Enerpac Tool(EPAC) - 2025 Q3 - Quarterly Report

Part I—Financial Information Item 1—Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three and nine months ended May 31, 2025, and 2024, including statements of earnings, comprehensive income, balance sheets, and cash flows, along with detailed notes on acquisitions, restructuring, and segment performance Condensed Consolidated Statements of Earnings For Q3 FY2025, net sales increased to $158.7 million, while operating profit slightly decreased to $31.7 million due to higher restructuring charges; for the nine-month period, net sales grew to $449.4 million, and operating profit increased to $93.6 million, with diluted EPS from continuing operations at $0.41 for the quarter and $1.18 for the nine-month period Consolidated Statements of Earnings Highlights (in thousands, except per share data) | Metric | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $158,661 | $150,389 | $449,385 | $430,796 | | Gross Profit | $79,903 | $77,883 | $227,985 | $223,608 | | Operating Profit | $31,681 | $33,363 | $93,633 | $91,547 | | Net Earnings from Continuing Operations | $22,044 | $22,621 | $64,668 | $58,798 | | Diluted EPS from Continuing Operations | $0.41 | $0.41 | $1.18 | $1.07 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for Q3 FY2025 significantly increased to $42.6 million from $26.5 million, primarily driven by a positive foreign currency translation adjustment of $20.3 million, with the nine-month comprehensive income rising to $70.7 million from $61.2 million Comprehensive Income Summary (in thousands) | Metric | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Earnings | $22,044 | $25,778 | $64,668 | $61,333 | | Foreign Currency Translation Adjustments | $20,280 | $423 | $5,178 | $(2,460) | | Comprehensive Income | $42,561 | $26,485 | $70,682 | $61,204 | Condensed Consolidated Balance Sheets As of May 31, 2025, total assets increased to $828.1 million from $777.3 million, driven by growth in goodwill, inventories, and property, plant, and equipment, while total liabilities remained stable at $389.9 million and total shareholders' equity grew to $438.2 million Balance Sheet Highlights (in thousands) | Account | May 31, 2025 | August 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $140,506 | $167,094 | | Total current assets | $382,581 | $372,258 | | Goodwill | $287,630 | $269,597 | | Total assets | $828,104 | $777,328 | | Total current liabilities | $132,020 | $129,393 | | Long-term debt, net | $184,627 | $189,503 | | Total liabilities | $389,879 | $385,349 | | Total shareholders' equity | $438,225 | $391,979 | Condensed Consolidated Statements of Cash Flows For the nine months ended May 31, 2025, net cash provided by operating activities increased to $56.0 million, net cash used in investing activities rose sharply to $43.1 million due to a business acquisition, and net cash used in financing activities decreased to $40.0 million, resulting in a net decrease of $26.6 million in cash and cash equivalents Cash Flow Summary (in thousands) | Activity | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $56,030 | $36,958 | | Cash used in investing activities | $(43,104) | $(7,505) | | Cash used in financing activities | $(39,971) | $(51,404) | | Net decrease in cash and cash equivalents | $(26,588) | $(22,053) | | Cash and cash equivalents - end of period | $140,506 | $132,362 | Notes to the Condensed Consolidated Financial Statements The notes detail accounting policies, revenue recognition, acquisitions, restructuring, debt, and segment information, highlighting the DTA acquisition for $26.7 million, the completion of the ASCEND program, a new Q3 FY2025 restructuring plan with $5.9 million in charges, and the repurchase of 660,050 shares for $28.6 million - On September 4, 2024, the Company acquired DTA for an initial purchase price of $26.7 million, plus a potential earn-out. This acquisition added $14.8 million to goodwill[47][48][51] - The ASCEND transformation program was completed as of August 31, 2024, with total program costs of $74.7 million. No related expenses were incurred in fiscal 2025[39][40] - During Q3 2025, the company initiated a new restructuring plan, incurring costs of $5.9 million related to personnel actions and charges for its former headquarters[45] - The company repurchased and retired 660,050 shares for $28.6 million in the nine months ended May 31, 2025. 