epac-20221130

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-11288

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ENERPAC TOOL GROUP CORP.

(Exact name of registrant as specified in its charter)

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Wisconsin						39-0168610
(State of incorporation)						(I.R.S. Employer Id. No.)

N86 W12500 WESTBROOK CROSSING

MENOMONEE FALLS, WISCONSIN 53051

Mailing address: P. O. Box 3241, Milwaukee, Wisconsin 53201

(Address of principal executive offices)

(262) 293-1500

(Registrant’s telephone number, including area code)

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Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Ticker Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.20 par value per share	EPAC	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ¨ No ☒

The number of shares outstanding of the registrant’s Class A Common Stock as of December 16, 2022 was 56,973,236.

Table of Contents

TABLE OF CONTENTS


			Page No.

Forward-Looking Statements and Cautionary Factors			1

Part I—Financial Information

Item 1—Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Statements of Earnings			3

Condensed Consolidated Statements of Comprehensive Income (Loss)			4

Condensed Consolidated Balance Sheets			5

Condensed Consolidated Statements of Cash Flows			6

Notes to the Condensed Consolidated Financial Statements			7

Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations			18

Item 3—Quantitative and Qualitative Disclosures about Market Risk			22

Item 4—Controls and Procedures			23

Part II—Other Information

Item 2—Unregistered Sales of Equity Securities and Use of Proceeds			24

Item 6—Exhibits			24

FORWARD-LOOKING STATEMENTS AND CAUTIONARY FACTORS

This quarterly report on Form 10-Q contains certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include statements regarding expected financial results and other planned events, including, but not limited to, anticipated liquidity, anticipated restructuring costs and related savings, anticipated future charges and anticipated capital expenditures. The terms “may,” “should,” “could,” “anticipate,” “believe,” “estimate,” “expect,” “objective,” “plan,” “project” and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual future events or results may differ materially from these statements. We disclaim any obligation to publicly update or revise any forward-looking statements as a result of new information, future events or any other reason.

The following is a list of factors, among others, that could cause actual results to differ materially from the forward-looking statements:

•supply chain issues, including shortages of adequate component supply that increase our costs or cause delays in our ability to fulfill orders;

•failure to estimate customer demand properly may result or could have an adverse impact on our business and operating results and our relationship with customers;

•the deterioration of, or instability in, the domestic and international economy and/or in our various end markets, including as a result of geopolitical activity;

•decreases in sales and/or increases in costs or reduced availability of commodities or components used in the production of our products due to sanctions and export controls targeting Russia in connection with its invasion of Ukraine;

•decreased demand from customers in the oil & gas industry, including as a result of significant volatility in oil prices resulting from disruptions in the oil markets;

•uncertainty over global tariffs or the financial impact of tariffs;

•our ability to execute on restructuring actions and on the objectives related to the ASCEND transformation program in order to achieve anticipated incremental operating profit;

•logistics challenges, including global freight capacity shortages, significant increases in freight costs or other delays in our ability to fulfill orders;

•failure to collect on accounts receivable, including in certain foreign jurisdictions where sales are concentrated to a limited number of distributors or agents;

•a significant failure in our information technology (IT) infrastructure, such as unauthorized access to financial and other sensitive data or cybersecurity threats;

•a material disruption at a significant manufacturing facility;

•competition in the markets we serve;

•currency exchange rate fluctuations, export and import restrictions, transportation disruptions or shortages, and other risks inherent in our international operations;

•regulatory and legal developments, including litigation, such as product liability and warranty claims;

•the extent to which the COVID-19 pandemic (including new variants of COVID-19) continues to impact our employees, operations, customers and suppliers;

•failure to develop new products and the extent of market acceptance of new products;

•our ability to execute on our growth strategy;

•our ability to successfully identify, consummate and integrate acquisitions and realize anticipated benefits/results from acquired companies as part of our portfolio management process;

•the effects of divestitures and/or discontinued operations, including retained liabilities from, or indemnification obligations with respect to, disposed businesses;

•if the operating performance of our businesses were to fall significantly below normalized levels, the potential for a non-cash impairment charge of goodwill and/or other intangible assets, as they represent a substantial amount of our total assets;

•a global economic recession;

•the impact of rapidly rising interest rates;

•our ability to comply with the covenants in our debt agreements and fluctuations in interest rates;

•our ability to attract, develop, and retain qualified employees;

•inadequate intellectual property protection or infringement of the intellectual property of others; and

•other matters, including those of a political, economic, business, competitive and regulatory nature contained from time to time in our U.S. Securities and Exchange Commission ("SEC") filings, including, but not limited to, those factors listed in the "Risk Factors" section within Item 1A of Part I of our Form 10-K filed with the SEC on October 25, 2022.

