rate of approximately 16%.

(2) Excludes approximately $0.3 million of restructuring charges, $2.5 million of business review charges, and $1.3 million of senior leadership transition charges in the second quarter of fiscal 2022. There were no comparable charges in the second quarter of fiscal 2021.

Discontinued Operations

Discontinued operations represent the impacts from certain retained liabilities associated with the divestiture of the former EC&S segment on October 31, 2019.

Balance Sheet and Leverage

(US$ in millions)

Period Ended

February 28, 2022

November 30, 2021

February 28, 2021

Cash Balance

$133.4

$126.5

$115.3

Debt Balance

$175.0

$175.0

$210.0

Net Debt to Adjusted EBITDA**

0.6

0.7

2.1

Net debt at February 28, 2022 was approximately $42 million (total debt of $175 million less $133 million of cash), which decreased approximately $6 million from November 30, 2021. Net Debt to Adjusted EBITDA from continuing operations was 0.6x at February 28, 2022.

**Calculated in accordance with the terms of the Company’s March 2019 Senior Credit Facility

ASCEND Launch and Share Repurchase Authorization

In a separate release this morning, the Company announced the launch of the ASCEND transformation program focused on driving accelerated growth and EBITDA to enhance shareholder value. The Company also announced that the Board of Directors authorized a new share repurchase program of up to 10 million shares of the Company’s common stock.

Outlook

Sternlieb continued, “As we move into the back half of our fiscal year, our focus is on successfully executing on our new ASCEND transformation program and accelerating shareholder value creation. Despite the strong quarter, the turmoil of global events in the last month and the resulting macroeconomic challenges have created second half headwinds and uncertainty in our markets, and as such we are adjusting our full year guidance for fiscal 2022.

“Factors such as the stronger US Dollar, which accounts for roughly half of the impact to our new net sales guidance, continued inflationary pressures, continued supply chain disruptions as well as greater supply chain difficulties resulting from the Russia-Ukraine conflict and, to a lesser extent product sold directly into Russia which has been suspended to comply with sanctions, have caused us to revise our full year sales guidance, to a new range of $560 to $580 million. While we have some potential tailwinds that could help support growth, we remain cautious. We continue to expect incremental EBITDA margins*** of 35% to 45% excluding the impact of foreign currency.”

***Incremental (or decremental) adjusted EBITDA margin is equivalent to the change in adjusted EBITDA divided by the change in Net Sales for the comparable periods.

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