2,056,999 shares remain available for purchase under the program[65] Item 2—Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, business strategy, and liquidity, noting Q3 FY2025 consolidated net sales grew 6% to $159 million (2% organic growth) with a gross profit margin decline, while nine-month sales increased 4% to $449 million (2% organic growth), driven by a strategy focused on organic growth, margin expansion, and disciplined capital deployment, with improved cash flow from operations Q3 FY2025 vs Q3 FY2024 Performance (in millions) | Metric | Q3 2025 | Q3 2024 | Change | Organic Growth | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $159 | $150 | +6% | +2% | | Gross Profit | $80 | $78 | +2.6% | N/A | | Operating Profit | $32 | $33 | -6.3% | N/A | Nine Months FY2025 vs FY2024 Performance (in millions) | Metric | 9M 2025 | 9M 2024 | Change | Organic Growth | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $449 | $431 | +4% | +2% | | Gross Profit | $228 | $224 | +1.8% | N/A | | Operating Profit | $94 | $92 | +2.2% | N/A | - The IT&S segment net sales increased by 5% in Q3 FY2025, with organic sales growth of 1%. For the nine-month period, segment sales grew 4%, with organic growth of 2%[88][89] - Net cash provided by operating activities increased to $56 million for the nine months ended May 31, 2025, up from $37 million in the prior year, driven by higher earnings and lower incentive payments[95] Item 3—Quantitative and Qualitative Disclosures about Market Risk The company manages exposure to interest rate, foreign currency, and commodity cost risks, using an interest-rate swap for $60 million of its term loan, and estimates a hypothetical 10% adverse change in foreign exchange rates would reduce quarterly sales by $7 million, while acknowledging vulnerability to commodity price fluctuations - Interest Rate Risk: An interest-rate swap effectively converts $60 million of variable-rate term loan debt to a fixed rate. A 10% increase in the average cost of variable rate debt would have a minimal impact (less than $1 million) on quarterly financing costs[108] - Foreign Currency Risk: A hypothetical 10% decrease in all foreign exchange rates against the U.S. dollar would have lowered quarterly sales by $7 million and operating profit by less than $1 million[110] - Commodity Cost Risk: The company is exposed to price fluctuations in commodity raw materials, such as steel and plastic resin, which could negatively impact results if price increases cannot be passed on to customers[111] Item 4—Controls and Procedures Senior management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of May 31, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[112] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[113] Part II—Other Information Item 1A—Risk Factors This section confirms no material changes to previously disclosed risk factors, reiterating key risks such as geopolitical actions (Middle East and Russia-Ukraine conflicts) and global tariff uncertainty that could deteriorate economic conditions and harm the business - The company highlights that geopolitical activities, including armed conflicts in the Middle East and the Russia-Ukraine conflict, could cause economic deterioration and harm the business[115] - Uncertainty over global tariffs poses a risk by potentially increasing production costs and depressing demand for the company's products[116] Item 2—Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased and retired 660,050 shares for $28.6 million in the nine months ended May 31, 2025, including 330,523 shares in Q3, with 2,056,999 shares remaining authorized for repurchase Share Repurchase Activity (Q3 FY2025) | Period | Shares Repurchased | Average Price Paid per Share | | :--- | :--- | :--- | | March 2025 | 180,333 | $44.83 | | April 2025 | 148,113 | $38.64 | | May 2025 | 2,077 | $39.93 | | Total Q3 | 330,523 | $42.03 | - For the nine months ended May 31, 2025, the company repurchased and retired 660,050 shares for $28.6 million[118] - The maximum number of shares that may yet be purchased under the program is 2,056,999[118][119] Item 5—Other Information This section discloses that three key executives, including the Non-Executive Chair, President and CEO, and Executive VP and CHRO, entered into new Rule 10b5-1 trading arrangements in May 2025 for the potential future sale of company stock - In May 2025, the Non-Executive Chair (E. James Ferland), President and CEO (Paul E. Sternlieb), and EVP and CHRO (Benjamin J. Topercer) each entered into new Rule 10b5-1 trading arrangements for the future sale of company shares[120][121][122] Item 6—Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO as required by Sections 302 and 906 of the Sarbanes-Oxley Act, and financial statements formatted in Inline XBRL - The report includes required certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[123] - Financial statements and notes are provided in Inline Extensible Business Reporting Language (Inline XBRL) format[123]