When used herein, the terms “we,” “us,” “our” and the “Company” refer to Enerpac Tool Group Corp. and its subsidiaries. Reference to fiscal years, such as "fiscal 2023," are to the fiscal year ending on August 31 of the specified year. Enerpac Tool Group Corp. provides free-of-charge access to its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments thereto, through its website, www.enerpactoolgroup.com, as soon as reasonably practicable after such reports are electronically filed with the SEC.

PART I—FINANCIAL INFORMATION

Item 1—Financial Statements

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended November 30,
	2022		2021
Net sales	$	139,382	$	130,903
Cost of products sold	71,476		71,277
Gross profit	67,906		59,626

Selling, general and administrative expenses	53,247		48,477
Amortization of intangible assets	1,368		2,005
Restructuring charges	982		2,737
Operating profit	12,309		6,407
Financing costs, net	2,815		961
Other expense, net	702		480
Earnings before income tax expense	8,792		4,966
Income tax expense	2,383		1,781
Net earnings from continuing operations	6,409		3,185
Earnings (loss) from discontinued operations, net of income taxes	1,044		(397)
Net earnings	$	7,453	$	2,788

Earnings per share from continuing operations
Basic	$	0.11	$	0.05
Diluted	$	0.11	$	0.05

Earnings (loss) per share from discontinued operations
Basic	$	0.02	$	(0.01)
Diluted	$	0.02	$	(0.01)

Earnings per share*
Basic	$	0.13	$	0.05
Diluted	$	0.13	$	0.05

Weighted average common shares outstanding
Basic	56,886		60,261
Diluted	57,317		60,621

*The total of Earnings per share from continuing operations and Loss per share from discontinued operations may not equal Earnings per share due to rounding.

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended November 30,
	2022		2021
Net earnings	$	7,453	$	2,788
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	5,941		(10,380)
Pension, other postretirement benefit plans, and cash flow hedges	83		336
Total other comprehensive income (loss), net of tax	6,024		(10,044)
Comprehensive income (loss)	$	13,477	$	(7,256)

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	(Unaudited)
	November 30, 2022		August 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	129,243	$	120,699
Accounts receivable, net	97,707		106,747
Inventories, net	90,664		83,672
Other current assets	35,059		31,262
Total current assets	352,673		342,380
Property, plant and equipment, net	41,784		41,372
Goodwill	261,659		257,949
Other intangible assets, net	41,031		41,507
Other long-term assets	77,254		74,104
Total assets	$	774,401	$	757,312
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable	$	74,673	$	72,524
Accrued compensation and benefits	23,441		21,390
Current maturities of debt	1,875		—
Short-term debt	—		4,000
Income taxes payable	4,992		4,594
Other current liabilities	49,165		50,680
Total current liabilities	154,146		153,188
Long-term debt, net	200,359		200,000
Deferred income taxes	7,887		7,355
Pension and postretirement benefit liabilities	11,902		11,941
Other long-term liabilities	65,784		66,217
Total liabilities	440,078		438,701
Commitments and contingencies (Note 14)
Shareholders’ equity
Class A common stock, $0.20 par value per share, authorized 168,000,000 shares, issued 83,529,142 and 83,397,458 shares, respectively	16,706		16,679
Additional paid-in capital	215,194		212,986
Treasury stock, at cost, 26,558,965 shares	(742,844)		(742,844)
Retained earnings	974,204		966,751
Accumulated other comprehensive loss	(128,937)		(134,961)
Stock held in trust	(3,239)		(3,209)
Deferred compensation liability	3,239		3,209
Total shareholders' equity	334,323		318,611
Total liabilities and shareholders’ equity	$	774,401	$	757,312

The accompanying notes are an integral part of these condensed consolidated financial statements.

