Basis of Presentation

9 Months Ended

May 31, 2021

Note 1. Basis of Presentation

General

Enerpac Tool Group Corp. ("Company") is a premier industrial tools and services company serving a broad and diverse set of customers in more than 100 countries. The Company has two operating segments, Industrial Tools & Service ("IT&S") and Other, with the IT&S segment representing the only reportable segment.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The condensed consolidated balance sheet data as of August 31, 2020 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes in the Company’s fiscal 2020 Annual Report on Form 10-K.

In the opinion of management, all adjustments considered necessary for a fair statement of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for the three and nine months ended May 31, 2021 are not necessarily indicative of the results that may be expected for the entire fiscal year ending August 31, 2021. The COVID-19 pandemic has negatively impacted, and is likely to continue to negatively impact to varying extents, the global economy. The Company's operating results and financial position will continue to be subject to the general economic conditions created by the pandemic, and the duration and extent to which the pandemic's effects impact the Company's business will depend on future developments, including the distribution and effectiveness of vaccines globally and therapeutics in minimizing its negative effects on macroeconomic conditions, which still remain uncertain.

The Company has updated our historical caption of "Selling, administrative and engineering expenses" in the Condensed Consolidated Statements of Operations to "Selling, general and administrative expenses." There has been no change to the composition of expenses within the caption in the current or historical periods presented.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which adds an impairment model that is based on expected losses rather than incurred losses and is called the Current Expected Credit Losses (“CECL”) model. This impairment model is applicable to loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables as well as any other financial asset with the contractual right to receive cash. Under the new model, an allowance equal to the estimate of lifetime expected credit losses is recognized, which will result in more timely loss recognition. The guidance is intended to reduce complexity by decreasing the number of credit impairment models. The Company adopted the guidance on September 1, 2020 using the modified retrospective approach and there was no impact to the financial statements as a result of the adoption.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for a limited time to ease the potential burden of accounting for reference rate reform on financial reporting. This guidance applies to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates. The guidance is effective beginning on March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 allowing entities to apply certain aspects of ASC 848 (previously ASU 2020-4) to all derivative instruments that undergo a modification of the interest rate used for discounting, margining or contract price alignment as a result of the reference reform. The guidance is also effective through December 31, 2022. The Company has not utilized any of the optional expedients or exceptions available under this guidance. The Company will continue to assess whether this guidance is applicable throughout the effective period.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions and amending and clarifying existing guidance. The guidance is effective for the Company in the first quarter of fiscal 2022 with early adoption permitted. The Company is currently assessing the impact of this ASU on its condensed consolidated financial statements.

Accumulated Other Comprehensive Loss

The following is a summary of the Company's accumulated other comprehensive loss (in thousands):


	May 31, 2021		August 31, 2020
Foreign currency translation adjustments	$	59,089	$	75,896
Pension and other postretirement benefit plans, net of tax	24,281		24,750
Unrecognized losses on cash flow hedges	30		78
Accumulated other comprehensive loss	$	83,400	$	100,724

Property Plant and Equipment

The following is a summary of the Company's components of property, plant and equipment (in thousands):


	May 31, 2021		August 31, 2020
Land, buildings and improvements	$	15,627	$	33,548
Machinery and equipment	147,525		134,536
Gross property, plant and equipment	163,152		168,084
Less: Accumulated depreciation	(113,005)		(106,679)
Property, plant and equipment, net	$	50,147	$	61,405