Manufacturers

Enerpac Tool Group Reports Third Quarter Fiscal 2021 Results

MILWAUKEE — Enerpac Tool Group Corp. (the “Company”) today announced results for its fiscal third quarter ended May 31, 2021.

“We are pleased with our return to year-over-year organic sales growth and the increased momentum as we progressed throughout the quarter,” said Randy Baker, Enerpac Tool Group’s President and CEO. “The continued positive sentiment among our distributors, the overall strength we are seeing across our vertical markets and product order rates in line with fiscal 2019 gives us confidence that our business will return to pre-COVID levels as we exit fiscal 2021.”

Baker added, “As expected, we saw economies recover and business activities normalize across many parts of the world but there are still some regions that remain challenged by pandemic related lockdowns. Our teams executed exceptionally well through the inflationary pressures, labor shortages and supply chain constraints that are impacting Enerpac Tool Group as well as many other companies around the world. I am incredibly proud of our team’s success in meeting customer demand and delivering a strong quarter despite these challenges. Enerpac Tool Group is well positioned to execute our strategic growth initiatives as the markets we serve continue to recover across the globe. With our strong balance sheet, we remain focused on new product development, driving organic growth and pursuing disciplined acquisition opportunities as we continue driving increased profitability and create value for all our stakeholders.”

Consolidated Results from Continuing Operations

  • Consolidated net sales from continuing operations for the third quarter were $143.1 million compared to $101.9 million in the prior year third quarter. Core sales improved 36% year-over-year, with product sales up 40% and service up 23%. The net impact of acquisitions and divestitures/strategic exits was immaterial, while the impact of foreign currency increased net sales by 6%.
  • Fiscal 2021 third quarter GAAP net income from continuing operations and diluted earnings per share from continuing operations were $25.3 million and $0.42, respectively, compared to a net loss from continuing operations of ($4.9) million and loss per share from continuing operations of ($0.08) in the third quarter of fiscal 2020. Fiscal 2021 third quarter net income from continuing operations included:
    • Restructuring charges of $1.6 million ($1.3 million, or $0.02 per share, after tax), related to a previously announced restructuring plan;
    • Corporate Development and Board search charges of $0.6 million ($0.4 million, or $0.01 per share, after tax);
    • Gain on sale of facility, net of transaction charges of $5.4 million ($2.4 million, or $0.04 per share, after tax) related to the sale of a large manufacturing facility in China as part of our footprint rationalization; and
    • Tax benefits of $7.5 million ($0.12 per share) related to the release of uncertain tax positions upon closure of income tax audits.
  • Fiscal 2020 third quarter net loss from continuing operations included a net impairment & 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).
  • Excluding the items detailed above, adjusted diluted EPS from continuing operations was $0.28 for the third quarter of fiscal 2021 compared to an adjusted loss per share from continuing operations of ($0.06) in the comparable prior year period.
  • Consolidated net sales for the nine months ended May 31, 2021 were $383.2 million, compared to $381.9 million in the comparable prior year period. Core sales were down 1% year-over-year, while the net impact of acquisitions and divestitures/strategic exits decreased net sales by 1% and the impact of foreign currency benefited net sales by 2%.
  • Consolidated net income from continuing operations and diluted EPS from continuing operations for the nine months ended May 31, 2021 were $33.7 million and $0.56, respectively, compared to net income from continuing operations and diluted EPS from continuing operations of $5.4 million and $0.09, respectively, in the comparable prior year period.

Industrial Tools & Services (IT&S)

  • Third quarter fiscal 2021 net sales were $133.4 million, 44% higher than the prior fiscal year’s third quarter net sales. Core sales increased 39% year-over-year, while the net impact of acquisitions and divestitures/strategic exits was immaterial and the impact of foreign currency increased net sales by 6%.
  • The increase in revenue is attributable to the broad-based market recovery as regions of the world return to normalized levels of activity coming out of the pandemic.
  • Adjusted operating profit margin of 19.0% in the quarter increased year-over-year primarily due to increased sales volume and savings from cost management and restructuring initiatives.

Corporate Expenses and Income Taxes (excluding non-GAAP adjustments)

  • Corporate expenses from continuing operations of $5.8 million for the third quarter of fiscal 2021 were $2.4 million lower than the comparable prior year period, primarily resulting from lower operating costs due to the prior fiscal year divestiture of the former Engineered Components & Systems (EC&S) segment, savings from equity compensations costs and lower consulting fees offset by higher insurance, legal and incentive compensation costs.
  • The fiscal 2021 third quarter effective income tax rate from continuing operations of approximately 3% was higher than the third quarter fiscal 2020 rate of approximately (7)%.

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.

Outlook

Baker continued, “As we move into the last quarter of fiscal 2021, we anticipate strengthening business trends and remain optimistic that our global end markets will continue on the path to returning to a pre-pandemic level of activity. We previously guided expected sales to be in a range of $280 million to $290 million for the second half of fiscal 2021, with continuing sequential improvement through the end of the fiscal year and anticipated incremental Adjusted EBITDA margins at the high end of 35% to 45%, excluding the impact of currency. Given our strong third quarter results, we believe that the sales range will be $290 million to $295 million for the second half of fiscal 2021, implying fourth quarter sales of $147 million to $152 million, with incremental Adjusted EBITDA margins on the high end of the range provided.”

Baker concluded, “Looking ahead, as end markets continue to recover, Enerpac Tool Group is well positioned to grow through new product development and organic growth in key vertical markets and inorganically through strategic acquisitions. We are encouraged by the broad-based improvement in the third quarter, confident in our ability to accelerate growth and look forward to executing our strategy to generate substantial shareholder value.”

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