ENERPAC TOOL GROUP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended November 30,
	2022		2021
Operating Activities
Net earnings	$	7,453	$	2,788
Less: Net earnings (loss) from discontinued operations	1,044		(397)
Net earnings from continuing operations	6,409		3,185
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities - continuing operations:
Depreciation and amortization	4,193		5,175
Stock-based compensation expense	2,155		6,147
(Benefit) provision for deferred income taxes	(33)		423
Amortization of debt issuance costs	460		120
Other non-cash benefits (charges)	11		(13)
Changes in components of working capital and other, excluding acquisitions and divestitures:
Accounts receivable	9,844		(10,801)
Inventories	(5,684)		(9,823)
Trade accounts payable	2,130		2,358
Prepaid expenses and other assets	(8,377)		140
Income tax accounts	5,104		682
Accrued compensation and benefits	1,529		(3,509)
Other accrued liabilities	73		1,975
Cash provided by (used in) operating activities - continuing operations	17,814		(3,941)
Cash used in operating activities - discontinued operations	(281)		(785)
Cash provided by (used in) operating activities	17,533		(4,726)

Investing Activities
Capital expenditures	(3,028)		(3,293)
Proceeds from sale of property, plant and equipment	493		133
Cash used in investing activities - continuing operations	(2,535)		(3,160)
Cash used in investing activities	(2,535)		(3,160)

Financing Activities
Borrowings on revolving credit facility	14,000		5,000
Principal repayments on revolving credit facility	(11,000)		(5,000)
Proceeds from issuance of term loan	200,000		—
Payment for redemption of revolver	(200,000)		—
Swingline borrowings/repayments, net	(4,000)		—
Payment of debt issuance costs	(2,417)		—
Taxes paid related to the net share settlement of equity awards	(969)		(1,393)
Stock option exercises & other	972		85
Payment of cash dividend	(2,274)		(2,409)
Cash used in financing activities - continuing operations	(5,688)		(3,717)
Cash used in financing activities	(5,688)		(3,717)

Effect of exchange rate changes on cash	(766)		(2,216)
Net increase (decrease) in cash and cash equivalents	8,544		(13,819)
Cash and cash equivalents - beginning of period	120,699		140,352
Cash and cash equivalents - end of period	$	129,243	$	126,533

The accompanying notes are an integral part of these condensed consolidated financial statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

General

Enerpac Tool Group Corp. ("Company") is a premier industrial tools, services, technology and solutions company serving a broad and diverse set of customers in more than 100 countries. The Company has one reportable segment, the Industrial Tools & Services Segment ("IT&S"), and an Other operating segment, which does not meet the criteria to be considered a 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, 2022 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 2022 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 months ended November 30, 2022 are not necessarily indicative of the results that may be expected for the entire fiscal year ending August 31, 2023.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, including the current supply chain and logistics environment caused by the sharp increase in demand as global economies recover. The Company also has historically sold products to companies located in or associated with Russia. In response to Russia's invasion of Ukraine, many countries, including the countries that are members of the North Atlantic Treaty Organization ("NATO"), including the United States, have initiated sanctions and export controls targeting Russia and entities associated with Russia which significantly limits our ability to serve certain customers and collect on our outstanding receivables. The duration and extent to which the pandemic and trade sanctions against Russia effect the Company's business will depend on future developments which still remain uncertain.

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which amends ASC 805 to require an acquirer to, at the date of acquisition, recognize and measure contract assets and contract liabilities acquired in accordance with ASU 2014-9, Revenue from Contracts with Customers (Topic 606) as if the entity had originated the contracts. The guidance is effective for fiscal years beginning after December 15, 2022. The Company will adopt this guidance in the event of a business combination subsequent to the effective date of the guidance.

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.

