Manufacturers

Enerpac Tool Group Reports Q1 2021 Results

MILWAUKEE — Enerpac Tool Group Corp. 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.

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 of impairment & divestiture charges in the first quarter of fiscal 2021 compared to $1.2 million of restructuring charges and $1.4 million of net impairment & divestiture gains in the three months ended November 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,
2020

August 31,
2020

November 30,
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 Senior Credit 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.

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.”

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