Accumulated Other Comprehensive Loss

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


	November 30, 2022		August 31, 2022
Foreign currency translation adjustments	$	110,137	$	116,078
Pension and other postretirement benefit plans, net of tax	18,800		18,883
Accumulated other comprehensive loss	$	128,937	$	134,961

Property Plant and Equipment

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


	November 30, 2022		August 31, 2022
Land, buildings and improvements	$	14,451	$	14,121
Machinery and equipment	144,963		141,571
Gross property, plant and equipment	159,414		155,692
Less: Accumulated depreciation	(117,630)		(114,320)
Property, plant and equipment, net	$	41,784	$	41,372

Note 2. Revenue from Contracts with Customers

Nature of Goods and Services

The Company generates its revenue under two principal activities, which are discussed below:

Product Sales: Sales of tools, heavy-lifting solutions, and rope solutions are recorded when control is transferred to the customer (i.e., performance obligation has been satisfied). For the majority of the Company’s product sales, revenue is recognized at a point in time when control of the product is transferred to the customer, which generally occurs when the product is shipped from the Company to the customer. For certain other products that are highly customized and have a limited alternative use, and for which the Company has an enforceable right of reimbursement for performance completed to date, revenue is recognized over time. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over-time revenue associated with these custom products. For a majority of the Company’s custom products, machine hours and labor hours (efforts-expended measurement) are used as a measure of progress.

Service & Rental Sales: Service contracts consist of providing highly trained technicians to perform bolting, technical services, machining and joint-integrity work for our customers. These revenues are recognized over time as our customers simultaneously receive and consume the benefits provided by the Company. We consider the input measure (efforts-expended or cost-to-cost) or output measure as a fair measure of progress for the recognition of over-time revenue associated with service contracts. For a majority of the Company’s service contracts, labor hours (efforts-expended measurement) is used as the measure of progress when it is determined to be a better depiction of the transfer of control to the customer due to the timing and pattern of labor hours incurred. Revenue from rental contracts (less than a year and non-customized products) is generally recognized ratably over the contract term, depicting the customer’s consumption of the benefit related to the rental equipment.

Disaggregated Revenue and Performance Obligations

The Company disaggregates revenue from contracts with customers by reportable segment and product line and by the timing of when goods and services are transferred. See Note 13, "Segment Information" for information regarding our revenue disaggregation by reportable segment and product line.

The following table presents information regarding revenues disaggregated by the timing of when goods and services are transferred (in thousands):


	Three Months Ended November 30,
	2022		2021
Revenues recognized at point in time	$	109,903	$	100,174
Revenues recognized over time	29,479		30,729
Total	$	139,382	$	130,903

Contract Balances

The Company's contract assets and liabilities are as follows (in thousands):


	November 30, 2022		August 31, 2022
Receivables, which are included in accounts receivable, net	$	97,707	$	106,747
Contract assets, which are included in other current assets	1,398		2,397
Contract liabilities, which are included in other current liabilities	3,156		2,804

Receivables: The Company performs its obligations under a contract with a customer by transferring goods or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is

transferred and a receivable for the Company is established. Accounts receivable, net is recorded at face amount of customer receivables less an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for expected losses as a result of customers’ inability to make required payments. Management evaluates the aging of customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of receivables that may be collected in the future and records the appropriate provision. The allowance for doubtful accounts was $17.3 million and $17.5 million at November 30, 2022 and August 31, 2022, respectively.

As indicated in the "Concentration of Credit Risk" section below, as of November 30, 2022 the Company was exposed to a concentration of credit risk with an agent as a result of its continued payment delinquency. As of November 30, 2022 the Company has a reserve of $13.2 million based on the consideration of the factors listed below, which fully reserves for the outstanding accounts receivable balance for this agent. The allowance for doubtful accounts, for this particular agent as of November 30, 2022 represents management's best estimate of the amount probable of collection and considers various factors with the respect to this matter, including, but not limited to, (i) the lack of payment by the agent since the fiscal quarter ended February 28, 2021, (ii) our due diligence on balances due to the agent from its end customers related to sales of our services and products and the known markup on those sales from agent to end customer, (iii) the status of ongoing negotiations with the agent to secure payments and (iv) legal recourse available to secure payment. Actual collections from the agent may differ from the Company's estimate.

Concentration of Credit Risk: The Company sells products and services through distributors and agents. In certain jurisdictions, those third parties represent a significant portion of our sales in their respective country which can pose a concentration of credit risk if these larger distributors or agents are not timely in their payments. As of November 30, 2022, the Company was exposed to a concentration of credit risk as a result of the payment delinquency of one of our agents whose accounts receivable represent 11.3% of the Company's outstanding accounts receivable. As of November 30, 2022, the Company has fully reserved for the amounts due from this agent.

Contract Assets: Contract assets relate to the Company’s rights to consideration for work completed but not billed as of the reporting date on contracts with customers. The contract assets are transferred to receivables when the rights become unconditional. The Company has contract assets on contracts that are generally long-term and have revenues that are recognized over time.

Contract Liabilities: As of November 30, 2022, the Company had certain contracts where there were unsatisfied performance obligations and the Company had received cash consideration from customers before the performance obligations were satisfied. The majority of these contracts relate to long-term customer contracts (project durations of greater than three months) and are recognized over time. The Company estimates that substantially all of the $3.2 million will be recognized in net sales from satisfying those performance obligations within the next twelve months.

Timing of Performance Obligations Satisfied at a Point in Time: The Company evaluates when the customer obtains control of the product based on shipping terms, as control will transfer, depending upon such terms, at different points between the Company's manufacturing facility or warehouse and the customer’s location. The Company considers control to have transferred upon shipment or delivery because (i) the Company has a present right to payment at that time; (ii) the legal title has been transferred to the customer; (iii) the Company has transferred physical possession of the product to the customer; and (iv) the customer has significant risks and rewards of ownership of the product.

Variable Consideration: The Company estimates whether it will be subject to variable consideration under the terms of the contract and includes its estimate of variable consideration in the transaction price based on the expected value method when it is deemed probable of being realized based on historical experience and trends. Types of variable consideration may include rebates, incentives and discounts, among others, which are recorded as a reduction to net sales at the time when control of a performance obligation is transferred to the customer.

Practical Expedients & Exemptions: The Company elected to expense the incremental cost to obtaining a contract when the amortization period for such contracts would be one year or less. The Company does not disclose the value of unperformed obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.

Note 3. ASCEND Transformation Program

In March 2022, the Company announced the launch of ASCEND, a new transformation program focused on driving accelerated earnings growth and efficiency across the business with the goal of delivering an incremental $40 to $50 million of annual operating profit once fully implemented. As part of ASCEND, the Company is focusing on the following key initiatives: (i) accelerating organic growth go-to-market strategies, (ii) improving operational excellence and production efficiency by utilizing a lean approach and (iii) driving greater efficiency and productivity in SG&A by better leveraging resources to create a more efficient and agile organization.

The Company is implementing the program and anticipates investing approximately $60 to $65 million (as disclosed in Note 4, "Restructuring Charges," approximately $10 to $15 million of these investments will be in the form of restructuring charges) over the life of the program, which is expected to be finalized as we exit fiscal 2024. Elements of these investments could include such cash costs as capital expenditures, restructuring costs, third-party support, and incentive costs. Total program expenses were approximately $10.4 million for the three months ended November 30, 2022, of which $9.4 million were recorded within SG&A expenses and included third-party support costs and $1.0 million were recorded within restructuring expenses (see Note 4, "Restructuring Charges," below).

Note 4. Restructuring Charges

The Company has undertaken or committed to various restructuring initiatives, including workforce reductions, leadership changes, plant consolidations to reduce manufacturing overhead, satellite office closures, the continued movement of production and product sourcing to low-cost alternatives, and the centralization and standardization of certain administrative functions. Liabilities for severance are generally to be paid within twelve months, while future lease payments related to facilities vacated as a result of restructuring are to be paid over the underlying remaining lease terms.

During fiscal 2019, the Company announced a restructuring plan focused on (i) the integration of the Enerpac and Hydratight businesses (IT&S segment), (ii) the strategic exit of certain commodity-type services in our North America Services operations (IT&S segment) and (iii) driving efficiencies within the overall corporate structure. In the third quarter of fiscal 2020, the Company announced the expansion and revision of this plan, which further simplified and flattened the corporate structure through elimination of redundancies between the segment and corporate functions, while enhancing our commercial and marketing processes to become even closer to our customers. Upon assessment of the Company's operating structure by the Company's new President and Chief Executive Officer (hired effective October 2021), the Company recorded $2.7 million of charges in the three months ended November 30, 2021 in order to further simplify and streamline the organizational structure. The total cumulative charges for the 2019 plan, which ended in the the third quarter of fiscal year 2022, were $18.0 million.

On June 27, 2022, the Company approved a new restructuring plan in connection with the initiatives identified as part of the ASCEND transformation program (see Note 3, “ASCEND Transformation Program”) to drive greater efficiency and productivity in global selling, general and administrative resources. The total costs of this plan were then estimated at $6 to $10 million, constituting predominately severance and other employee-related costs to be incurred as cash expenditures impacting both IT&S and Corporate. On September 23, 2022, the Company approved an updated restructuring plan. The costs of this updated plan (which includes the amounts for the plan approved in June) are estimated at $10 to $15 million. These costs are expected to be incurred over the expected duration of the transformation program, ending in the fourth quarter of fiscal year 2024. For the three months ended November 30, 2022, the Company recorded $1 million of restructuring charges associated with the ASCEND transformation program.

The following summarizes restructuring reserve activity (which for the three months ended November 30, 2021 excludes $0.7 million and $0.5 million of charges associated with the 2019 Plan for IT&S and Corporate, respectively, associated with the accelerated vesting of equity awards which has no impact on the restructuring reserve) for the IT&S segment and Corporate (in thousands):


	Three Months Ended November 30, 2022
	2019 Plan				ASCEND Plan
	IT&S		Corporate		IT&S		Corporate
Balance as of August 31, 2022	$	212	$	6	$	2,008	$	797
Restructuring charges	—		—		944		38
Cash payments	(19)		—		(1,211)		(117)
Impact of changes in foreign currency rates	4		—		67		—
Balance as of November 30, 2022	$	197	$	6	$	1,808	$	718


	Three Months Ended November 30, 2021
	IT&S		Corporate
Balance as of August 31, 2021	$	1,737	$	26
Restructuring charges	874		695
Cash payments	(609)		(8)

Impact of changes in foreign currency rates	(46)		—
Balance as of November 30, 2021	$	1,956	$	713

Total restructuring charges (inclusive of the Other segment) were $1.0 million and $2.7 million in the three months ended November 30, 2022 and 2021, respectively, being reported in "Restructuring charges."

Note 5. Discontinued Operations

On October 31, 2019, as part of our overall strategy to become a pure-play industrial tools and services company, the Company completed the sale of the businesses comprising its former Engineered Components & Systems ("EC&S") segment. This divestiture was considered part of our strategic shift to become a pure-play industrial tools and services company, and therefore, the results of operations are recorded as a component of "Earnings (loss) from discontinued operations, net of income taxes" in the Condensed Consolidated Statements of Earnings for all periods presented. All other discontinued operations activity included within the Condensed Consolidated Statements of Earnings and the Condensed Consolidated Statements of Cash Flows for the periods presented relate to impacts from certain retained liabilities.

The following represents the detail of "Earnings (loss) from discontinued operations, net of income taxes" within the Condensed Consolidated Statements of Earnings (in thousands) :


	Three Months Ended November 30,
	2022		2021
Selling, general and administrative expenses	$	5	$	503
Impairment & divestiture benefit	(1,329)		—
Operating profit (loss)	1,324		(503)
Other loss, net	—		—
Earnings (loss) before income tax expense (benefit)	1,324		(503)
Income tax expense (benefit)	280		(106)
Earnings (loss) from discontinued operations, net of income taxes	$	1,044	$	(397)

Note 6. Goodwill, Intangible Assets and Long-Lived Assets

Changes in the gross carrying value of goodwill and intangible assets result from changes in foreign currency exchange rates, business acquisitions, divestitures and impairment charges. The changes in the carrying amount of goodwill for the three months ended November 30, 2022 are as follows (in thousands):

SEC Form 10-Q filed by Enerpac Tool Group Corp.